Agricultural Marketing Service
Foreign Agricultural Service
Rural Business-Cooperative Service
Rural Housing Service
Foreign-Trade Zones Board
Industry and Security Bureau
International Trade Administration
Army Department
Navy Department
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Coast Guard
Federal Emergency Management Agency
Fish and Wildlife Service
Indian Affairs Bureau
Land Management Bureau
Employment and Training Administration
Federal Aviation Administration
Federal Highway Administration
Federal Railroad Administration
National Highway Traffic Safety Administration
Internal Revenue Service
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.
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U.S. Small Business Administration.
Notification of pilot program and request for comments.
SBA is introducing a new pilot loan program within the 7(a) Loan Program called “7(a) Working Capital Pilot” (WCP) to provide SBA 7(a) guaranteed lines of credit up to $5 million that may be used to support domestic and international transactions with SBA fees due from the Lender that operate as a function of time, charging a proportional amount for each year the facility is in use.
You may submit comments, identified by SBA docket number SBA-2024-0005, through the Federal eRulemaking Portal:
SBA will post all comments on
Specific WCP policy questions should be directed to
As small businesses grow, they require access to working capital. Working capital is most economically delivered through a line of credit and allows businesses to take on new opportunities in a way that a term loan cannot. For example, manufacturers require a revolving line of credit to build a resilient inventory position, and a contractor requires access to a transaction-based project line to successfully secure a multi-year government contract. In both examples, the revolving nature of a line of credit provides the most efficient means for the business to control its cash flow and manage the associated interest expense in a dynamic rate environment. For example, for a permanent term (non-revolving) loan that provides working capital, the borrower receives one lump sum of money and interest immediately begins accruing on the entire sum. In contrast, with a revolving line of credit, the borrower only borrows money as needed and pays interest only on the time the funds are being used.
SBA's flagship business loan program is the 7(a) Loan Program, which currently offers four delivery methods for making SBA 7(a) guaranteed lines of credit. These delivery methods are the 7(a) SBA Express, CAPLine, Export Express, and the Export Working Capital Program (EWCP) programs. While the existing 7(a) line of credit delivery methods serve a similar working capital function, each has its own unique rules and limitations. For example, 7(a) SBA Express and Export Express loans are limited to a maximum loan size of $500,000, while CAPLines and EWCP loans can be approved up to $5 million. Lenders appreciate the flexibility offered by the CAPLines Program; however, the four subprograms within CAPLines can be confusing to administer, and the fee structure makes these types of loans expensive when compared to EWCP. Lenders find the EWCP Program to be more similarly structured to their conventional asset-based lending norms than the CAPLine Program, and Lenders prefer EWCP's fee structure over CAPLine's fee structure; however, EWCP loan proceeds may only be used to finance export transactions. The difference in rules creates a challenge for Lenders, who must learn and manage four separate programs for the delivery of their small business working capital, which negatively affects Lender participation while also reducing the availability of working capital for small businesses. For these reasons, SBA is establishing the new 7(a) Working Capital Pilot Program to allow participating 7(a) Lenders to make working capital loans more efficiently and effectively.
Per 13 CFR 120.3, SBA is establishing the WCP Program as a pilot program within the 7(a) Loan Program. The WCP will be effective August 1, 2024, and continue through July 31, 2027. The purpose of the WCP Program is to allow participating 7(a) Lenders to make working capital lines of credit through asset-based and transaction-based lines of credit. Lenders making WCP loans $150,000 or less will have an 85 percent SBA guaranty, and WCP loans greater than $150,000 will have a 75 percent SBA guaranty. WCP Program requirements will be built around established industry norms. SBA intends to make program enhancements based on Lender feedback during the duration of the pilot program.
WCP loans may be approved up to $5 million and may be used to support domestic and international transactions. Lenders may authorize a loan term up to 60 months. Lenders set interest rates that must comply with 13 CFR 120.213 and 120.214.
In compliance with § 120.214(c), SBA is providing notice in this
Lenders must pay a guaranty fee to SBA for each loan made, and the guaranty fee due to SBA upon initial loan approval is called the SBA Upfront Fee. The SBA Upfront Fee for WCP is modeled after SBA's 7(a) EWCP Program, which has a guaranty fee that operates as a function of time, charging a proportional amount for each year the facility is in use. For example, a loan with a 36-month loan term pays an SBA Upfront Fee established for loans with a 36-month term, while loans with a 60-month loan term pay an SBA Upfront Fee that is proportionally higher based on the longer term.
SBA will publish the WCP Upfront Fee on SBA's website at
Lenders and Agents may collect fees from borrowers. Fees, including extraordinary servicing fees, are capped in accordance with 13 CFR 120.221 and Standard Operating Procedure (SOP 50 10). Extraordinary servicing fees are capped at 2 percent per year on the outstanding balance of the part requiring special servicing.
WCP loan proceeds may be used to provide a temporary advance against Federal and state tax credits and/or rebates in addition to certain other common uses for asset-based lines. The purpose for allowing WCP loan proceeds to be used to provide a temporary advance against Federal and or state tax credits and/or rebates is to provide immediate access to a portion of the funds once they are earned by the business and have been confirmed by the Lender.
More detailed guidance on the WCP will be provided in a 7(a) Working Capital Pilot Program Guide (Program Guide) published on SBA's website at
All participating 7(a) Lenders in good standing with a signed Loan Guaranty Agreement (Form 750) are eligible to participate in the WCP. The process for lenders to apply to participate with SBA as a 7(a) Lender is provided in SOP 50 56. If the 7(a) Working Capital Pilot is not extended, each Lender must continue to service and liquidate its WCP loans under the terms of the Pilot but will not be able to make any new WCP loans. If the WCP is extended or made permanent, each WCP Lender's authority to participate will be renewed based on the WCP Lender's compliance with the program requirements.
Under SBA's sole discretion, SBA may grant delegated authority to certain qualified Lenders with experience in asset-based lending to process, close, service, and liquidate WCP loans without prior SBA review. 7(a) Lenders with existing Preferred Lenders Program (PLP) delegated authority will
In FY25, SBA estimates it will approve approximately 270 WCP loans totaling $337 million. Half of that volume will be from loans that would have otherwise been approved as an SBA 7(a) Export Working Capital Program loan or SBA 7(a) CAPLines loan, and the other half will be new volume. The WCP is included in the 7(a) Loan Program budget estimate. The performance of these loans will be considered when calculating budget costs and any need for appropriations.
SBA analyzed the budget impact of WCP loans on the 7(a) Loan Program. The current estimates for FY24 and FY25 support the continued execution of the 7a Loan Program without needing an appropriation, and this will be reassessed annually.
Inquiries on specific WCP policies may be sent to
Pursuant to the authority provided to SBA under 13 CFR 120.3 to suspend,
SBA is also waiving 13 CFR 120.452(a)(2) that prohibits Lenders from making a PLP 7(a) loan that reduces its existing credit exposure for any Borrower to permit 7(a) Lenders to use their PLP-WCP delegated authority to refinance an existing same-institution SBA Express loan into a WCP loan to provide growing small businesses the ability to transition from an SBA Express line of credit to a monitored WCP line of credit.
SBA will evaluate the WCP Program periodically and prior to the initial end of the authorization period on July 31, 2027, to refine the program and to determine whether it should be made permanent. Evaluation criteria will include, but is not limited to, number of WCP loans approved, adoption rate (number of lenders making WCP loans), comparison of number of loans approved and adoption rate versus the same in 7(a) CAPLine and EWCP programs and among the top SBA Lenders, whether the costs (including losses) of the pilot are within an acceptable range, and portfolio performance as it relates to other 7(a) programs.
15 U.S.C. 636(a)(25) and 13 CFR 120.3.
National Highway Traffic Safety Administration (NHTSA), U.S. Department of Transportation (DOT).
Final rule.
This final rule amends the definition of “equipment” to conform with OMB's government-wide Guidance for Federal Financial Assistance affecting Federal grants.
This final rule is effective on October 1, 2024.
This document may be viewed online through the Federal eRulemaking portal at
On February 6, 2023, NHTSA published in the
On April 22, 2024, after conducting notice and comment rulemaking, the Office of Management and Budget (OMB) published in the
The regulation implementing NHTSA's State highway safety grant program lays out requirements related to “equipment” in 23 CFR 1300.31(d) specific to the NHTSA's grant program. Among other things, 23 CFR 1300.31(d) requires States to seek prior written approval from the Regional Administrator before purchasing or disposing of equipment, unless the to-be-disposed-of equipment “exceeded its useful life” under State law. 23 CFR 1300.31(d) uses a $5,000 monetary threshold to define “equipment,” matching the prior OMB rules.
In this rule, effective for fiscal year 2025 grants, NHTSA makes a technical amendment to update the monetary threshold for equipment in NHTSA's Uniform Procedures for State highway safety grant programs from $5,000 to $10,000 in 23 CFR 1300.31(d) to conform with the updated OMB rules. As a result of this threshold increase, States will no longer have to seek pre-approval to purchase or dispose of equipment between $5,000 and $9,999.99. In addition, States will no longer have to apply the heightened rules for use and management of equipment for items that fall under $10,000. States should be aware, however, that they must continue to meet all State rules for equipment, as defined by the State. This rule will become effective on October 1, 2024, and will apply to fiscal year 2025 State highway safety grants and later.
NHTSA concludes that it has good cause to issue without notice and comment this technical amendment
NHTSA makes this technical amendment to conform with the revisions published in OMB's final rule after OMB received and analyzed public comment. By issuing this technical amendment, NHTSA establishes consistency with OMB's rules and avoids confusion for State recipients of NHTSA's State highway safety grant programs as they prepare their fiscal year 2025 annual grant applications due August 2024.
Since NHTSA is issuing this technical amendment to conform with OMB's updated definition, providing notice and an opportunity for public comment is impracticable and unnecessary.
NHTSA has considered the impact of this rulemaking action under E.O. 12866 (as amended by E.O. 14094), E.O. 13563, and DOT's regulatory policies and procedures. This rulemaking document was not reviewed under E.O. 12866 or E.O. 13563. This action is not expected to impose any costs because it makes a limited revision that will lessen administrative burden under the State highway safety grant program. This rulemaking has been determined to be not “significant” under DOT's regulatory policies and procedures and the policies of OMB.
The Regulatory Flexibility Act (RFA) of 1980 (5 U.S.C. 601
This final rule makes a limited revision to the uniform procedures implementing State highway safety grant programs, which were previously determined not to have a significant impact on a substantial number of small entities. The grant programs impacted by this rule will affect only State governments, which are not considered to be small entities as that term is defined by the RFA. Therefore, NHTSA certifies that this action will not have a significant impact on a substantial number of small entities and finds that preparing a Regulatory Flexibility Analysis is unnecessary.
E.O. 13132 on “Federalism” requires NHTSA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” 64 FR 43255 (August 10, 1999). “Policies that have federalism implications” are defined in the E.O. to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under E.O. 13132, an agency may not issue a regulation with federalism implications that imposes substantial direct compliance costs not required by statute unless the Federal Government provides the funds necessary to pay the direct compliance costs incurred by State and local governments or the agency consults with the State and local government in the process of developing the proposed regulation. An agency also may not issue a regulation with federalism implications that preempts a State law without consulting with State and local officials.
NHTSA analyzed this rulemaking action in accordance with the principles and criteria set forth in E.O. 13132. The limited revision made by this rulemaking will decrease administrative burden for State recipients by updating the highway safety grant program's definition of “equipment” to conform with the updated OMB government-wide guidance for Federal financial assistance. Therefore, NHTSA determines that this technical amendment would not have sufficient federalism implications as defined in the Order to warrant formal consultation with State and local officials or preparation of a federalism summary impact statement.
Pursuant to E.O. 12988 (61 FR 4729 (February 7, 1996)), “Civil Justice Reform,” the agency has considered whether this rule would have any retroactive effect. I conclude that it would not have any retroactive or preemptive effect, and judicial review it may be obtained pursuant to 5 U.S.C. 702. That section does not require that a petition for reconsideration be filed prior to seeking judicial review. This action meets applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
Under the procedures established by the Paperwork Reduction Act of 1995, codified at 44 U.S.C. 3501
The Unfunded Mandates Reform Act (UMRA) of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in expenditures by State, local, or Tribal governments, in the aggregate, or by the private sector, of more than $100 million annually (adjusted annually for inflation with the base year of 1995). This rulemaking would not meet the definition of a Federal mandate because the resulting annual State expenditures will not exceed the minimum threshold; instead, this rulemaking will likely decrease administrative costs for States. Further, this rulemaking action updates NHTSA's State highway safety grant program, a voluntary program and States that choose to apply and qualify would receive grant funds.
NHTSA has analyzed the impacts of this rulemaking action under the National Environmental Policy Act (NEPA), codified at 42 U.S.C. 4321
E.O. 13211 applies to any rulemaking that is: (1) determined to be economically significant under E.O. 12866, and likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. 66 FR 28355 (May 18, 2001). This rulemaking is not likely to have a significant adverse effect on the supply of, distribution of, or use of energy. This rulemaking has not been designated as a significant energy action. Accordingly, this rulemaking is not subject to E.O. 13211.
NHTSA has analyzed this rulemaking under E.O. 13175 and determined that it would not have a substantial direct effect on one or more Indian Tribes, would not impose substantial direct compliance costs on Indian Tribal governments, and would not preempt Tribal law. Therefore, a Tribal summary impact statement is not required.
Please note that anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the
Administrative practice and procedure, Alcohol abuse, Drug abuse, Grant programs—transportation, Highway safety, Intergovernmental relations, Motor vehicles—motorcycles, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, under the authority of 23 U.S.C. 401
23 U.S.C. 402; 23 U.S.C. 405; Sec. 1906, Pub. L. 109-59, 119 Stat. 1468, as amended by Sec. 25024, Pub. L. 117-58, 135 Stat. 879; delegation of authority at 49 CFR 1.95.
(d)
Issued in Washington, DC, under authority delegated in 49 CFR 1.81 and 1.95 and 49 CFR 501.5.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for the Mississippi River from mile marker (MM) 219.5 to 218.5 near Grafton, IL. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by a Missouri National Guard training event near Grafton, IL. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port, Sector Upper Mississippi River.
This rule is effective from July 15, 2024, until July 22, 2024.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions about this rule, call or email MST1 Benjamin Conger, Sector Upper Mississippi River Waterways Management Division, U.S. Coast Guard; telephone 314-269-2573, email
The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory 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.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because of potential hazards created by the Missouri National Guard training event, in particular the presence of a military raft that will cross over the Upper Mississippi River during the event. As such, insufficient time exists to provide a reasonable comment period and then consider those comments before issuing the rule. It is impracticable to publish an NPRM because we must establish this safety zone by July 15, 2024.
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. The Captain of the Port Sector Upper Mississippi (COTP) has determined that potential hazards associated with the Missouri National Guard training event starting July 15, 2024, will be a safety concern for anyone operating or transiting within the Upper Mississippi River at between MM 219.5 to 218.5. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety
This rule establishes a safety zone during the Missouri National Guard training event on the Upper Mississippi River on July 15, 2024, and going through July 22, 2024. The safety zone will be active from 7 a.m.-7 p.m. each day and will cover all navigable waters from MM 219.5 to 218.5. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while the Missouri National Guard training event takes place on the Upper Mississippi River. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative via VHF-FM channel 16, or through USCG Sector Upper Mississippi River at 314-269-2332. Persons and vessels permitted to enter the safety zone must comply with all lawful orders or directions issued by the COTP or designated representative. The COTP or a designated representative will inform the public of the effective period for the safety zone as well as any changes in the dates and times of enforcement, as well as reductions in the size of the safety zone as conditions improve, through Local Notice to Mariners (LNMs), Broadcast Notices to Mariners (BNMs), and/or Safety Marine Information Broadcast (SMIB), as appropriate.
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 section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). 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, and time-of-day of the safety zone. Vessel traffic will be able to safely transit around this safety zone which will impact a small designated area of the Mississippi River. Moreover, the Coast Guard will issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the zone, and the rule would allow vessels to seek permission to enter the zone. The safety zone will be active and enforced only while training associated with the raft crossing is being conducted, from July 15, 2024, until July 22, 2024.
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 encompassing the width of the Upper Mississippi River from MM 219.5 to 218.5. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket.
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, 70124; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3.
(a)
(b)
(c)
(2) To seek permission to enter, contact the COTP or a designated representative via VHF-FM channel 16, or through USCG Sector Upper Mississippi River at 314-269-2332. Persons and vessels permitted to enter the safety zone must comply with all lawful orders or directions issued by the COTP or designated representative.
(d)
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for navigable waters of the Green River from Mile Marker 61 to 62 in Calhoun, KY. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by a power line replacement due to unstable powerline poles. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port, Sector Ohio Valley.
This rule is effective from 6 a.m. to 8 p.m. on July 16, 2024 through July 19, 2024.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions about this rule, call or email MST2 Bryan Crane, Sector Ohio Valley, U.S. Coast Guard; telephone 502-779-5334, email
The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory 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.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the power line poles failed the internal integrity test and prompt action is needed to respond to the potential safety hazards associated with the overhead power lines. It is impracticable to publish an NPRM because we must establish this safety zone by July 16, 2024.
Also, 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. The Captain of the Port Sector Ohio Valley (COTP) has determined that potential hazards associated with the power line replacement starting July 16, 2024 will be a safety concern for anyone within one (1) mile of the location of the powerline replacement location. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while the powerlines are being replaced.
This rule establishes a safety zone during daylight hours on July 16, 2024 through July 19, 2024. The safety zone will cover all navigable waters within one (1) Nautical Mile of vessels and
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 section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). 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, and time-of-day of the safety zone. Vessel traffic will be able to safely transit around this safety zone during the times that powerline work is not being conducted. Moreover, the Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the zone, and the rule would allow vessels to seek permission to enter the zone.
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 only four days that will prohibit entry within 1 nautical mile of the location of the power line crossing, Green River between Mile Markers 61 and 62, specifically 61.5. It is categorically excluded from further review under paragraph L60c 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, 70124; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3.
(a)
(b)
(2) To seek permission to enter, contact the COTP or the COTP's representative by VHF CH. 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.
(c)
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the State of Connecticut on December 14, 2015. This SIP revision includes Connecticut's revised regulations for new motor vehicle emission standards. Connecticut updated its motor vehicle emission regulations to adopt California's Advanced Clean Car (ACC) I program that includes California's low emission vehicle (LEV) III criteria pollutant standards and zero-emission vehicle (ZEV) sales requirements through the 2025 model year, and greenhouse gas (GHG) emissions standards that commence in the 2017 model year. Connecticut ensured that its regulations are identical to the California standards for which a waiver has been granted, as required by the Clean Air Act (CAA).
This rule is effective on August 14, 2024.
EPA has established a docket for this action under Docket Identification No. EPA-R01-OAR-2017-0697. All documents in the docket are listed on the
Eric Rackauskas, Air Quality Branch, U.S. Environmental Protection Agency, EPA Region 1, 5 Post Office Square—Suite 100 (Mail code 5-MI), Boston, MA 02109-3912, tel. (617) 918-1628, email
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.
On January 16, 2018 (83 FR 2097), EPA published a Notice of Proposed Rulemaking (NPRM) proposing approval of Connecticut's amended Section 22(a)-174-36b (Low Emission Vehicle II Program) (LEV II) and the newly adopted Section 22a-174-36c (Low Emission Vehicle III Program) (LEV III) of the Connecticut State Regulations into the Connecticut SIP.
EPA received two comments in support of EPA's proposed approval of Connecticut's SIP revision. The first comment stated that EPA, “correctly determined that the emission standards in Connecticut's SIP revision are identical to the relevant California Standards” and satisfy the requirements of the CAA. The second comment supported Connecticut's action and encouraged similar action in more states throughout the country. In addition, EPA received comments criticizing some technical aspects of the California Advanced Clean Car I (ACC I) program being adopted by Connecticut under the proposed Connecticut SIP revision.
Under CAA section 209(a), states are generally preempted from either adopting or enforcing emissions standards for new motor vehicles and engines. CAA section 209(b) allows EPA to waive this preemption for the State of California subject to listed criteria. Additionally, under CAA section 177, “any state which has plan provisions approved under this part
Specifically, section 177 of the CAA allows a state to adopt the California emissions standards if:
(1) Such standards are identical to the California standards for which a waiver has been granted for such model year, and
(2) California and such State adopt such standards at least two years before commencement of such model year.
EPA did not receive any comments challenging either of the above criteria. As such, EPA views the comments received as beyond the scope of this action. In this action, EPA is only approving Connecticut's adoption of standards into its SIP under CAA section 177 for which EPA has already granted a waiver of preemption to California (under CAA section 209(b)). To the extent commenters are challenging the ACC I program standards themselves, we note that there is no discretion to modify those standards because under CAA section 177, Connecticut cannot adopt standards that are not identical to the California standards. Therefore, challenges to the ACC I standards themselves are outside the scope of the present action. For example, comments pertaining to battery safety, mining of rare earth elements, and the greenhouse gas footprint of electric cars are beyond the scope of this action because they do not address Connecticut's authority to adopt these standards under Section 177 of the CAA. The standards at issue (LEV III criteria pollutant standards and GHG emission standards, and ZEV sales requirements, that all comprise the ACC I program) are the types of California standards that can be adopted into a state's SIP under the provisions of section 177 of the CAA and are not subject to preemption under section 209 of the CAA, so long as the underlying California standards have been waived under section 209(b) and the other criteria of section 177 have been met. Here, the ACC I standards have been waived by EPA and the other criteria in section 177 have been met.
As explained in the NPRM, EPA proposed approval of Connecticut's SIP revision incorporating California motor vehicle emissions standards into Connecticut's SIP (83 FR 2097). Specifically, the SIP revision adopts California's ACC I program regulations for which EPA had previously granted a waiver of preemption to California under CAA section 209(b) (78 FR 2112;
CAA section 110(a)(1) requires that SIPs provide for the implementation, maintenance, and enforcement of the NAAQS. As noted in the NPRM, Connecticut adopted the ACC I regulations to reduce emissions of volatile organic compounds (VOC), particulate matter (PM), and nitrogen oxides (NO
EPA is finalizing its proposed approval of Connecticut's December 14, 2015, SIP revision. Specifically, EPA is approving Connecticut's SIP revision adopting California's Advanced Clean Car I program into its SIP, which includes California's low emission vehicle (LEV) III criteria pollutant standards GHG emission standards that commence in the 2017 model year, and zero-emission vehicle (ZEV) sales requirements through the 2025 model year.
EPA is approving this SIP revision because it meets all applicable requirements of the Clean Air Act, including CAA section 110(l), because it will not interfere with any applicable requirement concerning attainment and reasonable further progress, or any other applicable requirement of the Act.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the Connecticut Department of Energy and Environmental Protection's adoption of the California Advanced Clean Car I program, in Sections 22(a)-174-36b and 22a-174-36c of the Regulations of Connecticut State Agencies, as discussed in sections I. and III. of this preamble and set forth below in the amendments to 40 CFR part 52. The EPA has made, and will continue to make, these documents generally available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those
• 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); and
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act.
In addition, 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 and will not impose substantial direct costs on Tribal governments or preempt Tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”
The Connecticut Department of Environmental Protection did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. EPA did not perform an EJ analysis and did not consider EJ in this action. Due to the nature of the action being taken here, this action is expected to have a neutral to positive impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 13, 2024. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
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.
Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
(132) Revisions to the State Implementation Plan submitted by the Connecticut Department of Environmental Protection on December 14, 2015.
(i) Incorporation by reference.
(A) Regulations of Connecticut State Agencies, Regulation 22a-174-36b, “Low emission vehicles II program,” amended August 1, 2013.
(B) Regulations of Connecticut State Agencies, Regulation 22a-174-36c, “Low Emission Vehicle III Program,” effective August 1, 2013.
(ii) Additional materials.
(A) Letter from the Connecticut Department of Energy and Environmental Protection, dated December 14, 2015, submitting a revision to the Connecticut State Implementation Plan.
The additions read as follows:
Environmental Protection Agency (EPA).
Final action.
The Environmental Protection Agency (EPA) is taking direct final action on the authorization of changes to North Carolina's hazardous waste program under the Resource Conservation and Recovery Act (RCRA), as amended. These changes were outlined in a June 26, 2023, application to the EPA. We have determined that these changes satisfy all requirements needed for final authorization.
This authorization is effective on September 13, 2024 without further notice unless the EPA receives adverse comment by August 14, 2024. If the EPA receives adverse comment, we will publish a timely withdrawal of this direct final action in the
Submit your comments, identified by Docket ID No. EPA-R04-RCRA-2024-0116, at
The EPA encourages electronic submittals and lists all publicly available docket materials electronically at
Leah Davis; RCRA Programs and Cleanup Branch; Land, Chemicals and Redevelopment Division; U.S. Environmental Protection Agency; Atlanta Federal Center, 61 Forsyth Street SW, Atlanta, Georgia 30303-8960; telephone number: (404) 562-8562; fax number: (404) 562-9964; email address:
The EPA is publishing this action without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment. This action is a routine program change. However, in the “Proposed Rules” section of this issue of the
If the EPA receives comments that oppose this authorization, we will withdraw this action by publishing a document in the
States that have received final authorization from the EPA under RCRA section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste program that is equivalent to, consistent with, and no less stringent than the Federal program. As the Federal program changes, States must change their programs and ask the EPA to authorize the changes. Changes to State programs may be necessary when Federal or State statutory or regulatory authority is modified or when certain other changes occur. Most commonly, States must change their programs because of changes to the EPA's regulations in title 40 of the Code of Federal Regulations (CFR), parts 124, 260 through 268, 270, 273, and 279.
New Federal requirements and prohibitions imposed by Federal regulations that the EPA promulgates pursuant to the Hazardous and Solid Waste Amendments of 1984 (HSWA) take effect in authorized states at the same time they take effect in unauthorized States. Thus, the EPA will implement those requirements and prohibitions in North Carolina, including the issuance of new permits implementing those requirements, until
North Carolina submitted a complete program revision application (PRA), dated June 26, 2023, seeking authorization of changes to its hazardous waste program corresponding to certain Federal rules promulgated between October 27, 1987, and October 1, 2021 (including HSWA Cluster
North Carolina has responsibility for permitting treatment, storage, and disposal facilities within its borders (except in Indian country, as defined at 18 U.S.C. 1151) and for carrying out the aspects of the RCRA program described in its PRA, subject to the limitations of HSWA, as discussed above.
The effect of this decision is that the changes described in North Carolina's PRA will become part of the authorized State hazardous waste program and will therefore be federally enforceable. North Carolina will continue to have primary enforcement authority and responsibility for its State hazardous waste program. The EPA will maintain its authorities under RCRA sections 3007, 3008, 3013, and 7003, including its authority to:
• Conduct inspections, and require monitoring, tests, analyses, and reports;
• Enforce RCRA requirements, including authorized State program requirements, and suspend or revoke permits; and
• Take enforcement actions regardless of whether the State has taken its own actions.
This action does not impose additional requirements on the regulated community because the regulations for which the EPA is authorizing North Carolina are already effective under State law and are not changed by this action.
North Carolina initially received final authorization on December 14, 1984, effective December 31, 1984 (49 FR 48694), to implement a hazardous waste management program. The EPA granted authorization for changes to North Carolina's program on the following dates: March 25, 1986, effective April 8, 1986 (51 FR 10211); August 5, 1988, effective October 4, 1988 (53 FR 29460); February 9, 1989, effective April 10, 1989 (54 FR 6290); September 22, 1989, effective November 21, 1989 (54 FR 38993); January 18, 1991, effective March 19, 1991 (56 FR 1929); April 10, 1991, effective June 9, 1991 (56 FR 14474); July 19, 1991, effective September 17, 1991 (56 FR 33206); April 27, 1992, effective June 26, 1992 (57 FR 15254); December 12, 1992, effective February 16, 1993 (57 FR 59825); January 27, 1994, effective March 28, 1994 (59 FR 3792); April 4, 1994, effective June 3, 1994 (59 FR 15633); June 23, 1994, effective August 22, 1994 (59 FR 32378); November 10, 1994, effective January 9, 1995 (59 FR 56000); September 27, 1995, effective November 27, 1995 (60 FR 49800); April 25, 1996, effective June 24, 1996 (61 FR 18284); October 23, 1998, effective December 22, 1998 (63 FR 56834); August 25, 1999, effective October 25, 1999 (64 FR 46298); February 28, 2002, effective April 29, 2002 (67 FR 9219); December 14, 2004, effective February 14, 2005 (69 FR 74444); March 23, 2005, effective May 23, 2005 (70 FR 14556); February 7, 2011, effective April 8, 2011 (76 FR 6561); June 14, 2013, effective August 13, 2013 (78 FR 35766); August 24, 2015, effective October 23, 2015 (80 FR 51141); and August 23, 2019, Effective October 10, 2019 (84 FR 54516).
North Carolina submitted a complete PRA, dated June 26, 2023, seeking authorization of changes to its hazardous waste management program in accordance with 40 CFR 271.21. This application included changes associated with Checklists 39.1, 50.1, 66.1, 126.1, 152, 167C.1, 219, and 240 through 244 from HSWA Cluster II and RCRA Clusters IV, VI, VIII, XIX, and XXVII through XXX. The EPA has determined, subject to receipt of written comments that oppose this action, that North Carolina's hazardous waste program revisions are equivalent to, consistent with, and no less stringent than the Federal program, and therefore satisfy all of the requirements necessary to qualify for final authorization. Therefore, the EPA grants final authorization to North Carolina for the following program changes:
When revised State rules differ from the Federal rules in the RCRA state authorization process, the EPA determines whether the State rules are equivalent to, more stringent than, or broader in scope than the Federal program. Pursuant to RCRA section 3009, 42 U.S.C. 6929, State programs may contain requirements that are more stringent than the Federal regulations. Such more stringent requirements can be federally authorized and, once authorized, become federally enforceable. Although the statute does not prevent States from adopting regulations that are broader in scope than the Federal program, states cannot receive Federal authorization for such regulations, and they are not federally enforceable. There are no State requirements in the program revisions listed in the table above that are considered to be broader in scope than the Federal requirements. The EPA has determined that certain regulations included in North Carolina's program revisions listed in the table above are more stringent than the Federal program. These more stringent requirements will become part of the federally enforceable RCRA program in North Carolina when authorized.
North Carolina's program is more stringent at 15A NCAC 13A .0108(c) and (d), insofar as these provisions require transporters to reconcile significant manifest discrepancies with the waste generator.
North Carolina's program is more stringent at 15A NCAC 13A .0111(b), insofar as these provisions require off-site recycling facilities that receive materials described in 40 CFR 266.70(a) to label containers and tanks holding recyclable materials with the words “Recyclable Material.”
It should be noted that States cannot receive authorization for certain Federal regulatory functions involving international shipments (
When final authorization takes effect, North Carolina will issue permits for all the provisions for which it is authorized and will administer the permits it issues. The EPA will continue to administer any RCRA hazardous waste permits or portions of permits that the EPA issued prior to the effective date of authorization until they expire or are terminated. The EPA will not issue any new permits or new portions of permits for the provisions listed in the table above after the effective date of the final authorization. The EPA will continue to implement, and issue permits for HSWA requirements for which North Carolina is not yet authorized. The EPA has the authority to enforce State-issued permits after the State is authorized.
North Carolina is not authorized to carry out its hazardous waste program in Indian country within the State, which includes the Indian lands associated with the Eastern Band of Cherokee Indians. Therefore, this action has no effect on Indian country. The EPA retains jurisdiction over Indian country and will continue to implement and administer the RCRA program on these lands.
Codification is the process of placing citations and references to the State's statutes and regulations that comprise the State's authorized hazardous waste program into the Code of Federal Regulations. The EPA does this by adding those citations and references to the authorized State rules in 40 CFR part 272. The EPA is not codifying the authorization of North Carolina's revisions at this time. However, the EPA reserves the ability to amend 40 CFR part 272, subpart II, for the authorization of North Carolina's program changes at a later date.
The Office of Management and Budget (OMB) has exempted this action from the requirements of Executive Order 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011). This action authorizes State requirements for the purpose of RCRA section 3006 and imposes no additional
Under RCRA section 3006(b), the EPA grants a State's application for authorization as long as the State meets the criteria required by RCRA. It would thus be inconsistent with applicable law for the EPA, when it reviews a State authorization application, to require the use of any particular voluntary consensus standard in place of another standard that otherwise satisfies the requirements of RCRA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this rule, the EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. The EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988), by examining the takings implications of this action in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the Executive order. This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Congressional Review Act, 5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Confidential business information, Hazardous waste, Hazardous waste transportation, Indian lands, Intergovernmental relations, Penalties, Reporting and recordkeeping requirements.
This action is issued under the authority of sections 2002(a), 3006, and 7004(b) of the Solid Waste Disposal Act as amended, 42 U.S.C. 6912(a), 6926, and 6974(b).
Agricultural Marketing Service, USDA.
Proposed rule.
The Agricultural Marketing Service (AMS) proposes multiple clarifying amendments to the Paper and Paper-Based Packaging Promotion, Research and Information Order (Order). The amendments include revising the definition of importer; adding a definition for partnership; clarifying the nominations process; clarifying language about in person and electronic voting for any Board meetings; updating the timing of financial reporting; and revising requirements for when exemptions can be requested. These actions would modify language in the Order to bring it up to date with current industry practices.
Comments must be received by August 14, 2024.
Interested persons are invited to submit written comments concerning this proposed rule. Comments may be mailed to the Docket Clerk, Market Development Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938; or submitted electronically by Email:
Samantha Mareno, Agricultural Marketing Specialist, Market Development Division, Specialty Crops Program, Agricultural Marketing Service, U.S. Department of Agriculture, 1400 Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-0244; Telephone: (720) 827-4907; or Email:
This proposed rule affecting the Order (7 CFR part 1222) is authorized by the Commodity Promotion, Research, and Information Act of 1996 (Act) (7 U.S.C. 7411-7425).
AMS is issuing this proposed rule in conformance with Executive Orders 12866, 13563, and 14094. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. This proposed rule is not a significant regulatory action within the meaning of Executive Order 12866. Accordingly, this action has not been reviewed by the Office of Management and Budget under section 6 of the Executive Order.
This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. AMS has assessed the impact of this proposed rule on Indian Tribes and determined that this proposed rule would not have Tribal implications that require consultation under Executive Order 13175. AMS hosts a quarterly teleconference with Tribal leaders where matters of mutual interest regarding the marketing of agricultural products are discussed. Information about the proposed changes to the regulations will be shared during an upcoming quarterly call, and Tribal leaders will be informed about the proposed revisions to the regulation and the opportunity to submit comments. AMS will work with the USDA Office of Tribal Relations to ensure meaningful consultation is provided as needed with regard to these proposed changes to the Order.
This proposal has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. Section 524 of the Act (7 U.S.C. 7423) provides that it shall not affect or preempt any other Federal or State law authorizing promotion or research relating to an agricultural commodity.
Under Section 519 of the Act (7 U.S.C. 7418), a person subject to an order may file a written petition with the U.S. Department of Agriculture (USDA), stating that an order, any provision of an order, or any obligation imposed in connection with an order, is not established in accordance with the law, and request a modification of an order or an exemption from an order. Any petition filed challenging an order, any provision of an order, or any obligation imposed in connection with an order, shall be filed within two years after the effective date of an order, provision, or obligation subject to challenge in the petition. The petitioner will have the opportunity for a hearing on the petition. Thereafter, USDA will issue a ruling on the petition. The Act provides that the district court of the United States for any district in which the petitioner resides or conducts business shall have the jurisdiction to review a final ruling on the petition if the petitioner files a complaint for that purpose not later than 20 days after the date of the entry of USDA's final ruling.
Under the Order, which became effective on January 23, 2014, the Paper and Packaging Board (Board), with oversight by USDA, administers a nationally coordinated program of research, promotion and information designed to strengthen the paper and paper-based packaging industry. The program covers four types of paper and paper-based packaging—printing and writing paper (used to make products for printing, writing and other communication purposes), kraft packaging paper (used for products like grocery bags and sacks), containerboard (used to make corrugated boxes, shipping containers and related products), and paperboard (used for food and beverage packaging, tubes, and other miscellaneous products). The program is financed by assessments on domestic manufacturers and importers of paper and paper-based packaging.
This proposed rulemaking would make multiple clarifying amendments to the Order. These amendments include revising the definition of importer; adding a definition for partnership; clarifying the nomination process; clarifying language about in person and electronic voting for any Board meetings; updating the timing of financial reporting; and revising requirements concerning when exemptions may be requested. The Board, which is composed of domestic manufacturers from across the country and importers, unanimously recommended the proposed changes to the Order on August 19, 2023. This action would modify language in the Order to bring it up to date with current industry practices.
In subpart A of the Order, several sections would be revised to clarify terms for the Board and the paper and paper-based packaging industry. Section 1222.7 currently defines fiscal period and marketing year. Proposed section 1222.7 would revise fiscal period to fiscal year as the term is better understood by the industry. The definition of importer in § 1222.8 would be revised to further clarify that importers are persons who import paper and paper-based packaging from outside the United States, that is subsequently released from custody by U.S. Customs and Border Protection (Customs) and introduced into the stream of commerce into the United States. Specifically, those persons are included who hold title of the foreign manufactured paper and paper-based packaging. The proposed revision is similar to the current definition of eligible importer in § 1222.101 (f) of Subpart B—Referendum Procedures.
Sections 1222.12 and 1222.13 currently include the term produce and producer respectively in the definition of manufacture and manufacturer. The term produce and producer are not used in the paper and paper-based packaging industry. Therefore, this proposed rule would remove these terms from the definition of manufacture and manufacturer.
Lastly, a new term for partnership would be added at § 1222.19 to state that a partnership includes, but is not limited to, spouses and joint ventures. This change is intended to clarify who is responsible for paying assessments. With this change, the existing sections 1222.19 through 1222.29 would be renumbered.
Section 1222.41 currently outlines the Board nominations and appointments process. Section 1222.41(c)(1) would be updated to clarify the process for conducting outreach and specifically issue a call for nominations to all current manufacturers and importers who have paid assessments during the prior fiscal year. Furthermore, section 1222.41(c)(4) and (c)(5) would be amended to remove repetitive language. Lastly, section 1222.41(c)(10) would be changed to specify that no two members shall be employed by a single manufacturer or importer that pays assessments under the Order to avoid confusion as to who can serve on the Board.
Section 1222.43(a) allows the Secretary to remove a Board member or employee for failure or refusal to perform their duties, per the Board's recommendation. This would be revised to remove the employee clause to be consistent with language in other research and promotion orders.
Section 1222.44 outlines the Board's procedures for conducting Board meetings. Section 1222.44(c) currently states that votes shall be cast in person at an assembled meeting. Additionally, section 1222.44 (d) allows for other means of voting in lieu of voting at an assembled meeting. Both sections would be revised to include options for electronic voting, or other means.
Section 1222.47 outlines prohibited activities for the Board. Section 1222.47(c) currently states no program, plan or project including advertising shall be false, misleading, or disparaging to another agriculture commodity. To be consistent in writing style, the proposed language would be modified to state any program, plan or project including advertising that is false, misleading, or disparaging to another agriculture commodity. This section would be updated to ensure clarity in wording.
Section 1222.50(i) outlines the operating monetary reserve for the Board and states that the funds in the reserve may not exceed one fiscal year's budget of expenses. This would be revised to increase the funds in the reserve so they may not exceed two fiscal years, which is consistent with other research and promotion orders.
Section 1222.51(b) describes when financial statements are to be submitted to the Department. The current timeframe is 30 days after the time period to which it applies, which is too restrictive because the Board reports financial statements on a quarterly basis. Therefore, this paragraph would be updated to specify that the financial statements are to be submitted quarterly and no later than 70 days after the period to which it applies.
Section 1222.51(c) refers to the annual financial statement that is submitted to the Department. Currently, the annual financial statement is due to the Department within 90 days after the end of the fiscal year. The Board has had difficulty in meeting this short deadline. Therefore, this rule would extend the timeframe to no later than 120 days to allow the Board more time to submit the statement to the Department.
Section 1222.52(e) currently states that importers of paper and paper-based packaging shall pay assessments through Customs to the Board. Customs does not currently collect import assessments for the Board and therefore, paragraph (e) would be revised by deleting “through Customs”, instead stating that each importer shall pay their assessment to the Board.
Section 1222.52(f) would also be revised by deleting the current language stating Customs collects assessments. Since Customs does not collect the assessment, the paragraph would be revised to state that each importer is responsible for paying assessments directly to the Board.
Section 1222.53(a)(1) currently specifies the minimum quantity necessary to be eligible for an exemption from assessments and requires manufacturers to apply for an exemption prior to the start of the marketing year. The rule would remove this requirement, allowing them to apply for an exemption at any time during a marketing year, not just before the year starts.
Section 1222.53(a)(2) (iii) provides that importers' assessments are collected by Customs and the Board shall refund the importer who has filed for exemption. Because Customs doesn't
Section 1222.53(a)(5) currently details how the quantity of paper and paper-based packaging counts towards an exemption. This paragraph would be revised to ensure that in determining whether a manufacturer or import qualifies for the exemption, the combined quantity of all paper and paper-based packaging manufactured or imported during a marketing year shall count towards the 100,000 short ton exemption.
Section 1222.81(2) refers to the frequency of referenda and outlines the criteria for continuation. This section would be updated to clarify that only eligible domestic manufacturers or eligible importers are included in the referendum voting. This change does not change who can vote and does not change voting restrictions.
Section 1222.82(b) currently states that the Secretary has the right to suspend or terminate the program whenever it is favored by the industry. This section would be updated to make the language used more concise to avoid confusion by the industry.
Definitions in Section 1222.101 would be updated to be consistent with terms defined in Subpart A. Specifically, paragraph (e) currently includes
Lastly, section 1222.102(a) currently outlines the voting eligibility of domestic manufacturers and importers. This section would be revised to include clarifying language to avoid confusion in the eligibility.
Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this action on small entities that would be affected by this rule. The purpose of the RFA is to fit regulatory action to scale of businesses subject to such action so that small businesses will not be disproportionately burdened. Manufacturers and importers would be considered agricultural service firms. The Small Business Administration defines small agricultural service firms as those having annual receipts of no more than $30 million (13 CFR part 121).
According to the Board, there are approximately 47 manufacturers in the United States that manufacture the types of paper and paper-based packaging covered under the Order. Using an average price of $1,350 per short ton,
Based on Customs data, there were 3,272 importers of paper and paper-based packaging in 2022. Of these, 40 importers, or 1 percent, had annual receipts of more than $30 million of paper and paper-based packaging. Thus, the majority of importers would be considered small entities.
This proposed rule would make multiple clarifying changes to the Order. The changes include revising the definition of importer; adding a definition for partnership; clarifying the nominations process; clarifying language about in person and electronic voting for any Board meetings; updating the timing of financial reporting; and revising requirements concerning when exemptions will be requested.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection and recordkeeping requirements that are imposed by the Order have been approved previously under OMB control number 0581-0093. This proposed rule would not result in a change to the information collection and recordkeeping requirements previously approved and would impose no additional reporting and recordkeeping burden on domestic manufacturers and importers of paper and paper-based packaging.
As with all Federal research and promotion programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. AMS has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.
AMS is committed to complying with the E-Government Act to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to government information and services, and for other purposes.
Regarding alternatives, the Board considered not making the clarifying changes to the Order and leaving it as it is currently. The Board decided against leaving the Order unchanged as confusion would continue and potentially worsen over time. Therefore, that alternative was rejected.
Regarding outreach efforts, the Board determined that making these proposed changes would clarify the issues and answer questions that have arisen over the last eight years and would help resolve similar questions in the future. This proposal was discussed by the Board in June and November 2022, and the full Board unanimously recommended the changes on August 19, 2023. AMS has performed this initial RFA analysis regarding the impact of this action on small entities and invites comments concerning potential effects of this action.
While this proposed rule as set forth below has not yet received the approval of AMS, it has been determined that it is consistent with and would effectuate the purposes of the Order. A 30-day comment period is provided to allow interested persons to respond to this proposal. All written comments received in response to this proposed rule by the date specified will be considered prior to finalizing this action.
Administrative practice and procedure, Advertising, Consumer information, Marketing agreements, Paper and paper-based packaging promotion, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Agricultural Marketing Service proposes to amend 7 CFR part 1222 as follows:
7 U.S.C. 7411-7425; 7 U.S.C. 7401.
(a) Spouses who have title to, or leasehold interest in, a paper and paper-based packaging manufacturing entity as tenants in common, joint tenants, tenants by the entirety, or, under community property laws, as community property; and
(b) So called “joint ventures” wherein one or more parties to an agreement, informal or otherwise, contributed land, facilities, capital, labor, management, equipment, or other services, or any variation of such contributions by two or more parties, that results in the manufacturing or importation of paper and paper-based packaging and the authority to transfer title to the paper and paper-based packaging so manufactured or imported.
(c) * * *
(1) The Board shall issue a call for nominations and conduct outreach to all current manufacturers and importers who paid assessments during the prior fiscal year. Manufacturers and importers may submit nominations to the Board;
(4) For domestic seats allocated by region, domestic manufacturers must manufacture paper and paper-based packaging in the region for which they seek nomination. Nominees that manufacture in both regions may seek nomination in one region of their choice;
(5) Nominees that are both a manufacturer and an importer may seek nomination to the board either as a manufacturer or as an importer so long as they meet the qualifications;
(10) No two members shall be employed by a single manufacturer or importer that pays assessments under this Order; and,
(a) The Board may recommend to the Secretary that a member be removed from office if the member consistently fails or refuses to perform his or her duties properly or engages in dishonest acts or willful misconduct. If the Secretary determines that any person appointed under this subpart consistently fails or refuses to perform his or her duties properly or engages in acts of dishonesty or willful misconduct, the Secretary shall remove the person from office. A person appointed under this subpart may be removed by the Secretary if the Secretary determines that the person's continued service would be detrimental to the purposes of the Act.
(c) The Board and related committees may conduct meetings by any means of communication available, electronic or otherwise, that effectively assembles the required participants and facilitates open communication. Eligible participants may vote by any means of communication available, electronic or otherwise; provided that votes cast are verifiable and that a quorum and other procedural requirements are met.
(d) In lieu of voting at an assembled meeting and, when in the opinion of the chairperson of the Board such action is considered necessary, the Board may take action if supported by a majority of members (unless a two-thirds majority is required under the Order) by any means of communication available, electronic or otherwise. In that event, all members must be notified and provided the opportunity to vote. Any action so taken shall have the same force and effect as though such action had been taken at an assembled meeting. All votes shall be recorded in Board minutes.
(c) Any program, plan or project including advertising that is false, misleading, or disparaging to another agricultural commodity. Paper and paper-based packaging of all geographic origins shall be treated equally.
(i) The Board may establish an operating monetary reserve and may carry over to subsequent fiscal years excess funds in any reserve so established: Provided, that, the funds in the reserve do not exceed two fiscal year's budget of expenses. Subject to approval by the Secretary, such reserve funds may be used to defray any expenses authorized under this subpart.
(b) Each quarterly financial statement shall be submitted to the Department no later than 70 calendar days after the period to which it applies.
(c) The Board shall submit to the Department an audited annual financial statement no later than 120 calendar days after the end of the fiscal year to which it applies.
(e) Each importer of paper and paper-based packaging shall pay to the Board an assessment on the paper and paper-based packaging imported into the United States identified in the Harmonized Tariff Schedule of the United States (HTSUS) number listed in the following table. In the event that any HTSUS number subject to assessment is changed and such change is merely a replacement of a previous number and has no impact on the description of the paper and paper-based packaging involved, assessments will continue to be collected based on the new number.
(f) Each importer is responsible for paying the assessment directly to the Board within 30 calendar days after the end of the quarter in which the paper and paper-based packaging was imported.
(a)
(2) * * *
(iii) The Board shall refund to such importers considered exempt assessments that the importer paid to the Board no later than 60 calendar days after the Board receives such assessments. The Board will stop refund of assessments to such importers who during the marketing year import more than 100,000 short tons of paper and paper-based packaging. These importers will be notified accordingly. No interest shall be paid on the assessments collected by the Board.
(5) In calculating whether a manufacturer or importer qualifies for an exemption, the combined quantity of all paper and paper-based packaging manufactured or imported by the manufacturer or importer during a marketing year shall count towards the 100,000 short-ton exemption.
(b) * * *
(2) Not later than seven years after this Order becomes effective and every seven years thereafter, to determine whether manufacturers and importers favor the continuation of the Order. The Order shall continue if it is favored by a majority of manufacturers and importers voting in the referendum who, during a representative period determined by the Secretary, are each an eligible domestic manufacturer or an eligible importer and who also represent a majority of the volume of paper and paper-based packaging represented in the referendum;
(b) The Secretary shall suspend or terminate this subpart at the end of the fiscal year whenever the Secretary determines that its suspension or termination is favored by a majority of manufacturers and importers voting in the referendum who, during a representative period determined by the Secretary, are each an eligible domestic manufacturer or an eligible importer and who also represent a majority of the volume of paper and paper-based packaging represented in the referendum;
(e) Eligible domestic manufacturer means any person who is currently a domestic manufacturer and who manufactured 100,000 short tons or more of paper and paper-based packaging during the representative period.
(i) Manufacture means the process of transforming pulp into paper and paper-based packaging.
(a) Each eligible domestic manufacturer and importer of paper and paper-based packaging shall be entitled to cast only one ballot in the referendum. However, each domestic manufacturer in a landlord/tenant relationship or a divided ownership arrangement involving totally independent entities cooperating only to manufacture paper and paper-based packaging, in which more than one of the parties is a domestic manufacturer or importer, shall be entitled to cast one ballot in the referendum covering only such domestic manufacturer or importer's share of ownership.
Nuclear Regulatory Commission.
Draft guides; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) is issuing for public comment two related draft Regulatory Guides (DG) namely DG-1290, Revision 1, “Design-Basis Floods for Nuclear Power Plants,” proposed Revision 3 of Regulatory Guide (RG) 1.59 of the same name and DG-1417, “Guidance for Assessment of Flooding Hazards due to Water Control Structure Failures and Incidents,” proposed new RG 1.256. DG-1290 provides guidance for applicants for new nuclear power plants (NPPs) on acceptable methods for evaluating design-basis floods and DG-1417 provides guidance for applicants on flooding hazards due to failure or other incidents at man-made water
Submit comments by August 14, 2024. Comments received after this date will be considered if it is practical to do so, but the NRC 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:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Edward O'Donnell, Office of Nuclear Regulatory Research, telephone: 301-415-3317; email:
Please refer to Docket ID NRC-2024-0110 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:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, 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 the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
The NRC is issuing for public comment two related DGs in the NRC's “Regulatory Guide” series, namely DG-1290 and DG-1417. This series was developed to describe methods that are acceptable to the NRC staff for implementing specific parts of the agency's regulations, to explain techniques that the staff uses in evaluating specific issues or postulated events, and to describe information that the staff needs in its review of applications for permits and licenses.
DG-1290 was previously released for public comment on February 23, 2022, as announced in the
DG-1417 is a proposed new RG, RG 1.256, of the same name, and is temporarily identified by its task number, DG-1417 (ADAMS Accession No. ML22278A110). It was developed to provide guidance to applicants for new NPPs on acceptable methods for evaluating design-basis flooding hazards due to failure or other incidents at man-made water control structures including, but not limited to, dams and levees. If finalized, RG 1.256 would formally incorporate interim staff guidance (ISG) “Guidance for Assessment of Flooding Hazards Due to Dam Failure” (JLD-ISG-2013-01) (ADAMS Accession No. ML13151A153) into NRC's regulatory guidance framework. ISGs are meant to be withdrawn after their immediate purpose has been fulfilled or integrated formally into the NRC's regulatory guidance framework. If DG-1417 is finalized as RG 1.256, JLD-ISG-2013-01 will be withdrawn. The staff is also issuing for public comment a draft regulatory analysis for DG-1417 (ADAMS Accession No. ML22278A111). The staff developed the regulatory analysis to assess the value of issuing or revising a RG, as well as alternative courses of action. A regulatory analysis for DG-1290 was released for comment on February 23, 2022, and although no comments were received it is available for comment and can be found in ADAMS under Accession No. ML12121A020.
As noted in the
If finalized, the NRC staff may use RG 1.256 as a reference in its regulatory processes, such as licensing, inspection, or enforcement. However, the NRC staff does not intend to use the proposed guidance in RG 1.256 to support NRC staff actions in a manner that would constitute backfitting as that term is defined in 10 CFR 50.109, “Backfitting,” and as described in NRC Management Directive (MD) 8.4, “Management of Backfitting, Forward Fitting, Issue Finality, and Information Requests,” (ADAMS Accession No. ML18093B087); nor does the NRC staff intend to use the proposed guidance to affect the issue finality of an approval under 10 CFR part 52, “Licenses, Certifications, and Approvals for Nuclear Power Plants.” The staff also does not intend to use the proposed guidance to support NRC staff actions in a manner that constitutes forward fitting as that term is defined and described in MD 8.4. If a licensee believes that the NRC is using this proposed RG in a manner inconsistent with the discussion in this Implementation section, then the licensee may file a backfitting or forward fitting appeal with the NRC in accordance with the process in MD 8.4.
A member of the public may, at any time, submit suggestions to the NRC for improvement of existing RGs or for the development of new RGs. Suggestions can be submitted on the NRC's public website at
For the Nuclear Regulatory Commission.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to supersede Airworthiness Directive (AD) 2023-08-04, which applies to certain The Boeing Company Model 787-8, 787-9, and 787-10 airplanes. AD 2023-08-04 requires a detailed visual inspection of all door 1 and door 3 lavatory and galley potable water systems for any missing or incorrectly installed clamshell couplings, and applicable on-condition actions. Since the FAA issued AD 2023-08-04, Boeing has discovered that some couplings did not have the required safety strap and has developed a design solution that replaces the couplings with couplings that have safety straps to address the unsafe condition. This proposed AD would retain the requirements of AD 2023-08-04 and require a detailed inspection of all clamshell couplings for the presence and correct installation of safety straps at door 1 and door 3 lavatories and galleys with a potable water system, and applicable on-condition actions. The AD would also prohibit the installation of affected parts at inspection locations and remove Model 787-10 airplanes from the applicability. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by August 29, 2024.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
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• For Boeing material identified in this NPRM, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; website
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at
Brandon Lucero, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3569; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and
The FAA issued AD 2023-08-04, Amendment 39-22419 (88 FR 33823, May 25, 2023) (AD 2023-08-04), for certain The Boeing Company Model 787-8, 787-9, and 787-10 airplanes. AD 2023-08-04 was prompted by reports of a loss of water pressure during flight and water leaks that affected multiple pieces of electronic equipment. AD 2023-08-04 requires a detailed visual inspection of all door 1 and door 3 lavatory and galley potable water systems for any missing or incorrectly installed clamshell couplings, and applicable on-condition actions. The agency issued AD 2023-08-04 to address incorrectly installed or missing lavatory and galley clamshell couplings that could lead to water leaks and water migration to critical flight equipment, which may affect the continued safe flight and landing of the airplane.
The FAA issued AD 2023-08-04 as an interim action and indicated that the FAA might consider additional rulemaking. AD 2023-08-04 requires an inspection of the potable water clamshell couplings, regardless of the safety-strap configuration. Boeing has determined that some clamshell couplings do not have the required safety straps and has since developed procedures to ensure that affected clamshell couplings have correctly installed safety straps. The FAA has now determined that further rulemaking is necessary, and this proposed AD follows from that determination.
Model 787-10 airplanes, which are all delivered with the safety-strap coupling, are no longer subject to the unsafe condition, and do not need the new proposed inspections. Therefore, those airplanes are not included in the applicability.
The FAA is proposing this AD to prevent a loss of water pressure during flight and water leaks that can affect multiple pieces of electronic equipment. The unsafe condition, if not addressed, could lead to water migration to critical flight equipment, which may affect the continued safe flight and landing of the airplane.
The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
The FAA reviewed Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023. This material specifies procedures for a detailed inspection for the presence and correct installation of safety straps at the clamshell couplings at door 1 and door 3 lavatories and galleys with a potable water system. The material also specifies applicable on-condition actions including correcting the installation of the safety strap, replacing any clamshell coupling that does not have a strap with a new clamshell coupling that has a safety strap, and performing a water leak test.
This proposed AD would also require Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022, which the Director of the Federal Register approved for incorporation by reference as of June 29, 2023 (88 FR 33823, May 25, 2023).
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
This proposed AD would retain all of the requirements of AD 2023-08-04. This proposed AD would require accomplishing the actions specified in the material already described, except for any differences identified as exceptions in the regulatory text of this proposed AD. This proposed AD would also prohibit the installation of affected parts at inspection locations and remove Model 787-10 airplanes from the applicability. For information on the procedures and compliance times, see this material at regulations.gov under Docket No. FAA-2024-1884.
The FAA estimates that this AD, if adopted as proposed, would affect 165 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any necessary on-condition actions that would be required based on the results of the proposed inspection. The agency has no way of determining the number of aircraft that might need these actions:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by August 29, 2024.
This AD replaces AD 2023-08-04, Amendment 39-22419 (88 FR 33823, May 25, 2023) (AD 2023-08-04).
This AD applies to The Boeing Company Model 787-8 and 787-9 airplanes, certificated in any category, as specified in Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022.
Air Transport Association (ATA) of America Code 38, Water/waste.
This AD was prompted by reports of a loss of water pressure during flight and water leaks that affected multiple pieces of electronic equipment. The FAA is issuing this AD to prevent a loss of water pressure during flight and water leaks that can affect multiple pieces of electronic equipment. The unsafe condition, if not addressed, could lead to water leaks and water migration to critical flight equipment, which may affect the continued safe flight and landing of the airplane.
Comply with this AD within the compliance times specified, unless already done.
This paragraph restates the requirements of paragraph (g) of AD 2023-08-04, with no changes. Except as specified by paragraph (h) of this AD: At the applicable times specified in the “Compliance” paragraph of Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022, do all applicable actions identified in, and in accordance with, the Accomplishment Instructions of Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022.
This paragraph restates the exceptions of paragraph (h) of AD 2023-08-04, with no changes. Where the Compliance Time columns of the table in the “Compliance” paragraph of Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022, refer to the Issue 001 date of Requirements Bulletin B787-81205-SB380021-00 RB, this AD requires using June 29, 2023 (the effective date of AD 2023-08-04).
This paragraph restates paragraph (i) of AD 2023-08-04, with no changes. This paragraph provides credit for the actions specified in paragraph (g) of this AD, if those actions were performed before June 29, 2023 (the effective date of AD 2023-08-04), using Multi Operator Message MOM-MOM-21-0554-01B, dated December 14, 2021 (for lavatory inspections); and MOM-MOM-22-0229-01B, dated April 29, 2022 (for galley inspections).
For airplanes identified in Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023: Except as specified by paragraph (k) of this AD, at the applicable times specified in the “Compliance” paragraph of Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023, do all applicable actions identified in,
Where the Compliance Time columns of the tables in the “Compliance” paragraph of Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023, use the phrase “the Issue 001 date of Requirements Bulletin B787-81205-SB250299-00 RB,” this AD requires using the effective date of this AD.
For the airplanes identified in Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023: Accomplishment of the actions required by paragraph (j) of this AD terminates the requirements of paragraph (g) of this AD.
As of the effective date of this AD, no person may install a clamshell coupling, part number (P/N) 14C02-08C or P/N AS1655A08, at inspection locations where P/N 14C02-08C or P/N AS1655A08 was replaced with P/N 14C34-08C or P/N 14C33-08 on any airplane in accordance with Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023.
(1) The Manager, AIR-520, Continued Operational Safety Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (o)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, AIR-520, Continued Operational Safety Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(4) AMOCs approved for AD 2023-08-04 are approved as AMOCs for the corresponding provisions of Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022, that are required by paragraph (g) of this AD.
(1) For more information about this AD, contact Brandon Lucero, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3569; email:
(2) Material identified in this AD that is not incorporated by reference is available at the addresses specified in paragraph (p)(5) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(3) The following material was approved for IBR on [DATE 35 DAYS AFTER PUBLICATION OF THE FINAL RULE].
(i) Boeing Alert Requirements Bulletin B787-81205-SB250299-00 RB, Issue 001, dated July 31, 2023.
(ii) [Reserved]
(4) The following material was approved for IBR on June 29, 2023 (88 FR 33823, May 25, 2023).
(i) Boeing Alert Requirements Bulletin B787-81205-SB380021-00 RB, Issue 001, dated August 12, 2022.
(ii) [Reserved]
(5) For Boeing material identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; website
(6) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(7) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Proposed rule; correction.
The FAA is correcting a notice of proposed rulemaking (NPRM) that was published in the
The last date for submitting comments on the NPRM (89 FR 51856, June 20, 2024) remains August 5, 2024.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For service information, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC
Stefanie Roesli, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3964; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Stefanie Roesli, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3964; email:
The FAA issued an NPRM (89 FR 51856, June 20, 2024) that would apply to all The Boeing Company Model 767-200, -300, and -300F series airplanes. The NPRM was prompted by a report of a main landing gear (MLG) collapse event following maintenance where a grinder was operating outside of its input parameters, resulting in possible heat damage to the outer cylinder of the MLG. The NPRM proposed to require replacing any affected outer cylinders. The FAA is proposing this AD to address any heat damage to the outer cylinder of the landing gear. The unsafe condition, if not addressed, could result in the inability of a principal structural element to sustain limit load, gear collapse resulting in loss of control and potential for off runway excursion.
The FAA reviewed Boeing Alert Requirements Bulletin 767-32A0253 RB, dated February 6, 2024. This service information specifies procedures for performing a check of maintenance records or performing an inspection of the left and right MLG outer cylinders for any affected part numbers and serial numbers and replacing affected cylinders. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
As published, the docket number referenced throughout the NPRM is incorrect. The NPRM incorrectly references “Docket No. FAA-2024-1688.” The correct docket number is “Docket No. FAA-2024-1689.”
Although no other part of the preamble or regulatory information has been corrected, for clarity the FAA is publishing the entire proposed rule in the
The comment due date of the NPRM remains August 5, 2024.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by August 5, 2024.
None.
This AD applies to all The Boeing Company Model 767-200, -300, and -300F series airplanes, certificated in any category.
Air Transport Association (ATA) of America Code 32, Landing Gear.
This AD was prompted by a report of a main landing gear (MLG) collapse event following maintenance where a grinder was operating outside of its input parameters, resulting in possible heat damage to the outer cylinder of the MLG. The FAA is issuing this AD to address any heat damage to the outer cylinder of the landing gear. The unsafe condition, if not addressed, could result in the inability of a principal structural element to sustain limit load, gear collapse resulting in loss of control and potential for off runway excursion.
Comply with this AD within the compliance times specified, unless already done.
Except as specified by paragraph (h) of this AD: At the applicable times specified in the “Compliance” paragraph of Boeing Alert Requirements Bulletin 767-32A0253 RB, dated February 6, 2024, do all applicable actions identified in, and in accordance with, the Accomplishment Instructions of Boeing Alert Requirements Bulletin 767-32A0253 RB, dated February 6, 2024.
Where the Boeing Recommended Compliance Time column of the table in the “Compliance” paragraph of Boeing Alert
(1) The Manager, AIR-520, Continued Operational Safety Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (j)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, AIR-520, Continued Operational Safety Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(1) For more information about this AD, contact Stefanie Roesli, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3964; email:
(2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (k)(3) and (4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Boeing Alert Requirements Bulletin 767-32A0253 RB, dated February 6, 2024.
(ii) [Reserved]
(3) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; website
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard proposes to remove the operating schedule that governs the FDOT Railroad Bridge, across the Miami River, North Fork, mile 5.3, at Miami, FL. The railroad bridge is being replaced with a fixed bridge. We invite your comments on this proposed rulemaking.
Comments and related material must reach the Coast Guard on or before August 14, 2024.
You may submit comments identified by docket number USCG-2024-0379 using Federal Decision Making Portal at
See the “Public Participation and Request for Comments” portion of the
If you have questions on this proposed rule, call or email Ms. Jennifer Zercher, Bridge Management Specialist, Seventh Coast Guard District; telephone 571-607-5951, email
The FDOT Railroad Bridge, across the Miami River, North Fork, mile 5.3, at Miami, FL, is a single bascule bridge with a 6-foot vertical clearance at mean high water in the closed position. The normal operating schedule is set forth in 33 CFR 117.307.
FDOT applied for and received a Coast Guard Bridge Permit to replace the existing moveable railroad bridge with a fixed railroad bridge. FDOT has requested the drawbridge operation regulation be removed and the bridge be allowed to remain closed to navigation in anticipation of phase one of the bridge replacement project, converting the moveable bridge to a fixed bridge, beginning August 2024.
The Miami River, under the jurisdiction of the U.S. Army Corps of Engineers, is a federal navigation project channel. On December 21, 2020, the U.S. Congress approved the deauthorization of navigational rights for the portion of the Miami River between the FDOT Railroad Bridge and the S-26 SFWMD structure with the Miami Rivel Canal provision of the Consolidated Appropriations Act, 2021 (12/21/2020).
Under this proposed rule, the FDOT Railroad Bridge would be allowed to remain closed to navigation until the bridge replacement project is completed. The waterway from the railroad bridge to the water control structure has been deauthorized of navigational rights, therefore, impacts to navigation are not expected. Vessels that can pass beneath the bridge without an opening would be able to so at any time.
We developed this proposed rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analyses based on these statutes and Executive Orders.
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 proposed rule has not been designated a “significant regulatory action,” under section 3(f) of Executive
This regulatory action determination is based on the ability that vessels able to transit the bridge without an opening may do so at any time.
The Regulatory Flexibility Act of 1980 (RFA), 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 proposed rule would not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the bridge may be small entities, for the reasons stated in section IV.A above this proposed rule would not have a significant economic impact on any vessel owner or operator.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see
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 proposed rule. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This proposed rule would call for no 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 proposed 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 proposed rule does not have tribal implications under Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments) because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the
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 proposed rule will not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Management Directive 023-01, Rev.1, associated implementing instructions, and Environmental Planning Policy COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f). The Coast Guard has 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 proposed rule promulgates the operating regulations or procedures for drawbridges. Normally such actions are categorically excluded from further review, under paragraph L49, of Chapter 3, Table 3-1 of the U.S. Coast Guard Environmental Planning Implementation Procedures.
Neither a Record of Environmental Consideration nor a Memorandum for the Record are required for this rule. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.
We view public participation as essential to effective rulemaking and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We review all comments received, but we will only post comments that address the topic of the proposed rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive.
Bridges.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:
33 U.S.C. 499; 33 CFR 1.05-1; and DHS Delegation No. 00170.1, Revision No. 01.3.
Environmental Protection Agency (EPA).
Proposed rule.
North Carolina has applied to the Environmental Protection Agency (EPA) for final authorization of changes to its hazardous waste program under the Resource Conservation and Recovery Act (RCRA), as amended. The EPA has reviewed North Carolina's application and has determined, subject to public comment, that these changes satisfy all requirements needed to qualify for final authorization. Therefore, in the “Rules and Regulations” section of this
Comments must be received on or before August 14, 2024.
Submit your comments, identified by Docket ID No. EPA-R04-RCRA-2024-0116, at
The EPA encourages electronic submittals, but if you are unable to submit electronically or need other assistance, please contact Leah Davis, the contact listed in the
All documents in the docket are listed in the
Leah Davis; RCRA Programs and Cleanup Branch; Land, Chemicals and Redevelopment Division; U.S. Environmental Protection Agency; Atlanta Federal Center, 61 Forsyth Street SW, Atlanta, Georgia 30303-8960; telephone number: (404) 562-8562; fax number: (404) 562-9964; email address:
This document proposes to take action on North Carolina's changes to its hazardous waste management program under the Resource Conservation and Recovery Act (RCRA), as amended. We have published a final action authorizing these changes in the “Rules and Regulations” section of this
If we receive no adverse comment, we will not take further action on this proposed rule. If we receive adverse comment, we will withdraw the final action and it will not take effect. We would then address all public comments in a subsequent final action and base any further decision on the authorization of the State program changes after considering all comments received during the comment period.
We do not intend to institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information, please see the information provided in the
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Denial of petitions for rulemaking.
This document denies a petition for rulemaking from Jerry and Marianne Karth, Eric Hein, and Lois Durso-Hawkins, requesting that NHTSA amend Federal Motor Vehicle Safety Standards (FMVSS) No. 223, “Rear impact guards,” and FMVSS No. 224, “Rear impact protection,” to include additional requirements. The agency is denying the petition because it does not provide new or different information that would warrant initiation of a rulemaking at this time. This document also discusses NHTSA's consideration of a similar petition from the same petitioners submitted to the docket of the July 15, 2022 final rule amending FMVSS Nos. 223 and 224.
July 15, 2024.
National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, West Building, Washington, DC 20590.
The National Traffic and Motor Vehicle Safety Act (“Safety Act”) (49 U.S.C. 30101
On July 15, 2022, NHTSA published a final rule in the
NHTSA received a petition for rulemaking from Jerry and Marianne Karth, Eric Hein, and Lois Durso-Hawkins dated August 18, 2022, requesting that NHTSA initiate rulemaking “to require that Rear Impact Guards on van-type or box semitrailers are able to prevent underride by passenger vehicles at 35 mph in 30% offset crashes.”
NHTSA received a similar submission from Jerry and Marianne Karth, Eric Hein, Lois Durso-Hawkins, Aaron Kiefer, Andy Young, and Garrett Mattos dated July 15, 2022, submitted as a petition for reconsideration of the July 15, 2022 final rule.
In the August 18 petition, the petitioners requested that NHTSA promptly initiate rulemaking to require that rear impact guards on trailers provide protection in 30 percent overlap crashes at 35 mph. The petitioners stated that this type of crash is known to result in death and significant injuries, including in collisions with rear impact guards designed to meet the requirements in the July 15, 2022 final rule. In support of their petition, the petitioners stated that NHTSA had been directed by Congress to “protect the safety of the driving public against unreasonable risk of death or injury” and claimed that the agency had failed to fulfill these directives.
The petitioners' July 15 submission advanced essentially the same arguments, that NHTSA had failed to address the guard deficiencies for 30 percent overlap protection identified by IIHS and that the agency had “summarily dismissed” IIHS's research in issuing the final rule. The petitioners also argued that the 2022 final rule did not address the concern that the attachments of the guards to the trailers were too weak. The petitioners noted that some manufacturers offered their redesigned guards as standard, while other manufacturers offered them only as an option, and that NHTSA “has demonstrated an unwillingness to require that all manufacturers install these stronger guards as Standard on new trailers” and has continued to allow unreasonable risk when there is “available and proven technology.” They asserted that the Advisory Committee on Underride Protection (ACUP) should have been able to provide input before the final rule was issued.
All NHTSA rulemaking actions establishing an FMVSS must meet the Safety Act's requirements. The FMVSS must be practicable, it must meet the need for motor vehicle safety, and it must be objective, reasonable, and appropriate for the motor vehicle type for which it is prescribed. While a particular trailer model may include a more robust guard as standard, the agency must consider the effect of a mandate on
In accordance with 49 U.S.C. 30162 and 49 CFR part 552, NHTSA is denying two petitions for rulemaking requesting that NHTSA initiate rulemaking to amend FMVSS No. 223, “Rear impact guards,” and FMVSS No. 224, “Rear impact protection,” to include additional requirements. NHTSA is denying these petitions because the petitioners did not provide new or different information that would warrant initiation of a rulemaking at this time.
Issued in Washington, DC, under authority delegated in 49 CFR 1.95 and 501.5.
Foreign Agricultural Service, Department of Agriculture (USDA).
Request for information.
The Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture requests comments from the public to inform an understanding on non-traditional, shelf-stable commodities that could be used in food assistance programming. FAS seeks to learn what commodities could be considered outside the traditional food assistance commodities. This RFI offers interested parties the opportunity to provide FAS with information regarding non-traditional, shelf-stable food aid commodities.
Comments on this notice must be received by July 30, 2024, to be assured of consideration.
USDA invites submission of the requested information through one of the following methods:
•
•
Molly Kairn, Program and Management Analyst, U.S. Department of Agriculture, Foreign Agricultural Service, email
In October 2023, USDA announced with United States Agency for International Development (USAID) the use of $1 billion of Credit Commodity Corporation funding to help fill food security gaps and supply safe and nutritious food to the global community in need.
Of this funding, up to $50 million will be set aside for use in a pilot program that will operate to utilize U.S. commodities that:
1. Have not recently been substantially included in international food assistance programming,
2. Are shelf-stable, and
3. Are suitable for use in feeding food-insecure populations.
These U.S.-grown commodities could include, but are not limited to, nuts; dried fruits; grains such as quinoa, farro, and oats; and canned fish or canned meats.
FAS requests information from the public to help identify non-traditional, shelf-stable commodities that could be used in food assistance programming under the proposed $50 million pilot program. Non-traditional commodities could include, but are not limited to, commodities that have never been used before in food assistance programming, commodities that have not been used in food assistance programming in at least the last 5 years, and/or commodities that can be made into a new product. Additionally, FAS requests information from the public about non-traditional commodities including:
1. Cost per metric tonnage, or other customary commercial unit of measure, including cost to the U.S. Government,
2. Estimated cost of delivery of commodities to a U.S. port,
3. Packaging details, including transportation/containerization requirements and costs,
4. The expected shelf life under normal storage conditions and adverse conditions that might be expected in developing countries (
5. Any history/documentation of successful storage performance for the commodity,
6. Nutritional benefits for adults and for children,
7. Essential minerals,
8. Testing requirements for food safety,
9. Consumer preparation instructions, if any, including requirements for potable water, fuel, and cooking time,
10. Whether the commodity meets current Food and Drug Administration requirements,
11. The current production capacity in the United States, and seasonality/availability of the commodity for export,
12. Known challenges and barriers around imports, and
13. Intended age range for population if product is fortified.
Please include any relevant data sources. The response to this RFI is voluntary, and the public is welcome to address any or all the questions and provide additional information that may be relevant to seeking information on non-traditional food aid commodities.
Responses may not exceed ten (10) pages per respondent and should focus on addressing the questions described above. Please do not submit applications, proposals, resumes or promotional materials. The submission shall be written in English and typed on standard 8
No confidential information, such as confidential business information or proprietary information, should be submitted in comments for this RFI. Comments received in response to this notice will be a matter of public record and will be made available for public inspection and posted without change and as received, including any business information or personal information provided in the comments, such as names and addresses. Please do not include anything in your comment submission that you do not wish to share with the public.
Rural Business-Cooperative Service, USDA.
Notice.
The Rural Business- Cooperative Service (the Agency) is issuing a notice of the Agency's intention to remove the self-imposed restriction that all Fiscal Year (FY) 2024 applications that are submitted under the Rural Energy for America Program (REAP) prior to June 30, 2024, and were not funded in the national unrestricted pooling competitions, must be withdrawn. The Agency is also updating its approach for application reviews. This Notice also outlines the Agency's prioritization of Underutilized Renewable Energy Technologies (UT) in National Office competitions for FY 2024.
Applicable July 15, 2024.
You are encouraged to contact your United States Department of Agriculture (USDA) Rural Development (RD) State Energy Coordinator well in advance of the application deadline to discuss your project and ask any questions about the application process. Contact information for State Office Energy Coordinators can be found at www.
Program guidance and application forms may be obtained at
Jonathan Burns, Program Management Division, Rural Business-Cooperative Service, United States Department of Agriculture, 774-678-7238 or email
The Agency published two funding opportunity notices and a correction notice in the
Due to the continued overwhelming response of the funding opportunity, the Agency continues to experience longer than anticipated turnaround times. The Agency recognizes this may negatively affect applicants and, to provide equitable treatment, the self-imposed deadline on the national unrestricted pooling competitions for FY 2024 will be extended. The Agency will continue processing FY 2024 applications, those received through June 30, 2024, until December 31, 2024. Unlike many prior years, National Office pooling of Unrestricted Funding is estimated to occur within the first quarter of the 2025 calendar year.
Applications received by June 30, 2024, that remain incomplete on January 1, 2025, will be withdrawn. Unfunded applications from the national competitions will not be moved into the FY 2025 funding cycle and must be withdrawn. Those applicants may submit a new application to compete in FY 2025 competition(s) if they have not already started their project or incurred project costs.
To maximize efficiency and address the backlog of applications, the Agency will use the following processing procedures effective on the publication date of this Notice.
If an application does not meet the definition of complete application, according to 7 CFR 4280.103, the Agency will send a notification identifying those parts of the application that are incomplete and no further action will be taken on the application.
The Agency will give 15 business days for applicants to provide the missing documentation. The application will be withdrawn, and the applicant notified if the required documentation is not received within the 15 business days or if the information submitted by the deadline is insufficient.
Application processing will continue if all documentation is received timely and is sufficient to meet the definition of a complete application.
The Agency will review for applicant and project eligibility and financial and technical feasibility. If the Agency requires additional clarification or documentation, the Agency will send a notification and give 15 business days for the applicant to provide the information.
The application will be withdrawn, and the applicant notified if the required information is not received within the 15 business days or if the information submitted by the deadline is insufficient.
Application processing will continue if all information is received timely and is sufficient for determining applicant and project eligibility. The applicant will then receive a notification of the eligibility review outcome.
To carry out the Inflation Reduction Act's intention to have set aside competition for UT, the Agency anticipates holding National Office competitions, exclusively for projects proposing the use of UT. These National Office competitions are anticipated to be held through the end of FY 2024, as needed.
In addition, the FY 2024 National Office Unrestricted pooled competition will first consider funding project proposing the use of UT in accordance with the March 31, 2023, REAP NOSA (88 FR 19239). This Unrestricted National Office pooled competition is
Rural Housing Service (RHS), USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Rural Housing Service's intention to request an extension for a currently approved information collection in support of the Community Facilities Grant Program.
Comments on this notice must be received by September 13, 2024 to be assured of consideration.
Comments may be submitted through the Federal eRulemaking Portal: Go to
MaryPat Daskal, Chief, Branch 1, Rural Development Innovation Center—Regulations Management Division, USDA, 1400 Independence Avenue SW, STOP 1522, South Building, Washington, DC 20250-1522. Telephone: (202) 720-7853. Email
The Office of Management and Budget's (OMB) regulation (5 CFR part 1320) implementing provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13) requires that interested members of the public and affected agencies have an opportunity to comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d)). This notice identifies an information collection that will be submitted to OMB for extension.
Information will be collected by the field offices from applicants, consultants, lenders, and public entities. The collection of information is considered the minimum necessary to effectively evaluate the overall scope of the project.
Failure to collect information could have an adverse impact on effectively carrying out the mission, administration, processing, and program requirements.
Copies of this information collection can be obtained from Kimble Brown, Rural Development Innovation Center, USDA, 1400 Independence Avenue SW, STOP 1522, South Building, Washington, DC 20250-1522. Telephone: (202) 720-6780. Email
All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become matter of public record.
Rural Housing Service (RHS), USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Rural Housing Service's intention to request an extension for a currently approved information collection in support of the program for Fire and Rescue Loans.
Comments on this notice must be received by September 13, 2024 to be assured of consideration.
Comments may be submitted through the Federal eRulemaking Portal: Go to
MaryPat Daskal, Chief, Branch 1, Rural Development Innovation Center—Regulations Management Division, USDA, 1400 Independence Avenue SW, STOP 1522, South Building, Washington, DC 20250-1522. Telephone: (202) 720-7853. Email
The Office of Management and Budget's (OMB) regulation (5 CFR part 1320) implementing provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13) requires that interested members of the public and affected agencies have an opportunity to comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d)). This notice identifies an information collection that RHS is submitting to OMB for extension.
The Community Facilities fire and rescue program has been in existence for over 35 years. This program has financed a wide range of fire and rescue projects varying in size and complexity from construction of a fire station with firefighting and rescue equipment to financing a 911 emergency system. These facilities are designed to provide fire protection and emergency rescue services to rural communities.
Information will be collected by the field offices from applicants, borrowers, and consultants. This information will be used to determine applicant/borrower eligibility, assess project feasibility, and ensure borrowers operate on a sound basis and use funds for authorized purposes. Failure to collect proper information could result in improper determination of eligibility, improper use of funds, and/or unsound loans.
Copies of this information collection can be obtained from Kimble Brown, Rural Development Innovation Center, USDA, 1400 Independence Avenue SW, STOP 1522, South Building, Washington, DC 20250-1522. Telephone: (202) 720-6780. Email
All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.
Rural Housing Service, USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Rural Housing Service's (RHS) intention to request an extension for a currently approved information collection in support of the program for Community Facility Loans.
Comments on this notice must be received by September 13, 2024 to be assured of consideration.
Comments may be submitted through the Federal eRulemaking Portal: Go to
Information on using
MaryPat Daskal, Chief, Branch 1, Rural Development Innovation Center—Regulations Management Division, USDA, 1400 Independence Avenue SW, STOP 1522, South Building, Washington, DC 20250-1522. Telephone: (202) 720-7853. Email
The Office of Management and Budget's (OMB) regulation (5 CFR part 1320) implementing provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13) requires that interested members of the public and affected agencies have an opportunity to comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d)). This notice identifies an information collection that RHS is submitting to OMB for extension.
Community Facilities programs have been in existence for 40 years. These programs have financed a wide range of projects varying in size and complexity from large general hospitals to small day care centers. The facilities financed are designed to promote the development of rural communities by providing the infrastructure necessary to attract residents and rural jobs.
Information will be collected by the field offices from applicants, borrowers, and consultants. This information will be used to determine applicant/borrower eligibility, assess project feasibility, and ensure borrowers operate on a sound basis and use funds for authorized purposes. Failure to collect proper information could result in improper determination of eligibility, improper use of funds, and/or unsound loans.
Copies of this information collection can be obtained from Kimble Brown, Rural Development Innovation Center—Regulations Management Division, at (202)720-6780, Email:
All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.
Architectural and Transportation Barriers Compliance Board.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995 (PRA), the Architectural and Transportation Barriers Compliance Board (Access Board or Board) invites comment on a proposed new collection of information titled “Technical Assistance Training Request Form”. The purpose of this information collection is to provide a standardized method for members of the public and State and local governments to request training from the Access Board. With this notice, the Access Board solicits comments on this new proposed information collection.
Send comments on or before September 13, 2024.
You may submit comments, identified by docket number ATBCB-2024-0004, by any of the following methods:
•
•
•
Attorney Advisor Wendy Marshall, (202) 272-0043,
Under the PRA and its implementing regulations (5 CFR part 1320), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor (
The Access Board is providing notice of its intent to seek approval of a new information collection regarding requests for training by members of the public and state and local governments. The Access Board provides training and technical assistance on the guidelines and standards that it promulgates, including design criteria for the built environment, transit vehicles, public rights-of-way, information and communication technology, and medical diagnostic equipment under the Americans with Disabilities Act of 1990, the Architectural Barriers Act of 1968, and other laws. By practice, the Access Board provides in-person and virtual training to organizations across the United States, to include State and local agencies. The Access Board receives email requests for training which currently result in multiple communications with the requestor to determine if the Access Board is able to
U.S. Committee on the Marine Transportation System.
Notice of request for information (RFI).
The U.S. Committee on the Marine Transportation System (CMTS) seeks information to identify what types of planning guidance, documents, datasets, and Federal funding opportunities are currently being utilized in planning for long-term environmental change in U.S. Ports; and to identify barriers to action. The information received from this RFI will be analyzed to assess whether the needs for this type of planning are being met and identify where improvements could be made. Information is requested from anyone who works in or adjacent to climate resilience planning and execution in ports (public and private).
Interested persons and organizations are invited to submit comments on or before August 29, 2024.
Interested individuals and organizations should submit comments electronically via
Heather Gilbert, Senior Policy Advisor, U.S. Committee on the Marine Transportation System; telephone (202) 366-3612; email
Per the interagency sea level rise report “2022: Global and Regional Sea Level Rise Scenarios for the United States: Updated Mean Projections and Extreme Water Level Probabilities Along U.S. Coastlines,” sea level rise driven by global climate change is a clear and present risk to the United States today and for the coming decades and centuries. Sea levels will continue to rise due to the ocean's sustained response to the warming that has already occurred—even if climate change mitigation succeeds in limiting surface air temperatures in the coming decades. Tens of millions of people in the United States already live in areas at risk of coastal flooding, with more moving to the coasts every year. Rising sea levels and land subsidence are combining, and will continue to combine, with other coastal flood factors, such as storm surge, wave effects, rising coastal water tables, river flows, and rainfall, some of whose characteristics are also undergoing climate-related changes. The net result will be a dramatic increase in the exposure and vulnerability of this growing population, as well as the critical infrastructure related to transportation, water, energy, trade, military readiness, and coastal ecosystems and the supporting services they provide.
By 2050, the expected relative sea level will cause tide and storm surge heights to increase and will lead to a shift in U.S. coastal flood regimes, with major and moderate high tide flood events occurring as frequently as moderate and minor high tide flood events occur today. Without additional risk-reduction measures, U.S. coastal infrastructure, communities, and ecosystems will face significant consequences. [
In addition to the impacts of sea level rise and flood risk, it is reasonable to assess whether changes in precipitation intensity and frequency or increasing temperatures will have impacts on port infrastructure, intermodal connectivity, or workforce health and efficiency. Long range planning efforts might consider if changes in sea ice extent and other environmental factors may lead to shifts in global trade patterns and shipping routes. Ports may assess potential changes in preferred shipping routes and changes to cargo volume and types associated with these shifts.
Various guidance documents have been published that can be used by ports for resiliency planning. The CMTS is looking to better understand how different threats impacting our ports—including increased storms, atmospheric rivers, changes in precipitation patterns are being perceived, planned for, and managed. What types of planning guidance, documents, datasets, and Federal funding opportunities are currently being utilized in planning for long-term environmental change on decadal or longer time scales?
Guides, such as the CISA Marine Transportation System Resilience Assessment Guide and the FEMA National Resilience Guidance have been released to help address these issues, and the CMTS is seeking input on how ports, port users and stakeholders are planning for these anticipated long term environmental changes.
Response to this RFI is voluntary. Each responding entity (individual or organization) is requested to submit only one response. The CMTS welcomes any responses to inform and guide the work of the request for information. Please feel free to respond to as many questions as you choose, indicating the question number being addressed. Responses are encouraged to include the name of the person(s) or organization(s) filing the comment, and may also include the respondent type (
Comments containing references, studies, research, and other empirical data that are not widely published should include copies or electronic links to the referenced materials. Please note that the U.S. Government will not pay for response preparation, or for the use of any information contained in the response. A response to this RFI will not be viewed as a binding commitment to develop or pursue the project or ideas discussed. Respondents may provide information on as many questions below as they choose. Input is welcome from stakeholders and members of the public representing all backgrounds and perspectives.
For this RFI, “port” means any waterways, shoreside infrastructure, and/or intermodal connections that work together as a transportation system. `User' includes port authorities, officials, employees, consultants, and/or anyone that uses a port. To support this information gathering, CMTS seeks information on the types of planning guidance, documents, datasets, and Federal funding opportunities currently being utilized in planning for long-term environmental change in and adjacent to ports. If effective planning is not being undertaken, what are the barriers to action? To guide your input, please respond to any or all of the following questions:
1. Demographics. What is the type of organization you represent, the size of port, and the region you are located in?
2. Use of Guidance and/or information products Documents to Support Long-term (
3. Access to Port Resilience Data. How/where do you obtain environmental data and decision support for your port resilience planning needs? Do these data include future projections of environmental conditions, such as sea level rise? Are the data you obtain sufficient to meet your requirements?
4. Long-term Port Resilience Planning Process. How do you approach port resilience planning for climate change? Is it done in-house or contracted? Who in your organization does your port resilience planning?
5. Have you engaged in port-to-port sharing? Are you open to engaging in port-to-port sharing to learn best practices from other ports?
6. Grants and Other Funding Opportunities. Do you have an awareness of the availability of Federal or State funding opportunities to support port resilience and infrastructure planning? If so, have you applied to and/or been awarded any funding specifically to support long-term port resilience and infrastructure planning? Do you know where to find funding opportunities?
a. Is funding available to do the planning work?
b. What gaps or challenges have you encountered related to obtaining grants/funding/etc.? (Information on applying; planning documents; etc.)
7. Additional Needs. What more (in addition to funding, existing guidance, and existing data) do you need to improve your long-term resilience planning? (
8. Other. Is there anything else you would like to share related to this request for information?
U.S. Commission on Civil Rights.
Announcement of public briefing.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act, that the Guam Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a virtual, public briefing via Zoom at 9:30 a.m. ChST on Wednesday, October 16, 2024 (7:30 p.m. ET on Tuesday, October 15, 2024). The purpose of this briefing is to hear testimony on the topic,
Wednesday, October 16, 2024, from 9:30 a.m.-11:30 a.m. ChST (Tuesday, October 15, 2024, from 7:30 p.m.-9:30 p.m. ET).
The meeting will be held via Zoom Webinar.
Kayla Fajota, DFO, at
This committee meeting is available to the public through the registration link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. If joining via phone, callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available by selecting “CC” in the meeting platform. To request additional accommodations, please email
Members of the public are entitled to submit written comments; the comments must be received within 30 days following the meeting. Written comments may be emailed to Kayla Fajota at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit, as they become available, both before and after the meeting. Records of the meeting will be available via the file sharing website,
U.S. Commission on Civil Rights.
Announcement of public briefing.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act, that the Guam Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a virtual, public briefing via Zoom at 9:30 a.m. ChST on Wednesday, August 14, 2024 (7:30 p.m. ET on Tuesday, August 13, 2024). The purpose of this briefing is to hear testimony on the topic,
Wednesday, August 14, 2024, from 9:30 a.m.-11:30 a.m. ChST (Tuesday, August 13, 2024, from 7:30 p.m.-9:30 p.m. ET).
The meeting will be held via Zoom Webinar.
Kayla Fajota, DFO, at
This committee meeting is available to the public through the registration link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. If joining via phone, callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available by selecting “CC” in the meeting platform. To request additional accommodations, please email
Members of the public are entitled to submit written comments; the comments must be received within 30 days following the meeting. Written comments may be emailed to Kayla Fajota at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit, as they become available, both before and after the meeting. Records of the meeting will be available via the file sharing website,
U.S. Commission on Civil Rights.
Announcement of virtual business meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act (FACA) that the California Advisory Committee (Committee) to the U.S. Commission on Civil Rights will convene by ZoomGov on Friday, July 26, 2024, for the purpose of discussing their project on the civil rights implications of AB5.
Friday, July 26, 2024, from 1:00 p.m.-2:00 p.m. PT.
Zoom Webinar Link to Join:
Brooke Peery, Designated Federal Officer (DFO) at
Committee meetings are available to the public through the registration link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. If joining via phone, callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning impairments. To request additional accommodations, please email Angelica Trevino, Support Services Specialist at
Members of the public are entitled to make comments during the open period at the end of the meeting. Members of the public may also submit written comments; the comments must be received in the Regional Programs Unit within 30 days following the meeting. Written comments may be emailed to Brooke Peery (DFO) at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit Office, as they become available, both before and after the meeting. Records of the meetings will be available via
U.S. Commission on Civil Rights.
Announcement of public briefing.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act, that the Guam Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a virtual, public briefing via Zoom at 9:30 a.m. ChST on Wednesday, September 18, 2024 (7:30 p.m. ET on Tuesday, September 17, 2024). The purpose of this briefing is to hear testimony on the topic,
Wednesday, September 18, 2024, from 9:30 a.m.-11:30 a.m. ChST (Tuesday, September 17, 2024, from 7:30 p.m.-9:30 p.m. ET).
The meeting will be held via Zoom Webinar.
Kayla Fajota, DFO, at
This committee meeting is available to the public through the registration link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. If joining via phone, callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available by selecting “CC” in the meeting platform. To request additional accommodations, please email
Members of the public are entitled to submit written comments; the comments must be received within 30 days following the meeting. Written comments may be emailed to Kayla Fajota at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit, as they become available, both before and after the meeting. Records of the meeting will be available via the file sharing website,
The City of Conroe, grantee of FTZ 265, submitted a notification of proposed production activity to the FTZ Board (the Board) on behalf of Unimacts Company (Unimacts) for Unimacts's facility in Conroe, Texas within FTZ 265. The notification conforming to the requirements of the Board's regulations (15 CFR 400.22) was received on July 3, 2024.
Pursuant to 15 CFR 400.14(b), FTZ production activity would be limited to the specific foreign-status material(s)/component(s) and specific finished product(s) described in the submitted notification (summarized below) and subsequently authorized by the Board. The benefits that may stem from conducting production activity under FTZ procedures are explained in the background section of the Board's website—accessible via
The proposed finished products include: machined structural “H” shaped steel supports and structural steel support machined tubes (duty-free).
The proposed foreign-status materials/components include: flat-rolled steel of varying thicknesses and steel shape “H” of varying weights (duty-free). The request indicates that certain materials/components may be subject to duties under section 232 of the Trade Expansion Act of 1962 (section 232) or section 301 of the Trade Act of 1974 (section 301), depending on the country of origin. The applicable section 232 and section 301 decisions require subject merchandise to be admitted to FTZs in privileged foreign status (19 CFR 146.41).
Public comment is invited from interested parties. Submissions shall be addressed to the Board's Executive Secretary and sent to:
A copy of the notification will be available for public inspection in the “Online FTZ Information System” section of the Board's website.
For further information, contact Kolade Osho at
The Emerging Technology Technical Advisory Committee (ETTAC) will meet on July 30, 2024, at 9:00 a.m.-4:30 p.m., (Eastern Daylight Time) in the Herbert C. Hoover Building, Room 3884, 1401 Constitution Avenue NW, Washington, DC (enter through Main Entrance on 14th Street between Constitution and Pennsylvania Avenues). The Committee's primary focus is the identification of emerging and foundational technologies that may be developed over a period of five to ten years with potential dual-use applications as early as possible in their developmental stages both within the United States and abroad, and any other matters relating to actions designed to carry out the policy set forth in section 1752(1)(A) of the Export Control Reform Act. The purpose of the meeting is to have Committee members and U.S. Government representatives mutually review updated technical data and policy-driving information that has been gathered.
1. Discussion of matters determined to be exempt from the open meeting and public participation requirements found in sections 1009(a)(1) and 1009(a)(3) of the Federal Advisory Committee Act (FACA) (5 U.S.C. 1001-1014). The exemption is authorized by section 1009(d) of the FACA, which permits the closure of advisory committee meetings, or portions thereof, if the head of the agency to which the advisory committee reports determines such meetings may be closed to the public in accordance with subsection (c) of the Government in the Sunshine Act (5 U.S.C. 552b(c)). In this case, the applicable provisions of 5 U.S.C. 552b(c) are subsection 552b(c)(4), which permits closure to protect trade secrets and commercial or financial information that is privileged or confidential, and subsection 552b(c)(9)(B), which permits closure to protect information that would be likely to significantly frustrate implementation of a proposed agency action were it to be disclosed prematurely. The closed session of the meeting will involve committee discussions and guidance regarding U.S. Government strategies and policies.
2. Opening remarks by the Chairman, Opening remarks by the Bureau of Industry and Security.
3. Opening remarks by BIS Export Administration Leadership.
4. Guest Speaker—Topic TBD.
5. Open Discussion.
The open session will be accessible via teleconference. To join the conference, submit inquiries to Ms. Yvette Springer at
A limited number of seats will be available for members of the public to attend the open session in person. Reservations are not accepted.
To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of materials to the Committee members, the Committee suggests that members of the public forward their materials prior to the meeting to Ms. Springer via email. Material submitted by the public will be made public and therefore should not contain confidential information. Meeting materials from the public session will be accessible via the Technical Advisory Committee (TAC) site at
The Deputy Assistant Secretary for Administration Performing the non-exclusive functions and duties of the Chief Financial Officer, with the concurrence of the delegate of the General Counsel, formally determined on July 3, 2024, pursuant to 5 U.S.C. 1009(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. 1009(a)(1) and 1009(a)(3). The remaining portions of the meeting will be open to the public.
For more information, contact Ms. Springer.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) is initiating a changed circumstances review (CCR) to determine whether TRAPA Forest Products Ltd. (TRAPA) is the successor-in-interest to Trans-Pacific Trading Ltd. (Trans-Pacific) in the context of the antidumping duty (AD) order on certain softwood lumber products (softwood lumber) from Canada. We preliminary determine that TRAPA is the successor-in-interest to Trans-Pacific.
Applicable July 15, 2024.
Robert Bolling, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3434.
On January 3, 2018, Commerce published in the
The product covered by the
Pursuant to section 751(b)(1)(A) of the Act and 19 CFR 351.216(d), Commerce will conduct a CCR upon receipt of information concerning, or a request from, an interested party for a review of an AD order which shows changed circumstances sufficient to warrant a review of the order. The information submitted by TRAPA supporting its claim that it is the successor-in-interest to Trans-Pacific demonstrates changed circumstances sufficient to warrant such a review.
Section 351.221(c)(3)(ii) of Commerce's regulations permits Commerce to combine the notice of initiation of a CCR and the notice of preliminary results if Commerce concludes that expedited action is warranted.
In this CCR, pursuant to section 751(b) of the Act, Commerce is conducting a successor-in-interest analysis. In making a successor-in-interest determination, Commerce examines several factors, including, but not limited to, changes in the following: (1) management; (2) production facilities; (3) supplier relationships; and (4) customer base.
In accordance with 19 CFR 351.216, we preliminarily determine that TRAPA is the successor-in-interest to Trans-Pacific. Record evidence, as submitted by TRAPA, indicates that TRAPA operates as essentially the same business entity as Trans-Pacific with respect to the subject merchandise.
For the complete successor-in-interest analysis, including discussion of business proprietary information,
In accordance with 19 CFR 351.309(c)(1)(ii), interested parties may submit case briefs not later than 30 days after the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than five days after the date for filing case briefs.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this CCR, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request via ACCESS within 30 days of publication of this notice. Hearing requests should contain: (1) the party's name, address, and telephone number; (2) the number participants; and (3) a list of issues to be discussed. Oral presentations at the hearing will be limited to issues raised in the briefs. If a request for a hearing is made, parties will be notified of the time and date for the hearing, in accordance with 19 CFR 351.310(d).
Consistent with 19 CFR 351.216(e), we will issue the final results of this CCR no later than 270 days after the date on which this review was initiated, or within 45 days if all parties agree to our preliminary finding. This notice is published in accordance with sections 751(b)(1) and 777(i) of the Act and 19 CFR 351.216(b), 351.221(b) and 351.221(c)(3).
Department of the Army, Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by September 13, 2024.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to Defense Forensics and Biometrics Agency, 251 18th Street, Suite 244A, Arlington, VA 22202, ATTN: Mr. Russell Wilson, or call (703) 571-0388.
Office of the Under Secretary of Defense for Personnel and Readiness (OUSD(P&R)), Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by September 13, 2024.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to Defense Commissary Agency, 1300 Eisenhower Avenue, Fort Gregg-Adams, Ms. Carol Chambliss, 804-734-8000 ext. 48841.
Defense Acquisition University (DAU), Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by September 13, 2024.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the Defense Acquisition University, 9820 Belvoir Road, Fort
Respondents are university applicants, DoD Acquisition Workforce students (contractor personnel sponsored by a DoD Program Management Office), and instructors who voluntarily provide personal information to take courses administered by DAU or access DAU training, knowledge-sharing, collaboration systems, and course offerings. Failure to provide required information results in the individual being denied access to these services and tools. All respondents are providing data which is used to support the academic functions, including: attendance, grades, statistical analysis, tracking, and reporting for Defense Acquisition Workforce Improvement Act Certification purposes. These functions are necessary to support Acquisition Workforce Certifications; graduation data will be shared with the Services and Corporate Partners of DoD-sponsored students.
Office of the Under Secretary of Defense for Personnel and Readiness (OUSD (P&R)), Department of Defense (DoD).
30-Day information collection notice.
The DoD has submitted to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by August 29, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Reginald Lucas, (571) 372-7574,
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
•
Requests for copies of the information collection proposal should be sent to Mr. Lucas at
Department of the Navy (DON), Department of Defense (DoD).
30-Day information collection notice.
The DoD has submitted to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by August 14, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Reginald Lucas, (571) 372-7574,
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
•
Requests for copies of the information collection proposal should be sent to Mr. Lucas at
Department of the Navy, Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by September 13, 2024.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to OPNAV Forms/Information Collections Office (DNS-14), 2000 Navy Pentagon, Room 4E563, Washington, DC 20350-2000, ATTN: Ms. Ashley Alford, or call 703-614-7585.
The MCIOs will use the information collected to query unrestricted sexual assault investigations and existing restricted reports in the CATCH database and potentially identify serial sexual assault offenders in both restricted and unrestricted reports of sexual assault. Respondents to this information collection are victims in restricted reports of sexual assault made to the Department of Defense. The respondents are providing information for this collection because upon making their restricted report of sexual assault to a Sexual Assault Response Coordinator, each respondent was given the option of voluntarily making a submission to this database. The respondents who elect to participate can do so by providing information electronically or through a CATCH submission form. The successful end result of this information collection is the identification of serial sexual assault offenders that otherwise may have gone undetected if the information had remained restricted from MCIO access.
Office of Postsecondary Education (OPE), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a revision of a currently approved information collection request (ICR).
Interested persons are invited to submit comments on or before September 13, 2024.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Karen Epps, (202) 453-6337.
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. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment 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 records.
This information collection requests approval for a revision to a previously approved collection that includes annual reporting requirements to comply with the requirements of the HEERF program and obtain information on how the funds were used. The revision simplifies the collection by substantially reducing the number of items because specific grant activities within HEERF have expired and many of the items have become moot. In accordance with the Recipients Funding Certification and Agreements executed by HEERF grantees, the Secretary may specify additional forms of reporting.
Office of Elementary and Secondary Education (OESE), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing an extension without change of a currently approved information collection request (ICR).
Interested persons are invited to submit comments on or before September 13, 2024.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Angela Hernandez-Marshall, (202) 205-1909.
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. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment 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 records.
Section 7122(h) of the ESEA (20 U.S.C. 7442(h)) requires that individuals who receive financial assistance through the Indian Education Professional Development program subsequently complete a service obligation equivalent to the amount of time for which the participant received financial assistance. Participants who do not satisfy the requirements of the regulations must repay all or a pro-rated part of the cost of assistance, in accordance with 20 U.S.C. 7442(h) and 34 CFR 263.9(a)(3). The regulations in part 263 implement requirements governing, among other things, the service obligation and reporting requirements of the participants in the Indian Education Professional Development program, and repayment of financial assistance by these participants. In order for the Federal Government to ensure that the goals of the program are achieved, certain data collection, recordkeeping, and documentation are necessary.
In addition, GPRA requires Federal agencies to establish performance measures for all programs, and the Department has established performance measures for the Indian Education Professional Development program. Data collection from participants who have received financial assistance under the Indian Education Professional Development program is a necessary element of the Department's effort to evaluate progress on these measures.
The Department tracks participants who are receiving or have previously received support through the Indian Education Professional Development program. Participants must sign a payback agreement that includes contact information. Additionally, the Department receives information about participants from institutions of higher education (IHEs) and other eligible grantees when participants are no longer receiving assistance through the Indian Education Professional Development program. When the performance period is complete, the participant data are collected from the grantee and from the participants.
The Federal Energy Regulatory Commission hereby gives notice that members of the Commission and/or Commission staff may attend the following meetings:
Further information regarding this meeting and how to join remotely may be found at:
Further information regarding this meeting and how to join remotely may be found at:
Further information regarding this meeting and how to join remotely may be found at:
Further information regarding this meeting and how to join remotely may be found at:
Further information regarding this meeting and how to join remotely may be found at:
Further information regarding this meeting and how to join remotely may be found at:
July 18, 2024 | 1:00 p.m.-3:00 p.m. Eastern
Further information regarding this meeting and how to join remotely may be found at:
The discussions at the meetings, which are open to the public, may address matters at issue in the following Commission proceedings:
For further information, please contact Leigh Anne Faugust at (202) 502-6396 or
Environmental Protection Agency (EPA).
Notice.
In accordance with the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), the Environmental Protection Agency (EPA or Agency) is providing this notice of receipt of and soliciting comment on the requests identified in Unit II. received from the registrants to voluntarily cancel their registrations of certain products containing the pesticide chlorpyrifos, or to amend their chlorpyrifos registrations to terminate one or more uses. EPA intends to grant these requests at the close of the comment period for this announcement unless the Agency receives substantive comments within the comment period that would merit its further review of the requests or if the registrant withdraws their request to cancel these uses or products. If these requests are granted, EPA will issue a final cancelation order under which any sale, distribution, or use of the products listed in this notice will be permitted after the registrations have been cancelled or the uses terminated only if such sale, distribution, or use is consistent with the terms described in the final order.
Comments must be received on or before August 14, 2024.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPP-2022-0223, through the
Patricia Biggio, Pesticide Re-Evaluation Division (7508M), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; telephone number: (202) 566-0700; email address:
This action is directed to the public in general and may be of interest to a wide range of stakeholders including environmental, human health, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides. Since others also may be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action.
1. Submitting CBI. Do not submit CBI to EPA through email or
2. Tips for preparing your comments. When preparing and submitting your comments, see the commenting tips at
This notice announces receipt by the Agency of requests from the registrants identified in Table 3 of this unit to cancel certain pesticide products or uses registered under FIFRA section 3 (7 U.S.C. 136a) or 24(c) (7 U.S.C. 136v(c)). These registrations are listed in sequence by registration number in table 1 and table 2 of this unit.
The current voluntary requests for termination of certain registered chlorpyrifos uses submitted by Loveland and as reflected in this notice supersede the requests for voluntary cancellation previously submitted by Loveland for which EPA provided notice in the
Unless the Agency determines that there are substantive comments that warrant further review of the requests or the registrants withdraw their requests, EPA intends to issue an order in the
As noted in table 1, Drexel and Loveland requested that several food uses be terminated, except in certain enumerated states; however, some of the uses identified in the table are not registered in states excluded from termination. Where the uses are not currently registered in those states, EPA intends to simply approve the use termination requests that are applicable, i.e., cancellation of use in those states where the use is registered, except in the enumerated states where the use is also registered. The request not to terminate uses in states where the product is not registered will not result in the product being registered in those states; registration of those uses in additional states must be accomplished through the FIFRA section 3 registration process.
Specifically, Drexel and Loveland requested that the use on apples be terminated, except in Idaho, Oregon, and Washington, among other states, on EPA Reg. Nos. 19713-520, 19713-599, 19713-671, 34704-857, and 34704-1077; however, some of the apple uses on those registrations are only permitted in states east of the Rockies. For those apple uses that are currently not permitted in Idaho, Oregon, and Washington, the request not to terminate use on apples in those states has no effect. Similarly, Drexel and Loveland requested that the use on wheat be terminated, except in Missouri (spring and winter wheat) or Iowa (winter wheat), on EPA Reg. Nos. 19713-520, 19713-599, 19713-671, 34704-857, and 34704-1077. But because these products are not registered for use on wheat in those states, that request has no effect. EPA intends to approve the requests to terminate uses that are registered, except for the uses that are requested to be retained where those uses are currently registered.
FIFRA section 6(f)(1) (7 U.S.C. 136d(f)(1)) provides that a registrant of a pesticide product may at any time request that any of its pesticide registrations be cancelled or cancel registered uses for a pesticide. FIFRA further provides that, before acting on the request, EPA must publish a notice of receipt of any such request in the
1. The registrant requests a waiver of the comment period, or
2. The EPA Administrator determines that continued use of the pesticide would pose an unreasonable adverse effect on the environment.
The registrants listed in table 3 of unit II. have requested that EPA waive the 180-day comment period. Accordingly, EPA is providing a 30-day comment period on the requests.
Registrants who choose to withdraw a request for cancellation should submit such withdrawal in writing to the person listed under
Existing stocks are those stocks of registered pesticide products that are currently in the United States and that were packaged, labeled, and released for shipment prior to the effective date of the cancellation action.
If the requests for voluntary cancellation and amendments to terminate uses are granted, the Agency intends to publish a final cancellation order in the
• Sale and distribution of existing stocks of Drexel CHLOR-PY-REX Chlorpyrifos Insecticide (EPA Reg. No. 19713-527), Drexel Chlorpyrifos Technical (EPA Reg. No. 19713-573) and Drexel Chlorpyrifos 99% Technical (EPA Reg. No. 19713-575) will not be permitted after the final cancellation order is issued.
• Sale and distribution of existing stocks for the following products will be permitted until April 30, 2025:
• Use of existing stocks of the following products on food, food processing sites, and food manufacturing sites must be consistent with the product labeling and will be permitted until June 30, 2025:
• Use of existing stocks of these products for non-food purposes will be permitted until existing stocks are exhausted, as long as such use is in accordance with the labeling.
• Use of existing stocks of Drexel Chlorpyrifos Concentrate (EPA Reg. No. 19713-518), will be permitted until existing stocks are exhausted, as long as such use is in accordance with the labeling as this product is not registered for any food uses.
After the dates identified in the final cancellation order, sale and distribution of existing stocks will be prohibited, except for export consistent with FIFRA section 17 (7 U.S.C. 136o), or for proper disposal.
Environmental Protection Agency (EPA).
Notice of delegation of authority.
On May 10, 2023, the Environmental Protection Agency (EPA) sent the State of Idaho (Idaho) two letters acknowledging that Idaho's delegation of authority to implement and enforce the National Emissions Standards for Hazardous Air Pollutants (NESHAP) and New Source Performance Standards (NSPS) had been updated. To inform regulated facilities and the public, the EPA is, through this notice, making available a copy of the EPA's letters to Idaho.
On May 10, 2023, the EPA sent Idaho two letters acknowledging that Idaho's delegation of authority to implement and enforce certain Federal NSPS and NESHAP had been updated.
The EPA has established a docket for this action under Docket ID No. EPA-R10-OAR-2024-0254. All documents, including the letters with enclosures sent to Idaho, in the docket are listed on the
Bryan Holtrop, Air and Radiation Division, U.S. EPA Region 10, 1200 Sixth Avenue, Suite 155, Seattle, WA 98101, (206) 553-4473 or
Section 112(l) of the Clean Air Act (CAA) provides for the regulation of hazardous air pollutants through the promulgation of NESHAP. Those NESHAP promulgated prior to the CAA Amendments of 1990 are found in 40 Code of Federal Regulations (CFR) part 61. Those NESHAP promulgated subsequent to the CAA Amendments of 1990 are found in 40 CFR part 63. 40 CFR part 63 subpart E contains the criteria and procedures for “straight delegation” (delegation of unchanged standards) of NESHAP.
On April 20, 2023, Idaho notified the EPA that the State had updated its incorporation by reference of Federal NSPS and NESHAP to include many such standards, as they were published in final form in the CFR dated July 1, 2022. On May 10, 2023, the EPA sent Idaho a letter acknowledging that Idaho now has the authority to implement and enforce the NESHAP as specified by Idaho in its notice to the EPA, as provided for under previously approved delegation mechanisms. All notifications, applications, reports, and other correspondence required pursuant to the delegated NESHAP must be submitted to both the EPA Region 10 and to the Idaho Department of Environmental Quality, unless the delegated standard specifically provides that such submittals may be sent to the EPA
This letter is in response to your April 20, 2023, request to update and continue the delegation of certain National Emission Standards for Hazardous Air Pollutants. Consistent with the approved mechanism for streamlined delegation as described in 67 FR 3106 (January 23, 2002), the U.S. Environmental Protection Agency hereby grants this updated delegation request, as described below, to the Idaho Department of Environmental Quality for those sources under your jurisdiction for the identified NESHAP in effect on July 1, 2022.
You have requested to update delegation of the 40 CFR parts 61 and 63 NESHAP standards that were previously delegated to IDEQ and to obtain delegation of new standards that the EPA has promulgated since your last delegation.
1. Your request for delegation of 40 CFR part 61, subpart M was limited to sources required to obtain permits under title V of the Clean Air Act.
2. Your request for delegation excluded subparts under 40 CFR part 61 regulating radon or radionuclides, specifically: subparts B, H, I, K, Q, R, T, and W.
3. Your request for delegation of all subparts of 40 CFR part 63
IDEQ demonstrated that on March 28, 2023, IDEQ adopted the identified provisions of 40 CFR parts 61 and 63 unchanged and as in effect on July 1, 2022, into IDEQ's regulations in IDAPA 58.01.01.107.03(g) and (i).
The EPA has determined that IDEQ's regulations continue to provide adequate and effective procedures for implementing and enforcing the NESHAP. Accordingly, the EPA hereby approves your request for an updated delegation of authority to implement and enforce the NESHAP standards identified in Enclosures A and B, subject to the following terms and conditions:
1. As requested by IDEQ:
a. The delegation of 40 CFR part 61, subpart M and all subparts of 40 CFR part 63
b. The delegation of all other requested NESHAP is limited to implementation and enforcement of the NESHAP as of July 1, 2022.
2. The EPA is not delegating the following provisions under 40 CFR part 63 to IDEQ:
a. Subpart B, which implements sections 112(g) and 112(j) of the Clean Air Act. The EPA has previously stated that a part 70 permitting authority does not need to apply for approval in order to use its own program to implement section 112(g). Furthermore, section 112(j) is designed to use the title V permit process as the primary vehicle for establishing requirements. Therefore, delegation is not required to implement sections 112(g) and 112(j) and 40 CFR subpart B.
b. Subpart C, which lists hazardous air pollutants that have been deleted or refined. This subpart grants no authority that is necessary to implement or enforce the program and is therefore not delegable.
c. Subpart D, which implements section 112(d) of the Clean Air Act. Because this subpart explicitly states that it applies to a state or local agency acting pursuant to a permit program approved under title V of the Clean Air Act, delegation is unnecessary.
d. Subpart E, which establishes procedures for the EPA approval of state rules, programs, or other requirements to implement and enforce section 112 Federal rules and is not delegable.
3. The EPA is not delegating the provisions of the Consolidated Air Rule under 40 CFR part 65. As proposed on October 28, 1998 (63 FR 57748, 57784-57786) and promulgated on December 14, 2000, (65 FR 78268, 78272), the CAR comprises alternative compliance approaches to referencing subparts in 40 CFR parts 60 and 63. Therefore, formal delegation of the CAR is not required provided the state has received formal delegation of the referencing subpart.
4. Note that certain authorities are automatically granted to you because you have an approved part 70 program (see for example, 40 CFR 63.6(i)(1)).
5. The EPA is delegating the identified Federal standards as in effect on July 1, 2022. New NESHAP or NESHAP that are revised substantively after that date are not delegated to your agency; these remain the responsibility of the EPA.
a. Acceptance of this delegation does not commit your agency to request or accept delegation of future NESHAP standards and requirements.
b. The EPA encourages your agency to update your NESHAP delegation on an annual basis. This could coincide with the updating of the adoption by reference of the Federal NESHAP standards, which is important for maintaining the EPA's approval of your part 70 permitting program.
6. The EPA is not delegating authorities under 40 CFR parts 61 and 63 that specifically indicate they cannot be delegated, that require rulemaking to implement, that affect the stringency of the standard, equivalency determinations, or where national oversight is the only way to ensure national consistency.
7. The EPA is not delegating standards that have been vacated as a matter of Federal law.
8. This delegation is subject to the terms and conditions of the EPA's previous NESHAP delegations to IDEQ, 61 FR 64622 (December 6, 1996) and 67 FR 3106 (January 23, 2002), as updated by this letter.
9. Implementation and enforcement of the delegated NESHAP are subject to the
10. Enforcement of these delegated NESHAP in your jurisdiction will be the primary responsibility of your agency. Nevertheless, the EPA may exercise its concurrent enforcement authority pursuant to sections 112(l)(7) and 113 of the Clean Air Act and 40 CFR 63.90(d)(2) with respect to sources that are subject to the NESHAP.
11. Your agency and the EPA should communicate sufficiently to ensure that each is fully informed and current regarding interpretation of regulations (including any unique questions about applicability) and the compliance status of subject sources in your jurisdiction.
a. Any records or reports provided to or otherwise obtained by your agency should be made available to the EPA upon request.
b. In accordance with 40 CFR 61.16 and 63.15, the availability to the public of information provided to or otherwise obtained by the EPA in connection with this delegation shall be governed by 40 CFR part 2.
12. Your agency will be the recipient of all notifications and reports and be the point of contact for questions and compliance issues for these delegated NESHAP. The EPA may request notifications and reports from owners/operators and/or your agency, if needed.
13. Your agency will work with owners and operators of affected facilities subject to a NESHAP subpart to ensure all required information is submitted to your agency. Your assistance is requested to ensure that this information, including excess emission reports and summaries, is submitted to the EPA upon request, if needed.
14. Your agency will require affected facilities to use the methods specified in 40 CFR parts 61 and 63, as applicable, in performing source tests pursuant to the regulations.
15. Changes and alternatives:
a. For part 61 standards, your agency is not delegated the authorities under 40 CFR 61.04(b), 61.04(c), 61.05(c), 61.11, 61.12(d), 61.13(h)(1)(ii), 61.14(d), 61.14(g)(1)(ii), and 61.16. Such authorities and approvals remain the responsibility of the EPA.
b. For part 63 standards, your agency is not delegated the Category II authorities in 40 CFR 63.91(g)(2)(ii). Such authorities and approvals remain the responsibility of the EPA.
c. Your agency must maintain a record of all approved alternatives to monitoring, testing, and recordkeeping/reporting requirements and provide this list of alternatives to the EPA semi-annually or more frequently if requested by the EPA. The EPA may audit any approved alternatives and disapprove any that it determines are inappropriate, after discussion with your agency. If changes are disapproved, your agency must notify the owner/operator that it must revert to the original applicable monitoring, testing, recordkeeping, and/or reporting requirements. Also, in cases where the owner/operator does not maintain the conditions which prompted the approval of the alternatives to the monitoring, testing, recordkeeping, and/or reporting requirements, your agency must require the source to revert to the original monitoring, testing, recordkeeping, and reporting requirements, or more stringent requirements, if justified.
16. Your agency's authority to implement and enforce NESHAP under this delegation does not extend to sources or activities located in Indian Country, as defined in 18 U.S.C. 1151. Consistent with previous Federal program approvals or delegations, the EPA will continue to implement the NESHAP in Indian Country because your agency has not demonstrated that it has authority over sources and activities located within the exterior boundaries of Indian reservations and in other areas of Indian Country.
17. The EPA Administrator delegated to the EPA, Region 10 the authority to delegate the NESHAP to any state or local agency. A state or local agency that receives delegation from the EPA, Region 10 does not have the federally recognized authority to further delegate the NESHAP.
18. 40 CFR 63.96(b) contains the applicable procedures governing withdrawal of this delegation by the EPA or from this delegation by IDEQ, as applicable.
Unless we receive negative comments from you within ten days, this delegation is final and will be effective ten days from the date of this letter. Otherwise, no further correspondence to the EPA is needed from IDEQ to make this delegation effective. We will periodically publish a notice in the
Section 111(b) of the CAA requires the EPA to establish standards of performance for new stationary sources of air pollution through the promulgation of NSPS. These NSPS are found in 40 CFR part 60. According to section 111(c) of the CAA and 40 CFR 60.4(b), States may submit plans for approval by the Administrator to implement and enforce NSPS. Neither section 111 of the CAA nor 40 CFR part 60, however, prescribe a mechanism for such a delegation of authority.
On April 20, 2023, Idaho notified the EPA that the State had updated its incorporation by reference of Federal NSPS to include many such standards, as they were published in final form in the Code of Federal Regulations (CFR) dated July 1, 2022. On May 10, 2023, the EPA sent Idaho a letter acknowledging that Idaho now has the authority to implement and enforce the NSPS as specified by Idaho in its notice to the EPA, as provided for under previously approved delegation mechanisms. All notifications, applications, reports, and other correspondence required pursuant to the delegated NSPS must be submitted to both the EPA Region 10 and to the Idaho Department of Environmental Quality, unless the delegated standard specifically provides that such submittals may be sent to the EPA or a delegated State. In such cases, the submittals should be sent only to the Idaho Department of Environmental Quality. A copy of the EPA's letter to Idaho follows:
This letter is in response to your April 20, 2023, request to update and continue the delegation of authority to implement and enforce certain New Source Performance Standards, 40 CFR part 60. After review of your request, the U.S. Environmental Protection Agency hereby grants this updated delegation request, as described below, to the Idaho Department of Environmental Quality for those sources under your jurisdiction for the identified NSPS in effect on July 1, 2022.
You have requested to update delegation of the 40 CFR part 60 NSPS that were previously delegated to IDEQ and to obtain delegation of new standards that the EPA has promulgated since your last delegation.
IDEQ demonstrated that on March 28, 2023, IDEQ adopted the identified provisions of 40 CFR part 60 unchanged and as in effect on July 1, 2022, into IDEQ's regulations in IDAPA 58.01.01.107.03(f).
The EPA has determined that IDEQ's regulations continue to provide adequate and effective procedures for implementing and enforcing the NSPS. Accordingly, the EPA hereby approves your request for an updated delegation of authority to implement and enforce the NSPS identified in Enclosure A, subject to the following terms and conditions:
1. As requested by IDEQ the delegation of all requested NSPS is limited to implementation and enforcement of the NSPS as of July 1, 2022.
2. The EPA is not delegating the following provisions under 40 CFR part 60 to IDEQ:
a. Subparts B and Ba, which apply to the adoption and submittal of state plans and actions taken to approve or disapprove such plans by the Administrator of the EPA. These subparts are not delegable.
b. Subpart C, which states that several other subparts contain emission guidelines and compliance times for the control of certain designated pollutants in accordance with section 111(d) and section 129 of the Clean Air Act and subpart B of 40 CFR part 60. This subpart establishes no authority that is necessary to implement or enforce the program and is not delegable.
c. Subparts Cb, Cc, Cd, Ce, Cf, BBBB, DDDD, FFFF, MMMM, and UUUUa. These subparts specify the requirements for approval of state plans for the control of certain designated pollutants in accordance with section 111(d) and section 129 of the Clean Air Act and subpart B or Ba of 40 CFR part 60.
3. The EPA is not delegating the provisions of the Consolidated Air Rule under 40 CFR part 65. As proposed on October 28, 1998, (63 FR 57748, 57784-57786) and promulgated on December 14, 2000, (65 FR 78268, 78272), the CAR comprises alternative compliance approaches to referencing subparts in 40 CFR parts 60 and 63. Therefore, formal delegation of the CAR is not required provided the state has received formal delegation of the referencing subpart.
4. The EPA is delegating the identified Federal standards as in effect on July 1, 2022. New NSPS or NSPS that are revised substantively after that date are not delegated to your agency; these remain the responsibility of the EPA.
a. Acceptance of this delegation does not commit your agency to request or accept delegation of future NSPS standards and requirements.
b. The EPA encourages your agency to update your NSPS delegation on an annual basis. This could coincide with the updating of the adoption by reference of the Federal NSPS standards, which is important for maintaining the EPA's approval of your part 70 permitting program.
5. The EPA is not delegating authorities under 40 CFR part 60 that specifically indicate they cannot be delegated, that require rulemaking to implement, that affect the stringency of the standard, equivalency determinations, or where national oversight is the only way to ensure national consistency.
6. The EPA is not delegating standards that have been vacated as a matter of Federal law.
7. Implementation and enforcement of the delegated NSPS are subject to the
8. Enforcement of these delegated NSPS in your jurisdiction will be the primary responsibility of your agency. Nevertheless, the EPA may exercise its concurrent enforcement authority pursuant to sections 111(d)(2) and 113 of the Clean Air Act with respect to sources that are subject to the NSPS.
9. Your agency and the EPA should communicate sufficiently to ensure that each is fully informed and current regarding interpretation of regulations (including any unique questions about applicability) and the compliance status of subject sources in your jurisdiction.
a. Any records or reports provided to or otherwise obtained by your agency should be made available to the EPA upon request.
b. In accordance with 40 CFR 60.9, the availability to the public of information provided to or otherwise obtained by the EPA in connection with this delegation shall be governed by 40 CFR part 2.
10. Your agency will be the recipient of all notifications and reports and be the point of contact for questions and compliance issues for these delegated NSPS. The EPA may request notifications and reports from owners/operators and/or your agency, if needed.
11. Your agency will work with owners and operators of affected facilities subject to an NSPS subpart to ensure all required information is submitted to your agency. Your assistance is requested to ensure that this information, including excess emission reports and summaries, is submitted to the EPA upon request, if needed.
12. Your agency will require affected facilities to use the methods specified in 40 CFR part 60, as applicable, in performing source tests pursuant to the regulations.
13. Changes and alternatives:
a. Your agency is not delegated the authorities under 40 CFR 60.4(b), 60.8(b) (terms 2 and 3, to the extent that the change represents an alternative or equivalent method or a
b. Your agency is not delegated the authority to approve a major change to monitoring under 40 CFR 60.13(i). A
c. Your agency must maintain a record of all approved alternatives to monitoring, testing, and recordkeeping/reporting requirements and provide this list of alternatives to the EPA semi-annually or more frequently if requested by the EPA. The EPA may audit any approved alternatives and disapprove any that it determines are inappropriate, after discussion with your agency. If changes are disapproved, your agency must notify the owner/operator that it must revert to the original applicable monitoring, testing, recordkeeping, and/or reporting requirements. Also, in cases where the owner/operator does not maintain the conditions which prompted the approval of the alternatives to the monitoring, testing, recordkeeping, and/or reporting requirements, your agency must require the owner/operator to revert to the original monitoring, testing, recordkeeping, and reporting requirements, or more stringent requirements, if justified.
14. Your agency's authority to implement and enforce NSPS under this delegation does not extend to sources or activities located in Indian Country, as defined in 18 U.S.C. 1151. Consistent with previous Federal program approvals or delegations, the EPA will continue to implement the NSPS in Indian Country because your agency has not demonstrated authority over sources and activities located within the exterior boundaries of Indian reservations and in other areas of Indian Country.
15. The EPA Administrator delegated to the EPA, Region 10 the authority to delegate the NSPS to any state or local agency. A state or local agency that receives delegation from the EPA, Region 10 does not have the federally recognized authority to further delegate the NSPS.
16. If the EPA determines that your agency's procedures for implementing or enforcing the NSPS are inadequate or are not being effectively carried out, this delegation may be revoked in whole or in part by written notice of the revocation. Any such revocation will be effective as of the date specified in the notice.
Unless we receive negative comments from you within ten days, this delegation is final and will be effective ten days from the date of this letter. Otherwise, no further correspondence to the EPA is needed from IDEQ to make this delegation effective. We will periodically publish a notice in the
This notice acknowledges the update of Idaho's delegation of authority to implement and enforce NSPS and NESHAP.
Environmental Protection Agency (EPA).
Notice of final order on petition.
The Environmental Protection Agency (EPA) Administrator signed an order dated June 25, 2024, denying a Petition dated January 16, 2024, from the Harahan/River Ridge Air Quality Group, JOIN for Clean Air, Sierra Club, and Environmental Integrity Project. The Petition requested that the EPA object to a Clean Air Act (CAA) title V operating permit issued by the Louisiana Department of Environmental Quality (LDEQ) to CF Industries East Point, LLC, Waggaman Complex, located in Jefferson Parish, Waggaman, Louisiana.
Elizabeth Layton, EPA Region 6 Office, Air Permits Section, (214) 665-2136,
The EPA received a petition from the Harahan/River Ridge Air Quality Group, JOIN for Clean Air, Sierra Club, and Environmental Integrity Project dated January 16, 2024, requesting that the EPA object to the issuance of operating permit no.1340-00352-V9, issued by LDEQ to CF Industries East Point, LLC, Waggaman Complex in Waggaman, Jefferson Parish, Louisiana. On June 25, 2024, the EPA Administrator issued an order denying the Petition. The order explains the basis for the EPA's decision.
Sections 307(b) and 505(b)(2) of the CAA provide that a petitioner may request judicial review of those portions of an order that deny issues in a petition. Any petition for review shall be filed in the United States Court of Appeals for the appropriate circuity no later than September 13, 2024.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA or Agency) is announcing the availability of and soliciting comment on the work plans and registration review case dockets for the following active ingredients: Banda de
Comments must be received on or before September 13, 2024.
Submit your comments, identified by the docket identification (ID) number for the specific pesticide of interest provided in table 1 of unit II., through the
This action is directed to the public in general and may be of interest to a wide range of stakeholders including environmental, human health, farm worker, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides. Since others also may be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult the Chemical Review Manager identified in table 1 of unit II.
Pursuant to 40 CFR 155.50(b), this notice announces the availability of the EPA's work plans and registration review case dockets for the pesticides shown in Table 1 and opens a 60-day public comment period on the work plans and case dockets.
EPA is conducting its registration review of the chemicals listed in Table 1 of Unit II. pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) section 3(g) (7 U.S.C. 136a(g)) and the Procedural Regulations for Registration Review at 40 CFR part 155, subpart C. FIFRA section 3(g) provides, among other things, that pesticide registrations are to be reviewed every 15 years. Consistent with 40 CFR 155.57, in its final registration review decision, EPA will ultimately determine whether a pesticide continues to meet the registration standard in FIFRA section 3(c)(5) (7 U.S.C. 136a(c)(5)).
Pursuant to 40 CFR 155.50, EPA initiates a registration review by establishing a public docket for a pesticide registration review case. Registration review dockets contain information that will assist the public in understanding the types of information and issues that the Agency has consider during registration review. Consistent with 40 CFR 155.50(a), these dockets may include information from the Agency's files including, but not limited to, an overview of the registration review case status, a list of current product registrations and registrants, any
Consistent with 40 CFR 155.50(b), EPA provides for at least a 60-day public comment period on work plans and registration review dockets. This comment period is intended to provide an opportunity for public input and a mechanism for initiating any necessary changes to a pesticide's workplan. During this public comment period, the Agency is asking that interested persons identify any additional information they believe the agency should consider during the registration reviews of these pesticides. The Agency identifies in each docket the areas where public comment is specifically requested, though comment in any area is welcome.
For additional background on the registration review program, see:
1.
2.
3.
All comments should be submitted using the methods in
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA or Agency) is announcing the availability of EPA's interim registration review decisions for the following chemicals: Copper 8-quinolinolate, DCNA, and norflurazon.
The dockets, identified by the docket identification (ID) number for the specific pesticide of interest provided in table 1 of unit II., are available online at
This action is directed to the public in general and may be of interest to a wide range of stakeholders including environmental, human health, farm worker, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides. Since others also may be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult the Chemical Review Manager identified in table 1 of unit II.
Pursuant to 40 CFR 155.58(c), this notice announces the availability of EPA's interim or final registration review decisions for the pesticides shown in Table 1. The interim and final registration review decisions are supported by rationales included in the docket established for each chemical.
EPA is conducting its registration review of the chemicals listed in table 1 of unit II. pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) section 3(g) (7 U.S.C. 136a(g)) and the Procedural Regulations for Registration Review at 40 CFR part 155, subpart C. FIFRA section 3(g) provides, among other things, that pesticide registrations are to be reviewed every 15 years. Consistent with 40 CFR 155.57, in its final registration review decision, EPA will ultimately determine whether a pesticide continues to meet the registration standard in FIFRA section 3(c)(5) (7 U.S.C. 136a(c)(5)). As part of the registration review process, the Agency has completed interim or final registration review decisions for the pesticides in table 1 of unit II.
Prior to completing the interim or final registration review decisions in table 1 of unit II., EPA posted proposed interim decisions or proposed registration review decisions for these chemicals and invited the public to submit any comments or new information, consistent with 40 CFR 155.58(a). EPA considered and responded to any comments or information received during these public comment periods in the respective interim decision or final registration review decisions.
For additional background on the registration review program, see:
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
Written comments and recommendations for the proposed information collection should be submitted on or before August 14, 2024.
Comments should be sent to
For additional information or copies of the information collection, contact Cathy Williams at (202) 418-2918. To view a copy of this information collection request (ICR) submitted to OMB: (1) go to the web page
The Commission may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
Sections 2.016 and 27.1603 require a 3.45 GHz Service licensee whose license area overlaps with a Cooperative Planning Area or Periodic Use Area, as defined in those sections, to coordinate deployments pursuant to those licenses in those areas with relevant Federal agencies. This coordination may take the form of a mutually acceptable operator-to-operator coordination agreement between the licensee and the relevant Federal agency. In the absence of such an agreement, this coordination will include a formal request for access through a Department of Defense online portal, which will include the submission of information related to the technical characteristics of the base stations and associated mobile units to be used in the covered area. It does not require a revision to the FCC Form 601.
Section 27.1605 requires non-Federal, secondary radiolocation operations which are relocating from the 3.45 GHz band to alternate spectrum to clear the band for new flexible-use wireless operations to submit certain information to a clearinghouse in order to ensure their relocation costs are fairly reimbursed. It does not require a revision to the FCC Form 601.
Section 27.1607 requires 3.45 GHz Service licensees to share certain information about their network operations in that band with operators in the adjacent Citizens Broadband Radio Service in order to enable the latter to synchronize their operations to reduce the risk of harmful interference. In response to a request by a Citizens Broadband Radio Service operator, a 3.45 GHz Service licensee must provide information to enable Time Division Duplex synchronization. The exact nature of the information to be provided will be determined by a negotiation between the two entities, conducted on a good faith basis. The 3.45 GHz Service licensee must keep the information current as its network operations change.
Section 27.14(w) requires 3.45 GHz Service licensees to provide information on the extent to which they provide service in their license areas. Licensees are required to file two such reports: The first four (4) years after its initial license grant and the second eight (8) years after such grant, unless they failed to meet the first set of performance requirements, in which case the second report is due seven (7) years after the initial grant. These reports are filed alongside the Form 601 and require no revisions to it.
Federal Trade Commission.
Notice.
The Federal Trade Commission (“FTC” or “Commission”) has clearance from the Office of Management and Budget (“OMB”) to send information requests, pursuant to compulsory process, to a combined ten or more of the largest cigarette manufacturers and smokeless tobacco manufacturers. The information sought includes, among other things, data on the manufacturers' annual sales and marketing expenditures for cigarettes, smokeless tobacco products, and electronic devices used to heat non-combusted cigarettes, and sales of tobacco-free nicotine lozenges and pouches. The current OMB clearance for this information collection expires on August 31, 2024. Accordingly, the Commission is providing this second opportunity for public comment while seeking OMB approval to renew the pre-existing clearance and to modify the existing clearance to allow for the collection of additional information concerning annual marketing expenditures for tobacco-free nicotine lozenges and pouches by smokeless tobacco manufacturers or related companies.
Comments must be filed by August 14, 2024.
Interested parties may file a comment online or on paper, by following the instructions in the Request for Comment part of the
Michael Ostheimer, Division of Advertising Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Mailstop CC-10507, Washington, DC 20580, (202) 326-2699.
Pursuant to section 6(b) of the FTC Act, 15 U.S.C. 46(b), the Commission collects information on sales and/or marketing of cigarettes, smokeless tobacco products, tobacco-free nicotine lozenges and pouches, and electronic devices used to heat non-combusted cigarettes (collectively, “subject products”) from manufacturers of cigarettes and smokeless tobacco products. Depending on the type of product a manufacturer produces, the Commission requests the information using two different instruments—that is, a Cigarette Order or a Smokeless Tobacco Order. The Commission compiles and publishes the data in two periodic reports.
The current OMB clearance to collect this information is valid through August 31, 2024 (OMB Control No. 3084-0134). On March 26, 2024, the Commission sought public comment on its proposal to renew its current OMB clearance, and to modify its existing clearance to allow for the collection of additional information concerning annual marketing expenditures for tobacco-free nicotine lozenges and pouches by smokeless tobacco manufacturers or related companies.
Two of the three comments express the commenters' strong support for the information collection,
Both supportive comments discuss the usefulness of the collection of the information. Specifically, both supportive comments note that the FTC's Cigarette and Smokeless Tobacco Reports provide critical data to researchers, policymakers, advocates, and the general public.
As part of its comment, Truth Initiative also makes the following recommendations—each of which would expand the scope of the information collection. First, Truth Initiative recommends that the Commission request information regarding low nicotine cigarettes. Truth Initiative points out that, in December 2019, the U.S. Food and Drug Administration authorized the marketing by one company of two new tobacco products, which are combusted, filtered cigarettes that contain a reduced amount of nicotine compared to typical commercial cigarettes.
The Commission's Cigarette Reports focus on the largest cigarette manufacturers and do not attempt to present a complete picture of the cigarette market. There are numerous smaller manufacturers and importers of cigarettes to which the Commission does not direct its cigarette Orders. Even if the Commission were to direct an order to the one company selling low nicotine cigarettes, it could not publish data regarding “low nicotine” cigarettes because doing so would result in publishing the one company's confidential commercial information. Accordingly, at this time, the Commission does not intend to seek information specifically regarding low nicotine cigarettes, or to direct an Order to the one company marketing such products.
Second, Truth Initiative suggests that the Commission collect and report on information about the content of advertisements for certain products, such as heated, non-combusted cigarettes and oral nicotine products; specifically, whether such products are being advertised as less harmful or better alternatives to traditional cigarette and smokeless tobacco products or as lifestyle products. In support of this recommendation, Truth Initiative notes that, for example, the marketing of oral pouch products as “tobacco-free” alternatives to smoking may lead consumers to ascribe lower risks to these products, despite a lack of evidence or proper federal authorization.
With respect to Truth Initiative's suggestion that the Commission collect information on certain types of advertising content, the Commission notes that the Cigarette and Smokeless Tobacco Reports have historically provided data on sales and advertising expenditures. Additionally, the Commission believes that expanding the scope of the requests to include this type of information would divert critical resources from other mission priorities. Therefore, the Commission declines to make these proposed modifications.
Third, Truth Initiative recommends that the Commission collect marketing data on cigars, and notes that “[y]outh use cigars at rates similar to cigarettes, making marketing information around cigars equally important.”
Truth Initiative also notes that one of its studies, which examined vaping influencers on Instagram, found that “most influencer posts promoting vaping products were unambiguous vaping advertisements promoting a specific brand or product,” and the majority of them did not disclose the influencer's brand relationship.
Accordingly, for the foregoing reasons, the Commission declines to make any adjustments to its prior burden estimates or to modify its initial proposal.
The Commission's section 6(b) Orders seek data regarding, among other things: (1) the cigarette or smokeless tobacco sales of industry members; (2) how much industry members spend advertising and promoting their cigarette or smokeless tobacco products, and the specific amounts spent in each of a number of specified expenditure categories; (3) whether industry members are involved in the appearance of their cigarette or smokeless tobacco products or brand imagery in television shows, motion pictures, on the internet, or on social media; (4) how much industry members spend on advertising intended to reduce youth cigarette or smokeless tobacco usage; (5) the events, if any, during which industry members' cigarette or smokeless tobacco brands are televised; and (6) how much industry members spend on public entertainment events promoting their companies but not specific cigarette or smokeless tobacco products or such products generally. The information requests to cigarette companies also seek information pertaining to the annual sales, giveaways, and marketing expenditures for electronic devices used to heat non-combusted cigarette products, and the information requests to smokeless tobacco companies also seek information pertaining to the annual unit and dollar sales of tobacco-free nicotine lozenges and pouches. Once the Commission's clearance request has been approved by OMB, the Commission's information requests to smokeless tobacco companies will also seek information concerning sales and advertising and promotional expenditures for tobacco-free nicotine lozenges and pouches, including the specific amounts spent in each of a number of specified expenditure categories.
Pursuant to OMB regulations, 5 CFR part 1320, which implement the Paperwork Reduction Act of 1995, as amended, 44 U.S.C. 3501
Your comment—including your name and your state—will be placed on the public record of this proceeding. Because your comment will be made public, you are solely responsible for making sure that your comment does not include any sensitive personal information, such as anyone's Social Security number; date of birth; driver's license number or other state identification number or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for ensuring that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “[t]rade secret or any commercial or financial information which is . . . privileged or confidential”—as provided in section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—including, in particular, competitively sensitive information, such as costs, sales statistics, inventories, formulas, patterns devices, manufacturing processes, or customer names.
Centers for Medicare & Medicaid Services (CMS), HHS.
Notice of meeting.
This meeting notice announces the virtual meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) on Monday, August 26, 2024 and Tuesday, August 27, 2024. The purpose of the Panel is to advise the Secretary on the clinical integrity of the Ambulatory Payment Classification groups and their associated weights, which are major elements of the Medicare Hospital Outpatient Prospective Payment System and the Ambulatory Surgical Center payment system, and supervision of hospital outpatient therapeutic services.
Presentations and comment letters that are not received by the due date and time will be considered late or incomplete and will not be included on the agenda. Presentations and comment letters may not be revised once they are submitted. If a presentation or comment letter requires changes, a new submittal must be submitted by August 02, 2024.
Please see additional information regarding the submission of section 508 compliant presentation and comment letter materials in section “III. Presentations and Comment Letters” of this notice.
Nicole Marcos, Designated Federal Official at (202) 690-7484 or via email at:
Press inquiries are handled through the CMS Press Office at (202) 690-6145.
The Secretary of the Department of Health and Human Services (the Secretary) is required by section 1833(t)(9)(A) of the Social Security Act (the Act) and is allowed by section 222 of the Public Health Service Act to consult with an expert outside panel, such as the Advisory Panel on Hospital Outpatient Payment (the Panel), regarding the clinical integrity of the Ambulatory Payment Classification (APC) groups and relative payment weights. The Panel is governed by the provisions of the Federal Advisory Committee Act (Pub. L. 92-463), as amended (5 U.S.C. appendix 2), to set forth standards for the formation and use of advisory panels. We consider the technical advice provided by the Panel as we prepare the final rule and the following calendar year's proposed rule to update the Hospital Outpatient Prospective Payment System (OPPS).
The agenda for the August 26 and 27, 2024 virtual Panel meeting will provide for discussion and comment on the following topics as designated in the Panel's Charter:
• Addressing whether procedures within an APC group are similar both clinically and in terms of resource use.
• Reconfiguring APCs.
• Evaluating APC group weights.
• Reviewing packaging costs of items and services, including drugs and devices, into procedures and services, including the methodology for packaging and the impact of packaging the cost of those items and services on APC group structure and payment.
• Removing procedures from the inpatient only list for payment under the OPPS.
• Using claims and cost report data for the Centers for Medicare & Medicaid Services' (CMS) determination of APC group costs.
• Addressing other technical issues concerning APC group structure.
• Evaluating the required level of supervision for hospital outpatient services.
• OPPS APC rates for covered Ambulatory Surgical Center (ASC) procedures.
The agenda will be posted on our website at:
The subject matter of any presentation and comment letter must be within the scope of the Panel as designated in the Charter. Any presentations or comments outside of the scope of the Panel will be returned or requested for amendment. Unrelated topics include but are not limited to: the conversion factor; charge compression; revisions to the cost report; pass-through payments; correct coding; new technology applications (including supporting information/documentation); provider payment adjustments; supervision of hospital outpatient diagnostic services; and the types of practitioners that are permitted to supervise hospital outpatient services. The Panel may not recommend that services be designated as nonsurgical extended duration therapeutic services. Presentations or comment letters that address OPPS APC rates as they relate to covered ASC procedures are within the scope of the Panel; however, ASC payment rates, ASC payment indicators, the ASC covered procedures list, or other ASC payment system matters will be considered out of scope. The Panel may use data collected or developed by entities and organizations other than the Department of Health and Human Services or CMS in conducting its review. We recommend organizations submit data for CMS staff and the Panel's review. All presentations are limited to 5 minutes, regardless of the number of individuals or organizations represented by a single presentation.
For this meeting, we are aiming to have all presentations and comment letters available on our website. Materials on our website must be section 508 compliant to ensure access to Federal employees and members of the public with and without disabilities. Presenters and commenters should reference the guidance on making documents section 508 compliant as they draft their submissions, and, whenever possible, submit their presentations and comment letters in a 508 compliant form. The section 508 guidance is available at:
We will review presentations and comment letters for section 508 compliance and place compliant materials on our website. As resources permit, we will also convert non-compliant submissions to section 508-compliant forms and offer assistance to submitters who are making their submissions section 508-compliant. All section 508-compliant presentations and comment letters will be made available on the CMS website. If difficulties are encountered accessing the materials, please contact the Designated Federal Official in the
In addition to formal presentations (limited to 5 minutes total per presentation), there will be an opportunity during the meeting for public comments as time permits (limited to 1 minute for each individual and a total of 3 minutes per organization).
The Panel's recommendations at any Panel meeting generally are not final until they have been reviewed and approved by the Panel on the last day of the meeting, prior to the final adjournment. These recommendations will be posted to our website after the meeting.
The Panel Charter provides that the Panel shall meet up to 3 times annually. We consider the technical advice provided by the Panel as we prepare the update to the calendar year OPPS proposed and final rules. The Panel shall consist of a chair and up to 15 members who are full-time employees of hospitals, hospital systems, or other Medicare providers that are subject to the OPPS. The Panel may also include a representative of a provider with ASC expertise, who advises CMS only on OPPS APC rates, as appropriate, impacting ASC covered procedures within the context and purview of the Panel's scope. The Secretary or a designee selects the Panel membership based upon either self-nominations or nominations submitted by Medicare providers and other interested organizations of candidates determined to have the required expertise. For supervision deliberations, the Panel may include members that represent the interests of critical access hospitals, who advise CMS only regarding the level of supervision for hospital outpatient therapeutic services. New appointments are made in a manner that ensures a balanced membership under the Federal Advisory Committee Act guidelines. The Secretary rechartered the Panel in 2022 for a 2-year period effective through November 20, 2024. The current charter is available on the CMS website at:
• E.L. Hambrick, M.D., J.D., CMS Chairperson.
• Becky Bean, BS, MHA/MBA, PharmD.
• Thomas Capco, BSRT, RRT, CPFT.
• Nancy Dawson, MD, FACP.
• Blake Dirksen, MS, DABR.
• Brandon Fazio, BS.
• Rahul Seth, DO, FASCO.
• Wendi Smith Lloyd, CPC, COC, CPMA, COSC.
• William Tettelbach, MD, FACP, FIDSA, FUHM, MAPWCA, CWSP.
The Request for Nominations to the Advisory Panel on Hospital Outpatient Payment notice (87 FR 68499) provided for nominations to be accepted through February 13, 2023 or after that date at CMS's discretion.
As a result of that notice, we are announcing 3 new members to the Panel. These 3 new Panel member appointments will assure that we continue to have a Chair and up to 15 members available to attend our scheduled meeting.
New members of the Panel and their terms are as follows:
• Jennifer Artigue, RHIT, CCS. Term: May 13, 2024-May 12, 2028.
• Scott Manaker, MD, Ph.D. Term: July 20, 2024-July 19, 2028.
• Caroline Zeller, DDS, MPH. Term: May 13, 2024-May 12, 2028.
We currently accept nominations on a continuous basis to fill upcoming panel vacancies. We encourage additional submissions. Any interested person or organization may nominate qualified individuals. Self-nominations from qualified individuals are also accepted. Nominations must be submitted through the “Hospital Outpatient Payment (HOP) Panel Member Nomination” module on MEARIS
This document does not impose information collection requirements, that is, reporting, recordkeeping, or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Administrator of the Centers for Medicare & Medicaid Services (CMS), Chiquita Brooks-LaSure, having reviewed and approved this document, authorizes Vanessa Garcia, who is the Federal Register Liaison, to electronically sign this document for purposes of publication in the
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
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, please access the CMS PRA website by copying and pasting the following web address into your web browser:
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.
Regulations at 45 CFR 155.405(a) provides more detail about the application that must be used by Marketplaces to determine eligibility and to collect information necessary for enrollment. Eligibility standards for the Marketplace are set forth in 45 CFR 155.305. The information will be required of each applicant upon initial application, with some subsequent information collections for the purposes of confirming accuracy of previous submissions and for changes in an applicant's circumstances. 42 CFR 435.907 and § 457.330 establish the standards for state Medicaid and CHIP agencies related to the use of the application. CMS has designed a dynamic electronic application that will tailor the amount of data required from an applicant based on the applicant's circumstances and responses to particular questions in the FFM (please note SBM implementations may vary but the essence of the data collection must adhere to the same parameters). The paper version of the application will not be tailored in the same way but will require only the data necessary to determine eligibility.
Information collected by the Marketplace, Medicaid or CHIP agency will be used to determine eligibility for coverage through the Marketplace and insurance affordability programs (
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration's (FDA or the Agency) Center for Biologics Evaluation and Research (CBER), Office of Therapeutic Products (OTP) is announcing the Cellular and Gene Therapies Interactive Site Tours Program (the Interactive Site Tours Program). This program is
Companies may send proposed agendas to the Agency by August 14, 2024.
Lori Tull, Office of Review Management and Regulatory Review, Office of Therapeutic Products, Center for Biologics Evaluation and Research, Food and Drug Administration, 240-402-8361,
Under section 351 of the Public Health Service Act (PHS Act), FDA is authorized to license biological products if they have been demonstrated to be “safe, pure, and potent.” CBER is one of two Centers at FDA that regulates biological products for human use under applicable statutory provisions of the PHS Act and the Federal Food, Drug, and Cosmetic Act (FD&C Act). Section 3033 of the 21st Century Cures Act (Cures Act) (Pub. L. 114-255), was signed into law on December 13, 2016, and amended section 506 of the FD&C Act to specifically address the expedited development and review of certain regenerative medicine therapies, including cell therapies, therapeutic tissue engineering products, and human cell and tissue products.
An important part of CBER's commitment to make safe and effective biological products available to all Americans is optimizing the efficiency and quality of the biologics review process. To support this goal, CBER has initiated various training and development programs to promote high performance in its regulatory project management and review staff. OTP seeks to enhance review efficiency and review quality by providing staff with a better understanding of the biotechnology industry and its operations. To this end, CBER/OTP is offering regulatory project managers and reviewers the opportunity to tour biotechnology manufacturing facilities. The goals are to provide the following: (1) firsthand exposure to industry's product development processes and (2) a venue for sharing information about project management best practices (but not product-specific information) with industry representatives.
In this program, which may last a few days, a small group of OTP regulatory project managers and/or reviewers, potentially also including senior level staff, can observe operations of biologics manufacturing and/or packaging facilities, pathology/toxicology laboratories, and regulatory affairs operations. Neither this tour nor any part of the program is intended as a mechanism to inspect, assess, judge, or perform a regulatory function, but is meant rather to provide an avenue for open dialogue between CBER/OTP staff and industry representatives. During the Interactive Site Tours Program, regulatory project managers and reviewers may also participate in daily workshops with their industry counterparts, focusing on selective regulatory issues important to both OTP staff and industry. The primary objective of the daily workshops is to understand the team approach to biological product development, including discovery, nonclinical and clinical evaluation, postmarketing activities, and regulatory submission operations. The overall benefit to regulatory project managers and reviewers will be exposure to project management, team techniques, and processes employed by the biotechnology industry. By participating in this program, the regulatory project managers and reviewers will gain a better understanding of industry processes and procedures.
All travel expenses associated with the Interactive Site Tours Program will be the responsibility of OTP; therefore, selection of facility tour sites will be based on the availability of funds and resources for the program. Selection will also be based on firms having a favorable facility status as determined by FDA's Office of Regulatory Affairs District Offices in the firms' respective locations. Firm participation in the program is limited to companies developing cellular and/or gene therapy products. Firms that want to learn more about this opportunity or that are interested in offering a site tour should respond by sending a proposed agenda via email directly to Lori Tull (see
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is withdrawing approval of the new drug application (NDA) for EXKIVITY (mobocertinib succinate) capsule, equivalent to (EQ) 40 milligrams (mg) base, held by Takeda Pharmaceuticals U.S.A., Inc., 95 Hayden Ave., Lexington, MA 02421 (Takeda). Takeda has voluntarily requested that FDA withdraw approval of this application and has waived its opportunity for a hearing.
Approval is withdrawn as of July 15, 2024.
Kimberly Lehrfeld, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6226, Silver Spring, MD 20993-0002, 301-796-3137,
On September 15, 2021, FDA approved NDA 215310 for EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, for the treatment of adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with epidermal growth factor receptor (EGFR) exon 20 insertion mutations, as detected by an FDA-approved test, whose disease has progressed on or after platinum-based chemotherapy (EGFR exon 20 insertion-mutated NSCLC), under the Agency's accelerated approval regulations, 21 CFR part 314, subpart H. The accelerated approval of EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, for EGFR exon 20 insertion-mutated NSCLC included a required postmarketing trial intended to verify the clinical benefit of EXKIVITY.
On October 19, 2023, FDA met with Takeda to discuss the voluntary withdrawal of EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, according to § 314.150(d) (21 CFR 314.150(d)). On October 25, 2023, FDA recommended the applicant voluntarily request withdrawal of approval of EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, for EGFR exon 20 insertion-mutated NSCLC according to § 314.150(d) because the postmarketing trial did not verify clinical benefit. FDA also requested Takeda waive its opportunity for a hearing.
On March 15, 2024, Takeda submitted a letter asking FDA to withdraw approval of NDA 215310 for EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, according to § 314.150(d) and waiving its opportunity for a hearing.
For the reasons discussed above, and in accordance with the applicant's request, approval of NDA 215310 for EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, and all amendments and supplements thereto, is withdrawn under § 314.150(d). Distribution of EXKIVITY (mobocertinib succinate) capsule, EQ 40 mg base, into interstate commerce without an approved application is illegal and subject to regulatory action (see sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(a) and 331(d)).
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 Advisory Council on Blood Stem Cell Transplantation (ACBSCT or Advisory Council) has scheduled public meetings. Information about the Advisory Council and the agenda for these meetings can be found on the ACBSCT website at
Thursday, August 22, 2024, 2:00 p.m.-6:00 p.m. Eastern Standard Time; and Thursday, October 24, 2024, 2:00 p.m.-6:00 p.m. Eastern Standard Time.
Both meetings will be held virtually by webinar. A link to register and join each meeting will be posted at least 10 days prior to the meeting date at:
Shelley Tims Grant, Designated Federal Official, HRSA Health Systems Bureau, Division of Transplantation, 5600 Fishers Lane, 8W-67, Rockville, Maryland 20857; 301-443-8036; or
ACBSCT provides advice and recommendations to the Secretary of Health and Human Services on policy, program development, and other matters of significance concerning the activities under the authority of 42 U.S.C. 274k (Section 379 of the Public Health Service Act), as amended, and Public Law 109-129, as amended. The Advisory Council may transmit its recommendations through the HRSA Administrator on matters related to the activities of the C.W. Bill Young Cell Transplantation Program and National Cord Blood Inventory.
The agenda for the August 22, 2024, meeting is being finalized and may include the following topics: criteria for defining a high-quality cord blood unit for banking specifications; the unmet needs in blood stem cell transplantation and cellular therapy; updates on transplant outcomes by different donor sources; strategies to improve rates of donation for adult blood stem cell donors; and other areas to increase blood stem cell donation and transplantation. The agenda for the October 24, 2024, meeting will be determined based on discussion, priorities, and/or action items from the August 22, 2024, meeting. All agenda items will be posted on the Advisory Council's website no later than 10 days prior to the respective meeting dates. Agenda items are subject to change as priorities dictate. Interested individuals are encouraged to monitor the Advisory Council's website for any updated information concerning the meeting.
Members of the public will have the opportunity to provide comments. Public participants may submit written statements in advance of the scheduled meetings; oral comments will be honored in the order they are requested and may be limited as time allows. Requests to submit a written statement or make oral comments to ACBSCT should be sent to Shelley Tims Grant, using the contact information above, at least 3 business days prior to the meeting.
Individuals who plan to attend and need special assistance or other reasonable accommodations should notify Advisory Council at the address and phone number listed above at least 10 business days prior to the meeting.
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the Paperwork Reduction Act of 1995, HRSA submitted an Information Collection Request (ICR) to the Office of Management and Budget (OMB) for review and approval. Comments submitted during the first public review of this ICR will be provided to OMB. OMB will accept further comments from the public during the review and approval period. OMB may act on HRSA's ICR only after the 30-day comment period for this notice has closed.
Comments on this ICR should be received no later than August 14, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To request a copy of the clearance requests submitted to OMB for review, email Joella Roland, the HRSA Information Collection Clearance Officer, at
• RCORP—Implementation grants fund established networks and consortia to deliver SUD/OUD prevention, treatment, and recovery activities in high-risk rural communities;
• RCORP—Psychostimulant Support grants aim to strengthen and expand access to prevention, treatment, and recovery services for individuals in rural areas who misuse psychostimulants, to enhance their ability to access treatment and move toward recovery;
• RCORP—Medication Assisted Treatment Access grants aim to establish new access points in rural facilities where none currently exist;
• RCORP—Behavioral Health Care support grants aim to expand access to and quality of behavioral health care services at the individual-, provider-, and community-levels;
• RCORP—Overdose Response recipients address immediate needs in rural areas through improving access to, capacity for, and sustainability of prevention, treatment, and recovery services for SUD;
• RCORP—Child and Adolescent Behavioral Health grants aim to establish and expand sustainable behavioral health care services for children and adolescents aged 5-17 years who live in rural communities; and
• RCORP—Neonatal Abstinence Syndrome grants aim to reduce the incidence and impact of Neonatal Abstinence Syndrome in rural communities by improving systems of care, family supports, and social determinants of health.
Note that additional grant initiatives may be added pending fiscal year 2025 and future fiscal year appropriations.
HRSA currently collects information about RCORP grants using approved performance measures. HRSA developed separate performance measures for RCORP's new Overdose Response, Behavioral Health, and Neonatal Abstinence Syndrome grants and seeks OMB approval for the new performance measures.
A 60-day notice published in the
For this program, performance measures were developed to provide data on each RCORP initiative and to enable HRSA to provide aggregate program data required by Congress under the Government Performance and Results Act of 1993. These measures cover the principal topic areas of interest to HRSA's Federal Office of Rural Health Policy, including: (a) provision of, and referral to, rural behavioral health care services, including SUD prevention, treatment and recovery support services; (b) behavioral health care, including SUD prevention, treatment, and recovery, process and outcomes; (c) education of health care providers and community members; (d) emerging trends in rural behavioral health care needs and areas of concern; and (e) consortium strength and sustainability. All measures will speak to the progress on meeting the set goals of the Federal Office of Rural Health Policy.
Office of the Secretary, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995, the Office of the Secretary (OS), Department of Health and Human Services, is publishing the following summary of a proposed collection for public comment.
Comments on the ICR must be received on or before August 14, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Sherrette Funn,
Interested persons are invited to send comments regarding this burden estimate or any other aspect of this collection of information, including any of the following subjects: (1) The necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
OMB No. 0990-NEW—Office of the Assistant Secretary for Health.
OASH oversees a broad range of grant programs within the Office of the Secretary (OS), Department of Health and Human Services (HHS). The current active OASH programs with discretionary grants (with assistance listing number) include: Public Awareness Campaigns on Embryo Adoption (93.007); Research on Research Integrity (93.085); Advancing System Improvements for Key Issues in Women's Health (93.088); Community Programs to Improve Minority Health Grant Programs (93.137); Family Planning Services (93.217); Family Planning Personnel Training (93.260); Teenage Pregnancy Prevention Program (93.297); Public Health Service Evaluation Funds (93.343); Research, Monitoring and Outcomes Definitions for Vaccine Safety (93.344); Minority HIV/AIDS Fund (93.899); Family Planning Service Delivery Improvement Research Grants (93.974); and National Health Promotion (93.990). OASH grants span a wide range of project types, including service, demonstration project, evaluation, research, training, and conference projects. Within each program, the awards are subdivided into cohorts aligned with the notices of funding opportunity under which OASH competed the awards. Currently, there are 47 cohorts of active awards across OASH. In any given year, OASH programs collectively monitor 450-550 active awards with another 200-300 inactive awards awaiting final reports as a prerequisite to closing the grant.
The collection is needed to enhance project performance information and simplify reporting under 45 CFR 75.301. Each recipient currently must submit a quarterly Federal Financial Report (FFR or SF-425)(45 CFR 75.341) and a periodic Performance Progress Report (PPR) for each grant (45 CFR 75.342(b)(2). PPR reporting periods in OASH are scheduled quarterly, semi-annually, or annually, depending on the need determined by the program office using a narrative format that can vary by cohort. The PPR schedule is specifically aligned with the quarterly FFRs whenever possible to create a complete snapshot of the project's progress at the end of the reporting period.
The common elements identified in the new collection for OASH programs will standardize the collection of the required information (45 CFR 75.342(b)(2)) including: (1) a comparison of the actual accomplishments to the objectives of the award for the period; (2) the reasons why established goals were not met; and (3) pertinent information, analysis and explanation of cost overruns or high unit costs. The common elements include reporting on publications, including data sets and other work products, to facilitate implementation of OSTP Memorandum Ensuring Free, Immediate, and Equitable Access Federally Funded Research (August 25, 2022). The new information collection will limit the content of the report to those activities taking place during the reporting period (
The content of the new collection is structured for web-based data collection under 7 headings: Report Header; Project Progress; Significant Project Accomplishments; Broader Program Impacts; Products and Dissemination; Collaboration and Partnering Activities; and Project Evaluation Activities. Information will be prepopulated based on the login credentials for the user submitting the report and the specific grant being reported. Not all grants will have reportable activities under all headings (
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting.
The meeting will be open to the public as indicated below. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public as indicated below in accordance with the provisions set forth in section 552b(c)(6), title 5 U.S.C., as amended for review, discussion, and evaluation of individual intramural programs and projects conducted by the National Library of Medicine, including consideration of personnel qualifications and performance, and the competence of individual investigators, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any member of the public may submit written comments no later than 15 days in advance of the meeting. 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.
Open sessions will be videocast and can be accessed from the NIH Videocasting and Podcasting website (
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the 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 materials, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
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 stringent procedures for entrance into NIH federal property. Visitors will be asked to show one form of identification (for example, a government-issued photo ID, driver's license, or passport) and to state the purpose of their visit.
Information is also available on the Institute's/Center's home page:
Federal Emergency Management Agency, Department of Homeland Security.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
Comments are to be submitted on or before October 15, 2024.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location
You may submit comments, identified by Docket No. FEMA-B-2448, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location
Federal Emergency Management Agency, Department of Homeland Security.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
Comments are to be submitted on or before October 15, 2024.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location
You may submit comments, identified by Docket No. FEMA-B-2444, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location
Privacy Office, Department of Homeland Security (DHS).
Committee management; notice of committee charter renewal.
The Secretary of Homeland Security has determined that the renewal of the Data Privacy and Integrity Advisory Committee is necessary and in the public interest in connection with the Department of Homeland Security's performance of its duties. This determination follows consultation with the Committee Management Secretariat, General Services Administration. This notice is not a solicitation for membership.
The committee's current Charter is effective August 9, 2022, and expires August 9, 2024.
Sandra L. Taylor, Designated Federal Officer, DHS Data Privacy and Integrity Advisory Committee, Department of Homeland Security, Privacy Office, Mail Stop 0655, 2707 Martin Luther King Jr. Ave. SE, Washington, DC 20598-0655, by telephone (202) 343-1717, by fax (202) 343-4010, or by email to
Fish and Wildlife Service, Interior.
Notice of receipt of permit applications; request for comments.
We, the U.S. Fish and Wildlife Service, have received applications for permits to conduct activities intended to enhance the propagation or survival of endangered or threatened species under the Endangered Species Act. We invite the public and local, State, Tribal, and Federal agencies to comment on these applications. Before issuing any of the requested permits, we will take into consideration any information that we receive during the public comment period.
We must receive your written comments on or before August 14, 2024.
•
•
Nathan Rathbun, 612-713-5343 (phone);
We, the U.S. Fish and Wildlife Service, invite review and comment from the public and local, State, Tribal, and Federal agencies on applications we have received for permits to conduct certain activities with endangered and threatened species under section 10(a)(1)(A) of the Endangered Species Act of 1973, as amended (ESA; 16 U.S.C. 1531
The ESA prohibits certain activities with endangered and threatened species unless authorized by a Federal permit. The ESA and our implementing regulations in part 17 of title 50 of the Code of Federal Regulations (CFR) provide for the issuance of such permits and require that we invite public comment before issuing permits for activities involving endangered species.
A recovery permit issued by us under section 10(a)(1)(A) of the ESA authorizes the permittee to conduct activities with endangered species for scientific purposes that promote recovery or for enhancement of propagation or survival of the species. Our regulations implementing section 10(a)(1)(A) for these permits are found at 50 CFR 17.22 for endangered wildlife species, 50 CFR 17.32 for threatened wildlife species, 50 CFR 17.62 for endangered plant species, and 50 CFR 17.72 for threatened plant species.
The ESA requires that we invite public comment before issuing these permits. Accordingly, we invite local, State, Tribal, and Federal agencies and the public to submit written data, views, or arguments with respect to these applications. The comments and recommendations that will be most useful and likely to influence agency decisions are those supported by quantitative information or studies. Proposed activities in the following permit requests are for the recovery and enhancement of propagation or survival of the species in the wild.
Written comments we receive become part of the administrative record associated with this action. 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 request in your comment that we withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Moreover, all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, will be made available for public disclosure in their entirety.
If we decide to issue permits to any of the applicants listed in this notice, we will publish a notice in the
We publish this notice under section 10(c) of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Bureau of Land Management, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Bureau of Land Management (BLM) proposes to renew an information collection.
Interested persons are invited to submit comments on or before September 13, 2024.
Send your written comments on this information collection request (ICR) by mail to Darrin King, Information Collection Clearance Officer, U.S. Department of the Interior, Bureau of Land Management, Attention PRA Office, 440 W 200 S #500, Salt Lake City, UT 84101; or by email to
To request additional information about this ICR, contact Grace M. Wagstaff by email at
In accordance with the Paperwork Reduction Act of 1995 (PRA, 44 U.S.C. 3501
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised and continuing collections of information. This helps the BLM assess impacts of its information collection requirements and minimize the public's reporting burden. It also helps the public understand BLM information collection requirements and ensure requested data are provided in the desired format.
The BLM is especially interested in public comment addressing the following:
(1) whether collection of information is necessary for the proper performance of the functions of the agency, including if the information will have practical utility;
(2) determination of the accuracy of the BLM's estimate of the burden for collection of information, including validity of methodology and assumptions used;
(3) methods to enhance the quality, utility, and clarity of information to be collected; and
(4) how the agency can minimize the burden of information collection on those who respond, including use of appropriate automated, electronic, mechanical or other technological collection techniques or other forms of information technology.
Comments submitted in response to this notice are a matter of public record. The BLM will include or summarize each comment in its request to OMB to approve this ICR. 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.
An agency may not conduct or sponsor and, notwithstanding any other provision of law, a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. International Trade Commission.
Notice.
Notice is hereby given that on July 5, 2024, the presiding chief administrative law judge (“CALJ”)
Panyin A. Hughes, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 205-3042. Copies of non-confidential documents filed in connection with this investigation may be viewed on the Commission's electronic docket (EDIS) at
Section 337 of the Tariff Act of 1930 provides that, if the Commission finds a violation, it shall exclude the articles concerned from the United States unless, after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry. (19 U.S.C. 1337(d)(1)). A similar provision applies to cease and desist orders. (19 U.S.C. 1337(f)(1)).
The Commission is soliciting submissions on public interest issues raised by the recommended relief should the Commission find a violation, specifically: a limited exclusion order directed to certain semiconductor devices, and methods of manufacturing same and products containing the same imported, sold for importation, and/or sold after importation by respondents Innoscience (Zhuhai) Technology Company, Ltd. and Innoscience America, Inc.; and cease and desist orders directed to the respondents. Parties are to file public interest submissions pursuant to 19 CFR 210.50(a)(4).
The Commission is interested in further development of the record on the public interest in this investigation. Accordingly, members of the public and interested government agencies are invited to file submissions of no more than five (5) pages, inclusive of attachments, concerning the public interest in light of the ALJ's Recommended Determination on Remedy and Bonding issued in this investigation on July 5, 2024. Comments should address whether issuance of the recommended remedial orders in this investigation, should the Commission find a violation, would affect the public health and welfare in the United States, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, or United States consumers.
In particular, the Commission is interested in comments that:
(i) explain how the articles potentially subject to the recommended remedial orders are used in the United States;
(ii) identify any public health, safety, or welfare concerns in the United States relating to the recommended orders;
(iii) identify like or directly competitive articles that complainant, its licensees, or third parties make in the United States which could replace the subject articles if they were to be excluded;
(iv) indicate whether complainant, complainant's licensees, and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the recommended orders within a commercially reasonable time; and
(v) explain how the recommended orders would impact consumers in the United States.
Written submissions must be filed no later than by close of business on August 9, 2024.
Persons filing written submissions must file the original document electronically on or before the deadlines stated above. The Commission's paper filing requirements in 19 CFR 210.4(f) are currently waived. 85 FR 15798 (Mar. 19, 2020). Submissions should refer to the investigation number (“Inv. No. 337-TA-1366”) in a prominent place on the cover page and/or the first page. (
Any person desiring to submit a document to the Commission in confidence must request confidential treatment by marking each document with a header indicating that the document contains confidential information. This marking will be deemed to satisfy the request procedure set forth in Rules 201.6(b) and 210.5(e)(2) (19 CFR 201.6(b) & 210.5(e)(2)). Documents for which confidential treatment by the Commission is properly sought will be treated accordingly. Any non-party wishing to submit comments containing confidential information must serve those comments on the parties to the investigation pursuant to the applicable Administrative Protective Order. A redacted non-confidential version of the document must also be filed simultaneously with any confidential filing and must be served in accordance with Commission Rule 210.4(f)(7)(ii)(A) (19 CFR 210.4(f)(7)(ii)(A)). All information, including confidential business information and documents for which confidential treatment is properly sought, submitted to the Commission for purposes of this investigation may be disclosed to and used: (i) by the Commission, its employees and Offices, and contract personnel (a) for developing or maintaining the records of this or a related proceeding, or (b) in internal investigations, audits, reviews, and evaluations relating to the programs, personnel, and operations of the Commission including under 5 U.S.C. appendix 3; or (ii) by U.S. Government employees and contract personnel, solely for cybersecurity purposes. All contract personnel will sign appropriate nondisclosure agreements. All nonconfidential written submissions will be available for public inspection on EDIS.
This action is taken under the authority of 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.
United States International Trade Commission.
July 19, 2024 at 11:00 a.m.
Room 101, 500 E Street SW, Washington, DC 20436, Telephone: (202) 205-2000.
Open to the public.
1.
2. Minutes.
3. Ratification List.
4. Commission vote on Inv. Nos. 701-TA-728 and 731-TA-1697 (Preliminary) (Vanillin from China). The Commission currently is scheduled to complete and file its determinations on July 22, 2024; views of the Commission currently are scheduled to be completed and filed on July 29, 2024.
5. Commission vote on Inv. No. 731-TA-1696 (Preliminary) (Large Top-Mount Combination Refrigerator-Freezers from Thailand). The Commission currently is scheduled to complete and file its determination on July 22, 2024; views of the Commission currently are scheduled to be completed and filed on July 29, 2024.
5.
Sharon Bellamy, Supervisory Hearings and Information Officer, 202-205-2000.
The Commission is holding the meeting under the Government in the Sunshine Act, 5 U.S.C. 552(b). In accordance with Commission policy, subject matter listed above, not disposed of at the scheduled meeting, may be carried over to the agenda of the following meeting.
By order of the Commission.
Notice.
The Department of Labor's (DOL) Employment and Training Administration (ETA) is soliciting comments concerning a proposed extension, with no changes, of the authority to conduct the information collection request (ICR) titled, “ETA Financial Report Form ETA-9130.” This comment request is part of continuing Departmental efforts to reduce paperwork and respondent burden in accordance with the Paperwork Reduction Act of 1995 (PRA).
Consideration will be given to all written comments received by September 13, 2024.
A copy of this ICR with applicable supporting documentation, including a description of the likely respondents, proposed frequency of response, and estimated total burden, may be obtained free by contacting Latonya Torrence by telephone at 202-693-3708 (this is not a toll-free number). For persons with a hearing or speech disability who need assistance to use the telephone system, please dial 711 to access telecommunications relay services.
Submit written comments about, or requests for a copy of, this ICR by mail or courier to the U.S. Department of Labor, Employment and Training Administration, Office of Grants Management, N-4716, 200 Constitution Avenue NW, Washington, DC 20210; by email:
Latonya Torrence by telephone at 202-693-3708 (this is not a toll-free number) or by email at
DOL, as part of continuing efforts to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies an opportunity to comment on proposed and/or continuing collections of information before submitting them to the Office of Management and Budget (OMB) for final approval. This program helps to ensure requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements can be properly assessed.
This proposed information collection request seeks the extension of ETA Financial Report Form ETA-9130, which is currently being used by all recipients of ETA federal assistance to report financial information to ETA. ETA utilizes the data collected to assess the effectiveness of ETA programs and to monitor and analyze the financial activity of its recipients. Recipients utilize a Federal shared-service provider to electronically report data that reflects the requirements of the ETA-9130. This also allows several sections of the ETA-9130 to be pre-filled and automatically calculated, thus reducing overall completion time. Workforce Innovation and Opportunity Act section 185(e), 20 CFR 667.300, and the Uniform Guidance (2 CFR part 200) authorizes this information collection.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
Interested parties are encouraged to provide comments to the contact shown in the
Submitted comments will also be a matter of public record for this ICR and posted on the internet, without redaction. DOL encourages commenters not to include personally identifiable information, confidential business data, or other sensitive statements/information in any comments.
DOL is particularly interested in comments that:
• 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;
• 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;
• Enhance the quality, utility, and clarity of the information to be collected; and
• 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, (
Notice.
The Department of Labor's (DOL) Employment and Training Administration (ETA) is soliciting comments concerning a proposed extension for the authority to conduct the information collection request (ICR) titled, “ETA 9161 Self Employment Assistance (SEA).” This comment request is part of continuing Departmental efforts to reduce paperwork and respondent burden in accordance with the Paperwork Reduction Act of 1995 (PRA).
Consideration will be given to all written comments received by September 13, 2024.
A copy of this ICR with applicable supporting documentation, including a description of the likely respondents, proposed frequency of response, and estimated total burden, may be obtained free by contacting Andre Chisolm by telephone at 202-693-3198 (this is not a toll-free number), or by email at
Submit written comments about, or requests for a copy of, this ICR by mail or courier to the U.S. Department of Labor, Employment and Training Administration, Office of Unemployment Insurance, Room S-4520, 200 Constitution Avenue NW, Washington, DC 20210, by email:
Eric Congious by telephone at 202-693-0763. (this is not a toll-free number) or by email at
DOL, as part of continuing efforts to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies an opportunity to comment on proposed and/or continuing collections of information before submitting them to the Office of Management and Budget (OMB) for final approval. This program helps to ensure requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements can be properly assessed.
The Noncitizen Benefit Clarification and Other Technical Amendments Act of 1998 (Pub. L. 105-306) permanently authorized the SEA program, which is a reemployment program that helps qualifying Unemployment Insurance (UI) claimants start their own businesses. Public Law 112-96, the Middle-Class Tax Relief and Job Creation Act of 2012 (the 2012 Act), expanded the SEA program to provide states the opportunity to allow UI claimants receiving Extended Benefits to participate in the SEA program. Currently, four states operate this reemployment program.
Section 2183(b)(1) of the 2012 Act directs the Secretary of Labor to establish reporting requirements for States that have established SEA programs, which shall include reporting on:
(A) The total number of individuals who received unemployment compensation and (i) were referred to the SEA program; (ii) participated in such program; and (iii) received an allowance under such program;
(B) the total amount of allowances provided to individuals participating in the SEA program;
(C) the total income (as determined by survey or other appropriate method) for businesses that have been established by individuals participating in the SEA program, as well as the total number of individuals employed through such businesses; and
(D) any additional information, as determined appropriate by the Secretary. ETA currently uses Form ETA 9161 as an electronic reporting mechanism to collect this required information. In addition to Public Law 112-96, collection of data is used for oversight of the program as authorized under Section 303(a)(6) of the Social Security Act.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
Interested parties are encouraged to provide comments to the contact shown in the
Submitted comments will also be a matter of public record for this ICR and posted on the internet, without redaction. DOL encourages commenters not to include personally identifiable information, confidential business data, or other sensitive statements/information in any comments.
DOL is particularly interested in comments that:
• 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;
• 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;
• Enhance the quality, utility, and clarity of the information to be collected; and
• 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, (
The National Science Board's (NSB) Committee on Science and Engineering Policy (SEP) hereby gives notice of the scheduling of a videoconference for the transaction of National Science Board business pursuant to the National Science Foundation Act and the Government in the Sunshine Act.
Friday, July 19, 2024, from 3:00 p.m.-4:00 p.m. Eastern.
The meeting will be held by videoconference through the National Science Foundation, 2415 Eisenhower Avenue, Alexandria, VA 22314. Members of the public can observe this meeting through a YouTube livestream. The YouTube link will be available from the NSB meetings web page—
Open.
Chair's opening remarks; Discussion and vote on Detailed Narrative Outline for
Point of contact for this meeting is Chris Blair,
Weeks of July 15, 22, 29, and August 5, 12, 19, 2024. The schedule for Commission meetings is subject to change on short notice. The NRC Commission Meeting Schedule can be found on the internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings or need this meeting notice or the transcript or other information from the public meetings in another format (
Public.
Members of the public may request to receive the information in these notices electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555, at 301-415-1969, or by email at
There are no meetings scheduled for the week of July 15, 2024.
There are no meetings scheduled for the week of July 22, 2024.
There are no meetings scheduled for the week of July 29, 2024.
There are no meetings scheduled for the week of August 5, 2024.
There are no meetings scheduled for the week of August 12, 2024
There are no meetings scheduled for the week of August 19, 2024
For more information or to verify the status of meetings, contact Sarah Turner at 301-287-9058 or via email at
The NRC is holding the meetings under the authority of the Government in the Sunshine Act, 5 U.S.C. 552b.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is recognizing a recently filed Postal Service document with the Commission concerning the removal of International Money Transfer Service-Outbound and International Money Transfer Service-Inbound from the
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On July 5, 2024, pursuant to 39 U.S.C. 3642 and 39 CFR 3040.130
The Postal Service states that the removal of MCS section 2620 IMTS—Outbound, effective October 1, 2024 (Phase II), and the removal of MCS section 2625 IMTS—Inbound, effective October 1, 2025 (Phase III), from the Competitive product list in the MCS are authorized by Governors' Decision No. 24-2.
The Postal Service states that the Request satisfies the requirements in 39 CFR 3040.131(a) through (f) because: (a) it includes the name and class of the products that are the subject of the request; (b) it includes a copy of the Governors' Decision supporting the request in Attachment 1; (c) it indicates that the products to be removed are from the Competitive product list; (d) it indicates that the two products to be removed are not one of the three identified categories subject to unique regulatory treatment; (e) it includes a Statement of Supporting Justification in Attachment 2, which explains why the requested changes to the MCS are not inconsistent with the applicable statutory and regulatory requirements; and (f) it includes a copy of the applicable sections of the MCS and the proposed changes in legislative format in Attachment 1.
In its Statement of Supporting Justification, the Postal Service states that the removal of the IMTS—Outbound product and the IMTS—Inbound product from the MCS will not result in the violations of the requirements in 39 U.S.C. 3633(a) for the following reasons.
In addition, the Postal Service states that its share of the market for services that are similar to international postal money orders is very small and there have been significant declines in the volume of the IMTS—Outbound and IMTS—Inbound products in recent years.
The Commission establishes Docket No. MC2024-413 for consideration of matters raised by the Request.
The Commission invites comments on whether the Postal Service's filing is consistent with 39 U.S.C. 3633 and 3642 and 39 CFR 3040.130, 3040.131, and 3040.132. Comments are due no later than August 5, 2024. The public portions of the filings can be accessed via the Commission's website (
The Commission appoints Samuel Robinson to represent the interests of the general public (Public Representative) in this docket, pursuant to 39 U.S.C. 505.
1. The Commission establishes Docket No. MC2024-413 for consideration of matters raised by the Postal Service's Request.
2. Pursuant to 39 U.S.C. 505, Samuel Robinson is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding.
3. Comments are due no later than August 5, 2024.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
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
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 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.
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 an International Priority Airmail, Commercial ePacket, Priority Mail Express International & Priority Mail International contract to the list of Negotiated Service Agreements in the Competitive Product List in the Mail Classification Schedule.
Date of notice: July 15, 2024.
Christopher C. Meyerson, (202) 268-7820.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 3, 2024, it filed with the Postal Regulatory Commission a
On March 27, 2024, New York Stock Exchange LLC (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (the “Commission”), pursuant to Section 19(b)(1)
This order institutes proceedings under Section 19(b)(2)(B) of the Exchange Act
SPACs are special purpose acquisition companies whose business plan is to raise capital in an initial public offering (“IPO”) and within a specified period of time, engage in a merger or acquisition with one or more unidentified operating companies.
The Exchange proposes to amend Section 102.06e to extend the period for which a SPAC can remain listed if it has signed a definitive agreement with respect to a Business Combination. As proposed, Section 102.06e would provide that a SPAC will be liquidated, and the Exchange will promptly commence delisting procedures, if the SPAC has not: (i) entered into a definitive agreement with respect to its Business Combination within (A) the time period specified by its constitutive documents or by contract or (B) three years, whichever is shorter; or (ii) consummated its Business Combination within the time period specified by its constitutive documents or by contract or forty-two months, whichever is shorter.
In support of the proposed rule change, the Exchange states that it believes that a SPAC represents a significantly different investment after it enters into a definitive agreement for a Business Combination, as investors who continue to hold the SPAC's securities or acquire them after that agreement is executed have knowledge about the operating asset the SPAC intends to own and can be assumed to own the securities because they want to have an ownership interest in the post-Business Combination entity.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act
Pursuant to Section 19(b)(2)(B) of the Exchange Act,
The Commission has consistently recognized the importance of national securities exchange listing standards. Among other things, such listing standards help ensure that exchange-listed companies will have sufficient public float, investor base, and trading interest to provide the depth and liquidity necessary to promote fair and orderly markets.
The Exchange has proposed a fundamental change to the well-established requirement that a SPAC's Business Combination must be consummated within three years or face delisting, and is seeking to extend this time requirement to allow up to 42 months for a SPAC to complete its Business Combination if the SPAC has entered into a “definitive agreement” to consummate its Business Combination.
The three-year limit, however, was put in place to provide protection for public shareholders by restricting the time period a SPAC could retain shareholder funds without consummating a Business Combination.
Accordingly, the Commission believes there are questions as to whether the proposal is consistent with Section 6(b)(5) of the Act and its requirements, among other things, that the rules of a national securities exchange be designed to protect investors and the public interest and whether the Exchange has provided an adequate basis for the Commission to conclude that the proposal would be consistent with Section 6(b)(5) of the Act.
In addition, the proposal raises concerns under the Investment Company Act of 1940. The Commission recently noted that a SPAC whose assets and income are substantially composed of, and derived from, securities raises concerns that it may be an investment company when it operates beyond certain timelines, including the one-year and eighteen-month timelines established under Rule 3a-2 of the Investment Company Act of 1940 and Rule 419 of the Securities Act of 1933, respectively.
Under the Commission's Rules of Practice, the “burden to demonstrate that a proposed rule change is consistent with the Exchange Act and the rules and regulations issued thereunder . . . is on the self-regulatory organization [`SRO'] that proposed the rule change.”
For these reasons, the Commission believes it is appropriate to institute proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act
The Commission requests that interested persons provide written submissions of their data, views, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is consistent with the Act, and the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of data, views, and arguments, the Commission will consider, pursuant to Rule 19b-4 under the Act,
Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by August 5, 2024. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by August 19, 2024. The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, which are set forth in the Notice,
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 the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend Interpretation and Policy .01 to Exchange Rule 3103, Continuing Education, to reopen the period by which eligible Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend Interpretation and Policy .01 to Exchange Rule 3103, Continuing Education, to provide eligible Members another opportunity to elect to reopen the period by which certain participants in the MQP will be able to complete their prescribed 2022 and 2023 continuing education content.
In 2021, the Financial Industry Regulatory Authority, Inc. (“FINRA”) implemented rule changes, which amended its Continuing Education (“CE”) Program requirements to, among other things, provide eligible individuals who terminate any of their representative or principal registration categories the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the MQP.
In 2023, FINRA amended FINRA Rule 1240.01, to provide Look-Back Individuals a second opportunity to elect to participate in the MQP (the “FINRA Second Enrollment Period”).
In response to FINRA's rule changes and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange implemented rule changes to align with FINRA's CE Program.
Exchange Rule 3103 also provided Look-Back Individuals with a second enrollment period, between September 18, 2023, and December 31, 2023 (the “Exchange Second Enrollment Period”). Exchange Rule 3103, Interpretation and Policy .01, requires that Look-Back Individuals who elect to participate in the MQP during the Exchange Second Enrollment Period complete any prescribed 2022 and 2023 MQP content by March 31, 2024.
FINRA recently submitted a proposal related to its CE Program (the “FINRA Rule Change”).
In the FINRA Rule Change, FINRA noted that it sent multiple reminders, including a March 16, 2024 email, to Look-Back Individuals who had enrolled in the MQP but had not completed their prescribed CE to remind them of the March 31, 2024 deadline. In the FINRA Rule Change, FINRA further noted that in the week leading up to the deadline, FINRA noticed that several thousand of those individuals were renewing their participation in the MQP for 2024 instead of completing their prescribed CE.
For similar reasons and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange is also proposing to amend its rules (
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.
The Exchange believes that reopening the period by which Look-Back Individuals will be able to complete their prescribed 2022 and 2023 CE content is appropriate under the circumstances. As FINRA noted in the FINRA Rule Change, Look-Back Individuals who had enrolled in the MQP in 2022 and 2023 but had not completed their prescribed 2022 and 2023 CE content by the March 31, 2024 deadline may have been confused, as described above. The Exchange believes that participation in the MQP reduces unnecessary impediments to requalification for these individuals without diminishing investor protection. In addition, the proposed rule change is consistent with other goals, such as the promotion of diversity and inclusion in the securities industry by attracting and retaining a broader and diverse group of professionals. The MQP also allows the industry to retain expertise from skilled individuals, providing investors with the advantage of greater experience among the individuals working in the industry. The Exchange believes that reopening the CE completion period, as proposed, will further these goals and objectives.
Further, the Exchange believes the proposed amendments reduce the possibility of a regulatory gap between Exchange and FINRA rules, providing more uniform standards across the securities industry. The Exchange believes that the proposed rule change will bring consistency and uniformity with FINRA's recently amended CE Program, which will, in turn, assist members and their associated persons in complying with these rules and improve regulatory efficiency. The proposed rule changes make ministerial changes to the Exchange's CE rules to align them with the CE rules of FINRA, in order to prevent unnecessary regulatory burdens and to promote efficient administration of the rules.
The Exchange does not believe that 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 believes that the proposed rule change, which harmonizes its rules with the recent rule change adopted by FINRA, will reduce the regulatory burden placed on market participants engaged in trading activities across different markets. The Exchange believes that the harmonization of the CE program requirements across the various markets will reduce burdens on competition by removing impediments to participation in the national market system and promoting competition among participants across the multiple national securities exchanges.
Written comments were neither solicited nor received.
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 the 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 under Section 19(b)(2)(B)
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.
On December 27, 2023, Cboe BYX Exchange, Inc. (“BYX” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
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 (“Act”),
The Exchange proposes to launch Proximity-On-Demand, a managed colocation solution.
The text of the proposed rule change is available on the Exchange's website at
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 proposes to launch Proximity-On-Demand (“POD”), a managed colocation solution. POD will offer colocation customers a convenient variant of colocation where applications are deployed on managed infrastructure in the form of virtual or dedicated servers in the co-location space.
The Exchange currently offers colocation services, which include a suite of data center space, power, telecommunication, and other ancillary products and services that allow customers to place their trading and communications equipment in close physical proximity to the quoting and execution facilities of the Exchange. The use of colocation services is entirely voluntary and colocation services are available to all market participants who desire them.
Colocation customers are not provided any separate or superior means of direct access to the Exchange quoting and trading facilities. Nor does the Exchange offer any separate or superior means of access to the Exchange quoting and trading facilities as among colocation customers themselves within the data center (or any future expansions to the data center).
In addition, all orders sent to the Exchange market enter the marketplace through the same central system quote and order gateway regardless of whether the sender is co-located in the Exchange data center or not. In short, the Exchange has created no special market technology or programming that is available only to co-located customers and the Exchange has organized its systems to minimize, to the greatest extent possible, any advantage for one customer versus another.
POD will be an alternative to the traditional offering of space and power for the physical colocation of customers' equipment. The Exchange will continue to offer its traditional colocation services.
With POD, customers will not need to order cabinets and power to install a server or network hardware in the Exchange's data center to be able to set up their systems and access the market directly. Instead, POD will provide customers with a variant of colocation where applications are deployed on a shared computing infrastructure
Customers will be able to select a dedicated server or a virtual machine. A dedicated server is single-tenant environment, meaning that only one customer has access to the server hardware. A virtual machine is a computing environment where each customer has exclusive access to their virtualized server, including its operating system and applications. While customers will control their virtual machines independently, the physical hardware resources, such as the CPU, memory, and storage, are shared among multiple virtual machines on the same physical server. Hypervisor technology keeps the separate customer operating systems securely segmented from each other, allowing a single server to support multiple virtual machines. This allows quicker deployment times and provides customers with the flexibility to dynamically adjust the amount of compute resources needed without requiring hardware changes. The Exchange anticipates that customers will choose a dedicated server where better performance is required but may prefer a virtual server for short-lived requirements or less performance-sensitive workloads.
The servers (dedicated and virtual) for POD will be located in a cabinet in the colocation space at the data center. Each customer will have their own logical network that is fully isolated and not shared with other customers. Those customers selecting a dedicated server would also have the option to add an analytics service.
Access to POD will be available via virtual private network (VPN) or Secure Shell (SSH), similar to how customers would access their fully owned co-located hardware. Customers will be able to choose from several existing options for physical connectivity, including 1G Ultra, 10G, 10G Ultra, and 40G. POD will provide access to the market through the same Extranet network as is used currently by existing colocation customers. To be clear, POD will not afford its users any special advantages relative to users of its traditional colocation services.
Exchanges offer colocation services to facilitate the trading activities of those market participants who believe that colocation enhances the efficiency of their trading. The Exchange believes that the launch of POD will benefit an underserved market segment, including a niche of smaller customers who do not currently co-locate in any form at the data center but wish to do so. These smaller trading firms that do not directly connect and interface with the Exchange may struggle with the complexity, upfront investment, ongoing expense, and knowledge gaps required to code, connect, host and manage their own infrastructure, and trade directly with the Exchange.
The Exchange notes that similar services are currently offered by, and customers may obtain such service from, managed service providers that operate at the Carteret data center. For example, Pico and Options-IT currently offer managed service colocation at the Carteret data center.
POD will provide customers with increased options for colocation. POD will be entirely optional and available to all market participants who desire to subscribe to POD. It is a business decision of each firm whether to subscribe to POD. Rather than choosing POD, customers may choose to (1) directly co-locate at the data center by ordering cabinet space and power, and placing their equipment at the data center; (2) co-locate through a third party; or (3) not co-locate at all.
The Exchange intends to submit a fee filing in the future to establish fees for POD, including fees for a dedicated server, a dedicated server with analytics, and a virtual machine. Implementation of the proposal described herein to offer POD would coincide with the subsequent fee filing.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes that the launch of POD will benefit an underserved market segment, including smaller customers who do not currently co-locate in any form at the data center but wish to do so. These smaller trading firms that do not directly connect and interface with the Exchange may struggle with the complexity, upfront
The proposal would benefit the public interest by providing customers more colocation options to choose from, thereby enhancing their ability to tailor their colocation operations to the requirements of their business operations. As noted above, POD will be entirely optional and available to all market participants who desire to subscribe to POD. Rather than choosing to co-locate via POD, customers may choose to (1) directly co-locate at the data center by ordering cabinet space and power, and placing their equipment at the data center; (2) co-locate through a third party; or (3) not co-locate at all. Services comparable to POD are currently offered by, and customers may obtain such service from, any managed service providers that operate at the Carteret data center.
Again, POD will offer its users no special advantages relative to users of the Exchange's traditional colocation services. Though POD will allow customers to use Exchange-provided hardware to access the Exchange, POD does not otherwise fundamentally differ from current connectivity to the Exchange. The Exchange is not proposing to change the nature of the services provided today. Rather, POD will differ as to who provides the hardware.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Nothing in the proposal imposes any burden on the ability of other exchanges to compete. The Exchange operates in a highly competitive market in which exchanges and other vendors offer colocation services to facilitate the trading and other market activities of those market participants who believe that colocation enhances the efficiency of their operations.
Nothing in the Proposal burdens intra-market competition because POD will be available to any customer and customers that wish to co-locate via POD can do so on a non-discriminatory basis. Use of any colocation service is completely voluntary, and each market participant is able to determine whether to use colocation services, including POD, based on the requirements of its business operations. POD will offer its users no special advantages relative to users of the Exchange's traditional colocation services.
No written comments were either solicited or received.
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)(iii) of the Act
At any time within 60 days of the filing of the 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 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 (“Act”),
The Exchange is filing a proposal to amend the MIAX Fee Schedule (“Fee Schedule”) to extend until September 30, 2024 the: (i) SPIKES Options Market Maker Incentive Program (the “Incentive Program”); and (ii) waiver period for certain non-transaction fees applicable to Market Makers
The text of the proposed rule change is available on the Exchange's website at
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 proposes to amend the Fee Schedule to extend until September 30, 2024 the: (i) Incentive Program; and (ii) waiver period for certain non-transaction fees applicable to Market Makers that trade solely in Proprietary Products.
On October 12, 2018, the Exchange received approval from the U.S. Securities and Exchange Commission (“Commission”) to list and trade on the Exchange options on the SPIKES® Index, a new index that measures expected 30-day volatility of the SPDR S&P 500 ETF Trust (commonly known and referred to by its ticker symbol, “SPY”).
On May 31, 2019, the Exchange filed its first proposal in a series of proposals with the Commission to amend the Fee Schedule to waive certain non-transaction fees applicable to Market Makers that trade solely in Proprietary Products (including options on the SPIKES Index) beginning June 1, 2019, through June 30, 2024.
On September 30, 2021, the Exchange filed its initial proposal to implement the Incentive Program for SPIKES options to incentivize Market Makers to improve liquidity, available volume, and the quote spread width of SPIKES options beginning October 1, 2021, and ending December 31, 2021.
Between December 23, 2021, and April 3, 2024, the Exchange filed several proposals to extend the Incentive Program, with the last extension period
The Exchange proposes to extend the Incentive Program for SPIKES options to continue to incentivize Market Makers to improve liquidity, available volume, and the quote spread width of SPIKES options. Currently, to be eligible to participate in the Incentive Program, a Market Maker must meet certain minimum requirements related to quote spread width in certain in-the-money (ITM) and out-of-the-money (OTM) options as determined by the Exchange and communicated to Members via Regulatory Circular.
The first pool (Incentive 1) has a total amount of $40,000 per month, which is allocated to Market Makers that meet the minimum requirements of the Incentive Program. Market Makers are required to meet minimum spread width requirements in a select number of ITM and OTM SPIKES option contracts as determined by the Exchange and communicated to Members via Regulatory Circular.
The second pool (Incentive 2 Pool) is capped at a total amount of $100,000 per month which is used during the Incentive Program to further incentivize Market Makers who meet or exceed the requirements of Incentive 1 (“qualifying Market Makers”) to provide tighter quote width spreads. The Exchange ranks each qualifying Market Maker's quote width spread relative to each other qualifying Market Maker's quote width spread. Market Makers with tighter spreads in certain strikes, as determined by the Exchange and communicated to Members via Regulatory Circular,
The Exchange proposes to extend the Incentive Program until September 30, 2024. The Exchange does not propose to make any amendments to how it calculates any of the incentives provided for in Incentive Pools 1 or 2. The details of the Incentive Program can continue to be found in the Regulatory Circular that was published on September 30, 2021, to all Exchange Members.
The Exchange also proposes to extend the fee waiver for Membership Application fees, monthly Market Maker Trading Permit fees, Member API Testing and Certification fees, and monthly MEI Port fees assessed to Market Makers that trade solely in Proprietary Products (including options on SPIKES) until September 30, 2024.
The Exchange currently assesses a one-time Membership Application fee for applications of potential Members. The Exchange assesses a one-time Membership Application fee on the earlier of (i) the date the applicant is certified in the membership system, or (ii) once an application for MIAX membership is finally denied. The one-time application fee is based upon the applicant's status as either a Market Maker or an Electronic Exchange Member (“EEM”).
The Exchange proposes that the waiver for the one-time Membership Application fee of $3,000 for Market Makers that trade solely in Proprietary Products (including options on SPIKES) will be extended from June 30, 2024 until September 30, 2024, which the Exchange proposes to state in the Fee Schedule. The purpose of this proposed change is to continue to provide an incentive for potential Market Makers to submit membership applications, which should result in an increase of potential liquidity in Proprietary Products, including options on SPIKES. Even though the Exchange proposes to extend the waiver of this particular fee, the overall structure of the fee is outlined in the Fee Schedule so that there is general awareness that the Exchange intends to assess such a fee after September 30, 2024.
The Exchange issues Trading Permits that confer the ability to transact on the Exchange. MIAX Trading Permits are issued to Market Makers and EEMs.
MIAX proposes that the waiver for the monthly Trading Permit fee for Market Makers that trade solely in Proprietary Products (including options on SPIKES) will be extended from June 30, 2024 to September 30, 2024, which the Exchange proposes to state in the Fee Schedule. The purpose of this proposed change is to continue to provide an incentive for Market Makers to provide liquidity in Proprietary Products on the Exchange, which should result in increasing potential order flow and volume in Proprietary Products, including options on SPIKES. Even though the Exchange proposes to extend the waiver of this particular fee, the overall structure of the fee is outlined in the Fee Schedule so that there is general awareness to potential Members seeking a Trading Permit that the Exchange intends to assess such a fee after September 30, 2024.
The Exchange also proposes that Market Makers who trade Proprietary Products (including options on SPIKES) along with multi-listed classes will continue to not have Proprietary Products (including SPIKES) counted toward those Market Makers' class assignment count or percentage of total national average daily volume. This exclusion is noted with the symbol “Ω” following the table that shows the monthly Trading Permit fees currently assessed to Market Makers in Section (3)(b) of the Fee Schedule.
The Exchange assesses an API Testing and Certification fee to all Members depending upon Membership type. An API makes it possible for Members' software to communicate with MIAX software applications, and is subject to Members testing with, and certification by, MIAX. The Exchange offers four types of interfaces: (i) the Financial Information Exchange Port (“FIX Port”),
API Testing and Certification fees for Market Makers are assessed (i) initially per API for CTD and MEI ports in the month the Market Maker has been credentialed to use one or more ports in the production environment for the tested API and the Market Maker has been assigned to quote in one or more classes, and (ii) each time a Market Maker initiates a change to its system that requires testing and certification. API Testing and Certification fees will not be assessed in situations where the Exchange initiates a mandatory change to the Exchange's system that requires testing and certification. The Exchange currently assesses a Market Maker an API Testing and Certification fee of $2,500. The API Testing and Certification fees represent costs incurred by the Exchange as it works with each Member for testing and certifying that the Member's software systems communicate properly with MIAX's interfaces.
MIAX proposes to extend the waiver of the API Testing and Certification fee for Market Makers that trade solely in Proprietary Products (including options on SPIKES) from June 30, 2024 until September 30, 2024, which the Exchange proposes to state in the Fee
MIAX assesses monthly MEI Port fees to Market Makers in each month the Member has been credentialed to use the MEI Port in the production environment and has been assigned to quote in at least one class. The amount of the monthly MEI Port fee is based upon the number of classes in which the Market Maker was assigned to quote on any given day within the calendar month, and upon the class volume percentages set forth in the Fee Schedule. The class volume percentage is based on the total national average daily volume in classes listed on MIAX in the prior calendar quarter. Newly listed option classes are excluded from the calculation of the monthly MEI Port fee until the calendar quarter following their listing, at which time the newly listed option classes will be included in both the per class count and the percentage of total national average daily volume. The Exchange assesses MIAX Market Makers the monthly MEI Port fee based on the greatest number of classes listed on MIAX that the MIAX Market Maker was assigned to quote in on any given day within a calendar month and the applicable fee rate that is the lesser of either the per class basis or percentage of total national average daily volume measurement. MIAX assesses MEI Port fees on Market Makers according to the following table:
MIAX proposes to extend the waiver of the monthly MEI Port fee for Market Makers that trade solely in Proprietary Products (including options on SPIKES) from June 30, 2024 until September 30, 2024, which the Exchange proposes to state in the Fee Schedule. The purpose of this proposal is to continue to provide an incentive to Market Makers to connect to MIAX through the MEI Port such that they will be able to trade in MIAX Proprietary Products. Even though the Exchange proposes to extend the waiver of this particular fee, the overall structure of the fee is outlined in the Fee Schedule so that there is general awareness that the Exchange intends to assess such a fee after September 30, 2024.
The Exchange notes that for the purposes of this proposed change, other Market Makers who trade MIAX Proprietary Products (including options on SPIKES) along with multi-listed classes will continue to not have Proprietary Products (including SPIKES) counted toward those Market Makers' class assignment count or percentage of total national average daily volume. This exclusion is noted by the symbol “Ω” following the table that shows the monthly MEI Port Fees currently assessed for Market Makers in Section (5)(d)(ii) of the Fee Schedule.
The proposed extension of the fee waivers are targeted at market participants, particularly market makers, who are not currently members of MIAX, who may be interested in being a Market Maker in Proprietary Products on the Exchange. The Exchange estimates that there are fewer than ten (10) such market participants that could benefit from the extension of these fee waivers. The proposed extension of the fee waivers does not apply differently to different sizes of market participants, however the fee waivers do only apply to Market Makers (and not EEMs).
Market Makers, unlike other market participants, take on a number of obligations, including quoting obligations that other market participants do not have. Further, Market Makers have added market making and regulatory requirements, which normally do not apply to other market participants. For example, Market Makers have obligations to maintain continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and to not make bids or offers or enter into transactions that are inconsistent with a course of dealing. Accordingly, the Exchange believes it is reasonable and not unfairly discriminatory to continue to offer the fee waivers to Market Makers because the Exchange is seeking additional liquidity providers for Proprietary Products, in order to enhance liquidity and spreads in Proprietary Products, which is traditionally provided by Market Makers, as opposed to EEMs.
The proposed fee changes are effective beginning July 1, 2024.
The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act
The Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to extend the Incentive Program for Market Makers in SPIKES options until September 30, 2024. The Incentive Program is reasonably designed because it will continue to incentivize Market Makers to provide quotes and increased liquidity in select SPIKES options contracts. The Incentive Program is reasonable, equitably allocated and not unfairly discriminatory because all Market Makers in SPIKES options may continue to qualify for Incentive 1 and Incentive 2, dependent upon each Market Maker's quoting in SPIKES options in a particular month. Additionally, if a SPIKES Market Maker does not satisfy the requirements of Incentive Pool 1 or 2, then it simply will not receive the rebate offered by the Incentive Program for that month.
The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to continue to offer this financial incentive to SPIKES Market Makers because it will continue to benefit all market participants trading in SPIKES options. SPIKES options is a Proprietary Product on the Exchange and the continuation of the Incentive Program encourages SPIKES Market Makers to satisfy a heightened quoting standard, average quote size, and time in market. A continued increase in quoting activity and tighter quotes may yield a corresponding increase in order flow from other market participants, which benefits all investors by deepening the Exchange's liquidity pool, potentially providing greater execution incentives and opportunities, while promoting market transparency and improving investor protection.
The Exchange believes that the Incentive Program is equitable and not unfairly discriminatory because it will continue to promote an increase in SPIKES options liquidity, which may facilitate tighter spreads and an increase in trading opportunities to the benefit of all market participants. The Exchange believes it is reasonable to operate the Incentive Program for a continued limited period of time to strengthen market quality for all market participants. The resulting increased volume and liquidity will benefit those Members who are eligible to participate in the Incentive Program and will also continue to benefit those Members who are not eligible to participate in the Incentive Program by providing more trading opportunities and tighter spreads.
Additionally, the Exchange believes that the proposal to extend the fee waiver period for certain non-transaction fees for Market Makers that trade solely in Proprietary Products is an equitable allocation of reasonable fees because the proposal continues to waive non-transaction fees for a limited period of time in order to enable the Exchange to improve its overall competitiveness and strengthen its market quality for all market participants in MIAX's Proprietary Products, including options on SPIKES. The Exchange believe the proposed extension of the fee waivers is fair and equitable and not unreasonably discriminatory because it applies to all market participants not currently registered as Market Makers at the Exchange. Any market participant may choose to satisfy the additional requirements and obligations of being a Market Maker and trade solely in Proprietary Products in order to qualify for the fee waivers.
The Exchange believes that the proposed extension of the fee waivers is equitable and not unfairly discriminatory for Market Makers as compared to EEMs because Market Makers, unlike other market participants, take on a number of obligations, including quoting obligations that other market participants do not have.
The Exchange believes it is reasonable and equitable to continue to waive the one-time Membership Application fee, monthly Trading Permit Fee, API Testing and Certification fee, and monthly MEI Port fee for Market Makers that trade solely in Proprietary Products (including options on SPIKES) until September 30, 2024, since the waiver of such fees provides incentives to interested market participants to trade in Proprietary Products. This should result in increasing potential order flow and liquidity in MIAX Proprietary Products, including options on SPIKES.
The Exchange believes it is reasonable and equitable to continue to waive the API Testing and Certification fee assessable to Market Makers that trade solely in Proprietary Products (including options on SPIKES) until September 30, 2024, since the waiver of such fees provides incentives to interested Members to develop and test their APIs sooner. Determining system operability with the Exchange's system will in turn provide MIAX with potential order flow and liquidity providers in Proprietary Products.
The Exchange believes it is reasonable, equitable and not unfairly discriminatory that Market Makers who trade in Proprietary Products along with multi-listed classes will continue to not have Proprietary Products counted toward those Market Makers' class assignment count or percentage of total national average daily volume for monthly Trading Permit fees and monthly MEI Port fees in order to incentivize existing Market Makers who currently trade in multi-listed classes to also trade in Proprietary Products, without incurring certain additional fees.
The Exchange believes that the proposed extension of the fee waivers constitutes an equitable allocation of reasonable fees and other charges among its Members and issuers and other persons using its facilities. The proposed extension of the fee waivers means that all prospective market makers that wish to become Market Maker Members of the Exchange and quote solely in Proprietary Products may do so and have the above-mentioned fees waived until September 30, 2024. The proposed extension of the fee waivers will continue to not apply to potential EEMs because the Exchange is seeking to enhance the quality of its markets in Proprietary Products through introducing more competition among Market Makers in Proprietary Products. In order to increase the competition, the Exchange believes that it must continue to waive entry type fees for such Market Makers. EEMs do not provide the benefit of enhanced liquidity which is provided by Market Makers, therefore the Exchange believes it is reasonable and not unfairly discriminatory to continue to only offer the proposed fee waivers to Market Makers (and not EEMs). Further, the Exchange believes it is reasonable and not unfairly discriminatory to continue to exclude Proprietary Products from an existing Market Maker's permit fees and port fees, in order to incentive such Market Makers to quote in Proprietary Products. The amount of a Market Maker's permit and port fee is determined by the number of classes quoted and volume of the Market Maker. By excluding Proprietary Products from such fees, the Exchange is able to incentivize Market
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes that the proposed extension of the Incentive Program to September 30, 2024, would continue to increase intra-market competition by incentivizing Market Makers to quote SPIKES options, which will continue to enhance the quality of quoting and increase the volume of contracts available to trade in SPIKES options. To the extent that this purpose is achieved, all the Exchange's market participants should benefit from the improved market liquidity for SPIKES options. Enhanced market quality and increased transaction volume in SPIKES options that results from the anticipated increase in Market Maker activity on the Exchange will benefit all market participants and improve competition on the Exchange.
Additionally, the Exchange believes that the proposal to extend certain of the non-transaction fee waivers until September 30, 2024 for Market Makers that trade solely in Proprietary Products would increase intra-market competition by incentivizing new potential Market Makers to quote in Proprietary Products, which will enhance the quality of quoting and increase the volume of contracts in Proprietary Products traded on MIAX, including options on SPIKES. To the extent that this purpose is achieved, all the Exchange's market participants should benefit from the improved market liquidity for the Exchange's Proprietary Products. Enhanced market quality and increased transaction volume in Proprietary Products that results from the anticipated increase in Market Maker activity on the Exchange will benefit all market participants and improve competition on the Exchange.
The Exchange does not believe that the proposed rule change will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed changes for each separate type of market participant (new Market Makers and existing Market Makers) will be assessed equally to all such market participants. While different fees are assessed to different market participants in some circumstances, these different market participants have different obligations and different circumstances as discussed above. For example, Market Makers have quoting obligations that other market participants (such as EEMs) do not have.
The Exchange does not believe that the proposed rule changes will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed extension of the Incentive Program applies only to the Market Makers in SPIKES options, which are traded exclusively on the Exchange.
Additionally, the Exchange does not believe that the proposed rule changes will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed extension of the fee waivers applies only to the Exchange's Proprietary Products (including options on SPIKES), which are traded exclusively on the Exchange.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
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.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) provided that certain agencies, including the Commission, establish an Office of Minority and Women Inclusion (OMWI).
The Contract Standard, which is included in the Commission's solicitations and resulting contracts for services with a dollar value of $100,000 or more, contains a “collection of information” within the meaning of the Paperwork Reduction Act. The Contract Standard requires that a Commission contractor with 50 or more employees provide documentation, upon request from the OMWI Director, to demonstrate that it has made good faith efforts to ensure the fair inclusion of minorities and women in its workforce and, as applicable, to demonstrate its covered subcontractors have made such good faith efforts. The documentation requested may include, but is not limited to: (1) the total number of employees in the contractor's workforce, and the number of employees by race, ethnicity, gender, and job title or EEO-1 job category (
The information collection is mandatory.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
Please direct your written comments to Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Oluwaseun Ajayi, 100 F Street NE, Washington, DC 20549 or send an email to:
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend Interpretation and Policy .01 to Exchange Rule 1903, Continuing Education, to reopen the period by which eligible Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend Interpretation and Policy .01 to Exchange Rule 1903, Continuing Education, to provide eligible Members another opportunity to elect to reopen the period by which certain participants in the MQP will be able to complete their prescribed 2022 and 2023 continuing education content.
In 2021, the Financial Industry Regulatory Authority, Inc. (“FINRA”) implemented rule changes, which amended its Continuing Education (“CE”) Program requirements to, among other things, provide eligible individuals who terminate any of their representative or principal registration categories the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the MQP.
In 2023, FINRA amended FINRA Rule 1240.01, to provide Look-Back Individuals a second opportunity to elect to participate in the MQP (the “FINRA Second Enrollment Period”).
In response to FINRA's rule changes and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange implemented rule changes to align with FINRA's CE Program.
Exchange Rule 1903 also provided Look-Back Individuals with a second enrollment period, between September 18, 2023, and December 31, 2023 (the “Exchange Second Enrollment Period”). Exchange Rule 1903, Interpretation and Policy .01, requires that Look-Back Individuals who elect to participate in the MQP during the Exchange Second Enrollment Period complete any prescribed 2022 and 2023 MQP content by March 31, 2024.
FINRA recently submitted a proposal related to its CE Program (the “FINRA Rule Change”).
In the FINRA Rule Change, FINRA noted that it sent multiple reminders, including a March 16, 2024 email, to Look-Back Individuals who had enrolled in the MQP but had not completed their prescribed CE to remind them of the March 31, 2024 deadline. In the FINRA Rule Change, FINRA further noted that in the week leading up to the deadline, FINRA noticed that several thousand of those individuals were renewing their participation in the MQP for 2024 instead of completing their prescribed CE.
For similar reasons and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange is also proposing to amend its rules (
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.
The Exchange believes that reopening the period by which Look-Back Individuals will be able to complete their prescribed 2022 and 2023 CE content is appropriate under the circumstances. As FINRA noted in the FINRA Rule Change, Look-Back Individuals who had enrolled in the MQP in 2022 and 2023 but had not completed their prescribed 2022 and 2023 CE content by the March 31, 2024 deadline may have been confused, as described above. The Exchange believes that participation in the MQP reduces unnecessary impediments to requalification for these individuals without diminishing investor protection. In addition, the proposed rule change is consistent with other goals, such as the promotion of diversity and inclusion in the securities industry by attracting and retaining a broader and diverse group of professionals. The MQP also allows the industry to retain expertise from skilled individuals, providing investors with the advantage of greater experience among the individuals working in the industry. The Exchange believes that reopening the CE completion period, as proposed, will further these goals and objectives.
Further, the Exchange believes the proposed amendments reduce the possibility of a regulatory gap between Exchange and FINRA rules, providing more uniform standards across the securities industry. The Exchange believes that the proposed rule change will bring consistency and uniformity with FINRA's recently amended CE Program, which will, in turn, assist members and their associated persons in complying with these rules and improve regulatory efficiency. The proposed rule changes make ministerial changes to the Exchange's CE rules to align them with the CE rules of FINRA, in order to prevent unnecessary regulatory burdens and to promote efficient administration of the rules.
The Exchange does not believe that 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 believes that the proposed rule change, which harmonizes its rules with the recent rule change adopted by FINRA, will reduce the regulatory burden placed on market participants engaged in trading activities across different markets. The Exchange believes that the harmonization of the CE program requirements across the various markets will reduce burdens on competition by removing impediments to participation in the national market system and promoting competition among participants across the multiple national securities exchanges.
Written comments were neither solicited nor received.
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 the 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 under Section 19(b)(2)(B)
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 EDGX Exchange, Inc. (the “Exchange” or “EDGX Equities”) proposes to amend its Fees Schedule. 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 proposes to amend its fee schedule to adopt fees for Dedicated Cores, effective July 1, 2024. Effective July 1, 2024, the Exchange will begin allowing Users
The Exchange proposes to assess the following monthly fees for Users that wish to use Dedicated Cores and adopt a maximum limit. First, the Exchange proposes to provide up to two Dedicated Cores to all Users who wish to use Dedicated Cores, at no additional cost. For the use of more than two Dedicated Cores, the Exchange proposes to assess the following fees: $650 per Dedicated Core for 3-15 Dedicated Cores; $850 per Dedicated Core for 16-30 Dedicated Cores; and $1,050 per Dedicated Core for 31 or more Dedicated Cores. The proposed fees are progressive and the Exchange proposes to include the following example in the Fees Schedule to provide clarity as to how the fees will be applied. Particularly, the Exchange will provide the following example: if a User were to purchase 16 Dedicated Cores, it will be charged a total of $9,300 per month ($0 * 2 + $650 * 13 + $850 * 1). The Exchange also proposes to make clear in the Fees Schedule that the monthly fees are assessed and applied in their entirety and are not prorated. The Exchange notes the current standard fees assessed for BOE Logical Ports, whether used with Dedicated or shared CPU cores, will remain applicable and unchanged.
Since the Exchange currently has a finite amount of physical space in its data centers in which its servers (and therefore corresponding CPU Cores) are located, the Exchange also proposes to prescribe a maximum limit on the number of Dedicated Cores that Users may purchase each month. The purpose of establishing these limits is to manage the allotment of Dedicated Cores in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an unlimited number of Dedicated Cores. The Exchange proposes to provide that Members will be limited to a maximum number of 60 Dedicated Cores
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.
The Exchange believes the proposal is reasonable because the Exchange is offering any Users who wishes to utilize Dedicated Cores up to two Dedicated Cores at no additional cost. The Exchange believes the proposed fees are reasonable because Dedicated Cores provide a valuable service in that it may provide reduced latency, enhanced throughput, and improved performance compared to use of a shared CPU Core since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core. The Exchange also emphasizes however, that the use of Dedicated Cores is not necessary for trading and as noted above, is entirely optional. Users can also continue to access the Exchange through shared CPU Cores at no additional cost. For example, less than half of the members of the Exchange's affiliate Cboe EDGA Exchange, Inc., (“Cboe EDGA”) currently use Dedicated Cores on Cboe EDGA. Depending on a firm's specific business needs, the proposal enables Users to choose to use Dedicated Cores in lieu of, or in addition to, shared CPU Cores (or as noted, not use Dedicated Cores at all). If a User finds little benefit in having Dedicated Cores, or determines Dedicated Cores are not cost-efficient for its needs or does not provide sufficient value to the firm, such User may continue its use of the shared CPU Cores, unchanged. The Exchange also has no plans to eliminate shared CPU Cores nor to require Users to purchase Dedicated Cores. The Exchange also notes that the proposed fees are the same as the fees recently adopted and assessed for Dedicated Cores on its affiliated exchange, Cboe BZX Exchange, Inc. (“Cboe BZX”).
The Exchange also believes that the proposed Dedicated Core fees are equitable and not unfairly discriminatory because they continue to be assessed uniformly to similarly situated users in that all Users who choose to purchase Dedicated Cores will be subject to the same proposed tiered fee schedule. Further all Users are entitled to up to 2 Dedicated Cores at no additional cost. The Exchange believes the proposed ascending fee structure is also reasonable, equitable and not unfairly discriminatory as it is designed so that firms that use a higher allotment of the Exchange's finite number of Dedicated Cores pay higher rates, rather than placing that burden on market participants that have more modest needs who will have the flexibility of obtaining Dedicated Cores at lower price points in the lower tiers. As such, the proposed fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the ascending fee structure reflects the (finite) resources consumed by the various needs of market participants—that is, the lowest Dedicated Core consuming Users pay the least, and highest Dedicated Core consuming Users pay the most. Other exchanges similarly assess higher fees to those that consume more Exchange resources.
The Exchange believes it is reasonable to limit the number of Dedicated Cores Users can purchase because the Exchange has a finite amount of space in its third-party data centers to accommodate CPU cores, including Dedicated Cores. The Exchange must also take into account timing considerations in procuring additional Dedicated Cores and related hardware such as servers, switches, optics and cables, as well as the readiness of the Exchange's data center to accommodate additional Dedicated Cores in the Exchange's respective Order Handler Cabinets. The Exchange will monitor market participant demand and space availability and endeavor to adjust the limit if and when the Exchange is able to accommodate additional Dedicated Cores. The Exchange monitors its capacity and data center space and thus is in the best place to determine these limits and modify them as appropriate in response to changes to this capacity and space, as well as market demand. For example, Cboe EDGA has increased the prescribed maximum limit twice since the launch of Dedicated Cores on its exchange on February 26, 2024 as a result of evaluating the demand relative to Dedicated Cores availability.
The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary in furtherance of the purposes of the Act because the proposed tiered fee structure will apply equally to all similarly situated Users that choose to use Dedicated Cores. As discussed above, Dedicated Cores are optional and Users may choose to utilize Dedicated Cores, or not, based on their views of the additional benefits and added value provided by utilizing a Dedicated Core. The E9xchange believes the proposed fees will be assessed proportionately to the potential value or benefit received by Users with a greater number of Dedicated Cores and notes that Users may determine at any time to cease using Dedicated Cores. As
Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market, including competition for exchange memberships. Market Participants have numerous alternative venues that they may participate on, including 15 other equities exchanges, as well as off-exchange venues, where competitive products are available for trading. Indeed, participants can readily choose to submit their order flow to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
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.
2:00 p.m. on Thursday, July 18, 2024.
The meeting will be held via remote means and/or at the Commission's headquarters, 100 F Street NE, Washington, DC 20549.
This meeting will be closed to the public.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present.
In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission's website at
The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5
The subject matter of the closed meeting will consist of the following topics:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations and enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters.
For further information, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551-5400.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to launch Proximity-On-Demand, a managed colocation solution.
The text of the proposed rule change is available on the Exchange's website at
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 proposes to launch Proximity-On-Demand (“POD”), a managed colocation solution. POD will offer colocation customers a convenient variant of colocation where applications are deployed on managed infrastructure in the form of virtual or dedicated servers in the co-location space.
The Exchange currently offers colocation services, which include a suite of data center space, power, telecommunication, and other ancillary products and services that allow customers to place their trading and communications equipment in close physical proximity to the quoting and execution facilities of the Exchange. The use of colocation services is entirely voluntary and colocation services are available to all market participants who desire them.
Colocation customers are not provided any separate or superior means of direct access to the Exchange quoting and trading facilities. Nor does the Exchange offer any separate or superior means of access to the Exchange quoting and trading facilities as among colocation customers themselves within the data center (or any future expansions to the data center).
In addition, all orders sent to the Exchange market enter the marketplace through the same central system quote and order gateway regardless of whether the sender is co-located in the Exchange data center or not. In short, the Exchange has created no special market technology or programming that is available only to co-located customers and the Exchange has organized its systems to minimize, to the greatest extent possible, any advantage for one customer versus another.
POD will be an alternative to the traditional offering of space and power for the physical colocation of customers' equipment. The Exchange will continue to offer its traditional colocation services.
With POD, customers will not need to order cabinets and power to install a server or network hardware in the Exchange's data center to be able to set up their systems and access the market directly. Instead, POD will provide customers with a variant of colocation where applications are deployed on a shared computing infrastructure
Customers will be able to select a dedicated server or a virtual machine. A dedicated server is single-tenant environment, meaning that only one customer has access to the server hardware. A virtual machine is a computing environment where each customer has exclusive access to their virtualized server, including its operating system and applications. While customers will control their virtual machines independently, the physical hardware resources, such as the CPU, memory, and storage, are
The servers (dedicated and virtual) for POD will be located in a cabinet in the colocation space at the data center. Each customer will have their own logical network that is fully isolated and not shared with other customers. Those customers selecting a dedicated server would also have the option to add an analytics service.
Access to POD will be available via virtual private network (VPN) or Secure Shell (SSH), similar to how customers would access their fully owned co-located hardware. Customers will be able to choose from several existing options for physical connectivity, including 1G Ultra, 10G, 10G Ultra, and 40G. POD will provide access to the market through the same Extranet network as is used currently by existing colocation customers. To be clear, POD will not afford its users any special advantages relative to users of its traditional colocation services.
Exchanges offer colocation services to facilitate the trading activities of those market participants who believe that colocation enhances the efficiency of their trading. The Exchange believes that the launch of POD will benefit an underserved market segment, including a niche of smaller customers who do not currently co-locate in any form at the data center but wish to do so. These smaller trading firms that do not directly connect and interface with the Exchange may struggle with the complexity, upfront investment, ongoing expense, and knowledge gaps required to code, connect, host and manage their own infrastructure, and trade directly with the Exchange.
The Exchange notes that similar services are currently offered by, and customers may obtain such service from, managed service providers that operate at the Carteret data center. For example, Pico and Options-IT currently offer managed service colocation at the Carteret data center.
POD will provide customers with increased options for colocation. POD will be entirely optional and available to all market participants who desire to subscribe to POD. It is a business decision of each firm whether to subscribe to POD. Rather than choosing POD, customers may choose to (1) directly co-locate at the data center by ordering cabinet space and power, and placing their equipment at the data center; (2) co-locate through a third party; or (3) not co-locate at all.
The Exchange intends to submit a fee filing in the future to establish fees for POD, including fees for a dedicated server, a dedicated server with analytics, and a virtual machine. Implementation of the proposal described herein to offer POD would coincide with the subsequent fee filing.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes that the launch of POD will benefit an underserved market segment, including smaller customers who do not currently co-locate in any form at the data center but wish to do so. These smaller trading firms that do not directly connect and interface with the Exchange may struggle with the complexity, upfront investment, ongoing expense, and knowledge gaps required to code, connect, host and manage their own infrastructure, and trade directly with the Exchange. As such, the Exchange believes that the proposal would further the objective of removing impediments to and perfecting the mechanism of a free and open market and a national market system.
The proposal would benefit the public interest by providing customers more colocation options to choose from, thereby enhancing their ability to tailor their colocation operations to the requirements of their business operations. As noted above, POD will be entirely optional and available to all market participants who desire to subscribe to POD. Rather than choosing to co-locate via POD, customers may choose to (1) directly co-locate at the data center by ordering cabinet space and power, and placing their equipment at the data center; (2) co-locate through a third party; or (3) not co-locate at all. Services comparable to POD are currently offered by, and customers may obtain such service from, any managed
Again, POD will offer its users no special advantages relative to users of the Exchange's traditional colocation services. Though POD will allow customers to use Exchange-provided hardware to access the Exchange, POD does not otherwise fundamentally differ from current connectivity to the Exchange. The Exchange is not proposing to change the nature of the services provided today. Rather, POD will differ as to who provides the hardware.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Nothing in the proposal imposes any burden on the ability of other exchanges to compete. The Exchange operates in a highly competitive market in which exchanges and other vendors offer colocation services to facilitate the trading and other market activities of those market participants who believe that colocation enhances the efficiency of their operations.
Nothing in the Proposal burdens intra-market competition because POD will be available to any customer and customers that wish to co-locate via POD can do so on a non-discriminatory basis. Use of any colocation service is completely voluntary, and each market participant is able to determine whether to use colocation services, including POD, based on the requirements of its business operations. POD will offer its users no special advantages relative to users of the Exchange's traditional colocation services.
No written comments were either solicited or received.
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)(iii) of the Act
At any time within 60 days of the filing of the 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 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)
Cboe BZX Exchange, Inc. (“BZX” or the “Exchange”) is filing with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change to modify the Company Listing Fees under Exchange Rule 14.13.
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 proposes a clean-up change to Rule 14.13(b) to correct a drafting error from a previous amendment to the Company Listings Fees that delineated the Application Fee from the Entry Fee in the Exchange's rulebook.
The Exchange proposes to adopt Rule 14.13(b)(1), which would be titled “Initial Listing Fees”. Thereunder, proposed Rules 14.13(b)(1)(A) and (B) would provide for the Application Fee and Entry Fee, respectively, which are currently provided under Rule 14.13(b)(1) and (2). The Exchange proposes no substantive change to the Application Fees provided under proposed Rule 14.13(b)(1)(A)(i)-(iii), except to update cross references to Rule 14.13 in proposed Rule 14.13(b)(1)(A)(iii). Similarly, the Exchange proposes to re-letter Rules 14.13(b)(2)(A) through (E) to Rules 14.13(b)(1)(B)(i) through (v), including any corresponding re-numbering or re-lettering to subparagraphs thereunder. The Exchange proposes no substantive change to proposed Rules 14.13(b)(1)(B)(i) through (v) except to update cross-references to Rule 14.13 in Rule 14.13(b)(1)(B)(iii).
Next, the Exchange proposes to delete existing Rule 14.13(b)(2)(G) which is currently reserved and contains no substantive text. The Exchange also proposes to re-letter existing Rules 14.13(b)(2)(F), (H), and (I) to proposed Rules 14.13(b)(1)(C), (D), and (E), respectively. By re-lettering these paragraphs, they will fall under the Initial Listing Fees section of the Rule and the Exchange believes such change will more clearly provide that those Rules are applicable to all Initial Listing Fees, regardless of whether they are an Application Fee or Entry Fee.
Prior to the Previous Amendment, the Application Fee was a subset of the Entry Fee but the Previous Amendment created a delineation between the Application Fee and Entry Fee in order to make the Rule easier to read. The proposal, however, did not make a corresponding amendment to Rule 14.13(b)(2)(F) to provide that the Exchange Board (the “Board”) or its designee may defer or waive any part of the Application Fee and/or Entry Fee. Now, the Exchange proposes to correct that oversight by updating proposed Rule 14.13(b)(1)(C) to provide that such discretion applies to the Initial Listing Fees, which includes both the Application Fee and Entry Fee.
The Exchange is also proposing to delete cross-references to Rule 14.13(b)(2) from proposed Rules 14.13(b)(2)(D) and (E). While the Exchange updated proposed Rules 14.13(b)(1)(D) and (E) in the Previous Amendment to apply to both the Application Fee and Entry Fee, those provisions were provided for only under the Entry Fee portion of the Rule, which the Exchange believes may be unclear or cause confusion. Accordingly, the Exchange believes that the proposed re-lettering of those rules will clearly provide that the exceptions apply to the Initial Listing Fees (which include both the Application Fee and Entry Fee).
In light of the structural changes proposed above, the Exchange proposes to re-number existing Rules 14.13(b)(3) and (4) to Rules 14.13(b)(2) and (3). The Exchange also proposes to update cross-references to Rule 14.13 in proposed Rules 14.13(b)(2)(C), (H), (I), and (K).
The Exchange believes the proposed rule change is consistent with the Act the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange first notes that its corporate listing business operates in a highly-competitive market in which Companies can readily list on another national securities exchange if they deem fee levels or any other factor at a particular venue to be insufficient or excessive. Exchange Rule 14.13 reflects a competitive pricing structure designed to incentivize Companies to list new securities, which the Exchange believes will enhance competition both among Companies and listing venues, to the benefit of investors.
The Exchange believes that the proposed changes will add clarity to the Exchange's rulebook, to the benefit of all
The Exchange believes it is reasonable to allow the Board of Directors or its designee, in its discretion, to defer or waive all or any part of the Initial Listing Fees described in proposed Rule 14.13(b)(1). Prior to the Previous Amendment, the Application Fee was a subset of the Entry Fee but the Previous Amendment created a delineation between the Application Fee and Entry Fee in order to make the Rule easier to read, but the proposal did not make a corresponding amendment to Rule 14.13(b)(2)(F) to provide that the Board or its designee may defer or waive any part of the Application Fee and/or Entry Fee. The Exchange's proposal would correct that drafting error by updating proposed Rule 14.13(b)(1)(C) to provide that such discretion applies to the Initial Listing Fees, which includes both the Application Fee and Entry Fee. The Exchange notes that another exchange's rules have long provided similar authority to its board of directors or its designee to defer or waive all or any part of the entry fee, which includes the application fee. Specifically, the Nasdaq Stock Market LLC (“Nasdaq”) rules provide that the application fee falls under the entry fees of its rulebook,
Given the foregoing, the Exchange believes the proposed fee amendments are consistent with the Act.
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. The market for listing services is extremely competitive and listed companies may freely choose alternative venues based on the aggregate fees assessed, and the value provided by each listing.
The proposed change is a clean-up change to Rule 14.13(b)(2)(F) to correct a drafting error from a previous amendment to the Company Listings Fees that delineated the Application Fee from the Entry Fee in the Exchange's rulebook. As a result, a particular exception to the Application Fee and Entry Fee was no longer applicable to both fee types, and other exceptions to the Application Fee and Entry Fee were unclearly listed under only one fee type under the Rule. The proposed amendments would provide that both the Application Fee and Entry Fee are part of the “Initial Listing Fees” and would make structural changes to existing Rule 14.13 to clearly provide any exceptions applicable to the Initial Listing Fees. As the proposed amendments are designed to add clarity to the Exchange's rulebook and to correct a drafting error, the Exchange does not believe the proposal will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes that the proposed amendment does not encumber competition for listings with other listing venues, which are similarly free to set their fees. Rather, it reflects competition among listing venues and will further enhance competition.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
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”),
The Exchange is filing with the Commission a proposed rule change to amend the Exchange's fee schedule applicable to Members
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 purpose of the proposed rule change is to amend the Fee Schedule to: (1) adopt a new tier under the Liquidity Provision Tiers; (2) modify the required criteria under Liquidity Provision Tiers 2, 3, and 4; (3) modify NBBO Setter Tier 1 by modifying the required criteria under such tier; and (4) eliminate the DLI Additive Rebate, each as further described below.
The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues, to which market participants may direct their order flow. Based on publicly available information, no single registered equities exchange currently has more than approximately 16.1% of the total market share of executed volume of equities trading.
The Exchange currently provides a standard rebate of $0.0015 per share for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange (such orders, “Added Displayed Volume”). The Exchange also currently offers Liquidity Provision Tiers 1-5, under which a Member may receive an enhanced rebate for executions of Added Displayed Volume by achieving the corresponding required volume criteria for each tier. The Exchange now proposes to adopt a new tier under the Liquidity Provision Tiers, which, as proposed, would be the new Liquidity Provision Tier 1, and the current Liquidity Provision Tiers 1, 2, 3, 4 and 5 would be renumbered as Liquidity Provision Tiers 2, 3, 4, 5 and 6 (hereinafter referred to as such). The applicable rebates and required criteria under Liquidity Provision Tiers 2, 3, 4, 5 and 6, would remain unchanged, except for the required criteria under Liquidity Provision Tiers 2, 3, and 4, which the Exchange is proposing to modify, as further described below.
Under the proposed new Liquidity Provision Tier 1, the Exchange will provide an enhanced rebate of $0.0034 per share for executions of Added Displayed Volume for Members that qualify for such tier by achieving either: (1) an ADAV
The proposed new Liquidity Provision Tier 1 is designed to encourage Members to maintain or increase their order flow that adds displayed liquidity to the Exchange in order to qualify for the proposed enhanced rebate for executions of Added Displayed Volume, thereby promoting price discovery and contributing to a deeper and more liquid market to the benefit of all market participants.
The Exchange is also proposing to modify the required criteria under Liquidity Provision Tiers 2, 3, and 4. First, with respect to Liquidity Provision Tier 2 (previously named Liquidity Provision Tier 1, as described above), the Exchange currently provides an enhanced rebate of $0.0033 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving: (1) an ADAV (excluding Retail Orders) that is equal to or greater than 0.45% of the TCV; or (2) an ADAV that is equal to or greater than 0.30% of the TCV and a Non-Displayed ADAV
With respect to Liquidity Provision Tier 3 (previously named Liquidity Provision Tier 2, as described above), the Exchange currently provides an enhanced rebate of $0.0032 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving an ADAV that is equal to or greater than 0.20% of the TCV and an ADV
With respect to Liquidity Provision Tier 4 (previously named Liquidity Provision Tier 3, as described above), the Exchange currently provides an enhanced rebate of $0.0030 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving an ADAV that is equal to or greater than 0.175% of the TCV. Now, the Exchange proposes to modify the required criteria under Liquidity Provision Tier 4 such that Members qualify for such tier by achieving: (1) an ADAV that is equal to or greater than 0.20% of the TCV in securities priced at or above $1.00 per share; or (2) an ADAV that is equal to or greater than 0.175% of the TCV. Thus, such proposed change would add alternative criteria (1) and keep the existing criteria intact as alternative criteria (2). The Exchange is not proposing to change the rebate provided under such tier.
The Exchange believes that the tiered pricing structure for executions of Added Displayed Volume under the proposed modified Liquidity Provision Tiers 2, 3, and 4 provides an incremental incentive for Members to strive for higher volume thresholds to receive higher enhanced rebates for such executions and, as such, is intended to encourage Members to maintain or increase their order flow, primarily in the form of liquidity-adding volume, to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all Members and market participants. Specifically, the Exchange believes that, after giving effect to the proposed changes described above, the rebate for executions of
The Exchange currently offers NBBO Setter Tier 1 under which a Member may receive an additive rebate of $0.0002 per share for a qualifying Member's executions of Added Displayed Volume (other than Retail Orders) in securities priced at or above $1.00 per share that establish the NBBO and have a Fee Code B
The Exchange believes that the proposed modified criteria provides an incremental incentive for Members to strive for higher ADAV in NBBO setting orders (
Lastly, the Exchange proposes to eliminate the DLI Additive Rebate. Currently, the Exchange offers a DLI Additive Rebate incentive that is applicable to DLI Tier 1, which provides an additive rebate of $0.0005 per share for executions of Added Displayed Volume for a Member that qualifies for DLI Tier 1 as well as either the criteria under the previous Liquidity Provision Tier 1 or Liquidity Provision Tier 2. The Exchange now proposes to eliminate such DLI Additive Rebate. The purpose of eliminating the DLI Additive Rebate is for business and competitive reasons, as the Exchange believes the elimination of such additive rebate would decrease the Exchange's expenditures with respect to the Exchange's transaction pricing, which would enable the Exchange to redirect future resources and funding into other incentives and tiers intended to incentivize increased order flow. For these reasons, the Exchange no longer wishes to, nor is it required to, maintain such tier.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
As discussed above, the Exchange operates in a highly fragmented and competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient, and the Exchange represents only a small percentage of the overall market. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and also recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to new or different pricing structures being introduced into the market. Accordingly, competitive forces constrain the Exchange's transaction fees and rebates, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange believes the proposal reflects a reasonable and competitive pricing structure designed to incentivize market participants to direct additional order flow to the Exchange, which the Exchange believes would promote price discovery and enhance liquidity and market quality on
The Exchange notes that volume-based incentives and discounts have been widely adopted by exchanges, including the Exchange, and are reasonable, equitable and not unfairly discriminatory because they are open to all members on an equal basis and provide additional benefits or discounts that are reasonably related to the value to an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns, and the introduction of higher volumes of orders into the price and volume discovery process. The Exchange believes that the proposed new Liquidity Provision Tier 1 is reasonable, equitable and not unfairly discriminatory for these same reasons, as it would provide Members with an additional incentive to achieve a certain volume threshold on the Exchange, is available to all Members on an equal basis, and, as noted above, is designed to encourage Members to maintain or increase their orders that add displayed liquidity to the Exchange in order to qualify for the enhanced rebate for executions of Added Displayed Volume, thereby promoting price discovery and contributing to a deeper and more liquid market to the benefit of all market participants. The Exchange also believes the enhanced rebate for executions of Added Displayed Volume under the proposed new Liquidity Provision Tier 1 reflects a reasonable and equitable allocation of fees and rebates because it is higher than the rebates provided for such executions under Liquidity Provision Tiers 2-6, which have lower volume thresholds as their required criteria, and is commensurate with its required criteria and the market quality benefits it is designed to achieve, as described above.
The Exchange believes that Liquidity Provisions Tier 2, 3, and 4, and NBBO Setter Tier 1, each as modified by the proposed changes to the required criteria under each tier as described above, are reasonable, equitable and not unfairly discriminatory for these same reasons. Such tiers would provide Members with an incremental incentive to achieve certain volume thresholds on the Exchange, are available to all Members on an equal basis, and, as described above, are designed to encourage Members to maintain or increase their order flow, including in the form of displayed, liquidity-adding, and/or NBBO-setting orders to the Exchange in order to qualify for an enhanced rebate, as applicable, thereby contributing to a deeper, more liquid and well balanced market ecosystem on the Exchange to the benefit of all Members and market participants.
The Exchange believes the proposed change to eliminate the DLI Additive Rebate is reasonable because, as noted above, it would enable the Exchange to redirect the associated resources and funding into other incentives and tiers, and the Exchange is not required to maintain such incentive or provide Members any opportunities to receive additive rebates. The Exchange believes the proposal to eliminate such incentive is also equitable and not unfairly discriminatory because it applies equally to all Members, in that the incentive would no longer be available for any Member.
For the reasons discussed above, the Exchange submits that the proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of the Act
The Exchange does not believe that the proposal will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the proposal is intended to incentivize market participants to direct additional order flow to the Exchange, thereby enhancing liquidity and market quality on the Exchange to the benefit of all Members and market participants. As a result, the Exchange believes the proposal would enhance its competitiveness as a market that attracts actionable orders, thereby making it a more desirable destination venue for its customers. For these reasons, the Exchange believes that the proposal furthers the Commission's goal in adopting Regulation NMS of fostering competition among orders, which promotes “more efficient pricing of individual stocks for all types of orders, large and small.”
As discussed above, the Exchange believes that the proposal would incentivize Members to submit additional order flow, including displayed, liquidity-adding, and/or NBBO setting orders to the Exchange,, thereby enhancing liquidity and market quality on the Exchange to the benefit of all Members, as well as enhancing the attractiveness of the Exchange as a trading venue, which the Exchange believes, in turn, would continue to encourage market participants to direct additional order flow to the Exchange. Greater liquidity benefits all Members by providing more trading opportunities and encourages Members to send additional orders to the Exchange, thereby contributing to robust levels of liquidity, which benefits all market participants. The opportunity to qualify for the proposed new Liquidity Provision Tier 1 and the modified Liquidity Provision Tiers 2, 3, and 4 and NBBO Setter Tier 1 and thus receive the corresponding enhanced rebate for executions of Added Displayed Volume, as applicable, would be available to all Members that meet the associated volume requirements in any month. As described above, the Exchange believes that the proposed new required criteria under each such tier are commensurate with the corresponding rebate under such tier and are reasonably related to the enhanced liquidity and market quality that such tier is designed to promote. Additionally, as noted above, the elimination of the DLI Additive Rebate will apply to all Members equally. For the foregoing reasons, the Exchange believes the proposed changes would not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act.
As noted above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. Members have numerous alternative venues that they may participate on and direct their order flow to, including 15 other equities exchanges and numerous alternative trading systems and other off-exchange venues. As noted above, no single registered equities exchange currently has more than approximately 16.1% of the total market share of executed volume of equities trading. Thus, in such a low-concentrated and highly competitive market, no single
Additionally, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of the 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.
On December 22, 2023, Banque Centrale de Compensation, which conducts business under the name LCH SA (“LCH SA”), filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act
LCH SA is a clearing agency that offers clearing of, among other things, credit-default swaps (“CDS”).
The Framework describes LCH SA's liquidity in terms of sources and needs. The Framework lists various sources of liquidity for LCH SA, such as cash and non-cash collateral provided by Clearing Members to meet their margin and default fund requirements. With respect to needs for liquidity, the Framework places these into three broad categories: (i) those arising from LCH SA's business-as-usual operations; (ii) those arising from Clearing Members' defaults; and (iii) those arising from the default of LCH SA's interoperating central counterparty (“CCP”).
Section 1 of the Framework describes the scope, purpose, and use of the Framework. Sections 2 and 3 describe certain limitations to, and justifications for, how LCH SA models its liquidity sources and needs. Section 4 details how LCH SA models its liquidity sources and needs. Section 5 describes how LCH SA tests and monitors the performance of these models. Finally, Section 6 contains certain additional information relevant to the Framework, presented as appendices to the Framework.
The purpose of the Proposed Rule Change is to make a variety of updates to the Framework. These updates are described below according to the section of the Framework where they appear. In general, these changes will: (a) revise the manner in which settlement obligation liquidity requirements are calculated; (b) revise the way LCH SA determines the potential value of liquidity obtained from pledging securities to the Banque de France (“BdF”); (c) extend the length of time for which LCH SA must maintain liquidity resources sufficient to meet its liquidity requirements; (d) include the liquidity needs generated by the expiration of physically settled stock futures in determining overall liquidity needs; and (e) require LCH SA, in calculating its required liquidity resources, to consider that Clearing Members may switch from depositing non-cash collateral in a Full Title Transfer Account (“FTTA”) to depositing non-cash collateral instead in a Single Pledged Account (“SPA”).
Section 1 of the Framework details the scope, purpose, and use of the Framework. The Proposed Rule Change would make various updates to this section, as described below.
Currently, Section 1.1, titled Model Objective, Business Scope and Intended Use, states that the Framework is owned by CaLRM and is reviewed on at least a quarterly basis. Currently, Section 1.1 provides that the Framework is reviewed at least on a quarterly basis. LCH SA is proposing to change the frequency the Framework is reviewed from quarterly to annually. LCH SA is making this change to align the review of the Framework with the frequency of the review of the Group Liquidity Risk Policy.
Section 1.1.1, titled Reminder of SA's activities, contains an overall description of LCH SA's activities as a clearing agency. Among other things, Section 1.1.1 currently explains that LCH SA maintains default funds which aim to cover the two largest losses that may exceed the losses covered by initial margins. LCH SA is proposing to revise this description slightly by deleting the phrase “two largest,” and noting instead that default funds are calibrated on the assumption of default of the two most exposed groups of affiliated Clearing Members (“Clearing Member Groups”).
The Proposed Rule Change would next amended Section 1.1.2, titled Investment Activities. To ensure that the Framework provides an accurate description of the Collateral and Liquidity Management (“CaLM”) Front Office team, LCH SA is clarifying the description of this team in this section. LCH SA's CaLM team manages LCH SA's investment activities, among other responsibilities, and the current Framework describes CaLM's tasks related to investment activities as liquidity management, non-cash collateral settlement in case of a Clearing Member's default, and investment management of cash margins, default funds, and other financial resources. The Proposed Rule Change would revise this description to state that CaLM's task is non-cash collateral liquidation, rather than settlement, in addition to liquidity and investment management.
Section 1.1.3, titled Interoperability of CC&G, describes the interoperability link that LCH SA maintains with another CCP, Cassa di Compensazione e
LCH SA is also making changes to reflect the other policies and procedures, in addition to the Framework, that it employs to manage its liquidity risk. As noted above, LCH SA is a subsidiary of LCH Group and an indirect subsidiary of LSEG. As such, LCH SA manages its liquidity risk using the Group Liquidity Risk Policy and the Group Liquidity Plan (which are applicable to each entity within LCH Group). LCH SA uses these other policies in addition to the Framework. The Proposed Rule Change would update Section 1.3, titled Model dependency and interconnectivity, to include summaries of these other policies, including the LCH SA Liquidity Plan, Group Liquidity Risk Policy, Group Financial Resource Adequacy Policy, Group Collateral Risk Policy, Group Investment Risk Policy, LCH SA Collateral Control Framework, and Group Risk Policy: Default Management.
The Proposed Rule Change would next amend Section 1.4, titled Model Governance. Here the Proposed Rule Change would add a footnote to clarify that the core liquidity reserve stress tests are performed monthly according to the Liquidity Risk Policy. LCH is making this change to align the Framework with LCH SA's Liquidity Risk Policy.
Section 1.6.1, titled Liquidity Sources, describes LCH SA's sources of liquidity. These sources include, among others, cash posted by Clearing Members to meet margin and default fund requirements and non-cash collateral posted by Clearing Members. Section 1.6.1 also describes the tools that CaLM would use to meet LCH SA's non-Euro liquidity requirements in case of a Clearing Member's default. Section 1.6.1 currently describes these tools as committed liquidity lines pledged with assets from margin collateral or investments and a rule book arrangement that allows LCH SA to pay its obligations in Euros. The Proposed Rule Change would add further explanation of the tools available to CaLM to meet LCH SA's non-Euro liquidity requirements in the event of a default. At a broad level, these tools include non-Euro cash deposited as collateral at creditworthy commercial banks; the sale of non-Euro securities of the defaulting member; repo transactions; the use of LCH SA's multicurrency overdraft facility; the use of FX spot market transactions; ECB weekly tender in U.S. dollars; and the replacement of LCH SA's liabilities in non-Euro by Euro. This description would be the same as what is currently found in Appendix 5 of the Framework.
The Proposed Rule Change next would make two changes in Section 1.6.1.1, titled Collateral transfer to the 3G pool, which is related to non-cash collateral posted by Clearing Members. LCH SA permits Clearing Members to deposit non-cash collateral either through a FTTA or through a SPA. LCH SA maintains FTTAs at various central securities depositories and maintains SPAs at Euroclear Bank and Bank of New York Mellon (for U.S. Treasuries). As currently described in Section 1.6.1.1, LCH SA can pledge certain of this non-cash collateral—mostly Euro-denominated securities, referred to herein as “Eligible Collateral”—at BdF to obtain a liquidity line on an intraday basis and overnight if needed. Securities denominated in other, non-Euro currencies are generally not considered Eligible Collateral under the Framework,
Section 1.6.1.2, titled Assessment of Assets Liquidity, describes how LCH SA categorizes its collateral in terms of how liquid that collateral is. LCH SA assigns collateral to a liquidity tiering scale, ranging from 1 to 3. Tier 1 assets are the most liquid and Tier 3 are the least liquid. Currently, Section 1.6.1.2 contains a table that lists out collateral by tier. This table includes, as Tier 1 assets, all Eligible Collateral, UK Gilts and US Treasury Bills, and Dutch and Belgian central bank guarantees (only for the defaulting member that posted the guarantee). The Proposed Rule Change would add to this table, as Tier 3 assets, non-cash collateral denominated in Danish Krone, Norwegian Krone, Swedish Krona, Japanese Yen, Swiss Franc, Canadian Dollar, and Australian Dollar. As noted, such collateral is not Eligible Collateral. The Proposed Rule Change also would note, elsewhere in Section 1.6.1.2, that Tier 1 Assets include Gilt US securities and the central bank guarantee of the defaulter if the member is based in the same country as the central bank providing the guarantee. This additional language would be consistent with what is currently found in the table regarding Tier 1 assets.
Section 1.6.1.3, titled Synthesis, contains a table that synthesizes information about LCH SA's various liquidity sources. This table categorizes each source as cash, non-cash collateral from Clearing Members, collateral from investment activities, and other. In this table the Proposed Rule Change would replace references to CC&G with references to Euronext Clearing, to reflect the name change noted above. Currently, this table also explains that LCH SA retains the right of collateral re-hypothecation for all Eligible Collateral, but not for collateral deposited under the pledge regime and CDS. The Proposed Rule Change would remove the reference specific to CDS. Because pledge is now available at LCH SA's CDS service, the disclaimer for pledge also applies to CDS, and therefore the CDS business line does not need to be mentioned separately.
In addition, the table currently notes that LCH SA has demonstrated an ability to raise Euro cash using non-Euro, non-cash collateral, based on exercises performed in 2017. The Proposed Rule Change would clarify that CaLM demonstrated in 2021 and 2022 the ability to raise Euro liquidity from non-Euro non-cash collateral in USD and GBP. The table currently notes that when valuing non-Euro non-cash collateral as a liquidity source, LCH SA applies an arbitrary buffer of ten percent as a haircut. The Proposed Rule Change also would revise the description of this buffer from “arbitrary” to “conservative” and would note it is applied to absorb market stress that may occur beyond the volatility already captured by the all-in haircut.
Finally, the table currently identifies as a source of liquidity guarantee letters
Section 1.6.2, titled Liquidity Needs, describes LCH SA's liquidity needs. As noted, the Framework identifies three broad categories of liquidity needs: (i) those arising from LCH SA's business-as-usual operations; (ii) those arising from Clearing Members' defaults; and (iii) those arising from the default of LCH SA's interoperating CCP.
Section 1.6.2.1, titled Liquidity needs arising from members' defaults, further identifies liquidity needs arising from Clearing Member defaults. These needs include, among others, settlement cash outflows and the value of Eligible Collateral pledged at BdF. With respect to settlement cash outflows, Section 1.6.2.1 provides that cash outflows are generated when LCH SA must step in on behalf of the defaulted member to post cash to non-defaulting member(s) and take in the underlying collateral. The Proposed Rule Change would revise this description, from “underlying collateral” to “underlying securities.” Section 1.6.2.1 specifies that LCH SA obtains liquidity based on the value of the Eligible Collateral that it pledges. Given that a Clearing Member's default likely would result in (or result from) stress market conditions, and given that such conditions could lower the value of Eligible Collateral, the Proposed Rule Change would specify that LCH SA would consider stress market conditions in determining the value of Eligible Collateral pledged.
Finally, Section 1.6.2.2, titled Liquidity needs arising from interoperating CCPs' defaults, identifies the liquidity needs arising from the default of LCH SA's interoperating CCP. In Section 1.6.2.2, the Proposed Rule Change would replace references to CC&G with references to Euronext Clearing, consistent with the name change noted above.
Section 2, titled Limitations and Compensating Controls, and Section 3, titled Justification of Modelling Approach, describe certain limitations to, and justifications for, how LCH SA models its liquidity sources and needs. The Proposed Rule Change would not make any amendments to Sections 2 and 3.
Section 4, titled Model Specification, explains how LCH SA models its liquidity sources and needs. Section 4 is organized according to LCH SA's three broad categories of liquidity needs: (i) those arising from LCH SA's business-as-usual operations; (ii) those arising from Clearing Members' defaults; and (iii) those arising from the default of LCH SA's interoperating CCP.
Section 4.1, titled Operational Target, describes how LCH SA determines its liquidity needs arising from business-as-usual operations. LCH SA values its operational liquidity needs by determining the amount of its sources of liquidity from its operations and the amount of its requirements for liquidity from its operations. LCH SA then subtracts the total of its requirements from the total of its sources, to determine whether it has sufficient resources to meet its requirements. As described in Section 4.1.3, titled Model Outputs, LCH SA's CaLRM team generates reports daily to check that operational liquidity sources are sufficient to cover operational liquidity requirements.
The Proposed Rule Change would first amend Section 4.1.2, titled Model Inputs and Variable Selection, to clarify that the repayment of excess cash as well as excess ECB eligible securities deposited to cover margin requirements are considered in the liquidity requirements of the Operational Target. Operational liquidity requirements currently include, among other items, repayment of excess cash collateral, which is cash that Clearing Members provided to meet their margin and default fund requirements, but that is no longer needed to meet such requirements. This could occur, for example, when a Clearing Member's margin and default fund requirements decrease due to a change in the Clearing Member's positions or risk associated with those positions, and Clearing Members request the return of such excess cash collateral. Like excess cash, Clearing Members may request the return of Eligible Collateral that is no longer needed to meet margin and default fund requirements. Because LCH SA considers Eligible Collateral as a potential source of liquidity, the return of Eligible Collateral represents a potential liquidity requirement for LCH SA. Accordingly, the Proposed Rule Change would note that the return of excess Eligible Collateral represents a potential liquidity requirement.
The Proposed Rule Change also would update a related footnote, which explains that LCH SA excludes certain securities from its liquidity assets, and therefore, LCH SA does not consider these securities as potential excess Eligible Collateral. These include securities denominated in Danish Krone, Norwegian Krone, Swedish Krona, Japanese Yen, Swiss Franc, Canadian Dollar, and Australian Dollar. These securities are not Eligible Collateral because LCH SA is not able to pledge them for a liquidity line. Here the Proposed Rule Change would specify that Portuguese and Finnish government bonds posted via the triparty solution are excluded from the liquid assets because LCH SA cannot pledge these securities at BdF due to operational constraints.
The Proposed Rule Change would next amend Section, 4.1.4, titled Mathematical Formula, Derivation and Algorithm, and Numerical Approximation. This section explains the mathematical formula LCH SA uses to confirm that its sources of operational liquidity are sufficient to meet its needs. As noted, LCH SA determines the total of its sources and the total of its operational liquidity requirements and then subtracts the total of its requirements from the total of its sources. LCH SA refers to the resulting figure as its “Operational Target.” The Proposed Rule Change would not alter this formula, but it would add language to note that, after subtracting operational liquidity requirements from liquidity resources, the remaining amount must always be greater than zero.
The Proposed Rule Change would next amend Section 4.1.5, titled Model Assumptions, 4.1.5, which details how LCH SA determines the amounts of its operational liquidity resources and needs, and the period for which LCH SA seeks to maintain sufficient liquidity resources. Currently, LCH SA seeks to maintain sufficient liquidity sources for five days in stressed situations. The Proposed Rule Change would revise this time horizon to provide that liquidity resources must be sufficient to meet LCH SA's liquidity requirements for seven days in stressed situations. Additionally, details related to the management of the former horizon have been removed to state that the horizon is seven days and results will be displayed without any aggregation. LCH SA is making this change to ensure that the time horizon is the same for all business lines. Specifically, this change would make the time horizon for LCH SA's business lines consistent with the time horizon for its RepoClear business
Section 4 contains descriptions of the various components of LCH SA's operational liquidity requirements, which the Framework calls “liquidity requirements drivers.” One of these drivers is the potential requirement to repay excess collateral. As noted, excess cash collateral is a potential liquidity need because Clearing Members may request the return of such excess cash collateral. The Proposed Rule Change would add a description of the return of excess Eligible Collateral as a related liquidity need.
Another liquidity driver is the operational liquidity need created when Clearing Members switch cash collateral with non-cash collateral, or switch Eligible Collateral with other non-cash collateral. LCH SA currently considers the impact of such switches over five days. Under the Proposed Rule Change, LCH SA would consider the switches over seven days rather than five, consistent with the changes described above. To facilitate this change, the Proposed Rule Change would add two additional definitions for the amounts of such switches, corresponding to T+5 and T+6.
This section also currently explains that with respect to switches from cash to Eligible Collateral, LCH SA assumes that it can pledge the Eligible Collateral within the same day. The Proposed Rule Change would clarify that, to confirm this assumption, in quarter 3 of 2022, the CaLM demonstrated the ability to transfer Eligible Collateral to BdF within 30 minutes. The Framework currently lists the countries for whose securities CaLM demonstrated this ability, in other words, the countries whose sovereign securities are Eligible Collateral. The Proposed Rule Change would remove this list from the Framework because it is subject to change and depends on the collateral that LCH SA itself accepts from Clearing Members. This section also notes that, with respect to the amount of equity lodged, LCH SA takes the maximum amount of switch observed (currently 100 million Euro) and that this assumption is very conservative because the amount of equities lodged over the past 3 years did not exceed 400,000 Euro. The Proposed Rule Change would keep this sentence but delete the reference to the actual amounts (100 million and 400,000 Euro) because, as LCH SA takes the maximum amount of switched observed, both figures are subject to change.
Another liquidity driver is the need created when LCH SA must provide liquidity to facilitate settlement, including fails resulting from delays in posting securities by Clearing Members. Currently, LCH SA determines the amount of this liquidity need based on the historical amount of EOD securities carried overnight, using a two-year lookback period. LCH SA is also making changes that will clarify the specific amount that is calibrated will be determined using the maximum EOD securities carried overnight over the whole time series available, rather than just a two-year lookback period. The Proposed Rule Change would delete the reference to the two-year lookback period and instead note that the estimate is based on the entire time series that is available to LCH SA.
Another liquidity driver is the need created when Clearing Members' stressed margin requirements decrease. If a Clearing Member's margin requirement goes down, then the Clearing Member may request the return of collateral that it provided to cover that requirement, and therefore a reduction in margin could generate a liquidity need for LCH SA. The Proposed Rule Change would modify the targeted estimated margin reduction of non-defaulting Clearing Members to be consistent with the changes described above. Specifically, the estimated margin reduction will be calculated over seven consecutive days rather than the current three days. To reflect this change, a detailed table and related clarifying footnotes that describe the margin reduction rate per day of the horizon period would be added to the Framework.
The liquidity need generated by LCH SA paying variation margin to its interoperable CCP is also a driver of operational liquidity. As with the changes discussed above, the Proposed Rule Change would replace references to CC&G in this section with references to Euronext Clearing. The Proposed Rule Change also would clarify that LCH SA estimates the variation margin payment based on the Initial Margin posted at LCH SA to cover a 5-day holding period to be spread out over a 5-day period according to a simulated market stress based on historical yield shifts.
Finally, the Proposed Rule Change would make a minor amendment to Section 4.1.5.i, titled Model assumptions, Planned Default Fund (DF) reductions, which discusses how a decrease in the default fund would affect LCH SA's operational liquidity needs. The Proposed Rule Change would clarify that default fund is abbreviated as “DF” in the discussion accompanying Section 4.1.5.i.
Section 4.2 of the Framework, titled LCR, describes how LCH SA determines its liquidity needs arising from the default of a Clearing Member. As described, LCH SA must ensure that it has enough liquidity to satisfy a “Cover 2” requirement, meaning default of the two largest Clearing Member Groups at the same time.
This section details the sources of liquidity and needs for liquidity that would arise in the event of a Clearing Member's default. The Framework refers to these liquidity sources as “Total Available Assets” and liquidity needs as “Total Default Liabilities.” To determine how well it is covering its liquidity needs arising from the potential default of a Clearing Member, LCH SA divides its Total Available Assets by its Total Default Liabilities. LCH SA refers to the resulting figure as its “Liquidity Coverage Ratio” or “LCR.” LCH SA calculates, monitors, and reviews the LCR daily.
The Proposed Rule Change would revise this section to provide that the purpose of the LCR Cover 2 scenario is to allow LCH SA to ensure that it has enough liquidity in the case of default of the two largest Clearing Member Groups during the seven days following the default, rather than five days, as is currently provided. This change would be consistent with the other changes noted above, extending the time horizon for maintaining liquidity resources from five to seven days.
With respect to the components that make up the LCR, Section 4.2.2, titled Model Inputs and Variable Selection, identifies four categories of Total Available Assets: (i) margin collateral; (ii) cash in the default fund; (iii) Eligible Collateral that LCH SA has pledged; and (iv) liquidity raised from investment activities. With respect to Total Default Liabilities, Section 4.2.2 identifies four categories: (i) the operational liquidity needs discussed above, which will continue during the default of a Clearing Member; (ii) contractual settlements related to LCH SA's RepoClear, EGCPlus, and EquityClear business lines; (iii) the cost of financing those contractual settlements; and (iv) variation margin paid to non-defaulting Clearing Members.
The Proposed Rule Change would add to Section 4.2.2 language regarding the treatment of assets belonging to clients of FCM/BD Clearing Members. As reflected currently in the Framework, LCH SA segregates margin provided by FCM/BD Clearing Members on behalf of their clients. This means that LCH SA can only use a particular Clearing Member's client's margin to cover a shortfall arising from that particular client's default, and not to cover a shortfall arising from a Clearing Member's default or another client's default. The Proposed Rule Change would add language to further clarify LCH SA's treatment of margin provided by FCM/BD Clearing Members on behalf of their clients. This new language would specify that, in the context of default and monitoring of the LCR, LCH SA treats a specific FCM/BD Clearing Member's client's collateral as an available liquidity resource only if the specific client defaults and generates a liquidity need. Otherwise, LCH SA does not treat a specific FCM/BD client's resources as available liquidity assets for any other FCM/BD client, the client's FCM/BD Clearing Member, or any other Clearing Member.
The Proposed Rule Change also would make an amendment regarding LCH SA's Total Available Assets. As noted above, the Framework identifies four categories of Total Available Assets. The Proposed Rule Change would amend the description of the third category, Eligible Collateral pledged at BdF. Currently, Section 4.2.2 describes this as the amount of liquidity that can be provided by BdF when pledging securities and including the haircut effect on the resulting figures. The Proposed Rule Change would revise this description to explain that LCH SA would be pledging the securities at stressed market prices.
The Proposed Rule Change would make an amendment regarding LCH SA's Total Default Liabilities. As noted above, the Framework identifies four categories of Total Default Liabilities. The Proposed Rule Change would amend the description of the fourth category, the cost of paying variation margin to non-defaulting Clearing Members. The Framework currently describes this liability as the stressed variation margin impact for cash, derivatives, and CDS markets, on top of which is added the market stress risk impact on the contractual settlements for RepoClear. The Proposed Rule Change would describe this instead as the stressed variation margin impact for cash, derivatives, RepoClear, EGC, and CDS markets and would delete the phrase “on top of which is added the market stress risk impact on the contractual settlements for RepoClear.” Thus, under the Proposed Rule Change, LCH SA would consider as a liability the general stressed variation margin impact for RepoClear but not include the specific market stress risk impact on the contractual settlements for RepoClear. LCH SA is excluding this component because it will instead treat the market stress risk impact as a decrease in the value of liquidity obtained from pledging Eligible Collateral at BdF. As noted above, under the Proposed Rule Change, LCH SA would use stressed market prices to determine the amount of liquidity that it could obtain from pledging Eligible Collateral at BdF
The Proposed Rule Change next would amend Section 4.2.4, titled Mathematical Formula Derivation and Algorithm and Numerical Approximation, which describes the mathematical formula that LCH SA uses to calculate its LCR. The Proposed Rule Change would make conforming revisions to the description of the mathematical formula in Section 4.2.4 to carry through the changes from elsewhere in the Framework described herein. For example, the description of the mathematical formula would be revised to clarify that securities pledged at the BdF and included among Total Available Assets will be valued at stressed market prices and will include the ECB haircut effect on the resulting figures, to incorporate the revisions discussed above in Section 4.2.2. Similarly, the Proposed Rule Change would revise the description of the mathematical formula in Section 4.2.4 to incorporate the clarification of LCH SA's treatment of margins provided by FCM/BD Clearing Members on behalf of their clients discussed above. Specifically, the description of the mathematical formula would be revised to clarify that, in the event of default by a specific FCM/BD Clearing Member's client (and for the purpose of LCR monitoring), LCH SA would treat that FCM/BD Clearing Member's client's collateral as available liquidity resources only if that specific FCM/BD client defaults and generates a liquidity need. Consistent with the changes discussed above, the description would also be revised to clarify that LCH SA would not consider these resources as available liquidity assets for any other FCM/BD clients, the FCM/BD Clearing Member, or any other Clearing Member.
Section 4.2.5, titled Model Assumptions, describes the various risks and assumptions that LCH SA considers when calculating the LCR. Section 4.2.5 describes these assumptions per LCH SA business line, beginning with LCH SA's RepoClear business. To clarify that LCH SA must consider certain risks for each business line in determining liquidity requirements, the Proposed Rule Change would change the title of section 4.2.5.1 to “Description of risks per Business Line.”
Section 4.2.5.1.1, titled RepoClear, describes the liquidity needs associated
Also in Section 4.2.5.1.1, the Proposed Rule Change would amend the period for which LCH SA considers the cash needs associated with purchasing securities on behalf of a defaulting RepoClear clearing member. Currently, LCH SA calculates this liquidity need, which the Framework calls “settlement cash outflows,” over a five-day time horizon. The Proposed Rule Change would extend this to seven days, consistent with the changes discussed above. This change also would align this monitoring period to the RepoClear new maximum holding period to manage a default (five days holding period of margin plus two days of settlement convention).
The Proposed Rule Change also would amend Section 4.2.5.1.1 to clarify that LCH SA will not offset the liquidity needs arising from the defaults of related Clearing Members. As noted above, LCH SA's Clearing Members may be part of an affiliated Clearing Member Group. As described in Section 4.2.5.1.1, LCH SA calculates these settlement outflows on a gross basis for each Clearing Member. For those Clearing Members that are part of a Clearing Member Group, LCH SA aggregates the gross outflows for each Clearing Member in that group. To facilitate the prohibition of netting between entities of the same group, the Proposed Rule Change would clarify that settlement cash outflows will be calculated over a period of 7 days and on a gross basis, aggregated by ISIN, settlement date, and Clearing Member level. LCH SA would then aggregate the final settlement outflows at the Clearing Member Group level without allowing any netting across members of the same Clearing Member Group.
The Proposed Rule Change would add a new Section 4.2.5.1.1.1, titled Liabilities Contractual Obligations on Physical Delivery. This section would describe how LCH SA would estimate the liquidity needs associated with the physical settlement of transactions on behalf of a defaulting Clearing Member. In the case of default, LCH SA will assume and honor the obligations of the defaulted Members. In the event of securities with physical settlement, LCH SA might need to source securities to complete a defaulting Clearing Member's transaction, which could represent a substantial liquidity need for LCH SA. This section would describe the way LCH SA would navigate this scenario, and would describe how LCH SA's pledge of Eligible Collateral to obtain liquidity would affect its ability to source securities to settle transactions.
The Proposed Rule Change also would add a new Section 4.2.5.1.1.2, titled Assets: Settlement Securities Pledged at Central Bank. This new section would describe how LCH SA would estimate the value of liquidity it could raise through pledging settlement securities withdrawn from the settlement system on behalf of a defaulting Clearing Member. This new section would describe in detail how LCH SA would determine the value of the liquidity it could raise, including the relevant mathematical formulas and assumptions. As would be described, LCH SA would consider the potential reduction in market price of the securities during unfavorable market conditions. In other words, LCH SA would consider the stressed market prices of the securities, in line with similar changes described above. LCH SA would also consider the haircut that BdF would apply when lending cash to LCH SA in exchange for the securities. Finally, to remain consistent with the calculation of settlement obligations, as described in this section, after calculating the Liquidity retrieved from the BdF for all dates in the LCR period at Member level, the amounts are aggregated at the Clearing Member Group level.
The Proposed Rule Change would revise Section 4.2.5.1.1.3 (renumbered from 4.2.5.1.1.1), titled Market Risk. This section describes the liquidity need generated by the requirement that LCH SA pay variation margin to non-defaulting Clearing Members on behalf of the defaulting Clearing Member. The Proposed Rule Change would clarify that, in addition to the liquidity flows driven by settlement obligations, the position of the defaulter may generate a liquidity drain for LCH SA in the form of negative mark-to-market to be paid to non-defaulting members. The Proposed Rule Change also would revise the formula that LCH SA uses to estimate the value of this liquidity need. Under the Proposed Rule Change, LCH SA would consider the worst stress loss of the defaulter position according to the relevant RepoClear stress test scenario and add additional margin to model any concentration or market liquidity issues. The Proposed Rule Change further would add a footnote to explain that Appendix 6.7 to the Framework contains a list of stress scenarios.
Dection 4.2.5.1.2, titled EGCPlus, describes the liquidity needs arising from EGCPlus. These liquidity needs could arise from the securities purchased on behalf of a defaulting Clearing Member. LCH SA aggregates these needs by ISIN of the securities and maturity of the contracts. The Proposed Rule Change would revise this section to clarify that, when calculating the settlement-driven cash outflows, the aggregation is based on data provided by the triparty agent and that a liquidity need is generated only by positions in which the defaulter is a cash borrower in the first leg of the repo and the collateral taker when the repo closes. The Proposed Rule Change would further add a footnote that would explain which positions generate a liquidity upon a default. Specifically, a liquidity need is generated by those positions in which the defaulting Clearing Member is a cash borrower (collateral giver) in the first leg of the repo and, therefore, the collateral taker when the repo closes.
To incorporate a recommendation from LCH SA's Model Validation Team to improve the liquidity needs estimation related to Market Risk in the LCR, the Proposed Rule Change also would clarify that, for EGCPlus, the additional liquidity needs generated by negative mark to market payments to non-defaulting Clearing Members is estimated in line with what is done for RepoClear. As noted above, this means LCH SA would consider the worst stress loss of the defaulter position according to the relevant stress test scenario and add any additional margin to model any concentration or market liquidity issues.
Section 4.2.5.1.3, titled EquityClear, describes the liquidity needs arising from EquityClear. In this section, the Proposed Rule Change would incorporate amendments made elsewhere to the Framework. For example, the Proposed Rule Change would update Section 4.2.5.1.3 to clarify that the settlement cash outflows will be calculated on a gross basis at the Clearing Member level and then aggregated at the Clearing Member Group level without allowing any netting across the Clearing Members of the same Clearing Member Group. Doing so would help to ensure that there is no netting across Clearing Members in the same Group, the same as the amendments discussed above. Further,
To address a recommendation from LCH SA's Model Validation Team, the Proposed Rule Change would add the liquidity needs related to the expiry of physically delivered single stock futures in the LCR. Where the defaulting Clearing Member holds a long futures position which expires during the LCR horizon, LCH SA will have to pay the future price to the non-defaulting counterparty in order to settle the physical underlying. Therefore, LCH SA would consider this as a potential additional liquidity need.
Section 4.2.5.1.3.2, titled Listed Derivatives, describes the liquidity needs arising from LCH SA's listed derivatives business line. Here the Proposed Rule Change would clarify that futures on equity index contracts are included among the listed derivatives instruments considered in the calculation of the LCR and that derivatives expirations occur on a monthly basis rather than the previously stated quarterly basis. Moreover, when determining the liquidity need generated by the requirement that LCH SA pay variation margin to non-defaulting Clearing Members on behalf of the defaulting Clearing Member, under the Proposed Rule Change LCH SA would consider the worst stress loss of the defaulter position according to the relevant stress test scenario, consistent with changes elsewhere in the Framework.
Section 4.2.5.1.4, titled Credit Default Swaps, describes the liquidity needs arising from LCH SA's CDSClear business line. Here the Proposed Rule Change would clarify that the calculation of the liquidity needs generated by negative mark-to-market payments to be made to non-defaulting members is charged in line with what is done for the other LCH SA services. Specifically, LCH SA will calculate this need as the worst stress loss of the defaulter position according to the relevant stress test scenario. The Proposed Rule Change further would add a footnote to explain that Appendix 6.7 to the Framework contains a list of stress scenarios.
Section 4.2.5.2 of the Framework, titled Other Liquidity Requirements, describes certain other components that LCH SA considers as part of the LCR.
For example, LCH SA includes the liquidity requirement arising from the operational target as a liquidity need in calculating the LCR. LCH SA does so with two modifications. First, LCH SA removes the cost of paying variation margin to its interoperable CCP. LCH SA makes this modification because it assumes that where its two largest Clearing Member Groups have defaulted, LCH SA would be collecting variation margin from its interoperable CCP rather than paying out variation margin. Second, LCH SA removes the impact of a margin reduction for defaulting Clearing Members. As discussed above, LCH SA considers the liquidity need created when Clearing Members' margin requirements decrease. If a Clearing Member's margin requirement goes down, then the Clearing Member may request the return of collateral that it provided to cover that requirement, and therefore a reduction in margin generates a liquidity need for LCH SA. The same is true when a Clearing Member requests the return of excess cash collateral. For the sake of accounting for the operational target in the LCR, LCH SA excludes this component with respect to the two Clearing Member Groups that are assumed to be in default. LCH SA does this because, where a Clearing Member is in default, LCH SA has the right to use the collateral of the defaulting Clearing Member, including any excess collateral. LCH SA is already reducing the impact of these two components of the operational target in the current version of the Framework, and the Proposed Rule Change would make clarifying edits to the description of these components.
LCH SA includes margin collateral in its available assets when calculating the LCR. LCH SA does this because, as discussed, LCH SA can obtain liquidity for margin collateral, by pledging Eligible Collateral and otherwise engaging in investment transactions. In doing so, LCH SA considers potential losses to the market value of non-cash collateral because such losses could decrease the amount of liquidity that LCH SA is able to obtain. The Proposed Rule Change would clarify that LCH SA would consider these potential losses by applying the same set of stress scenarios used by LCH SA in the calibration of the default fund for its RepoClear service, and choosing the one that generates the biggest liquidity exposure in terms of Cover 2.
As part of the LCR, LCH SA also considers potential losses related to investment activities involving a defaulting Clearing Member's non-cash collateral. LCH SA does so because it may use the proceeds of its investment activities as a liquidity resource when a Clearing Member defaults, and losses would decrease the amount of these proceeds. The Proposed Rule Change would clarify that LCH SA would consider these potential losses by applying the same set of stress scenarios used by LCH SA in the calibration of the default fund for its RepoClear service, and choosing the one that generates the biggest liquidity exposure in terms of Cover 2.
The Proposed Rule Change would add a new Section 4.2.5.2.4, titled Collateral Pledge modelling. This new section would describe, in detail, how pledged collateral is modelled when calculating the LCR. As noted, LCH SA may pledge Eligible Collateral deposited via FTTA to obtain a liquidity line, but not collateral deposited via SPA. If Clearing Members switch from depositing Eligible Collateral via FTTA to SPA, that could reduce the amount of liquidity that LCH SA is able to obtain. To account for this, LCH SA would assume that Clearing Members with an active SPA would pledge collateral near the maximum allowed on each LCH SA business line. LCH SA would therefore subtract this amount of Eligible Collateral from its liquidity resources. LCH SA will calculate the expected additional pledge as the difference between the maximum pledge allowed on the business line scaled by a parameter to capture Clearing Member's expected use of pledge and the actual pledge used by Clearing Members. Currently, LCH SA would assume that each Clearing Member with an active SPA would pledge 100% of the securities that it is allowed to pledge.
For Clearing Members without an active SPA, LCH SA would include all Eligible Collateral deposited via FTTA in its liquidity resources. As noted, certain securities, like those denominated in Danish Krone, Norwegian Krone, Swedish Krona, Japanese Yen, Swiss Franc, Canadian Dollar, and Australian Dollar are not considered Eligible Collateral. LCH SA would therefore exclude these securities from its liquidity resources. The Proposed Rule Change would add a notation to that effect in Section 4.2.5.2.4.
Section 4.2.5.3, titled Stress scenario selection, describes the scenarios that LCH SA uses to factor the effect on market values that could occur in a stressed environment, including a Cover 2 default. Such a situation could, for example, lead to a decrease in the value of the defaulting Clearing Members' non-cash collateral and/or require that LCH SA pay variation margin on behalf of the defaulting Clearing Members. Thus, such a scenario would impact LCH SA's liquidity, both in terms of the amount of liquidity it is able to obtain from non-cash collateral, and the amount of liquidity it may need to pay out in the form of variation margin.
As described, LCH SA uses separate scenarios for each of its clearing services, taken from the set of scenarios used to calibrate the amount of Default Fund for the different services. The Proposed Rule Change would clarify that the stress test scenarios selected for each LCH SA service would be consistent with a market state resulting from Cover 2 default as assumed by the LCR. Moreover, the Proposed Rule Change would update the list of scenarios to include only those most relevant given the LCR assumptions.
Section 4.2.5.3 also contains a table describing the haircuts that would be applied when LCH SA pledges Eligible Collateral. These haircuts reduce the value of collateral that LCH SA can pledge, and therefore ultimately reduce the amount of liquidity that LCH SA is able to obtain. The Proposed Rule Change would update this table to reflect the current haircuts.
Section 4.2.5.4, titled Cover 2 selection, describes how LCH SA calculates the liquidity requirements for each Clearing Member in a stressed environment, which it then uses to determine its Cover 2 requirement by Clearing Member Group (
The Proposed Rule Change will revise this section to specify that LCH SA will determine its Cover 2 requirement in the following manner: LCH SA will first calculate certain liquidity requirements for each individual Clearing Member and then aggregate these amounts per each Clearing Member Group, to arrive at a total requirement for each Clearing Member Group. The Cover 2 requirement would be the two largest amounts per Clearing Member Group.
As would be described in revised Section 4.2.5.4, LCH SA first would calculate the following requirements for each Clearing Member, before determining the aggregate liquidity requirement per Clearing Member Group:
• Stress Variation Margin—for all the services, these variation margins would be modelled by applying the most punitive scenario among the chosen sets and consistent with the LCR assumptions;
• Settlement liquidity requirements due to RepoClear and Cash equity settlement obligations—LCH SA would value securities pledged according to the scenario that would generate the highest loss;
• Non-cash Collateral stress losses—LCH SA would estimate these losses by stressing the Eligible Collateral with the set of scenarios consistent with the LCR assumptions;
• Investment stress losses over haircut—LCH SA would estimate these losses by applying the stress scenarios to the collateral received from the reverse repo activity with each specific counterparty; and
• ECB Haircut—LCH SA would determine the impact by applying the relevant haircut to all the Eligible Collateral received from a specific clearing member.
LCH SA would use the scenarios relevant to each of its clearing services to determine these requirements and then select the scenario that generates the maximum loss of the sum of all of the above elements for the two most exposed Clearing Member Groups. As noted, this sum would determine LCH SA's Cover 2 requirement for purposes of determining its LCR.
Section 4.3 of the Framework, titled LCR Euronext Clearing, describes how LCH SA calculates the liquidity impact resulting from the potential default of its interoperable CCP. Throughout this section, the Proposed Rule Change would change the name of the interoperable CCP from CC&G to Euronext Clearing, including in the titke. The Proposed Rule Change also would update the time horizon for which LCH SA would consider this potential liquidity impact from five to seven days. These changes would be consistent with the changes made in other sections of the Framework, as described above.
Section 5 of the Framework, titled Model Performance Testing and Ongoing Monitoring, describes how LCH SA monitors and tests its liquidity sources and requirements. Section 5.1, titled Ongoing Monitoring, describes the metrics that LCH SA calculates each day, notes the formula used to determine each metric, how LCH SA reports that metric, the limit associated with the metric, and what action LCH SA would take if the limit is breached. For example, Section 5.1 describes how LCH SA calculates its LCR, how LCH SA reports the LCR daily, and the amount of LCR that would trigger an alert and further actions. Throughout Section 5.1, the Proposed Rule Change would update references to the length of time for which LCH SA must maintain liquidity resources from five to seven days and change the name of LCH SA's interoperable CCP to Euronext Clearing, consistent with changes elsewhere in the Framework.
Section 5.1 also describes how LCH SA monitors the allocation between cash and non-cash collateral and specifies that cash collateral should represent at least 25% of LCH SA's available liquid resources after the default of its most significant Clearing Member. The Proposed Rule Change would revise this to state that cash collateral and non-cash collateral that is eligible to be pledged at BdF (meaning Eligible Collateral) should represent at least 25% of LCH SA's available liquid resources after the default of its most significant Clearing Member. LCH SA is making this change in recognition that it can pledge Eligible Collateral for liquidity and further to conform the Framework with LCH SA's Liquidity Policy.
The Proposed Rule Change next would amend Section 5.3, titled Reverse Stress Test, which describes the reverse stress tests that LCH SA performs. LCH SA performs these reverse stress tests using extreme market conditions that go beyond what are considered plausible. As described in the introduction to Section 5.3, LCH SA uses these extreme market conditions to satisfy certain requirements of applicable law. The Proposed Rule Change would add to the discussion of applicable law a summary of Commission Rules 17Ad-22(e)(7)(vi)(B) and (C).
As described in Section 5.3, LCH SA conducts its reverse stress tests using two approaches. First, LCH SA conducts reverse stress tests using seven separate risk factors, with one single factor
Section 5.3.1, titled Independent stress of various risk factors, describes each of the seven risk factors, and the Proposed Rule Change would make various updates to this description. For example, the first risk factor considers the effect on LCH SA's liquid resources arising from a reduction in margin requirements. The description of this risk factor currently notes that a primary source of liquidity is from investment management by LCH SA's CaLM team. The Proposed Rule Change would revise this to note that a primary source of liquidity is from investment management
The second risk factor considers the effect on LCH SA's liquidity resources arising from Clearing Members replacing Eligible Collateral that LCH SA can pledge for liquidity at BdF with collateral that LCH SA cannot pledge. The current Framework describes the collateral that LCH SA cannot pledge as, among others, U.K. or U.S. bonds, equities, and other non-Euro non-cash collateral. The Proposed Rule Change would add to this list pledge collateral, meaning collateral deposited in a SPA. As discussed above, LCH SA cannot use collateral deposited via SPA to obtain liquidity at BdF, even if that collateral is Eligible Collateral.
The third risk factor considers the impact from a downgrade in the rating of countries in the Eurozone. Such a downgrade could increase the haircut applied to Eligible Collateral when LCH SA pledges it at BdF to obtain liquidity. Currently, the Framework describes this risk factor as a reverse stress test that aims at modelling the downgrade of the relevant countries and estimating the theoretical ECB haircuts generating a liquidity shortfall. The Proposed Rule Change would revise this description to modelling the downgrade of the relevant countries and estimating the theoretical ECB haircuts
The Proposed Rule Change would not make any amendments to the description of the fourth and fifth risk factors, which consider the effects of the increase of the maturity of the securities from the settlement of repo transactions and the effects of the market-to-market drop of tier 1 assets.
For the sixth risk factor, the Proposed Rule Change would revise the phrase “the direction of the position” to “the direction of the positions.”
The seventh risk factor considers how many defaults LCH SA can sustain before experiencing a shortfall in liquidity. Here the Framework currently includes the following question: given that liquidity requirements are sized to a Cover 2 standard, is it plausible that there are more than 2 members who could lead to a liquidity deficit? The Proposed Rule Change would revise the phrasing of this question to “2 member Groups defaults” instead of “2 members.” Further, the current Framework specifies that, to answer this question, LCH SA rank orders Clearing Member Groups based on their internal credit scores (“ICS”), starting from the ones with the worst ICS. The Proposed Rule Change would revise the wording of this sentence to state instead that to answer this question, LCH SA ranks Clearing Member Groups on their ICS and starts with the one with the worst ICS. Finally, the current Framework notes that, starting from the top of the list, LCH SA assesses how many defaults have to take place to generate a liquidity shortage. The Proposed Rule Change would revise this slightly to state that, starting from the top of the list
Section 5.3.2, titled Combined reverse stress test scenarios, describes the combined reverse stress test scenarios. Section 5.3.2.1 currently notes that LCH SA performs these additional combined reverse stress tests quarterly. The Proposed Rule Change would revise this language to
Section 5.3.2.2, titled Behavioural scenario, describes the combined scenario that stresses the structure of LCH SA's liquidity resources, including the individual risk factors that LCH SA combines to create this scenario. This section also describes the overall question that LCH SA seeks to answer with this reverse stress test, which is whether there is any combination of changes in the liquidity resources that could lead to a liquidity shortfall without any stress in the market. In addition to describing the risk factors tested and the overall aim of the scenario, Section 5.3.2.2 also provides an example of how LCH SA reports the results of the test. The Proposed Rule Change would update this example to reflect a new layout for the report.
Section 5.3.2.3, titled Macro-economic scenario, describes the combined scenario that simulates the effect of a macro-economic shock on LCH SA's liquidity resources. This section describes how LCH SA combines the individual risk factors to create the overall scenario, as well as the overall question that LCH SA seeks to answer with this reverse stress test, which is how many multiple defaults LCH SA can sustain until it experiences a liquidity shortfall in a shocked macro-economic environment. To simulate the shocked macro-economic environment, the Framework currently uses two macro-economic scenarios, which are described in Section 5.3.2.3. The Proposed Rule Change would remove these two scenarios and replace them with the same scenarios that it uses to determine its LCR.
Section 5.3.3.3, titled Frequency and Reporting, would be a new section to describe how often LCH SA conducts testing, reviews the results, and reviews the underlying scenarios. As would be specified in Section 5.3.3.3, LCH SA would perform the core reverse stress tests monthly and the combined reverse stress test scenarios quarterly. Through its monthly core reverse stress tests, LCH SA would conduct a comprehensive analysis of the existing stress testing scenarios, models, and underlying parameters and assumptions used in evaluating liquidity needs and resources. In certain circumstances, LCH SA also would perform an ad hoc analysis of the existing stress testing scenarios, models, and underlying parameters and assumptions used in evaluating liquidity needs and resources. LCH SA would do so when
Section 6 of the Framework, titled Appendix, contains appendices to the main document. There are currently six appendices to the Framework. The Proposed Rule Change would revise Appendices two through five and add new Appendices seven and eight.
Appendix two, titled Members behaviour analysis, describes how LCH SA models the behavior of Clearing Members during a period of market stress. This appendix considers behaviors that could affect LCH SA's liquidity resources, such as replacing cash collateral with non-cash collateral, withdrawing excess collateral, and reducing positions (which in turn could reduce margin and guaranty fund requirements and therefore the financial resources available to LCH SA). Throughout this section the Proposed Rule Change would change relevant time horizons from five to seven days, consistent with the changes to main body of the Framework discussed above.
The Proposed Rule Change also would update the description of non-cash collateral that LCH SA cannot pledge at the BdF to obtain a liquidity line of credit. Appendix two currently describes this collateral as mainly Gilts and Central Bank Guarantees. The Proposed Rule Change would expand this list to include U.S. Treasuries, as well as securities denominated in Danish Krone, Norwegian Krone, Swedish Krona, Japanese Yen, Swiss Franc, Canadian Dollar, and Australian Dollar, because LCH SA cannot pledge such securities at BdF. Appendix two also currently notes that, although LCH SA cannot pledge this collateral at BdF, the use of this collateral by Clearing Members would not be material to LCH SA's liquidity resources. This is because, as currently described in Appendix two, this collateral represents a small percentage of total collateral, and LCH SA expects to limit use of this collateral. The Proposed Rule Change would revise this description to note that LCH SA has imposed concentration limits on collateral that it cannot pledge at BdF, rather than LCH SA expecting to limit the use of such collateral.
Appendix three, titled Reminder of SA's sources of liquidity and related risk drivers, is a table that describes, in summary form, LCH SA's sources of liquidity. For each source of liquidity, the table also describes risks that could affect the amount of liquidity that LCH SA can obtain for the source, as well as how LCH SA mitigates those risks. Here the Proposed Rule Change would change the name of LCH SA's interoperable CCP to Euronext. The Proposed Rule Change also would add an additional risk to one of LCH SA's liquidity sources. Currently the table lists non-cash collateral from Clearing Members as a source of liquidity because LCH SA may obtain liquidity with such collateral through investment transactions or by pledging Eligible Collateral at BdF. The Proposed Rule Change would note that a Clearing Member's ability to pledge non-cash collateral using a SPA is a risk to this liquidity source. This is a risk because LCH SA cannot use collateral deposited via a SPA to obtain liquidity, even if that collateral is Eligible Collateral.
Appendix four, titled Liquidity risk drivers synthesis by reports, is a table that describes, in summary form, LCH SA's liquidity needs. This table presents the liquidity needs according to three broad categories: (i) operational target (needs arising from LCH SA's business-as-usual operations); (ii) LCR (needs arising from Clearing Members' defaults); and (iii) Euronext LCR (needs arising from interoperating CCP's defaults). Here the Proposed Rule Change would change the name of LCH SA's interoperable CCP to Euronext and change the time horizon from five to seven days.
Appendix five, titled Liquidity risk monitoring reports, shows examples of the reports that LCH SA uses to monitor its liquidity. The Proposed Rule Change would update the layout of these examples to match the current versions used by LCH SA.
As noted, the Proposed Rule Change would add a new Appendix seven, which would be titled Stress scenarios list. It would contain a list of stress scenarios that LCH SA uses for each of its clearing services.
The Proposed Rule Change also would add a new Appendix eight, which would be titled Pseudo-code of settlement and market risk calculation. Appendix eight would explain the algorithm that LCH SA uses to calculate the settlement obligation driven liquidity requirements in the monitoring of the LCR and the resulting BdF liquidity raised by pledging the securities withdrawn from the settlement systems. This appendix would present the algorithm in pseudo-code format, meaning the appendix would show how the algorithm would look when programmed into a computer for calculation. This same algorithm would also be described in Section 4.2.5.1.1.1 and Section 4.2.5.1.1.2 of the Framework.
Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed rule change of a self-regulatory organization if it finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the organization.
Under Section 17A(b)(3)(F) of the Act, LCH SA's rules, among other things, must be “designed to promote the prompt and accurate clearance and settlement of . . . derivative agreements, contracts, and transactions . . . .”
LCH SA relies on the Framework to support its management of liquidity risk arising from a potential Clearing Member default, default of Euronext Clearing, and operational liquidity requirements. Managing such risks, such as through the maintenance of liquid resources sufficient to meet payment obligations, reduces the likelihood that LCH SA would fail to make payments when due, thereby avoiding disruptions to the settlement of transactions for which such payments are due. Thus, the Framework, as a rule of LCH SA, supports the prompt and
Certain of the changes would update and clarify existing aspects of the Framework. These include the updates to overall scope, purpose, and use of the Framework in Section 1. Throughout the Framework, the Proposed Rule Change also would update the name of LCH SA's interoperable CCP to Euronext Clearing. These updates and clarifications contribute to the effectiveness of the Framework as a tool supporting LCH SA's management of liquidity risk arising from a potential member default, default of Euronext Clearing, and operational liquidity requirements, which facilitates prompt and accurate clearance and settlement.
In addition to updating and clarifying the Framework, the Proposed Rule Change also would revise how LCH SA determines its liquidity sources and needs under the Framework. With respect to sources of liquidity, the Proposed Rule Change would require LCH SA to consider Clearing Members' ability to switch from depositing collateral using FTTAs to SPAs. Such switches could reduce the amount of liquidity that LCH SA is able to obtain when pledging Eligible Collateral at BdF because LCH SA cannot pledge any collateral deposited via SPAs. Similarly, the Proposed Rule Change would require LCH SA to consider stressed market prices when determining the amount of liquidity that it could obtain by pledging Eligible Collateral at BdF. The amount of liquidity that LCH SA could obtain is based on the value of the collateral at the time of the pledge, minus an applicable haircut, and potential stress market conditions could decrease the value of the collateral or increase the haircut.
With respect to LCH SA's liquidity needs, the Proposed Rule Change would prevent netting between Clearing Members of the same group. Eliminating netting potentially could increase the liquidity needs generated among a group of related Clearing Members. The Proposed Rule Change also would extend to seven days (from five days) the time horizon for which LCH SA must maintain liquidity resources sufficient to meet its liquidity requirements. Doing so could potentially increase the amount of LCH SA's liquidity requirements. Finally, the Proposed Rule Change would require that LCH SA consider the liquidity requirements generated by the expiration of physically settled stock futures, adding another potential liquidity need to LCH SA's existing liquidity needs.
These changes, taken together, would improve LCH SA's ability to determine the amount of its liquidity needs and the amount of its resources to satisfy those liquidity needs. More accurately determining the amount of LCH SA's liquidity needs and resources would thereby improve LCH SA's ability to control and quantify its liquidity risk. Control over and accurate measurement of liquidity risk is necessary to ensure that LCH SA's liquidity needs do not exceed its resources so that LCH SA can meet its payment obligations on time without disrupting settlement. Thus, the proposed changes to the Framework promote prompt and accurate clearance and settlement.
The Commission finds, therefore, that the Proposed Rule Change is consistent with the requirements of Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(7) requires LCH SA to establish, implement, maintain, and enforce written policies and procedures reasonably designed to effectively measure, monitor, and manage the liquidity risk that arises in or is borne by LCH SA, including measuring, monitoring, and managing its settlement and funding flows on an ongoing and timely basis, and its use of intraday liquidity.
Rules 17Ad-22(e)(7)(vi)(B) and (C)
On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the Act, and in particular, Section 17A(b)(3)(F) of the Act,
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to amend Interpretation and Policy .01 to Exchange Rule 1903, Continuing Education, to reopen the period by which eligible Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend Interpretation and Policy .01 to Exchange Rule 1903, Continuing Education, to provide eligible Members another opportunity to elect to reopen the period by which certain participants in the MQP will be able to complete their prescribed 2022 and 2023 continuing education content.
In 2021, the Financial Industry Regulatory Authority, Inc. (“FINRA”) implemented rule changes, which amended its Continuing Education (“CE”) Program requirements to, among other things, provide eligible individuals who terminate any of their representative or principal registration categories the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the MQP.
In 2023, FINRA amended FINRA Rule 1240.01, to provide Look-Back Individuals a second opportunity to elect to participate in the MQP (the “FINRA Second Enrollment Period”).
In response to FINRA's rule changes and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange implemented rule changes to align with FINRA's CE Program.
Exchange Rule 1903 also provided Look-Back Individuals with a second enrollment period, between September 18, 2023, and December 31, 2023 (the “Exchange Second Enrollment Period”). Exchange Rule 1903, Interpretation and Policy .01, requires that Look-Back Individuals who elect to participate in the MQP during the Exchange Second Enrollment Period complete any prescribed 2022 and 2023 MQP content by March 31, 2024.
FINRA recently submitted a proposal related to its CE Program (the “FINRA Rule Change”).
In the FINRA Rule Change, FINRA noted that it sent multiple reminders, including a March 16, 2024 email, to Look-Back Individuals who had enrolled in the MQP but had not completed their prescribed CE to remind them of the March 31, 2024 deadline. In the FINRA Rule Change, FINRA further noted that in the week leading up to the deadline, FINRA noticed that several thousand of those individuals were renewing their participation in the MQP for 2024 instead of completing their prescribed CE.
For similar reasons and to facilitate compliance with the Exchange's CE Program requirements by members of multiple exchanges, the Exchange is also proposing to amend its rules (
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.
The Exchange believes that reopening the period by which Look-Back Individuals will be able to complete their prescribed 2022 and 2023 CE content is appropriate under the circumstances. As FINRA noted in the FINRA Rule Change, Look-Back Individuals who had enrolled in the MQP in 2022 and 2023 but had not completed their prescribed 2022 and 2023 CE content by the March 31, 2024 deadline may have been confused, as described above. The Exchange believes that participation in the MQP reduces unnecessary impediments to requalification for these individuals without diminishing investor protection. In addition, the proposed rule change is consistent with other goals, such as the promotion of diversity and inclusion in the securities industry by attracting and retaining a broader and diverse group of professionals. The MQP also allows the industry to retain expertise from skilled individuals, providing investors with the advantage of greater experience among the individuals working in the industry.
Further, the Exchange believes the proposed amendments reduce the possibility of a regulatory gap between Exchange and FINRA rules, providing more uniform standards across the securities industry. The Exchange believes that the proposed rule change will bring consistency and uniformity with FINRA's recently amended CE Program, which will, in turn, assist members and their associated persons in complying with these rules and improve regulatory efficiency. The proposed rule changes make ministerial changes to the Exchange's CE rules to align them with the CE rules of FINRA, in order to prevent unnecessary regulatory burdens and to promote efficient administration of the rules.
The Exchange does not believe that 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 believes that the proposed rule change, which harmonizes its rules with the recent rule change adopted by FINRA, will reduce the regulatory burden placed on market participants engaged in trading activities across different markets. The Exchange believes that the harmonization of the CE program requirements across the various markets will reduce burdens on competition by removing impediments to participation in the national market system and promoting competition among participants across the multiple national securities exchanges.
Written comments were neither solicited nor received.
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 the 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 under Section 19(b)(2)(B)
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.
On May 16, 2024, Nasdaq ISE, LLC (“Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
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 Equities”) proposes to amend its Fees Schedule. 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 proposes to amend its fee schedule to amend the fees and increase the maximum cap for Dedicated Cores.
By way of background, the Exchange recently began to allow Users
The Exchange proposes to assess the following monthly fees for Users that wish to use Dedicated Cores and adopt a maximum limit. First, the Exchange proposes to provide up to two Dedicated Cores to all Users who wish to use Dedicated Cores, at no additional cost. For the use of more than two Dedicated Cores, the Exchange proposes to assess the following fees: $650 per Dedicated Core for 3-10 Dedicated Cores; $850 per Dedicated Core for 11-15 Dedicated Cores; and $1,050 per Dedicated Core for 16 or more Dedicated Cores. The proposed fees are progressive and the Exchange proposes to include the following example in the Fees Schedule to provide clarity as to how the fees will be applied. Particularly, the Exchange will provide the following example: if a User were to purchase 11 Dedicated Cores, it will be charged a total of $6,050 per month ($0 * 2 + $650 * 8 + $850 * 1). The Exchange also proposes to make clear in the Fees Schedule that the monthly fees are assessed and applied in their entirety and are not prorated. The Exchange notes the current standard fees assessed for BOE Logical Ports, whether used with Dedicated or shared CPU cores, will remain applicable and unchanged.
Since the Exchange currently has finite amount of physical space in its data centers in which its servers (and therefore corresponding CPU Cores) are located, the Exchange also proposes to prescribe a maximum limit on the number of Dedicated Cores that Users may purchase each month. The purpose of establishing these limits is to manage the allotment of Dedicated Cores in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an unlimited number of Dedicated Cores. The Exchange previously established a limit for Members of a maximum number of 20 Dedicated Cores and Sponsoring Members a limit of a maximum number of 8 Dedicated Cores for each of their Sponsored Access relationships.
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.
The Exchange believes the proposal is reasonable because the Exchange is offering any Users who wishes to utilize Dedicated Cores up to two Dedicated Cores at no additional cost.
The Exchange also believes that the proposed Dedicated Core fees are equitable and not unfairly discriminatory because they continue to be assessed uniformly to similarly situated users in that all Users who choose to purchase Dedicated Cores will be subject to the same proposed tiered fee schedule. Further all Users are entitled to up to 2 Dedicated Cores at no additional cost. The Exchange believes the proposed ascending fee structure is also reasonable, equitable and not unfairly discriminatory as it is designed so that firms that use a higher allotment of the Exchange's finite number of Dedicated Cores pay higher rates, rather than placing that burden on market participants that have more modest needs who will have the flexibility of obtaining Dedicated Cores at lower price points in the lower tiers. As such, the proposed fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the ascending fee structure reflects the (finite) resources consumed by the various needs of market participants—that is, the lowest Dedicated Core consuming Users pay the least, and highest Dedicated Core consuming Users pay the most. Other exchanges similarly assess higher fees to those that consume more Exchange resources.
The Exchange believes it is reasonable to limit the number of Dedicated Cores Users can purchase because the Exchange has a finite amount of space in its third-party data centers to accommodate CPU cores, including Dedicated Cores. The Exchange must also take into account timing considerations in procuring additional Dedicated Cores and related hardware such as servers, switches, optics and cables, as well as the readiness of the Exchange's data center to accommodate additional Dedicated Cores in the Exchange's respective Order Handler Cabinets. The Exchange has, and will continue to, monitor market participant demand and space availability and endeavor to adjust the limit if and when the Exchange is able to accommodate additional Dedicated Cores. The Exchange monitors its capacity and data center space and thus is in the best place to determine these limits and modify them as appropriate in response to changes to this capacity and space, as well as market demand. For example, since the launch of Dedicated Cores on February 26, 2024, the Exchange's affiliate Cboe EDGA has increased the prescribed maximum limit twice as a result of evaluating the demand relative to Dedicated Cores availability.
The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary in furtherance of the purposes of the Act because the proposed tiered fee structure will apply equally to all similarly situated Users that choose to use Dedicated Cores. As discussed above, Dedicated Cores are optional and Users may choose to utilize Dedicated Cores, or not, based on their views of the additional benefits and added value provided by utilizing a Dedicated Core. The Exchange believes the proposed fee will be assessed proportionately to the potential value or benefit received by Users with a greater number of Dedicated Cores and notes that Users may determine at any time to cease using Dedicated Cores. As discussed, Users can also continue to access the Exchange through shared CPU Cores at no additional cost. Finally, all Users will be entitled to two Dedicated Cores at no additional cost.
Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market, including competition for exchange memberships. Market Participants have numerous alternative venues that they may participate on, including 15 other equities exchanges, as well as off-exchange venues, where competitive products are available for trading. Indeed, participants can readily choose to submit their order flow to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
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 coment 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 (“Act”),
The Exchange proposes to adopt a new protocol, “Ouch to Trade Options” or “OTTO” and establish pricing for this new protocol.
The text of the proposed rule change is available on the Exchange's website at
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.
BX proposes to offer a new order entry protocol called OTTO. Today, BX Participants may enter orders into the Exchange through the “Financial Information eXchange” or “FIX.”
The OTTO protocol is a proprietary protocol of Nasdaq, Inc. The Exchange continues to innovate and modernize technology so that it may continue to compete among options markets. The ability to continue to innovate with technology and offer new products to market participants allows BX to remain competitive in the options space which currently has seventeen options markets and potential new entrants.
As proposed, OTTO would allow Participants and their Sponsored Customers
Only one order protocol is required for a BX Participant to submit orders into BX. Only BX Participants may utilize ports on BX. Any market participant that sends orders to a BX Participant would not need to utilize a port. The BX Participant may send all orders, proprietary and agency, through one port to BX. Participants may elect to obtain multiple ports to organize their business,
Participants may elect to enter their orders through FIX, OTTO, or both protocols, although both protocols are not necessary. Participants may prefer one protocol as compared to another protocol, for example, the ability to route may cause a Participant to utilize FIX and a Participant that desires to execute an order locally may prefer OTTO. Also, the OTTO Port offers lower latency as compared to the FIX Port, which may be attractive to Participants depending on their trading behavior. Nasdaq believes that the addition of OTTO will provide BX Participants with additional choice when submitting orders to BX.
While the Exchange has no way of predicting with certainty the amount or type of OTTO Ports market participants will in fact purchase, the Exchange anticipates that some Participants will subscribe to multiple OTTO Ports in combination with FIX Ports. The Exchange notes that Options Participants may use varying number of OTTO ports based on their business needs.
In connection with offering OTTO, the Exchange proposes to amend other rules within Options 3. Each amendment is described below.
BX proposes to amend Options 3, Section 7, Types of Orders and Quote Protocols. Specifically, BX proposes to amend Options 3, Section 7 (b)(2) that describes the Immediate-or-Cancel” or “IOC” order. Today, Options 3, Section 7(b)(2)(B) notes that an IOC order may be entered through FIX or SQF, provided that an IOC Order entered by a Market Maker through SQF is not subject to the Order Price Protection, the Market Order Spread Protection, or Size Limitation in Options 3, Section 15(a)(1), (a)(2), and (b)(2), respectively. The Exchange proposes to add “OTTO” to the list of protocols to note that an IOC order may also be entered through OTTO.
BX also proposes to amend the “DAY” order in Options 3, Section 7(b)(3) that currently provides that a Day order may be entered through FIX. With the addition of OTTO, a Day order may also be entered through OTTO.
BX also proposes to amend the “Good Til Cancelled” or “GTC” order which currently does not specify that a GTC order may be entered through FIX. GTC orders would only be able to be entered through FIX and not OTTO. The Exchange proposes to amend Options 3, Section 7(b)(4) to add a sentence to note that GTC orders may be entered through FIX.
BX proposes to amend Options 3, Section 8, Options Opening Process. BX proposes to amend Options 3, Section 8(l) that describes the Opening Process Cancel Timer. The Opening Process Cancel Timer represents a period of time since the underlying market has opened. If an option series has not opened before the conclusion of the Opening Process Cancel Timer, a Participant may elect to have orders returned by providing written notification to the Exchange. Today, these orders include all non-Good Til Cancelled Orders received over the FIX protocol. The Exchange proposes to add the OTTO protocol as well to the rule text language in that paragraph.
The Exchange proposes to amend the Options 3, Section 12, Crossing Orders. Specifically, the Exchange proposes to amend Customer Crossing Orders in Options 3, Section 12(a) that currently provides Public Customer-to-Public Customer Cross Orders are automatically executed upon entry provided that the execution is at or between the best bid and offer on the Exchange and (i) is not at the same price as a Public Customer Order on the Exchange's limit order book and (ii) will not trade through the NBBO. Public Customer-to-Public Customer Cross Orders must be entered through FIX. The Exchange proposes to remove the sentence that provides that Public Customer-to-Public Customer Cross Orders must be entered through FIX because they will be able to be entered through both FIX and OTTO.
The Exchange proposes to amend the Kill Switch at Options 3, Section 17. The Kill Switch provides Participants with an optional risk management tool to promptly cancel and restrict orders.
The Exchange proposes to renumber Options 3, Section 17(a)(i) and (ii) as (a)(1) and (2). Current Options 3, Section 17(a)(i) states, “If orders are cancelled by the BX Participant utilizing the Kill Switch, it will result in the cancellation of all orders requested for the Identifier(s). The BX Participant will be unable to enter additional orders for the affected Identifier(s) until re-entry has been enabled pursuant to section (a)(ii).” The Exchange proposes to instead provide, “A BX Participant may submit a request to the System through FIX or OTTO to cancel all existing orders and restrict entry of additional orders for the requested Identifier(s) on a user level on the Exchange.” With the addition of OTTO, the Exchange notes that both FIX and OTTO orders may be cancelled. Further, today, BX Participants utilize an interface to send a message to the Exchange to initiate a Kill Switch.
Finally, the Exchange proposes to amend proposed Options 3, Section 17(a)(2) to align to MRX's rule text by providing “Once a BX Participant initiates a Kill Switch pursuant to (a)(1) above . . .” in the first sentence. This amendment simply rewords the rule text without a substantive amendment to the rule text.
The Exchange proposes to amend Options 3, Section 18, Detection of Loss of Communication. The Exchange proposes to add OTTO to Options 3, Section 18 as OTTO would also be subject to this rule. Today, when the SQF Port or the FIX Port detects the loss of communication with a Participant's Client Application because the Exchange's server does not receive a Heartbeat message for a certain time period, the Exchange will automatically logoff the Participant's affected Client Application and automatically cancel all of the Participant's open quotes through SQF and open orders through FIX. Quotes and orders are cancelled across all Client Applications that are associated with the same BX Options Market Maker ID and underlying issues.
At this time, the Exchange proposes to permit orders entered through OTTO to be cancelled similar to FIX orders when the Exchange's server does not receive a Heartbeat message for a certain time period. The Exchange is proposing to amend Options 3, Section 18 to also rearrange the rule text to add the word “Definitions” next to “a” and move the rule text in current “a” to “b” and re-letter the other paragraphs accordingly. Also, the Exchange proposes to define “Session of Connectivity” for purposes of this rule to mean each time the Participant connects to the Exchange's System. Further, each new connection, intra-day or otherwise, is a new Session of Connectivity. The Exchange proposes to use the new definition throughout Options 3, Section 18.
Similar to FIX, when the OTTO Port detects the loss of communication with a Participant's Client Application because the Exchange's server does not receive a Heartbeat message for a certain time period, the Exchange will automatically logoff the Participant's affected Client Application and automatically cancel all of the Participant's open orders through OTTO. Orders would be cancelled across all Client Applications that are associated with the same BX Options Market Maker ID and underlying issues. The Exchange proposes to update Options 3, Section 18 to provide in proposed Options 3, Section 18(a)(3) that the OTTO Port is the Exchange's proprietary System component through which Participants communicate their orders from the Client Application. Further, the Exchange would note in proposed Options 3, Section 18(c) that when the OTTO Port detects the loss of communication with a Participant's Client Application because the Exchange's server does not receive a Heartbeat message for a certain time period (“nn” seconds), the Exchange will automatically logoff the Participant's affected Client Application and if the Participant has elected to have its orders cancelled pursuant to proposed Section 18(f), automatically cancel all orders. Proposed Options 3, Section 18(f) would provide that the default period of “nn” seconds for OTTO Ports would be fifteen (15) seconds for the disconnect and, if elected, the removal of orders. A Participant may determine another time period of “nn” seconds of no technical connectivity, as required in proposed paragraph (c), to trigger the disconnect and, if so elected, the removal of orders and communicate that time to the Exchange. The period of “nn” seconds may be modified to a number between one hundred (100) milliseconds and 99,999 milliseconds for OTTO Ports prior to each Session of Connectivity to the Exchange. This feature may be disabled for the removal of orders, however the Participant will be disconnected.
Proposed Options 3, Section 18(f)(1) would provide that if the Participant changes the default number of “nn” seconds, that new setting shall be in effect throughout the current Session of Connectivity and will then default back to fifteen seconds. The Participant may change the default setting prior to each Session of Connectivity. Finally, as proposed in Options 3, Section 18(f)(2), if the time period is communicated to the Exchange by calling Exchange operations, the number of “nn” seconds selected by the Participant will persist for each subsequent Session of Connectivity until the Participant either contacts Exchange operations by phone and changes the setting or the Participant selects another time period through the Client Application prior to the next Session of Connectivity. The trigger for OTTO Ports is event and Client Application specific. The automatic cancellation of the BX
BX proposes to amend its Pricing Schedule at Options 7, Section 3, BX Options Market—Ports and other Services, to assess a port fee for the new OTTO protocol.
The Exchange proposes to assess an OTTO Port Fee of $650 per port, per month, per account number. OTTO would be an additional order entry protocol for BX Participants in addition to FIX, which is currently utilized by BX Participants to enter orders into BX. The Exchange currently assesses a FIX Port Fee of $650 per port, per month, per account number.
Only BX Participants may utilize ports on BX. Any market participant that sends orders to a Participant would not need to utilize a port. The BX Participant can send all orders, proprietary and agency, through one port to BX. Participants may elect to obtain multiple account numbers to organize their business, however only one account number and one port for orders is necessary for a BX Participant to trade on BX. All other order entry ports offered by BX are not required for a BX Participant to meet its regulatory obligations. BX Participants utilizing the first FIX Port offered at no cost do not need to purchase an OTTO Port to meet their regulatory obligations.
Further, while only one FIX protocol is necessary to submit orders into BX, Participants may choose to purchase a greater number of order entry ports, depending on their business model.
The Exchange also proposes to add OTTO and Disaster Recovery Ports to the list of ports that are capped at $7,500 on BX. The Exchange notes that BX currently does not assess BX Participants for Disaster Recovery Ports.
Only one FIX order protocol is required for a BX Participant to submit orders into BX and to meet its regulatory requirements.
The proposed fee for BX OTTO is identical to the fee offered for OTTO, an identical protocol, on MRX.
The Exchange will implement this rule change on or before December 20, 2025. The Exchange will announce the operative date to Participants in an Options Trader Alert.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange's proposal to adopt OTTO is consistent with the Act because OTTO would provide BX Participants with an alternative protocol to submit orders to the Exchange. As proposed, BX would offer the first OTTO Port at no cost to submit orders into BX, which would remove impediments to and perfect the mechanism of a free and open market.
With the addition of OTTO, a BX Participant may elect to enter their orders through FIX, OTTO, or both protocols, although both protocols are not necessary. Each BX Participant would receive one OTTO Port at no cost, thereby promoting just and equitable principles of trade. The Exchange notes that Participants may prefer one order protocol as compared to another order protocol, for example, the ability to route an order may cause a Participant to utilize FIX and a Participant that desires to execute an order locally may utilize OTTO. Also, the OTTO Port offers lower latency as compared to the FIX Port, which may be attractive to Participants depending on their trading behavior. With this proposal, BX Participant may organize their business as they chose with the ability to send orders to BX at no cost. The proposed new OTTO protocol is identical to the OTTO protocol offered today on ISE, GEMX, MRX.
In connection with offering OTTO, the Exchange proposes to amend other rules within Options 3 to make clear where the FIX and OTTO protocols may be utilized. IOC Orders may be entered through FIX, OTTO or SQF. A Day order may be entered through FIX or OTTO. A GTC order may only be entered through FIX. A Public Customer-to-Public Customer Cross Order may be entered through FIX or OTTO. Other processes such the Opening Cancel Timer would impact FIX and OTTO equally.
The Exchange's proposal to amend the Kill Switch at Options 3, Section 17 to align its rule text in proposed Options 3, Section 17(a) and (a)(2) with MRX's Options 3, Section 17 is consistent with the Act because it does not substantively amend the functionality beyond removing the group level cancel capability. The Exchange's proposal to amend proposed Options 3, Section 17(a)(2) to specify that FIX and OTTO orders may be cancelled is consistent with the Act as it will make clear that all orders entered on BX may be purged through the Kill Switch. Finally, allowing BX Participants to send a mass purge request through FIX or OTTO, in lieu of an interface, is consistent with Act and the protection of investors and the general public because it will enable BX Participants to initiate the Kill Switch more seamlessly without the need to utilize a separate interface. Further, utilizing the order protocols directly, in lieu of the interface, will align the Kill Switch functionality to that of ISE, GEMX and MRX. When initiating a cancellation of their orders by sending a mass purge request through FIX or OTTO, Participants will be able to submit a Kill Switch request on a user level only because the purge will be specific to a FIX or OTTO user for these ports.
Finally, the Detection of Loss of Communication would apply equally to FIX and OTTO. The Exchange believes that its proposal is consistent with the Act and protects investors as the Exchange is making clear what types of order types and other mechanisms may utilize OTTO. Today, BX Participants utilize FIX to enter their orders. Despite the fact that OTTO would not be available for the GTC Time-In-Force modifier, the Exchange notes that one OTTO Port is being provided to Participants at no cost. Today, FIX is the only manner in which to enter orders into BX.
Only one FIX order protocol is required for a BX Participant to submit orders into BX and to meet its regulatory requirements
The Exchange proposes to offer each Participant the first FIX Port at no cost to meet their regulatory requirements. As noted above, Participants may freely choose to rely on one or many ports, depending on their business model.
The Exchange's proposal is reasonable, equitable and not unfairly discriminatory as BX is providing BX Participants the first FIX Port to submit orders at no cost. These ports, which are offered at no cost, would allow a BX Participant to meet its regulatory requirements. All other ports offered by BX are not required for a BX Participant to meet its regulatory obligations. Therefore, for the foregoing reasons, it is reasonable to assess no fee for the first FIX Port obtained by a Participant as a BX Participant is able to meet its regulatory requirements with these ports. Additionally, the proposal offers a free FIX Port to BX Participants that already subscribe to FIX, thereby reducing fees for these market participants.
Further it is equitable and not unfairly discriminatory to assess no fee for the first FIX Port to Participants as all BX Participants would be entitled to the first FIX Port at no cost. With this proposal, BX Participants may organize their business in such a way as to submit orders to BX at no cost.
The Exchange's proposal to assess $650 per port, per month, per account number for an OTTO Port is reasonable because OTTO is not required for a Participant to meet its regulatory requirements. The Exchange is offering the first FIX Port at no cost to submit orders to BX. In addition to the FIX Port, all Participants may elect to purchase OTTO to submit orders to BX. BX Participants utilizing the FIX Port, which is offered at no cost, do not need to utilize OTTO.
Finally, in the event that a BX Participant elects to subscribe to multiple ports, the Exchange offers a monthly cap beyond which a Participant would be assessed no additional fees for the month and proposes to add OTTO to the monthly cap. BX proposes to cap FIX Port, OTTO Port, CTI Port, FIX Drop Port, BX Depth Port, BX TOP Port Fees, and all Disaster Recovery Port Fees
The proposed BX OTTO fee is the same as the OTTO Port fee on MRX, for the identical port. Additionally, MRX offers one free FIX Port to its Members and assesses the same FIX Port fee of $650 per port, per month, per account number as BX assesses today for a FIX Port. MRX offers its Members a free FIX Disaster Recovery Port.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The OTTO protocol is a proprietary protocol of Nasdaq, Inc. The Exchange continues to innovate and modernize technology so that it may continue to compete among options markets. The ability to continue to innovate with technology and offer new products to market participants allows BX to remain competitive in the options space which currently has seventeen options markets and potential new entrants. If BX were unable to offer and price new protocols, it would result in an undue burden on competition as BX would not have the ability to innovate and modernize its technology to compete effectively in the options space. BX's ability to offer OTTO will enable it to compete with other options markets that provide its market participants a choice as to the type of order entry protocols that may be utilized. BX's ability to offer and price new and innovative products and continue to modernize its technology, similar to other options markets, supports intermarket competition.
The Exchange's proposal to adopt an OTTO Protocol does not impose an undue burden on intramarket competition. Today, all BX Participants utilize FIX to send orders to BX. The Exchange would offer each BX Participant the first FIX Port at no cost with this proposal. With the addition of OTTO Ports, a BX Participant may elect to enter their orders through FIX, OTTO, or both protocols, although both protocols are not necessary. The Exchange's proposal to adopt an OTTO Protocol does not impose an undue burden on intermarket competition as other options exchanges offer multiple protocols today such as ISE, GEMX and MRX.
The Exchange's proposal to amend other rules within Options 3 to make clear where the FIX and OTTO protocols may be utilized does not impose an undue burden on intramarket competition as these rules will apply in the same manner to all Participants. The Exchange's proposal to amend other rules within Options 3 to make clear where the FIX and OTTO protocols may be utilized does not impose an undue burden on intermarket competition as other options exchanges may elect to utilize their order entry protocols in different ways.
Nothing in the proposal burdens inter-market competition because BX's proposal to offer the first FIX Port for free is similar to MRX's FIX Port offering and allows BX Participants to meet their regulatory obligations. BX's offering would permit Participants the ability to submit orders to BX at no cost. OTTO Ports are not required for BX Participants to meet their regulatory obligations.
Nothing in the proposal burdens intra-market competition because the Exchange would uniformly assess the port fees to all Participants, as applicable, and would uniformly apply monthly caps. The proposed fees are identical to fees recently approved on MRX.
To the extent that the Commission does not permit BX to assess the same identical fees for the same identical products on its market, the Commission is creating a burden on competition by allowing MRX to assess fees and offer a product that would otherwise be unavailable on BX. Additionally, the proposal offers a free FIX Port to BX Participants that already subscribe to FIX, the only order port currently offered on BX, thereby reducing fees for these market participants. Each SRO should be permitted to mirror fees assessed by another SRO to further competition among the exchanges.
No written comments were either solicited or received.
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)(iii) of the Act
At any time within 60 days of the filing of the 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 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 (“Act” or “Exchange Act”)
Cboe BZX Exchange, Inc. (“BZX” or the “Exchange”) is filing with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change to exempt closed-end management investment companies registered under the Investment Company Act of 1940 from the annual meeting of Shareholders requirement set forth in Exchange Rule 14.10(f). 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.
This Amendment No. 1 to SR-CboeBZX-2024-055 amends and replaces in its entirety the proposal as originally submitted on June 25, 2024. The Exchange submits this Amendment No. 1 in order to clarify certain points and add additional details to the proposal.
Exchange Rule 14.10(f) requires that each Company
Generally, the main purpose of an annual meeting is to allow Shareholders to elect the directors who are responsible for the oversight of the company and its strategic direction. The annual meeting requirement dates back to 1909 and derives from a provision included in individually negotiated listing agreements on New York Stock Exchange (“NYSE”).
The listing rules of exchanges, including the Exchange, are the only authority that require listed Closed-End Funds to hold annual shareholder meetings. As such, the Exchange proposes to eliminate such requirement for the reasons set forth below.
Although the annual Shareholder meeting requirement dates back to 1909, the requirement was not memorialized in the 1940 Act. The 1940 Act is generally designed to protect the interests of Shareholders with respect to all critical aspects of the structure and operation of a fund. Nonetheless, when Congress considered requiring that registered investment companies hold annual meetings it declined to adopt the requirement.
While the 1940 Act does not require an annual Shareholder meeting, it otherwise provides various mechanisms designed to protect the interest of Closed-End Fund Shareholder interests.
Like other types of corporations, trusts, or partnerships, an investment company must be operated for the benefit of its owners. Unlike most business organizations, however, investment companies are typically organized and operated by an investment adviser that is responsible for the day-to-day operations of the fund. In most cases, the investment adviser is separate and distinct from the fund it advises, with primary responsibility and loyalty to its own Shareholders. Because the structure of a fund differs from a company, the board of directors plays an important role in fund governance by overseeing the performance of service providers that run the fund's day-to-day operations (including the fund's adviser) and monitoring for potential conflicts of interests.
The 1940 Act protects Closed-End Fund Shareholders by preserving their ability to elect directors who are responsible for the oversight of the fund. Specifically, the 1940 Act requires a Closed-End Fund to hold a Shareholder meeting in two instances: (1) to elect the initial board of directors; and (2) to fill all existing vacancies on the board if Shareholders have elected less than a majority of the board. Further, the 1940 Act requires that Shareholders fill any director vacancies if they have elected less than two-thirds of the directors holding office.
The Exchange believes these provisions are designed to provide Shareholders with a say on fund management while also protecting Shareholders from ceding control of an investment company to a new board without any Shareholder notice or action. Through these requirements, the Exchange believes the 1940 Act ensures that fund Shareholders retain the direct ability to meet and determine important corporate governance decisions when, as Congress determined, they are appropriate. In the Exchange's view, this reflects an important distinction from operating companies, who are not subject to these requirements under the 1940 Act, and whose Shareholders do not have these rights under federal securities laws.
Given the structure of investment companies, conflicts of interest can arise because the interest of the investment adviser is to maximize its own profits for the benefit of its owners, which may conflict with its duty to act in the best interests of the investment company and its Shareholders. Therefore, the board of directors, and particularly “independent directors”
To further protect Shareholder interests, the 1940 Act also requires that a majority of independent directors approve significant actions, especially those that involve a potential conflict of interest such as approval of the investment advisory agreement between
• Approval of advisory agreement (Section 15);
• Approval of underwriting agreement (Section 15);
• Selection of independent public accountant (Section 32);
• Acquisition of securities by a fund from an underwriting syndicate of which the fund's adviser or certain other affiliates are members (Rule 10f-3(h));
• The purchase or sale of securities between investment companies that have the same investment adviser (Rule 17a-7(e));
• Mergers or asset acquisitions involving investment companies that have the same investment adviser (Rule 17a-8(a));
• Use of an affiliated broker-dealer to effect portfolio transactions on a national securities exchange (Rule 17e-1(b)); and
• Approval of the fund's fidelity bond coverage (Rule 17g-1(d)).
The Exchange notes that in in certain circumstances the SEC has observed independent directors can provide greater protection to Shareholders than an annual shareholder vote. For example, when the SEC adopted Rule 32a-4 under the 1940 Act to allow a fund to avoid seeking ratification of the fund's independent public accountant at annual meetings it stated:
Section 32(a)(2) of the Act requires that the selection of a fund's independent public accountant be submitted to shareholders for ratification or rejection. New rule 32a-4 exempts a fund from this requirement if the fund has an audit committee consisting entirely of independent directors to oversee the fund's auditor. The new rule could provide significant benefits to shareholders. Many believe shareholder ratification of a fund's independent auditor has become a perfunctory process, with votes that are rarely contested. As a consequence, we believe that the ongoing oversight provided by an independent audit committee can provide greater protection to shareholders than shareholder ratification of the choice of auditor.
In addition to Shareholder vote requirements for approving certain measures, the 1940 Act further protects Shareholders by explicitly requiring investment companies to obtain Shareholder approval for most material governance or policy changes. Specifically, the following types of changes require Shareholder approval:
• A new investment management agreement or a material amendment to an investment management agreement (Section 15);
• A change from closed-end to open-end status, or vice versa (Section 13);
• A change from diversified company to non-diversified company (Section 13);
• A change in a policy with respect to borrowing money, issuing senior securities, underwriting securities that other persons issue, purchasing or selling real estate or commodities or making loans to other persons, except in each case in accordance with the recitals of policy contained in its registration statement in respect thereto (Section 13);
• A deviation from a policy in respect of concentration of investments in any particular industry or fundamental investment policy (Section 13); and
• A change in the nature of the investment company's business so as to cease to be an investment company (Section 13).
The 1940 Act Shareholder vote to approve such changes requires the following:
Given this, the voting standard under (A) above requires the fund to meet a de facto quorum of at least 50 percent of all outstanding shares to even hold the vote, and to pass the vote the fund must receive an affirmative vote of 67 percent of the shares present. Alternatively, the standard under (B) above requires a majority of all outstanding voting securities. The Exchange believes the voting standard for investment companies is thus higher than most standard operating companies and illustrates the 1940 Act's strong protections for Shareholders.
Closed-End Funds are the only form of registered investment company listed on the Exchange required to hold annual Shareholder meetings under Exchange Rules. Specifically, the Exchange recently changed its rules to provide that Derivative Securities
Rule 14.10(e) provides for the exemptions from the corporate governance rules afforded to certain types of companies. Specifically, Rule 14.10(e)(1)(E) sets forth exemptions from the corporate governance rules specifically applicable to management investment companies. The Exchange proposes to adopt Rule 14.10(e)(1)(E)(iv) which would provide that management investment companies that are Closed-End Funds, as defined in Rule 14.8(a), are exempt from the requirements relating to Meetings of Shareholders (as
The Exchange believes the proposed rule change is consistent with the Exchange Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Exchange Act.
The Exchange believes that the proposal protects investors and the public interest because it exempts Closed-End Funds from the burdensome annual Shareholder meeting requirement, which the Exchange believes is unnecessary given the investor protections afforded under the 1940 Act. Specifically, the Exchange believes that because the 1940 Act preserves Shareholder ability to elect Directors, requires Independent Directors to approve significant actions, and requires a Shareholder vote on material governance and policy changes, the Exchange's requirement to hold an annual Shareholder meeting is unnecessary. The Exchange further believes that because no other registered investment companies listed on the Exchange are required to hold an annual Shareholder meeting, there is not a compelling reason for Closed-End Funds to be subject to such a requirement.
The Exchange also believes amending Rule 14.10 to explicitly provide that Closed-End Funds are exempt from the annual Shareholder meeting requirement are designed to promote transparency and clarity in the Exchange's Rules. The Exchange believes that with these changes, Rule 14.10 would clearly provide that Closed-End Funds are exempt from the annual Shareholder meeting requirements required under Rule 14.10(f).
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 Exchange Act. The purpose of the proposal is to eliminate the burdensome and unnecessary annual Shareholder meeting requirement for Closed-End Funds and would apply equally to all similarly situated funds listed on the Exchange. Other listing venues can adopt similar rules if they so desire. As such, the Exchange does not believe that the proposal imposes any burden on competition.
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, as modified by Amendment No. 1, 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.
This is a notice of an Administrative declaration of a disaster for the State of Oklahoma dated 07/03/2024.
Issued on 07/03/2024.
Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be submitted online using the MySBA Loan Portal
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 20417B and for economic injury is 204180.
The States which received an EIDL Declaration are Kansas, Oklahoma, Texas.
Small Business Administration.
30-Day notice.
The Small Business Administration (SBA) is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act and OMB procedures, SBA is publishing this notice to allow all interested member of the public an additional 30 days to provide comments on the proposed collection of information.
Submit comments on or before August 14, 2024.
Send all comments to Gregorius Suryadi, Senior Financial and Loan Specialist, Office of Financial Assistance, Small Business Administration, Washington, DC 20416.
Gregorius Suryadi, Senior Financial and Loan Specialist, 202-205-6806,
The Small Business Investment Act authorizes SBA to guarantee a debenture issued by a Certified Development Company (CDC). The proceeds from each debenture are used to fund loans to eligible small business concerns (“504 loans”). 15 U.S.C. 697(a). The Small Business Act and the Small Business Investment Act mandate that all guaranteed loans provided by the SBA to small business concerns (SBCs) must have a reasonable assurance of ability to repay. See 15 U.S.C. 636(a) (6) and 687(f); see also 13 CFR 120.150. The information collections described below—SBA Form 1244 is part of the application process for a 504 loan. SBA issued Information Notice under control number 5000-20056 on September 30,2020 for the retirement of Form 2450.
Additionally, in accordance to the National Defense Authorization Act (NDAA)/Small Business Runway Extension Act (SBREA) for Fiscal Year 2022 rule, the SBA will use its administrative discretion to permit loan applicants to choose between 3 years and 5 years for receipts-based size standards, and from 12 months to 24 months for employee-based size standards. (15 U.S.C. 632(a)(2))
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
The information collected by this form is used to review the eligibility of the small business concern (SBC) for SBA financial assistance; the creditworthiness and repayment ability of the SBC; and the terms and conditions of the 504 loan for which the SBC is applying.
SBA has established a streamlined loan application processing procedure known as the Abridged Submission Method (ASM). Under this process, the CDCs are required to collect and retain all exhibits to SBA Form 1244 but are only required to submit selective documents. CDCs using the non-ASM method are required to submit all documents and exhibits required for Form 1244.
The burden estimates (based on the experience of the CDCs and SBA field offices) of the burden hours imposed by use of these forms, including exhibits, are as follows:
There are 200 CDCs affected by the information collection. The total number of small business concerns that will annually respond to Form 1244 is approximately 7,119 based on the average submission of applications submitted from CDCs over the past FY using both the ASM and non-ASM methods. This is a total of 7,119 respondents. Burden hours are 2.25 hours for PCLP Loan and ALP Express Loan, 2.5 hours for ASM, and 3.5 hours for non-ASM submissions.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the State of Michigan dated 07/08/2024.
Issued on 07/08/2024.
Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be submitted online using the MySBA Loan Portal
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 20331C and for economic injury is 203320.
The State which received an EIDL Declaration is Michigan.
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 September 13, 2024.
You may submit comments by any of the following methods:
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You must include the DS form number (if applicable), information collection title, and the OMB control number in the email subject line.
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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 Secretary of State is authorized to issue U.S. passports under 22 U.S.C. 211a
Passport bearers may submit the form on the Department of State's website,
Pursuant to the authority vested in the President under the Trade Act of 1974, as amended, Public Law 93-618, 88 Stat. 1978 (hereinafter “the Act”), and assigned to the Secretary of State by virtue of section 1(a) of Executive Order 13346 of July 8, 2004, and delegated by Department of State Delegation of Authority 513, of April 7, 2021, I determine, pursuant to section 402(d)(1) of the Act, 19 U.S.C. 2432(d)(1), that the further extension of the waiver authority granted by section 402 of the Act will substantially promote the objectives of section 402 of the Act. I further determine that continuation of the waiver applicable to Turkmenistan will substantially promote the objectives of section 402 of the Act.
This Determination shall be published in the
Surface Transportation Board.
Notice of public hearing.
The Surface Transportation Board (Board) will hold a public hearing on September 16 and 17, 2024, to gather information about recent trends and strategies for growth in the freight rail industry. The Board requests the attendance of executive-level officials from the BNSF Railway Company, Canadian National Railway Company, Canadian Pacific Kansas City Limited, CSX Transportation, Inc., Norfolk Southern Railway Company, and Union Pacific Railroad Company (collectively, “Class I railroads”). The Board also invites and welcomes testimony from industry analysts, other rail carriers, rail customers, rail suppliers, labor organizations, and other interested parties who can contribute to the Board's understanding of how the industry has grown and intends to grow in the future.
The hearing will be held on September 16 and 17, 2024, beginning at 9:30 a.m. ET each day, in the Hearing Room of the Board's headquarters and will be open for public observation. The hearing will also be available for public viewing on YouTube. Any person wishing to speak at the hearing must file with the Board a notice of intent to participate (identifying the party, proposed speaker, and amount of time requested) no later than August 14, 2024. In addition, written testimony from hearing participants, and written comments by any other interested persons, must be submitted by August 16, 2024
The hearing will be held in the Hearing Room of the Board's headquarters, located at 395 E Street SW, Washington, DC 20423-0001. All filings must be submitted via e-filing on the Board's website at
Jonathon Binet at (202) 245-0368. If you require an accommodation under the Americans with Disabilities Act, please call (202) 245-0245.
Freight rail is critically important to the nation's economy, and the Board has an interest in the health and growth of the industry and the need for rail customers to move their goods efficiently and reliably. On the subject of freight rail industry growth, while the Board recognizes that some shifts in volume may not be primarily within the control of rail carriers, the Board has observed that over the past ten years carload volumes have not grown, and have in fact decreased.
The Board will hold a public hearing to explore these topics on September 16 and 17, 2024, beginning at 9:30 a.m. ET each day, at its headquarters in Washington, DC. In addition to requesting the attendance of executive-level officials from the Class I railroads, the Board invites and welcomes testimony from industry analysts, other rail carriers, rail customers, rail suppliers, labor organizations, and other interested parties. Participation at the hearing will be limited to those who file notices of intent to participate, and the
1. A public hearing will be held on September 16 and 17, 2024, beginning at 9:30 a.m. ET each day, in the Hearing Room of the Board's headquarters, located at 395 E Street SW, Washington, DC 20423-0001.
2. By August 14, 2024, any person wishing to speak at the hearing shall file with the Board a notice of intent to participate identifying the party, the proposed speaker(s), and the amount of time requested.
3. Written testimony from hearing participants and written comments from any other interested persons must be filed by August 16, 2024.
4. Filings will be posted to the Board's website and need not be served on any hearing participants or other commenters.
5. This decision is effective on its service date.
6. This decision will be published in the
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Federal Aviation Administration (FAA), Department of Transportation.
Notice of public meeting.
This notice announces a meeting of the NextGen Advisory Committee (NAC).
The meeting will be held on August 22, 2024, from 10:00 a.m.-1:00 p.m. ET. Requests to attend the meeting virtually must be received by August 15, 2024. Requests for accommodations for a disability must be received by August 15, 2024. Written materials requested to be reviewed by NAC Members before the meeting must be received no later than August 15, 2024.
The meeting will be held at the Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591, with a virtual option. Virtual meeting information will be provided on the NAC internet website at least one week in advance of the meeting. Information on the NAC, including copies of previous meeting minutes, is available on the NAC internet website at
Kimberly Noonan, NAC Coordinator, U.S. Department of Transportation, at
The Secretary of Transportation established the NAC under agency authority in accordance with the provisions of the Federal Advisory Committee Act, as amended, Public Law 92-463, 5 U.S.C. ch. 10, to provide independent advice and recommendations to the FAA and to respond to specific taskings received directly from the FAA. The NAC recommends consensus-driven advice for FAA consideration relating to Air Traffic Management System modernization.
At the meeting, the agenda will cover the following topics:
The detailed agenda will be posted on the NAC internet website at least one week in advance of the meeting.
The meeting is open to the public. Members of the public who wish to attend are asked to register via email by submitting their full legal name, country of citizenship, contact information (telephone number and email address), name of their industry association or applicable affiliation, and if they would like to attend the meeting in person or virtually. Please email this information to the email address listed in the
Only NAC Members, NAC working group members, and FAA staff who are providing briefings will have the ability to speak. All other attendees will be able to listen only.
The U.S. Department of Transportation is committed to providing equal access to this meeting for all participants. If you need alternative formats or services because of a disability, please contact the person listed in the
Any member of the public may present a written statement to the committee at any time. Written statements submitted by the deadline will be provided to the NAC members before the meeting. Written statements must be submitted to the person listed under the heading
Federal Highway Administration (FHWA), DOT.
Notice of request for reinstatement of a previously approved information collection.
The FHWA has forwarded the information collection request described in this notice to the Office of Management and Budget (OMB) to reinstate an information collection. We are required to publish this notice in the
Please submit comments by August 14, 2024.
You may submit comments identified by DOT Docket ID Number 0052 by any of the following methods:
Mr. Paul Foundoukis, (785) 273-2655, Department of Transportation, Federal Highway Administration, Highway Systems Performance (HPPI-20), Office of Highway Policy Information, Office of Policy & Governmental Affairs, 1200 New Jersey Avenue SE, Washington, DC 20590. Office hours are from 7:30 a.m. to 4 p.m., Monday through Friday, except Federal holidays.
We published a
There were no comments received.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of Funding Opportunity (NOFO or Notice), Assistance Listing (formerly CFDA) #20.324.
This Notice details the application requirements and procedures to obtain grant funding for eligible projects under the Restoration & Enhancement (R&E) Grant Program for Fiscal Years (FY) 2021-2024. This Notice solicits applications for the R&E Grant Program with funds made available by the following: Consolidated Appropriations Act, 2021, the Infrastructure Investment and Jobs Act (IIJA), and additional carryover funding from Consolidated Appropriations Act, 2019 and Further Consolidated Appropriations Act, 2020. The opportunity described in this Notice is made available under Assistance Listings Number 20.324, “Restoration & Enhancement Grant Program.”
Applications for funding under this solicitation are due no later than 11:59 p.m. Eastern Time (ET), September 30, 2024. Applications for funding received after 11:59 p.m. ET on September 30, 2024 will not be considered for funding. Incomplete applications will not be considered for funding. Applications that do not adequately address the information requested may be considered incomplete. Adequacy of information provided will also be considered in evaluating the responsiveness to the evaluation criteria. See Section D of this Notice for additional information on the application and submission requirements and Section E of this Notice for additional information on review of applications.
Applications must be submitted via
For further information concerning this notice, please contact the FRA NOFO Support program staff via email at
The purpose of the R&E Grant Program (“Program” or “R&E Program”) is to provide financial assistance for Initiating, Restoring, or Enhancing Intercity Rail Passenger Transportation operations as authorized under 49 U.S.C. 22908. Funding for the Program under this NOFO is made available in the following: Consolidated Appropriations Act, 2021, Div. L, Tit. I, Public Law 116-260; IIJA, 2021, Public Law 117-58 (November 15, 2021); and carryover funding from Consolidated Appropriations Act, 2019, Div. G, Tit. I, Public Law 116-6 and Further Consolidated Appropriations Act, 2020, Div. H, Tit. I, Public Law 116-94. FRA will consider applications that are consistent with the priorities in 49 U.S.C. 22908(d). The opportunities described in this notice are made available under Assistance Listing 20.324, “Restoration and Enhancement.”
The Program plays a vital role in the success of Intercity Passenger Rail Service by offsetting initial operating losses while the new or expanded Services build their ridership and Revenue base. As experienced around the world and on the Amtrak network, new Intercity Passenger Rail Service and frequencies do not realize their longer-term ridership/Revenue potential immediately upon Initiating operations. The R&E program provides the greatest support in the first years of operation, and as ridership and Revenue grows over the first six years of operations, R&E funding is gradually reduced.
The U.S. Department of Transportation (“USDOT” or “DOT” or “Department”) seeks to fund projects that advance the Administration Priorities (also known as USDOT Strategic Goals) of safety, equity, climate change and sustainability, workforce development, job quality, and wealth creation, as described in Section E as well as the USDOT Strategic Plan, Research, Development and Technology Strategic Plan
Section E, which outlines the grant selection criteria, describes the process for selecting projects that further these goals. Section F(3) describes progress and performance reporting requirements for selected projects.
This section describes significant changes from the prior NOFO,
• The more substantive changes to 49 U.S.C. 22908 resulting from IIJA section 22304 include the following:
○ Definition of “Applicant” now includes a federally recognized Indian Tribe;
○ Definition of “Operating Assistance” added for Routes subject to section 209 of the Passenger Rail Investment and Improvement Act of 2008 (Pub. L. 110-432) (PRIIA);
○ Priorities include Routes selected under the Corridor Identification and Development Program and operated by Amtrak;
○ Funding plan requirements for initial capital and Operating Costs must now cover the first six years of operation, and, to the extent necessary, capital and Operating Costs after the first six years of operation;
○ Grant Award Term Limits are extended so R&E grants for any individual Route or Service may not provide funding for more than six years; and,
○ Maximum funding of projected Net Operating Costs may not exceed the following for each Year of Service: (1) 90 percent for the first Year of Service; (2) 80 percent for the second Year of Service; (3) 70 percent for the third Year of Service; (4) 60 percent for the fourth Year of Service; (5) 50 percent for the fifth Year of Service; and (6) 30 percent for the sixth Year of Service.
• FRA made changes to
• Prior R&E Program grant selections: Section B(2) describes award limits for projects selected under the FY 2017-2020 R&E Program. Section D(2)(a)(iii) provides direction to applicants for additional funding for the same Service on the same Route.
• Additional guidance on timing of incurrence of pre-award costs.
• Each applicant must include information that explains and supports its authority to undertake the operations activities in the proposed project, either by itself or through agreement, if selected for an award.
• Changes to applicability of written agreements required under 49 U.S.C. 22905(c)(1).
Terms defined in this section are capitalized throughout this NOFO.
a. “Commuter Rail Passenger Transportation” means short-haul rail passenger transportation in metropolitan and suburban areas usually having reduced fare, multiple rides, and commuter tickets, and morning and evening peak period operations, consistent with 49 U.S.C. 24102(3); the term does not include rapid transit operations in an urban area that are not connected to the general railroad system of transportation.
b. “Enhancing” or “Enhance” means upgrading or modifying the Service currently offered on an Intercity Rail Passenger Transportation Route or train. Examples include adding a station stop, increasing frequency of a train (
c. “Initiating” or “Initiation” or “Initiate” means commencing Service on an Intercity Rail Passenger Transportation Route that did not previously operate Intercity Rail Passenger Transportation.
d. “Intercity Rail Passenger Transportation” means rail passenger transportation, except Commuter Rail Passenger Transportation. See 49 U.S.C. 22901(3). In this NOFO, “Intercity Passenger Rail Service” and “Intercity Passenger Rail Transportation” are equivalent terms to “Intercity Rail Passenger Transportation.”
e. “Interstate Rail Compact” means a legislatively enacted agreement or compact that establishes a formal, legally binding relationship between two or more States to prepare for and provide Intercity Passenger Rail Service.
f. “Lifecycle Stage” means each of the consecutive stages of a capital project as it is developed and implemented that includes Systems Planning, Project Planning, Project Development, Final Design, Construction, and Operation. Each sequential stage involves specific activities. Lifecycle Stages are further described in FRA's Guidance on Development and Implementation of Railroad Capital Projects (88 FR 2163, Jan. 12, 2023) which can be found here:
g. “National Environmental Policy Act” or “NEPA” is a federal law that requires federal agencies to analyze and document the environmental impacts of a proposed action in consultation with appropriate federal, state, and local authorities, and with the public. NEPA classes of action include an Environmental Impact Statement (EIS), Environmental Analysis (EA) or Categorical Exclusion (CE). The NEPA class of action depends on the nature of the proposed action, its complexity, and the potential impacts. For purposes of this NOFO, NEPA also includes all related federal laws and regulations including the Clean Air Act, Section 4(f) of the Department of Transportation Act, Section 7 of the Endangered Species Act, and Section 106 of the National Historic Preservation Act. Additional information regarding FRA's environmental processes and requirements are located at
h. “Net Operating Cost(s)” is defined as Operating Costs incurred minus Revenue for each Service on a Route.
i. “Operating Assistance” is defined in 49 U.S.C. 22908(a)(2), with respect to any Route subject to Section 209 of the Passenger Rail Investment and Improvement Act of 2008 (Pub. L. 110-432) (PRIIA), as any cost allocated, or that may be allocated, to a Route pursuant to the cost methodology established under Section 209 of PRIIA or under 49 U.S.C. 24712, as described in the Section 209 policy approved by the State-Amtrak Intercity Passenger Rail Committee.
In addition, 49 U.S.C. 22908(b) uses the term “Operating Assistance” in authorizing the Secretary to “develop and implement a program for issuing Operating Assistance grants to applicants.” To avoid confusion, FRA does not use the term “Operating Assistance” elsewhere in this NOFO.
j. “Operating Costs” means,
i. With respect to any Route subject to Section 209 of PRIIA, the Operating Assistance associated with the operation of the Service for each Year of Service. Eligible capital costs are limited to capital overhaul (
ii. With respect to Routes not subject to Section 209 of PRIIA, the expenses associated with the operation of the Service for each Year of Service. Examples of such expenses may include: staffing costs for train
k. “Revenue” means the Revenue attributable to the Service, including but not limited to ticket Revenue and food and beverage Revenue, calculated annually for each Year of Service, consistent with the cost methodology policy required under section 209 PRIIA and further described in 49 U.S.C. 24712, unless otherwise agreed to by FRA and the applicant for Routes not subject to section 209 of PRIIA.
l. “Rail Carrier” means a person providing common carrier railroad transportation for compensation. See 49 U.S.C. 24102.
m. “Restoring” or “Restore” means reinstating Service to an Intercity Rail Passenger Transportation Route that formerly operated Intercity Rail Passenger Transportation.
n. “Route” means the point-to-point geographic location where a particular Service is being offered.
o. “Service” means the specific Enhancement activity or activities that are proposed to be funded under this NOFO, or the operation on the Route that is being Initiated or Restored with funding under this NOFO. Examples include: the addition of one or more frequencies or the addition of on-board Services to trains on a Route. Service does not include excursion train Services or short-term Services for the purpose of collecting data.
p. “Year of Service” means the 365-day period used for calculating the maximum funding under the Program as well as the period in which costs may be incurred to be eligible for reimbursement. The recipient may choose to start the first Year of Service at any point between the initial incurrence of cost for the Service (including start-up costs) and the first day of Revenue Service.
The total funding available for awards under this NOFO is $153,845,680.
The total amount in the previous paragraph includes funding from previous R&E Program years: $4,527,896 is available from the FY 2021 Appropriation; $145,395,000 is available from the FY 2022-2024 advance appropriations in Title VIII of Division J of IIJA ($48,465,000 from each year); and $3,922,784 in carryover funding from the FY 2019-2020 Appropriations is available.
Under 49 U.S.C. 22908(e)(2), not more than six R&E grants may be simultaneously active. FRA considers a grant active at the time of selection. In addition, FRA considers all selections under the R&E program for the same Service, on the same Route, to the same recipient, as one R&E grant, subject to the limitations in 49 U.S.C. 22908(e). To date, FRA made four selections under the R&E Program for three Services. Two of the selections were for the same applicant, for the same Service, on the same Route; FRA considers this as a single grant. Therefore, FRA currently has three simultaneously active R&E grants.
Under 49 U.S.C. 22908(e)(1), R&E grants may not provide funding for more than six years on any individual Intercity Rail Passenger Transportation Route and may not be renewed. Currently active R&E grants that were selected for three years of funding under the FY 2017 and FY 2018-20 R&E NOFOs are eligible for funding for additional Years of Service for the same Service on the same Route, not to exceed a combined total of six years.
Applicants can apply to use R&E funding for: (a) multiple Years of Service or (b) only one Year of Service, provided the Service has not already received six years of R&E funding. Recipients receiving less than six years of funding for a Service on any individual Intercity Rail Passenger Transportation Route under this NOFO and/or previous R&E NOFOs may apply for R&E grants under future NOFOs, if available.
FRA anticipates selecting multiple projects for the funding made available. There are no predetermined minimum or maximum dollar thresholds for awards.
FRA strongly encourages applicants to identify and include other state and/or local public funding and/or private funding to support the proposed project to maximize competitiveness. A recipient of a R&E grant may use the grant funding in combination (
FRA will make awards for projects selected under this NOFO through grant agreements or cooperative agreements. Grant agreements are used when FRA does not expect to have substantial federal involvement in carrying out the funded activity. Cooperative agreements allow for substantial federal involvement in carrying out the agreed upon investment, including technical assistance, review of interim work products, and increased program oversight. The term “grant” is used throughout this document and is intended to reference funding awarded through a grant agreement, as well as funding awarded through a cooperative agreement.
The funding provided under this NOFO will be made available to recipients on a reimbursable basis. Recipients must certify that their expenditures are allowable, allocable, reasonable, and necessary to the approved project before seeking reimbursement from FRA.
The FRA grant agreement consists of three parts: Attachment 1: Standard Terms and Conditions; Attachment 2: Project-Specific Terms and Conditions; and Terms and Conditions Exhibits. The grant agreement templates are available at:
DOT and FRA may concurrently solicit applications for related transportation infrastructure projects for several financial assistance programs. Applicants may submit applications requesting funding for a related project to one or more of these programs. In the application for funding under this NOFO, applicants must indicate the other program(s) to which they submitted or plan to submit an application for funding the entire project or certain components, as well as highlight new or revised information in the application responsive to this NOFO that differs from the previously submitted application(s).
This section of the NOFO explains applicant eligibility, project eligibility, and cost sharing or matching
Consistent with 49 U.S.C. 22908(a)(1), eligible applicants for R&E funding are:
a. A State (including the District of Columbia);
b. A group of States;
c. An entity implementing an Interstate Rail Compact;
d. A public agency or publicly chartered authority established by one or more States;
e. A political subdivision of a State;
f. A federally recognized Indian Tribe;
g. Amtrak or another Rail Carrier that provides Intercity Rail Passenger Transportation;
h. Any Rail Carrier in partnership with at least one of the entities described in paragraphs (a) through (f); and
i. Any combination of the entities described in paragraphs (a) through (f).
See Section D(2)(a)(iv) of this NOFO for information about supporting documentation required to demonstrate eligibility in the application.
If an application includes a partnership with more than one eligible applicant, the application must identify one lead eligible applicant to be the recipient, as well as primary point of contact for the application.
Grants for a project funded under the Program shall not exceed 90 percent of the projected Net Operating Costs for the first Year of Service; 80 percent of the Net Operating Costs for the second Year of Service; 70 percent of the projected Net Operating Costs for the third Year of Service; 60 percent of the projected Net Operating Costs for the fourth Year of Service; 50 percent of the projected Net Operating Costs for the fifth Year of Service; and 30 percent of the projected Net Operating Costs for the sixth Year of Service. Net Operating Costs not covered by the R&E grant may be comprised of eligible public sector funding (
Applicants must identify the source(s) of non-R&E grant funds for the Service, and they must clearly and distinctly reflect these funds in the budget sections of the application.
A recipient of a R&E grant under this NOFO may use that grant in combination with other federal grants awarded that would benefit the applicable Service.
Operating Costs eligible for funding under this NOFO must be for projects within the United States and must be associated with Enhancing, Initiating, or Restoring Service on an Intercity Rail Passenger Transportation Route or train.
Required documents for the application are outlined in the following paragraphs. Applicants must complete and submit all components of the application. See Section D(2) for the application checklist. FRA welcomes the submission of additional relevant supporting documentation, such as planning, engineering and design documentation (as applicable), and letters of support from partnering organizations, which will not count against the Project Narrative 25-page limit.
Applicants may access application materials at
Applicants are strongly encouraged to apply early to ensure that all materials are received before the application deadline. FRA reserves the right to modify this deadline. General information for submitting applications through
The E-Biz point of contact at the applicant's organization must respond to the registration email from
If an applicant experiences difficulty at any point during this process, please call the
FRA strongly advises applicants to read this section carefully. Applicants must submit all required information and components of the application package to be considered for funding. Applications that are not submitted on time or do not contain all required documentation will not be considered for funding. To support the application, applicants may provide other relevant and available optional supporting documentation that may have been developed by the applicant, especially such documentation that provides evidence of completion of the appropriate Lifecycle Stage(s), if capital improvements are necessary before starting the operation Lifecycle Stage of the proposed Service. FRA evaluates project readiness for a Lifecycle Stage when considering a proposed project for funding. Additionally, applicants selected to receive funding must satisfy any applicable requirements in 49 U.S.C. 22905, including FRA's Buy America requirement and conditions explained in part at
Sharing of Application Information—FRA may share application information within USDOT or with other federal agencies if FRA determines that sharing is relevant to the respective program's objectives.
Required documents and information for an application package include the following:
This section
The applicant must provide the content listed above in a narrative statement. The Project Narrative may not exceed 25 pages in length (excluding cover pages, table of contents, and supporting documentation). FRA will not review or consider Project Narratives beyond the 25-page limit. If possible, applicants should submit supporting documents via website links rather than hard copies. If supporting documents are submitted, applicants must clearly identify the relevant portion of the supporting document with the page numbers of the cited information in the Project Narrative. The Project Narrative must adhere to the following outline:
i.
ii.
iii.
Applicants for additional funding for the same Service funded under a currently active R&E grant must describe how the funds under the FY 2017 and FY 2018-2020 R&E selections and the requested funding under this NOFO, if selected for award, will be used. Specifically, the applicant should describe, at a minimum, the following: (1) for FY 2017 and FY 2018-2020 R&E selections that have not yet been obligated, whether the funds under this NOFO would replace the previous R&E awards; (2) how additional funds under this NOFO will be applied to additional Years of Service; and (3) how all R&E funding will be used with respect to each Year of Service.
All applicants must include funding commitment letters outlining proposed or confirmed funding agreements in the amount of the projected Net Operating Costs that would not be funded through the proposed R&E grant, in an attachment or appendix to the application.
Project funding information must be consistent throughout all application materials, specifically the Standard Form (SF) 424, Project Narrative, SOW, project budget, and funding commitment letters.
iv.
If the applicant is eligible under 49 U.S.C. 22908(a)(1)(H) as a Rail Carrier in partnership with at least one of the other eligible entities in Section 22908(a)(1)(A) through (a)(1)(F), the applicant should explain the partnership and each entity's contribution to the partnership. Similarly, if the applicant is a combination of entities described in Section 22908(a)(1)(A) through (a)(1)(F), the application should explain the partnership and each entity's contribution to the partnership.
Applicants must identify the applicant's legal authority to receive federal financial assistance and complete the project, including management of contracts and other activities necessary for the operation of intercity rail passenger Service, and provide supporting information, including citations to authorizing legislation and a legal opinion from the applicant's legal counsel.
v.
vi.
vii.
viii.
Further, applicants must provide their plan for taking affirmative steps to employ small businesses consistent with 2 CFR 200.321. Describe past experience in managing and overseeing similar projects, as applicable; the technical qualifications and demonstrated experience of key personnel proposed to lead and perform the technical efforts; and the qualifications of the primary and supporting organizations to fully and successfully execute the proposed project within the proposed timeframe and budget, including a discussion of the risk evaluation factors in 2 CFR 200.206(b) and the proposed approach to assessing and mitigating project risk (these factors may be summarized in the Project Narrative and additional information may be provided as supporting documentation, as applicable).
Applicants must submit the documents and forms listed in this section. NOTE: The Standard OMB Forms needed for the electronic application process are available at:
i. A statement of work (SOW) addressing the scope, budget, estimated project schedule, and performance measures for the proposed project if it were selected for award. Applicants are expected to use the templates for the SOW, project budget, estimated project schedule, and performance measures that are Articles 4-7 of Attachment 2: Restoration and Enhancement Grant Program Project Specific Terms and Conditions. Those documents must contain sufficient detail so FRA, and the applicant, can understand the expected outcomes of the proposed work to be performed and can monitor progress toward completing project tasks and deliverables during a prospective grant's period of performance. Applications that do not follow this format may be considered incomplete and may not be reviewed.
When preparing the budget, the estimated total Net Operating Cost of the proposed project must be based on the best available information, including engineering studies, studies of economic feasibility, environmental analyses, and information on the expected use of equipment and/or facilities. The project schedule should be sufficiently detailed to include the date when the first Year of Service will commence and the planned Revenue Service start date, as well as reasonable due dates for expenses associated with the operation of the Service.
For all proposed projects, applicants must provide information about proposed performance measures, as described in Section F(3) and required in 2 CFR 200.301. Further, applicants must provide their plan for taking affirmative steps to employ small businesses consistent with 2 CFR 200.321.
ii. Capital and mobilization plan that includes:
(A) A description of any necessary capital investments recently completed or not-yet-completed for the Service that are related to the proposed project (as applicable), Service planning actions (such as environmental reviews), and mobilization actions (such as qualifications of train crews) required for Initiation, Enhancement, or Restoration of the intercity passenger rail transportation; and
(B) A timeline for undertaking and completing each of the investments and actions referred to in subparagraph (A) above. Applicants must follow the sample timeline table format to the extent practical (modifications can be made by adding rows or columns, as appropriate). In addition, the timeline table must include all actions required, along with realistic, estimated completion timeframes, to start Service, using FRA's anticipated R&E award selection timeframe as a key milestone—see the FRA Discretionary Grants Calendar on the FRA website.
iii. Operating plan describing:
(A) Planned Service operation;
(B) Identity and qualifications of the train operator;
(C) Identity and qualifications of any other Service providers (
(D) Service frequency;
(E) Planned Routes and schedules;
(F) Station facilities that will be utilized;
(G) Projected ridership, Revenues, and costs, along with descriptions of how and when the projections were developed;
(H) Equipment that will be utilized, how and when such equipment will be acquired or refurbished (if necessary), and where such equipment will be maintained; and
(I) A plan for ensuring safe operations and compliance with applicable safety regulations.
iv. Funding plan that:
(A) Describes the funding of initial capital costs and Operating Costs for the first six years of operation, along with projected Revenue and Net Operating Costs. Provide date of cost estimates and indicate if cost estimate updates are pending or needed;
(B) Includes commitment by the applicant to provide the funds described in subparagraph (1) to the extent not covered by federal grants and Revenues; and
(C) Describes the funding of Operating Costs and capital costs, to the extent necessary, after the first six years of operation.
(D) The applicant should propose a schedule for payment of invoices and submission of federal reimbursement requests.
v. Status of negotiations and agreements with:
(A) Each of the railroads or regional transportation authorities whose tracks or facilities would be utilized by the Service;
(B) The anticipated Rail Carrier if such entity is not part of the applicant group;
(C) Any other Service providers or entities expected to provide Services or facilities that will be used by the Service, including any required access to Amtrak systems, stations, and facilities if Amtrak is not part of the applicant group; and
(D) Cost share partners if there will be multiple parties contributing toward the cost of the Service. Indicate the level of approval required within each entity and/or if any council, board, or legislative approval is required.
vi. Environmental compliance documentation, as applicable, if a website link is not cited in the Project Narrative. Applicants should explain what federal (and, if appropriate, state, tribal, and local) environmental compliance and permitting requirements have been completed. Such requirements include NEPA and other federal, state, tribal, and local permitting requirements, if applicable. For all other federal, state, tribal, and local permitting requirements, the applicant should describe which permits apply, the status of those reviews, and the expected timeline for completion. If the NEPA process is complete, an applicant should indicate the date of completion, and provide a website link or other reference to the documents demonstrating compliance with NEPA, which might include a final Categorical Exclusion determination documentation, Finding of No Significant Impact, or Record of Decision. If the NEPA process is not yet underway, the application should state this. If the NEPA process is underway, but not complete, the application should detail the type of NEPA review underway, where the project is in the process, and indicate the anticipated date of completion of all NEPA-related milestones. Additional information regarding FRA's environmental processes and requirements is located at
vii. SF 424—Application for Federal Assistance.
viii. SF 424A—Budget Information for Non-Construction.
ix. SF 424B—Assurances for Non-Construction.
x. FRA F30—Certification Regarding Debarment, Suspension and Other Responsibility Matters, Drug-Free Workplace Requirements and Lobbying.
xi. FRA F 251—Applicant Financial Capability Questionnaire.
xii. SF LLL—Disclosure of Lobbying Activities.
To apply for funding through
FRA may not make a grant award to an applicant until the applicant has complied with all applicable SAM requirements, and if an applicant has not fully complied with the requirements by the time the federal awarding agency is ready to make a federal award, the federal awarding agency may determine that the applicant is not qualified to receive a federal award and use that determination as a basis for making a federal award to another applicant. Late applications, including those that are the result of a failure to register or comply with
All applicants for federal financial assistance must maintain current registrations in the SAM database. An applicant must be registered in SAM to successfully register in
On April 4, 2022, the Federal government discontinued using the Data Universal Numbering System (DUNS). The DUNS number was replaced by a new, non-proprietary identifier that is provided by the System for Award Management (
Applicants must submit complete applications to
To ensure a fair competition of limited discretionary funds, no late submissions will be reviewed for any reason, including: (1) failure to complete the
Intergovernmental Review is required for this Program. Applicants must contact their state single point of contact to comply with their state's process under Executive Order 12372.
Consistent with 2 CFR 200.458, as applicable, FRA will only approve pre-award costs if such costs are incurred pursuant to the negotiation and in anticipation of the grant agreement and if such costs are necessary for efficient and timely performance of the scope of work.
FRA is prohibited under 49 U.S.C. 22905(f) from providing R&E grants for Commuter Rail Passenger Transportation. FRA's interpretation of this provision is informed by the language in 49 U.S.C. 22908(b). Under this NOFO, FRA's primary intent in funding projects is to help offset initial operating losses while the new or expanded Intercity Passenger Rail Services build their ridership and Revenue base. Such projects may be located on shared corridors where Commuter Rail Passenger Transportation and/or freight rail also benefit from the project.
Applications must be submitted to
Only applicants who comply with all submission deadlines described in this NOFO and electronically submit valid, on-time applications through
Any applications that
FRA will first screen each application for applicant and project eligibility (eligibility requirements are outlined in Section C of this Notice) and completeness (application documentation and submission requirements are outlined in Section D of this Notice). As described in Section D(2)(a)(iv), FRA will also evaluate information provided by the applicant to identify and support its legal authority to undertake the activities it would conduct if it is selected for an R&E grant award.
FRA will evaluate all eligible and complete applications using the evaluation criteria (as part of the merit review) outlined in this section to determine project readiness, technical merit, and project benefits. FRA will consider the adequacy of information provided in the application in evaluating whether the application is complete and responsive to the evaluation criteria.
In evaluating Project Readiness, FRA will evaluate project and applicant risk based on the applicant's preparedness and capacity to implement the proposed project, including whether the applicant is reasonably equipped to begin operation of the Service in a timely manner to meet their proposed schedule. FRA will evaluate whether the applicant is able to meet project milestones and use federal funds efficiently to deliver the proposed project.
FRA will evaluate application information for the degree to which the application demonstrates strong project readiness, evidenced by:
(A) The appropriate planning, design, any environmental reviews, negotiation of agreements, acquisition of equipment, construction, and other actions necessary for Initiation, Restoration, or Enhancement of Service have been completed or nearly completed (49 U.S.C. 22908(d)(1));
(B) Funds are committed (
(C) The capital and mobilization plan, operating plan, funding plan, and status of negotiations and agreements described in Section D(2)(b), are appropriate for the proposed project, including the planned first Year of Service, proposed Service start date, and subsequent Year(s) of Service included in the proposed grant period of the proposed project, at a minimum (See 49 U.S.C. 22908(c)).
In evaluating Technical Merit, FRA will evaluate the degree to which the SOW, project budget, and estimated project schedule are reasonable and appropriate to achieve the expected outcomes, commitment of necessary resources and workforce to deliver the project, and the proposed project elements are appropriate for the project funding request. FRA will also consider applicant risk with respect to the applicant's past performance as a FRA recipient for grant-funded projects, as applicable. FRA will evaluate application information for the degree to which:
(A) The tasks and subtasks outlined in the SOW, estimated project schedule, and project budget, are reasonable and appropriate to achieve the expected outcomes of the proposed project;
(B) The technical qualifications and demonstrated experience of key personnel proposed to lead and perform the technical efforts, and the qualifications of the primary and supporting organizations to fully and successfully execute the proposed project within the proposed timeframe and budget;
(C) The applicant's past performance in developing and delivering similar projects, as applicable, and previous financial contributions;
(D) The applicant's proposed approach to assessing and mitigating risk is appropriate for the proposed project;
(E) Whether the applicant has, or will have, the legal, financial, and technical capacity to carry out the project; satisfactory continuing access to equipment or facilities; and the capability and willingness to maintain the equipment or facilities.
FRA will evaluate the project benefits of the proposed project for the anticipated private and public benefits, including any combination of the following:
(A) Provide daily or daytime Service over Routes where such Service did not previously exist (49 U.S.C. 22908(d)(3));
(B) Restore Service over Routes formerly operated by Amtrak, including Routes described in section 11304 of the Passenger Rail Reform and Investment Act of 2015 (49 U.S.C. 22908(d)(2));
(C) Provide Service to regions and communities that are underserved or not served by other intercity public transportation (49 U.S.C. 22908(d)(6));
(D) Foster economic development, particularly in rural communities and for disadvantaged populations (49 U.S.C. 22908(d)(7));
(E) Provide other non-transportation benefits (49 U.S.C. 22908(d)(8)); and,
(F) Enhance connectivity and geographic coverage of the existing national network of Intercity Passenger Rail Service (49 U.S.C. 22908(d)(9)).
For each evaluation criterion—Project Readiness, Technical Merit, and Project Benefits—FRA will evaluate whether the application demonstrates level of risk or responsiveness, as applicable, and will result in a rating of “unacceptable,” “high,” “medium,” or “low” as described in the rubric tables below. For each merit criterion, FRA will use rubric ratings with applied criteria to evaluate whether the applications meet the defined thresholds:
In addition to the ratings described above, FRA will also apply the selection preferences and consider the Administration Priorities, both described in Section E(1).
After completing the review of eligibility, completeness, and evaluation criteria (merit review), among projects of similar merit, FRA will apply the following criteria:
(A)
1. The proposed R&E funding is less than the maximum funding limit for the applicable Year(s) of Service, as specified in Section C(2);
2. The application includes funding more than one source, such as state, local, regional governmental, and/or private sources, demonstrating broad participation by affected stakeholders (49 U.S.C. 22908(d)(4));
3. The applicant has funding plan that demonstrates the Service will be financially sustainable beyond the grant period of performance (49 U.S.C. 22908(d)(5));
4. The proposed Services are on Route(s) selected under the Corridor Identification and Development Program and operated by Amtrak (49 U.S.C. 22908(d)(10));
5. The start of Revenue Service is likely to occur within one year of award selection. This means most Service preparation activities, particularly activities with uncertain duration or duration of more than one year and activities necessary to resolve complex issues, have been initiated, are well underway, and have realistic near-term completion dates based on supporting explanations and/or documentation. This is due to the limitation on the number of active R&E grants.
(B)
USDOT prioritizes projects that help to address transportation insecurity, which is the inability for people to get to where they need to go to meet the needs of their daily life regularly, reliably, and safely due to either the high cost of transportation, lack of access, or lack of safe transportation options. When identifying projects, applicants must consider how the proposed project will increase safety, lower transportation costs, increase the availability of multimodal transportation options, and decrease greenhouse gas emissions. Funding applications should state the identified area of transportation insecurity the project is mitigating or reversing. USDOT will also consider whether the applicant is participating in a federal technical assistance program as part of the cross-government place based technical assistance efforts, as appropriate.
1.
2.
3.
Applicants are strongly encouraged to use FRA's Justice40 Rail Explorer Tool, (
4.
For Administration Priorities, FRA will evaluate whether the application demonstrates level of risk or responsiveness, as applicable, and will result in a rating of “Non-responsive,” “Acceptable,” “Responsive,” or “Highly Responsive” as described in the rubric below. Applicants do not need to respond to all of the Administration Priorities if a certain criterion is not applicable to the proposed project or indicate if a criterion is not applicable.
The evaluation process may draw upon subject matter experts within FRA Divisions whose expertise is relevant to understanding the application's responsiveness to the Program criteria, such as assessing the applicant's capacity to successfully deliver the project in compliance with applicable federal requirements based on factors including, but not limited to, the recipient's experience working with federal agencies, previous experience with DOT discretionary grant awards and/or the technical experience and resources dedicated to the proposed project. Finally, in determining the allocation of program funds, FRA may also consider geographic diversity, diversity in the size of the systems receiving funding, and the applicant's receipt of other competitive awards.
Upon completion of all reviews, FRA will finalize an Overall Rating for each application. This rating will be a combination of the results of the three merit criteria reviews, specifically Project Readiness, Project Benefits, and Technical Merit criteria ratings as described in Section E(1); and the Administration Priorities as described in Section E(1). Provided in the Overall Rating Rubric below, each rating has defined parameters by which each application will be assessed.
FRA will conduct a five-part application review process, as follows:
Before making a federal award with a total amount of federal funding greater than the simplified acquisition threshold per 2 CFR 200.1 and 2 CFR 200.320, FRA will review and consider any information about the applicant that is in the designated integrity and performance system accessible through SAM (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). See 41 U.S.C. 2313.
An applicant, at its option, may review information in the designated integrity and performance systems accessible through SAM and comment on any information about itself that a federal awarding agency previously entered and is currently in the designated integrity and performance system accessible through SAM.
FRA will consider any comments by the applicant, in addition to the other information, in making a judgment about the applicant's integrity, business ethics, and record of performance under federal awards when completing the review of risk posed by applicants as described in 2 CFR 200.206.
FRA will announce applications selected for funding in a press release and on FRA's website after the application review period. This announcement is FRA's notification to successful and unsuccessful applicants alike. FRA will contact applicants with successful applications after announcement with information and instructions about the award process. This notification is not an authorization to begin proposed project activities. FRA requires satisfaction of applicable requirements by the applicant and a formal agreement signed by both the recipient and the FRA, including an approved scope, schedule, and budget, before obligating the grant. See an example of standard terms and conditions for FRA grant awards at
In connection with any program or activity conducted with or benefiting from funds awarded under this Notice, recipients of funds must comply with all applicable requirements of federal law, including, without limitation, the Constitution of the United States; the conditions of performance, nondiscrimination requirements, and other assurances made applicable to the award of funds in accordance with regulations of DOT; and applicable federal financial assistance and contracting principles promulgated by the Office of Management and Budget. In complying with these requirements, recipients, must ensure, in particular, that no concession agreements are denied, or other contracting decisions made, on the basis of speech or other activities protected by the First Amendment. If DOT determines that a recipient has failed to comply with applicable federal requirements, DOT may terminate the award of funds and disallow previously incurred costs, requiring the grantee to reimburse any expended award funds.
Examples of administrative and national policy requirements include: 2 CFR part 200; procurement standards at 2 CFR part 200 subpart D, 2 CFR 1207.317, and 2 CFR 200.401; compliance with federal civil rights laws and regulations; disadvantaged business enterprises requirements; debarment and suspension requirements; drug-free workplace requirements; FRA's and OMB's Assurances and Certifications; the Americans with Disabilities Act (ADA); safety requirements; NEPA; and environmental justice requirements. Unless otherwise stated in statutory or legislative authority, or appropriations language, all financial assistance awards follow the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards at 2 CFR part 200 and 2 CFR part 1201.
Assistance under this NOFO is subject to the grant conditions in 49 U.S.C. 22905, including protective arrangements that are equivalent to the protective arrangements established under section 504 of the Railroad Revitalization and Regulatory Reform Act of 1976 (45 U.S.C. 836) with respect to employees affected by actions taken in connection with the project to be financed in whole or in part by grants subject to 49 U.S.C. 22905, and the provision deeming operators Rail Carriers and employers for certain purposes.
Projects that have not sufficiently considered climate change and sustainability in their planning, as determined by FRA, will be required to do so before obligating a grant, consistent with Executive Order 14008,
Projects must consider and address equity and barriers to opportunity in their planning, as determined by FRA, consistent with Executive Order 13985,
Recipients must comply with applicable appropriations act requirements and all relevant requirements of 2 CFR part 200. Rights to intangible property under grants awarded under this NOFO are governed in accordance with 2 CFR part 200.315. See an example of standard terms and conditions for FRA grant awards at
To the extent that applicants have not sufficiently considered job quality and labor rights in their planning, as determined by the Department of Labor, the applicants will be required to do so before receiving funds for construction, consistent with Executive Order 14025,
As a condition of grant award and consistent with Executive Order 11246,
The U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) is charged with protecting America's workers by enforcing equal employment opportunity and affirmative action obligations of employers that do business with the federal government. OFCCP enforces Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans' Readjustment Assistance Act of 1974. Together these legal authorities make it unlawful for federal contractors and subcontractors to discriminate in employment because of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran.
It is the policy of the United States to strengthen the security and resilience of its critical infrastructure against both physical and cyber threats. Each applicant selected for federal funding under this notice must demonstrate, prior to signing of the grant agreement, efforts to consider and address physical and cyber security risks relevant to the transportation mode and type and scale of the project. Proposed projects that have not appropriately considered and addressed physical and cyber security and resilience in their planning, design, and project oversight, as determined by the Department and the Department of Homeland Security, will be required to do so before grant obligation, consistent with the National Security Memorandum Presidential Policy Directive 221 to Secure and Enhance the Resilience of U.S. Critical Infrastructure.
Assistance under this NOFO is subject to the Buy America requirements in 49 U.S.C. 22905(a) and the Build America, Buy America Act, Public Law 117-58, 70901-52. In addition, as expressed in Executive Order 14005,
As a condition of a grant award, grant recipients should demonstrate that the recipient has a plan for compliance with civil rights obligations and nondiscrimination laws, including Title VI of the Civil Rights Act of 1964 and implementing regulations (49 CFR part 21), the Americans with Disabilities Act of 1990 (ADA), Section 504 of the Rehabilitation Act, all other civil rights requirements, and accompanying regulations. This may include a current Title VI plan, completed Community Participation Plan, and a plan to address any legacy infrastructure or facilities that are not compliant with ADA standards. DOT's and the applicable Operating Administrations' Office of Civil Rights may work with awarded grant recipients to ensure full compliance with Federal civil rights requirements.
Each applicant selected for a grant will be required to comply with all standard FRA reporting requirements, including quarterly progress reports, quarterly federal financial reports, and interim and final performance reports, as well as all applicable auditing, monitoring and close out requirements. Reports may be submitted electronically. Pursuant to 2 CFR 170.210, non-federal entities applying under this NOFO must have the necessary processes and systems in place to comply with the reporting requirements should they receive federal funding.
Applicants selected for funding are required to comply with all reporting requirements in the standard terms and conditions for FRA grant awards including 2 CFR 180.335 and 2 CFR 180.350. If the total value of a selected applicant's currently active grants, cooperative agreements, and procurement contracts from all federal awarding agencies exceeds $10,000,000 for any period of time during the period of performance of this federal award, then the applicant must maintain the information reported to SAM and ensure that is made available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)) about civil, criminal, or administrative proceedings described in paragraph 2 of this award term and condition. This is a statutory requirement under section 872 of Public Law 110-417, as amended (41 U.S.C. 2313). As required by section 3010 of Public Law 111-212, all information posted in the designated integrity and performance system on or after April 15, 2011, except past performance reviews required for federal procurement contracts, will be publicly available.
Recipients and subrecipients are also encouraged to incorporate program evaluation, including associated data collection activities from the outset of their program design and implementation, to meaningfully document and measure their progress towards meeting an agency priority goal(s). Title I of the Foundations for Evidence-Based Policymaking Act of 2018 (Evidence Act), Public Law 115-435 (2019) urges federal awarding agencies and federal assistance recipients and subrecipients to use program evaluation as a critical tool to learn, to improve equitable delivery, and to elevate program service and delivery across the Project Performance Period of the grant agreement/cooperative agreement. Evaluation means “an assessment using systematic data collection and analysis of one or more programs, policies, and organizations intended to assess their effectiveness and efficiency” (5 U.S.C. 311). Credible program evaluation activities are implemented with relevance and utility, rigor, independence and objectivity, transparency, and ethics (OMB Circular A-11, Part 6 Section 290).
For grant recipients receiving an award, evaluation costs are allowable costs (either as direct or indirect), unless prohibited by statute or regulation, and such costs may include the personnel and equipment needed for data infrastructure and expertise in data analysis, performance, and evaluation (2 CFR part 200).
Each applicant selected for funding must collect information and report on the project's performance using measures mutually agreed upon by FRA and the recipient to assess progress in achieving strategic goals and objectives. Examples of some performance measures are listed in the table below. The applicable measure(s) will depend upon the type of project, consistent with the recipient's application materials and program goals.
As a condition of grant award, grantees may be required to participate in an evaluation undertaken by DOT, or another agency or partner. The evaluation may take different forms such as an implementation assessment across grant recipients, an impact and/or outcomes analysis of all or selected sites within or across grantee, or a benefit/cost analysis or assessment of return on investment. DOT may require applicants to collect data elements to aid the evaluation. As a part of the evaluation, as a condition of award,
For further information concerning this Notice, please contact the FRA NOFO Support program staff via email at
All information submitted as part of or in support of any application shall use publicly available data or data that can be made public and methodologies that are accepted by industry practice and standards, to the extent possible. If the application includes information the applicant considers to be a trade secret or confidential commercial or financial information, the applicant should do the following: (1) Note on the front cover that the submission “Contains Confidential Business Information (CBI)”; (2) mark each affected page “CBI”; and (3) highlight or otherwise denote the CBI portions.
The DOT regulations implementing the Freedom of Information Act (FOIA) are found at 49 CFR part 7 Subpart C—Availability of Reasonably Described Records under the Freedom of Information Act which sets forth rules for FRA to make requested materials, information, and records publicly available under FOIA. Unless prohibited by law and to the extent permitted under the FOIA, contents of applications and proposals submitted by successful applicants may be released in response to FOIA requests. In addition, following the completion of the selection process and announcement of awards, FRA may publish a list of all applications received along with the names of the applicant organizations and funding amounts requested. Except for information withheld under the previous paragraph, FRA may also make application narratives publicly available or share application information within DOT or with other Federal agencies if FRA determines that sharing is relevant to the respective program's objectives.
Issued in Washington, DC.
Office of the Secretary (OST), Department of Transportation (DOT).
Request for Information (RFI).
The Office of the Secretary of Transportation (OST) invites public comment on the most meaningful activities to advance equity that should be considered as part of DOT's 2024 update to its Equity Action Plan. The responses to this RFI will help the Department of Transportation (DOT, or the Department) understand the impact of our equity activities to date and inform what equity-related activities and performance metrics we prioritize through the Plan.
Comments are requested by August 14, 2024. See the
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•
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Please email
(1) What activities being advanced through DOT's Equity Action Plan would be the most meaningful in advancing equity?
(a) What activities can be expanded?
(b) What new activities can DOT consider for the future?
This section includes additional background information related to DOT's Equity Action Plan that may be helpful in responding to this question.
The DOT Strategic Plan (available at
In response to Executive Order (E.O.) 13985,
E.O. 14091,
The Bipartisan Infrastructure Law (BIL; enacted November 15, 2021 as the Infrastructure Investment and Jobs Act) and Inflation Reduction Act (IRA; enacted August 16, 2022) make historic investments in the transportation sector, improving public safety and climate resilience, creating jobs across the country, and delivering a more equitable future. The Department is committed to applying an equity lens to implementation of BIL and IRA, including through actions described in our initial and updated Equity Action Plans.
Government-wide definitions of (a) equity, (b) underserved communities, and (c) disadvantaged communities have been established via Executive Order(s). DOT has adopted these government-wide definitions for the purpose of this RFI and our Equity Action Plan:
(a) The term “equity” means the consistent and systematic treatment of all individuals in a fair, just, and impartial manner, including individuals who belong to communities that often have been denied such treatment, such as Black, Latino, Indigenous and Native American, Asian American, Native Hawaiian, and Pacific Islander persons and other persons of color; members of religious minorities; women and girls; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; persons who live in United States Territories; persons otherwise adversely affected by persistent poverty or inequality; and individuals who belong to multiple such communities. [Source: E.O. 14091.]
(b) The term “underserved communities” refers to those populations [included in the definition of “equity”] as well as geographic communities that have been systematically denied the opportunity to participate fully in aspects of economic, social, and civic life, as defined in E.O. 13985. [Source: E.O. 14091.]
(c) The term “disadvantaged community” refers to a community that experiences disproportionately high and adverse health, environmental, climate related, economic, and other cumulative impacts. [Source: E.O. 14008,
In addition, DOT has adopted the following definitions of (d) overburdened community and (2) for the purpose of this RFI and our Equity Action Plan:
(d) The term “overburdened community” refers to minority, low-income, tribal, or Indigenous populations or geographic locations in the United States that potentially experience disproportionate environmental and/or safety harms and risks. This disproportionality can be a result of greater vulnerability to environmental hazards, heightened safety risks, lack of opportunity for public participation, or other factors. [Source:
(e) The term “meaningful public involvement” refers to a process that proactively seeks full representation from the community, considers public comments and feedback, and incorporates that feedback into a project, program, or plan. [Source:
DOT is in the process of preparing the 2024 Equity Action Plan update. The responses to this RFI will help the Department understand the impact of our equity activities to date and inform what we prioritize through this year's update to DOT's Equity Action Plan. Through this request, the Department seeks information from stakeholders in public agencies, academic researchers involved in the study of equity in transportation decision-making, advocacy, community-based organizations, and not-for-profit institutions and individuals working in the transportation sector or the field of equity, and State, local, Tribal, and territorial areas, and the public. A summary of input provided to the 2023 EAP update is available at:
To ensure that your comments are filed correctly, please include the docket number of this document DOT-OST-2024-0072 in your comments.
Please submit one copy (two copies if submitting by mail or hand delivery) of your comments, including any attachments, to the docket following the instructions given above under
Any submissions containing Confidential Information must be delivered to DOT in the following manner:
• Submitted in a sealed envelope marked “confidential treatment requested”;
• Document(s) or information that the submitter would like withheld from the public docket should be marked “PROPIN”;
• Accompanied by an index listing the document(s) or information that the submitter would like the Departments to withhold. The index should include information such as numbers used to identify the relevant document(s) or information, document title and description, and relevant page numbers and/or section numbers within a document; and
• Submitted with a statement explaining the submitter's grounds for objecting to disclosing the information to the public.
DOT will treat such marked submissions as confidential under the FOIA and not include them in the public docket. DOT also requests that
DOT will consider all comments received before the close of business on the comment closing date indicated above under
You may read the comments received at the address given above under
Please note, this RFI is a planning document and will serve as such. The RFI should not be construed as policy, a solicitation for applications, or an obligation on the part of the government.
Internal Revenue Service (IRS) Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel Joint Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference through the Microsoft Teams Platform.
The meeting will be held Thursday, August 22, 2024.
Conchata Holloway at 1-888-912-1227 or 214-413-6550.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App. (1988) that an open meeting of the Taxpayer Advocacy Panel Joint Committee will be held Thursday, August 22, 2024, at 3:00 p.m. Eastern Time via teleconference. The public is invited to make oral comments or submit written statements for consideration. For more information, please contact Conchata Holloway at 1-888-912-1227 or 214-413-6550, or write TAP Office, 1114 Commerce St. MC 1005, Dallas, TX 75242 or contact us at the website:
The agenda will include the potential project referrals from the committees, and discussions on priorities the TAP will focus on for the 2024 year. Public input is welcomed.
Internal Revenue Service (IRS) Treasury.
Notice of Meeting.
An open meeting of the Taxpayer Advocacy Panel's Special Projects Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Wednesday, August 14, 2024.
Antoinette Ross at 1-888-912-1227 or 202-317-4110.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. app. (1988) that an open meeting of the Taxpayer Advocacy Panel's Special Projects Committee will be held Wednesday, August 14, 2024, at 11:00 a.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of intent to participate must be made with Antoinette Ross. For more information please contact Antoinette Ross at 1-888-912-1227 or 202-317-4110, or write TAP Office, 1111 Constitution Ave. NW, Room 1509, Washington, DC 20224 or contact us at the website:
Internal Revenue Service (IRS), Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel's Taxpayer Assistance Center Improvements Project Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Tuesday, August 13, 2024.
Matthew O'Sullivan at 1-888-912-1227 or (510) 907-5274.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. app. (1988) that an open meeting of the Taxpayer Advocacy Panel's Taxpayer Assistance Center Improvements (TAC) Project Committee will be held Tuesday, August 13, 2024, at 3:00 p.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of
Internal Revenue Service (IRS), Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel's Notices and Correspondence Project Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Wednesday, August 21, 2024.
Robert Rosalia at 1-888-912-1227 or (718) 834-2203.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. app. (1988) that an open meeting of the Taxpayer Advocacy Panel's Notices and Correspondence Project Committee will be held Wednesday, August 21, 2024, at 11:00 a.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of intent to participate must be made with Robert Rosalia. For more information, please contact Robert Rosalia at 1-888-912-1227 or (718) 834-2203, or write TAP Office, 2 Metrotech Center, 100 Myrtle Avenue, Brooklyn, NY 11201 or contact us at the website:
Internal Revenue Service (IRS), Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel's Tax Forms and Publications Project Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Thursday, August 8, 2024.
Ann Tabat at 1-888-912-1227 or (602) 636-9143.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. app. (1988) that a meeting of the Taxpayer Advocacy Panel's Tax Forms and Publications Project Committee will be held Thursday, August 8, 2024, at 3:00 p.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of intent to participate must be made with Ann Tabat. For more information, please contact Ann Tabat at 1-888-912-1227 or (602) 636-9143, or write TAP Office, 4041 N Central Ave., Phoenix, AZ 85012 or contact us at the website:
Internal Revenue Service (IRS), Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel's Taxpayer Communications Project Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Thursday, August 8, 2024.
Jose Cintron-Santiago at 1-888-912-1227 or 787-522-8607.
Notice is hereby given pursuant to section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. app. (1988) that a meeting of the Taxpayer Advocacy Panel Taxpayer Communications Project Committee will be held Thursday, August 8, 2024, at 1:00 p.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of intent to participate must be made with Jose Cintron-Santiago. For more information, please contact Jose Cintron-Santiago at 1-888-912-1227 or 787-522-8607, or write TAP Office, 48 Carr 165, Suite 2000, Guaynabo, PR 00968-8000 or contact us at the website:
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce
Written comments should be received on or before September 13, 2024 to be assured of consideration.
Direct all written comments to Andres Garcia, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to
Requests for additional information or copies of the regulation should be directed to Kerry Dennis at (202) 317-5751, or at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at
The following paragraph applies to all the collections of information covered by this notice.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS) Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel's Toll-Free Phone Lines Project Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. This meeting will be held via teleconference.
The meeting will be held Thursday, August 8, 2024.
Kelvin Johnson at 1-888-912-1227 or 504-202-9679.
Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App. (1988) that an open meeting of the Taxpayer Advocacy Panel Toll-Free Phone Lines Project Committee will be held Thursday, August 8, 2024, at 4:00 p.m. Eastern Time. The public is invited to make oral comments or submit written statements for consideration. Due to limited time and structure of meeting, notification of intent to participate must be made with Kelvin Johnson. For more information, please contact Kelvin Johnson at 1-888-912-1227 or 504-202-9679, or write TAP Office, 1555 Poydras Street, Suite 12, New Orleans, LA 70112 or contact us at the website:
Office of the Assistant Secretary for Financial Markets, Treasury.
Notice of call for Large Position Reports.
The U.S. Department of the Treasury (Treasury) called for the submission of Large Position Reports by entities whose positions in the 4
Reports must be received by 12:00 p.m. Eastern Time on Monday, July 15, 2024.
Reports may be submitted using Treasury's webform (available at
Lori Santamorena, Kevin Hawkins, John Garrison, or Luisa Jou-Penchev; Government Securities Regulations Staff, Department of the Treasury, at 202-504-3632 or
In a public announcement issued on July 9, 2024, and in this
This call for Large Position Reports is pursuant to Treasury's large position reporting rules under the Government Securities Act regulations (17 CFR part 420), promulgated pursuant to 15 U.S.C. 78o-5(f). Reports must be received by Treasury before 12:00 p.m. Eastern Time on Monday, July 15, 2024, and must include the required positions and administrative information.
The 4
The public announcement, a copy of a sample Large Position Report which appears in appendix B of the rules at 17 CFR part 420, supplementary formula guidance, and a series of training modules are available at
Non-media questions about Treasury's large position reporting rules and the submission of Large Position Reports should be directed to Treasury's Government Securities Regulations Staff at (202) 504-3632 or
The collection of large position information has been approved by the Office of Management and Budget pursuant to the Paperwork Reduction Act under OMB Control Number 1530-0064.
Notice is hereby given, pursuant to 5 U.S.C. app. 2, section 10(a)(2), that a meeting will be held at the United States Treasury Department, 15th Street and Pennsylvania Avenue NW, Washington, DC on July 30, 2024, at 9:00 a.m., of the following debt management advisory committee: Treasury Borrowing Advisory Committee.
At this meeting, the Treasury is seeking advice from the Committee on topics related to the economy, financial markets, Treasury financing, and debt management. Following the working session, the Committee will present a written report of its recommendations. The meeting will be closed to the public, pursuant to 5 U.S.C. app. 2, section 10(d) and Public Law 103-202, section 202(c)(1)(B) (31 U.S.C. 3121 note).
This notice shall constitute my determination, pursuant to the authority placed in heads of agencies by 5 U.S.C. app. 2, section 10(d) and vested in me by Treasury Department Order No. 101-05, that the meeting will consist of discussions and debates of the issues presented to the Committee by the Secretary of the Treasury and the making of recommendations of the Committee to the Secretary, pursuant to Public Law 103-202, section 202(c)(1)(B).
Thus, this information is exempt from disclosure under that provision and 5 U.S.C. 552b(c)(3)(B). In addition, the meeting is concerned with information that is exempt from disclosure under 5 U.S.C. 552b(c)(9)(A). The public interest requires that such meetings be closed to the public because the Treasury Department requires frank and full advice from representatives of the financial community prior to making its final decisions on major financing operations. Historically, this advice has been offered by debt management advisory committees established by the several major segments of the financial community. When so utilized, such a committee is recognized to be an advisory committee under 5 U.S.C. app. 2, section 3. Although the Treasury's final announcement of financing plans may not reflect the recommendations provided in reports of the Committee, premature disclosure of the Committee's deliberations and reports would be likely to lead to significant financial speculation in the securities market. Thus, this meeting falls within the exemption covered by 5 U.S.C. 552b(c)(9)(A).
The Office of Debt Management is responsible for maintaining records of debt management advisory committee meetings and for providing annual reports setting forth a summary of Committee activities and such other matters as may be informative to the public consistent with the policy of 5 U.S.C. 552(b). The Designated Federal Officer or other responsible agency official who may be contacted for additional information is Fred Pietrangeli, Director for Office of Debt Management (202) 622-1876.
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C. 10, that a meeting of the Health Systems Research (HSR) Merit Review Board (hereinafter, “the Board”) will be held on Wednesday, August 28, 2024, via WebEx from 12-1:30 p.m. EST. The meeting will be partially closed to the public, with an open portion from 12-12:15 p.m. EST. The closed portion, from 12:15-1:30 p.m. EST, will be used for discussion, examination of and reference to the research applications and scientific review. Discussions will involve reference to staff and consultant critiques of research proposals. Discussions will also cover the scientific merit of each proposal and the qualifications of the personnel conducting the studies, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy. Additionally, premature disclosure of research information could significantly obstruct implementation of proposed agency action regarding the research proposals. As provided by Public Law 92-463 subsection 10(d), and amended by Public Law 94-409, closing the committee meeting is in accordance with 5 U.S.C. 552b(c)(6) and (9)(B).
The objective of the Board is to provide for the fair and equitable selection of the most meritorious research projects for support by VA research funds and to offer advice for research program officials on program priorities and policies. The ultimate objective of the Board is to ensure that the VA HSR program promotes functional independence and improves the quality of life for impaired and disabled Veterans.
Board members will advise the Deputy Chief Research and Development Officer for Investigators, Scientific Review and Management (ISRM) and the Chief Research and Development Officer on the scientific and technical merit, mission relevance and protection of human and animal
Members of the public may attend the open portion of the meeting via WebEx, from 12-12:15 p.m. EST, in listen-only mode, as the time-limited open agenda does not allow for public comment presentations. To attend the open portion of the meeting, the public may dial the Webex phone number (1-833-558-0712) and entering the meeting number/access code (2829 182 9834).
Written comments from members of the public must be mailed to Tiffin Ross-Shepard, Designated Federal Officer, HSR, Department of Veterans Affairs (14RDH), 810 Vermont Avenue NW, Washington, DC 20420, or to
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995, this notice announces that the Veterans Benefits Administration, Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden, and it includes the actual data collection instrument.
Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice by clicking on the following link
VA PRA information: Maribel Aponte, 202-461-8900,
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The
(1) To establish a country of smelt and country of most recent cast requirement for imports of aluminum articles and derivative aluminum articles from Mexico, and an increase in the duty rate for imports of aluminum articles and derivative aluminum articles that are products of Mexico containing aluminum for which the reported primary country of smelt, secondary country of smelt, or country of most recent cast is China, Russia (subject to paragraph 10 of this proclamation), Belarus, or Iran, amendments to U.S. note 19 to subchapter III of chapter 99 and new HTSUS headings are provided for in the Annex to this proclamation. Imports of aluminum articles and derivative aluminum articles that are products of Mexico shall
(2) Aluminum articles eligible for treatment under clause 1 of this proclamation must be accompanied by a certificate of analysis in order to receive such treatment. Eligible aluminum articles must not contain primary aluminum for which the reported primary country of smelt, secondary country of smelt, and country of most recent cast is China, Russia (subject to paragraph 10 of this proclamation), Belarus, or Iran. “Primary country of smelt” is defined as the country where the largest volume of new aluminum metal is produced from alumina (or aluminum oxide) by the electrolytic Hall-Héroult process. “Secondary country of smelt” is the country where the second largest volume of new aluminum metal is produced from alumina (or aluminum oxide) by the electrolytic Hall-Héroult process. “Country of most recent cast” refers to the country where the aluminum (with or without alloying elements) was last liquified by heat and cast into a solid state. The final solid state can take the form of either a semi-finished product (slab, billets or ingots) or a finished aluminum product. The Secretary, in consultation with the Secretary of Homeland Security and the United States Trade Representative, is authorized to take such actions as are necessary to ensure compliance with this requirement. Failure to comply could result in applicable remedies or penalties under United States law.
(3) For purposes of implementing this and other proclamations, importers shall provide to CBP the information necessary to identify the countries where the primary aluminum used in the manufacture of aluminum articles imports covered by clause 1 of Proclamation 9704 are smelted and information necessary to identify the countries where such aluminum articles imports are cast. CBP shall implement the smelt and cast information requirements as soon as practicable.
(4) The modifications to the HTSUS made by clause 1 of this proclamation shall be effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on July 10, 2024, and shall continue in effect, unless such actions are expressly reduced, modified, or terminated.
(5) Any imports of aluminum articles that are products of Mexico and that were admitted into a U.S. foreign trade zone under “privileged foreign status” as defined in 19 CFR 146.41, prior to 12:01 a.m. eastern daylight time on July 10, 2024, shall be subject upon entry for consumption made on or after 12:01 a.m. eastern daylight time on July 10, 2024, to the provisions of Proclamation 9893, Proclamation 9980, and Proclamation 10522 (for imports containing aluminum smelt or cast in Russia).
(6) Any provision of previous proclamations and Executive Orders that is inconsistent with the actions taken in this proclamation is superseded to the extent of such inconsistency.
(1) To establish a melt and pour requirement for imports of steel articles and derivative steel articles that are products of Mexico, and an increase in the duty rate for imports of steel articles and derivative steel articles that are products of Mexico that are melted and poured in a country other than Mexico, Canada, or the United States, amendments to U.S. note 16 to subchapter III of chapter 99 and new HTSUS headings are provided for in the Annex to this proclamation. Imports of steel articles and derivative steel articles that are products of Mexico shall be exempt from the duty provided that such steel products are melted and poured in Mexico, Canada, or the United States.
(2) For purposes of implementing the melt and pour requirements in this and other proclamations, importers of steel and steel derivative articles shall provide to CBP the information necessary to identify the countries where the steel used in the manufacture of steel articles imports, covered by clause 1 of Proclamation 9705, and derivative steel articles, specified in Annex II of Proclamation 9980, are melted and poured. CBP shall implement the melt and pour information requirements as soon as practicable.
(3) The modifications to the HTSUS made by clause 1 of this proclamation shall be effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on July 10, 2024, and shall continue in effect, unless such actions are expressly reduced, modified, or terminated.
(4) Any imports of steel articles that are products of Mexico and that were admitted into a U.S. foreign trade zone under “privileged foreign status” as defined in 19 CFR 146.41, prior to 12:01 a.m. eastern daylight time on July 10, 2024, shall be subject upon entry for consumption made on or after 12:01 a.m. eastern daylight time on July 10, 2024, to the provisions of Proclamations 9894 and 9980.
(5) Any provision of previous proclamations and Executive Orders that is inconsistent with the actions taken in this proclamation is superseded to the extent of such inconsistency.
Bureau of Indian Affairs, Interior.
Proposed rule.
The U.S. Department of the Interior (Department), Office of the Assistant Secretary for Indian Affairs, proposes to revise the regulations that implement Tribal Self-Governance, as authorized by title IV of the Indian Self Determination and Education Assistance Act. This proposed rule has been negotiated among representatives of Self-Governance and non-Self Governance Tribes and the Department.
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All comments received may be posted without change to
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Oliver Whaley, Director, Office of Regulatory Affairs and Collaborative Action (RACA), Office of the Assistant Secretary—Indian Affairs, Department of the Interior, telephone (202) 738-6065,
This proposed rule is published in exercise of authority delegated by the Secretary of the Interior (Secretary) to the Assistant Secretary—Indian Affairs (Assistant Secretary; AS-IA) by 209 Department Manual 8 (209 DM 8).
On October 21, 2020, the Practical Reforms & Other Goals to Reinforce the Effectiveness of Self Governance & Self Determination for Indian Tribes Act (PROGRESS Act) was signed into law.
Section 413 of Public Law 116-180, 25 U.S.C. 5363 directs the Secretary to promulgate regulations using the negotiated rulemaking process to carry out subchapter IV of the ISDEAA, the Department's Tribal Self-Governance Program. Section 413(a)(3) of Public Law 116-180 establishes expiration of authority for the promulgation of such regulations. A Committee was established and commenced with the negotiated rulemaking process for this proposed rule. On April 20, 2023, the Committee's authority to promulgate regulations to meet the directive of the
The Department is requesting comment on this proposed rule to update regulations implementing Tribal Self-Governance at the Department. While the proposed rule does incorporate terms and processes that may be common to self-governance at the Department of Health and Human Services (HHS) authorized by Title V of ISDEAA, and the Department of Transportation (DOT) authorized by 23 U.S.C. 207, it is not the intent of this proposed rule to define or regulate any term or process that is applicable to HHS or DOT, even where such terms or processes are common between the agencies. The proposed rule should not be construed to bind HHS or DOT to any particular interpretation of a term or process. Accordingly, we seek comment on how to incorporate this distinction into a final rule.
This proposed rule has been negotiated by representatives of Self-Governance and non-Self-Governance Tribes, and the Department. The intended effect is to transfer to participating Tribes control of, funding for, and decision making concerning certain Federal programs, consistent with updates contained in the PROGRESS Act. The Department anticipates this proposed rule will have a negligible cost burden for Tribes currently participating in Self-Governance, some startup costs for Tribes not currently participating in Self-Governance, and no new costs to the Federal Government.
The PROGRESS Act directed the Secretary to adapt negotiated rulemaking procedures regarding the unique context of self-governance and the government-to-government relationship between the United States and Indian Tribes. The PROGRESS Act also called for a negotiated rulemaking committee (Committee) to be established under 5 U.S.C. 565, with membership comprised only of representatives of Federal agencies and Tribal governments, with the Office of Self-Governance (OSG) serving as the lead agency for the Department. The Secretary charged the Committee with developing proposed regulations for the Secretary's implementation of the PROGRESS Act's provisions regarding the Department's Self-Governance Program.
The Department published a
To fulfill the requirements for negotiated rulemaking and the Federal Advisory Committee Act, representatives reflect those currently participating in the Tribal Self-Governance Program and those that are not currently participating in, but are interested in, the Tribal Self-Governance Program. In addition, Tribal representatives reflect a balance in terms of geographical location and size of the Tribe. Membership consists of only representatives of Federal and Tribal governments, with OSG serving as the lead agency.
The Committee met fifteen times to negotiate the proposed regulations. The Committee members and technical advisors organized themselves into two subcommittees and used the scheduled subcommittee meetings to develop draft materials and exchange information. The Committee's meeting minutes, and any materials approved by the full Committee, were made a part of the official record.
The Committee reached consensus, as reflected by votes documented in its meeting minutes, on:
• Subpart A (General Provisions);
• Subpart B (Selection of Additional Tribes for Participation in Tribal Self-Governance);
• Subpart C (Planning and Negotiation Grants for BIA Programs);
• Subpart D (Financial Assistance for Planning and Negotiations Activities for Non-BIA Bureau Programs);
• Subpart H (Negotiation Process);
• Subpart I (Final Offer);
• Subpart J (Waiver of Regulations);
• Subpart L (Federal Tort Claims);
• Subpart M (Reassumption);
• Subpart N (Retrocession);
• Subpart O (Trust Evaluation);
• Subpart P (Reports);
• Subpart Q (Operational Provisions);
• Subpart S (Conflicts of Interest); and
• Subpart T (Tribal Consultation Process).
The Committee did not reach consensus on:
• Subpart E (Compacts);
• Subpart F (Funding Agreements for BIA Programs);
• Subpart G (Funding Agreements for Non-BIA Programs);
• Subpart K (Construction); and
• Subpart R (Appeals).
Regardless of the consensus reached thus far, the Department will consider all relevant comments submitted and will make modifications to the proposed rule as the Department determines is appropriate. The Department expressly reserves its right to modify the final rule.
The following summary describes each subpart of the Department's proposed regulations to implement the PROGRESS Act. Except for four areas of disagreement discussed below, the proposed regulations are the product of consensus.
This subpart contains the authority, purpose and scope of the proposed rule, and the Congressional and Secretarial policies that will guide the implementation of the ISDEAA, as amended by the PROGRESS Act, by the Secretary and the various bureaus of the Department. The subpart also defines terms used throughout the proposed rule consistent with the PROGRESS Act.
This subpart further clarifies the effect of 25 CFR part 1000 on existing Tribal rights, including Tribal sovereign immunity from suit, the United States' trust responsibility, a Tribe's choice to participate in self-governance, or the issuance of awards by other departments or agencies to Tribes. Additionally, this subpart identifies the application of any agency circular, policy, manual, guidance, or rule adopted by the Department on self-governance Tribes/Consortia.
This subpart describes the steps a Tribe/Consortium must take to participate in Tribal self-governance and the selection process and eligibility criteria that the Secretary will use to decide whether a Tribe/Consortium may participate. Under the PROGRESS Act, a Tribe/Consortium is eligible to participate in self-governance if it submits documentation to OSG demonstrating: (1) successful completion of a planning phase; (2) a request to participate in self-governance by a Tribal resolution and/or final official action; and (3) financial stability and financial management capability through evidence of having no uncorrected significant and material
The OSG Director may select up to 50 eligible Tribes or Consortia for negotiation. If there are more Tribes selected to negotiate in any given year, this proposed rule provides that the first 50 Tribes/Consortia who apply, and are determined to be eligible, will have the option to participate.
This proposed rule also stipulates that a Tribe/Consortium may be selected to negotiate a funding agreement for non-Bureau of Indian Affairs (BIA) programs that are otherwise available to Tribes without first negotiating a funding agreement for BIA programs. However, to negotiate for a non-BIA program under 25 U.S.C. 5363(c) for which the Tribe/Consortium has only a geographic, cultural, or historical connection, the ISDEAA requires that the Tribe/Consortium must first have a funding agreement with the BIA under 25 U.S.C. 5363(b)(1) or any non-BIA bureau under 25 U.S.C. 5363(b)(2). (The term “programs” as used in this proposed rule refers to complete or partial programs, services, functions, or activities (PSFAs)).
This subpart also describes what happens when a Tribe wishes to withdraw from a Consortium's funding agreement. In such instances, the withdrawing Tribe must notify the Consortium, appropriate Department bureau, and OSG of its intent to withdraw 180 days before the effective date of the next funding agreement. Unless otherwise agreed to, the effective date of the withdrawal will be the earlier date of one year after the date of submission of the request, or when the current agreement expires.
In completing the withdrawal, the Consortium's funding agreement must be reduced by that portion of funds attributable to the withdrawing Tribe on the same basis or methodology upon which the funds were included in the Consortium's funding agreement. If such a basis or methodology does not exist, then the Tribe, the Consortium, appropriate Department bureau, and OSG must negotiate an appropriate amount.
This subpart describes the criteria and procedures for awarding various self-governance negotiation and planning grants. These grants are discretionary and will be awarded by the OSG Director. The award amount and number of grants depends upon Congressional appropriations. If funding in any year is insufficient to meet total requests for grants and financial assistance, priority will be given first to negotiation grants and second to planning grants.
Negotiation grants are non-competitive. In order to receive a negotiation grant, a Tribe/Consortium must first be selected to join self-governance and then submit a letter affirming its readiness to negotiate and requesting a negotiation grant. This subpart further provides that a Tribe/Consortium may elect to negotiate a self-governance agreement if selected without applying for or receiving a negotiation grant. Planning grants will be awarded to Tribes/Consortia requesting financial assistance in order to complete the planning phase requirement for joining self-governance.
This subpart describes the additional requirements and criteria applicable to receiving financial assistance to assist Tribes/Consortia with planning and negotiating for funding agreements involving non-BIA programs. This financial assistance is available to any Tribe/Consortium that:
(a) Applied to participate in self-governance;
(b) Has been selected to participate in self-governance; or
(c) Has negotiated and entered into an existing funding agreement.
Subject to the availability of funds, this subpart requires the Secretary to publish a notice in the
The Committee proposes to insert this new subpart to implement section 404 of title IV, as amended, which requires the Secretary to enter into a written compact with each participating Tribe/Consortium. The previous version of title IV included no such requirement and compacts were negotiated and executed at the option of the participating Tribe/Consortium.
The current rule at 25 CFR part 1000 that became effective on January 16, 2001 (“current rule”), includes provisions addressing compacts at §§ 1000.161 through 1000.165. The Committee proposes to amend and move those sections to the new subpart E (Compacts) and to include additional sections. This new subpart is proposed to be inserted before the respective subparts for funding agreements because compacts are applicable to funding agreements both for BIA programs and for non-BIA programs.
The current rule also includes a model format for a compact at Appendix A. The Committee proposes to omit the model format for a compact and Appendix A from this proposed rule. In lieu of a model format, compacts will be negotiated and executed in accordance with title IV, as amended, and with this proposed rule.
This subpart describes self-governance compacts and the minimum content requirements of a self-governance compact. Unlike a funding agreement, parts of a compact apply to all bureaus within the Department rather than a single bureau. Therefore, a Tribe/Consortium needs only to negotiate and execute one self-governance compact to participate in self-governance.
This subpart also establishes a compact's effective term and addresses how a compact may be amended. Further, this subpart clarifies that a Tribe/Consortium who executed a compact prior to the enactment of the PROGRESS Act has the option to either retain its existing compact, in whole or in part, to the extent that the provisions are not directly contrary to any express provisions of the PROGRESS Act or negotiate a new compact.
This subpart describes the components of a funding agreement for BIA programs. The current rule includes “Subpart E—Annual Funding Agreements for Bureau of Indian Affairs Programs.” The Committee proposes to amend the title of the subpart and move it within this proposed rule. The title of the subpart is proposed to be amended to “Funding Agreements for BIA Programs” because title IV now excludes the term “Annual Funding
A funding agreement is a legally binding and mutually enforceable written agreement between a Tribe/Consortium and the Secretary. Funding agreements must include at a minimum, but are not limited to, provisions specifying the programs transferred to the Tribe/Consortium, providing for the Secretary to monitor the performance of trust functions administered by the Tribe/Consortium, providing the funding amount(s), providing a stable base budget, and specifying the funding agreement's effective date.
Parties to a funding agreement can mutually agree to include additional provisions and/or include and incorporate by reference additional documents such as funding tables or construction project agreements. Additionally, Tribes/Consortia may elect to negotiate a funding agreement with a term that exceeds one year, subject to the availability of appropriations.
This subpart also provides that a Tribe/Consortium with a funding agreement executed before the enactment of the PROGRESS Act has the option to either retain that funding agreement, in whole or in part, to the extent that the provisions are not directly contrary to any express provisions of the PROGRESS Act or negotiate a new funding agreement.
This subpart establishes that a funding agreement shall remain in full force and effect following the end of its term until a subsequent funding agreement is executed. When a subsequent funding agreement is executed, its terms will be retroactive to the term of the preceding funding agreement for purposes of calculating the amount of funding for the Tribe/Consortium.
This subpart states that a Tribe/Consortium may include BIA-administered programs in its funding agreement regardless of the BIA agency or office performing the program. The Secretary must provide to the Tribe/Consortium:
(a) Funds equal to what the Tribe/Consortium would have received under contracts and grants under title I of Public Law 93-638 (25 U.S.C. 5321,
(b) Any funds specifically or functionally related to providing services to the Tribe/Consortium by the Secretary; and
(c) Any funds that are otherwise available to Indian Tribes for which appropriations are made to other agencies other than the Department and transferred to the Department as directed by law, an Interagency Agreement, or other means.
Except for construction programs or projects governed by subpart K (Construction), or where a statute contains specific limitations on the use of funds, a Tribe/Consortium may redesign or consolidate programs and reallocate funds in any manner the Tribe/Consortium deems to be in the best interest of the Indian community being served without the Secretary's approval except for programs described in 25 U.S.C. 5363(b)(2) or (c), or that involve a request to waive a Department regulation. However, a redesign or consolidation may not have the effect of denying eligibility for services to population groups otherwise eligible to be served under applicable Federal law.
In determining the funding amount available to a Tribe/Consortium, this subpart identifies funds that are used to carry out inherent Federal functions
This subpart defines Tribal shares as the amount determined for that Tribe/Consortium that supports any program within the BIA, the Bureau of Indian Education (BIE), the Bureau of Trust Funds Administration (BTFA), or the Office of the Assistant Secretary for Indian Affairs and are not required by the Secretary for the performance of an inherent Federal function. Tribal share amounts may be determined by either:
(a) A formula that has a reasonable basis in the function or service performed by the BIA office and is consistently applied to all Tribes served by the area and agency offices; or
(b) On a Tribe-by-Tribe basis, such as competitive grant awards or special project funding.
Funding amounts may be modified during the term of a funding agreement to adjust for certain Congressional actions, correct a mistake, or if there is mutual agreement to do so.
This subpart also defines stable base budgets as the amount of recurring funding to be transferred to the Tribe/Consortium for a period specified in the funding agreement. Stable base budgets are derived from:
(a) A Tribe/Consortium's Public Law 93-638 contract amounts;
(b) Negotiated amounts of agency, area, and central office funding;
(c) Other recurring funding;
(d) Special projects, if applicable;
(e) Programmatic shortfall;
(f) Tribal priority allocation increases and decreases;
(g) Pay costs and retirement cost adjustments; and
(h) Any other inflationary cost adjustments.
Stable base budgets do not include any non-recurring program funds, construction and wildland firefighting accounts, Congressional earmarks, or other funds specifically excluded by Congress.
A stable base budget is established at the request of the Tribe/Consortium and will be included in BIA's budget justification for the following year, subject to Congressional appropriation. Once stable base budgets are established, a Tribe/Consortium need not renegotiate these amounts unless it wants to. If the Tribe/Consortium wishes to renegotiate, it also would be required to renegotiate all funding included in the funding agreement on the same basis as all other Tribes and is eligible for funding amounts of new programs or available programs not previously included in the funding agreement on the same basis as other Tribes. Stable base budgets must be adjusted for certain Congressional actions, to correct a mistake, or if there is mutual agreement.
This subpart describes program eligibility, funding for, and terms and conditions relating to Self-Governance funding agreements covering non-BIA programs that can help further Secretarial co-stewardship objectives as set forth in Joint Secretarial Order No. 3403. This section was renamed from Subpart F, as detailed in the Committee Report. Funding agreements for non-BIA programs are legally binding and mutually enforceable agreements between a bureau and a Tribe/Consortium participating in the self-governance program that contain a
The current rule includes “Subpart G—Negotiation Process for Annual Funding Agreements.” The Committee proposes to amend the title of this subpart and move it within this proposed rule. The subpart title is proposed to be amended to “Negotiation Process” because the amended subpart addresses the process for negotiating compacts and funding agreements. The location of the subpart within this proposed rule is to be moved from subpart G of the current rule to become subpart H because a new subpart E for compacts is proposed to be inserted. Items addressed in subpart H of the current rule are proposed to be addressed in proposed new subpart Q (Operational Provisions).
Sections 1000.161 through 1000.165 of the current rule addresses the negotiation of compacts and are proposed to be amended and moved to the new subpart E (Compacts).
This subpart establishes the process and timelines for negotiating a self-governance compact with the Secretary and a funding agreement with any Departmental bureau. Under this subpart, the negotiation process consists of two phases, an information phase and a negotiation phase.
In the information phase, any Tribe/Consortium that has been selected to participate in the self-governance program may submit a written request clearly identified as a “Request to Initiate the Information Phase,” which notifies the Secretary of a Tribe/Consortium's interest in negotiating for a program(s) and requesting information about the program(s). Although this phase is not mandatory, it is expected to facilitate successful negotiations by providing for a timely exchange of information on the requested programs. This subpart establishes the information a Tribe/Consortium is encouraged to include in its Request to Initiate the Information Phase and the steps a bureau must take after receiving a request.
The negotiation phase establishes detailed timelines and procedures for conducting negotiations with Tribes that have been selected into the self-governance program, including the minimum issues that must be addressed at negotiation meetings. A Tribe/Consortium initiates this phase by submitting a Request to Initiate the Negotiation Phase. This subpart also establishes the required response that the Secretary must provide a Tribe/Consortium after receipt of a Request to Initiate the Negotiation Phase, including identifying the lead Federal negotiator. Further, this subpart establishes the process for finalizing and executing a compact and/or funding agreement when the parties are in agreement on such terms and conditions following the completion of negotiations.
This subpart also establishes proposed rules for the negotiation process for subsequent funding agreements. A subsequent funding agreement is a funding agreement negotiated with a particular bureau after an existing agreement with that bureau. The process for negotiating a subsequent agreement is the same as the process provided in this subpart for funding agreements. The Committee expects, however, that subsequent funding agreements will build upon the prior funding agreements. As such, most provisions of the funding agreement will carry forward and not require renegotiation. This will result in an expedited and simplified negotiation process.
The Committee proposes to insert this new subpart to implement section 406(c) of title IV, as amended by the PROGRESS Act, 25 U.S.C. 5366(c), that prescribes the process to be followed if the Secretary and the participating Tribe/Consortium are unable to come to agreement, in whole or in part, on the terms of a compact or funding agreement during negotiations. The previous version of title IV included no such provisions, nor does the current rule.
The new subpart is proposed to be inserted at this location to immediately follow the proposed amended subpart H for the negotiation process. Doing so allows the reader to move sequentially from the negotiation process to determine options for next steps if those negotiation efforts do not result in agreement.
This subpart explains the final offer process provided by the Act for resolving disputes when the Secretary and a Tribe/Consortium are unable to agree, in whole or in part, on the terms of a compact or funding agreement (including funding levels) during a negotiation. Under this subpart a Tribe/Consortium may submit a final offer to resolve these disputes. A final offer must be emailed or mailed to the Director at OSG's headquarters. A valid email address will be provided in the final rule. This proposed rule uses the placeholder “[TBD]”.
A final offer under this subpart must contain a description of the disagreement, the Tribe/Consortium's final proposal to resolve the disagreement (including any proposed terms for a compact, funding agreement, or amendment), and the name and contact information for the Tribe's/Consortium's authorized official.
In accordance with 25 U.S.C. 5366(c)(6), the Secretary may reject all or part of a final offer for one of six specified reasons. If the Secretary does not act on a final offer within 60 days, the final offer is accepted automatically by operation of law for any compact or funding agreement except as to its application to a program described under section 403(c) of title IV. Final offers with respect to any program described under section 403(c) of title IV that the Secretary does not act on within 60 days are rejected automatically by operation of law. This subpart also addresses what happens if the Secretary rejects all or part of a final offer, including provision of technical assistance to overcome a rejection, the ability to appeal a rejection, and the portions of a final offer not in dispute taking effect.
This subpart implements 25 U.S.C. 5363(i)(2)(A) that authorizes the Secretary to waive all Department regulations governing programs included in a funding agreement, as identified by the Tribe/Consortium.
This subpart also provides timelines, explains how a Tribe/Consortium applies for a waiver, the basis for granting or denying a waiver request, the documentation requirements for a decision, and establishes a process for
The basis for the Secretary's denial of a waiver request must be predicated on a prohibition of Federal law.
This subpart applies to all construction programs and projects, both BIA and non-BIA. The subpart specifies which construction program activities are subject to subpart K, such as design, construction management services, actual construction; and which are not, such as planning services, operation and maintenance activities, and certain construction programs that cost less than $100,000. All provisions of the proposed rule apply to this subpart except where such provisions are inconsistent; in such case the regulatory provisions of this subpart will govern.
This subpart specifies the roles and responsibilities of the Tribe/Consortium and the Secretary in construction programs, including environmental determinations, performance, changes, monitoring, inspections, and reassumption. This subpart details the process by which a Tribe/Consortium, at its election and with the approval of the Secretary, designates a certifying Tribal officer to represent the Tribe/Consortium and accepts the jurisdiction of the United States courts for the purpose of enforcing the responsibilities of the certifying Tribal officer in order for the certifying Tribal officer to assume some responsibilities of the official under the National Environmental Policy Act (NEPA), the National Historic Preservation Act (NHPA), and related provisions of other laws and regulations.
While the proposed text in this subpart reflects the consensus of the committee, subsequent to the approving its report to the Secretary, the Council on Environmental Quality (CEQ) revised its NEPA implementing regulations, 40 CFR parts 1500 through 1508, which are effective July 1, 2024.
Federal Acquisition Regulations provisions are specifically not incorporated into this proposed rule; however, they may be negotiated by the parties in the funding agreement. Also, construction project agreements, made part of a funding agreement, must address applicable Federal laws, program statutes, and regulations. In addition to requirements for all funding agreements referenced in subpart F (Funding Agreements for BIA Programs), other provisions are added for construction project agreements and programs and funding agreements that include a construction project or program to implement the requirements of the PROGRESS Act, including health and safety standards, brief progress reports, financial reports, and suspension of work when appropriate. Building codes appropriate for the project must be used and the Federal agency must notify the Tribe when Federal standards are appropriate for any project.
Lastly, this subpart provides that the Secretary may accept funds from other departments for construction projects or programs, subject to an interagency agreement between the Secretary, with Tribal concurrence.
This subpart explains the applicability of the Federal Tort Claims Act.
Reassumption is the federally initiated action of reassuming control of Federal programs formerly performed by a Tribe/Consortium. This subpart explains the types of reassumption authorized under title IV, as amended by the PROGRESS Act, including the rights of a Consortium member, the types of circumstances necessitating reassumption, and Secretarial responsibilities including prior notice requirements and other procedures. The subpart explains what is meant by imminent jeopardy to trust assets, natural resources, and public health and safety that may be grounds for reassumption.
This subpart also describes the hearing rights a Tribe/Consortium has before or after reassumption by the Secretary, the activities to be performed after reassumption has been completed, and the effect of reassumption on other provisions of a funding agreement.
Retrocession is the Tribally-initiated voluntary action of returning control of certain programs to the Federal Government. This subpart defines retrocession, including how Tribes/Consortia may retrocede, the effect of retrocession on future funding agreement negotiations, and Tribal/Consortium obligations regarding the return of Federal property to the Secretary after retrocession.
This subpart establishes a procedural framework for the Secretary's annual trust evaluation mandated by the PROGRESS Act. The purpose of the Secretary's annual trust evaluation is to ensure that trust functions assumed by Tribes/Consortia are performed in a manner that does not place trust assets in imminent jeopardy.
Imminent jeopardy of a physical trust asset or natural resource (or their intended benefits) exists where there is an immediate threat and likelihood of significant devaluation, degradation, or loss to such asset. Imminent jeopardy to public health and safety means an immediate and significant threat of serious harm to human well-being, including conditions that may result in serious injury, or death, caused by Tribal action or inaction or as otherwise provided in a funding agreement.
This subpart requires the Secretary's designated representative to prepare a written report for each funding agreement under which trust functions are performed by a Tribe. This proposed rule also authorizes a review of Federal performance of residual and nondelegable trust functions affecting trust resources. The name of this subpart has been changed from “Trust Evaluation Review” to “Trust Evaluation.” It was redundant to have both evaluation and review in the title.
This subpart describes the report on self-governance that the Secretary prepares annually for transmittal to Congress. It also includes the requirements for the annual report that Tribes/Consortia submit to the Secretary and other data requirements the Secretary may request of Tribes/Consortia. The issue related to the inclusion of BIE in the BIA programs for purposes of the reporting requirements surfaces in this subpart and is addressed in subpart A (General Provisions).
The current rule includes “Subpart Q—Miscellaneous Provisions.” The Committee proposes to amend the title of this subpart to “Operational Provisions” to be more descriptive and instructive to the reader and to bring consistency with regulations promulgated at 42 CFR subchapter M part 137-Tribal Self-Governance under the Indian Health Service as authorized by title V of the ISDEAA, as amended.
The proposed changes to this subpart address many facets of self-governance not covered in the other subparts. Issues covered include the applicability of various laws such as the Freedom of Information Act (FOIA), the Privacy Act, the Prompt Payment Act, and the Single Agency Audit Act, applicable provisions of OMB circulars, how funds are handled in various situations, including carryover of funds, savings from programs, and the use of funds to meet matching or cost participant requirements under other laws.
Certain provisions of this subpart are proposed to be amended to become current with the PROGRESS Act, and with applicable regulations promulgated by OMB at 2 CFR part 200. References to outdated OMB circulars within this subpart are proposed to be updated throughout. New sections within this subpart are proposed to address new provisions within the Act, as amended, such as claims against a Tribe/Consortium in relation to disallowance of costs, and limitation of costs.
This subpart prescribes the process Tribes/Consortia may use to resolve disputes with the Department arising before or after execution of a funding agreement or compact and certain other disputes related to self-governance.
This subpart sets out the minimum requirements a Tribe/Consortium must have in place, pursuant to Tribal law and procedures, to address conflicts of interest, including organizational and personal conflicts.
This subpart describes the process for engaging in consultations related to self-governance with Tribes/Consortia. The current rule includes “Subpart I—Public Consultation Process.” The Committee proposes to move and rename this subpart to reflect that the subpart applies to Tribal consultation, and to conform to more recent Federal and Department policy on Tribal consultation. Under this subpart, consultations related to self-governance commenced after this rule's effective date, should it become final, will comply with the Tribal consultation process outlined in the revised version of this subpart, and such previous regulations governing public consultation shall be superseded.
This subpart establishes when the Secretary shall consult on matters related to self-governance and identifies that consultation will occur: (1) to determine eligible programs for inclusion in a funding agreement; (2) to establish programmatic targets for the inclusion of non-BIA programs in funding agreements; and (3) on any secretarial action with Tribal implications on matters related to self-governance. This subpart also establishes the applicable process for engaging in Tribal consultations, which is inspired by the President's November 30, 2022, Memorandum on Uniform Standards for Tribal Consultation, and the Department's current Departmental Manuals.
This subpart also establishes guiding principles applicable to Tribal consultation related to self-governance. Additionally, this subpart requires the Secretary to provide notice of upcoming consultations to Tribes/Consortia, allow written comments, and develop a record reflecting a Tribal consultation. Finally, this subpart establishes how the Secretary will handle confidential or sensitive information provided by a Tribe/Consortium during a consultation.
The Committee agreed to require at least 30 days' notice to Tribes/Consortia prior to any planned consultation sessions. However, the Committee recognizes that situations may occur that require the need for Tribal consultation on an expedited basis to address urgent issues. Therefore, the Committee expects that the Secretary could waive applicable notice requirements at the request of a Tribe/Consortium pursuant to subpart J (Waiver of Regulations) in such urgent situations. However, the Committee views the requirement for 30 days' notice as the norm and expects any such waivers to be at the request of a Tribe/Consortium.
The Committee did not reach consensus on four issues. These include: (1) the minimum contents that must be included in a compact and funding agreement; (2) inclusion of language about which functions may be considered “inherently Federal” for purposes of 25 U.S.C. 5363(k); (3) whether certain responsibilities pursuant to NEPA and related statutes are “inherent Federal functions;” and (4) when a Tribe/Consortium may choose to pursue an administrative appeal with the appropriate bureau head/Assistant Secretary as an alternative path to filing an administrative appeal with the Interior Board of Indian Appeals (IBIA).
Each area of disagreement is summarized below, in order, by subpart and section, as appropriate. To the extent a disagreement could not be resolved, the Department has incorporated the Federal language proposal into the proposed regulatory text. A summary of the Tribal and Federal views on these areas of disagreement are set forth below. More detail is available in the Committee's report, which is a part of the official record in this rulemaking and is available upon request. The Department solicits comments on these areas of disagreement.
One issue of disagreement encountered by the Tribal and Federal representatives concerns the minimum contents that must be included in a compact and funding agreement in order to reflect the requirements of title IV as required under 25 U.S.C. 5365(a).
25 U.S.C. 5365(a) provides that “[a]n Indian Tribe and the Secretary shall include in any compact or funding agreement provisions that reflect the requirements of this subchapter,”
The Tribal position is that the proposed language in §§ 1000.510(e) and 1000.515 is excessive and not properly tailored to satisfying the requirement to reflect the requirements of title IV under 25 U.S.C. 5365(a). The identified topics in these regulatory sections correspond with general topics set out in 25 U.S.C. 5365. These topics include, for example, Tribal assurances that it has procedures in place to address conflicts of interest (25 U.S.C. 5365(b)), will apply applicable cost principles under OMB circulars in performing the title IV compact and funding agreement (25 U.S.C. 5365(c)), and will maintain a recordkeeping system and provide the Secretary with reasonable access to the records to permit the Secretary to meet the requirements of 44 U.S.C. 3101 through 3106 (25 U.S.C. 5365(g)).
The Tribal position is that a title IV compact or funding agreement can include language that satisfies 25 U.S.C. 5365(a), which states that the Tribe/Consortium will carry out the compact or funding agreement “
The Federal position on the proposed §§ 1000.510(e) and 1000.515 is based on the language of 25 U.S.C. 5365(a) providing that “[a]n Indian Tribe and the Secretary shall include in any compact or funding agreement provisions that reflect the requirements of this subchapter.” The Federal committee members read this statutory language to direct that the parties include in a compact or funding agreement each of the provisions reflecting the requirements of Title IV.
The Federal position is that relevant provisions of the PROGRESS Act indicate that particular language or provisions must be included in a funding agreement or a compact. For example, 25 U.S.C. 5366(b)(1) directs that “[a] compact or funding agreement shall include provisions for the Secretary to reassume a program and associated funding if there is specific finding relating to that program.” As another example, 25 U.S.C. 5363(e)(2) authorizes the parities to specify an effective date for retrocession. The Federal position is that the best way to fulfill these statutory requirements is to include provisions matching each of the headings set forth in 25 U.S.C. 5365.
Similar to subpart E (Compacts), an issue of disagreement encountered by the Tribal and Federal representatives concerns the minimum contents that must be included in a compact and funding agreement in order to reflect the requirements of title IV as required under 25 U.S.C. 5365(a).
For the reasons explained in the Tribal view associated with subpart E (Compacts), the Tribal representatives did not agree to the inclusion of the proposed § 1000.610(b) concerning language which “must be included in either a compact or funding agreement.” In parallel to the replacement of the proposed § 1000.515, this language should be replaced by a provision that requires either a compact and funding agreement to “include a general attestation that, in implementing the agreement, the Tribe will comply with all requirements of Title IV.”
There was also disagreement between the Tribal and Federal representatives regarding negotiations about inherent Federal functions. Both Federal and Tribal representatives agree that the identification of a particular function as an inherent Federal function is a pre-award dispute that is appealable to either the IBIA or the appropriate Bureau head/Assistant Secretary (covered in subpart R—Appeals). And both Federal and Tribal representatives agree that that the amount of funding withheld to cover the cost of inherent Federal functions is subject to pre-award negotiations (covered in this subpart). Tribal representatives proposed language in § 1000.695 to create consistency between subpart R (Appeals) and subpart F (Funding Agreements for BIA Programs) by clarifying, in subpart F (Funding Agreements for BIA Programs), that the identification of an inherent Federal function is a topic of negotiation.
The Federal position on proposed § 1000.610(b), for reasons explained in the Federal narrative associated with subpart E (Compacts), is based on the language of 25 U.S.C. 5365(a) providing that “[a]n Indian Tribe and the Secretary shall include in any compact or funding agreement provisions that reflect the requirements of this subchapter.” The Federal Committee members read this statutory language to direct that the parties include in a compact or funding agreement each of the provisions reflecting the requirements of title IV. This position is informed by the Department's experience when encountering a problem in the execution of a funding agreement. In that situation, the primary question that arises involves what the agreed upon terms of a funding agreement provide as to a particular outcome.
A disagreement arose surrounding the inclusion of language about which functions may be considered “inherently Federal” for purposes of 25 U.S.C. 5363(k) and may therefore not be contracted to Tribes. In addition, a disagreement arose as to whether contract support costs are limited by Congressional appropriations.
Tribal representatives proposed to include a single sentence from a Department Solicitor guidance memorandum, “Inherently Federal Functions under the Tribal Self-Governance Act,” dated May 17, 1996 (Solicitor Memo), which has been in place for close to 30 years. Those parts of the proposed sentence that are not copied verbatim from the Solicitor Memo are substantively identical to the statement from the memo, according to the Tribal representatives.
The Tribally proposed sentence would state that “[w]hen determining whether a function is inherently Federal within the meaning of the Act, the more a delegated PSFA relates to Tribal sovereignty over citizens or territory, the more likely it is that the function is not inherently Federal.”
Tribal representatives initially requested that the proposed rule clarify that the Department will provide all necessary contract support costs, as calculated under section 106(a) of the ISDEAA, for all Self-Governance agreements entered into by non-BIA Agencies. Such a regulatory commitment would create predictability, transparency, and the necessary financial footing for increasing the abysmally low level of non-BIA Self-Governance agreements. The Federal representatives did not agree to such a commitment in this proposed rule.
As a compromise, the Committee proposes to keep the existing regulatory
The Federal position on the proposed § 1000.845(a) is that particular quotations taken out of context from legal guidance issued by the Department's Solicitor to DOI bureaus and offices should not be codified in regulation. A single sentence in isolation fails to capture the complete standard for identifying an inherently Federal function under the legal guidance. Furthermore, if the sentence in isolation became the regulatory standard for an inherently Federal function, that would create an administrative process by which an applicant Tribe asks a bureau or office of the Department to opine on the Tribe's sovereignty, and attendant obligation under the Administrative Procedure Act, could unintentionally create roadblocks or limitations upon the Tribe's sovereignty in a manner that the Department cannot endorse.
Additionally, the Department notes that provision of contract support costs is subject to Congressional appropriations. While individual bureaus and offices may support providing contract support costs, as discussed in the Tribal narrative, the Department is unable to reallocate funds to provide those contract support costs without Congressional authorization.
A number of disagreements arose regarding whether certain responsibilities pursuant to the NEPA and related statutes are “inherent Federal functions.”
25 U.S.C. 5367(b) provides that, “subject to the agreement of the Secretary,” a Tribe or Consortium may “elect to assume some Federal responsibilities under” NEPA by (a) designating a Tribal official to “assume the status of a responsible Federal official” for purposes of NEPA and (b) issuing a limited waiver of sovereign immunity for the purposes of “enforcing the responsibilities” of that official. Because making environmental determinations, such as whether to approve NEPA documents, including categorical exclusions (CEs), environmental assessments (EAs), and environmental impact statements (EISs), is one of the responsibilities of a Federal official under NEPA, and because Tribal officials have been issuing such decisions for years under similar language in Title V, the Tribal representatives proposed several regulatory provisions to clarify the rights and responsibilities of a Tribe or Consortium that elects to assume Federal responsibilities pursuant to 25 U.S.C. 5367(b).
Tribal negotiators proposed regulatory provisions to clarify the rights and responsibilities of a Tribe or Consortium that elects to assume Federal responsibilities pursuant to 25 U.S.C. 5367(b). Tribal negotiators proposed a regulatory provision reflecting the process by which a Tribe/Consortium is recognized as having led, cooperating, or joint lead agency status on a project. Tribal representatives to the Committee argued that the proposed rule should define the term “categorical exclusion” for ease of use by Tribal and Federal officials, and because the term is used in proposed § 1000.1385.
The Federal position is that the Committee must follow the language of the PROGRESS Act, which only allows Tribes to assume under title IV “
A disagreement arose about when a Tribe/Consortium may choose to pursue an administrative appeal with the appropriate bureau head/Assistant Secretary as an alternative path to filing an administrative appeal with the IBIA.
The Tribal position is that the proposed regulations should empower, and not limit, Tribes/Consortia to have options to decide how to proceed with an administrative appeal. Tribal representatives are aware that Tribes/Consortia have encountered difficulties and delays when pursuing appeals with the IBIA. Although changes to the IBIA itself are outside the scope of this negotiated rulemaking, the Tribal representatives urged that this proposed rule should provide Tribes/Consortia with the greatest flexibility to address the realities of the IBIA appeals process. Further, the Tribal representatives emphasize that the Department and Congress should pursue all available routes to improve the IBIA appeals process to decide appeals in a just, efficient, and time-sensitive manner.
To address the realities of the IBIA system, Tribal negotiators argue that
The Federal position on the proposed §§ 1000.2302 and 1000.2351 is that these sections, which provide the appeals process for certain types of disputes under the current regulations—and were not otherwise changed, amended, or even addressed by the PROGRESS Act—provide an avenue for Tribes to appeal their disputes in a
Executive Order (E.O.) 12866, as amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB) will review all significant rules. OIRA has determined that this proposed rule is significant.
E.O. 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the Nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The E.O. directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. The Department has developed this proposed rule in a manner consistent with these requirements.
In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed rule may be found at
The Department is proposing new regulations to update the manner in which it implements self-governance at the Department. This Notice discusses the rationale for the changes that should have no major impacts on regulations or programs administered by other agencies. Overall, the proposed rule is expected to apply only to those Tribes/Consortia that enter into a self-governance compact with the Department and conclude a funding agreement under that compact.
However, during OIRA's E.O. 12866 review, the Department received comment expressing concerns about how the Department's proposed rule might intersect with another agency's self-governance regulations and program. The Department currently lacks information to describe the manner, if any, in which its self-governance regulations might affect self-governance compacts and funding agreements between Tribes/Consortia and agencies other than the Department. Some priority learning questions, where we seek information, include:
• How or whether the provisions of the proposed rule, especially those terms and processes in common between the Department and self-governance regulations at other agencies could affect any term of any other agency's self-governance procedures?
• How or whether the Department could specify that its proposed rule implementing self-governance at the Department does not bear upon either interpretation of language in another agency's self-governance regulations or authorizing statute, nor language in a compact or funding agreement between a Tribe/Consortia and another agency.
• How or whether the Department could address potential inconsistencies between its proposed rule, based on the Department's authorizing legislation, and similar provisions in other agencies' self-governance regulations, which are based on their respective, different authorizing statutes.
The Department has evaluated the effects of this proposed rule on small entities, such as local governments and businesses. Based on its evaluation, the Department certifies that this document would not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
While any determination will not be made until any final rule is published, the Department does not anticipate that this rule, if finalized, would meet the criteria under 5 U.S.C. 804(2), because it would not have an annual effect on the economy of $100 million or more, would not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions, and would not have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
This proposed rule would not impose an unfunded mandate on State, local, or Tribal governments or the private sector of more than $100 million per year. This proposed rule would not have a significant or unique effect on State, local, or Tribal governments or the private sector because this proposed rule affects only putative exporters and their related businesses. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531
This proposed rule would not affect a taking of private property or otherwise have taking implications under E.O. 12630. A takings implication assessment is not required.
Under the criteria in section 1 of E.O. 13132, this proposed rule would not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. A federalism summary impact statement is not required.
This proposed rule complies with the requirements of E.O. 12988. Specifically, this proposed 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
The Department strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and Tribal sovereignty. We have evaluated this proposed rule under the Department's consultation policy and under the criteria in E.O. 13175 and have determined that the NPRM would not impose substantial direct compliance costs on Indian Tribal governments, would not preempt Tribal law, would not have any potentially adverse effects, economic or otherwise, on the viability of Indian Tribes. Rather, this action will reduce the administrative burden of Indian Tribes participating in this program. Therefore, a Tribal summary impact statement is not required.
The Department initiated a negotiated rulemaking process, with both Tribal and Federal representatives, which the Department asserts fulfills its obligations to consult to develop the text of this proposed rule. The results of these ongoing negotiated rulemaking meetings were periodically reported and discussed in other Federal and Tribal fora. The Tribal and Federal representatives reached consensus on the proposed rule text and Preamble, except for the four areas of disagreement discussed above.
The Department anticipates seeking Tribal input through the comment period and until publication of a Final Rule.
This proposed rule contains existing information collections. All information collections require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The following revision to the existing information collections require approval by OMB.
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As part of our continuing effort to reduce paperwork and respondents' burdens, we invite the public and other Federal agencies to comment on any aspect of this information collection including:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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 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,
Send your written comments and suggestions on this information collection to OIRA listed in
Under NEPA, categories of Federal actions that normally do not significantly impact the human environment may be categorically excluded from the requirement to prepare an environmental assessment or environmental impact statement.
This proposed rule is not a significant energy action under the definition in E.O. 13211. A Statement of Energy Effects is not required.
The Department is required by Executive Orders 12866 (section 1(b)(12)), 12988 (section 3(b)(l)(B)), and 13563 (section l(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 feel that we have not met these requirements, send us comments by one of the methods listed in the
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.
Administrative practice and procedure, Indian Tribes, Tribal Consortium.
The authority of this entire part 1000 is as follows:
25 U.S.C. 5373
This part is prepared and issued by the Secretary of the Interior with the active participation and representation of Indian Tribes, Tribal organizations and inter-Tribal consortia under the negotiated rulemaking procedures required by section 413 of the Indian Self-Determination and Education Assistance Act, Public Law 93-638, as amended by the PROGRESS for Indian Tribes Act, Public Law 116-180 (25 U.S.C. 5373).
(a)
(b)
(c)
(a)
(1) The Tribal right of self-governance flows from the inherent sovereignty of Indian Tribes and nations;
(2) The United States recognizes a special government-to-government relationship with Indian Tribes,
(3) Although progress had been made, the Federal bureaucracy has discouraged, to some degree, the further compacting of Indian programs or hindered negotiations between the Department and Tribes for renewing self-governance compacts and funding agreements;
(4) Tribal Self-Governance was designed to improve and perpetuate the government-to-government relationship between Indian Tribes and the United States and to strengthen Tribal control over Federal funding and program management; and
(5) Congress further finds that:
(i) Transferring control over funding and decision making to Tribal governments, upon Tribal request, for Federal programs is an effective way to implement the Federal policy of government-to-government relations with Indian Tribes; and
(ii) Transferring control over funding and decision making to Tribal governments, upon request, for Federal programs strengthens the Federal policy of Indian self-determination.
(b)
(1) To enable the United States to maintain and improve its unique and continuing relationship with, and responsibility to, Indian Tribes;
(2) To permit each Tribe to choose the extent of its participation in self-governance;
(3) To coexist with the provisions of the Indian Self-Determination and Education Assistance Act relating to the provision of Indian services by designated Federal agencies;
(4) To ensure the continuation of the trust responsibility of the United States to Indian Tribes and Indian individuals;
(5) To permit an orderly transition from Federal domination of programs and services to provide Indian Tribes with meaningful authority to plan, conduct, redesign, and administer PSFAs that meet the needs of the individual Tribal communities; and
(6) To provide for an orderly transition through a planned and measurable parallel reduction in the Federal bureaucracy.
(c) As reflected in H. Rept. 116-422 and S. Rept. 116-34, it is the policy of the PROGRESS for Indian Tribes Act, Public Law 116-180:
(1) To clarify and streamline the Department's process for approving self-governance compacts and funding agreements;
(2) To create consistency and administrative efficiencies between title IV and title V of Public Law 93-638, as amended; and
(3) To minimize delays to self-governance compacting or funding.
In carrying out Tribal self-governance under title IV, it is the policy of the Secretary:
(a) To fully support and implement the foregoing policies to the full extent of the Secretary's authority.
(b) To recognize and respect the unique government-to-government relationship between Tribes, as sovereign governments, and the United States.
(c) To have all bureaus of the Department work to further and protect the trust responsibility of the United States with respect to Tribes and individual Indians that exists under treaties, Executive orders, other laws, or court decisions.
(d) To have all bureaus of the Department work cooperatively and pro-actively with Tribes/Consortia on a government-to-government basis within the framework of the Act and any other applicable provision of law, so as to make the ideals of self-determination and self-governance a reality.
(e) To have all bureaus of the Department work to streamline the process for Tribes/Consortia participating in or applying to participate in self-governance to establish administrative efficiencies and consistency with the processes under title IV and title V of Public Law 93-638, as amended.
(f) To have all bureaus of the Department actively share information with Tribes and Tribal Consortia to encourage Tribes and Tribal Consortia to become knowledgeable about the Department's programs and the opportunities to include them in a funding agreement.
(g) To interpret each Federal law and regulation in a manner that facilitates the inclusion of programs in funding agreements and the implementation of funding agreements.
(h) That all bureaus of the Department will negotiate in good faith, liberally construe each applicable Federal law and regulation in a manner that will benefit Tribes and Tribal Consortia participating in self-governance and facilitate the inclusion of programs in each funding agreement authorized, and timely enter into such funding agreements under title IV, whenever possible.
(i) To afford Tribes and Tribal Consortia the maximum flexibility and discretion necessary to meet the needs of their communities consistent with their diverse demographic, geographic, economic, cultural, health, social, religious, and institutional needs. These policies are designed to facilitate and encourage Tribes and Tribal Consortia to participate in the planning, conduct, and administration of those Federal programs, included, or eligible for inclusion in a funding agreement.
(j) To the extent of the Secretary's authority, to maintain active communication with Tribal governments regarding budgetary matters applicable to programs subject to the Act, and that are included in an individual funding agreement.
(k) To implement policies, procedures, and practices at the Department to ensure that the letter, spirit, and goals of the Act are fully and successfully implemented to the maximum extent allowed by law.
(l) To ensure that Executive Order 13175 on Consultation and Coordination with Indian Tribal Governments and any subsequent Executive Orders regarding consultation will apply to the implementation of these regulations.
Nothing in this part shall be construed as:
(a) Affecting, modifying, diminishing, or otherwise impairing the sovereign immunity from suit enjoyed by Indian Tribes;
(b) Terminating, waiving, modifying, or reducing the trust responsibility of the United States to the Indian Tribe(s) or individual Indians. The Secretary must act in good faith in upholding this trust responsibility;
(c) Requiring an Indian Tribe to participate in self-governance; or
(d) Impeding awards by other Departments and agencies of the United States to Indian Tribes to administer Indian programs under any other applicable law.
Unless expressly agreed to by the Tribe/Consortium in a compact or funding agreement, the Tribe/Consortium shall not be subject to any agency circular, policy, manual, guidance, or rule adopted by the Department, except for the eligibility provisions of 25 U.S.C. 5324(g) and the
This subpart describes the selection process and eligibility criteria that the Secretary uses to decide that Indian Tribes may participate in Tribal self-governance as authorized by 25 U.S.C. 5362.
A signatory is a Tribe or Consortium that meets the eligibility criteria in §§ 1000.115 and 1000.125 and directly signs the agreements. A signatory may exercise all of the rights and responsibilities outlined in the compact and funding agreement and is legally responsible for all financial and administrative decisions made by the signatory.
(a) A nonsignatory Tribe is a Tribe that either:
(1) Does not meet the eligibility criteria in §§ 1000.115 and 1000.125 and, by resolution of its governing body, authorizes a Consortium to participate in self-governance on its behalf.
(2) Meets the eligibility criteria in §§ 1000.115 and 1000.125 but chooses to be a member of a Consortium and have a representative of the Consortium sign the compact and funding agreement on its behalf.
(b) A non-signatory Tribe under paragraph (a)(1) of this section:
(1) May not sign the compact and funding agreement. A representative of the Consortium must sign both documents on behalf of the Tribe.
(2) May only become a “signatory Tribe” if it independently meets the eligibility criteria in §§ 1000.115 and 1000.125.
There are two types of entities who may participate in Tribal self-governance:
(a) Indian Tribes; and
(b) Consortia of Indian Tribes.
(a) The Secretary, acting through the Director of the OSG, may select not more than 50 new Indian Tribes per year from those Tribes eligible under 25 U.S.C. 5362(c) to participate in self-governance. A Consortium of Indian Tribes counts as one Tribe for purposes of calculating the 50 additional Tribes per year.
(b) The limitation of not more than 50 new Tribes per year does not preclude a signatory Tribe from negotiating a new or amended compact or funding agreement. Such new or amended compacts or funding agreements do not count against the limitation of not more than 50 new Tribes per year.
The Tribe/Consortium must submit to OSG documentation that demonstrates the following:
(a) Successful completion of a planning phase as described in § 1000.140. A Consortium's planning activities satisfy this requirement for all its member Tribes for the purpose of the Consortium meeting this requirement.
(b) A request for participation in self-governance by a Tribal resolution and/or a final official action by the Tribal governing body. For a Consortium, the governing body of each Tribe must authorize its participation by a Tribal resolution and/or a final official action by the Tribal governing body that specifies the scope of the Consortium's authority to act on behalf of the Tribe.
(c) For a Tribe/Consortium required to perform an annual audit under the Single Audit Act and Subpart F of 2 CFR part 200, financial stability and financial management capability as evidenced by the Tribe (or participating Tribes in a Consortium) having no uncorrected significant and material audit exceptions in the required annual audit of its self-determination or self-governance agreements with any Federal agency for the three fiscal years preceding the date on which the Tribe/Consortium requests participation, provided that documentation demonstrating the correction of any significant and material audit exceptions may include, but is not limited to, Agency Management Decision Letters issued in accordance with 2 CFR 200.521, Summary Schedule of Prior Audit Findings included in subsequent audit reports in accordance with 2 CFR 200.511, or any documentation provided by the Tribe/Consortium.
At the option of the Tribe/Consortium, a Tribe/Consortium may identify BIA and non-BIA programs that the Tribe/Consortium may wish to subsequently negotiate for inclusion in a funding agreement. The inclusion of PSFAs in a funding agreement is not limited by the provision of this additional information.
In accordance with the expressed terms of the compact or written agreement of the Consortium, a Consortium member Tribe (either a signatory or nonsignatory Tribe) may fully or partially withdraw from a participating Consortium its share of any program included in a compact or funding agreement to directly negotiate a compact and funding agreement. The withdrawing Tribe must do the following:
(a) Independently meet all of the eligibility criteria in §§ 1000.115 through 1000.140. If a Consortium's planning activities specifically consider self-governance activities for a member Tribe, that planning activity may be used to satisfy the planning requirements for the member Tribe if it applies for self-governance status on its own.
(b) Submit a notice of withdrawal to OSG and the Consortium as evidenced by a resolution of the Tribal governing body.
The planning phase must be conducted to the satisfaction of the Tribe/Consortium and must include:
(a) Legal and budgetary research; and
(b) Internal Tribal government, planning, training, and organizational preparation related to the operation of PSFAs contemplated by the Tribe/Consortium.
A Tribe/Consortium has an uncorrected significant and material audit exceptions if any of the audits that it submitted under § 1000.125(c) identifies:
(a) Significant deficiencies and material weaknesses in internal control over major programs and significant instances of abuse relating to major programs which the Tribe/Consortium has not corrected.
(b) Material noncompliance with the provisions of Federal statutes, regulations, or the terms and conditions of Federal awards related to a major program which the Tribe/Consortium has not corrected.
(c) A single finding of known questioned costs subsequently disallowed by a contracting officer or awarding official that exceeds $25,000 (or such higher amount as may be established in 2 CFR 200.516).
If a Tribe/Consortium has an uncorrected significant and material audit exception, the Tribe/Consortium is ineligible to be selected to participate in self-governance until the Tribe/Consortium meets the documentation requirements in § 1000.125.
Yes. In considering proposals by a Tribe/Consortium for participation in Self-Governance, if the Secretary determines that the Tribe/Consortium lacks adequate internal controls necessary to manage PSFAs proposed for inclusion in a compact or funding agreement under this part, the Secretary shall, as soon as practicable, provide the necessary technical assistance to assist the Tribe/Consortium in developing adequate internal controls in accordance with 25 U.S.C. 5324(q)(1).
(a) For a Tribe not presently participating in Self Governance to be selected, the Tribe/Consortium may submit a request to the Director at any time, but no later than 180 days before the proposed effective date of the funding agreement (
(b) OSG shall select a Tribe/Consortium to participate in self-governance upon a determination that the Tribe/Consortium has provided the required documentation in § 1000.125, consistent with 25 U.S.C. 5362(b)(1)(A).
(c) OSG shall notify the Tribe/Consortium no later than 45-days after receipt of the Tribe's/Consortium's request that the Tribe/Consortium has been selected to participate in self-governance or does not have a complete request under § 1000.185.
OSG accepts requests at any time. A Tribe/Consortium may request a meeting or other informal discussion with the OSG before submitting its request to participate.
Yes.
(a) Once selected to participate in self-governance, the parties should begin negotiations at least 180 days before the proposed effective date of the initial funding agreement and compact (
(b) A Tribe/Consortium may be selected to participate during one year but negotiate a compact and funding agreement in a subsequent year. In this case, the Tribe/Consortium must, before the applicable period established in § 1000.160, submit to OSG documentation demonstrating continued eligibility under 25 U.S.C. 5362(c).
A Tribe/Consortium may withdraw its request to participate in Self Governance by submitting a Tribal resolution or official action by the Tribal governing body to the Director of OSG.
The first 50 Tribes/Consortium who apply and are determined to be eligible under § 1000.160 shall have the option to begin to participate in self-governance. Any Tribe/Consortium denied participation due to the limitation in number of Tribes/Consortium is entitled to participate in the next fiscal year, provided the Tribe/Consortium remains eligible under 25 U.S.C. 5362(c).
If OSG determines that a Tribe's/Consortium's request is not complete, OSG will notify the Tribe/Consortium that the request is not complete under § 1000.125 by electronic mail and by letter, certified mail, return receipt requested no later than 45-days after receipt of the Tribe's/Consortium's request. The email and letter will explain what the Tribe/Consortium must do to complete the request.
(a) The Tribe/Consortium remains eligible to negotiate a compact and funding agreement at any time unless:
(1) It does not satisfy the eligibility requirements under 25 U.S.C. 5362(c); or
(2) Submits a Tribal resolution or official action by the Tribal governing body to the Director, OSG requesting to withdraw its request to participate in Self Governance.
(b) Whether or not a Tribe/Consortium executes an agreement has no effect on the selection of up to 50 new Tribes/Consortia in a subsequent year.
Yes, a Tribe/Consortium may be selected to negotiate a funding agreement under 25 U.S.C. 5363(b)(2) without having or negotiating a funding agreement under 25 U.S.C. 5363(b)(1).
No, 25 U.S.C. 5363(c) of the Act states that any programs of special geographic, cultural, or historical significance to the Tribe/Consortium must be included in funding agreements negotiated under 25 U.S.C. 5363(a) and/or 25 U.S.C. 5363(b). A Tribe may be selected to negotiate a funding agreement under 25 U.S.C. 5363(c) at the same time that it negotiates a funding agreement under 25 U.S.C. 5363(b)(1) and/or 25 U.S.C. 5363(b)(2).
(a) A Tribe wishing to withdraw from all or a part of a Consortium's funding agreement must notify the parties to the compact and funding agreement. The notice must:
(1) Be in the form of a Tribal resolution or other official action by the Tribal governing body; and
(2) Be received no later than 180 days before the effective date of the next Consortium funding agreement, unless the parties agree to another date.
(b) The resolution referred to in paragraph (a) of this section must
(c) The effective date of the withdrawal will be the date specified in the Tribal resolution and mutually agreed upon by the parties that signed the compact and funding agreement. In the absence of a specific time set forth in the resolution, such withdrawal becomes effective on:
(1) The earlier of one year after the date of submission of the request, or the date on which the funding agreement expires; or
(2) Such date as may be mutually agreed upon by the withdrawing Tribe and the parties that signed the compact and funding agreement.
When a Tribe eligible to enter into a contract under title I or a compact or funding agreement under title IV fully or partially withdraws from a participating Consortium, and has proposed to enter into a contract or compact and funding agreement covering the withdrawn funds:
(a) The withdrawing Tribe is entitled to its Tribal share of funds supporting those programs that the Tribe will be carrying out under its own contract or compact and funding agreement (calculated on the same basis or methodology upon which the funds were included in the Consortium's funding agreement); and
(b) The funds referred to in paragraph (a) of this section must be transferred from the Consortium's funding agreement, on the condition that the provisions of 25 U.S.C. 5321 and 5324(i), as appropriate, apply to the withdrawing Tribe.
If a Tribe withdrawing from a Consortium's funding agreement elects to operate a program carried out under a compact and funding agreement under title IV through a contract under title I, at the option of the Tribe, the resulting contract is considered a mature contract as long as the Tribe meets the requirements set forth in 25 U.S.C. 5304(h).
All funds not obligated by the Consortium associated with the withdrawing Tribe's returned Tribal share of funds, less close out costs, shall be returned by the Consortium to DOI for operation of the programs included in the withdrawal.
When a Tribe withdraws from a Consortium, the Consortium's funding agreement must be reduced by the portion of funds attributable to the withdrawing Tribe. The Consortium must reduce the funding agreement on the same basis or methodology upon which the funds were included in the Consortium's funding agreement.
(a) If there is not a clear identifiable methodology upon which to base the reduction for a particular program, the parties to the compact and funding agreement must negotiate an appropriate amount on a case-by-case basis.
(b) If a Tribe withdraws in the middle of a funding year, the Consortium agreement must be amended to reflect:
(1) A reduction based on the amount of funds passed directly to the Tribe, or already spent or obligated by the Consortium on behalf of the Tribe; and
(2) That the Consortium is no longer providing those programs associated with the withdrawn funds.
(c) Unexpended funds from a previous fiscal year may be factored into the amount by which the Consortium agreement is reduced if:
(1) The parties to the compact and funding agreement and the withdrawing Tribe agree it is appropriate; and
(2) The funds are clearly identifiable.
(a) The withdrawing Tribe and the parties to the compact and funding agreement must reach an agreement on the amount of funding and other issues associated with the program(s) involved.
(b) If agreement is not reached:
(1) For BIA Programs, the Director of OSG must make a decision on the funding or other issues involved within 45-days of the Tribe's or Consortium's written submittal of the dispute to the Director of OSG with a copy to the other party.
(2) For non-BIA Programs, the bureau head will make a decision on the funding or other issues involved.
(c) A copy of the decision made under paragraph (b) of this section must be distributed in accordance with the following table:
(d) Any decision made under paragraph (b) of this section is appealable under subpart R of this part.
Under § 1000.205, a Tribe may withdraw from a Consortium and request that the Secretary award the Tribe its portion of a construction project's funds. The Secretary may decide not to award these funds if the Secretary determines that the award of the withdrawing Tribe's portion of funds would affect the ability of the remaining members of the Consortium to complete a severable or non-severable phase of the project within available funding.
(a) An example of a non-severable phase of a project would be the construction of a single building to serve all members of a Consortium.
(b) An example of a severable phase of a project would be the funding of a road in one village where the Consortium would be able to complete the roads in other villages that were part of the project approved initially in the funding agreement.
(c) The Secretary's decision under this section may be appealed under subpart R of this part.
This subpart describes how a Tribe/Consortium seeking to begin or expand its participation in self-governance may request grants to assist with its required planning phase and to negotiate a compact and funding agreement.
Yes, any Tribe/Consortium may apply, as provided in § 1000.315, for a grant to assist it to:
(a) Plan to participate in self-governance; and
(b) Negotiate the terms of the compact and funding agreement between the Tribe/Consortium and the Secretary.
A Tribe/Consortium seeking a planning or negotiation grant must submit the following:
(a) A resolution or other final action by the Tribe's/Consortium's governing body requesting to begin or expand its participation in self-governance and to receive a grant; and
(b) For a Tribe/Consortium required to perform an annual audit under the Single Audit Act and subpart F of 2 CFR part 200, evidence showing that the Tribe/Consortium has no uncorrected significant and material audit exceptions in the required annual audit of its self-determination or self-governance agreements with any Federal agency for the three fiscal years preceding its current request to participate in self-governance.
Subject to the availability of funds, the Department will annually publish a notice of the number of planning and negotiation grants available, an explanation of the application process for such grants, and the criteria for award. Questions may be directed to the OSG.
No, a Tribe/Consortium may use other resources to meet the planning requirement and to negotiate. The award of a planning grant or a negotiation grant is not required in order to meet the planning phase requirement of the Act or to negotiate a compact or funding agreement.
The Secretary must give funding priority to approved requests for negotiation grants if there are insufficient funds to award all the approved requests for planning and negotiation grants in any given year.
Yes. A planning grant and a negotiation grant may be awarded to the same Tribe/Consortium in the same or separate years.
The Secretary must communicate in writing the reasons for declining to award a planning or negotiation grant, and offer the Tribe/Consortium any technical assistance that might make an award possible.
No. The Secretary's decision to not award a grant under this subpart is final for the Department.
This subpart describes additional requirements and criteria applicable to receiving financial assistance for planning and negotiating activities for a non-BIA program.
(a) Tribes/Consortium may contact a non-BIA bureau to determine if funds may be available for the purpose of planning and negotiating activities with non-BIA bureaus under this subpart, including grants awarded pursuant to 25 U.S.C. 5362(e).
(b) Tribes/Consortium may also request information identified in § 1000.1025(b)(2).
Financial assistance received by a Tribe/Consortium from non-BIA bureaus for planning and negotiation activities for non-BIA programs may support activities such as, but not limited to, the following:
(a) Information gathering and analysis;
(b) Planning activities, that may include notification and consultation with the appropriate non-BIA bureau and identification and/or analysis of activities, resources, and capabilities that may be needed for the Tribe/Consortium to assume non-BIA programs; and
(c) Negotiation activities.
A Tribe/Consortium may apply for financial assistance to plan and negotiate non-BIA programs if the Tribe/Consortium meets the requirements of 25 U.S.C. 5362(e) and;
(a) Applied to participate in self-governance; or
(b) Been selected to participate in self-governance; or
(c) Has negotiated and entered into an existing funding agreement.
At the discretion of the non-BIA bureau's director/commissioner, financial assistance to plan and negotiate non-BIA programs may be awarded when requested by the Tribe/Consortium. A Tribe/Consortium may submit only one application per year for financial assistance under this section.
Subject to the availability of funds, the Secretary will annually publish a notice in the
The application for financial assistance for planning and negotiation activities for a non-BIA program must include:
(a) Written notification by the governing body or its authorized representative of the Tribe's/Consortium's intent to engage in planning/negotiation activities like those described in § 1000.410;
(b) Written description of the planning and/or negotiation activities that the Tribe/Consortium intends to undertake, including, if appropriate, documentation of the relationship between the proposed activities and the Tribe/Consortium;
(c) The proposed timeline for completion of the planning and/or negotiation activities to be undertaken; and
(d) The amount requested.
The non-BIA bureau director/commissioner must review all applications received by the date specified in the announcement to determine whether or not the applications include the required elements outlined in the announcement. The non-BIA bureau must rank the complete applications submitted by the deadline using the criteria in the notice of funding availability.
Yes, upon request from the Tribe/Consortium and subject to the availability of resources, a non-BIA bureau may provide technical assistance to the Tribe/Consortium in the drafting of its application.
The non-BIA bureau director/commissioner must communicate in writing the reasons for declining to award financial assistance and offer the Tribe/Consortium technical assistance that might make an award successful through a future application.
No, all decisions made by the non-BIA bureau director/commissioner to award or not to award financial assistance under this subpart are final for the Department.
Yes, a Tribe/Consortium may reapply through a future planning and negotiation application.
Yes, the non-BIA bureau will notify all applicant Tribes/Consortium in writing as soon as possible after completing the selection process.
A self-governance compact is a legally binding and mutually enforceable written agreement that affirms the government-to-government relationship between a self-governance Tribe and the United States consistent with the trust responsibility of the Federal Government with respect to Indian Tribes that exists under treaties, Executive orders, court decisions, and other laws. The compact differs from a funding agreement in that parts of the compact apply to all bureaus within the Department rather than a single bureau.
The DOI OSG negotiates self-governance compacts.
A compact shall include general terms setting forth the government-to-government relationship consistent with the Federal Government's trust responsibility with respect to Indian Tribes that exists under treaties, Executive orders, court decisions, and other laws and such other terms as the parties intend to control during the term of the compact.
Each self-governance compact must:
(a) Specify and affirm the general terms of the government-to-government relationship between the Tribe and the Secretary;
(b) State the general terms and conditions of the compact;
(c) Identify the effective date of the compact;
(d) Identify the duration of the compact; and
(e) Include provisions that reflect the requirements of the Act in accordance with § 1000.515.
Subject to 25 U.S.C. 5365, the following must be included in either a compact or funding agreement. The Tribe/Consortium may include the following in either a compact or funding agreement:
(a) Conflicts of interest;
(b) Applicable cost principles and application of the Single Audit Act;
(c) Limitations on remedies relating to cost disallowances;
(d) For non-construction programs, authorization for the Tribe/Consortium to redesign or consolidate eligible programs and to reallocate funds for such programs;
(e) Reassumption;
(f) Retrocession; and
(g) Recordkeeping.
Yes, a Tribe/Consortium must have a compact in order to participate in self-governance.
Yes, the Secretary and a self-governance Tribe/Consortium may negotiate additional terms relating to the government-to-government relationship between the Tribe(s) and the United States consistent with the trust responsibility of the Federal Government with respect to Indian Tribes that exists under treaties, Executive orders, court decisions, and other laws. A Tribe/Consortium and the Secretary may agree to include any provision from title I of the Act, as amended, in a compact provided that the inclusion of any such provision shall be subject to, and shall not conflict with, section 101(a) of the PROGRESS for Indian Tribes Act, Public Law 116-180 (25 U.S.C. 5361 note).
Upon approval and execution of a compact, the compact remains in effect for so long as authorized by Federal law or until terminated by mutual written agreement or retrocession or reassumption of all programs.
A compact may be amended at any time subject to the applicable negotiation procedures contained in this
No, a compact is a separate document from a funding agreement, and the compact may be negotiated prior to or at the same time as a funding agreement.
Yes, a participating Tribe/Consortium with a negotiated compact executed prior to October 21, 2020, the enactment of Public Law 116-180, shall have the option at any time after that date to:
(a) Retain its existing compact, in whole or in part, to the extent that the provisions of the compact are not directly contrary to any express provision of the Act, as amended, or
(b) Negotiate a new compact in accordance with the Act.
If the Secretary and the Tribe/Consortium have negotiated and are unable to reach agreement, in whole or in part, on the terms of a compact then the Tribe/Consortium may submit a final offer in accordance with subpart I of this part.
This subpart describes the components of funding agreements for BIA programs.
Funding agreements are legally binding and mutually enforceable written agreements negotiated and entered into between a self-governance Tribe/Consortium and the Secretary.
(a) Each funding agreement must:
(1) Specify the PSFAs that the Tribe/Consortium is authorized to plan, conduct, consolidate, and administer and the responsibilities of the Secretary as outlined in § 1000.650;
(2) Provide for the Secretary to monitor the performance of trust functions administered by the Tribe/Consortium through the annual trust evaluation as specified in subpart O of this part;
(3) Provide for annual or semi-annual installments of advance payment(s), at the option of the Tribe/Consortium;
(4) Provide for the incorporation of required provisions of title I of Public Law 93-638, as amended, pursuant to section 201(d) of the PROGRESS for Indian Tribes Act, and for the incorporation of other provisions of title I of Public Law 93-638, as amended, at the option of the Tribe/Consortium;
(5) Provide for a stable base budget as outlined in §§ 1000.745 through 1000.760, at the option of the Tribe/Consortium;
(6) Prohibit the Secretary from waiving, modifying, or diminishing the trust responsibility of the United States;
(7) Specify the funding agreement's effective date;
(8) Prohibit the Tribe/Consortium from contracting with the Secretary for duplicative funds and/or PSFAs under title I;
(9) Provide that the Tribe/Consortium shall be eligible for new programs and new funding on the same basis as other Indian Tribes; and shall be responsible for the administration of programs in accordance with the compact or funding agreement;
(10) Provide the funding amount(s); and
(11) Include as attachments and incorporate by reference additional documents agreed upon by the parties.
(b) Subject to 25 U.S.C. 5365, the following must be included in either a compact or funding agreement. The Tribe/Consortium may include the following in either a compact or funding agreement:
(1) Conflicts of Interest;
(2) Applicable Cost Principles and application of the Single Audit Act;
(3) Limitations on remedies relating to cost disallowances;
(4) For non-construction programs, authorization for the Tribe/Consortium to redesign or consolidate programs and to reallocate funds for such programs;
(5) Reassumption;
(6) Retrocession; and
(7) Recordkeeping.
Yes, any provision that the parties mutually agreed upon may be included in a funding agreement.
Yes, a Tribe/Consortium has the right to include any provision of title I of Public Law 93-638, as amended, in a funding agreement.
A funding agreement shall have the term mutually agreed to by the parties. Absent notification from a Tribe/Consortium that it is withdrawing or retroceding the operation of one or more programs identified in a funding agreement or by the nature of any noncontinuing PSFA contained in a funding agreement, the funding agreement shall remain in full force and effect until a subsequent funding agreement is executed.
Yes, at the option of the Tribe/Consortium, and subject to the availability of Congressional appropriations, a Tribe/Consortium may negotiate a funding agreement with a term that exceeds one year under 25 U.S.C. 5363(p)(4).
Yes, the provisions of a funding agreement, including all recurring increases received and continuing eligibility for other increases, remain in full force and effect until a subsequent funding agreement is executed, including coverage of the Tribe/Consortium under the Federal Tort Claims Act (FTCA) 28 U.S.C. 2671 through 2680. Upon execution of a subsequent funding agreement, the provisions of such a funding agreement are retroactive to the term of the preceding funding agreement for purposes of calculating the amount of funding to which the Tribe/Consortium is entitled.
Yes, a participating Tribe/Consortium with a funding agreement executed prior to October 21, 2020, the enactment of Public Law 116-180, shall have the option at any time after that date to:
(a) Retain its existing funding agreement, in whole or in part, to the extent that the funding agreement is not contrary to the Act, as amended by Public Law 116-180; or
(b) Negotiate a new funding agreement.
A Tribe/Consortium may include in its funding agreement PSFAs administered by the Secretary for the
(a) The funding agreement must specify in writing the services, functions, and responsibilities to be assumed by the Tribe/Consortium and the functions, services, and responsibilities to be retained by the Secretary.
(b) Any division of responsibilities between the Tribe/Consortium and BIA must be clearly stated in writing as part of the funding agreement. Similarly, when there is a relationship between the program and BIA's inherent Federal functions, the relationship must be explained in the funding agreement.
Except where a statute contains specific limitations on the use of funds, a Tribe/Consortium may redesign or consolidate programs included in a funding agreement and reallocate funds for such programs in any manner which it deems to be in the best interest of the Indian community being served, so long as the redesign or consolidation does not have the effect of denying eligibility for services to population groups otherwise eligible to be served under applicable Federal law; provided however, that a reduction in funds available for a program or service shall not be considered a denial of eligibility for services. However, redesign of construction project(s) included in a funding agreement must be done in accordance with subpart K of this part.
No, the Secretary does not have to approve a redesign of a program under the funding agreement, except when the redesign involves:
(a) Programs described in 25 U.S.C. 5363(b)(2) or (c); or
(b) A request to waive a regulation.
Yes, terms and conditions in a funding agreement may be amended during the year it is in effect as agreed to by both the Tribe/Consortium and the Secretary.
(a) Subject to the terms of a funding agreement, the Secretary must transfer to a Tribe/Consortium all funds provided for in the funding agreement, pursuant to 25 U.S.C. 5368. The Secretary shall provide funding for periods covered by joint resolution adopted by Congress making continuing appropriations, to the extent permitted by such resolution.
(b) At the option of the Tribe/Consortium, the Secretary must provide the following program funds to the Tribe/Consortium through a funding agreement:
(1) An amount equal to the amount that the Tribe/Consortium would have been eligible to receive under contracts and grants for direct programs and contract support under title I of Public Law 93-638, as amended;
(2) Any funds that are specifically or functionally related to providing services and benefits to the Tribe/Consortium or its members by the Secretary without regard to the organizational level within BIA where such functions are carried out; and
(3) Any funds otherwise available to Indian Tribes or Indians for which appropriations are made to other Federal agencies and transferred to the Department as directed by law, an Interagency Agreement, or other means.
(c) Examples of the funds referred to in paragraphs (b)(1) and (b)(2) of this section are:
(1) A Tribe's/Consortium's Public Law 93-638 contract amounts;
(2) Negotiated amounts of agency, regional and central office funds, including previously undistributed funds or new programs on the same basis as they are made available to other Tribes;
(3) Other recurring funding;
(4) Non-recurring funding;
(5) Special projects, if applicable;
(6) Construction;
(7) Wildland firefighting accounts;
(8) Competitive grants; and
(9) Congressional earmarked funding.
(d) Examples of the funds referred to in paragraph (b)(3) of this section are:
(1) Federal Highway Administration funds;
(2) Federal Transit Administration funds; and
(3) Funding pursuant to an approved plan under Public Law 102-477, as amended.
Funds associated with programs prohibited from inclusion under 25 U.S.C. 5363(m)(1) may not be included in a funding agreement.
No, unless the Secretary is required to develop terms and conditions that are required by law or that are required by the agency to which the appropriation is made.
The funds for BIA to carry out inherent Federal functions are the funds to support functions that may not legally be delegated to an Indian Tribe if all Tribes were to assume responsibilities for all BIA programs that the Act permits.
(a) Between October 1st and December 31st of each fiscal year, each regional and central office shall develop a document that contains its inherent Federal function information and cost calculation for that office based either on an enacted budget or Continuing Resolution budgetary guidance, and promptly distribute that document to each Tribe/Consortium served by that office.
(b) The Secretary shall amend the document throughout the year if programs are added or changed in ways that affect the inherent Federal functions directly associated with a PSFA transferred, or proposed to be transferred, into the funding agreement of the Tribe/Consortium, and distribute that revised document to any Tribe/Consortium served by that office and seeking to transfer a PSFA into a funding agreement under the Act.
(c) Once final budget amounts are known and suballocated, the Secretary will provide an updated document within 90 days to each Tribe/Consortium.
(d) Inherent Federal function information must clearly identify the legal authority that specifically precludes delegation to a Tribe.
(e) Cost calculations must be limited to the minimum amount of funds necessary to carry out specific inherent Federal functions necessary for that office to administer PSFAs transferred to the funding agreement.
(f) The development of the document in paragraph (a) must be based on the following principles:
(1) Uniformity and consistency in the identification of inherent Federal functions and in the calculation of their associated costs;
(2) The determination of inherent Federal functions in each office is based only on those inherent Federal functions actually being performed at that office; and
(3) The Secretary shall consult with Tribes/Consortium on inherent Federal function determinations and associated cost calculations at various forums, including the Tribal Interior Budget Council (TIBC).
(g) In negotiating the amount of funds due a Tribe/Consortium in a funding agreement, the Secretary may withhold from transfer to the funding agreement only those funds to carry out inherent Federal functions directly associated with the PSFAs assumed in the funding agreement, unless otherwise expressly agreed to by the Tribe/Consortium in the funding agreement.
(h) Upon the request of a Tribe/Consortium, the Secretary must promptly provide a specific description of each inherent Federal function directly associated with a PSFA transferred, or proposed to be transferred, into the funding agreement of the Tribe/Consortium, along with the detailed basis for the Secretary's associated cost calculation.
Yes, the Secretary's calculation of such costs is an appropriate subject during the negotiation of a funding agreement because it affects the amount of funds available for transfer to the funding agreement. If the Tribe/Consortium and the Secretary are unable to agree on the amount of funds to be withheld by the Secretary to cover the Secretary's expense of carrying out inherent Federal functions directly associated with the PSFAs assumed in the funding agreement, the Tribe/Consortium may exercise any of its options under 25 U.S.C. 5366(c), including the final offer process in subpart I of this part.
Yes, pending appeal of funding amounts associated with inherent Federal functions, any Tribe/Consortium may continue to negotiate a funding agreement using the information under § 1000.690 that is being appealed. This information will be subject to later adjustment based on the final determination of a Tribe's/Consortium's appeal.
A Tribal share is the portion of all funds and resources determined for a particular Tribe (or Tribes within a Consortium) that support any program within BIA, BIE, BTFA, or the Office of the Assistant Secretary for Indian Affairs and are not required by the Secretary for the performance of an inherent Federal function as described in §§ 1000.685 through 1000.695.
There are typically two methods for determining the amount of funds to be included in the funding agreement:
(a)
(1) Distribution formulas must be reasonably related to the function or service performed by an office, and must be consistently applied to all Tribes within each regional and agency office.
(2) The process in paragraph (a) of this section for calculating a Tribe's funding under self-governance must be consistent with the process used for calculating funds available to non-self-governance Tribes.
(b)
Yes, where BIA services for a particular Tribe/Consortium are provided from a location outside its immediate agency or region, the Tribe may negotiate its share from the BIA location where the service is actually provided.
Funds provided for Indian services/programs that have not been mandated by Congress to be distributed on a competitive/discretionary basis may be distributed to a Tribe/Consortium under a formula-driven method. In order to receive such funds, a Tribe/Consortium must be eligible and qualified to receive such funds. A Tribe/Consortium that receives such funds under a formula-driven methodology would no longer be eligible to compete for these funds.
No, at the discretion of the Tribe/Consortium, Tribal shares may be left, in whole or in part, with BIA for certain programs. This is referred to as a “retained Tribal share.”
Funds that are saved as a result of downsizing in BIA are allocated to Tribes/Consortium in the same manner as Tribal shares as provided for in § 1000.710.
No, except with respect to programs described in 25 U.S.C. 5363(b)(2) or (c) or as otherwise required by law, the Secretary does not have to approve the reallocation of funds between programs that a Tribe/Consortium administers under a funding agreement. However, reallocation of funds for construction project(s) included in a funding agreement must be done in accordance with subpart K of this part.
Yes, funding amounts negotiated in a funding agreement may be adjusted under the following circumstances:
(a)
(1) Increases/decreases as a result of Congressional appropriations and/or a
(2) General decreases due to Congressional action must be applied consistently to BIA, self-governance Tribes/Consortium, and Tribes/Consortium not participating in self-governance.
(3) General increases due to Congressional appropriations must be applied consistently, except where used to achieve equitable distribution among regions and Tribes.
(4) A Tribe/Consortium will be notified of any decrease and be provided an opportunity to reconcile.
(b)
(c)
(a) A Tribe/Consortium self-governance stable base budget is the amount of recurring funding to be transferred to the Tribe/Consortium, for a period specified in the funding agreement. This amount must be adjusted to reflect subsequent annual changes in Congressional appropriations. It includes amounts that are eligible to be base transferred or have been base transferred from BIA budget accounts to self-governance budget accounts. As allowed by Congress, self-governance stable base budgets are derived from:
(1) A Tribe's/Consortium's Public Law 93-638 contract amounts;
(2) Negotiated agency, regional, and central office amounts;
(3) Other recurring funding;
(4) Special Projects, if applicable;
(5) Programmatic shortfall;
(6) Tribal priority allocation increases and decreases;
(7) Pay costs and retirement cost adjustments; and
(8) Any other inflationary cost adjustments.
(b) Self-governance stable base budgets must not include any non-recurring program funds, construction and wildland firefighting accounts, Congressional earmarks, or other funds specifically excluded by Congress. These funds are negotiated annually and may be included in the funding agreement but must not be included in the self-governance stable base budget.
(c) Self-governance stable base budgets may not include other recurring type programs that are currently in Tribal priority allocations (TPA) such as general assistance, housing improvement program (HIP), road maintenance and contract support. Should these later four programs ever become base transferred to Tribes, then they may be included in a self-governance Tribe's stable base budget.
(d) A funding agreement shall not specify the funding associated with a program described in 25 U.S.C. 5363(b)(2) or (c) without the Secretary's agreement.
No, unless otherwise requested by the Tribe/Consortium, these amounts are not renegotiated each year. If a Tribe/Consortium renegotiates funding levels:
(a) It must negotiate all funding levels in the funding agreement using the process for determining funds for BIA to carry out inherent Federal functions on the same basis as other Tribes; and
(b) It is eligible for funding amounts of new programs or available programs not previously included in the funding agreement on the same basis as other Tribes.
At the request of the Tribe/Consortium, a self-governance stable base budget identifying each Tribe's funding amount is included in BIA's budget justification for the following year, subject to Congressional appropriation.
Self-governance stable base budgets must be adjusted as follows:
(a)
(1) Increases/decreases as a result of Congressional appropriations and/or a directive in the statement of managers accompanying a conference report on an appropriations bill or continuing resolution.
(2) General decreases due to Congressional action must be applied consistently to BIA, self-governance Tribes/Consortium, and Tribes/Consortium not participating in self-governance.
(3) General increases due to Congressional appropriations must be applied consistently, except where used to achieve equitable distribution among regions and Tribes.
(4) A Tribe/Consortium will be notified of any decrease and be provided an opportunity to reconcile.
(b)
(c)
This subpart describes program eligibility, funding, terms, and conditions of funding agreements for non-BIA programs.
Funding agreements for non-BIA programs are legally binding and mutually enforceable agreements between a bureau and a Tribe/Consortium participating in the self-governance program that contain:
(a) A description of that portion or portions of a bureau program that are to be performed by the Tribe/Consortium; and
(b) Associated funding, terms and conditions under which the Tribe/Consortium will assume a program, or portion of a program.
Programs authorized by sections 403(b)(2) and 403(c) (25 U.S.C. 5363(b)(2) and 5363(c)), as amended, are eligible for inclusion in a funding agreement. The Secretary will publish annually a list of these programs in accordance with 25 U.S.C. 5372(c)(3) and (4).
Yes, those programs, or portions thereof, that are eligible for inclusion in funding agreements under section 403(b)(2) (25 U.S.C. 5363(b)(2).
Those non-BIA programs, or portions thereof, that are eligible for inclusion in funding agreements under the Act, as amended.
Non-BIA programs within the Department of special geographic, historical, or cultural significance to participating Tribes, individually or as members of a Consortium, are eligible for inclusion in funding agreements under section 403(c) (25 U.S.C. 5363(c)).
(a) Geographic generally refers to all lands presently “on or near” an Indian reservation, and all other lands within “Indian country,” as defined by 18 U.S.C. 1151. In addition, “geographic” includes:
(1) Lands of former reservations;
(2) Lands on or near those conveyed or to be conveyed under the Alaska Native Claims Settlement Act (ANCSA);
(3) Judicially established aboriginal lands of a Tribe or a Consortium member or as verified by the Secretary; and
(4) Lands and waters pertaining to Indian rights in natural resources, hunting, fishing, gathering, and subsistence activities, provided or protected by treaty or other applicable law.
(b) Historical generally refers to programs or lands having a particular history that is relevant to the Tribe. For example, particular trails, forts, significant sites, or educational activities that relate to the history of a particular Tribe.
(c) Cultural refers to programs, sites, or activities as defined by individual Tribal traditions and may include, for example:
(1) Sacred and medicinal sites;
(2) Gathering of medicines or materials such as grasses for basket weaving; or
(3) Other traditional activities, including, but not limited to, subsistence hunting, fishing, and gathering.
(d) In determining whether a Tribe/Consortium has demonstrated a non-BIA program's special geographic, historical or cultural significance to such Tribe/Consortium, the Secretary shall interpret each Federal law and regulation in a manner that will facilitate the inclusion of a program in, and the implementation of, a funding agreement.
Non-BIA programs eligible for inclusion in funding agreements under the Act, as amended, must be awarded non-competitively.
Yes, if there is a special geographic, historical, or cultural significance to the program or activity administered by the bureau, the law affords the non-BIA bureau the discretion to include the programs or activities in a funding agreement on a non-competitive basis.
(a) Inherently Federal functions in accordance with 25 U.S.C. 5361(6) and 5363(k).
(b) Programs where the statute establishing the existing program does not authorize the type of participation sought by the Tribe/Consortium. In determining whether a statute “does not authorize the type of participation sought by” the Tribe/Consortium within the meaning of 25 U.S.C. 5363(k), the Department shall take the following factors into consideration:
(1) Tribes need not be identified in an authorizing statute in order for a program, or element of a program, to be included in a funding agreement;
(2) The lack of specificity in a statute by itself does not create a blanket exclusion from inclusion of a program, or element of a program, in a funding agreement; and
(3) It is not an adequate ground to refuse to compact specific functions that are not inherently Federal in character, simply because an organic statute vests an agency with generic management authority over a broad category of land.
(c) The Secretary shall interpret each Federal law and regulation in a manner that facilitates:
(1) The inclusion of programs in funding agreements; and
(2) The implementation of funding agreements.
No, the Act, as amended, favors the inclusion of a wide range of programs.
Yes, the Secretary must consult each year with Tribes/Consortia participating in self-governance programs regarding which bureau programs are eligible for inclusion in funding agreements. If a Tribe/Consortium makes a written request for a program to be included on the annual list for non-BIA reporting found in subpart P of this part (§§ 1000.2010(c) and 1000.2012), the Secretary must provide a written rationale if the Secretary does not include such program.
(a) The Secretary shall consult with Tribes/Consortia in developing the list of available programs in accordance with subpart T of this part.
(b) In addition to the requirements in subpart T of this part:
(1) The Secretary must publish the previous year's list of available programs in accordance with 25 U.S.C. 5372(c)(3) in the
(i) All of the Secretary's proposed additions and revisions for the coming year with an explanation; and
(ii) Programmatic targets detailed in § 1000.2010(e) and an initial point of contact for each bureau.
(2) If the Secretary does not plan to include a Tribal suggestion or revision in the final published list, the Secretary must provide to such Tribe/Consortium a written explanation of reasons consistent with § 1000.855.
The list will also include programmatic targets and an initial point of contact for each bureau. Programmatic targets will be established as part of the consultation process described in § 1000.860.
Yes, the annual list will specify that bureaus will negotiate for other programs eligible under 25 U.S.C. 5363(b)(2) when requested by a Tribe/Consortium. Bureaus may negotiate for 25 U.S.C. 5363(c) programs whether or not they are on the list.
(a) If a program is of special geographic, historical, or cultural significance to more than one Tribe/Consortium, the bureau may allocate the program among the several Tribes/Consortia through separate funding agreements or select one Tribe/Consortium with whom to negotiate a funding agreement.
(b) In making a determination under paragraph (a) of this section, the bureau will, in consultation with the affected Tribes/Consortia, consider:
(1) The special significance of each Tribe's or Consortium member's interest; and
(2) The statutory objectives being served by the bureau program.
(c) The bureau's decision will be final for the Department.
It will occur during the pre-negotiation process, subject to the timeframes in subpart H of this part (
Non-BIA bureaus determine the amount of funding to be included in the funding agreement using the following principles:
(a)
(b)
(1) The funding agreement will include:
(i) Amounts equal to the direct program or project costs the bureau would have incurred were it to operate that program at the level of work mutually agreed to in the funding agreement; and:
(ii) Allowable indirect costs; and
(iii) Such amounts as the Tribe/Consortium and the Secretary may negotiate for pre-award, start-up and direct contract support costs, or upon appropriations of such funds by Congress.
(2) A bureau is not required to include management and support funds from the regional or central office level in a funding agreement, unless:
(i) The Tribe/Consortium will perform work previously performed at the regional or central office level;
(ii) The work is not compensated in the indirect cost rate; and
(iii) Including management and support costs in the funding agreement does not result in the Tribe/Consortium being paid twice for the same work when negotiated indirect cost rate is applied.
The Department's Interior Business Center (IBC) or other cognizant Federal agency and the Tribe/Consortium negotiate indirect cost rates. These rates are based on the applicable provisions of subpart E of 2 CFR part 200, or other applicable OMB cost circular and the provisions of title I of the Act, as amended. These rates are used generally by all Federal agencies for contracts and grants with the Tribe/Consortium, including self-governance agreements.
The Secretary determines the amount of indirect costs by:
(a) Applying the negotiated indirect cost rate to the appropriate direct cost base; or
(b) At the Tribe's/Consortium's option, negotiating a lump sum amount for indirect costs.
Yes, as provided for by 25 U.S.C. 5363(b)(2) and 5363(c) and as necessary to meet program mandates while consistent with this subpart, provided, however, that a bureau may not require in a funding agreement that a Tribe/Consortium retain, hire or assign a Federal employee in a contracted program, nor may a bureau condition its approval of a funding agreement upon a requirement that a Tribe/Consortium retain, hire or assign a Federal employee in a contracted program.
Yes, 25 U.S.C. 5365(d)(2) permits such reallocation, consolidation, and redesign upon joint agreement of the Secretary and the Tribe/Consortium.
No, unless otherwise required by law, the Secretary does not have to approve the reallocation of funds with the exception of construction projects.
Yes, subject to the terms of the funding agreement, a Tribe/Consortium and a non-BIA bureau may agree to provide for the performance under the funding agreement to extend beyond the fiscal year. However, the Secretary may not obligate funds in excess and advance of available appropriations.
Yes, terms and conditions in a non-BIA funding agreement may be amended during the year it is in effect as agreed to by both the Tribe/Consortium and the Secretary.
If the effective date of a successor funding agreement is not on or before the expiration of the current funding agreement, subject to terms mutually agreed upon by the Tribe/Consortium and the Secretary at the time the current funding agreement was negotiated or in a subsequent amendment, the Tribe/Consortium may continue to carry out the program authorized under the funding agreement to the extent resources permit. During this extension period, the current funding agreement shall remain in effect, including coverage of the Tribe/Consortium under the Federal Tort Claims Act (FTCA) 28 U.S.C. 2671-2680 (1994); and the Tribe/Consortium may use any funds remaining under the funding agreement, savings from other programs or Tribal funds to carry out the program. Nothing in this section authorizes a funding agreement to be continued beyond the completion of the program authorized under the funding agreement or the amended funding agreement. This section also does not entitle a Tribe/Consortium to receive, nor does it prevent a Tribe/Consortium from receiving, additional funding under any successor funding agreement. The successor funding agreement must provide funding to the Tribe/Consortium at a level necessary for the Tribe/Consortium to perform the PSFA, or portions thereof, for the full period they were or will be performed.
This subpart provides the process and timelines for negotiating a self-governance compact with the Secretary and a funding agreement with any bureau.
There are two phases of the negotiation process:
(a) The information phase; and
(b) The negotiation phase.
Any Tribe/Consortium that has been selected to participate in self-governance may initiate the information phase.
No, a Tribe/Consortium may go directly to the negotiation phase.
A Tribe/Consortium initiates the information phase by sending to the Secretary a written request clearly identified as a “Request to Initiate the Information Phase”. This request notifies the Secretary of the Tribe's/Consortium's interest in negotiating for a program(s) and request for information about the program(s). This request must be sent:
(a) If in electronic form (PDF), which is the preferred method, to [TBD]; or
(b) If in paper form by United States Mail or express courier to Director, Office of Self-Governance, at the headquarters address indicated on the official Department, OSG website.
(a) A Tribe/Consortium is encouraged to include the following in a Request to Initiate the Information Phase:
(1) As specifically as possible, the program(s) for which the Tribe/Consortium is interested in negotiating under this subpart;
(2) The bureau, service, office, or agency (bureau) that administers the program(s) of interest;
(3) The scope(s) of program activity in which the Tribe/Consortium is interested;
(4) If applicable, a brief explanation of the cultural, historical, or geographic significance to the Tribe/Consortium of the program(s);
(5) A request for budget, staffing, and other locations of the offices providing administrative support;
(6) Other information that the Tribe/Consortium may choose to submit for the Secretary's consideration; and
(7) The Tribe's/Consortium's designated contact.
(b) The Tribe/Consortium may choose to request information and technical assistance in a Request to Initiate the Information Phase notice including, but not limited to:
(1) Information that will assist the Tribe/Consortium in initiating and/or implementing the negotiation process;
(2) Information regarding grants or funds within the bureau, or other known possible sources of funding, that may be available to the Tribe/Consortium for planning and negotiating, or renegotiating a compact and/or funding agreement;
(3) Information on any funds available within the bureau, or from other sources of funding, that the Tribe/Consortium may include in the funding agreement for performing the program(s);
(4) Information contained in the previous year, present year, and, if available, next year's budget proposed by the President at the national program level and the regional/local level;
(5) Information used to support budget allocations for the programs identified (
(6) Information used to operate and/or evaluate a program, such as statutory and regulatory requirements and program standards;
(7) If applicable, information regarding how a program is administered by more than one bureau, including a point of contact for information for the other bureau(s); and
(8) Technical assistance from the bureau in preparing documents or materials that may be required for the Tribe/Consortium in the negotiation process.
A Tribe/Consortium may submit a Request to Initiate the Information Phase to the Secretary at any time.
(a) Within 15 days of receipt of a Tribe's/Consortium's Request to Initiate the Information Phase, the bureau will respond in writing to the Tribe's/Consortium's identified point of contact and identify the person designated as the bureau's representative responsible for providing information under this subpart. The bureau representative shall in good faith fulfill the following responsibilities:
(1) In accordance with paragraph (b) of this section, provide the Tribe/Consortium with all program budget and program information from each organizational level of the bureau(s); and
(2) Notify any other bureau as required under this subpart.
(b) Within 30 calendar days of receipt of the Tribe's/Consortium's request, the bureau representative must provide to the Tribe/Consortium the information responsive to the Tribe's/Consortium's Request to Initiate the Information Phase, if otherwise consistent with the bureau's budgetary process including, at a minimum:
(1) Information regarding program, budget, staffing, and locations of the offices administering the program identified by the Tribe/Consortium and related administrative support programs; and
(2) Such other information requested by the Tribe/Consortium in its request.
(c) Upon request by a Tribe/Consortium, the bureau will provide technical assistance to the Tribe/Consortium and be available to meet with Tribal/Consortium representatives to explain the information provided and discuss other questions from the Tribe/Consortium;
(d) The bureau shall issue a written explanation if it determines it cannot provide information required under paragraph (b) within the 30-day period. If a bureau makes such a determination, then the bureau must provide any other information that is reasonably related to the Tribe/Consortium's request and the date when other information, not provided within 30 days but available for disclosure to the Tribe/Consortium, can be provided;
(e) The Secretary shall provide information under this section in a manner that facilitates the inclusion of programs in funding agreements and the implementation of funding agreements (25 U.S.C. 5369);
(f) If a bureau fails to timely provide information under this subpart, the Tribe/Consortium may:
(1) File a Freedom of Information Act request. These requests shall be considered for a fee waiver under the Freedom of Information Act; and/or
(2) Appeal in accordance with subpart R of this part.
A Tribe/Consortium initiates the negotiation phase by sending to the Secretary a written request clearly identified as a Request to Initiate the Negotiation Phase. This request notifies the Secretary of the Tribe's/Consortium's interest in negotiating for a program(s). This request must be sent:
(a) If in electronic form (PDF), which is the preferred method, to [TBD]; or
(b) If in paper form by United States Mail or express courier to the Director, Office of Self-Governance, at the headquarters address indicated on the official Department, OSG website.
Within 15 days of receiving a Request to Initiate the Negotiation Phase for a
Within 15 days of receiving a Tribe's/Consortium's Request to Initiate the Negotiation Phase for a non-BIA funding agreement, the Department will take the steps in this section:
(a) If the program involves multiple bureaus, the Secretary will identify the lead Federal negotiator(s);
(b) If the program is authorized for negotiations by 25 U.S.C. 5363(b)(2), the bureau will identify the lead Federal negotiator(s).
(c) If the program may be authorized for negotiations by 25 U.S.C. 5363(c), the bureau will identify the lead Federal negotiator(s) and schedule a pre-negotiation discussion with the Tribe/Consortium as soon as possible. The purpose of the discussion is to assist the bureau in determining if the program is available for negotiation. If there is agreement that a program is eligible for inclusion in a funding agreement, the parties may jointly agree to waive this discussion.
(d) Within 10 days after convening a discussion under paragraph (c), or no later than 30 days of receipt by the Secretary of the Tribe's/Consortium's Request to Initiate the Negotiation Phase:
(1) If the program is available for inclusion in a funding agreement, the bureau will begin negotiating a non-BIA funding agreement in accordance with subpart G of this part; or
(2) If the program is unavailable for negotiation, the bureau will provide a written explanation of why the program is unavailable for inclusion in a funding agreement.
(a) Within 30 days of receiving a written Request to Initiate the Negotiation Phase, the bureau and the Tribe/Consortium will agree to a date to conduct an initial negotiation meeting. Subsequent meetings will be held with reasonable frequency at reasonable times.
(b) Tribe/Consortium and bureau lead negotiators must:
(1) Be authorized to negotiate on behalf of their government; and
(2) Involve all necessary persons in the negotiation process.
(c) Once negotiations have been completed, with the parties in agreement concerning all terms and conditions of a compact and/or funding agreement, the parties will acknowledge in writing the date on which agreement was reached and:
(1) The Secretary and Tribe/Consortium will finalize the compact and/or funding agreement for submission to the Tribe/Consortium within 15 days or by a mutually agreed upon date; and
(2) Upon the Secretary's receipt of a compact or funding agreement signed by the Tribe/Consortium, the Secretary will execute and return the funding agreement by a mutually agreed upon date not to exceed 45 days, and the compact by a mutually agreed upon date not to exceed 90 days.
The negotiation meetings referred to in § 1000.1055 must address at a minimum the following:
(a) The specific Tribe/Consortium proposal(s) and intentions;
(b) Legal or program issues that the bureau or the Tribe/Consortium identify as concerns;
(c) Options for negotiating programs and related budget amounts, including mutually agreeable options for developing alternative formats for presenting budget information to the Tribe/Consortium;
(d) Dates for conducting and concluding negotiations;
(e) Protocols for conducting negotiations;
(f) Responsibility for preparation of a written summary of the discussions; and
(g) Who will prepare an initial draft of the compact or funding agreement, as applicable.
(a) After all necessary parties have signed the compact or funding agreement, a copy is sent to the Tribe/Consortium.
(b) No later than 90 days before the proposed effective date of an executed funding agreement, the Secretary shall forward a copy of the funding agreement to each Indian Tribe/Consortium served by the local BIA Agency office that serves any Tribe/Consortium that is a party to the funding agreement. The Secretary's obligation under 25 U.S.C. 5363(f) shall not impact the funding agreement's effective date as specified under § 1000.1075.
If the bureau and Tribe/Consortium are unable to agree, in whole or in part, on the terms of a compact or funding agreement (including funding levels) then the final offer process in subpart I of this part shall apply.
A funding agreement shall become effective on the date it is fully executed or as identified by its terms.
A subsequent funding agreement is negotiated after a Tribe's/Consortium's existing funding agreement. The parties to the funding agreement should generally use the terms of the existing funding agreement to expedite and simplify the exchange of information and the negotiation process.
Although a written request is desirable to document the precise request and date of the request, a written request is not mandatory. If either party anticipates a significant change in an existing program in the funding agreement, it should notify the other party of the change at the earliest possible date so that the other party may plan accordingly.
The Tribe/Consortium and the bureau shall use the procedures in §§ 1000.1005 through 1000.1070.
This subpart explains the final offer process provided by the Act for resolving, within a specific timeframe, disputes that may develop in negotiation of compacts, funding agreements, or amendments thereof.
The Tribe/Consortium may submit a final offer when it has determined that the Tribe/Consortium and the Secretary are unable to agree, in whole or in part, on the terms of a compact, funding agreement, or amendment (including funding levels).
(a) A Tribe/Consortium must submit its written final offer for a compact or funding agreement, or amendment thereof:
(1) If in electronic form (PDF), which is the preferred method, to [TBD] for any DOI program; or
(2) If in paper form by United States Mail or express courier to the Director, Office of Self-Governance, at the headquarters address indicated in the official Department, OSG website.
(b) The document should be separate from the compact, funding agreement or amendment and clearly identified as a “Final Offer.”
A final offer must contain a description of the disagreement between the Secretary and the Tribe/Consortium, the Tribe's/Consortium's final proposal to resolve the disagreement, including any draft proposed terms to be included in a compact, funding agreement, or amendment, and the name and contact information for the person authorized to act on behalf of the Tribe/Consortium.
The 60-day review period begins on the date the final offer is received at the office's mailing or email address identified in this subpart. Demonstration of receipt includes a postal return receipt, express delivery service receipt, or date stamp; all email submissions are presumed received by the Secretary no later than the next business day following transmission from the Tribe/Consortium.
(a) Within 10 days of receipt by the officials designated by the Secretary in § 1000.1110, the Department will send the Tribe/Consortium a written acknowledgement of the final offer.
(b) The acknowledgement reference in paragraph (a) shall include:
(1) A statement acknowledging receipt of the final offer;
(2) The date the final offer was received and the last day of the applicable statutory review period;
(3) If applicable, the Secretary may request additional information. A request for more information has no effect on deadlines for a response under this subpart; and
(4) A statement notifying the Tribe/Consortium that technical assistance is available upon request to comply with paragraph (b)(3).
(a) Yes, the Secretary may request an extension of time before the expiration of the 60-day review period. The Tribe/Consortium may either grant or deny the Secretary's request for an extension. To be effective, any grant of extension of time must be in writing and be signed by the person authorized by the Tribe/Consortium to grant the extension before the expiration of the 60-day review period.
(b) The deadline described in paragraph (a) may be extended for any additional length of time as agreed upon in writing by the Tribe/Consortium and the Secretary, and
(c) The 60-day period may be extended up to 30 days for circumstances beyond the control of the Secretary, upon written request from the Secretary to the Tribe/Consortium.
(d) A Tribe/Consortium must respond within 10 days of receiving the Secretary's request for an extension under paragraph (c).
The final offer is:
(a) Accepted automatically by operation of law for a compact or funding agreement provision except as to its application to a program described under 25 U.S.C. 5363(c); or
(b) Rejected automatically by operation of law with respect to any program described under 25 U.S.C. 5363(c).
After the Tribe/Consortium's final offer is accepted or accepted by the operations of law, within 10 days the parties will amend the compact or funding agreement to incorporate the accepted terms of the final offer.
The Secretary may reject a final offer for one of the following reasons:
(a) The amount of funds proposed in the final offer exceeds the applicable funding level to which the Tribe/Consortium is entitled under the Act;
(b) The program that is the subject of the final offer is an inherent Federal function that cannot legally be delegated to a Tribe/Consortium or is subject to discretion of the Secretary under the Act;
(c) The Tribe/Consortium cannot carry out the program in a manner that would not result in significant danger or risk to the public health or safety, to natural resources, or to trust resources;
(d) The Tribe/Consortium is not eligible to participate in self-governance under 25 U.S.C. 5362;
(e) The funding agreement would violate a Federal statute or regulation; or
(f) With respect to a program or portion of a program included in a final offer pursuant to 25 U.S.C. 5363(b)(2), the program or the portion of the program is not otherwise available under 25 U.S.C. 5321(a)(1)(E).
The Secretary rejects a final offer by providing written notice to the Tribe/Consortium based on the criteria in § 1000.1145 not more than 60 days after the receipt of a final offer, or a later date in accordance with § 1000.1130.
A significant danger or risk is determined on a case-by-case basis in accordance with 25 U.S.C. 5366.
Yes, the Secretary must provide technical assistance to overcome the objection stated in the notification of the rejection of the final offer.
Yes, the Tribe/Consortium is entitled to appeal the decision of the Secretary, with an agency hearing on the record, and the right to engage in full discovery relevant to any issue raised in the matter. The procedures for appeals are found in subpart R of this part. Alternatively, at its option, the Tribe/Consortium has the right to initiate an action challenging the Secretary's decision in U.S. District Court under 25 U.S.C. 5331(a).
Yes, subject to 25 U.S.C. 5366(c)(6)(A)(iv).
No, appealing the decision does not prevent the Secretary and Tribe/Consortium from entering into any
With respect to any appeal, hearing, or civil action, brought under this subpart, the Secretary shall have the burden of clearly demonstrating the validity of the grounds for rejecting the final offer.
All regulations that govern the operation of programs included in a funding agreement apply unless waived under this subpart. To the maximum extent practical, the parties should identify these regulations in the funding agreement.
Yes, a Tribe/Consortium may ask the Secretary to grant a waiver of some or all Department regulation(s) applicable to a program, in whole or in part, operated by a Tribe/Consortium under a compact or funding agreement.
A Tribe/Consortium may request a waiver of a regulation:
(a) As part of the negotiation process;
(b) At any time after a funding agreement has been executed; or
(c) Following a denial decision, provided that the Tribe/Consortium acknowledges that the submission commences a new 120-day review period under § 1000.1240.
(a) A Tribe/Consortium must submit its written waiver request for any DOI compact, funding agreement, or amendment thereof:
(1) In electronic form (PDF), which is the preferred method, by email to [TBD]; or
(2) If in paper form by United States Mail or express courier to Director, Office of Self-Governance at the headquarters address indicated on the official Department OSG website.
(b) The waiver request, including one made under § 1000.1210(a), must be a separate document from the compact, funding agreement, or amendment and clearly identified as a “Waiver Request.”
(a) For a waiver request involving any program that has been integrated under an approved plan authorized by Public Law 102-477, as amended, or proposed to be integrated under a Public Law 102-477 plan, the Tribe must submit the request to the BIA—Division of Workforce Development.
(b) The provisions of 25 U.S.C. 3406 (b),
(c) If a waiver of regulations had been previously obtained for a program administered by the Department that is later integrated into a plan authorized by Public Law 102-477, such waiver of regulations will continue to be in effect.
(a) Yes, a Tribe/Consortium may request an optional meeting or other informal discussion with the appropriate bureau official(s).
(b) To provide reasonable time for consideration, the Tribe/Consortium may request a meeting or other informal discussion to be held with the appropriate bureau official(s) no less than 30 days before the end of the 120-day period, unless the parties agree on another date.
(c) For all purposes relating to these meeting or informal discussion procedures, the parties are the designated representatives of the Tribe/Consortium and the appropriate bureau official(s) from whom the waiver is requested.
Yes.
(a)
(b)
(1) Provide technical assistance to overcome any objection which the bureau might have to the request while a waiver request is under consideration; and/or
(2) Identify additional information that may assist the bureau in making a decision.
Within 10 business days of receipt, the officials designated by the Secretary in § 1000.1215 will email to the Tribe/Consortium a letter:
(a) Acknowledging receipt of the waiver request; and
(b) Identifying the date the waiver request was received and the last day of the applicable statutory review period.
(a) Not later than 120 days after receipt of a waiver request by the Secretary and the Secretary's designated officials in accordance with § 1000.1215.
(b) This 120-day period may be extended for any length of time, as agreed upon by both the Tribe/Consortium and the Secretary.
(a) The Secretary must issue a written decision explaining the rationale for denying or approving the requested waiver.
(b) If the Secretary issues a written decision denying the requested waiver, it must describe the basis for the specific finding that the identified text in the regulation may not be waived because such a waiver is prohibited by Federal law.
(c) The decision is final for the Department.
If the Secretary fails to make a determination with respect to a waiver request within the period specified in § 1000.1240 (including any extension agreed to under that section), the waiver request is automatically, by operation of law,
(a) Deemed approved except for programs eligible under section 403(b)(2) or section 403(c) (25 U.S.C. 5363(b)(2) or 5363(c)), as amended; or
(b) Deemed denied with respect to programs eligible under section 403(b)(2) or section 403(c) (25 U.S.C. 5363(b)(2) or 5363(c)), as amended. Such deemed denial is a final decision for the Department.
Yes, the Tribe/Consortium may appeal the Secretary's decision
Upon approval, a waiver is deemed approved until such time as rescinded by the Tribe/Consortium.
Yes. If a Tribe/Consortium chooses to withdraw a waiver request before the Secretary makes a decision, it must do so in writing prior to the end of the 120-day time frame.
Yes. A Tribe/Consortium may have more than one waiver request pending before the Secretary at the same time, provided that each waiver request affects a different regulatory provision.
Yes, pending final decision on a waiver request, any Tribe/Consortium may continue to negotiate and implement a funding agreement. The regulation will apply until it is waived. The funding agreement will be subject to later adjustment based on an affirmative final decision on the Tribe's/Consortium's waiver request.
The waiver approval is made part of the funding agreement by attaching a copy of it to the funding agreement and by mutually executing any necessary conforming amendments to the funding agreement. The waiver requests and bureau's decision document(s), pursuant to § 1000.1245, will be posted and archived on the OSG website or successor technology within 30 days of the decision. Such posting/archiving shall include deemed approved and deemed denied decisions under § 1000.1250. All decisions shall be made available on request, and a summary of decisions will be included in the Self Governance Annual Report to Congress.
(a) Coordination and information exchange between the Tribe/Consortium and the Federal Government;
(b) Preparation of a Tribe's/Consortium's project agreement; and
(c) A Tribe's/Consortium's subcontract scope of work identification and subcontract preparation, and competitive selection of construction contract subcontractors.
(a) Establishes project phase start and completion dates, which may extend over a period of one or more years;
(b) Provides a general description of the project, including the scope of work, references to design criteria and standards by which it will be accomplished, and other terms and conditions;
(c) Identifies the responsibilities of the Tribe/Consortium and the Secretary;
(d) Addresses how project-related environmental considerations will be addressed;
(e) Identifies the owner and operations and maintenance entity of the proposed work;
(f) Provides a budget;
(g) Provides a payment process;
(h) Establishes the duration of the agreement based on the time necessary to complete the specified scope of work, which may be one or more years; and
(i) Identifies the agreement of the Secretary and Tribe/Consortium over which entity will bear any additional costs necessary to meet changes in scope, or errors or omissions in design and construction.
(a) All construction programs and construction projects included in a funding agreement under title IV are subject to this subpart.
(b) The following programs and activities are not construction programs and activities for the purposes of this subpart:
(1) Activities limited to providing planning services, administrative support services, coordination, responsibility for the construction project, site-management and administration of the project, which may include cost management, project budgeting, project scheduling and procurement.
(2) The BIA Housing Improvement Program;
(3) The BIA Road Maintenance Program and other road maintenance activities as maintenance is defined by 23 U.S.C. 101;
(4) Operation and maintenance programs;
(5) Child Care Development Fund projects using funds transferred under an approved Public Law 102-477 plan; and
(6) Non-403(c) Programs that are less than $100,000, subject to 25 U.S.C. 5363(e)(2), other applicable Federal law, and § 1000.1515.
Yes, program or project-specific contracting mechanisms or agreements involving construction and related activities will satisfy the requirements of this subpart and may be incorporated into the Tribe/Consortium's funding agreement, provided that such program or project-specific contracting mechanism or agreement addresses all the requirements of 25 U.S.C. 5367 that are applicable to the construction program or project. Nothing herein shall require the Secretary to duplicate the Federal requirements of 25 U.S.C. 5367 that are applicable to the project in the program or project-specific contracting mechanism or agreement.
Yes, the Secretary may accept funds from another Department for a program or project involving construction and related activities for transfer to the Tribe/Consortium under its funding agreement or construction project agreement, subject to an interagency agreement between the Secretary and the Federal agency, with the concurrence of the Tribe/Consortium before such interagency agreement is finalized, that addresses the purpose, intent, Federal oversight and other responsibilities for the construction program or project, and related activities.
(a) As authorized by 25 U.S.C. 5367(g), and at the option of the Tribe/Consortium, construction project funding proposals shall be negotiated with the Secretary pursuant to the statutory process in 25 U.S.C. 5324, and any resulting agreement shall be incorporated into the funding agreement as an “addendum”; or
(b) A Tribe/Consortium may negotiate a construction project with the Secretary pursuant to the statutory process in 25 U.S.C. 5324, and incorporate any resulting construction project agreement into a separate title I construction contract and funding agreement subject to title I and the part 900 regulations, including subpart J (Construction) of part 900. Such construction project shall not be subject to this subpart.
No, a BIA or non-BIA construction program or project does not automatically create an agency relationship. However, Federal law, provisions of a funding agreement, or Federal actions may create an agency relationship.
Yes, before developing a new project resource allocation methodology and application process the Secretary must consult with all Indian Tribes/Consortia as set forth in subpart I of this part.
Before spending any funds for planning, design, construction, or renovation projects, whether or not subject to a competitive application and ranking process, the Secretary must confer with any Indian Tribe/Consortium that would be significantly affected by the expenditure to determine and honor Tribal preferences whenever practicable concerning the size, location, type, and other characteristics of the project.
(a) A Tribe/Consortium may start the process of developing a construction project proposal to include in a funding agreement or construction project agreement by:
(1) Notifying the Secretary in writing that the Tribe/Consortium wishes to perform one or more construction projects under 25 U.S.C. 5367; or
(2) Submitting a proposed construction project agreement for consideration and negotiation, or
(3) A combination of the actions described in paragraphs (a)(1) and (2) of this section.
(b) Within 30 days after receiving a request from a Tribe/Consortium, the Secretary and the Tribe/Consortium shall exchange all applicable information available to each party about the project including, but not limited to, planning, construction drawings, maps, engineering reports, design reports, plans of requirements, cost estimates, environmental assessments, or environmental impact reports and archaeological reports.
A construction project proposal must contain all of the required elements of a construction project contained in § 1000.1355. In addition to these minimum requirements, a Tribe/Consortium may include additional items for negotiation.
Yes, a Tribe/Consortium may include multiple projects in a single funding agreement or construction project agreement if funded by the same bureau, or may add additional projects by amendment(s) to an existing funding agreement or construction project agreement with the same bureau.
(a) No, the Tribe/Consortium and the Secretary must agree upon and specify appropriate building codes and architectural and engineering standards (including health and safety) which must be in conformity with nationally recognized standards for comparable projects as long as they meet or exceed the requirements of 25 U.S.C. 5367(d).
(b) The Secretary may provide, or the Tribe/Consortium may request, Federal construction guidelines and manuals for consideration by the Tribe/Consortium in the preparation of its construction project proposal. If Tribal construction codes and standards (including national, regional, State, or Tribal building codes or contrition industry standards) that meet or exceed otherwise applicable standards, the Secretary must accept the Tribally proposed standards.
Unless otherwise agreed to in writing by a Tribe/Consortium, no provision of title 41, United States Code, the Federal Acquisition Regulations, or any other law or regulation pertaining to Federal procurement, shall apply to any construction program or project carried out under title IV of the Act. Absent a negotiated agreement, such provisions and regulatory requirements do not apply.
(a) For each construction project or program carried out by the Tribe/Consortium under 25 U.S.C. 5367, the Tribe/Consortium and the Secretary shall negotiate a provision in the construction project agreement or funding agreement that identifies:
(1) The approximate start and completion dates for the project, which may extend over a period of one or more years;
(2) A general description of the project, including the scope of work, references to design criteria, and other terms and conditions;
(3) The responsibilities of the Tribe/Consortium for the project;
(4) How project-related environmental considerations will be addressed;
(5) The amount of Federal funds provided for the project;
(6) The terms and conditions by which funding for the project, including contingency funds, will be paid to the Tribe/Consortium by the Secretary;
(7) The obligations of the Tribe/Consortium to comply with the applicable codes and standards referenced in 25 U.S.C. 5367(d) and applicable Federal laws and regulations;
(8) The agreement of the parties over who will bear any additional costs necessary to meet changes in scope, or errors or omissions in design and construction;
(9) The entity responsible to issue any Certificate of Occupancy, if applicable; and
(10) Other terms and conditions the parties mutually agree upon.
(b) The Tribe/Consortium shall include in the construction project agreement or funding agreement that includes a construction project or program a provision for the submission to the Secretary of progress reports and financial status reports not less than semi-annually commencing after funding for the project is received by the Tribe/Consortium and continuing until the construction of the project is complete.
(a) In carrying out a construction project under this subpart, a Tribe/Consortium must:
(1) Adhere to applicable Federal, State, local, and Tribal building codes, architectural and engineering standards, and applicable Federal guidelines regarding design, space, and operational standards, appropriate for the particular project; and
(2) Use only architects and engineers who:
(i) Are licensed to practice in the State in which the facility will be built; and
(ii) Certify that:
(A) They are qualified to perform the work required by the specific construction involved; and
(B) Upon completion of design, the plans, and specifications meet or exceed the applicable construction and safety codes.
No, Tribes/Consortia are not required to carry out any activities involving NEPA in order to enter into a construction project agreement.
(a) A Tribe/Consortium may, subject to the agreement of the Secretary, elect to assume some Federal responsibilities under NEPA, NHPA, and related provisions of other laws and regulations that would apply if the Secretary were to undertake a construction project by adopting a resolution:
(1) Designating a certifying Tribal officer to represent the Indian Tribe and to assume the status of a responsible Federal official under those Acts, laws, or regulations; and
(2) Accepting the jurisdiction of the United States courts for the purpose of enforcing the responsibilities of the certifying Tribal officer assuming the status of a responsible Federal official under those Acts, laws, or regulations.
(b) Notwithstanding paragraph (a), nothing in this section authorizes the Secretary to include in any compact or funding agreement duties of the Secretary under NEPA, NHPA, and other related provisions of law that are inherent Federal functions.
A Tribe/Consortium may elect to carry out some or all activities involving development and preparation of applicable documentation under NEPA, NHPA and related provisions of other laws and regulations for final review and approval by the Secretary.
No, the Tribe/Consortium may adopt a single resolution or take equivalent Tribal action to assume some environmental responsibilities of the Secretary for NEPA, NHPA, and related laws and regulations for a single project, multiple projects, a class of projects, or all projects performed under 25 U.S.C. 5367.
(a) Depending upon the nature and the location of the construction project, environmental laws related to NEPA and NHPA may include:
(1) Archaeological and Historical Data Preservation Act (54 U.S.C. 3120501 through 3120508);
(2) Archeological Resources Protection Act (16 U.S.C. 470aa
(3) Clean Air Act (42 U.S.C. 7401
(4) Clean Water Act (33 U.S.C. 1251
(5) Coastal Barrier Improvement Act (16 U.S.C. 3501
(6) Coastal Barrier Resources Act (16 U.S.C. 3501
(7) Coastal Zone Management Act (16 U.S.C. 1451
(8) Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601
(9) Endangered Species Act (16 U.S.C. 1531
(10) Farmland Protection Policy Act (7 U.S.C. 4201
(11) Marine Protection, Research, and Sanctuaries Act (33 U.S.C. 1401 through 1445; 16 U.S.C. 1431 through 1447F; 33 U.S.C. 2801 through 2805);
(12) National Trails System Act (16 U.S.C. 1241
(13) Native American Graves Protection and Repatriation Act (25 U.S.C. 3001
(14) Noise Control Act (42 U.S.C. 4901
(15) Resource Conservation and Recovery Act (42 U.S.C. 6901
(16) Safe Drinking Water Act (42 U.S.C. 300f
(17) Toxic Substance Control Act (15 U.S.C. 2601
(18) Wild and Scenic Rivers Act (16 U.S.C. 1271
(19) Wilderness Act (16 U.S.C. 1131
(b) This section provides a list of environmental laws for informational purposes only and does not create any legal rights or remedies, or imply private rights of action.
(a) During the environmental review process, the following activities may occur:
(1) Consult with appropriate Tribal, Federal, state, local officials, and interested parties on potential environmental effects;
(2) Document assessment of potential environmental effects;
(3) Perform necessary environmental surveys and inventories;
(4) Consult with the Advisory Council on Historic Preservation, acting through the SHPO or THPO, to ensure compliance with the NHPA;
(5) Assess whether extraordinary or exceptional circumstances exist that may prevent the project from meeting the criteria for categorical exclusion from further environmental review under NEPA, or if an environmental assessment is required;
(6) Identify methods to avoid or mitigate potential adverse effects; and
(7) Obtain environmental permits and approvals as required.
(b) This section is for informational purposes only and does not create any legal rights or remedies, or imply private rights of action.
Yes, Council on Environmental Quality (CEQ) regulations direct agencies to make use of any reliable data sources, in carrying out their responsibilities under NEPA. The Secretary recognizes that Tribes/Consortia hold relevant information and perspectives regarding the environment, and Indigenous Knowledge can inform the Secretary's environmental analysis. Similarly, section 106 of NHPA (54 U.S.C. 306108) establishes a process to ensure that the Secretary take into account the effects of a project the Department carries out, licenses, or assists on historic properties.
Yes, consistent with 40 CFR 1501.7(b) and 1501.8, a Tribe/Consortium may act as a cooperating agency or joint lead agency for environmental review purposes under this part. For informational purposes only, the term “cooperating agency” is defined at 40 CFR 1508.1(g) and the criteria for a Tribe/Consortium to act as a “cooperating agency” are set out in 40 CFR 1501.8 and Department regulations at 43 CFR 46.225, respectively.
(a) A Tribe/Consortium complies with NEPA and NHPA by:
(1) Developing and adopting their own environmental review procedures that meet or exceed applicable Federal requirements;
(2) Adopting the procedures of the Secretary; or
(3) Adopting the procedures of another Federal agency.
(b) The Tribe/Consortium shall reference such procedures in the funding agreement or construction project agreement and use such procedures in undertaking the project.
No, the Federal agency is responsible for ensuring its own policies and procedures meet the requirements of NEPA, NHPA, and related environmental laws, not the Tribe/Consortium.
Yes, funds are available:
(a) For project-specific environmental costs through the construction project agreement or funding agreement that includes the construction project; and
(b) For environmental review program costs through a funding agreement and/or a construction project agreement.
(a) The Tribe/Consortium and the Secretary shall work together during the initial stages of project development to identify program and project related costs associated with carrying out environmental responsibilities for proposed projects. The goal in this process is to identify the costs associated with all foreseeable environmental review activities.
(b) If unforeseen environmental review and compliance costs are identified during the performance of the construction project, the Tribe/Consortium or, at the request of the Tribe/Consortium, the Tribe/Consortium and Secretary may do one or more of the following:
(1) Mitigate adverse environmental effects;
(2) Alter the project scope of work; and/or
(3) Add additional program and/or project funding, including seeking supplemental appropriations.
(a) A Tribe/Consortium may include costs allowed by applicable provisions of subpart E of 2 CFR part 200, and costs allowed under 25 U.S.C. 5367, 25 U.S.C. 5325 and 25 U.S.C. 5324(m). The cost incurred will vary depending on which phase of the construction process the Tribe/Consortium is conducting and type of construction project agreement that will be used.
(b) Regardless of whether a construction project agreement or funding agreement that includes a construction project is fixed priced or cost-reimbursement, budgets may include costs or fees associated with the following:
(1) Construction project proposal preparation;
(2) Conducting community meetings to develop project documents;
(3) Architects, engineers, and other consultants to prepare project planning documents, to develop project plans and specifications, and to assist in oversight of the design during construction;
(4) Real property lease or acquisition;
(5) Development of project surveys including topographical surveys, site boundary descriptions, geotechnical surveys, archeological surveys, and NEPA compliance;
(6) Project management, superintendence, safety, and inspection;
(7) Travel, including local travel incurred as a direct result of conducting the construction project agreement and remote travel in conjunction with the project;
(8) Consultants, such as demographic consultants, planning consultants, attorneys, accountants, and personnel who provide services, to include construction management services;
(9) Project site development;
(10) Project construction cost;
(11) General, administrative overhead, and indirect costs;
(12) Securing and installing moveable equipment, telecommunications and data processing equipment, furnishings, including works of art, and special purpose equipment when part of a construction contract;
(12) Other costs directly related to performing the construction project;
(13) Project Contingency;
(i) A cost-reimbursement project agreement budgets contingency as a broad category. Project contingency remaining at the end of the project is considered savings.
(ii) Fixed-price agreements budget project contingency in the lump sum price or unit price.
(c) In the case of a fixed-price project agreement, a reasonable profit determined by taking into consideration the relevant risks and local market conditions.
No, the Secretary may not reject a Tribe's/Consortium's final offer of a construction project based on a determination of Tribal capacity or capability.
As described in subpart I—Final Offer of this part, rejection of a final offer by the Secretary for a construction project must be based on a specific finding by the Secretary that clearly demonstrates, or that is supported by a controlling legal authority, that one or more of the statutory criteria under 25 U.S.C. 5366(c)(6) exist to reject the final offer.
The Secretary has the following role regarding a construction program or project contained in a funding agreement or construction project agreement:
(a) On a schedule negotiated by the Secretary and the Tribe/Consortium, to ensure health and safety standards and compliance with Federal law, the Secretary shall review and verify, to the satisfaction of the Secretary:
(1) That project planning and documents prepared by the Tribe/Consortium in advance of initial construction are in conformity with the obligations of the Tribe/Consortium under 25 U.S.C. 5367(d); and
(2) Before the project planning and design documents are implemented, that subsequent document amendments that result in a significant change in construction are in conformity with the obligations of the Tribe/Consortium under 25 U.S.C. 5367(d).
(b) Where no time is otherwise specified in a funding agreement or construction project agreement, the Secretary shall complete the review and verification of project documents required under 25 U.S.C. 5367(h) and provide a Tribe/Consortium a written response within 30 days of the Secretary's receipt from the Tribe/Consortium of project planning and design documents. Absent a written response by the Secretary within the 30-day period, the project planning and design documents, or amendments to such documents, shall be deemed to be conformity with the Tribe's obligations under 25 U.S.C. 5367(d).
(c) The Secretary must approve any proposed changes in the construction project that require;
(1) An increase in the negotiated funding amount; or
(2) An increase in the negotiated performance period; or
(3) A significant departure from the scope or objective of the construction program as agreed to in the funding agreement or construction project agreement.
(d) A Tribe/Consortium may make immaterial changes to the performance period and make budget adjustments within available Federal funding without an amendment to the funding agreement or construction project agreement.
(e) The Secretary may conduct onsite project oversight visits semiannually or on an alternate schedule agreed to by the Secretary and the Tribe/Consortium. The Secretary must provide the Tribe/Consortium with reasonable advance written notice to assist the Tribe/Consortium in coordinating the visit. The purpose of the visit is to review the progress under the construction project agreement or funding agreement. At the request of the Tribe/Consortium, the Secretary must provide the Tribe/Consortium a written site visit report;
(f) Where the Secretary and the Tribe/Consortium share construction project or program activities, the Secretary and Tribe/Consortium shall provide for the exchange of information;
(g) The Secretary may reassume the construction portion of a funding agreement or construction project agreement if the Secretary, in accordance with subpart M of this part, makes a written finding of:
(1) A significant failure to substantially carry out the terms of the funding agreement or construction agreement without good cause; or
(2) Imminent jeopardy to a physical trust asset, to a natural resource, or that adversely affects public health and safety as provided in subpart M of this part.
A significant change in the original scope of work is:
(a) A change that would result in a cost that exceeds the total of the Federal project funds available and the Tribe's/Consortium's contingency funds; or
(b) A material departure from the original scope of work, including substantial departure from timelines negotiated in the construction project agreement.
(a) The Secretary may, in lieu of reassumption under subpart M of this part, allow a Tribe/Consortium to suspend certain work under a construction portion of a funding agreement or construction project agreement for up to 30 days only if the Secretary notifies the Tribe/Consortium in writing that the Secretary has found that:
(1) Site conditions adversely affect health and safety; or
(2) Work in progress or completed for the construction project fails to substantially carry out the terms of the construction project agreement or funding agreement without good cause.
(b) The Secretary may suspend only work directly related to the criteria specified in paragraph (a) of this section unless other reasons for suspension are specifically negotiated in the funding agreement or construction project agreement.
(c) Unless the Secretary determines that a health and safety emergency requiring immediate reassumption under subpart M of this part exists, before requesting a suspension of work on the project by the Tribe/Consortium, the Secretary must provide:
(1) A 5-working days written notice to the Tribe/Consortium specifying the reasons the Secretary requests a suspension of certain project work; and
(2) A reasonable opportunity for the Tribe/Consortium to correct the problem.
(d) The Tribe/Consortium must be compensated for reasonable costs due to any suspension of work that occurred through no fault of the Tribe/Consortium. Project funds will not be used for this purpose. However, if suspension occurs due to the action or inaction of the Tribe/Consortium, then project funds will be used to cover suspension related activities.
If there is a reassumption by the Secretary of a project for substantial failure to carry out the funding agreement or construction project agreement, property and funding will be returned as provided in subparts M and N of this part.
Except when the Secretary makes a finding of imminent jeopardy to a physical trust asset, a natural resource, or public health and safety, requiring immediate reassumption as provided in subpart M of this part, a finding by the Secretary of substantial failure to carry out the terms of the construction project agreement or funding agreement that includes a construction project or program without good cause is not corrected or resolved by the Tribe/Consortium during the suspension of work, the Secretary may initiate a reassumption at the end of the 30-day suspension of work if an extension has not been negotiated. Any unresolved dispute will be processed in accordance with the Contract Disputes Act of 1978, 41 U.S.C. 7101,
(a) For all construction projects performed under a funding agreement or construction project agreement, advance payments shall be made annually or semiannually, at the Tribe's/Consortium's option as provided in 25 U.S.C. 5367(f). The initial payment shall include all contingency funding for the project or phase of the project to the extent that there are funds appropriated for that purpose.
(b) The amount of subsequent advance payments is based on the mutually agreeable project schedule reflecting:
(1) Work to be accomplished within the advance payment period;
(2) Work already accomplished; and
(3) Total prior payments for each annual or semiannual advance payment period.
(c) For lump sum, fixed price agreements, at the request of the Tribe/Consortium, payments shall be based on an advance payment period measured as follows:
(1) One year; or
(2) Project Phase (
(d) For construction project agreements, the amount of advance payments shall include the funds necessary to perform the work identified in the advance payment period of one year.
(e) Any agreement to advance funds under paragraphs (b), (c) or (d) of this section is subject to the availability of appropriations.
(f) Initial advance payments are due within 10 days of the effective date of the funding agreement or construction project agreement, and subsequent advance payments are due:
(1) Within 10 days of apportionment for annual payments, or
(2) Within 10 days of the start date of the project phase for phase payments.
Yes, upon completion of a facility constructed under the Act, the Secretary shall include the facility among those eligible for annual operation and maintenance funding support comparable to that provided for similar facilities funded by the Department as annual appropriations are available and to the extent that the facility size and complexity and other factors do not exceed the funding formula criteria for comparable buildings.
(a) In carrying out a construction project under the Act, a Tribe/Consortium shall assume responsibility for the completion of the construction project and of a facility that is usable for the purpose for which the Tribe/Consortium received funding, including day-to-day on-site management and administration of the project, in accordance with the negotiated funding agreement or construction project agreement. However, Tribes/Consortia are not required to perform beyond the amount of funds provided. For example, a Tribe/Consortium may encounter unforeseen circumstances during the term of a funding agreement or construction project agreement. If this occurs, options available to the Tribe/Consortium include, but are not limited to:
(1) Reallocating existing funding;
(2) Reducing/revising the scope of work that does not require an amendment because it does not result in a significant change;
(3) Utilizing savings;
(4) Requesting additional funds or appropriations;
(5) Utilizing interest earnings;
(6) Seeking funds from other sources; and/or
(7) Redesigning or re-scoping that does not result in a significant change by amendment as provided in the funding agreement the construction project agreement.
(b) The Tribe/Consortium must give the Secretary timely notice of any proposed changes to the project that require an increase to the negotiated funding amount or an increase in the negotiated performance period or any other significant departure from the scope or objective of the project. The Tribe/Consortium and Secretary may negotiate to include timely notice requirements in the funding agreement or construction project agreement.
Yes, as required under § 1000.1355(b), construction project progress reports and financial reports are only required for active construction projects. The construction progress and financial reports shall provide the following information:
(a) Construction project progress reports contain information about
(1) Phase(s) of the project completed or in progress including but not limited to design complete, environmental review complete, and construction underway;
(2) Milestone project event(s) reached (
(3) Other information mutually agreeable to the Tribe/Consortium and the Secretary.
(4) Upon project completion, the final construction progress report will provide notification to the Secretary that the project has been completed in accordance with the approved project scope, including any changes in the project scope of work.
(b) Construction project financial reports contain information regarding the amount of funds expended during the reporting period and financial concerns of the Tribe/Consortium concerning the project, if any.
Yes, any funds remaining in a funding agreement or construction project agreement for a project at the end of the funding year may be spent for construction under the terms of the funding agreement or construction project agreement for which the funds were awarded.
(a) No, the Secretary may, however, provide information about Federal standards as early as possible in the construction process.
(b) If Tribal construction codes and standards (including national, regional, State, or Tribal building codes or construction industry standards), including health and safety, meet or exceed applicable Federal codes and standards, then the Secretary must accept the Tribe's/Consortium's proposed codes and standards.
(c) The Secretary may also accept commonly accepted industry construction codes and standards; provided that such codes and standards meet or exceed otherwise applicable Federal standards for the construction project.
Yes, the relevant bureau may provide to the Tribe/Consortium project design criteria and other terms and conditions that are required for such a construction project or program. The construction project or program must be completed in accordance with the terms and conditions set forth in the funding agreement or construction project agreement.
Yes, all provisions of other subparts apply to construction portions of a funding agreement or construction project agreement unless those provisions are inconsistent with this subpart.
Under § 1000.235, a Tribe may withdraw from a Consortium and request its portion of a construction project's funds. The Secretary may decide not to award these funds if the award will affect the Consortium's ability to complete a non-severable phase of the project within available funding. A non-severable phase of a project would include but is not limited to the construction of a single building serving a Consortium. A severable phase of a project would include but is not limited to the funding for a road in one village where the Consortium would be able to complete the roads in the other villages that were part of the project approved initially in the funding agreement. The Secretary's decision under this section may be appealed under subpart R of this part.
No, a Tribe/Consortium may not reallocate funds from a construction program to a non-construction program unless otherwise provided under the relevant appropriation acts.
Yes, a Tribe/Consortium may reallocate funds among construction programs if permitted by appropriations law or if approved in advance by the Secretary.
Yes, the Secretary must retain project funds to ensure proper health and safety standards in construction projects. Examples of purposes for which bureaus may retain funds include:
(a) Determining or approving appropriate construction standards to be used in funding agreements;
(b) Verifying that there is an adequate Tribal inspection system utilizing licensed professionals;
(c) Providing for sufficient monitoring of design and construction by the Secretary; and
(d) Requiring corrective action during performance when appropriate.
The Secretary must provide funding for a construction project agreement or funding agreement that includes a construction project or program in accordance with 25 U.S.C. 5325 and 25 U.S.C. 5363(g)(3).
Yes, at the request of the Tribe/Consortium, the Secretary must include Federal funds from other DOI sources as permitted by law, whether on an ongoing or a one-time basis.
Yes, at the discretion of a Tribe/Consortium, a Tribe/Consortium may contribute funds to a construction project.
This subpart explains the applicability of the Federal Tort Claims Act (FTCA). This section covers:
(a) Coverage of claims arising out of the performance under compacts and funding agreements;
(b) Procedures for filing claims under FTCA; and
(c) Procedures for a Tribe/Consortium to cooperate with the Federal Government in connection with tort claims arising out of the Tribe's/Consortium's performance of a compact or funding agreement under this part.
A number of other statutes and regulations apply to FTCA coverage, including the Federal Tort Claims Act (28 U.S.C. 1346(b), 2401, 2671 through 2680), 25 U.S.C. 5376, and related U.S. Department of Justice regulations in 28 CFR part 14.
Yes, there are claims against Tribes/Consortia which are not covered by FTCA, claims which may not be pursued under FTCA, and remedies that are excluded by FTCA. The following general guidance is not intended as a definitive description of coverage, which is subject to review by the U.S. Department of Justice and the courts on a case-by-case basis.
(a)
(b)
(1) Claims against subcontractors arising out of the performance of subcontracts with a Tribe/Consortium;
(2) Claims for on-the-job injuries which are covered by workmen's compensation;
(3) Claims for breach of contract rather than tort claims; or
(4) Claims resulting from activities performed by an employee which are outside the scope of employment.
(c) What remedies are expressly excluded by FTCA and therefore are barred?
(1) Punitive damages, unless otherwise authorized by 28 U.S.C. 2674; and
(2) Other remedies not permitted under applicable state law.
Yes, claims shall be filed within 2 years of the date of accrual. (28 U.S.C. 2401).
The Federal Government has 6 months to process a FTCA claim after the claim is received by the Federal agency, before a lawsuit may be filed.
No, clauses about FTCA coverage are optional. At the request of Tribes/Consortia, a compact or funding agreement shall include the following clause to clarify the scope of FTCA coverage:
Yes. In accordance with 25 U.S.C. 5376, FTCA applies to a compact or funding agreement even if the compact or funding agreement does not mention it.
(a) The Tribe/Consortium shall designate in writing to the Secretary an individual to serve as tort claims liaison with the Federal Government.
(b) As part of the notification required by 28 U.S.C. 2679(c), the Tribe/Consortium shall notify the Secretary immediately in writing of any tort claim (including any proceeding before an administrative agency or court) filed against the Tribe/Consortium or any of its employees that relates to performance of a compact, funding agreement, or subcontract.
(c) The Tribe/Consortium, through its designated tort claims liaison, shall assist the appropriate Federal agency in preparing a comprehensive, accurate, and unbiased report of the incident so that the claim may be properly evaluated. This report should be completed within 60 days of notification of the filing of the tort claim. The report should be complete in every significant detail and include as appropriate:
(1) The date, time and exact place of the accident or incident;
(2) A concise and complete statement of the circumstances of the accident or incident;
(3) The names and addresses of Tribal and/or Federal employees involved as participants or witnesses;
(4) The names and addresses of all other eyewitnesses;
(5) An accurate description of all government and other privately-owned property involved and the nature and amount of damage, if any;
(6) A statement as to whether any person involved was cited for violating a Federal, State, or Tribal law, ordinance, or regulation;
(7) The Tribe's/Consortium's determination as to whether any of its employees (including Federal employees assigned to the Tribe/Consortium) involved in the incident giving rise to the tort claim were acting within the scope of their employment in the performance of the compact or funding agreement at the time the incident occurred;
(8) Copies of all relevant documentation, including available police reports, statements of witnesses, newspaper accounts, weather reports, plats and photographs of the site or damaged property, such as may be necessary or useful for purposes of claim determination by the Federal agency; and
(9) Insurance coverage information, copies of medical bills, and relevant employment records.
(d) The Tribe/Consortium shall cooperate with and provide assistance to the U.S. Department of Justice attorneys assigned to defend the tort claim, including, but not limited to, case preparation, discovery, and trial.
(e) If requested by the Secretary, the Tribe/Consortium shall make an assignment and subrogation of all the Tribe's/Consortium's rights and claims (except those against the Federal Government) arising out of a tort claim against the Tribe/Consortium.
(f) If requested by the Secretary, the Tribe/Consortium shall authorize representatives of the Secretary to settle or defend any claim and to represent the Tribe/Consortium in or take charge of any action.
(g) If the Federal Government undertakes the settlement or defense of any claim or action, the Tribe/Consortium shall provide all reasonable additional assistance in reaching a settlement or asserting a defense.
No, subcontractors or subgrantees providing services to a Public Law 93-
Yes, except as explained in § 1000.1610(b). No claim may be filed against a Tribe/Consortium or employee based upon performance of a compact or funding agreement. All claims shall be filed against the United States and are subject to the limitations and restrictions of FTCA.
The following employees are covered by FTCA for claims:
(a) Permanent employees;
(b) Temporary employees;
(c) Persons providing services without compensation in the performance of a compact or funding agreement; and;
(d) Federal employees assigned to a Tribe/Consortium under the compact or funding agreement including those under the Intergovernmental Personnel Act.
Yes, FTCA covers employees of the Tribe/Consortium who are not paid from funds transferred under a funding agreement as long as the services out of which the claim arose were performed under the compact or funding agreement.
Yes, any person(s) may assert tort claims under FTCA arising out of the performance of a compact or funding agreement by Tribes/Consortia under this subpart.
As part of the notification required by 28 U.S.C. 2679(c), if the Tribe/Consortium or Tribe's/Consortium's employee receives a summons and/or complaint alleging a tort covered by FTCA and arising out the performance of a compact or funding agreement, the Tribe/Consortium should immediately:
(a) Inform the Assistant Solicitor, Procurement and Patents, Office of the Solicitor, Department of the Interior, Room 6511, 1849 C Street NW, Washington, DC 20240.
(b) Inform the Tribe's/Consortium's tort claims liaison, and
(c) Forward all of the materials identified in § 1000.1635(c) to the contacts given in § 1000.1665(a) and (b).
This subpart explains when the Secretary can reassume a program without the consent of a Tribe/Consortium.
Reassumption means the Secretary, without consent of the Tribe/Consortium, takes control or operation of the PSFAs and associated funding in a compact or funding agreement, in whole or in part, and assumes the responsibility to provide such PSFAs.
The Secretary may reassume a program and the associated funding if the Secretary makes a specific finding relating to that program of:
(a) Imminent jeopardy to a trust asset, a natural resource, or public health and safety that:
(1) Is caused by an act or omission of the Tribe/Consortium; and
(2) Arises out of a failure to carry out the compact or funding agreement; or
(b) Gross mismanagement with respect to funds transferred to a Tribe/Consortium under a compact or funding agreement, as determined by the Secretary in consultation with the Inspector General, as appropriate.
Imminent jeopardy means an immediate threat and likelihood of significant devaluation, degradation, damage, or loss of a trust asset, or the intended benefit from the asset caused by the actions or inactions of a Tribe/Consortium in performing trust functions. This includes disregarding Federal trust standards and/or Federal law while performing trust functions if the disregard creates such an immediate threat.
The standard for natural resources is the same as for a physical trust asset, except that a review for compliance with the specific mandatory statutory provisions related to the program as reflected in the funding agreement must also be considered.
Imminent jeopardy to public health and safety means an immediate and significant threat of serious harm to human well-being, including conditions that may result in serious injury, or death, caused by Tribal/Consortium action or inaction or as otherwise provided in a funding agreement.
Except as provided in § 1000.1750 for immediate reassumption, prior to a reassumption becoming effective, the Secretary must:
(a) Notify the Tribe/Consortium in writing of the details of the findings required under § 1000.1710;
(b) Request specific corrective action to remedy the mismanagement of the funds or programs within a reasonable period of time which in no case may be less than 45 days;
(c) Offer and provide, if requested, the necessary technical assistance and advice to assist the Tribe/Consortium overcome the conditions that led to the findings described under (a); and
(d) Provide the Tribe/Consortium with a hearing on the record as provided under subpart R of this part.
Yes, at the request of the Tribe/Consortium, the Secretary must provide a hearing on the record prior to or in lieu of the corrective action period identified in § 1000.1730(b).
(a) The Secretary shall provide a second written notice to the Tribe/Consortium served by the compact or funding agreement that the compact or funding agreement will be rescinded, in whole or in part.
(b) The second notice shall include:
(1) The intended effective date of the Secretary's reassumption;
(2) The details and facts supporting the intended reassumption; and
(3) Instructions that explain the Tribe/Consortium's right to a formal hearing within 30 days of receipt of the notice.
Except as provided in § 1000.1750, no program may be reassumed by the Secretary until 30 days after the final resolution of the hearing and any subsequent appeals to provide the Tribe/Consortium with an opportunity to take corrective action in response to any adverse final ruling.
Yes, the Secretary may immediately reassume operation of a program and associated funding upon providing to the Tribe/Consortium written notice in which the Secretary makes a finding of:
(a) Imminent and substantial jeopardy and irreparable harm to a trust asset, a natural resource, or public health and safety that:
(1) Is caused by an act or omission by the Tribe/Consortium; and
(2) Arises out of a failure to carry out the terms of an applicable compact or funding agreement.
(b) If the Secretary reassumes operation of a program under this provision, the Secretary must provide the Tribe/Consortium with a hearing on the record not later than 10 days after the date of reassumption.
On the effective date of reassumption, the Tribe/Consortium must, at the request of the Secretary, deliver all property and equipment, and title thereto:
(a) That the Tribe/Consortium received for the program under the funding agreement; and
(b) That has a per item value in excess of $5,000, or as otherwise provided in the funding agreement.
The Tribe/Consortium must return unexpended funds, less “wind up costs,” that remain available to the Department as soon as practical after the effective date of the reassumption.
Yes, the Tribe/Consortium may be reimbursed for actual and reasonable “wind up costs” to the extent that funds are available.
A reassumption action taken by the Secretary does not affect the Tribe/Consortium's ability to negotiate a funding agreement for programs not affected by the reassumption.
A reassumed program may be included in future funding agreements, but the Secretary may include conditions in the terms of the funding agreement to ensure that the circumstances that caused jeopardy to attach do not reoccur.
This subpart explains what happens when a Tribe/Consortium fully or partially and voluntarily returns a program to a bureau before the expiration of the term of the compact or funding agreement.
No, a decision by a Tribe/Consortium not to include a program in a successor agreement is not considered a retrocession.
A Tribe/Consortium may retrocede a program. However, the right of a Consortium member to retrocede may be subject to the terms of the agreement among the members of the Consortium and §§ 1000.205 through 1000.235.
The Tribe/Consortium must submit:
(a) A written notice to:
(1) The Office of Self-Governance for BIA programs; or
(2) The appropriate bureau for non-BIA programs; and
(b) A Tribal resolution or other official action of its governing body.
The retrocession becomes effective on the date that is mutually agreed to by the parties in writing. In the absence of a mutually agreed upon effective date, the retrocession becomes effective on the earlier of:
(a) One year after the date the Tribe/Consortium submits its notice of retrocession; or
(b) The date the funding agreement expires.
Retrocession does not affect other parts of the funding agreement or funding agreements with other bureaus. A Tribe/Consortium may request to negotiate for and include retroceded programs in future funding agreements or through a self-determination contract.
The Tribe/Consortium and the Secretary must negotiate the amount of funds that have not been obligated by the Tribe/Consortium to be returned to the Secretary, less close out costs, for the Secretary's operation of the retroceded program. This amount must be based on such factors as the time remaining or functions remaining in the funding cycle or as provided in the funding agreement.
On the effective date of any retrocession, the Tribe/Consortium must, at the option of the Secretary, return all property and equipment, and title thereto:
(a) That was acquired with funds under the funding agreement for the program being retroceded; and
(b) That has a per item current fair market value in excess of $5,000 at the time of the retrocession, or as otherwise provided in the funding agreement.
If a Tribe/Consortium retrocedes operation of a program carried out under a title IV funding agreement, at the option of the Tribe/Consortium, the resulting self-determination contract is considered mature if the Tribe/Consortium meets the requirements of 25 U.S.C. 5304(h).
The level of operation of the program will depend upon the amount of funding that is returned with the retrocession.
This subpart describes how the trust responsibility of the United States is legally maintained through a system of trust evaluations when Tribes/Consortia perform trust PSFAs through funding agreements under the Act. It describes the principles and processes upon which trust evaluations by the Secretary will be based.
No, the Act does, however, permit a Tribe/Consortium to assume management responsibilities for trust assets and resources on its own behalf and on behalf of individual Indians. Under the Act, the Secretary has a trust responsibility to conduct annual trust evaluations of a Tribe's/Consortium's performance of trust PSFAs under a funding agreement to ensure that Tribal and individual trust assets and resources are managed in accordance with the legal principles and standards governing the performance of trust PSFAs set out in the funding agreement or as provided for by law.
(a) Trust resources include property and interests in property:
(1) That are held in trust by the United States for the benefit of a Tribe or individual Indians; or
(2) That are subject to restrictions upon alienation.
(b) Trust assets include:
(1) Other assets, trust revenue, royalties, or rental, including natural resources, land, water, minerals, funds, property, or claims, and any intangible right or interest in any of the foregoing;
(2) Any other property, asset, or interest therein, or treaty right for which the United States is charged with a trust responsibility. For example, water rights and off-reservation treaty rights.
(c) This definition defines trust resources and trust assets for purposes of the trust evaluation process only.
Trust PSFAs are those programs, services, functions and activities necessary to the management of assets and resources held in trust by the United States for an Indian Tribe or individual Indian.
If the parties agree in writing and it is practical, the Secretary may arrange for a written assessment by the Department of the status of the trust resource and asset at the time of the transfer of the PSFAs or at a later time. The parties shall agree upon an estimate of time required to complete a baseline assessment. Upon completion of the assessment report by the Department, the Secretary's designated representative shall provide a copy of the assessment to the Tribe/Consortium within 30 days.
A trust evaluation is an annual review and evaluation of trust functions performed by a Tribe/Consortium to ensure that the functions are performed in accordance with trust standards as defined by Federal law. Trust evaluations address trust functions performed by the Tribe/Consortium on its own behalf as well as trust functions performed by the Tribe/Consortium for the benefit of individual Indians or Alaska Natives.
(a) Each year the Secretary's designated representative(s) will conduct an evaluation of trust PSFAs for each funding agreement. The Secretary's designated representative(s) will coordinate in writing with the leadership of the Tribe/Consortium, with a copy to the designated Tribe's/Consortium's representative(s), to arrange the evaluation of trust PSFAs and throughout the trust evaluation, including the written report required by § 1000.1940.
(b) This section describes the general framework for trust evaluations. However, each Tribe/Consortium may develop, with the appropriate bureau, an individualized trust evaluation method to allow for the Tribe's/Consortium's unique history, circumstances, trust resources and assets, and the terms and conditions of its funding agreement. An individualized trust evaluation must, at a minimum, contain the measures in paragraph (d) of this section.
(c) To facilitate the trust evaluation so as to mitigate costs and maximize efficiency, each Tribe/Consortium must provide access to all records, plans, and other pertinent documents relevant to the trust PSFAs under review not otherwise available to the Department.
(d) The Secretary's designated representative(s) will:
(1) Review trust transactions;
(2) Conduct on-site inspections of trust resources and assets, as appropriate, at a time to be coordinated between the parties;
(3) Review compliance with applicable statutory and regulatory requirements;
(4) Review compliance with the trust provisions and standards as may be negotiated and included in the funding agreement;
(5) Ensure that the same level of trust services is provided to individual Indians as would have been provided by the Secretary;
(6) Document deficiencies in the performance of trust PSFAs discovered during the trust evaluation in the final report which the Department will submit to the Tribe/Consortium pursuant to § 1000.1940; and
(7) Ensure the fulfillment of the Secretary's trust responsibility to Tribes and individual Indians by documenting the existence of:
(i) Systems of internal controls;
(ii) Trust standards; and
(iii) Safeguards against conflicts of interest in the performance of trust PSFAs.
Yes, if the parties agree in writing to such additional reviews.
Yes, unless review methods are otherwise provided by Federal law, the Secretary's designated representative will negotiate review methods at the request of the Tribe/Consortium for inclusion in a funding agreement as provided in § 1000.1930(b).
The Secretary's representative(s) must prepare a written report documenting the results of the trust evaluation within 60 days of the Department's completion of an on-site and/or desk review.
(a) The Secretary's representative(s) will provide the Tribe/Consortium representative(s) with a copy of the report for review and comment before finalization.
(b) The Secretary's representative(s) will attach to the report any Tribal/Consortium comments that the representative receives.
(c) The Secretary's representative(s) must respond to the Tribe's/
No, Tribes/Consortia are under the same obligation as the Secretary to perform trust PSFAs and related activities in accordance with trust protection standards and principles whether managing Tribally or individually owned trust resources and assets. The Department's process for conducting the annual evaluation of Tribal/Consortium performance of trust PSFAs on behalf of individual Indians is the same as that used in evaluating performance of Tribal trust PSFAs.
When the annual trust evaluation by the Secretary reveals a deficient performance of trust PSFAs by a Tribe/Consortium due in part to the action or inaction of a bureau, it will trigger an evaluation by the Department of the Secretary's inherent Federal functions and any retained trust PSFAs pertaining to the bureau's action or inaction.
The appropriate Department officials will be notified in writing by the Secretary's representative of the need for corrective action. A copy of such written notice shall be sent by the Secretary's representative to the Tribe/Consortium. The review of the Secretary's trust PSFAs shall be based on the standards in Federal law.
(a) A finding of imminent jeopardy to a trust asset, natural resource, or public health and safety that is caused by an act or omission of the Tribe/Consortium and that arises out of a failure by the Tribe/Consortium to carry out the compact or funding agreement, triggers the Federal reassumption process (
(b) The reassumption process will not be triggered if the Secretary's designated representative determines that the Tribe/Consortium:
(1) Can cure the conditions causing jeopardy within 60 days; and
(2) Will not cause significant loss, harm, or devaluation of a trust asset, natural resources, or the public health and safety.
Where problems not rising to the level of imminent jeopardy are caused by Tribal/Consortium action or inaction, the conditions must be:
(a) Documented in the Department's annual trust evaluation report;
(b) Reported to the Secretary; and
(c) Reported in writing to:
(1) The governing body of the Tribe; and
(2) In the case of a Consortium, to the governing body of each Tribe on whose behalf the Consortium is performing the trust PSFAs.
The Tribe/Consortium is primarily responsible for identifying and implementing corrective actions for matters contained in the funding agreement, but the Department may also suggest possible corrective measures for Tribal/Consortium consideration.
A report summarizing the results of the trust evaluation will be prepared by the Secretary's designated representative(s) and copies provided to the Tribe/Consortium within the time frame specified in § 1000.1940. The annual trust evaluation report must:
(a) Be written objectively, concisely, and clearly;
(b) Present information accurately and fairly, including only relevant and adequately supported information, findings, and conclusions; and
(c) Include a written response from the Tribe/Consortium to the draft report provided to the Tribe/Consortium by the Secretary's representative(s).
(a) Yes, if the Department receives information that it concludes rises to the level of a threat of imminent jeopardy to a trust asset, natural resource, or the public health and safety, caused by an act or omission of a Tribe/Consortium and arises out of a failure to carry out a compact or funding agreement, the Department, as trustee, may conduct a preliminary investigation. The Department:
(1) Shall promptly contract the Tribe/Consortium to discuss the nature of the threat;
(2) Will follow up with notification to the Tribe/Consortium in writing, and
(3) May conduct an on-site inspection upon 2 days' advance written notice to the Tribe/Consortium.
(b) If the preliminary investigation shows that appropriate, sufficient data are present to indicate there may be imminent jeopardy, the Secretary's designated representative shall follow the reassumption procedures in accordance with subpart M of this part.
This subpart describes what reports are developed under self-governance by the Secretary and the Tribes/Consortia.
Yes, on January 1 of each year, the Secretary will submit a report on self-governance to the Congress. The report will be based on:
(a) Information contained in funding agreements;
(b) Annual audit reports, and
(c) Data of the Secretary regarding the disposition of Federal funds.
The Secretary's report will:
(a) Identify:
(1) The relative costs and benefits of self-governance;
(2) With particularity, all funds that are specifically or functionally related to the provision by the Secretary of services and benefits to self-governance Indian Tribes and members of Indian Tribes;
(3) The funds transferred to each Tribe/Consortium and the corresponding reduction in the Federal employees and workload; and
(4) The funding formula for individual Tribal shares of all Central Office funds, together with the comments of affected Indian Tribes, developed for the report to Congress as required by 25 U.S.C. 5372(d).
(b) Include the separate views and comments of each Indian Tribe or Tribal organization; and
(c) Include a list of:
(1) All such programs that the Secretary determines, in consultation with Indian Tribes participating in self-governance, are eligible for negotiation to be included in a funding agreement at the request of a participating Indian Tribe;
(2) All such programs which Indian Tribes have formally requested to include in a funding agreement under section 403(c) (25 U.S.C. 5363(c)) due to the special geographic, historical, or cultural significance of the program to the Indian Tribe, indicating whether each request was granted or denied, and stating the grounds for any denial; and
(d) Include in this report, in the aggregate, a description of the internal controls that were inadequate, the technical assistance provided, and a description of Secretarial actions taken to address any remaining inadequate internal controls after the provision of technical assistance and implementation of the plan required by 25 U.S.C. 5324(q)(1).
(e) Programmatic targets established by the Secretary, after consulting with participating Tribes/Consortia, to encourage bureaus of the Department, other than the BIA, the BIE, the BTFA, or the Office of Assistant Secretary for Indian Affairs to ensure that an appropriate portion of those programs are available to be included in funding agreements.
Yes. In order to optimize opportunities for including non-BIA programs in agreements with Tribes/Consortia participating in self-governance under the Act, the Secretary shall review all non-BIA programs without regard to the agency or office concerned.
Yes, the Secretary shall annually review and publish in the
Yes, before the report of the Secretary is submitted to Congress, it must be distributed by the Secretary to Tribes/Consortia for comment. The comment period must not be less than 30 days.
(a) The Tribe's/Consortium's annual self-governance report may address:
(1) A list of unmet Tribal needs in order of priority;
(2) The approved, year-end Tribal/Consortium budget for the programs and services funded under self-governance, summarized, and annotated as the Tribe/Consortium may deem appropriate;
(3) Identification of any reallocation of trust programs;
(4) Program and service delivery highlights, which may include a narrative of specific program redesign or other accomplishments, or benefits attributed to self-governance; and
(5) At the Tribe's/Consortium's option, a summary of the highlights of the report referred to in paragraph (a)(2) of this section and other pertinent information the Tribe/Consortium may wish to report.
(b) The report submitted under this section is intended to provide the Department with information necessary to meet its Congressional reporting responsibilities and to fulfill its responsibility as an advocate for self-governance. The report is not intended to be burdensome, and Tribes/Consortia are encouraged to design and present the report in a brief and concise manner.
Yes, Tribes/Consortia may be requested to submit data for the Secretary to determine allocation of funds to be awarded under a funding agreement.
Yes. The Single Agency Audit Act, 31 U.S.C. 7501
Yes. In accordance with 2 CFR 200.501(d), a non-Federal entity that expends less than the amount as published by OMB during the entity's fiscal year in Federal awards is exempt from submitting an annual single audit report for that year.
Yes, Tribes/Consortia are required to maintain reports and records in accordance with 25 U.S.C. 5305.
If a Tribe/Consortium chooses to hire a Federal employee, it can use, in addition to any other available options, one of the arrangements listed in this section:
(a) The Tribe/Consortium can use its own personnel hiring procedures. Federal employees hired by the Tribe/Consortium are separated from Federal service.
(b) The Tribe/Consortium can “direct hire” a Federal employee as a Tribal/Consortium employee. The employee will be separated from Federal service and work for the Tribe/Consortium, but maintain a negotiated Federal benefit package that is paid for by the Tribe/Consortium out of funding agreement program funds; or
(c) The Tribe/Consortium can negotiate an agreement under the Intergovernmental Personnel Act, 5 U.S.C. 3371 through 3375, 25 U.S.C. 323, 25 U.S.C. 48, or other applicable Federal law. The employee will remain a Federal employee during the term of the agreement.
Yes, under the Intergovernmental Personnel Act, 5 U.S.C. 3371 through 3375, 25 U.S.C. 323, 25 U.S.C. 48, or other applicable law, when permitted by the Secretary.
(a) Access to records maintained by the Secretary is governed by the Freedom of Information Act (5 U.S.C. 552) and other applicable Federal law.
(b) Unless the Tribe/Consortium specifies otherwise in a funding agreement, records of the Tribe/Consortium shall not be considered Federal records for the purpose of the Freedom of Information Act.
(c) The Freedom of Information Act does not apply to records maintained solely by Tribes/Consortia.
Unless the Tribe/Consortium specifies otherwise, records of the Tribe/Consortium shall not be considered Federal records for the purposes of the Privacy Act.
The Single Agency Audit Act, 31 U.S.C. 7501
(a) A Tribe/Consortium shall apply cost principles under the applicable OMB circular, except as modified by:
(1) Any provision of law, including 25 U.S.C. 5325; or
(2) Any exemptions or exceptions granted by OMB.
(b) In any circumstances where the provisions of Federal statutes or this part differ from the provisions of 2 CFR part 200, the provisions of the Federal statutes or this part govern. This includes the provisions of Public Law 93-638, including 25 U.S.C. 5325 and 5365(c).
Any claim by the Federal Government against a Tribe/Consortium relating to the disallowance of costs for funds received under a funding agreement based on any audit (other than those relating to a criminal offense) shall be subject to the 365-day period set forth in 25 U.S.C. 5325(f), as prescribed by 25 U.S.C. 5365(c)(3).
(a) Yes, for a Tribe/Consortium required to perform an annual audit under the Single Audit Act and subparts E and F of 2 CFR part 200, the Tribe/Consortium must maintain management systems that are determined to be adequate by an independent audit.
(b) For a Tribe/Consortium that is not required to perform an annual audit under the Single Audit Act, the financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the funding agreement, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the requirements of the funding agreement.
(c) As prescribed by subparts E and F of 2 CFR part 200, every Tribe/Consortium must establish and maintain effective internal controls over funds included in a funding agreement that provide reasonable assurances that the Tribe/Consortium is managing the funds in compliance with Federal statutes, regulations, and the terms and conditions of the funding agreement.
Yes, funds awarded to a Tribe/Consortium under a funding agreement may be spent only for costs associated with PSFAs subject to the funding agreement.
Funds awarded a Tribe/Consortium under a funding agreement, including advance payments, shall be managed by the Tribe/Consortium using the prudent investment standard, provided that the Secretary shall not be liable for any investment losses of funds managed by the Tribe/Consortium that are not otherwise guaranteed or insured by the Federal Government.
The prudent investment standard requires the exercise of reasonable care, skill, and caution, and is to be applied to investments not in isolation but in the context of the investment portfolio and as part of an overall investment strategy, which should incorporate risk and return objectives reasonably suitable to the Tribe/Consortium. In making and implementing investment decisions, the Tribe/Consortium has a duty to diversify the investment, unless, under the circumstances, it is prudent not to do so. In addition, the Tribe/Consortium must:
(a) Conform to fundamental fiduciary duties of loyalty and impartiality;
(b) Act with prudence in deciding whether and how to delegate authority and in the selection and supervision of agents; and
(c) Incur only costs that are reasonable in amount and appropriate to the investment responsibilities of the Tribe/Consortium.
(a) Interest or income earned on investments or deposits of awards made under a funding agreement may be:
(1) Used for any governmental purpose approved by the Tribe/Consortium; or
(2) Used to provide expanded services under the funding agreement and to support some or all of the costs of investment services.
(b) The retention of interest or investment income under paragraph (a) shall not diminish the amount of funds a Tribe/Consortium is entitled to receive under a funding agreement in the year the interest or income is earned or in a subsequent fiscal year.
Yes, notwithstanding any provision of an appropriations Act, the Tribe/Consortium may retain savings for each fiscal year during which a funding agreement is in effect. A Tribe/Consortium must use any savings that it realizes under a funding agreement, including a construction contract:
(a) To provide additional services or benefits under the funding agreement; or
(b) As carryover; and
(c) For purposes of this subpart only, programs administered by BIA using appropriations made to other Federal agencies, such as the U.S. Department of Transportation, will be treated in accordance with paragraph (b).
(a) Yes. Notwithstanding any provision of an appropriations Act, all funds paid to a Tribe/Consortium in accordance with a compact or funding agreement shall remain available until expended.
(b) If a Tribe/Consortium elects to carry over funding from one year to the next, the carryover shall not diminish the amount of funds the Tribe/Consortium is entitled to receive under a funding agreement in that fiscal year or any subsequent fiscal year.
(c) A Tribe/Consortium may elect to carry over funding from one year to the next without any additional justification or document necessary for expenditure.
The non-BIA bureau may request the return of unexpended funds already transferred to a Tribe/Consortium only under the following circumstances:
(a) Retrocession;
(b) Reassumption;
(c) Construction, when there are special legal requirements; or
(d) As otherwise provided for in the funding agreement.
(a)
(b)
No, for the period that an agreement entered into under this part is in effect, the provisions of 25 U.S.C. 81, 82a, and 476, do not apply to attorney and other professional contracts by participating Tribes/Consortia.
(a) Yes, in accordance with 25 U.S.C. 5363(j), all funds provided under funding agreements shall be treated as non-Federal funds for purposes of meeting matching requirements under any other Federal law.
(b) Alternatively, a Tribe/Consortium may elect under 25 U.S.C. 5363(
Yes, in accordance with section 25 U.S.C. 5307(b) and (c), as amended, Tribal law governs Indian preference in employment in contracting and subcontracting in performance of a funding agreement.
No, wage and labor standards of the Davis-Bacon Act, 40 U.S.C. 3141 through 3144, 3146 and 3147, do not apply to employees of Tribes and Tribal Consortia. Davis-Bacon wage and labor standards do apply to all other laborers and mechanics employed by contractors and subcontractors of a Tribe/Consortium in the construction, alteration, and repair (including painting or redecorating) of buildings or other facilities in connection with a funding agreement.
Yes. A Tribe/Consortium and its employees may use Federal supply sources (including lodging, airline, interagency motor pool vehicles, and other means of transportation) or other Federal resources (including supplies, services and resources available to the Secretary under any procurement contracts in which the Department is eligible to participate), to the same extent as if the Tribe/Consortium were a Federal agency. While implementation of this provision is the responsibility of the General Services Administration, the Department shall assist the Tribes/Consortia to resolve any barriers to full implementation that may arise to the fullest extent possible.
Yes. The Prompt Payment Act (31 U.S.C. 3901) applies to a BIA funding agreement.
Yes, unless restricted by a funding agreement, the Prompt Payment Act shall apply to a non-BIA funding agreement.
A Tribe/Consortium shall not be obligated to continue performance that requires an expenditure of funds in excess of the amount of funds transferred under a compact or funding agreement. If at any time the Tribe/Consortium has reason to believe that the total amount provided for a specific activity under a compact or funding agreement is insufficient, the Tribe/Consortium shall provide reasonable notice of such insufficiency to the Secretary. If, after notice, the Secretary does not increase the amount of funds transferred under the funding agreement, the Tribe/Consortium may suspend performance of the activity until such time as additional funds are transferred. Nothing in 25 U.S.C. 5368(
This subpart prescribes the process Tribes/Consortia may use to resolve disputes with the Department arising before or after execution of a funding agreement or compact and certain other disputes related to self-governance.
Throughout this subpart, the phrase “title-I-eligible programs” is used to refer to all PSFAs that the Secretary provides for the benefit of Indians because of their status as Indians without regard to the agency or office of the Department within which the PSFAs have been performed.
(a) The Department encourages its bureaus to seek all means of dispute resolution before the Tribe/Consortium files a formal appeal(s).
(b) Disputes shall be addressed through government-to-government discourse. This discourse must be respectful of government-to-government relationships and relevant Federal-Tribal agreements, treaties, judicial decisions, and policies pertaining to Indian Tribes, including, but not limited to, such applicable principles described in subpart I.
(c) All disputes arising under this rule, including, but not limited to, disputes related to decisions described in § 1000.2345, may use non-binding informal alternative dispute resolution, such as an informal conference or assistance of the Department's Office of Collaborative Action and Dispute Resolution (CADR), at the option of the Tribe/Consortium. The Tribe/Consortium may ask for this alternative dispute resolution any time before the issuance of an initial decision of a formal appeal. The appeals timetable will be suspended while alternative dispute resolution is pending.
Yes, the Tribe/Consortium may request a non-binding alternative dispute resolution process-without the need for a formal appeal. Or, the Tribe/Consortium may, in lieu of filing an administrative appeal under this subpart, file an action in an appropriate Federal court under 25 U.S.C. 5331, or any other applicable law.
As required by sections 25 U.S.C. 5366(d) and 5375, in any administrative action, appeal, or civil action for judicial review of any decision made by the Secretary under this title, the Secretary shall have the burden of proof:
(a) To demonstrate by a preponderance of the evidence the validity of the grounds for a reassumption under 25 U.S.C. 5366(b);
(b) To clearly demonstrate the validity of the grounds for rejecting a final offer made under 25 U.S.C. 5366(c); and
(c) Except as provided in 25 U.S.C. 5366(d), to demonstrate by a preponderance of the evidence the validity of the grounds for a decision made and the consistency of the decision with the requirements and policies of the Act.
The Tribe/Consortium shall file its request for an informal conference with the office of the person whose decision it is appealing, within 30 days of the day it receives the decision.
(a) The Tribe/Consortium may either hand-deliver the request for an informal conference to that person's office, email the request, or mail it by certified mail, return receipt requested.
(b) If the Tribe/Consortium mails the request, it will be considered filed on the date the Tribe/Consortium mailed it by certified mail. If the Tribe/Consortium emails the request, it will be presumed received on the next business day following transmission from the Tribe/Consortium.
(c) The document should be clearly identified as “Request for Informal Conference”.
For all purposes relating to these informal conference procedures, the parties are the designated representatives of the Tribe/Consortium and the bureau.
(a) The informal conference shall be held within 30 days of the date the request was received, unless the parties agree on another date.
(b) If possible, at the option of the Tribe/Consortium, the informal conference will be held at the Tribe's/Consortium's office. If the meeting cannot be held at the Tribe's/Consortium's office, the parties must agree on an alternative meeting place or forum, including but not limited to telephonic or virtual meeting forums. If the alternative meeting place is more than fifty miles from the Tribe's/Consortium's office, the Secretary must arrange to pay transportation costs and per diem for incidental expenses to allow for adequate representation of the Tribe/Consortium.
(c) The informal conference shall be conducted by a designated representative of the Secretary.
(d) Only the parties may make presentations at the informal conference.
(e) The informal conference is not a hearing on the record. Nothing said during an informal conference may be used by either party in litigation.
(a) Within 10 business days of the informal conference, the person who conducted the informal conference shall prepare and mail to the Tribe/Consortium a brief summary of the informal conference. The summary must include any agreements reached or changes from the initial position of the bureau or the Tribe/Consortium.
(b) Every summary of an informal conference must contain the following language:
(c) If in its judgment no agreement was reached, the Tribe/Consortium may choose to appeal the initial decision, as modified by any changes made as a result of the informal conference, under this subpart.
With the exception of certain decisions concerning immediate reassumption (
25 U.S.C. 5331 and the regulations at 25 CFR 900.216 through 900.230 apply to disputes concerning signed funding agreements and compacts (and any signed amendments), that are appealed to the CBCA, except that any references to the U.S. Department of Health and Human Services are inapplicable. For purposes of such appeals:
(a) The terms “contract” and “self-determination contract” mean compacts and funding agreements entered into under the Act; and
(b) The term “Tribe” means “Tribe/Consortium”.
Decisions that a Tribe/Consortium may appeal include, but are not limited to:
(a) A decision to reject a final offer, or a portion thereof, under 25 U.S.C. 5366(c);
(b) A decision to reject a proposed amendment to a compact or funding agreement, or a portion thereof, under 25 U.S.C. 5366(c);
(c) A decision that provisions in a retained funding agreement and/or compact are directly contrary to any express provision of the Act;
(d) A decision to reassume a compact or funding agreement, in whole or in part, under 25 U.S.C. 5366(b), except for immediate reassumptions under 25 U.S.C. 5366(b)(3);
(e) A decision to reject a final construction project proposal, or a portion thereof, under 25 U.S.C. 5367(g) and subpart K of this part; and
(f) For construction project agreements carried out under 25 U.S.C. 5367, a decision to reject project planning documents, design documents, or proposed amendments submitted by a Tribe/Consortium under 25 U.S.C. 5367(h)(1) and subpart K of this part.
Decisions that may not appealed under §§ 1000.2345 through 1000.2395 shall be limited to:
(a) Disputes arising under the terms of a compact, funding agreement, or construction project agreement that has been awarded;
(b) Disputes arising from immediate reassumptions under 25 U.S.C. 5366(b)(3) and § 1000.1750 which is covered under §§ 1000.2405 through 1000.2430;
(c) Decisions relating to planning and negotiation grants (subparts C and D of this part) and certain discretionary grants not awarded under title IV (25 CFR part 2);
(d) Decisions regarding requests for waivers of regulations (subpart J of this part);
(e) Decisions regarding construction (subpart K of this part) addressed in § 1000.1455; and
(f) Decisions under any other statute, such as the Freedom of Information Act and the Privacy Act (
(a)
(b)
(1)
(i) PSFAs that are not title 1-eligible;
(ii) Inherently Federal functions;
(iii) Decisions declining to provide requested information as addressed in § 1000.1035; and
(iv) Allocations of program funds when a dispute arises between a Consortium and a withdrawing Tribe.
(2)
Every decision in any of the areas listed in § 1000.2345 must contain information which shall tell the Tribe/Consortium where and when to file the Tribe's/Consortium's appeal. Each decision shall include the following statement:
Within 30 days of the receipt of this decision, you may request non-binding informal alternative dispute resolution, such as an informal conference under § 1000.2320, or file an appeal of the initial decision of the Department in accordance with subpart R of this part. Alternatively, you may file an action in Federal court pursuant to 25 U.S.C. 5331.
(a) If a Tribe/Consortium wishes to exercise its appeal rights to the bureau head/Assistant Secretary under § 1000.2351, it must make a written request for review to the appropriate bureau head within 30 days of receiving the initial adverse decision or the conclusion of any non-binding informal alternative dispute resolution process. In addition, the Tribe/Consortium may request the opportunity to have a meeting with appropriate bureau personnel in an effort to clarify the matter under dispute before a formal decision by the bureau head.
(b) The written request for review should include a statement describing its reasons for a review, with any supporting documentation, or indicate that such a statement or documentation will be submitted within 30 days. A copy of the request must also be sent to the Director of the OSG.
(c) If the initial decision was made by the bureau head, any appeal shall be directed to the appropriate Assistant Secretary. If a Tribe does not request a review within 30 days of receipt of the decision, the initial decision will be final for the Department.
Within 30 days of receiving the request for review and the statement of reasons described in § 1000.2360, the bureau head or, where applicable, the appropriate Assistant Secretary must:
(a) Issue a written final decision stating the reasons for the decision; and
(b) Send the decision to the Tribe/Consortium.
The appropriate Assistant Secretary will decide an appeal of any initial decision made by a bureau head (
(a) If a Tribe/Consortium wishes to exercise its appeal rights to the IBIA under § 1000.2351, it must file a notice of appeal to the IBIA within 30 days of receiving the initial decision or the conclusion of any non-binding informal alternative dispute resolution process.
(b) The Tribe/Consortium may either hand-deliver the notice of appeal to the IBIA, or mail it by certified mail, return receipt requested. If the Tribe/Consortium mails the Notice of Appeal it will be considered filed on the date the Tribe/Consortium mailed it by certified mail. The Tribe/Consortium should mail the notice of appeal to: Interior Board of Indian Appeals, Office of Hearings and Appeals, U.S. Department of the Interior, 801 N Quincy Street, Suite 300, Arlington, VA 22203.
(c) The Notice of Appeal must include:
(1) A statement describing the Tribe's/Consortium's reasons for a review (including why the Tribe/Consortium thinks the initial decision is wrong and briefly identify the issues involved in the appeal);
(2) Any supporting documentation;
(3) If the Tribe/Consortium's Notice of Appeal does not include the items in the above paragraphs (1) or (2), an indication that such a statement or documentation will be submitted within 30 days; and
(4) A statement whether the Tribe/Consortium wants a hearing on the record, or whether the Tribe/Consortium wants to waive its right to a hearing.
(d) The Tribe/Consortium must serve a copy of the notice of appeal upon the official whose decision it is appealing. A copy of the notice of appeal must also be sent to the Director of the OSG. The Tribe/Consortium must certify to the IBIA that it has done so.
(e) The authorized representative of the Secretary will be considered a party to all appeals filed with the IBIA under the Act.
(a) Within 5 days of receiving the Tribe's/Consortium's notice of appeal, the IBIA will decide whether the appeal falls under § 1000.2345. If so, the Tribe/Consortium is entitled to a hearing.
(b) If the IBIA cannot make that decision based on the information included in the notice of appeal, the IBIA may ask for additional statements from the Tribe/Consortium, or from the appropriate Federal agency. If the IBIA asks for more statements, it will make its decision within 5 days of receiving those statements.
(c) If the IBIA decides that the Tribe/Consortium is not entitled to a hearing or if the Tribe/Consortium has waived its right to a hearing on the record, the IBIA will dismiss the appeal and inform the Tribe/Consortium that it is not entitled to a hearing or has waived its right to a hearing.
The IBIA may use the procedures set forth in 43 CFR 4.22 through 4.27 as a guide.
To the extent not inconsistent with this subpart, the regulations at 25 CFR 900.159 through 900.169 apply to disputes that are appealed to the IBIA, except that any references to the U.S. Department of Health and Human Services are inapplicable. For purposes of such appeals:
(a) The terms “contract” and “self-determination contract” mean compacts and funding agreements entered into under the Act; and
(b) The term “Tribe” means “Tribe/Consortium.”
No, a pending appeal will not adversely affect or prevent the negotiation or award of another compact, funding agreement, or construction project agreement.
Yes, the Secretary shall publish all final decisions from the Administrative Law Judge (ALJs) and IBIA under this subpart. Decisions can be found on the Department's website.
If the Secretary immediately reassumes a program under § 1000.1750, the Secretary must comply with §§ 1000.2410 through 1000.2430.
Yes, unless the Tribe/Consortium waives its right to a hearing in writing. The Deputy Director of the Office of Hearings and Appeals must appoint an ALJ to hold a hearing.
(a) The hearing must be held within 10 days of the date of the notice referred to in § 1000.1750 unless the Tribe/Consortium agrees to a later date.
(b) If possible, the hearing will be held at the office of the Tribe/Consortium. The parties may agree to an alternative meeting place or forum, including but not limited to telephonic or virtual meeting forums. If the hearing is held more than 50 miles from the office of the Tribe/Consortium, the Secretary must arrange to pay transportation costs and per diem for incidental expenses. This will allow for adequate representation of the Tribe/Consortium.
(a) Within 30 days after the end of the hearing or any post-hearing briefing schedule established by the ALJ, the ALJ must send all parties a recommended decision by certified mail, return receipt requested. The recommended decision shall contain the ALJ's findings of fact and conclusions of law on all the issues. The recommended decision must also state that the Tribe/Consortium has the right to object to the recommended decision.
(b) The recommended decision must contain the following statement:
No, any party to the appeal may file precise and specific written objections to the recommended decision, or any other comments, within 15 days of receiving the recommended decision. The objecting party must serve a copy of its objections on the other party. The recommended decision will become final 15 days after the Tribe/Consortium receives the ALJ's recommended decision, unless a written statement of objection is filed with the IBIA during the 15-day period. If no party files a written statement of objections within 15 days, the recommended decision will become final.
(a) The IBIA has 15 days from the date the Secretary receives timely written objections to modify, adopt, or reverse the recommended decision. If the IBIA does not modify or reverse the recommended decision during that time, the recommended decision automatically becomes final.
(b) When reviewing the recommended decision, the IBIA may consider and decide all issues properly raised by any party to the appeal, based on the record.
(c) The decision of the IBIA must:
(1) Be in writing;
(2) Specify the findings of fact or conclusions of law that are modified or reversed;
(3) Give reasons for the decision, based on the record; and
(4) State that the decision is final for the Department.
No, a pending appeal will not adversely affect or prevent the negotiation or award of another compact, funding agreement, or construction project agreement.
Yes. EAJA claims against the Department will be heard under 48 CFR 6101.30, 6101.31 (CBCA) and 43 CFR 4.602, 4.604 through 4.628 (Department) and under the Equal Access to Justice Act, 5 U.S.C. 504 and 28 U.S.C. 2412.
Yes. A Tribe/Consortium participating in self-governance must ensure that internal measures are in place to address, pursuant to Tribal law and procedures, conflicts of interest in the administration of programs carried out under a compact and funding agreement.
The Tribe/Consortium and the Secretary may agree that using the Tribe's/Consortium's own written code of ethics satisfies the objectives of the personal conflicts and organizational conflicts provisions of this subpart, in whole or in part.
When the Secretary and the Tribe/Consortium agree to use the Tribe's/Consortium's written codes or measures, the funding agreement will reflect that and the agreed-upon provisions shall be followed, rather than the related provisions of this subpart.
(a) An organizational conflict of interest arises when, in the administration of programs performed under a compact or funding agreement subject to this part, there is a direct conflict between the financial interests of the Tribe/Consortium and:
(1) The financial interests of beneficial owners of Indian trust resources;
(2) The financial interests of the United States relating to trust resources, trust acquisitions, or lands conveyed or to be conveyed under the Alaska Native Claims Settlement Act, 43 U.S. C. 1601
(3) An express statutory obligation of the United States to third parties. This section only applies if the conflict was not addressed when the funding agreement was first negotiated.
(b) This section only applies where the financial interests of the Tribe/Consortium are significant enough to impair the Tribe's/Consortium's objectivity in carrying out the funding agreement, or a portion of the funding agreement.
This section only applies if the conflict was not addressed when the funding agreement was first negotiated. When a Tribe/Consortium becomes aware of an organizational conflict of interest, the Tribe/Consortium must immediately disclose the conflict to the Secretary.
A Tribe/Consortium must maintain written standards of conduct, pursuant to Tribal law and procedures, to govern officers, employees, and agents (including subcontractors) engaged in functions related to the management of trust assets performed under a compact and funding agreement subject to this part.
The Tribe/Consortium must ensure that internal measures are in place that specify that no officer, employee, or agent (including a subcontractor) of the Tribe/Consortium reviews a trust transaction in which that person has a financial or employment interest that conflicts with that of the trust beneficiary, whether the beneficiary is the Tribe/Consortium or an allottee. Interests arising from membership in, or employment by, a Tribe/Consortium or rights to share in a Tribal claim need not be regulated.
The personal conflicts of interest standards, established pursuant to Tribal law and procedures, must:
(a) Prohibit an officer, employee, or agent (including a subcontractor) from participating in the review, analysis, or inspection of trust transactions involving an entity in which such persons have a direct financial interest or an employment relationship;
(b) Prohibit such officers, employees, or agents from accepting any gratuity, favor, or anything of more than nominal value, from a party (other than the Tribe/Consortium) with an interest the trust transactions under review; and
(c) Provide for sanctions or remedies for violation of the standards.
(a) This subpart describes the process for engaging in consultations related to self-governance with Tribes/Consortia.
(b) The Tribal Consultation Process for self-governance matters described in this subpart is intended to apply to consultations commencing after the effective date of this rule and supersedes previous self-governance consultation processes used by the Secretary.
On matters related to self-governance, the Secretary shall consult:
(a) To determine which programs are eligible for negotiation to be included in a funding agreement at the request of a participating Tribe/Consortium;
(b) To establish programmatic targets to encourage the Department's bureaus to ensure that an appropriate portion of non-BIA programs are available to be included in funding agreements;
(c) On any Secretarial Action with Tribal Implications, provided that the Secretary incorporate input and requests from Tribes and Consortia on topics for consultation.
To the extent practical and not prohibited by law, consultations with self-governance Tribes/Consortia should satisfy the following principles:
(a) Consultation recognizes Tribal sovereignty and the Nation-to-Nation relationship between the United States and Tribes and Consortia and acknowledges that the United States holds treaty and trust responsibilities to Tribes and Consortia.
(b) Consultation is a two-way Nation-to-Nation exchange of information and dialogue between official representatives of the United States and Tribes and Consortia.
(c) Consultation session methods may include, but are not limited to, in-person meetings, video conferences, teleconferences, and correspondence to discuss a specific issue, and must identify the session as consultation in advance of the scheduled meeting.
(d) Consultation should include both the elected or appointed official of the Tribe, acting in the official capacity as the leader of the Tribe or Consortia, or designee of the elected or appointed representative, and the Departmental official with authority to decide on the proposed Departmental Action with Tribal Implications, or designee.
(e) The Secretary shall make good faith efforts to invite Tribes and Consortia to consult early in the planning process and throughout the decision-making process and engage in robust, interactive, pre-decisional, informative, and transparent consultation when planning actions with Tribal implications.
(f) The Secretary should give meaningful consideration to information obtained during consultation with Tribes and Consortia.
(g) The Secretary should strive for consensus with Tribes and Consortia through consultation or a mutually desired outcome. It is the policy of the Department to seek consensus with Tribes and Consortia.
(h) Consultation will ensure that applicable information is readily available to Tribes and Consortia.
(i) Consultation will ensure that officials from Tribes and Consortia and Federal officials have adequate time to communicate.
(j) Consultation will ensure that Tribes and Consortia are advised as to how their input influenced the Department's decision-making.
(a) The Secretary shall issue a notice of consultation which includes:
(1) Sufficient information on the topic to be discussed, in an accessible language and format, and context for the consultation topic, to facilitate meaningful consultation;
(2) Identification of a timeline of the process and possible outcomes for Departmental action under consideration;
(3) The date, time, and location of the consultation;
(4) If consulting virtually or by telephone, links to join or register in advance;
(5) An explanation of any time constraints known to the Department at that time;
(6) Deadlines for Tribes and Consortia to submit written comments on the topic; and
(7) The names and contact information for Departmental staff who can provide additional information on the consultation.
(b) The Secretary shall provide notice of at least 30 days to Tribes and Consortia of any planned consultation sessions.
(c) The Secretary shall distribute such notice under this section to each Tribe/Consortium through:
(1) Email to a point of contact for each Tribe and Consortium; and
(2) Posting the notice on the website for the Department and/or OSG.
(d) The Secretary should, to the greatest extent practical, provide appropriate, available information on the subject of consultation including, where consistent with applicable law, a proposed agenda, framing paper, and other relevant documents to assist in the consultation process.
Yes. The Secretary shall allow for a written comment period following the consultation of at least 30 days, unless otherwise directed by law.
(a) The Secretary shall maintain a record of a consultation with Tribes or Consortia that includes:
(1) A summary of Tribal or Consortia input received;
(2) A general explanation of how Tribes or Consortia input influenced or was incorporated into the agency action; and
(3) If relevant, the general reasoning for why suggestions from Tribes or Consortia were not incorporated into the agency action or why consensus could not be attained.
(b) The Secretary shall timely disclose the outcome of a consultation and decisions made as a result of the consultation.
(c) The record of consultation does not waive any privilege or other exception to disclosure pursuant to the Freedom of Information Act or its implementing regulations.
Prior to a consultation, the Secretary shall inform Tribes and Consortia of those Federal laws, including the Freedom of Information Act, that may require disclosure of information provided by the self-governance Tribe/Consortium during a consultation. To the extent permitted by applicable law, the Secretary shall ensure that such information designated as confidential or sensitive by a Tribe or Consortium is not publicly disclosed. The Department should obtain advance informed consent from Tribes/Consortia for the use of confidential or sensitive information provided, and should inform Tribal representatives that certain Federal laws, including the Freedom of Information Act, may require disclosure of such information.
Agricultural Marketing Service, USDA.
Proposed rule.
This decision proposes to amend the pricing provisions in the 11 Federal Milk Marketing Orders (FMMOs).
Written exceptions and comments to this proposed rule must be submitted on or before September 13, 2024.
Written exceptions should be filed with the Office of the Hearing Clerk, U.S. Department of Agriculture, 1400 Independence Ave. SW, Stop 9203, Room 1031, Washington, DC 20250-9203; Fax: (844) 325-6940 or via the internet at
Erin Taylor, USDA/AMS/Dairy Programs, Order Formulation and Enforcement Branch, STOP 0231-Room 2530, 1400 Independence Avenue SW, Washington, DC 20250-0231, Telephone: (202) 720-7183, Email address:
This recommended decision proposes amendments to five categories of milk pricing:
1.
2.
3. C
4.
5.
In conjunction with this Recommended Decision, the Agricultural Marketing Service (AMS) conducted a Regulatory Economic Impact Analysis to determine the potential impact of amending FMMO pricing formulas on producer revenue and marketwide pool values. AMS used a static analysis incorporating actual data reported from January 2019 to December 2023 to determine the estimated price impacts of the package of amendments included in this Recommended Decision. The full text of the Regulatory Economic Impact Analysis may be accessed at
This administrative action is governed by sections 556 and 557 of title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Orders 12866, 13563, and 13175.
The amendments to the rules proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the proposed amendments would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674) (AMAA), provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the AMAA, any handler subject to an order may request modification or exemption from such order by filing a petition with the USDA stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with the law. A handler is afforded the opportunity for a hearing on the petition. After a hearing, USDA would rule on the petition. The AMAA provides that the district court of the United States in any district in which the handler is an inhabitant, or has its principal place of business, has jurisdiction in equity to review USDA's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling.
AMS has reviewed this rulemaking in accordance with USDA Departmental Regulation 4300-004, Civil Rights Impact Analysis, to identify any major civil rights impacts the rule might have on FMMO participants on the basis of race, color, national origin, disability, sex, gender identity, political beliefs, age, marital, family/parental status, religion, sexual orientation, reprisal, or because of an individuals' income is derived from any public assistance program. Based on the review and analysis of the rule and all available data, issuance of this proposed rule is not likely to negatively impact low and moderate-income populations, minority populations, women, Tribes or persons with disabilities, by virtue of their age, race, color, national origin, sex, disability, or marital or familial status. No major civil rights impact is likely to result from this proposed rule.
In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
To determine which dairy farms are “small businesses,” the $3.75 million per year income limit was used to establish an annual milk marketing threshold of 18.3 million pounds. Although this threshold does not factor in additional monies that may be received by dairy producers, it should be an accurate standard for most “small” dairy farmers. Based on the U.S. 2023 average yield per cow and 2023 NASS average All-Milk price, a dairy farm with approximately 780 cows or fewer would meet the definition of small business. In 2022, the most recent year with statistics available, there were 24,470 dairy farms with milk sales, of which approximately 19,576 had milk regulated on an FMMO for at least one month of the year. Based on the 2022 Census of Agriculture, Milk Cow Herd Size by Inventory and Sales, an estimated 89 percent of operations with milk sales are likely to be small businesses.
To determine a handler's size, if the plant is part of a larger company operating multiple plants that collectively exceed the 750-employee limit for creamery butter manufacturing; the 1,000-employee limit for dry, condensed, and evaporated dairy product manufacturing; the 1,150-employee limit for fluid milk manufacturing; or the 1,250-employee limit for cheese manufacturing; the plant was considered a large business even if the local plant does not exceed the 750, 1,000, 1,150, or 1,250-employee limit, respectively.
In 2022, the following number of plants were regulated for at least one month of the year in each FMMO: 66 plants on the Northeast, 19 plants on the Appalachian, 9 plants on the Florida, 20 plants on the Southeast, 58 plants on the Upper Midwest, 32 plants on the Central, 43 plants on the Mideast, 24 plants on California, 17 plants on the Pacific Northwest, 26 plants on the Southwest, and 8 plants on Arizona. According to the 2022 Census of Agriculture, approximately 86 percent of fluid milk manufacturing plants, approximately 96 percent of cheese plants, approximately 82 percent of dry products plants, and approximately 78 percent of butter plants met the SBA definition of small businesses.
The amendments recommended for adoption in this decision cover five milk pricing subject areas: Milk Composition Factors, Surveyed Commodity Products, Class III and Class IV Formula Factors, base Class I skim milk price (Class I mover), and Class I and II Differentials. This decision proposes to amend provisions in all five pricing subject areas. The amendments are intended to update formulas and factors in response to industry changes over time, many of which have not been updated since the provisions were adopted on January 1, 2000, to ensure USDA is carrying out the purposes of the AMAA.
This decision finds these amendments are necessary. The evidentiary record reflected testimony from a broad range of stakeholder views that updates are necessary in all five pricing subject areas to reflect current market conditions.
An economic analysis has been performed on impacts the proposed amendments will have on industry participants, including producers and handlers. It can be found on the AMS website at
AMS considered alternatives to each of the recommended amendments. Over 49 days of hearing, dozens of witnesses from 9 industry stakeholder groups presented testimony and evidence on 21 proposals in the 5 pricing subject areas. AMS considered all evidence and testimony, including alternative proposals presented, in making its recommendations.
A review of reporting requirements was completed under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was determined that these proposed amendments would have no impact on reporting, recordkeeping, or other compliance requirements because they would remain identical to the current requirements. No new forms are proposed, and no additional reporting requirements would be necessary.
This proposed rule does not require additional information collection that requires clearance by the Office of Management and Budget (OMB) beyond currently approved information collection. The primary sources of data used to complete the forms are routinely used in most business transactions. Forms require only a minimal amount of information which can be supplied without data processing equipment or a trained statistical staff. Thus, since the information is already provided, no new information collection requirements are needed, and the current information collection and reporting burden is relatively small. Requiring the same reports for all handlers does not significantly disadvantage any handler that is smaller than the industry average.
AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
No other burdens are expected to fall on the dairy industry as a result of this rulemaking. This rulemaking does not duplicate, overlap, or conflict with any existing Federal rules.
A public hearing was held upon proposed amendments to the marketing agreement and the orders regulating the handling of milk in all 11 Federal milk marketing areas. The hearing was held pursuant to the provisions of the AMAA, as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR part 900).
The proposed amendments set forth below are based on the record of a public hearing held in Carmel, IN, from August 23-October 11, 2023, November 27-December 8, 2023, January 16-19, 2024, and January 29-31, 2024, pursuant to a notice of hearing published July 24, 2023 (88 FR 47396), a notice of reconvened hearing published November 6, 2023 (88 FR 76143), and a second notice of reconvened hearing, published December 29, 2023 (88 FR 90134).
The hearing was held to receive evidence on 21 proposals submitted by dairy farmers, handlers, and other interested parties. A total of 165 witnesses testified over the course of the 49-day hearing. Witnesses provided an overview of the complexity of the U.S. dairy industry and submitted 511 exhibits containing supporting data, analyses, and historical information.
The material issues, related to FMMO pricing formulas, presented on the record of hearing are as follows:
Two proposals seeking to amend the milk composition standards are being considered in this rulemaking. Proposal 1, submitted by the National Milk Producers Federation (NMPF) seeks to increase the skim component factors, with a 12-month implementation lag. The proposed standards are as follows: increase the nonfat solids assumption from 9.0 to 9.41 per hundredweight (cwt) of Class IV skim milk; increase the protein assumption from 3.1 to 3.39 per cwt of Class III skim milk; and increase the other solids assumption from 5.9 to 6.02 per cwt of Class III skim milk. Proposal 1 also contains an updating methodology that would automatically update the standards no more than once every three years once the nonfat solids component for the prior three years changes by at least .07 percentage points.
Proposal 2, submitted on behalf of National All-Jersey (NAJ), is identical to Proposal 1, except for the automatic update methodology. The proposal would update the standards annually using the previous year's weighted averages, with a 12-month implementation lag.
A witness from NMPF, a trade association representing dairy farmer-owned cooperative marketing associations throughout the United States, testified in support of updating the skim milk price milk component factors, as contained in Proposal 1. The witness explained how the U.S. dairy industry has undergone dynamic structural change since 2000, while FMMO product price formulas have
The NMPF witness asserted the static component levels contained in the formulas result in underpayments to producers in all FMMO's for the value of their Class I skim milk. Therefore, NMPF proposes to increase the milk composition factors in skim milk to 2022 levels. The NMPF witness analyzed 2013-2022 FMMO product prices and concluded adoption of Proposal 1 would have increased the Class III skim price by $0.80 per cwt and the Class IV skim milk price by $0.41 per cwt. An increase from the 2022-based skim milk component factors by the proposed 0.07 percentage point threshold level, the witness added, would have increased the Class III and Class IV prices by $0.14 and $0.07 per cwt, respectively.
Another NMPF witness testified the announced FMMO Class III and Class IV skim milk values do not reflect the current component levels of producer milk, resulting in announced prices being lower than actual market values. The witness said this leads to a misalignment of fluid and manufacturing milk, possibly leading to disorderly marketing conditions. This occurs because the Class I Mover skim milk price is calculated based on skim milk component levels based on 2000 levels, narrowing the difference between Class I prices and manufacturing milk prices (Classes III and IV) and resulting in more instances of price inversions and depooling.
Several NMPF dairy farmer witnesses testified in support of Proposal 1. The witnesses stated improved genetics and feed quality have caused component levels in the milk they market to increase. The witnesses stated component levels in the pricing formulas should be updated to reflect the additional protein produced.
An NMPF witness testified regarding their work as a business consultant with dairy farmers. The witness said dairy farming costs have been consistently increasing due to higher feed prices, overall inflation, interest rate increases, and rising costs associated with labor and environmental regulations. The witness estimated the average margin per cwt of milk produced over the past decade was less than $1, or approximately 4 to 7 percent of the average milk price. It was the witness's opinion that financially sustainable margins are necessary to avoid further consolidation in the industry.
An NMPF dairy farmer witness testified that monthly pay price volatility has increased since 2000. According to the witness, in 2000 their pay price varied $0.52, from a high of $12.95 to a low of $12.43. In the 12 months prior to August 2023, the witness said the variance was $7.46, ranging from $22.50 to $15.04, while costs continued to rise, including the price of corn and soybean meal more than doubling. The witness said that during the same 12-month period their milk output rose over 10,000 pounds. The witness attributed improvements in cow comfort, genetics, and feed quality to the increases in milk output and component levels but opined low component standards were depressing producer price differentials (PPDs) and discouraging milk from supplying the Class I market.
NMPF, in their post-hearing brief, offered additional support for Proposal 1. The brief credited significant advances related to animal genetics, farm management, and cow nutrition as contributing to rising skim milk component levels. NMPF reiterated hearing testimony regarding the static component levels in the formulas leading to a narrowing of the difference between Class I and manufacturing milk prices resulting in more price inversions, larger volumes of depooled milk, and resulting in disorderly marketing. NMPF stated higher skim milk component levels have value in the competitive manufacturing dairy market, which is the basis for determining Class I values. NMPF stated that increasing the skim milk components in the formulas to reflect current levels would recognize the current average value of producer milk used for manufacturing dairy products and result in a Class I price that properly reflects base milk values. Additionally, NMPF argued delayed implementation of updated component level factors is necessary because of dairy farmers' use of risk management programs. Such a delay would allow for the completion of most transactions placed prior to announcement of the change.
A Dairy Farmers of America, Inc. (DFA) witness, appearing on behalf of NMPF, testified the failure to delay an update in skim component standards would cause financial harm to dairy farmers, milk plants, end users, and others who entered into risk-management transactions. DFA is a dairy farmer cooperative and owns and operates 14 manufacturing plants which produce liquid whey, Italian cheese, skim milk powder, whole milk powder, American-style cheese, condensed milk, cream, nonfat dry milk, milk protein concentrate (MPC), sweetened condensed milk, and dry whey. The witness testified that failure to delay implementation would affect the basis, or the profit margin for milk being hedged. The witness testified that 35 to 45 percent of the U.S. milk supply was hedged by dairy farmers and there is a growing demand for risk management services among larger-sized dairies.
A witness representing the American Farm Bureau Federation (AFBF), a farmer advocacy organization with approximately 6 million members throughout the U.S., testified in support of Proposal 1. The witness estimated that raising the skim component standards would increase the Class I price by an average of $0.70 per cwt, based on 2022 data. Consequently, raising the skim component standards would help bring the Class I, III, and IV prices in alignment, reduce the frequency of negative PPDs, and reduce the incentives for depooling, which the witness said undermines orderly marketing. The witness stated that raising the value of the skim milk in the manufacturing classes for the skim and butterfat markets would reduce the incentive of manufacturing plants in the multiple component pricing (MCP) orders to pool milk, which would lower the producer's price and discourage milk from entering a milk deficit region. The witness testified that updating component standards would address some price misalignment issues and is preferred to prevent handlers from depooling.
AFBF offered support in their post-hearing brief stating Proposal 1 would more accurately define the market value of skim milk pooled on FMMOs. The brief asserted the resulting increase in Class I prices would reduce the incidences of price misalignment with Class III and IV prices, reduce the size and frequency of negative PPDs, and reduce depooling incentives. AFBF supported periodic adjustments to component levels, as contained in Proposal 1, to account for the continuing increases in the component levels, but specified these levels should
A witness representing NAJ, an organization representing the interests of Jersey cattle breeders, testified in support of Proposal 2, which proposes the same milk composition levels as Proposal 1, with automatic annual updates. The witness said many factors have contributed to increased component levels, including improved genomics, increased use of gender-selected semen, and volume-based programs such as base/excess programs. The witness testified an annual update would provide improved accuracy because of the recently accelerated pace of component increases and would have better alignment with pricing between butterfat/skim and multiple component pricing FMMOs. Additionally, the witness stated a 1-year lag on implementing these updates would allow for greater risk management which is becoming increasingly more important to producers and processors.
NAJ's post-hearing brief reiterated their support for Proposal 2, arguing record evidence shows protein and other solids levels in producer milk have progressively and significantly increased since FMMO reform in the late 1990s. NAJ stated the trend of higher solids components in skim milk was expected to continue due to economic signals to producers from component values and improved production techniques. NAJ argued amendments of standard skim milk composition factors is necessary to help avoid periods of price inversions, depooling, undervaluing Class I milk, milk supply inefficiency, and disincentives to supply milk for Class I use. NAJ stated a change to the skim milk component levels should be announced at least 11 months in advance of implementation due to risk management practices used by producers and processors. NAJ argued annual updates better serve risk management practices because it would lead to smaller incremental changes and less adverse impact on risk management contracts with more than 12-months open interest at the time component changes are announced.
A witness representing Edge Dairy Farmer Cooperative (Edge), a Wisconsin-based dairy milk test verification cooperative, testified in support of Proposals 1 and 2. The witness recommended increasing the implementation lag to 15.5 months to support longer contract hedging. The witness was of the opinion the standard butterfat test also should be updated from 3.5 percent to 4.06 percent, the 2022 average butterfat for all markets combined as published by the USDA's AMS. According to the witness, this would more accurately reflect current butterfat levels and better align the butterfat to protein ratio used in the formula, ensuring more effective risk management tools, as farmers' ability to manage their gross pay price risk would improve.
Edge, in their post-hearing brief, reiterated hearing testimony that failure to adjust the butterfat level when updating skim component levels would cause disorderly milk marketing, as it undermines effective risk-management tools for dairy farmers. Edge argued that without the corresponding change, producers hedging milk revenue using risk management products based on Class III milk or Class IV milk prices, will tend to be under protected against the decline in butterfat prices. Edge added that changing the butterfat level would not affect handler obligations to the producer settlement fund, PPDs, or uniform producer prices.
A witness representing the International Dairy Foods Association (IDFA) testified in opposition to Proposals 1 and 2, stating that updating the component standards would increase the Class I skim price by $0.60 per cwt, a value that cannot be recovered in the marketplace. IDFA is a trade organization representing dairy manufacturers of milk, cheese, ice cream, yogurt, cultured products, and dairy ingredients. The IDFA witness testified consumers choose finished Class I products based on desired fat level, freshness, and price, not higher nonfat solids levels. The witness estimated that updating component levels in the formulas would result in manufacturing handlers in butterfat/skim FMMOs paying an additional $0.40 to $0.80 per cwt, even though the component levels of milk delivered to those plants was less than those proposed. The witness cited National Dairy Herd Information Association (DHI) data showing 2020 to 2022 average skim protein levels in butterfat/skim FMMOs below the levels contained in Proposals 1 and 2. The witness attributed the lower observed component levels to the fact that producer payments in these orders are made on the basis of the fat and skim content of their milk, leaving no financial incentive to produce higher component milk.
A witness from Saputo Cheese USA (Saputo), appearing on behalf of IDFA, also testified in opposition of Proposals 1 and 2. Saputo is a dairy processor and manufacturer operating 29 plants throughout the U.S. The witness said Saputo operates three plants located in the skim/fat orders, and in 2022 the average NFS level of milk received at those plants was 9.1070 percent, which is less than what is proposed in Proposals 1 and 2. The witness explained Saputo purchases skim solids to add to its skim milk in order to ensure the Class II products it manufactures contain the skim solids necessary to meet standard of identity requirements for those products. Updating the component levels in the formula would only result in Saputo paying for skim solids not received, but it would not lower the amount of skim solids Saputo must purchase, explained the witness.
A post-hearing brief submitted by IDFA reiterated its opposition to Proposals 1 and 2, arguing that increased component levels have no financial benefit or economic value to Class I handlers who would be the primary entities impacted by adoption of these proposals. IDFA stated the current FMMO system of pricing Class I milk on a skim/fat basis versus Classes II, III, and IV milk on a component basis does not create disorderly marketing.
The Milk Innovation Group (MIG) is a group of fluid milk processors and producers that market value added dairy based products. MIG's members include Anderson Erickson Dairy (AE), Aurora Organic Dairy (Aurora), Crystal Creamery, Danone North America (Danone), fairlife, HP Hood LLC (HP Hood), Organic Valley/CROPP Cooperative (Organic Valley), Shamrock Foods Company (Shamrock), Shehadey Family Foods LLC (Shehadey), and Turner Dairy Farms (Turner Dairy). Crystal Creamery is a California fluid milk processor producing Class I, II, and IV conventional and organic milk products. Danone is a food and beverage company operating seven plants in the U.S. Fairlife is a fluid milk processor of ultra-filtered lactose free milk, and other high protein products. Organic Valley is a dairy farmer-owned organic cooperative producing more than 30 percent of the organic milk sold in the U.S.
Seven witnesses representing MIG, including witnesses from HP Hood, Shehadey, Saputo, Shamrock, AE, Turner Dairy, and Aurora, testified in opposition to Proposals 1 and 2. HP Hood is a fluid milk processor operating five ESL plants and four high-temperature, short-time (HTST) plants in the Northeast and California. Shehadey operates four manufacturing plants in California, Nevada, and Oregon, producing Class I and Class II products. Shamrock is a fluid milk
Six witnesses testified their plants regularly receive milk with components below the proposed levels. One witness offered that component levels received ranged from 3.09 to 3.63 percent protein, 5.83 to 6.10 percent other solids, and 8.92 to 9.65 percent NFS. MIG members testified that increasing the component levels in the formulas would increase their raw milk costs, requiring them to pay for milk components not received. One witness stated that adoption of Proposals 1 and 2 would increase costs between $0.60 and $0.75 per cwt. All MIG witnesses claimed that fluid milk processors, even if they did receive higher component milk, are unable to convert those higher components into additional market revenue as Class I products are sold on a volume, not component basis.
Another MIG witness testified on a survey conducted of MIG members plus two additional large grocery retailers who own their own fluid milk processing plants. According to the witness, using component data from 32 out of the 36 plants surveyed, these plants frequently received milk with components below the proposed levels. As data was confidential, no specific data was provided. The witness also noted the data showed component levels changed due to seasonality and geographics, demonstrating inconsistent levels received by plants. The witness testified the adoption of Proposals 1 or 2 would raise Class I prices and make it more challenging for these plants to recover costs. Should USDA decide to change the standard component levels in the pricing formulas, the witness testified component minimums should be used instead of averages because FMMOs are meant to provide minimum prices.
A post-hearing brief filed on behalf of MIG argued it would be disorderly for Class I fluid milk processors, the only mandatory participant of FMMOs, to be forced to pay for component levels regardless of what is actually received. MIG opined consumers do not value additional skim component levels in fluid milk products, therefore Class I processors are unable to recoup additional revenue out of the market. MIG was of the opinion no record evidence was provided at the hearing that the current skim component formula factors are causing disorderly marketing and added that although they oppose Proposals 1 and 2, if any part of these proposals are adopted there should be a 12-month implementation delay.
A witness representing the CME Group (CME) testified to explain various dairy risk management tools offered through the exchange, including futures and options contracts. The witness explained the CME is a derivatives marketplace offering a range of futures exchanges to meet private risk management needs. The witness explained a futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month. An option on a futures contract is the right, but not the obligation, to buy or sell the underlying futures contract at a predetermined price on or before a given date in the future. The witness stated 97.43 percent of contracts in the futures and options market are for 12-month periods, and in a previous change to futures contracts there was an 18-month lag on implementation to be beyond open interest. The witness testified that Dairy Revenue Protection (DRP) is one of many programs that rely on CME markets and advocated USDA to consider futures and options markets when establishing implementation plans.
In its post-hearing brief, CME reiterated its neutrality on all proposals under consideration. They stated any change modifying the current Class III and Class IV formulas would be considered a material change affecting current contracts. CME stressed the importance of sufficient and transparent notice of any changes.
A post-hearing brief was submitted on behalf of Select Milk Producers (Select), a dairy-farmer owned cooperative which owns and operates eight processing plants in Texas, New Mexico, and Michigan, manufacturing ESL fluid milk products and a variety of cheese, butter, and NFDM products. Select offered support for Proposal 1 and took exception to the assertion there is no value in higher protein levels in Class I products, as it is belied by the success of specialty fluid milk products such as fairlife, and the higher milk solids required for California fluid milk. Although Select supported adoption of Proposal 1, they do not support a delay in implementation, nor the annual update as contained in Proposal 2.
Lamers Dairy Inc. (Lamers), a Wisconsin based HTST fluid milk processor, submitted a post-hearing brief in opposition to Proposals 1 and 2. Lamers stated component levels can vary both regionally and from farm to farm. Lamers opined that USDA is statutorily required to conduct a study of component levels before any change could be made and argued adoption of Proposals 1 and 2 should not be considered.
New Dairy OPCO LLC (New Dairy), a fluid milk processor operating four fully regulated distributing plants (three of which are located in the southeastern U.S.), submitted a post-hearing brief in opposition to Proposals 1 and 2. New Dairy offered support for arguments made by IDFA and MIG that fluid milk processors would be unable to recoup the additional cost of components should Proposals 1 or 2 be adopted. They purport that charging fluid milk processors for components not actually received would be disorderly. New Dairy said raising component levels in the formulas would harm its southeastern plants as they pay on a skim/fat basis which provides no incentive to producer to increase components to match the national average.
In its post-hearing brief, NMPF opposed the annual updating feature contained in Proposal 2. NMPF stated that by limiting changes to the standard component levels to a periodic basis and relying on 3-year weighted average, Proposal 1 is more likely to produce accurate component values and avoid disruption from more frequent changes.
This rulemaking proceeding considers four proposals, and a modified proposal submitted during the hearing, that would add or remove a variety of products in the DPMRP survey, which are then reported in the National Dairy Product Sales Report (NDPSR) and used to establish FMMO classified prices. The proposals are as follows:
Proposal 3, submitted by NMPF, seeks to eliminate the Cheddar cheese barrel price from the cheese price formula.
Proposal 4, submitted by AFBF, seeks to add Cheddar cheese 640-pound block price series to the cheese price formula.
Proposal 5, submitted by AFBF, seeks to add unsalted butter to the butterfat and cheese price formulas.
Proposal 6, submitted by the California Dairy Campaign (CDC), seeks to add a price series for mozzarella to the cheese price formula.
Edge offered a proposal modification during the hearing to adopt different weighting methodology which would
NMPF witnesses from Foremost Farms USA (Foremost), Ellsworth Cooperative Creamery (Ellsworth), Land O'Lakes (LOL), and DFA testified in support of Proposal 3. Foremost is a cooperative with 850 members located in Wisconsin, Michigan, Iowa, Minnesota, Indiana, Ohio, and Illinois, and operating eight manufacturing plants producing cheese and butter.
Ellsworth is a Wisconsin-based cheese manufacturer producing a significant volume of barrel cheese and a variety of specialized cheeses and cheese curds from 250 dairy-farmer members. LOL is a dairy farmer-owned cooperative with more than 1,000 dairy farmer members, primarily producing butter and cheese.
The witnesses explained the current cheese price formula includes both block and barrel cheese in the computation. They asserted the cheese price formula provides for orderly marketing if the difference, known as the “spread,” in the respective market prices of blocks and barrels remains close to the assumed $0.03 per pound cost difference, which occurred from 2000 to 2016. However, since 2017 the spread between the block and barrel prices has been volatile. One witness stated the weighted average spread published in the weekly NDPSR during January 2017 through July 2023 was $0.120 per pound, with a much wider and more volatile range per pound. The LOL witness opined that the DPMRP survey could continue to include and publish prices of 500-pound barrel cheese without necessitating its inclusion in the Class III protein price calculation.
An NMPF witness testified the CME block cheddar price is used as a pricing index for most cheese produced in the U.S., including cheddar, 40-pound block, 640-pound block, mozzarella, other American-type cheese, and other cheese including cream cheese, and Hispanic cheese. They estimated 90 percent of natural cheese produced in the U.S. is sold using the CME 40-pound block cheddar price as a pricing index. The witness estimated the CME barrel cheese price is used to price only about 9 percent of total domestically produced natural cheeses, including barrels themselves. They said DPMRP survey volumes of barrel cheese between 2013 and 2022 ranged from 44 to 52 percent, resulting in an overrepresentation of 500-pound barrels compared to the actual volume of cheese that is priced off of barrels. The witness testified that since 2017, the significantly wider and increasingly volatile block-barrel spread has caused instability in the cheese market. Consequently, the witness said, dairy farmer revenue has been reduced as the over representation of 500-pound barrels lowered the Class III price. The Foremost witness estimated the undervaluation represented $2 billion since 2017, opining the value would have been greater if not for the large volume of Class III milk not pooled in 2020 and 2021.
The NMPF witness testified eliminating 500-pound barrel prices from the Class III price would create more orderly marketing in FMMOs by reducing the financial uncertainty for dairy producers and manufacturers and ensuring the cheese price in the protein component formula represents the single commodity cheddar cheese product. The witness described how barrel cheese manufacturers are harmed when they must account to the pool at an FMMO cheese price higher than the revenue generated from barrel cheese product. The witness said eliminating the 500-pound barrels would have increased the Class III price by $0.41 per cwt, using average product prices for 2017 to 2022.
An NMPF witness testified that removing 500-pound barrels had been addressed in prior rulemakings, but denied by USDA in the rulemaking. However, current market conditions have significantly changed, necessitating a re-evaluation. The witness attributed the increased volatility in the block-barrel price spread since 2017 to a variety of factors, including increased 500-pound barrel production capacity that may be due to increasing values of its white whey by-product.
NMPF witnesses testified eliminating 500-pound barrel cheese from the protein component price (PCP) formula would still provide adequate volume of cheddar cheese for price discovery purposes as 40-pound block cheese surveyed represents approximately 16 percent of total U.S. natural cheddar cheese production. The witness also said this methodology change would bring the cheese price into conformity with the price for butter, NFDM, and dry whey, which utilize only one surveyed product for price discovery purposes.
The witness testifying on behalf of Ellsworth stated 40-pound blocks and 500-pound barrels are not interchangeable products. The witness said while 40-pound block cheddar has many markets and uses, 500-pound barrel cheddar is used for processed cheese, a market driven by few processors and purchasers. As a result, the witness said, surveying barrel cheese prices skews the FMMO cheese price towards a smaller market which is not representative of the rest of the cheese market. The witness estimated the volatility in the block-barrel spread since 2017 cost Ellsworth producers $0.84 per cwt. The witness said barrel cheese manufacturers would adjust to the elimination of barrel prices from the survey and eventually transition to prices based on the 40-pound block cheese price.
Witnesses representing IDFA, Leprino Foods Company (Leprino), and Associated Milk Producers, Inc. (AMPI) testified in opposition to Proposal 3. Leprino operates nine plants in the U.S., manufacturing mozzarella cheese, whey products, and NFDM. AMPI owns and operates eight manufacturing plants processing cheese, butter and powdered dairy products from member farms in Wisconsin, Minnesota, Iowa, Nebraska, South Dakota, and North Dakota.
The witnesses said sales of both block and barrel cheddar cheese are robust and each play a significant role in setting the market value of cheddar cheese. They argued eliminating 500-pound barrels would reduce by more than half the cheese market price contained in the survey and would result in a distorted picture of the total commodity cheddar market. The witness said opposition to removing barrels was not related to the presumed effect on the Class III price as the NDPSR weighted average cheese price (reflecting block and barrel cheese) was higher than the 40-pound block price in 9 of 14 years from 2009 to 2022. One witness opined additional cheddar block plant capacity is coming on-line in the next couple of years, increasing 40-pound block volumes, and would reduce the block-barrel spread to historical levels under normal supply-demand behavior.
The IDFA witness speculated cheddar barrel manufacturers may opt not to pool milk if the barrel price is no longer surveyed because they would be unable to garner sufficient market revenue in order to account to the pool and the Class III price.
Two Leprino witnesses testified eliminating 500-pound barrels from the Class III price formula removes the product most closely reflecting the supply and demand balance. They were of the opinion that removing 500-pound barrels would both shrink the survey volume and likely result in greater production of cheddar blocks as a way to clear the market. The witnesses testified this would add volatility to the block market, cause unnecessary stress to the U.S. marketplace, and make U.S.
The Leprino witnesses said dropping 500-pound barrels from the survey would create a presumption within the Class III formula that all cheese, including barrels, would then be priced off blocks. The witnesses asserted barrels and blocks have different supply and demand functions, and eliminating barrels from the Class III formulas would force barrels to be priced off blocks, adding dysfunction to the barrel market. The witnesses were of the opinion barrels are the market-clearing cheese, and instead 40-pound blocks should be eliminated from the price formula to be more consistent with the minimum pricing provisions.
In its post-hearing brief, NMPF reiterated testimony regarding price differences between 40-pound blocks and 500-pound barrels becoming more volatile since 2017. Historically, NMPF wrote, using both block and barrel prices in the Class III pricing formula increased the volume of cheddar cheese reported in the NDPSR. However, the increased price spread has caused instability in the cheese market and reduced revenue for dairy farmers as the barrel price is a disproportionately large share when compared to its volume in the cheese market. NMPF estimated 90 percent of the natural cheese produced in the U.S. is priced using the CME 40-pound block price, while the remaining is priced off of the CME barrel cheese price. As a result, NMPF wrote, the Class III milk price has been undervalued and lowered producer revenue.
Leprino submitted a post-hearing brief reiterating the important balancing function barrels provide and opined removing them would push 40-pound blocks into the balancing role and would increase price volatility for cheddar blocks.
Select submitted a post-hearing brief in support of Proposal 3, arguing 500-pound barrels no longer represent the commodity cheddar market and 40-pound blocks are an appropriate commodity to establish the protein price. According to Select's brief, current formulas dramatically over weights the price of barrels relative to the markets actual use barrels and the cheese priced off of them.
The AFBF submitted a post-hearing brief in support of Proposal 3 reiterating hearing testimony that barrels represent roughly 50 percent of the NDPSR volume but is used to set prices for only 10 percent of the cheese in the U.S. market. The AFBF stressed use of barrels in the cheddar cheese price formula creates a price not representative of the value of 90 percent of cheddar cheese produced.
IDFA, in their post-hearing brief, opposed Proposal 3 as they argued its adoption would make 500-pound barrel production uneconomical, resulting in barrel makers going out of business or switching to block production which would destabilize the block market. IDFA wrote that 40-pound blocks and 500-pound barrels serve materially different functions in the market and the failure to include both in the survey would distort the commodity cheddar cheese market.
NAJ submitted a post-hearing brief in opposition to Proposal 3. NAJ cited hearing evidence showing the market price of block and barrel cheese has diverged significantly since 2017, with barrel cheese priced about $0.11 per pound less than block cheese from 2017-2022. NAJ stated blocks and barrels have different uses, different buyer markets, and limited substitutability. With an expected increase in block production in the coming years, NAJ wrote, there may be many months in which barrels are more per pound and should remain part of the cheese price formula.
A witness representing the AFBF testified in support of adding 640-pound cheddar blocks to the Class III formula, as contained in Proposal 4. The witness said adding 640-pound blocks would expand the volume of cheese surveyed and better reflect U.S. block and barrel production volumes. The witness was of the opinion there has been a pronounced production shift from 40-pound blocks to 640-pound blocks and adding 640-pound blocks would provide more survey volume to avoid future rulemaking to address the dwindling 40-pound block survey volume. The witness testified that 40-pound and 640-pound blocks are largely interchangeable in price, use, and storage, and therefore it is appropriate those prices be reflected in the Class III price.
A witness representing IDFA testified in opposition to Proposal 4. The witness said the DPMRP cheese survey encompassed more than 1.34 billion pounds of sales in 2022, divided almost evenly between 40-pound blocks and 500-pound barrels. The witness testified the data set is sufficient to determine prices in the market and, since 640-pound blocks typically trade off the 40-pound block price, its addition would provide little additional price discovery information. The witness opined that only a small percentage of the 640-pound block market would meet survey specifications because of the nature of how the product is manufactured and sold.
The two Leprino witnesses argued it would be inappropriate to add 640-pound blocks as the market is largely make-to-order and the lack of equipment to handle 640-pound blocks limits sales to a narrow group of buyers. The witnesses noted the 640-pound block market is balanced through the cutting down of 640-pound blocks into 40-pound blocks, so the 40-pound block cheddar market is already reflected in its pricing.
A witness representing Glanbia PLC (Glanbia), testified in opposition to Proposal 4. Glanbia owns four dairy plants in Idaho and partially owns two joint venture plants in New Mexico and Michigan, processing 34 million pounds of milk daily into barrel cheese, block cheese, whey protein concentrates, proprietary protein blends, and lactose. The witness testified Glanbia plants manufacture 40-pound and 640-pound-blocks, both priced off the CME 40-pound block price and opined that adding 640-pound blocks would not add new information to the survey.
A witness representing the Wisconsin Cheese Makers Association (WCMA), whose 81 members include cheese manufacturers making 40-pound blocks, 640-pound blocks, and 500-pound barrels, testified in opposition to Proposal 4. The witness testified the industry uses the 40-pound block price to price 640-pound blocks, and since 40-pounds blocks are already used in the protein formula, adding 640-pound blocks would add no new price information.
A DFA witness representing NMPF, testifying in opposition to Proposal 4, said the 40-pound block volume provides an adequate dataset and the sole inclusion of 40-pound blocks is sufficient for cheese price discovery, making adoption of Proposal 4 unnecessary. The witness stated the daily CME cash block cheese market is widely recognized by market participants as heavily influencing the price of cheese. The witness concluded that because annual CME block cheese traded volumes are not as large as NDPSR block survey volumes, the volume of 40-pound blocks reported in the NDPSR is more than adequate to determine the FMMO cheese price. The witness testified that incorporating 640-pound blocks into the NDPSR data set could promote the same disorderly market conditions currently observed with the inclusion of 500-pound barrels.
The AFBF reiterated their support of Proposal 4 in their post-hearing brief. The AFBF indicated 640-pound blocks are priced identically, or nearly
Select, in their post-hearing brief, expressed support for Proposal 4 agreeing with proponents that its inclusion would increase DPMRP survey volume. Select mentioned that with new cheese processing capacity starting in upcoming years in Minnesota, New Mexico, Michigan, and Texas, 640-pound blocks would become a larger proportion of the commodity cheddar market and it would be prudent to incorporate their prices and volume in the survey.
IDFA reiterated opposition to Proposal 4 in its post-hearing brief. IDFA highlighted evidence describing how 640-pound blocks are typically made to customer order as there is only a small number of cheese buyers who are able to purchase and process them. Since manufacturers of 640-pound blocks often balance the 640-pound block market by cutting them down to 40-pound blocks, IDFA said no new price information would be gained from including 640-pound blocks in the survey.
WCMA also expressed opposition to Proposal 4 in their post-hearing brief and wrote that because 640-pound blocks do not have a unique price discovery mechanism, they would add no new price information to the formulas.
A witness representing the AFBF testified in support of Proposal 5, seeking to add unsalted butter to the DPMRP butter survey. The witness said because of the growing volume of unsalted butter production and use in the U.S., the DPMRP salted-only butter price collection increasingly underrepresents the value of U.S. butter. According to the witness, the amount of butter captured by the NDPSR as a percentage of total butter production has been declining, from 16 percent in 1999 to 9.4 percent in 2022. The witness expected this trend to continue without the addition of unsalted butter.
Citing USDA voluntarily graded salted and unsalted butter volumes, the AFBF witness said one reason for declining butter survey volumes is the increase in U.S. unsalted butter production. The AFBF witness testified the exclusion of unsalted butter is unnecessarily restrictive for the purposes of the DPMRP survey. The witness cited U.S. butter export data showing 2,000 metric tons exported in 2000, to over 65,000 metric tons in 2022, estimating almost all the exports were unsalted. The witness said incorporating unsalted butter prices into the FMMO butterfat formula would make the survey more representative of the evolving butter market, allow for better market transparency, and provide for more orderly marketing of butter and milk. The witness claimed salted and unsalted butter are production substitutes, as the same production line can be used for both without substantial interruption. The witness clarified Proposal 5 is not intended to change the current 80 percent butterfat reporting standard for butter, and therefore exported unsalted butter at 82 percent butterfat would continue to be excluded.
A witness representing CDC expressed support for Proposal 5, without additional testimony. The CDC represents dairy farmers throughout California and is a state chapter of the National Farmers Union.
A witness representing IDFA testified in opposition to Proposal 5. The witness testified there is no uniform specification for unsalted butter, so it is impossible to derive a uniform price for purposes of an FMMO pricing formula. The witness explained unsalted butter does not store as well compared to salted butter, rendering unsalted butter less capable of providing useful uniform price information. The witness also testified unsalted butter tends to be priced off the CME Grade AA salted butter price, and therefore does not bring any new pricing information. As substantial quantities of unsalted butter are exported through premium-assisted sales, which would not be included in the DPMRP survey, emphasizing unsalted butter should not be relied on for determining the market price of butter. Moreover, the witness considered the current volume of salted butter reported in the DPMRP to be a robust quantity of butter sales.
A witness representing the Dairy Institute of California (DIC) testified in opposition to Proposal 5. The DIC is a trade association, representing fluid milk and dairy product processing plants in California. The witness asserted most unsalted butter is 82 percent butterfat and exported and should be considered substantively different from domestically consumed butter which contains 80 percent butterfat. The witness referenced a lack of clarity on how subsidies on exported butter would be handled in the product price reporting as another reason for their opposition.
A California Dairies, Inc. (CDI) witness, representing NMPF, testified in opposition to Proposal 5. CDI is a California dairy farmer-owned cooperative with 258 members producing and marketing 41 percent of California's total milk production and operating six butter and milk powder manufacturing facilities in the state. The witness disagreed with the assertion that salted butter at 80 percent butterfat no longer represents an adequate survey volume. The witness testified CDI manufactures both types of butter, and unlike salted butter, unsalted butter is manufactured exclusively for customer order. The witness argued sales of the two types of butter are not interchangeable. The witness stressed the addition of salt allows salted butter to be stored for long periods, making it a market clearing product, whereas the nature of unsalted butter requires it to be sold and consumed in a significantly shorter period of time. The witness was of the opinion introducing unsalted butter into the survey may result in volatility in the relationship between salted and unsalted butter similar to the current volatile relationship between 40-pound block and 500-pound cheddar barrels. The witness said it was preferable to have one product generate the singular commodity reference price for purposes of calculating the minimum FMMO prices.
In post-hearing briefs, the AFBF offered additional support for Proposal 5, stating the growing volume of unsalted butter production and use in the U.S. markets results in a salted-only butter price collection in the NDPSR survey which increasingly underrepresents the value of U.S. butter. The AFBF argued the declining trend in butter survey volume as a percent of actual production would continue, as butter survey volume has fallen from 16 percent of total production in the 1999 to 9.4 percent in 2022.
Select expressed opposition to Proposal 5 in its post-hearing brief. Select argued that despite the growth of unsalted butter products, it should not be included in the survey because it lacks a uniform specification, is typically produced for special orders, has no active commodity market, is often made with 82 percent butterfat versus 80 percent, and is viewed as a higher-value product.
IDFA's post-hearing brief reiterated their opposition to Proposal 5 stating the Grade AA salted butter survey volume is robust and the product is traded on the CME. IDFA wrote that a majority of unsalted butter is exported through government or private assisted sales, such as Dairy Export Incentive Program or Cooperatives Working Together, which would disqualify such sales from being reported. IDFA also stated unsalted butter does not store as
A witness representing the CDC testified in support of adding mozzarella prices to the FMMO cheese price, as contained in Proposal 6. The witness was of the opinion adding mozzarella would make the FMMO Class III price more reflective of all U.S. cheese production. The witness asserted that because the volume of mozzarella production significantly exceeds cheddar production it should be reflected in the FMMO cheese price to improve price transparency and increase dairy farmer revenue. The CDC witness also stated mozzarella production is the largest category of cheese produced today and deserves a standard specification determined by the volume of mozzarella produced today.
The CDC witness proposed adding mozzarella to the FMMO protein price based on the Van Slyke cheese yield formula, a formula for predicting cheddar cheese yields from milk on the basis of its fat and casein content. The witness submitted numerous USDA Specifications of Mozzarella Cheese for the Department to consider when determining an acceptable moisture and fat content of mozzarella cheese to be surveyed. The specification detailed requirements for six variations of mozzarella types in four forms (loaf, sliced, shredded, or diced). The witness testified that 5 to 6-pound loaves of mozzarella would be representative of a wholesale commodity mozzarella product and reasonable for inclusion in the survey.
A California dairy farmer testified in support of Proposal 6. The witness said including mozzarella in the survey would create a Class III price that more accurately reflects the value of the current cheese market. The witness attributed the ongoing decline in the number of California dairy farms to negative margins and price volatility and stressed the urgency in capturing the additional value of mozzarella. A Wisconsin dairy farmer also supported inclusion of mozzarella for similar reasons.
A witness representing IDFA testified in opposition to Proposal 6. The witness described the difficulty in selecting appropriate mozzarella product specifications, yield assumptions, and manufacturing costs to include in the formulas whose factors currently reflect only cheddar production. The witness also testified the commercial mozzarella cheese market contains wide product variability, including varying fat and moisture parameters demanded by mozzarella customers. The witness testified that unlike bulk cheddar products, mozzarella is not a market-clearing product, is often sold to meet the customer specifications, is not traded on the CME, and is not storable for extended periods.
Witnesses from Leprino and Glanbia testified in opposition to Proposal 6, asserting the proposal lacked critical details making it difficult to interpret and evaluate. The witnesses explained the equipment, production, and yield difference between mozzarella and commodity cheddar. The witnesses said Proposal 6 does not define the type of mozzarella to be surveyed or how USDA should address the diversity of mozzarella cheese types and packages. The witnesses stated significant volumes of mozzarella are manufactured into value-added forms, whether as shred, string, or smaller retail or foodservice loaves by the primary manufacturer. The witnesses also noted most mozzarella is not market-clearing and is stored in refrigerated form with limited shelf life reducing its role as a market clearing product. The witnesses added that the volume of mozzarella production sold by the primary manufacturer in bulk format is comparatively small, in contrast to cheddar, in which most shredding, processing into consumer packaging, and conversion to other forms is performed by different companies rather than the original manufacturer. The witnesses opined cheddar remains the most appropriate Class III cheese product.
Leprino reiterated their opposition to Proposal 6 in their post-hearing brief. Leprino argued mozzarella cheese is a grouping or collection of similar products with diverse specifications, and that the assumption mozzarella production volume represents a single defined bulk product is incorrect. Leprino further stated mozzarella has different manufacturing processes, costs, and product yields. Therefore, if mozzarella was added to the Class III pricing formula, the formula would become substantially more complicated with little incremental benefit.
A Foremost witness, testifying on behalf of NMPF, testified in opposition to Proposal 6, urging USDA to only utilize one commodity price series to represent each of the four dairy prices: cheese, butter, NFDM, and dry whey, to ensure orderly marketing. The witness noted the many mozzarella composition types, and purported deriving a 40-pound block cheddar equivalent price would be difficult. The witness added mozzarella manufacturing costs are different and no data exists to determine how those costs should be reflected in the cheese make allowance. The witness said including mozzarella pricing into the protein price calculation would not enhance price discovery as mozzarella prices already move with the 40-pound cheddar market. Other NMPF witnesses testified to the appropriateness of limiting the cheese price to one survey product, cheddar. Witnesses representing the AFBF and WCMA opposed the inclusion of mozzarella due to the lack of standard format that could be surveyed.
Select's post-hearing brief opposed Proposal 6 because no workable framework for incorporating mozzarella into the price formula was provided on the record.
IDFA's post-hearing brief reiterated their opposition of Proposal 6 as mozzarella lacks uniformity in compositional specifications and yields and is not traded on the CME. IDFA wrote the U.S. Food and Drug Administration (FDA) Standards of Identity provide four different variants of mozzarella cheese, with a wide variety of fat and moisture levels. IDFA also stated that while proponents advocated use of the Van Slyke formula to determine yields, the record lacked evidence as to how the formula should be revised to incorporate mozzarella cheese.
WCMA opposed Proposal 6 in their post-hearing brief. WCMA members argued that there is no FDA Standard of Identity for mozzarella and are concerned over the vast variety of forms and functionality of each mozzarella manufacturer.
A witness testifying on behalf of the CME offered information regarding its dairy futures and options markets which utilize FMMO prices. The witness did not appear in support or in opposition to any proposal under consideration. The witness testified that the CME dairy product portfolio, which began in 1996, includes Class III and Class IV milk futures and options, cash-settled cheese, 40-pound block cheese, cash-settled butter, NFDM, and dry whey. The witness said the relationship between Class III and Class IV milk futures can serve as a mechanism to manage both input and output costs and provide the dairy trading community with an opportunity to provide liquidity to the market while managing risk. The witness testified any changes to FMMO formulas, or underlying DPMRP survey methodology could result in a material change to the valuation of the contracts. A post-hearing brief filed by CME reiterated its hearing testimony and stressed that the Department consider the impact to futures and options
A witness representing Edge offered the modified proposal that would reweight 40-pound blocks and 500-pound barrels by U.S. production volumes, not DPMRP survey volumes. The witness said this alternative weighting methodology would reduce the weight of barrel cheese as most cheddar cheese is manufactured into blocks. The witness explained that since a significant volume of block cheddar cheese does not qualify for inclusion in the NDPSR, barrels have a weight disproportionate to their true market share of the cheddar market. The witness was of the opinion the protein price should primarily reflect the block cheddar cheese market as it is estimated 70 to 75 percent of all cheddar cheese is produced into 40-pound or 640-pound blocks.
The Edge witness predicted that the block-barrel spread could invert in 2025 due to the growth of block cheese production. The witness expects cheese manufacturers who can make either blocks or barrels will react to profitable opportunities, thus reducing the spread between block and barrel prices by altering their production schedules. The witness argued that, given the anticipated trends over the next 3 to 5 years, it would be more prudent to reduce the weight of barrels today and revisit the topic of removing barrels in 5 years.
Edge reiterated their support for the weighting methodology in its post-hearing brief, as an alternative to eliminating barrel cheese or adding 640-pound blocks to the survey. Edge explained that, in practice, the Department would survey all barrel cheese production volume on an annual basis, including forward contracted cheese volumes, to determine the percentage of barrel cheese produced in relation to the NASS total U.S. cheddar cheese production estimates. Edge proposed the percentage be rounded to the nearest 5 percent, and the inverse would be assumed to represent block production. This calculated weight would be announced by September 15 and be applicable for the following calendar year. Survey prices would then be weighted by these percentages to determine weighted average cheese prices.
IDFA, in their post-hearing brief, opposed Edge's modified proposal, arguing that it ignores market clearing, minimum pricing principles. IDFA opposed the idea of Class III prices being predominantly determined through a 40-pound block cheddar price.
A post-hearing brief submitted by NMPF opposed Proposals 4, 5, 6, and Edge's modified proposal on the grounds the proposals perpetuate the problem Proposal 3 seeks to fix, which is to have only one product surveyed to determine a wholesale commodity price.
Proponents submitted three proposals to amend the make allowances in the Class III and IV formulas. Proposal 7, submitted by NMPF, seeks to update make allowances to the following: cheese, $0.2400; dry whey, $0.2300; NFDM, $0.2100; butter, $0.0210. WCMA and IDFA submitted Proposal 8 and identical Proposal 9, respectively, to update make allowances as described in the below table. The proposals contain a four-year implementation schedule with 50 percent of the increase implemented in year 1 and the remaining 50 percent implemented evenly across the remaining 3 years.
A former University of Wisconsin economics professor testified regarding separate manufacturing cost surveys they conducted on behalf of USDA and IDFA in 2021 and 2023, respectively. Each survey collected data submitted voluntarily from plants producing commodity cheddar cheese, dry whey, butter, and NFDM. The witness previously conducted similar surveys used by the Department in determining make allowance levels. The witness did not testify in support or opposition to any manufacturing allowance proposals under consideration.
The witness explained that only plants manufacturing commodity products meeting DPMRP product specifications were eligible to participate. As plant participation was voluntary, the sample of plants and respective volumes varied by product and between surveys, with increasing cost variation between plants over time. The witness noted more observed cost variation across plants can occur due to newer automation technology employed in some plants, varying utility costs over time, and economies of scale achieved by some plants who negotiate input costs. The witness explained that dairy-based raw product costs, such as raw milk or purchased cream, are excluded, while costs of non-dairy ingredients needed to transform the raw milk into a manufactured product, such as salt and enzymes, are collected and included in the survey results. The witness said costs, such as labor and utility, through the product-packaging stage are incorporated, but post-packaging costs, such as long-term storage or distribution and sales costs, are not. The witness explained an economic depreciation factor, not consistent with taxable depreciation, is incorporated to cover consumed capital, and the asset's return on investment is included to capture opportunity costs.
The witness explained two different methodologies used for allocating costs in multi-product plants that could not be associated with a specific product (unallocated costs). The witness said the 2021 survey utilized a degree-of-transformation factor to allocate costs based on degree of transformation raw milk must undergo in order to be manufactured into the wholesale product. Transformation factors were assigned subjectively, based on knowledge of manufacturing processes. As a result, the witness said, unallocated costs were weighted towards heavily transformed products, such as NFDM, while products undergoing less transformation, for example, butter, were assigned a lower portion of the unallocated costs. Due to questions from the industry regarding this methodology, the witness said the 2023 survey reverted to allocating costs on a solids basis, a methodology more familiar to industry stakeholders. The
The witness attributed much of the survey result differences to the plant samples. For NFDM, the 2021 survey had 27 participating plants, whereas the 2023 survey had 15, with larger average volume per plant, according to the witness. For cheese, the 2023 survey included 18 cheddar cheese plants compared to 10 in the 2021 survey, and the witness elaborated that the cheese plants surveyed were much larger on average and represented a significant proportion of the NDPSR volume when compared to the 2021 survey.
The witness testified the data on butter highlighted the importance of sample composition. Both surveys sampled a similar numbers of butter plants, 13 in 2023 and 12 in 2021, and represented roughly the same total volume. However, the witness stated the 2023 survey had more variation in production volumes whereas in the 2021 survey, butter plants were more similarly sized. Finally, the witness testified the dry whey surveys had similar numbers of participating plants, 9 in 2023 and 8 in 2021, but the surveyed volume in the 2023 survey was nearly 50 percent more than that contained in the 2021 survey.
NMPF offered Proposal 7 as one option for amending FMMO make allowance levels. Eleven NMPF witnesses, representing the manufacturing interests of cooperatives, testified in support of Proposal 7. The witnesses testified the current FMMO make allowances do not resemble manufacturing costs currently experienced in their plants. The witnesses provided detailed testimony on the impact of inadequate make allowances, which consisted of similar themes. First, they were of the opinion inadequate make allowances cause the FMMOs to overvalue raw milk. Consequently, the witnesses said many cooperatives have reblended cooperative revenues to members as a way of recouping manufacturing costs not covered by current FMMO make allowances. Second, the witnesses said insufficient make allowances disincentivize plant investment, whether it be in current or potential new plants.
The NMPF witnesses testified the industry lacks consensus on reliable data to determine make allowances due to inconsistencies in cost allocation and reporting across operations. The witnesses were of the opinion the available manufacturing cost surveys are not comprehensive or reliable enough to justify large make allowance increases. The witnesses all stressed increasing make allowances to levels above actual costs could cause untenable financial harm to producers, putting many out of business and jeopardizing the milk supply. One NMPF witness described how an informal manufacturing cost survey of some NMPF members was used in the development of Proposal 7.
A CDI witness testified regarding the impact insufficient make allowances have had on their member farms and six butter and milk powder manufacturing facilities. The CDI witness testified the NFDM and butter make allowances in Proposal 7 are transformations of the 2021 survey results, using the combined costs and yields of the two products. An LOL witness testified inadequate make allowances have led to disorderly market conditions, including lack of investment in manufacturing plants to process and balance milk supplies and inequitable producer pay prices between producers of different cooperatives and between cooperative and nonmember producers.
An Agri-Mark witness said current make allowances overvalue producer milk and make it difficult for cooperatives with manufacturing facilities to remain profitable and pay the FMMO blend price. Consequently, the witness said, cooperatives must re-blend proceeds in order to recoup manufacturing costs, resulting in producer pay prices often less than FMMO blend prices. Agri-Mark is a dairy farmer-owned cooperative located in the Northeastern U.S. with over 550 members, 3 cheese manufacturing plants and 1 butter-powder plant in the region.
A Foremost witness attributed higher operating costs seen in their plants to inflation since 2008, adding that in the last 2 years, they have experienced particularly acute price increases in all categories. A witness representing FarmFirst Dairy Cooperative (FarmFirst), a cooperative operating in the Upper Midwest with 2,600 dairy farmer members, testified negotiated over-order premiums have diminished by 24 percent since 2020 due to their processor's compressed margins, partly a result of inadequate make allowance levels. In addition to reducing premiums, the FarmFirst witness attested the current make allowances overvalue producer milk and have contributed to an oversupply of milk in the Upper Midwest, resulting in milk dumping, negative PPDs, depooling, and milk selling at below Class III prices.
A Northwest Dairy Association (NDA) witness testified in support of Proposal 7. NDA is a dairy farmer-owned cooperative located in the Pacific Northwest with approximately 295 members, whose subsidiary (Darigold) operates 5 fluid milk bottling plants and 7 manufacturing plants making butter, cheese, dry whey, and dry milk products. The witness testified Darigold's manufacturing costs increased 80 percent between 2008 and 2022. The witness said inadequate or delayed investment in manufacturing plant capacity increases transportation costs, which are borne by producers, since milk must be shipped farther distances to find an available manufacturing market. A witness representing Maryland and Virginia Milk Producers Cooperative, Inc. (MDVA), a dairy farmer-owned cooperative located in the Mid-Atlantic that operates three pool distributing plants and two pool supply plants manufacturing bulk butter and NFDM, testified costs had increased compared to 2008 levels, with NFDM conversion costs increasing 64 percent over the period. According to the MDVA witness, Proposal 7 would reduce, but not eliminate, the manufacturing losses incurred in balancing their milk supply. A witness representing Lone Star Milk Producers (Lone Star), a dairy-farmer owned cooperative marketing milk on the Appalachian, Southeast, Central, and Southwest FMMOs, testified that manufacturing costs at their butter and NFDM plant have risen since commencing operation in 2017. A witness representing Ellsworth testified to the increasing costs of production at their cheese and dry whey operation. Lastly, a DFA witness testified in support of Proposal 7 and provided dairy farm cost of production data, arguing this data should be considered when determining make allowances.
A dairy economist from the University of Missouri, appearing on behalf of NMPF, testified on the estimated economic impact of Proposal 7. Using an econometric model, the witness estimated the proposed make allowances would lead to a $0.30 decline in the All-Milk Price and a 200-million-pound milk production decline in the first year of implementation, with a further milk production decline of 400 million pounds in the second year. In the long run, the witness forecasted the decline in the All-Milk Price would
A dairy farm accountant, testifying on behalf of NMPF, presented various statistics related to their dairy farmer clientele. The witness testified average total income from their clients' operations was $5.50 per cwt in 2022, with a break-even milk price of $19.78 per cwt. The witness said the average net income from 2006 to 2023 was $1.23 per cwt, on an average milk production of 995,115 cwt, yielding an average net income of approximately $1.2 million. The witness later stated that a 3,300-milking cow herd would require an investment of approximately $40 million.
An economist from Cornell University, testifying on behalf of NMPF, testified on the topics of dairy farm profitability, cost of production measures, and farm data from the Cornell Dairy Farm Business Summary, Michigan State University, and the University of Wisconsin. The witness warned that setting make allowances “too high” would lead to unwarranted investments in processing facilities while setting make allowances “too low” would lead to insufficient plant investments and cooperative deductions on member milk checks.
Numerous dairy farmers testified in support of Proposal 7, recognizing the need for increased make allowances despite what they acknowledge would be a decrease in FMMO producer prices. These witnesses testified to recent decreased farm margins due to a declining All-Milk Price, falling net pay prices, higher feed costs, and increased production costs, leading to near negative operating incomes. The witnesses said that while make allowance increases would hasten this trend, Proposal 7 accounts for these factors, balancing producer and processor needs. Multiple witnesses expressed doubt in the available manufacturing cost survey data due to its voluntary and unaudited nature, as well as observations of cheese manufacturing profitability and continued investment.
Dairy farmer witnesses testified that inadequate make allowances have disadvantaged dairy farmer-members of cooperatives who own manufacturing plants compared to dairy farmer-members of cooperatives who own no plants. Several dairy farmer witnesses said that the prevalence of market adjustment deductions from their member milk check signifies negative returns on the cooperatives manufacturing assets due to inadequate make allowances. Another dairy farmer testified processing costs for Agri-Mark's four manufacturing plants producing cheese, butter, NFDM, and whey have increased by an average of 20 percent since 2008, and insufficient make allowances have resulted in deductions to member milk checks to cover processing costs. According to the Agri-Mark witness, this has led to disorderly market conditions, which impair plant investment and disadvantage cooperative members. A CDI dairy farmer witness testified to the financial difficulties of operating CDI's balancing plants given current make allowance levels.
A witness representing the Milk Producers Council (MPC), an organization representing California dairy farms, testified Proposal 7's proposed make allowances balance producer and processor needs. The witness said the cost survey information entered into evidence is of limited value due to its voluntary, unaudited nature and the lack of transparency in cost allocation for multi-product plants. The witness argued differences between the All-Milk Price and the Mailbox Price indicates a need for increased make allowances and a guideline to the resulting impact on producer pay prices, currently estimated at $0.75 per cwt.
In its post-hearing brief, NMPF reiterated its arguments for adopting the make allowance levels contained in Proposal 7, writing it is the only option accounting for an increased cost in manufacturing while protecting producer pay prices. NMPF stated there has never been a make allowance adjustment greater than $0.35 per cwt, and the changes contained in Proposal 7 would decrease farmer milk prices by approximately $0.50 per cwt.
NMPF presented in its brief the aggregated costs cooperatives with manufacturing capacity shared on the record, to emphasize the increases across cost categories since make allowances were last updated. While the need to update make allowances to reflect higher costs is necessary, NMPF stated the data on the record is not sufficiently comprehensive, verifiable, or unambiguous to determine make allowances above those offered in Proposal 7. In its post-hearing brief, Agri-Mark reiterated support for Proposal 7 as the most balanced approach to updating make allowances, despite acknowledging the proposed levels are not sufficient to cover all manufacturing costs.
Opponents to Proposal 7, primarily representatives for IDFA or WCMA, echoed similar concerns from cooperative manufacturers regarding inadequate make allowances, claiming the inability to recover manufacturing costs on wholesale commodity products has led to a lack of investment in manufacturing capacity. These witnesses testified on the importance of make allowances fully covering manufacturing costs, rather than a portion of costs as proposed in Proposal 7. Witnesses testified that continued capital investment in plant yield and efficiency gains have not fully countered the effects of insufficient make allowances as costs have continued to increase. Without make allowances accurately reflecting costs, the witness said, manufacturers receive inaccurate financial signals, which impact investments, capital distribution, and FMMO pooling decisions. Additionally, they said the competitive advantage gained by manufacturing plants not regulated by an FMMO lead to more investments into operations unaffiliated with the FMMO system. Only an increase in make allowances reasonably covering commodity product manufacturing costs, according to these witnesses, can counteract these effects.
In its post-hearing brief, IDFA reiterated opposition for Proposal 7, writing that the proposed make allowance levels are inadequate and not grounded in observed data. IDFA stressed that make allowances are defined as covering the entire cost of converting raw milk to a given dairy product, not a portion. In its brief, IDFA pointed to NMPF's recognition that Proposal 7's make allowances do not fully cover actual costs but instead represent a balance dairy farmers can withstand. IDFA objected to the consideration of farm production costs when determining make allowance levels. IDFA reiterated FMMOs are not a price support or income support program, and the prices must reflect the market price of end-dairy products. IDFA explained manufacturers cannot raise the prices of commodity dairy products to offset higher manufacturing costs because the wholesale prices are captured in the NDPSR and would raise the reference price by the same amount. AMPI reiterated in its post-hearing brief opposition for Proposal 7 as failing to reflect 2022 manufacturing costs. AMPI argued that USDA should not delay increasing make allowances on the possibility that legislation will give USDA the authority to conduct a mandatory audited survey.
A witness from DIC testified in support of Proposals 8 and 9. The witness testified that setting minimum prices too high incentivizes excess milk production, while a low minimum price through higher make allowances allows for over-order premiums to set a competitive market price. The witness
The DIC witness entered data concerning its 2022 California dairy manufacturing cost forecast (2022 CA Forecast). The witness testified the 2022 CA Forecast used a combination of 2003-2016 California Department of Food and Agriculture (CDFA) data, state and national indices, and market developments to measure how changes in labor, utility, and other costs historically moved the actual CDFA cost data. The model then used that information to forecast California-specific 2017-2022 manufacturing costs, according to the witness. The witness said while the model forecasts costs, the range of actual costs around those forecasts could be relatively wide given the relatively few observations (14 years) used to estimate the model. For example, the expert witness elaborated that CDFA only collected dry whey costs until 2006, when they surveyed fewer than three dry whey plants, which is why the CA analysis did not forecast dry whey costs. The DIC witness opined the best approach to determine manufacturing allowance levels is using observed cost data but offered the 2022 CA Forecast as another methodology for use with the other cost surveys and testimony presented.
An IDFA witness testified in support of Proposals 8 and 9, stating make allowances should be updated to reflect increased costs in manufacturing dairy products. The witness said that while end-product-prices change monthly to reflect the current market, make allowances are fixed at 2006 cost levels, forcing dairy manufacturers to lose money or stop production. The witness stressed the need for relief from the current inadequate make allowances that do not reflect rising industry costs, adding losses are not sustainable for plants or dairy farmers who depend on these manufacturing outlets for their milk. The witness explained IDFA's proposed make allowances are simple averages of the 2023 survey and 2022 CA Forecast plus a $0.0015 marketing cost.
The IDFA and WCMA witnesses asserted accurate make allowances need to be adopted quickly as current make allowances are based on 2005/2006 cost data. The IDFA witness clarified their staggered implementation proposal, which would implement proposed year 1 levels shortly after the final decision is published. Both IDFA and WCMA witnesses said the staggered implementation is designed to recognize the impact significant make allowance increases would have on producer prices. However, if there is any delay in implementing changes, both witnesses stressed the staggered implementation approach should be abandoned and the proposed year 4 levels should be implemented.
The WCMA witness stated the use of audited California manufacturing cost data in the 2022 CA Forecast should alleviate any data validity concerns and the 2023 survey methodology follows precedent used to determine the current make allowance levels. The witness noted the risk of using a simple average of the 2022 CA Forecast and the 2023 survey to determine proposed make allowances is the potential of the result being skewed towards California costs, since California plants are represented in both surveys.
A dairy farmer witness, who is a member of AMPI, testified on behalf of IDFA and expressed support of Proposals 8 and 9. The witness testified that AMPI, who participated in the 2023 survey, experienced cheese manufacturing costs close to the study average despite plant sizes that were smaller than the survey average plant size. The witness said their manufacturing costs of bulk cheese products are 47 percent higher and general plant expenses are up 62 percent in 2022, compared to 2008.
Several dairy manufacturer witnesses representing Hilmar Cheese Company (Hilmar), Glanbia, Saputo, and Leprino testified in support of Proposals 8 and 9. Hilmar is a cheese and whey manufacturer with processing locations in California and Texas. These witnesses testified dairy processing costs have increased, particularly of late because of inflation, noting Hilmar's natural gas costs were 45.1 percent above the 20-year average. The Saputo witness echoed testimony on increasing costs, citing the St. Louis Federal Reserve data series for labor, energy, packaging, and maintenance costs. The witness said these costs, comprising 20 percent of the total cost to manufacture a finished cheese product, rose 60 percent, on average since 2006. According to the witness, Saputo's manufacturing costs align with the 2021 and 2023 survey results. The Hilmar witness testified their manufacturing cost increases correlate with the results of the 2022 CA Forecast. The Leprino witness stated the 2021 survey and 2023 survey had robust participation, and the 2022 CA Forecast, which used CDFA audited mandatory data, leveraged a widely accepted statistical modeling approach. All four witnesses stressed the urgency of updating make allowances. The manufacturer witnesses generally agreed that inaccurate make allowances distort pricing signals for farmers, processors, and ultimately consumers.
Witnesses representing Nasonville Dairy and Cedar Grove Cheese, two proprietary specialty and commodity cheese manufacturer members of WCMA, testified to rising manufacturing costs by outlining costs in a similar manner to the 2021 and 2023 surveys. According to the witnesses, their costs have risen $0.3226 and $0.77 per pound, respectively, far beyond the fully implemented Proposal 8 levels. The witnesses testified that insufficient make allowances negatively impact cheese processing investments and increase the production of higher-cost specialty products unable to play the same balancing or foodservice roles as commodity products. They added current make allowance levels impair the ability of proprietary manufacturers to participate in the FMMO pool and deprives producers the benefits of having their milk pooled.
In their post-hearing briefs, WCMA and IDFA reiterated their support for Proposals 8 and 9. IDFA wrote that USDA has consistently set make allowances to reflect the most recent and reliable actual cost data, using multiple surveys, as in Proposals 8 and 9. Further, IDFA stressed in its brief the 2023 survey is the most robust of all of the author's previous surveys used to set make allowances. IDFA refuted the notion the 2022 CA Forecast is inappropriate to use for determining make allowances, explaining the underlying data is robust audited California manufacturing data and the econometric techniques are widely accepted. IDFA contended that the 2022 CA Forecast and 2023 survey averages are lower than the cooperative manufacturing costs shared on the record. Even if inflation has subsided since 2022, IDFA added in its brief, there would have to be deflation to arrive below pre-2022 levels.
IDFA clarified in its brief the proposed schedule for phasing in make allowance changes, which is designed to accommodate farmers. When addressing implementation timing, IDFA refuted the CME's points about incorporating risk management in the timing of implementation, arguing that CME's interests do not necessarily align with those of the broader dairy industry because of the fee revenue they generate.
In its brief, IDFA emphasized the destabilizing effect of current make allowances on processors and farmers. IDFA shared charts from the hearing, showing how the Mailbox Price is in close proximity to FMMO blend price,
IDFA said the best method to update make allowances is through a mandatory and audited USDA survey; however, USDA does not currently have the authority and IDFA estimates it would take approximately five years before new make allowances could be adopted once the authority was granted. IDFA reiterated arguments that make allowances under-representing actual costs harm both dairy farmers and manufacturers.
In its post-hearing brief, AMPI reiterated support for the make allowance levels in Proposals 8 and 9, contending they accurately reflect the changes in costs. AMPI added it supports immediate implementation, rather than the phased 4-year approach. AMPI wrote the 2023 survey had the largest product volumes of any previous surveys and highlighted other manufacturing cooperative testimony describing increased manufacturing costs. AMPI opined continued high manufacturing costs and farm bill delays have made make allowance updates more urgent.
Leprino's post-hearing brief reiterated its support of Proposals 8 and 9, emphasizing the importance of implementing make allowance changes immediately. Leprino stressed 2023 cost levels have continued to climb and offered its own updated cost increases, compared to 2022: 11 percent for labor, 17 percent for property insurance, and 9 percent for liability insurance.
A witness representing the AFBF testified in opposition to Proposals 8 and 9, opining the 2021 and 2023 survey data may be biased due to its unaudited nature and the known potential to be used for rulemaking, stating the incentive to overestimate reported costs for commodity goods disqualifies this voluntary data. The witness testified only the 2016 CDFA survey results can be verified as accurate enough to be used for determining make allowances. According to the witness, the relatively complicated 2022 CA Forecast model using a small number of observations (14 years) to forecast 2022 costs (6 years out from the actual data) could be overfitted to the 2000-2016 data and unreliable to predict future costs.
Numerous dairy farmer witnesses testified in opposition to Proposals 8 and 9, focusing on the negative effect significant make allowance increases would have on producer pay prices. A DFA farmer witness from New Mexico testified the make allowance increases contained in Proposals 8 and 9 would result in negative operating income over the next 10 years, making continued operation of their farm unsustainable. The witness said any make allowance increases would severely and disproportionally impact producers in the southwest due to the share of milk going into manufacturing products. A LOL dairy farmer testified significant increases in make allowances would be difficult for farms in California to absorb, where water scarcity has led to high forage costs. According to the witness, large make allowance increases would put adequate milk supply at risk, all the while guaranteeing profit for commodity manufacturers and leading to over production of manufactured dairy products.
Two dairy farmer witnesses, a member of the CDC and a small Maryland dairy farmer, testified against increases in make allowances due to the impact on producer pay prices and lack of accounting for dairy farm production costs. According to the witnesses, while processors can pass on costs to customers up the supply chain, producer margins are too thin to sustain substantial price decreases from increased make allowances. The witnesses testified that further declines to producer margins will cause more producer exits and disruption to the milk supply. A dairy farmer representing Edge testified any change in make allowances should require a 15.5-month delay, be restrained by the impact on producer pay prices, and cover only the most efficient plants.
In its post-hearing brief, NMPF reiterated its arguments in opposition to Proposals 8 and 9. NMPF argued that these proposed changes would decrease dairy farmer milk prices by approximately $1.45 per cwt, further narrowing producer margins and causing disorderly marketing.
NMPF cited ongoing plant investment as an indication current make allowances are not too low as portrayed by proprietary manufacturers. NMPF emphasized proprietary manufacturers are not required to be regulated and, thus, can choose not to participate in the FMMO and avoid paying minimum prices they contend are too high because of inadequate make allowance levels. NMPF opined about the lack of evidence to merit raising make allowances to levels contained in Proposals 8 and 9.
In its brief, NMPF refuted the studies used as a basis for Proposals 8 and 9. NMPF cited hearing testimony regarding the insufficiency of some plant sample sizes in the 2023 survey. Further, NMPF argued the 2023 survey does not capture how manufacturing costs are skewed by plants that serve a balancing role. NMPF stated if make allowances are set too high, balancing plants would be incentivized to run at maximum capacity, rather than running at less than full capacity to provide critical balancing services to the market. NMPF voiced concerns with the 2022 CA Forecast, noting the proposed make allowances in Proposals 8 and 9 are duplicative since the 2023 survey included California data. Further, NMPF opined that the 2022 CA Forecast is of little utility as it did not account for basic changes to the California dairy manufacturing sector since 2016, such as plant openings and closings and productivity improvements.
In its post-hearing brief, Select also opposed Proposals 8 and 9, on the basis of the 2022 CA Forecast being inappropriate to use in determining make allowances. Select echoed NMPF's argument that use of the forecast would be duplicative of California data. Further, Select argued indexing does not account for improvements to plant efficiencies and the Department has not previously used indexing to determine make allowances.
In its brief, the AFBF opposed any increase to make allowances, instead advocating they only be increased once a mandatory, audited cost survey was administered by the Department. The AFBF opined that both the 2021 and 2023 surveys were biased because there was a clear intention the surveys would be used in a rulemaking proceeding. The AFBF opposed the use of indexing to set make allowances, as was done in the 2022 CA Forecast, because it fails to recognize productivity improvements over time. The AFBF echoed other brief arguments that continued processor investment is evidence that make allowances are not too low.
The Midwest Dairy Coalition (MDC), an alliance of six dairy farmer-owned cooperatives operating in the Midwest, filed a post-hearing brief stating make allowance updates are long overdue, but took the position the Department should be granted legislative authority to conduct a mandatory and audited cost survey. MDC did not offer support or opposition to any make allowance related proposals. In its post-hearing brief, Edge also did not support or oppose any make allowance related
In its post-hearing brief, Select offered an alternative methodology for determining the make allowance levels using what Select argued was the most reliable record data. Select suggested taking the average of the 2021 survey and 2023 survey, subtracting the current make allowance level, and taking half that difference to add to current make allowance levels. As a result, Select proposed the following: cheddar cheese, $0.2281; butter, $0.2004; NFDM, $02260; and dry whey, $0.2498.
In its post-hearing brief, CME noted any make allowance changes would be considered material changes, and USDA should consider an implementation timeframe that mitigates risks to those involved in futures and options trading.
Submitted by Select, Proposal 10 seeks to amend the cheese price formula by increasing the butterfat recovery rate in the cheese yield, from 90 to 93 percent. A Select witness testified in support of Proposal 10 and clarified a butterfat recovery rate of 93 percent would also necessitate an increase in the butterfat yield factor in the protein price formula from 1.572 to 1.624. According to the witness, these changes would result in a modest increase in the Class III price, estimated at $0.04 per cwt. The witness stressed USDA should not be guided by price impacts but rather by achieving formulas to better reflect manufacturing realities and the actual value of raw milk. Select reiterated support for this proposal in its post-hearing brief.
An independent expert witness, retained by Select, testified advancements in vat technology, coagulants, and curd handling have enabled manufacturers to achieve recovery rates higher than the currently assumed 90 percent. The witness described how modern, horizontal vats attain butterfat recoveries far exceeding both open and enclosed horizontal vats, and how most commodity cheddar manufacturers use advancements in coagulants and curd handling to attain greater than 93 percent butterfat recovery. Additionally, the witness said, whey cream can be reintroduced into the cheesemaking vat to increase cheese yield and revenue, ultimately increasing butterfat recovery.
The AFBF wrote in its brief that it also supports Proposal 10 to increase the butterfat recovery factor. The AFBF pointed to evidence on the record of increasing plant efficiencies, justifying updating the butterfat recovery factor to the level in Proposal 10.
Six witnesses, representing Glanbia, Leprino, IDFA, CDI, DIC, and MPC, testified in opposition to Proposal 10. The Glanbia witness described a broad range of industry fat recovery based on plant age and processing techniques, and acknowledged many modern plants, including Glanbia plants, can achieve 93 percent cheddar fat recovery. The witness testified Proposal 10 is being offered to enhance prices while ignoring other parts of the formula that overvalue milk. The witness contended lost solids within the manufacturing plant and the discounted price of whey cream, should they be considered, outweigh the effects of Proposal 10 on milk prices. The Leprino witness testified any changes to the yield factor should only occur after a comprehensive review of all yield assumptions. The witness agreed 93 percent butterfat retention is achievable in some plants but does not believe it is possible across the entire industry.
The IDFA witness contended Proposal 10 takes a piecemeal approach to changes in the yield formula and selectively focuses on dairy farmer revenue enhancements only. The witness opined whey cream is overvalued in the current formula, as butterfat not going into cheese is currently valued as Grade AA butter despite regulation that whey cream cannot be used in Grade AA butter. The witness claimed whey cream is discounted 20 percent or more compared to fresh cream. In addition, the witness said in-plant milkfat losses are not recognized in the current formula, something that should be considered when evaluating yield factor changes. The witness testified any decreases in the Class III prices that result from accurately accounting for both processing losses and whey cream values would more than offset the increases in Class III prices proposed by Select.
A witness from the Center for Dairy Research (CDR), appearing on behalf of IDFA, testified to observing improvements in butterfat retentions over the past 40 years, mostly due to improved vat design and technology. The CDR, with a dairy plant on the University of Wisconsin-Madison campus, supports the U.S. dairy industry with expertise in cheese, dairy ingredients, cultured products, dairy beverages, quality/safety, and dairy processing. The witness noted a range of butterfat losses at the cutting stage including 9 to 10 percent fat loss in open vats, 7 percent fat loss in Double O vats, 6 percent fat loss in horizontal vats, and 5 percent fat loss in modern vats. The witness testified that while large modern plants are installing newer, more efficient vats, old, less efficient vats are not leaving production, and are being repurposed and installed in medium and small plants throughout the country. The witness noted there is still a large variety of vats being using in the industry, and stressed the latest vat design does not ensure optimal butterfat retention, as the experience of the cheesemaker and product handling practices could also lower butterfat recovery.
Based on current observations and work within the industry, the CDR witness provided best estimates for fat recoveries in cheddar cheesemaking as 91 to 93 percent retention in well-run factories with modern vats, 90 to 92 percent retention in well-run factories with vertical Double O vats, and 88 to 91 percent retention in factories with open vats. The witness said, based on their experience, 91 percent could be considered the industry average butterfat recovery for cheddar cheese plants.
A CDI witness, appearing on behalf of NMPF, testified to the lack of yield data available to support the proposed recovery rate contained in Proposal 10. The witness supported a tempered update to the cheese make allowance that does not include an update to the yield factor. A witness representing DIC testified the current 90 percent butterfat recovery rate is reasonable because, despite some newer, more efficient plants achieving higher fat recovery, older plants may not be able to achieve the higher rates. The DIC witness stated fat recovery data is lacking across the industry and further asserted the current 90 percent butterfat recovery should be retained. The witness representing MPC testified the current formula should remain in place until the industry tackles the mechanics of the Class III formula, and the big issue is how butterfat not being retained in the cheesemaking process is valued.
A witness representing AMPI provided testimony supporting the improvement seen in butterfat recovery due to new vat technology. The witness said AMPI installed cheesemaking equipment that facilitates the recovery of fat; however, they did not provide specific data.
Submitted by Select, Proposal 11 seeks to eliminate farm-to-plant shrinkage from the yield factors in the FMMO Class III and IV price formulas. A witness appearing on behalf of Select testified USDA's decision to include
Other than milk losses occurring with hoses, the Select witness was unaware of any inherent, unavoidable, farm-to-plant losses that could occur within the pick-up process. The witness said even farms without the ability to fill a tanker can adopt farm scales, flow measurement, and other technologies to minimize imprecision and inaccuracy. The witness testified the cost of implementing these improvements would be offset by the anticipated price impacts of adopting Proposal 11, which the witness estimated to be $0.07 per cwt.
A second Select witness presented an analysis of Select plant data from August 2022 to July 2023, representing 171,240 milk shipments and a total of 9.8 billion pounds. The witness stated approximately half of their customers do not report plant weights back to Select. For those plants who do report, the witness said reported plant weights exceeded farm weights about half of the time. The witness stated non-shrink factors, such as scale calibration or weather, typically cause the large discrepancy between farm and plant weights. The witness concluded that for the subset of loads where differences occurred between farm and plant weights, the net variance across all loads was less than 0.1 percent.
A witness testifying on behalf of Continental Dairy Facilities (CDF) and Continental Dairy Facilities Southwest (CDF SW), two wholly owned subsidiary plants of Select in Michigan and Texas, manufacturing NFDM, butter, and buttermilk powder, presented farm-to-plant loss data to support Proposal 11. The witness analyzed farm-to-plant losses in milk deliveries to the two CDF facilities from August 2022 through July 2023, comprised of both single and multi-farm pickups. The witness stated in total, plant weights averaged 0.15 percent lower than farm weights for CDF and 0.10 percent lower for CDF SW. The discrepancies ranged from a negative 0.32 percent (plant weights were 0.32 percent lower than farm weights) to 0.67 percent (plants weights were 0.67 percent lower than farm weights). Since many of the non-Select shipments to CDF are multi-farm pickups, the witness said management for farm-to-plant shrink is not unique to Select or larger farms, generally. The witness described improperly calibrated scales, input or transposition errors by milk haulers, changes in equipment or personnel when weighing loads, or snow settled on scales or tanks when weighing, as reasons for weight discrepancies. The witness testified these variances are not inherent and that they can be addressed. Select reiterated its arguments supporting Proposal 11 in its post-hearing brief.
The AFBF expressed support for Proposal 11 in its post-hearing brief. The AFBF contended that data on farm-to-plant shrinkage contained in evidence is similar to what was used to determine the original farm-to-plant shrinkage factor. The AFBF argued that this issue does not merit a formal data collection, but a one-time adjustment to reflect that farm-to-plant shrinkage is much less significant than it used to be.
Five witnesses representing IDFA, Leprino, CDI, DIC, and MPC testified in opposition to Proposal 11. The witnesses asserted Select's minimal farm-to-plant shrinkage is not the reality for much of the dairy industry, noting the lack of industry-wide data on farm-to-plant shrinkage and the differing nature of measuring components at the farm, rather than at the plant, are reasons Proposal 11 should not be adopted. The witnesses further testified FMMO yield factors should not be based on one company's experience, especially one, they argued, that was an industry leader in this area.
The Leprino witness testified that while Select has been able to limit their own farm-to-plant loss through increasing herd sizes and improvements in milk weighing and sampling, this is not a representation of the nationwide dairy industry. Additionally, the witness argued the scientific characteristic of milk fat clinging to the walls of stainless steel has not changed; as such, volume and fat loss still occur, even at the most innovative plants. The IDFA witness claimed less than 10 percent of all farms produce enough milk to fill entire tanker loads, so it is reasonable to conclude the losses experienced when the formulas were adopted are still happening today. According to the witness, failure to account for the diversity of farm size may further incentivize manufacturers to prefer larger farms over smaller farms.
Submitted by Select, Proposal 12 recommends amending the nonfat solids price formula by increasing the NFDM yield factor from 0.99 to 1.03. A Select witness testifying in support of Proposal 12 said it would correct the NFS yield factor by including the value of milk solids utilized in buttermilk powder, as producers are not currently paid accurately from a price calculated on NFDM prices alone. According to the witness, a proper yield factor for NFDM should account for all milk solids, including the milk solids remaining in cream after separation and used in butter or buttermilk. The witness stressed the initial NFS formula, correctly adopted in 2000, included buttermilk powder.
A witness representing CDF and CDF SW testified on price alignment and processing differences between NFDM and buttermilk powder. The witness stated sales and regional prices observed at the two plants for buttermilk powder and low-heat NFDM are closely aligned, as well as consistent with prices reported by AMS' Dairy Market News (DMN) from January 2023 through June 2023. The witness further testified that the process of drying buttermilk utilizes the same equipment as that of drying skim milk but requires a thorough cleaning of equipment when changing product lines, higher temperature, and additional drying time due to buttermilk's higher butterfat content. The witness said this leads to increased utility costs of approximately $0.02. The witness testified the NFS yield factor should consider all powder products, including buttermilk powder whose yield is lower than NFDM. Select reiterated its arguments in support of Proposal 12 in its post-hearing brief.
In its post-hearing brief, the AFBF expressed support for Proposal 12 as it believes it reflects the long-term market shift toward valuing buttermilk near the NFDM price. The AFBF stated that a formal extensive data collection is not
Two witnesses, representing Leprino and IDFA, testified in opposition to Proposal 12. The witnesses testified Proposal 12 is based upon a theoretical yield approach which assumes a perfect system with no in-plant component losses in the conversion of NFS to NFDM. The witness said in-plant losses exist even in the most modern and efficient manufacturing facilities and should be recognized in the price formulas. The witnesses gave an example of the portion of NFS remaining in cream after separation, which cannot be processed into NFDM. The Leprino witness argued the FMMO system is predicated on the notion processors should pay for milk based on the revenue they can derive from selling products manufactured from that milk. The witness said milk routinely lost in processing does not end up in finished products, which should continue to be accounted for in the formulas. The IDFA witness testified product yields should incorporate manufacturing losses, and overestimating the quantity of NFDM manufactured from NFS by accounting for buttermilk powder would overvalue the market-clearing of NFDM and contribute to disorderly marketing.
A witness from CDI testified on behalf of NMPF in opposition to Proposal 12. The witness testified CDI supports evaluating all factors in the Class III and IV formulas, and yield factors should only be updated once industry-wide data on product yields are available. The witness stated the NFS price formula is based on NFDM and the yield factor correctly reflects the yield of NFDM only, without an adjustment for buttermilk powder. The witness said Proposal 12 would adjust the NFDM yield factor to represent a composite yield for multiple products which differ in terms of component composition, uses, cost of manufacture, and market prices. While acknowledging buttermilk powder's processing costs are likely higher than NFDM's, the CDI witness testified there was not enough data to quantify the difference in processing costs; further, data presented from DMN and by Select witnesses are not sufficient to determine the alignment of prices between buttermilk powder and NFDM. The witness clarified that buyers of butterfat and NFS must account for all solids utilized at the minimum component prices, regardless of whether the solids are used in the surveyed products of butter and NFDM or in other Class IV products such as buttermilk powder.
A witness from the DIC testified in opposition to Proposal 12. According to the witness, while NFDM yields are likely higher than the current yield factor of 0.99, not all NFS in producer milk end up in NFDM, with some NFS from cream remaining in buttermilk. The DIC witness claimed the lower yield factor is to compensate for generally lower buttermilk powder prices compared to NFDM but acknowledged DMN data suggested a buttermilk powder price discount relative to NFDM narrowing in recent years. A witness from MPC testified in opposition to Proposal 12, stating they were opposed largely due to a lack of adequate data.
In their post-hearing briefs, IDFA and NMPF opposed Proposals 10, 11, and 12. IDFA argued the three proposals are not representative of industry-wide experience, but rather on what is possible given modern technology and equipment. NMPF echoed IDFA's opposition in its brief, citing insufficient data to justify the proposed changes. IDFA specifically objected to Proposal 11, stating it would place an unfair burden on small farms that cannot fill a tanker and, thus, continue to experience shrinkage. Proposal 11 was also opposed by WCMA in its post-hearing brief. Lastly, IDFA contended Proposal 12 should be rejected because it overvalues buttermilk powder.
Six proposals to amend the base Class I skim milk price were considered in this proceeding. Proposal 13, submitted by NMPF, seeks to return the base Class I skim milk price to the higher-of the Class III or Class IV advanced skim milk price, referred to as the “higher-of” mover. Proposal 14, submitted by IDFA, would use an average of the advanced Class III and Class IV skim milk prices, plus an adjuster that resets every January. The adjuster would be the higher of either: (1) $0.74; or (2) the 24-month average difference between the higher-of and the average-of the advanced Class III and Class IV skim milk pricing factors. The 24-month calculation would run from August of the three years prior to July of the previous year. Proposal 15, submitted by MIG, would amend the current average-of mover from a $0.74 adjuster to a monthly rolling average adjuster calculated as the difference between the higher-of and the average-of, for 24 months, with a 12-month lag.
Proposal 16, referred to as “Class III plus,” submitted by Edge, would start with the announced Class III price and incorporate a 36-month rolling adjuster averaging the monthly differences between the higher-of the advanced Class III or advanced Class IV skim milk prices, and the Class III skim milk price. The proposal would eliminate advanced prices. Proposal 17, also submitted by Edge, would return to the higher-of mover but would use announced rather than advanced prices. Proposal 18, submitted by the AFBF, would return to the higher-of mover and would eliminate the advanced pricing of Class I skim milk, Class I butterfat and Class II skim milk.
An NMPF witness testified in support of Proposal 13. The witness reviewed the 2000 Federal Order Reform (Order Reform) rulemaking and summarized the higher-of methodology as accurately reflecting the value of the different milk use categories and ensuring shifts in demand for any one manufactured product does not lower Class I prices. The witness said the Department determined during Order Reform that the higher-of mover addresses disorderly marketing by reducing volatility in milk prices, reducing class price inversions and depooling, and assisting Class I handlers in competing for a milk supply.
The NMPF witness testified the 2019 change to the average-of was designed to facilitate price risk management strategies for fluid milk processors, which, the witness stated, is not an objective of FMMOs. The witness said the intent of the change was to be roughly revenue neutral, while allowing handlers to better manage volatility in monthly Class I skim milk prices using Class III and Class IV milk futures and options contracts. The witness claimed the 2019 change has not functioned as intended or anticipated by NMPF, has exacerbated disorderly marketing conditions, has not been revenue neutral, and will continue to have deleterious effects on the dairy industry. The witness described the asymmetrical risk to producers which was not anticipated when the mover change occurred. The witness explained the higher-of exceeds the average-of calculation whenever the Class III and IV advanced skim milk pricing factors differ by more than $1.48 per cwt, regardless of which factor is higher. The witness noted the reverse is true when the advanced skim pricing factors differ by less than $1.48 per cwt.
A witness from Southeast Milk, Inc. (SMI), a NMPF cooperative member with 114 dairy farmer members, testified that when the two advanced skim milk pricing factors are equal, the maximum amount by which the average-of can exceed the higher-of Class I mover is $0.74 per cwt, but there is no limit by which the average-of can
The SMI witness testified the average-of mover has lowered dairy farmer revenue compared to what they would have received under the higher-of mover, with estimated cumulative market losses totaling $998.3 million from May 2019 through August 2023. The witness said that for the same period, the average-of mover decreased revenue to the southeastern FMMO producers by more than $192 million. The NMPF witness reviewed data during periods of relative price stability, revealing the average-of mover generated modest gains over the higher-of mover. However, in periods of price volatility, there were substantial revenue losses in months when the average-of mover was less than the calculated higher-of mover, which resulted in significant cumulative losses to producers over time.
The NMPF witness claimed the change to the average-of mover increased disorderly marketing by reducing Class I prices relative to the other classes and creating greater incentives for handlers to depool milk. The witness said that in 2020, the enhanced demand for cheese relative to the demand for butter and NFDM widened the spread between Classes III and IV well beyond $1.48, substantially lowering Class I prices compared to what they would have been under the higher-of mover. The SMI witness testified that between May 2019 and June 2023, the Class III skim value exceeded the Class IV skim value by over $1.48 per cwt in 16 months, and the Class IV skim value exceed Class III skim value by $1.48 or more per cwt in 11 months. In 2023, according to the SMI witness, the average-of continued to be lower than the higher-of in some months, which had a more significant impact to dairy farmers because it occurred during a time of extremely low dairy farm margins. The witness said they expect to see more volatility and larger spreads between Class III and Class IV prices in the future because of anticipated higher butterfat prices which will lower the Class III skim value.
The NMPF witness testified that adoption of the average-of mover created class price inversions and resulted in significant volumes of depooled Class III milk during the second half of 2020. Class price inversions occurred again in 2022 and 2023, said the witness, resulting in price volatility and substantial depooling of Class IV milk. The witness opined a wide variety of market conditions have proven capable of generating market volatility, driving a wedge between Class III and IV skim milk prices, and resulting in an average-of mover of more than $1 per cwt below what the higher-of mover calculation would have been.
The NMPF witness said the average-of mover has not resulted in increased risk management activity at a value to handlers anywhere near the losses experienced by dairy farmers. Numerous witnesses testified their fluid milk customers have shown very little interest in hedging milk since the average-of mover was implemented.
NMPF witnesses testified other Class I mover proposals under consideration in this proceeding use the higher-of mover calculation as the benchmark for determining adequate Class I skim milk price revenue. They testified those proposals provide producers revenue in an after-the-fact-manner that fails to maintain the maximum monthly separation between advanced Class I prices and the manufacturing class prices, a goal expressed by the Department when it recommended the higher-of mover during Order Reform.
The SMI witness testified that because of the change to the average-of mover, the southeastern FMMOs experienced disproportionately large reductions in blend prices due to the higher Class I utilization in the region, making it harder to attract supplemental milk the region requires to meet fluid demand. The witness noted that using an average-of mover to establish a Class I skim price makes it more difficult for Class I handlers to procure milk from plants with higher-value manufactured products because the price difference is not large enough to draw milk away from manufacturing. The witness opined a Class I skim mover should provide for orderly marketing by ensuring an adequate supply of raw milk for fluid plants, producer price equity including prompt and uniform payments to farmers and cooperatives, and stability for dairy farms. The witness argued the current average-of mover makes it more difficult for FMMOs to achieve those purposes.
An NMPF consultant witness testified the higher-of mover is necessary to transmit market signals in real time. The witness said a higher Class I milk price relative to other class prices sends market signals to move milk from surplus to deficit regions to ensure adequate fluid milk supplies. Additionally, the witness continued, disorderly marketing caused by prolonged depooling occurs when the Class I price is lower than Class II, III, or IV prices. The witness asserted prolonged periods of depooling create market disorder. Since the change in 2019, claimed the witness, the Class I mover has facilitated persistent long-term periods of depooling because there is no guarantee Class I prices will exceed the other class prices over time. In contrast, the witness asserted that under the higher-of mover, if Class III and IV advance skim prices increased, the Class I price would remain higher and depooling would moderate.
The NMPF witness presented data to demonstrate the objective of adopting the average-of mover, to allow for greater risk management, has not been accomplished, and prolonged periods of depooling have made it difficult for producers to hedge their farm margins. The witness stated that when milk is not pooled, producer hedging losses cannot be offset by gains on milk checks because revenue from the higher valued manufacturing milk is not shared with the marketwide pool. The witness asserted risk-management performance is relatively similar under the higher-of and average-of movers, entering data they believed showed how Class III futures contracts would similarly mitigate risk. The witness contended other proposals do not adequately replicate the higher-of price in future periods; nor do they share equally among dairy producers and others, necessitating periodic recalibration. Rather than recognize the average-of limitations, the witness said, other proposals seek to align the average-of and higher-of performance. The witness testified an average-of mover with an adjuster causes past market conditions to influence current prices, sending pricing misinformation to the market and causing disorderly marketing. The witness concluded that without immediate market signals from the advanced Class III and IV milk prices, any of the average-of or Class III plus movers would struggle to replicate the higher-of mover performance.
An NMPF witness representing Prairie Farms testified producer revenue
The Prairie Farms witness testified dairy producers want a pricing system that gives real-time market signals, which is accomplished with the higher-of mover. The witness testified Prairie Farms supported the change to the average-of mover believing it would facilitate their customers' ability to hedge Class I milk. However, Class I processors have generally not increased their use of hedging, said the witness, while dairy producers have taken on additional risk by giving up a higher Class I price. The witness stated one reason they believe their customers do not utilize hedging is because of fear of incurring a price disadvantage compared to their competitor. The witness added that of the Prairie Farms dairy farmer members engaged in risk management, there has been a decrease in the use of forward contracting since the implementation of the average-of mover because of negative PPDs, as they create a negative basis dairy producers are unable to account for in their risk management decisions. The witness presented data showing negative PPDs have become larger and more frequent under the average-of mover, which has increased the volume of depooled milk and significantly reduced revenue to farmers.
Another NMPF witness representing Upstate Niagara Cooperative (Upstate Niagara) testified the average-of mover has not operated as intended, has negatively impacted producer revenue, and has exacerbated disorderly conditions. Upstate Niagara is a dairy farmer-owned cooperative marketing the milk of approximately 250 members and operating eight fluid processing and manufacturing plants in New York and Pennsylvania. According to the witness, under the average-of mover, producers pooled on FMMOs with higher Class I utilization were most severely impacted due to the depressed Class I milk prices and no ability to benefit from the higher priced manufacturing milk. Similar to other witnesses, the Upstate Niagara witness described the asymmetric price risk of the average-of mover.
From interactions with fluid milk customers, the Upstate Niagara witness said there is widespread acceptance of prices based on FMMO monthly price announcements by their conventional customers. The witness said conventional customers have been less interested in pursuing a fixed price if there was any chance it could result in a competitive disadvantage in any given month. The witness recognized there may be some processors or end users in specialized Class I product channels that may utilize hedging but contended it is a relatively small portion of total Class I sales.
A University of Missouri professor testifying on behalf of NMPF presented results of an analysis conducted to evaluate the impact of adopting Proposal 13. The witness testified, under the higher-of mover, Class I prices would increase every year between $0.32 and $0.50 per cwt; the Class II price would be between $0.08 and $0.12 per cwt less annually; the Class III price would be between $0.06 and $0.13 per cwt less annually; the Class IV price would be between $0.08 and $0.12 per cwt less annually; and the all-milk price would be between $0.01 or $0.02 per cwt higher annually, except for a more significant increase of $0.06 per cwt in the first year. The witness said the model forecasted the effect on the all-milk price to moderate over time as production expands.
Twenty dairy farmers testified in support of Proposal 13. Many dairy farmers testified blend prices have been lower and their milk prices have been reduced since the average-of mover was implemented. They said only when Class III and Class IV prices are within a narrow range of each other is the average-of mover equal to or outperforming the higher-of mover. The witnesses said their experience supports NMPF's assertion that farmers' milk prices have been reduced by $950 million, and the reduction is not just a COVID-era anomaly. Dairy farmer witnesses said the losses demonstrate the goal of revenue neutrality with the change to the average-of has not been achieved. One witness asserted that in 29 of the 52 months since the average-of was adopted, Class I prices averaged $1.30 per cwt less than what the price would have been under the higher-of mover. In comparison, said the witness, in the remaining 23 of the 52 months the average-of returned a price only $0.42 higher per cwt. The witnesses testified to near-universal support by dairy farmers for a return to either the higher-of or, under the average-of, a mechanism to be equal to the higher-of over a period of time, such as 24 months.
Several dairy farmers urged a return to the higher-of mover, claiming a need for financial relief as dramatic shifts in milk markets since implementation of the average-of mover have caused significant financial losses to dairy farmers. Dairy farmers reiterated the average-of mover change affects 100 percent of pooled producer milk while it is unlikely fluid milk processors are covering 100 percent of their products with risk management tools. A dairy farmer testified they were assured the change to the average-of would be net neutral or net positive, but it has not been. Many dairy farmer witnesses described losses to dairy farmers under the average-of compared to what the Class I mover would have been under the higher-of and testified to receiving lower blend prices. The dairy farmers were concerned about receiving a delayed value of milk from a Class I mover with a rolling average methodology because they believe they cannot afford to wait months or years for the added revenue. They testified restoring the higher-of mover through adoption of Proposal 13 would help to reduce the volatility in monthly milk prices, bringing more stability and predictability to farmer income.
Dairy farmers of all sizes testified to relying on risk-management tools, such as Dairy Margin Coverage (DMC), Dairy Revenue Protection (DRP), and CME futures and options markets because it is difficult to manage their farms through periods of significant price volatility. Dairy farmers' testimonies described a range of contract periods, anywhere from 3-18 months, depending on the individual farmers' risk-management strategy and risk tolerance. In its post-hearing brief, NMPF reiterated hearing testimony arguing the average-of mover does not meet the standards set forth in Order Reform, and the change has not been revenue neutral as originally assumed. NMPF restated that under the average-of mover, price inversions, volatility, and depooling have increased, and Class I prices have been less effective at incenting milk to fluid processors relative to manufacturing. NMPF reiterated the asymmetrical risk borne by dairy farmers with the average-of mover and the frequency of which the difference between Class III and IV prices exceeded $1.48 per cwt, effectuating that risk.
NMPF reiterated the average-of mover failed to send appropriate market
The demand for Class I hedging is not clear, NMPF asserted in its brief, and no evidence was presented to suggest more than a small minority of the overall fluid market utilizes hedging, especially beyond ESL handlers. NMPF argued in its brief that while facilitating risk management for fluid processors may have merit, it is not an objective of FMMOs. In regulating processors, the AMAA only considers price uniformity to processors, NMPF asserted. Finally, NMPF restated in its brief the widespread support of producers for a return to the higher-of mover.
The Dairy Cooperative Marketing Association, Inc. (DCMA), a Capper-Volstead Marketing Agency in Common with nine cooperative members in the southeastern U.S., submitted a post-hearing brief in support of Proposal 13. In its brief, DCMA argued the change to the average-of mover has not been revenue neutral to dairy farmers, nor provided benefits to the industry as originally intended. According to DCMA, the hearing record demonstrates that little Class I hedging occurs, especially on HTST milk, and includes no evidence that the use of hedging is more prevalent now than prior to the change. DCMA stated most testimony demonstrated HTST milk is sold based on FMMO announced prices each month plus a fixed margin. Because revenue on packaged milk sales flows back to the processor in step with the monthly changes in the FMMO announced prices, there is no price risk to the Class I processor under this system, according to DCMA. In its brief, DCMA described the pronounced losses in the southeastern region as a result of the change to the average-of mover.
The MDC submitted a post-hearing brief in support of Proposal 13, expressing the importance of making the changes as part of the FMMO reform process underway. MDC conveyed in its brief the importance of ensuring all reforms are considered in concert since all changes have ripple effects throughout the entire system and across all classes of milk.
In its post-hearing brief in support of Proposal 13, Select reiterated the proposal would support the priorities expressed by the Department in Order Reform, the rationales of which remain true today. Select cited billions of dollars lost to producers, an increase in depooling, and a lack of Class I handlers hedging their milk costs as reasons the average-of has failed.
In both witness testimony and briefs, IDFA and MIG strongly opposed a return to a higher-of mover. A majority of their opposition was contained in supporting testimony and evidence for Proposals 14 and 15, as detailed below.
A witness representing IDFA testified in support of Proposal 14. The witness said the goal of Proposal 14 is to keep producer Class I revenue consistent with what would be experienced under the previous higher-of mover, while allowing for effective and affordable Class I risk-management strategies.
The IDFA witness claimed that in the long-run, the proposed Class I mover would never fall below what the Class I skim milk price would have been under the higher-of mover. According to the witness, Proposal 14 would have paid more than the higher-of mover in 13 of the past 21 years. The witness asserted dairy farmers are “made whole” as compared to the higher-of mover over time through the annual adjuster calculation. The witness presented data from 2003 through 2019 showing Proposal 14 would have yielded a Class I price $0.08 greater than the higher-of mover. For 2004 through 2023, the witness said Proposal 14 would have yielded a Class I price $0.05 higher, due to the $0.74 floor.
The IDFA witness entered data and analysis to show the volume of milk not pooled would be slightly less under Proposal 14 than Proposal 13, and the Class I price would be lower than Class III or Class IV prices in nearly the same number of months under both proposals. The IDFA witness presented an analysis showing Proposal 14 would have reduced price volatility with the only exception of very high cheese prices in 2020. According to the witness, volatility equates to greater price risk, which increases hedging costs, and ultimately higher consumer prices.
The IDFA witness countered claims the higher-of mover sends important price signals to dairy farmers through the Class I price, instead claiming the blend price sends more important price signals because it is the price farmers receive. The witness alleged there is little difference between signals sent by the blend price under Proposals 13 and 14, arguing that from 2012 to 2022, Proposal 13 would average 31.9 percent of the Class I value in the blend price while Proposal 14 would average 31.8 percent. As the impact on the blend prices is very similar, over time there is little difference in price signals between the proposals, the witness said.
Regarding the delay incorporated by the rolling adjuster and farmers possibly not receiving the make-up payments, the IDFA witness noted farmers go out of business for many reasons, and some may go into the business or expand and benefit from higher payments. The witness said this issue is no different than handlers going out of business before the make allowances are raised.
The IDFA witness testified hedging is a critical tool for the subset of innovation and value-added milk manufacturers to remain competitive with alternative beverages. In the few growing segments of the milk market, especially ESL and higher value-added products, retailers are demanding processors provide long-term fixed price contracts, rather than contracts with fluctuating monthly prices, the witness said. Since processors cannot enter into a fixed purchase price for raw milk with their milk suppliers, hedging allows processors to take on the risk of entering into a fixed sales price for its finished products and cover the risk of raw milk prices rising during the contract period, the witness testified.
The IDFA witness noted several ESL processors formed and quickly implemented risk management plans in anticipation of the change to the average-of mover. The witness noted ESL processors are interested in hedging because of the longer product shelf-life. According to the witness, a risk management plan allows a processor to level out what could otherwise be very different costs of milk products that could have been produced at significantly different times but are being sold to the customer at the same point in time. The witness noted more hedging of HTST products is done by end users, such as foodservice customers, not processors. The witness testified that while risk management is not a stated objective of the AMAA, a stable price, promotion, and growth of the sale of milk are, and the ability to use risk management tools results in stable prices and increased sales.
The witness testified IDFA would support a rolling average longer or shorter than 24 months, but the 12-month implementation lag is essential to allow for hedging. The witness testified Proposal 14 calculates the adjuster from August through July because long term Class I sales contracts between processors and retailers are often negotiated and entered into during the final months of the calendar year. To allow for effective hedging for those contracts, Class I processors would need to know at the time of the contract negotiations what the adjuster would be for the next calendar year. The witness supported Proposal 15 as an acceptable alternative to Proposal 14.
A dairy processor witness representing Schreiber Foods (Schreiber) testified in support of Proposal 14 or 15. Schreiber is a fluid milk processor primarily manufacturing Class II and Class III products, with approximately 5 percent of their products sold as ESL Class I products. The witness testified that over the past 20 years risk management has become a necessary tool for companies with exposure to dairy market volatility. The witness said that only since the change to the average-of mover in 2019 have milk processors had a viable way to manage risk. The witness testified that, in response to requests from foodservice and retail customers to manage Class I costs, Schreiber has offered Class I forward contracts since 2019. Prior to 2019, the witness said creating an effective hedge for Class I milk was challenging as it was unknown whether Class III or Class IV would be the mover. The witness stressed the change to the average-of allows purchasers to use a combination of Class III and Class IV hedge positions, which gives everyone in the supply chain the ability to control their market risk in a way that was not previously possible under the higher-of.
According to the witness, Schreiber hedges price risk for its ESL production through a combination of Class III and IV futures and swaps, and Class I swaps, which typically go out 12 to 18 months. Under Proposal 14, the witness explained, market participants will know the fixed adjuster in advance of the calendar year in order to conduct their hedging analyses for the coming year. If the Class I mover were to revert to the higher-of, the witness testified they would have to either find a different way to hedge or cease offering forward contracts on their ESL products.
A witness representing Nestlé USA (Nestlé) testified in support of Proposal 14. Nestlé is a fluid milk processor operating one plant regulated by the FMMO system. Nestlé procures milk from cooperatives using contract agreements, the witness testified, and offers its customers an annual fixed price contract for their primary Class I product, an ESL product. The witness stressed the importance of hedging to manage risk and compete in the market against nondairy beverages. The witness stated Nestlé did not use hedging for Class I under the higher-of mover because not knowing which class price would be higher caused uncertainty. The witness testified Nestlé currently hedges all its Class I milk purchases using Classes III and IV futures contracts, and while they have an 18-month outlook they typically hedge Class I milk 6 months out. If USDA returns to the higher-of mover, the witness testified, Nestlé would not be able to continue hedging its Class I milk. The witness testified price volatility has specific impacts on ESL products, as it is challenging for retailers to set different prices due to monthly milk price fluctuations for two identical products sold at the same time but produced in different months.
A witness representing Lamers testified in support of Proposals 14 and 15 stating those proposals would help smooth out the volatility in the pricing of Class III and Class IV.
In its post-hearing brief, IDFA reiterated the importance of hedging to processors for managing price risk and volatility and claimed effective hedging could only be achieved with an average-of mover. IDFA noted that when price uncertainty does not allow fluid milk processors to manage risk 6 to 12 months out, they risk losing shelf space to plant-based and other alternative beverage products that can offer fixed prices. IDFA argued that the choice for a fluid milk processor, especially with respect to ESL products, higher value-added products, and foodservice, is increasingly between offering stable pricing and long-term contracts demanded by customers or losing shelf space to competing beverages. Pricing stability and long-term contracting are facilitated by hedging, according to IDFA. IDFA stressed the growing need for Class I hedging because of increased volatility between the manufacturing classes.
In response to criticism of Proposal 14, IDFA wrote the average-of mover does not create price inversions or lead to milk not being pooled, arguing depooling occurs because of the price relationships between classes, and is caused by negative PPDs and pooling requirements. IDFA also wrote that the average-of mover does not increase price volatility, unlike a higher-of mover which routinely and unpredictably switches between Class III and Class IV. Finally, IDFA asserted the value of Class I products is not necessarily related to the value of Class III or IV products, thus, the higher-of does not better reflect the value of milk than the average-of mover.
NAJ submitted a post-hearing brief in support of Proposal 14, arguing it better protects long-term producer milk revenue, provides less Class I price volatility, and preserves equitable risk-management opportunities for Class I handlers who are required to participate in the FMMO system. NAJ noted the perception a return to the higher-of mover would produce higher producer Class I revenues is based on highly divergent Class III and IV price movers and an expectation this will continue in the future. However, NAJ argued in its brief this price divergence analysis does not account for composition factor amendments nor potential Class I differential amendments. With revised composition factors, NAJ asserted, a restored manufacturing to Class I price spread would mitigate price inversion and depooling.
A MIG witness testified in support of Proposal 15 seeking to amend the average-of mover from a $0.74 adjuster to a rolling 24-month adjuster with a 12-month lag. The witness claimed the movers contained in Proposals 14 and 15 provide similar base Class I skim milk prices and have similar effects on producer prices. The witness explained in certain years Proposal 15 would return more money to farmers than the higher-of, and even if farmers do not experience the benefits of a high manufacturing price immediately, they will over time through the lagged adjuster. The witness presented data comparing the monthly average base Class I skim milk price calculated under the current mover, the higher-of mover, and Proposal 15 from 2003 to 2022 to show Proposal 15 would be revenue neutral in the long run.
The MIG witness testified Proposal 15 preserves risk-management opportunities for both producers and Class I processors, which is part of orderly marketing. The ability to hedge Class I milk became effective in 2019, followed by the pandemic and regulatory uncertainty as to whether the average-of would remain, and time, resources, and lack of knowledge slowed the adoption of Class I risk-management strategies, the witness testified.
Five MIG member witnesses representing fairlife, HP Hood, Turner Dairy, Shehadey, and Crystal Creamery testified on the importance of hedging Class I milk. The fairlife and HP Hood
A processor witness representing Shehadey testified contracts with retailers such as grocery stores use a fixed formula that changes monthly, quarterly, or semi-annually, and are based on FMMO prices. The witness testified Shehadey has only HTST Class I milk products and they do not use any form of risk-management tools to hedge their risk. The Turner Dairy and Crystal Creamery witnesses said their companies primarily process HTST Class I milk products which they currently do not hedge. Both witnesses expressed value in hedging HTST milk sold to foodservice, as foodservice customers prefer to know prices months to years in advance. The fairlife and HP Hood witnesses testified hedging under the higher-of mover was difficult due to price volatility and uncertainty, but the average-of mover allows them to offset the risk. The witnesses also testified it takes time to develop a robust hedging program. The HP Hood witness stated Class I hedging is primarily used by more sophisticated operators, but as Class I hedging becomes more accepted, the market should become more liquid, and more processors will likely use this risk-management tool. The fairlife witness said fairlife typically hedges its ESL Class I products, mainly 0 to 6 months out, but contracts could extend up to 12 months.
A MIG witness explained that the adoption of Proposal 15 would allow for less price volatility throughout the market and support industry growth by stabilizing the cost of milk for retailers and consumers. Hedging, the witness said, is important to offering customers and consumers a more stable price, which could stem the declines in fluid milk as fluid milk competes with many beverages in the market. The fairlife witness testified that price certainty translates to price stability for both the retailer and the consumer. The HP Hood witness testified the goal of hedging is not to make a higher return, but instead to act as price risk insurance by removing some input price volatility and increasing margin certainty for end-product sales. The Turner Dairy witness testified the average-of mover results in more price stability which is beneficial to the Class I market. The witness said under the higher-of formula, the Class I price went up with every spike in butter, cheese, or powder markets, even though short-term changes in those product prices have no direct effect on the actual Class I market. The witness argued the price spikes necessitated raising prices to cover cost, without a market-based explanation to provide to customers.
The MIG and fairlife witnesses testified in support of the 12-month lagged adjuster contained in Proposal 15, stating it is critical to allow Class I processors to mitigate risk and hedge successfully. Knowing the adjuster 12 months in advance allows companies who hedge to reduce or eliminate basis risk, the witness said, while the 24-month rolling adjuster updates and provides dynamic market signals. The witnesses said Proposal 15 would stabilize prices by moving gradually and make fluid milk products a more reliable and steady purchase for customers. Proposal 15 has no floor or ceiling, as the witness testified MIG members believe floors and ceilings can create price distortions. The witnesses testified a lookback of less than 24 months would create more volatility, while a longer lookback does not transfer market signals well over time. The fairlife witness testified the 12-month lag is necessary to be able to buy futures 12 months out. The 24-month rolling average adjuster allows the system to recognize the difference between Class III and Class IV prices and what the higher-of mover would have been, the witness said, allowing the industry to know definitively what the premium structure is going to look like associated with the adjuster 12 months into the future.
In its post-hearing brief in support of Proposal 15, MIG argued USDA should first assess whether the current average-of formula has resulted in disorderly marketing. MIG wrote the current average-of mover ensures the market has sufficient milk for both fluid and manufacturing uses and there is not disorderly competition for fluid market access. MIG argued a return to the higher-of under Proposal 13 would not provide higher returns to farmers, estimating a minimal impact of a $0.01 to $0.02 per cwt increase in the long term. However, MIG argued in its brief, the return to the higher-of mover would have significant negative impacts on the Class I market and the entire dairy industry. There is no asymmetrical risk inherent in Proposal 15, MIG argued in its brief, unlike the present average-of mover formula.
According to MIG, the use of risk management developed primarily after the average-of formula was adopted and is likely to grow in the future. MIG stated Class I processors do currently use risk-management tools to hedge ESL products, as this sector has historically utilized more fixed pricing, meaning hedging can be more easily adopted. MIG stated many HTST customers, such as grocery stores, have become accustomed to the monthly fluctuations of pass-through pricing, but HTST customers, such as school lunch programs or USDA feeding programs, would benefit from the increased price certainty that comes with an average-of calculated mover. The industry has not yet had time to widely adopt risk management, MIG reiterated in its brief, and regulatory uncertainty due to this proceeding has caused processors to hesitate further use of risk-management tools.
MIG noted in its brief that even though the AMAA does not specifically provide for hedging, a Class I formula that supports hedging helps serve the enumerated purpose of the AMAA of avoiding unreasonable price fluctuations and reducing milk price volatility. When Class I processors can better manage risk, they can offer more stable prices to customers and consumers, MIG argued in its brief.
In its brief, MIG reiterated hearing testimony that use of an average-of mover best ensures an orderly market, and sufficient supply of milk for fluid use, including the most accurate pricing signals for dairy farmers in a longer, and more appropriate, time. MIG took exception to arguments that the Class I price be used to address price inversions and depooling. Using a California pool example, MIG argued that record evidence shows the Department would have to increase the Class I price an impractical amount to incentivize both manufacturing classes to remain pooled. MIG reiterated many factors cause depooling and negative PPDs, and neither the Class I price nor use of an average-of mover drive those results. Rather, according to MIG, the main drivers of depooling in the months reviewed in testimony were the Class III/IV spread and advanced pricing.
In its brief, MIG argued a return to the higher-of mover will not help Class I handlers in competing for milk supply
Lamers submitted a post-hearing brief in support of retaining an average-of mover. Lamers argued that because of the small percentage of Class IV use in the market, Class IV prices should not be a main driver for setting the Class I price, as an average-of mover is more representative of the entire manufacturing market. Lamers preferred the lower of the Class III and IV prices should be used when setting the mover as they believe the higher-of artificially raises Class I prices to consumers.
NMPF presented numerous witnesses who testified in opposition to the continuation of the average-of mover, embedded in the summary of their testimony and post-hearing brief presented above. An SMI witness opposed a modified average-of mover, testifying it would result in revenue losses to dairy farmers because the Class I price is paid back to dairy farmers over time and would not compensate dairy farmers that have exited the business.
Select expressed opposition to Proposals 14, 15, and 16 in its post-hearing brief. Select wrote that the higher-of more accurately reflects the value of milk in manufacturing classes, better manages shifts in demand for any one manufactured product, helps reduce milk price volatility, better addresses class price inversions and depooling, and makes it more difficult to draw milk away from Class I uses for manufacturing. Select noted most Class I handlers have not engaged in milk hedging under the average-of mover, and the average-of mover creates and exacerbates opportunistic depooling when Class III and IV prices diverge significantly. Select opined the average-of mover results in market disorder which they believe would continue until the higher-of mover is restored.
In its post-hearing brief, the AFBF opposed Proposals 14 and 15, arguing they do not address the key issue of class price misalignment. The AFBF believes handlers of all sizes can find alternative methods of managing risk under a higher-of mover.
A witness representing Edge testified in support of Proposals 16 and 17. The witness advocated for the adoption of Proposal 16, referred to as a Class III plus proposal, because the Class III price is typically higher than the Class IV milk price. In times of rapidly declining dairy prices brought on by a decrease in demand, the witness said, government recovery efforts typically prioritize more perishable products, usually Class III. The witness said this would result in higher Class III prices in relation to Class IV, and consequently a base Class I skim price under Proposal 16 approximately equal to the higher-of mover. According to the witness, in situations where the Class IV skim milk price is higher than the Class III skim milk price, any lost revenue would be redistributed to producers over the next three years through the adjuster and would better support dairy farmers during years of lower profitability. The witness testified risk management under Proposal 16 is easy to implement and less expensive due to high liquidity of Class III milk futures, creating more predictable prices and making fluid milk products competitive with plant-based beverages. The witness testified Edge would support a monthly rolling adjuster in place of an annual adjuster.
The Edge witness testified that as Class I utilization rates continue to fall, advanced pricing would continue to cause disorderly marketing conditions such as opportunistic depooling. The witness said advanced prices are antiquated and anti-competitive and their elimination would encourage fluid plants to use risk management. The Edge witness entered data showing the contribution of various factors to negative PPDs. The witness testified that while the change to the average-of mover tended to make PPDs more negative, advanced prices and the spread between Class III and IV influenced pooling decisions, not the adoption of the average-of mover. The witness testified that if the Class I price was announced at the same time as the Class III and Class IV prices, it would prevent a for-profit Class I trading relationship between Class III and Class IV, and the CME group would be more likely to create a Class I futures contract. The witness expressed a strong preference for Proposal 16, which they argue balances producer, processor, and consumer needs and supports risk management which they said was critical for the success of the nation's dairy farmers, particularly fluid sector innovators.
The Edge witness also testified in support of Proposal 17, returning to the higher-of mover without advanced pricing. The witness said the proposal would allow the Class I futures price to be equal to the greater of the Class III futures price and the Class IV futures price. Risk management players would have minimal risk in providing liquidity to Class I hedgers by spreading their position between Class I and the higher-of Class III or IV futures. The witness testified dairy producers may prefer the higher-of mover without advanced pricing, such as Proposal 17, as it provides real-time maximum income for Class I milk, whereas Proposal 16 is more of a compromise.
The Edge witness stated that since 2010, total fluid milk sales have been steadily declining, adding more instability and difficulties hedging under the higher-of mover. The witness entered data showing how much more risk and costs were involved to hedge under the higher-of mover than the average-of mover. The witness concluded a person hedging with futures contracts under the higher-of mover would have significant difficulties, but hedging under the average-of mover meets effectiveness standards required for hedge accounting.
Nine dairy farmer witnesses, located in Wisconsin, Minnesota, Iowa, and South Dakota, testified in support of Proposals 16 and 17. The dairy farmers opined Proposals 16 and 17 would decrease the frequency of negative PPDs and depooling, and enhance their ability to manage price risk through hedging and other risk-management programs. One witness said using only the Class III skim price to set the Class I skim price is the best option because Class III milk futures carry more liquidity than Class IV and better represent Class I prices. The witnesses testified Proposal 16 would help keep prices steady, benefitting both plants and customers.
In its post-hearing brief, Edge objected to what it believes are goals of some proponents to maximize FMMO Class I handler obligations in order for the additional revenue to be used to offset the negative producer impact of increasing make allowances. Edge argued the Department should consider the following factors in its decision: there have not been any significant shortages in the supply of beverage milk to retail stores; Congress' reason for changing to the average-of mover to facilitate risk management by fluid milk processors which fluid milk processors testified is still relevant; advanced pricing is outdated and no longer necessary to facilitate supply chain coordination but instead facilitates opportunistic depooling; a mover resulting in the highest fluid milk price when the Class IV price substantially exceeds Class III is not in the best interest of consumers; and a mover resulting in the highest fluid milk price when the Class IV price substantially exceeds Class III is not in the best interest of all dairy farmers. Edge argued dairy farmers located where Class I utilization is low may be worse off under a higher-of mover than an
Edge reiterated Proposal 16 would facilitate risk management by fluid milk manufacturers and large commercial buyers, eliminate outdated advanced pricing and reduce the incidence and magnitude of opportunistic depooling, and best serve both producer and consumer interests.
A witness representing the AFBF testified in support of Proposal 18. The witness said the AFBF believes orderly pooling is the key to orderly marketing, and this is best accomplished by the proper alignment of the four class prices. The witness claimed advanced Class I pricing leads to increased Class III component values, a common factor contributing to negative PPDs. The witness said advanced prices reflect market conditions that are 25 to 40 days older than final prices, which are announced after the close of the month. When a market rally occurs between the announcement of advanced and final prices, the witness said it leads to low or negative PPDs and creates incentives for handlers to depool milk. The witness stated depooling results in elevated component prices not being shared with the pool, further depressing the PPD and undermining the FMMO principle of uniform producer prices. The witness testified advanced pricing may also cause price inversions when manufacturing prices are rising rapidly, making it difficult for Class I handlers to attract adequate milk supplies. The witness entered data showing the effects of advanced pricing on class price alignment from May 2019 to May 2023 under the current average-of, and under Proposals 13, 17, and 18. The witness said this data showed many months under the current average-of mover and Proposal 13 in which the manufacturing class prices exceeded the Class I price, testifying this created disorderly marketing conditions. On the other hand, according to the witness, the data showed elimination of advanced pricing under Proposals 17 and 18 resulted in more consistent alignment of class prices.
The AFBF witness testified the frequency of published commodity data allows handlers to estimate price changes regardless of when prices are announced, and as more products are available on the CME or other exchanges, processors and manufacturers will have information needed to hedge and manage risk. The witness opined that the elimination of advanced pricing would allow for the introduction of Class III and IV spread options, providing an additional way to hedge Class I milk when both are used in combination. Three dairy farmers testified in support of Proposal 18, stating the proposal would reduce the incentive to depool brought on by low and negative PPDs.
The AFBF witness also testified that while they support the elimination of advanced pricing, they oppose Proposal 16 because it would delink Class I prices from Class IV prices, which they anticipate being higher than Class III in the future due to better export markets. The witness said tying the Class I price to only the Class III price could operate more like a “lower-of” formula. The witness stated the AFBF supports Proposal 17 because it is identical to Proposal 18 if combined with Proposal 13.
In its post-hearing brief, the AFBF reiterated its support for a return to the higher-of mover, which it argued would support class price alignment and substantially decrease negative PPDs and depooling.
The AFBF reiterated its hearing testimony that volatility has and continues to increase, contributing to price inversions and rapidly changing markets, resulting in competitive inequalities among dairy farmers. The AFBF said the CME has indicated a willingness to provide contracts catering to industry demand, and the fact that the industry is used to advanced pricing should not be a driving reason for its retention. The AFBF argued disorderly marketing conditions are present when producers do not receive uniform prices because of frequent depooling, and its proposals lead to the realignment of class prices, which encourage consistent pooling and uniform pricing.
An SMI witness, appearing on behalf of NMPF, testified in opposition to elimination of advanced pricing as contained in Proposals 16, 17, and 18. The witness said 90 percent of packaged fluid milk is highly perishable HTST milk which is processed, packaged, distributed, and sold in a relatively short period. The witness said these marketing characteristics require the price of the product to be known at the time of purchase, which advanced pricing of Class I milk provides. According to the witness, most HTST packaged fluid milk is priced monthly by fluid processors to their customers based on monthly FMMO Class I prices. This is materially different from cheese and butter products, the witness said, the prices of which are typically based on CME daily cash prices. According to the witness, advanced pricing enables retailers to set store milk prices at the beginning of a month, allowing the fluid processor to know the price the plant would receive for the packaged fluid milk prior to the raw milk being processed, packaged, and sold.
The SMI witness also testified that if advanced pricing was eliminated, retailers would not know their fluid milk costs until the end of the month when FMMO Class I prices are announced. This would mean most fluid milk purchased by retailers would be sold during the month without knowing its minimum regulated price which, the witness said, from a retailer's perspective is not orderly marketing. The witness claimed that if there were significant month-to-month increases in the Class I price, retailers could seek price relief from the processor, and ultimately, cooperative suppliers, opening the potential for fluid milk processors in the same marketing area to have inequitable raw milk costs and non-uniform payments to producers. In its post-hearing brief, NMPF reiterated its opposition to the elimination of advanced pricing.
A witness representing IDFA opposed Proposals 16, 17 and 18. The witness objected to the elimination of advanced pricing as it would result in Class I handlers pricing milk products to their customer before knowing the minimum regulated milk price and impact a handler's ability to hedge. In its post-hearing brief, IDFA supported the feature of Proposal 16 that would create a predictable Class I price that could be hedged based off a hedged Class III price plus a known adjuster. However, IDFA maintained its opposition to the elimination of advanced pricing, arguing it is essential for non-hedging Class I handlers to know their milk cost before the start of the month. It is also an important part of planning for fluid milk retail customers to market milk, IDFA stated. IDFA noted in its brief that traditional fluid milk retail customers are not yet using hedging sufficiently to permit a regulatory change eliminating advanced pricing. IDFA reiterated their total opposition to Proposals 17 and 18 in that they would return to a higher-of mover and, according to the brief, eliminate any practical ability to hedge.
A MIG witness testified in opposition to eliminating advanced pricing. The witness said the industry is not yet using hedging sufficiently to permit this regulatory change, as advanced pricing remains critical for the dominant share of the fluid market as retailers expect to know the price in advance. The witness also opposed Proposal 16, which would price Class I milk solely off the Class III price. The witness said the proposal would delink the fluid milk supply and demand from Class IV which MIG believes is critical for balancing. The witness opposed Proposals 17 and 18 as
In testimony and in its post-hearing brief, MIG opposed a return to the higher-of mover under Proposals 13, 17, and 18 as it would severely limit risk-management opportunities. MIG argued in its brief that a return to the higher-of is unnecessary and not supported by the facts as the industry has acknowledged the higher-of does not work. Dairy farmers' concerns are not about the average-of, MIG asserted, but rather the fixed $0.74 addition. USDA should support moving the industry forward, not revert to an outdated policy because it is familiar, MIG stated.
MIG argued NMPF introduced no evidence the average-of mover hinders a sufficient supply of milk for fluid uses. Rather, MIG wrote, a return to the higher-of mover would result in disorderly marketing as larger spreads between Classes III and IV would lead to higher prices under the higher-of mover and raise the uniform price, incentivizing the lower-priced manufacturing milk to remain pooled. In that situation, MIG argued, FMMOs should not be raising the uniform price paid out to the lower-priced manufacturing class, thus, encouraging it to remain pooled. This compensation, argued MIG, overvalues the lower-priced manufacturing milk in the marketplace and incentivizes milk to move to the lower manufacturing class instead of to a higher performing class. According to MIG, the average-of mover would better move milk between the manufacturing classes as the market needs. MIG argued the FMMOs are designed to ensure processors have sufficient milk supplies for fluid use, but FMMOs should not be drawing milk away from Class III or IV when a manufacturing use would be the highest and best value for the milk. According to MIG, Class I does not need more milk, and FMMOs should not be disrupting the market to pull milk for fluid utilization. MIG argued in its brief that revenue neutrality is not a valid policy consideration without evidence to establish revenue neutrality is necessary to ensure a sufficient supply of fluid milk.
A witness representing Lamers testified in opposition to the elimination of advanced pricing in Proposals 16, 17, and 18. The witness stated Class I handlers need to know prices in advance so they can set wholesale pricing with their retail customers.
In its post-hearing brief, Select opposed the elimination of advanced pricing set forth in Proposals 17 and 18, arguing that testimony at the hearing made clear that the majority of producers prefer using the higher-of, and the majority of handlers prefer to maintain advanced pricing which Select believes is in the best interest of stability in the Class I market.
Numerous witnesses appeared on behalf of NMPF testifying in support of increasing the Class I differentials as provided for in Proposal 19. Witness testimony centered around the themes of increased hauling costs, changes in milk supply and demand locations, changes in supply patterns resulting in longer hauls, and insufficient over-order premiums to cover the full cost of servicing the Class I market. The witnesses said the outdated assumptions embedded in the current Class I differentials threaten the willingness of milk suppliers to serve the Class I market.
An NMPF witness argued current differentials are antiquated, since, other than the three southeast FMMOs, they have not been updated in almost 25 years. In that time, they said, fuel costs and hauling distances have increased due to changes in supply and demand locations. The witness stressed over-order premiums should not be considered an effective substitute for FMMO prices because they are very difficult to obtain and maintain at levels adequate to cover the cost of servicing the Class I market. The witness argued inadequate Class I differentials contribute to price inversions and incentives to depool, which further jeopardize the availability of milk to meet Class I demand.
The NMPF witness described the methodology used to arrive at the proposed differential levels. According to the witness, NMPF requested an update of the U.S. Dairy Sector Simulator Model (USDSS) which was used during Order Reform as a basis for the differential levels adopted January 1, 2000.
The USDSS model owners testified on the USDSS methodology, the updated data and parameters, and explained the results. They explained the USDSS model evaluates the geographic value of milk at fluid milk processing plants across the U.S by finding the lowest cost solution of assembling milk at farms and delivering it to plants. They said the model accounts for approximately 90 percent of the U.S. dairy processing and manufacturing plant capacity, and considers such factors as milk supply locations, transportation costs (both variable and fixed) associated with raw milk assembly, final and intermediate product distribution, per capita demand by county population, and road weight limits. In the model, plant capacity, products produced, and milk components demanded at each plant are constrained by a variety of government and private sources. The resulting values, said the witnesses, represent the value of an additional load of milk at a specific plant location (otherwise known as the “marginal value”).
The witnesses said two sets of USDSS results were provided to NMPF, May and October 2021, to provide marginal values for both flush and deficit months. According to the witnesses, the results suggest considerable differences between the values of milk at fluid plants derived from spatial economic modeling and current Class I differential values, with differences as large as $3.00 per cwt in some locations. The witnesses attributed these differences to changes in the location of milk production, the composition of dairy product demand, changes in the location of dairy product demand from regional population shifts, and the cost of transportation. Both witnesses discussed how modeling, even though complex, is a simplification of reality and that there may be unaccounted factors in some areas that would justify deviations from the model results, including local traffic congestion, geography, infrastructure restrictions, and price alignment across orders. The witnesses said the model does not account for other factors, such as existing business relationships and FMMO regulations, because they could cause a departure from a market efficient solution. Lastly, the witnesses noted the USDSS does not produce a base differential value; it merely provides the additional value needed to move milk to a particular location.
While NMPF cooperative member witnesses testified on how they used the USDSS results to arrive at the proposed differentials, NMPF witnesses stated they followed the same iterative process applied during Order Reform, starting
One witness said NMPF started with a base differential assumption of $1.60 per cwt, as currently contained in the Class I differentials. The witness said the costs embedded in the base differential (Grade A maintenance, balancing, and a competitive factor) are still applicable and those costs have not decreased over the past 25 years. The witness said the base differential should also serve to limit class price inversions, incentivize Class I milk deliveries, and ensure class price alignment. To accomplish these goals, the witness said that in some parts of the country the base differential is recommended to increase to $2.20 per cwt.
One NMPF witness testified regarding the dairy farmer cost of maintaining Grade A status. The witness said that in order to participate in the FMMO program, dairy farmers incur costs associated with obtaining and maintaining Grade A licenses. The witness was of the opinion partial cost reimbursement for maintaining a Grade A license, which currently represent $0.40 per cwt in the base differential, should continue to be provided. The witness detailed standards for maintaining Grade A status, which include various infrastructure maintenance and sanitation requirements, and estimated a total current cost of $1.30 per cwt to meet those requirements.
A series of NMPF witnesses testified on the regional considerations factored into the proposed Class I differentials contained in Proposal 19. During their testimony they also touched on balancing costs faced by NMPF cooperative members and the continued need to include a competitive factor in the base differential. One witness described how the average of the May and October 2021 results was used as a starting point. From there, NMPF formed regional committees to evaluate the USDSS average results and use their local market knowledge to derive the final proposed differential values. According to the witness, a series of 19 anchor cities were selected for their proximity near the border of where two regions abutted. The regional committees used these anchor cities as common starting points to design a final Class I differential surface that ensured price alignment between orders. Each committee looked at current price relationships between plant locations and consumer demand areas, compared those to the USDSS averages, and designed a Class I differential structure that accounted for factors NMPF members thought were not adequately addressed in the USDSS results.
A DFA witness testifying on behalf of NMPF discussed the changes in the Northeast marketing area, including increased hauling costs, changes in the milk production and location of farm and fluid processing plants, and an overall increase in production costs. The witness said milk production in 11 of the 12 northeast states declined from 2000 to 2022, except for New York which saw a 31.4 percent increase, resulting in a small overall increase in the region's milk production of 2.2 percent. During this time, the witness said the resident population increased by 9.1 percent. The witness noted the geographic shift in where milk is processed due to the closure of fluid plants in urban areas since 2000. The witness surmised local milk supplies in the northeast are used to meet increasing Class II and Class III needs, necessitating milk to travel farther distances to meet fluid demand. The witness estimated transportation costs paid by producers in the region have increased $0.70 per cwt.
An Agri-Mark witness also testified regarding the changing marketing conditions in the northeast region and described some of the proposed differential differences from the USDSS model. The witness opined that if the USDSS averages were adopted for Maine, it would incent producers in Maine to service Massachusetts, instead of remaining available to meet local demand. Therefore, the witness said NMPF is proposing to flatten the differentials in Maine to maintain current competitive relationships. NMPF is also proposing lower differentials in northern Vermont and New York in order to incent milk movements south and east. The witness said these changes from the USDSS average results are needed to preserve current milk movements and to maintain competitive relationships.
An MDVA witness representing NMPF testified regarding the proposed differentials in the Mid-Atlantic region. The witness said MDVA operates two balancing plants in the region that help balance the market's reserves in both the Northeast and Appalachian FMMOs. According to the witness, there are large seasonal swings in milk delivered to those balancing plants, which result in significant cost to the cooperative and its members. The witness was of the opinion the base Class I differential should provide some balancing cost reimbursement to its members through its distribution through the marketwide pool. Transportation costs have also increased significantly, the witness said, to a point where Class I differentials are less effective in attracting milk from reserve supply areas to Class I plants. In order to meet fluid demand, the witness said cooperative members must pay for the additional cost through milk check deductions without any additional compensation through the Class I differential.
The MDVA witness compared current and USDSS average values for multiple plant locations in the region. According to the witness, the regional committee focused on the need to cover additional transportation costs of servicing the fluid market and maintaining current price relationships as principles when determining deviations from the USDSS average results. One example cited two plants in Landover, Maryland and Frederick, Maryland, located approximately 55 miles apart with a current difference in differential values of $0.10. The witness said the USDSS average would have resulted in a $0.35 difference and created an artificial regulated cost advantage for the lower zoned plant in Frederick, Maryland. Another example was in the southeastern region where two Virginia plants located 15 miles apart and currently in the same differential zone would have seen a $0.10 differential difference under the USDSS model average scenario. In this case, said the witness, the committee decided to propose the same differential value for the two plants in order to preserve their competitive relationship.
A DFA witness representing NMPF testified on the proposed differentials in the southeast region. Similar to other witnesses, their testimony centered on the decline in dairy farmers and the closure of fluid processing plants which necessitate longer milk hauls at a greater expense to dairy farmers, particularly cooperative members. The witness spoke to the unique marketing conditions in the southeast region, with a growing population, local fluid demand, and a significant milk supply deficit requiring supplemental milk supplies to be acquired from outside the region. The witness said the supplemental milk supplies are obtained at great expense to DFA cooperative members. The witness stated it is typical for supplemental loads to travel between 500-650 miles or more, and while the transportation credits in the Southeast FMMO provide partial reimbursement, the fund is
An SMI witness representing NMPF testified on the proposed differential for the Florida FMMO. The witness said there is an inadequate milk supply available in Florida to meet its Class I needs, necessitating significant volumes of milk deliveries from outside the marketing area, notably Georgia. According to the witness, Florida milk production is quickly shrinking, declining more than 10.9 percent in 2022, and necessitating more than 24 percent of its milk needs to come from other states.
The witness discussed Florida's significant population increase and high Class I utilization, which has averaged greater than 82 percent since 2000. The witness described significant seasonal swings in fluid milk needs and SMI's efforts to balance those needs through purchasing additional milk tankers, marketing milk to non-pool plants at below FMMO values when needed and buying supplemental loads at above FMMO values during other times of the year. The witness said weather and the seasonal population influx also complicate the region's milk balancing efforts. These dynamics make supplying the Florida region particularly expensive, estimating that SMI balancing costs for the first half of 2023 were $1.33 per cwt.
The SMI witness testified the proposed Florida differentials maintain the historical differential slope while more adequately reimbursing for transportation costs, which the witness estimated has more than doubled in the past 20 years, from $2.31 in 2002 to $5.98 in May 2023. The witness said the Florida differentials contained in Proposal 19 are similar to the averages of the May and October 2021 USDSS results but were adjusted to preserve current competitive relationships. As a result, the witness concluded the region would be assured an adequate supply of milk for fluid use and fluid milk buyers would be better assured of equal raw product costs.
The SMI witness was of the opinion the differentials should not be adjusted to reflect recently enacted Distributing Plant Delivery Credits in the Florida FMMO, as both are needed to ensure adequate supplies of fluid milk for the region.
A Lone Star witness representing NMPF testified regarding the differentials between the southwest and southeast regions. The witness said the eastern portion of the Southwest FMMO and the three southeastern FMMOs are milk deficit regions. The witness emphasized the differential recommendations are designed to provide proper financial incentives through a steeper differential slope to move milk into and within those regions. The witness said other factors considered included keeping current city to city price relationships as well as competitive relationships between plants often clustered around metropolitan areas. While differentials in some areas were increased relative to the USDSS average to reflect NMPF member knowledge of milk movements and related transportation costs in the region, other differentials were lowered. The witness noted NMPF members believe the USDSS overestimated balancing costs for parts of Virginia and the Carolinas, and subsequently is proposing muted differential increases for those regions.
Regarding Florida, the witness said the NMPF members accepted the USDSS model average output of $7.90 as the differential for Miami, Florida. They then worked up through the state with a priority of maintaining competitive relationships between plants. The only deviation the witness noted was Myakka City, Florida, whose current differential is $0.40 higher than plants in the Tampa-Orlando corridor. The witness was of the opinion the spread was too large, and consequently Proposal 19 recommends the spread be reduced to $0.20.
In the southwest region, the Lone Star witness said, milk must move significant distances from the supply region in the Texas panhandle and eastern New Mexico to the demand centers in east Texas. The witness said milk routinely travels anywhere from 400-650 miles to service the fluid needs of the state and stressed the current differentials in the region are inadequate in covering transportation costs for these routine milk movements. Consequently, Proposal 19 generally contains higher proposed differentials than the USDSS model average, with greater increases moving northwest to southeast to incent milk to move where needed. The witness added there is a single differential level proposed for New Mexico, reflecting what the witness said was primarily a captive in-state market for milk.
A DFA witness representing NMPF testified in detail on hauling assembly costs associated with the Mideast marketing area. The witness described the region's principal supply areas as central and northeast Michigan, northern Indiana and northwestern Ohio, and fluid demand areas centering around the region's large cities of Detroit, Grand Rapids, Indianapolis, Columbus, and Pittsburgh. The fluid plants compete for a milk supply with the numerous small to medium-sized cheese plants in northeast Ohio, two large cheese plants in central and western Michigan and one large cheese plant in western Pennsylvania, explained the witness.
The DFA witness testified the Mideast region has increased milk production 20 percent over the last 23 years, while simultaneously seeing a 66 percent reduction in dairy farms. The region's Class I utilization was 37 percent in 2022, supplied by approximately 33 distributing plants, down from 57 in 2000. The consolidation in both the supply and demand sectors, increased hauling distances to fluid plants, along with a robust manufacturing sector, has created challenges in encouraging milk to meet fluid demand.
The DFA witness estimated that Ohio assembly and delivery costs have increased approximately 69 percent from 2006 to 2023, attributing most of the increase to fuel, labor and equipment costs. The witness said current differentials do not provide enough financial incentive to move milk from supply regions to Class I plants. As a result, said the witness, the cost of supplying fluid milk needs is largely borne by cooperatives and their members.
For the Mideast area, the DFA witness said the committee concentrated on a selected group of larger cities in the region to analyze the relative value differences. The overall objective was to determine the value needed to encourage milk to move from milk supply areas in the north and west to areas of demand. The committee started with Chicago, Illinois, and determined that even though no fluid plants operated in the Chicago region, its differential should align with prices of locations that supply packaged milk, which are Grand Rapids, Michigan, Cedarburg Wisconsin, Rockford, Illinois, and Dubuque, Iowa. The committee ultimately determined a $3.10 differential appropriate for Chicago (Cook County). From there, the witness reviewed a series of city pairs and provided justification for why the
The DFA witness also detailed considerations for proposed differentials in western Pennsylvania, centering around plants in the Pittsburgh area, and plants in southwest Ohio and eastern Indiana. They said differentials were adjusted in those areas to account for what the committee believed were current competitive relationships. The witness said that, ultimately, the committee recommended more slope than the USDSS model by reducing the differential increases in the milk surplus areas of Michigan and increasing the slope when moving to the south and east.
Another DFA witness spoke to increased hauling costs in the Mideast area. The witness said that as the number of dairy farms in the area has declined, so has the number of available milk haulers. Compounding the issue is competition with other industries who also rely on commercial haulers. As a result, milk hauling rates have increased as the fewer number of milk haulers must travel farther distances to assemble and deliver milk loads. The witness presented data on various factors that contribute to overall transportation costs, such as wages, diesel fuel prices, and equipment purchase costs.
A witness from the Michigan Milk Producers Association (MMPA) testified on the unique Michigan marketing conditions that resulted in deviations from the USDSS model output. The witness said Michigan has experienced significant milk production growth, accounting for 68 percent of the region's growth. Michigan milk production serves as a reserve supply for states south and east, which are considerably longer routes than when the differentials were adopted in 2000, said the witness. They testified current differentials are no longer adequate to cover current transportation costs and highlighted how the large flat differential zone in Michigan, covering 525 miles, makes it difficult to encourage milk to travel farther distances to supply fluid demand instead of satisfying local manufacturing plant demand. Therefore, NMPF proposed more, smaller pricing zones within the state to better reflect the cost to move milk. The witness estimated MMPA's hauling cost for transporting milk from mid-Michigan to eastern Ohio, approximately 287 miles, was $1.06 per cwt per 100 miles.
The MMPA witness testified that is has been more difficult to obtain over order premiums to cover increased costs because national retailers with more bargaining power have replaced local independent stores. Consequently, the witness said, national retailers with a wider geographic footprint and higher milk volume needs have put downward pressure on premiums. The witness concluded that increasing Class I differentials to better reflect the cost of supplying the fluid market would be more equitable than an increasing reliance on a dairy farmer's ability to negotiate over-order premiums in a magnitude large enough to fully cover costs.
A Prairie Farms witness representing NMPF explained the proposed Minnesota and Wisconsin differentials. The witness said the USDSS results had too much slope between the states that would have created too much financial incentive to move milk out of Minnesota, creating difficulties for Minnesota plants to compete for a milk supply. Consequently, the witness said NMPF is proposing fewer differential zones in the Upper Midwest region to ensure a local supply could be maintained. Further, in that region, NMPF was cognizant to propose differential levels that would minimize negative impacts on producer blend prices. This witness opined the differentials contained in Proposal 19 would not fully cover the cost of moving milk the long distances required to service the fluid market in regions where they operate. However, they said, the proposed differentials would encourage the availability of adequate milk supplies to support milk demand in distant markets.
The Prairie Farms witness also testified on the proposed Class I differentials in the Illinois, Iowa, Missouri, and Nebraska areas. The witness said that in the last 20 years the cooperative has become more dependent on supplemental milk supplies to serve markets in Illinois and Missouri, while Iowa has lost milk processing capacity in the eastern half of the state due to plant closures. In addition, the decline of milk production in southeast Iowa has made it more difficult for Prairie Farms to stair step milk into the Appalachian and Southeast FMMOs to meets its supplemental milk needs. All these factors have contributed to changes in the region's milk movements and increased producer hauling costs, stressed the witness. The witness reviewed several equidistant Prairie Farms hauling routes and highlighted the disparity in differential gains. For example, some routes traveling approximately 300 miles may see a differential gain of $0.90, while other routes traveling a similar distance may only see a gain of $0.25. The witness stated the region's differentials need to be adjusted to remove some of the disparity and provide adequate financial incentive to supply fluid plants located in the south and east. The Prairie Farms witness said their cost to move milk to its four southern and southeastern fluid plants was approximately $5.25 to $5.50 per loaded mile, and costs to supply plants in central Illinois is similar.
A DFA witness also testified to differentials proposed for the Central FMMO region. The witness echoed other testimony regarding decreased farm numbers, longer distances traveled, and increased hauling expenses. The witness estimated DFA hauling costs in the region have increased 151 percent from 2005 to 2022. The witness spoke to the proposed differential increases in the region. Proposal 19 would increase the current differential values by $1.35 in Kansas City, $1.15 in Omaha and $1.65 in Wichita. The witness elaborated that the higher increase in Wichita reflects the area's lack of an adequate local milk supply. More specifically, the witness stated that only 27 percent of Wichita's demand is delivered from within a 150-mile radius, while in Kansas City and Omaha, 47 percent and 55 percent, respectively, comes from within 150 miles.
Numerous NMPF witnesses testified about the proposed Colorado differentials. One DFA witness testified the USDSS model overestimated the amount of milk in Colorado available to meet the State's fluid needs because of private contractual relationships with manufacturing plants. Consequently, NMPF recommends deviations from the model to recognize current competitive relationships, said the witness. The witness also discussed population, milk production, and fluid demand similarities between Denver and other regional cities to justify increasing the Denver area differentials to more closely align with differentials in those cities. The witness said adoption of the USDSS model output for Colorado, without adjustments, when combined with other
Other DFA witnesses spoke in more detail on the potential producer price impact on Colorado dairy farmers. The witnesses testified hauling and feed costs in Colorado are higher than other parts of the region, which they believe were not properly reflected in the USDSS model. One witness said producer prices in Colorado currently exceed those of the FMMO's base zone, however, if the USDSS model average were adopted, it would result in producer blend prices lower than prices announced at the base zone, causing significant financial harm to Colorado dairy farmers.
A United Dairymen of Arizona (UDA) witness representing NMPF testified in support of Proposal 19. UDA is a dairy farmer-owned cooperative association, with 36 cooperative members and a manufacturing plant located in Arizona. The witness cited many factors, such as weather, climate, transportation, fuel, and increased costs of producing Grade A milk as challenges for Arizona dairy farmers. The witness stressed the costs of maintaining Grade A status in the State exceeded $2.35 per cwt. According to the UDA witness, the proposed Arizona Class I differentials: generally follow the USDSS model, with deviations made to reflect local market conditions; maintain current price relationships between handlers within Arizona and the surrounding states; and establish a smooth differential transition from surrounding areas.
The witness noted UDA operates a plant in Tempe, Arizona, that serves as a balancing plant for the market. The witness said the cost of operating the plant does increase in the summer months as less milk volume is run through the plant when milk supplies are lower.
A CDI witness testified on the process for determining the proposed California differentials. The witness said the goal of the California differentials was to recognize regional cost drivers and local market conditions unique to servicing California urban areas, and to maintain price relationships with surrounding states. In the witness' opinion, the USDSS model did not account for the impact on producer prices, which could alter pool stability and incentives to supply the Class I market, and region-specific cost drivers such as geography or traffic. Those considerations form the basis for the deviations from the USDSS model output NMPF proposed.
The CDI witness provided an overview of the similarities between the California Central Valley and Upper Midwest milksheds to justify the position that the lowest differential in both regions should remain similar. For that reason, said the witness, NMPF proposes a minimum differential zone of $2.50 in California, which is similar to the lowest Upper Midwest differential zone of $2.55. The witness also discussed dwindling milk supplies, increased population, pervasive traffic congestion, and the closure of manufacturing plants in southern California as reasons for making adjustments. The witness described changes made in three California regions (Central Valley, Bay Area, and Southern California) to provide incentives for dairy farmers to serve the Class I market in the urban areas.
A DFA witness also testified on California and Northern Nevada proposed Class I differentials. The witness advocated the maintenance of competitive equity between Class I and manufacturing plants in northern Nevada and California counties. The witness was of the opinion the USDSS model fell short in adequately capturing the cost of producing milk in California. The witness said the current 10-cent difference in zones is not sufficient as it does not reflect the actual movements of milk or unique California State regulations, taxes, geography, and high milk production costs. The witness stated the current differentials do not cover the hauling costs in a state with high gas prices, heavy traffic, and road weight limits. The witness supported testimony from the CDI witness justifying the proposed California differentials. The DFA witness also expressed northern Nevada counties have a historic competitive relationship with northern California, which should be preserved. The witness noted that Proposal 19 recognizes this dynamic by proposing a $2.90 differential for the region.
A witness representing Northwest Dairy Association (NDA) testified on behalf of NMPF regarding the proposed differentials in the Pacific Northwest (PNW) region, which includes the States of Washington, Oregon, Idaho and Montana. NDA is a dairy farmer-owned cooperative that markets the milk of approximately 295 dairy farmers in Washington, Oregon, Idaho, and Montana, and conducts all processing and marketing operations through the wholly owned subsidiary Darigold. The witness described regional competitiveness at the farm level, ensuring incentives to service Class I markets, and geographic and population-influenced cost factors were the primary reasons the proposed differentials deviate from the USDSS averages. The witness was of the opinion proposed differentials in the PNW FMMO urban areas should mirror those of the Central FMMO, as the urban areas of the two regions operate similarly. To ensure competitive equity and the balancing needs of distinct areas within the region, the witness said Proposal 19 recommends fewer pricing zones than produced by the USDSS model.
The NDA witness also described market changes similar to those of other witnesses: declining milk production, increased population, longer haul distances, and increased transportation costs. The witness estimated NDA transportation costs for servicing PNW Class I plants has increased $1.10 per cwt in the last 15 years.
In regard to the unregulated areas of the Northwest, the witness used King County, Washington, as the base at $3.00 per cwt, and kept the zones the same as they currently exist. In counties with little to no milk production, the differential was reduced to as low as $2.20 in Idaho. For areas with higher milk production, the differentials are proposed at $2.55, reflecting the same level of differentials in South Dakota.
In its post-hearing brief, NMPF emphasized adoption of Proposal 19 was necessary to ensure Class I differentials would be more reflective of the current costs of supplying the Class I market. NMPF maintained that the proposal would result in Class I differentials below actual costs, keeping with the FMMO principle of minimum pricing. NMPF reiterated testimony given at the hearing regarding the continued relevancy of the costs associated with the base differential, and stressed the costs have increased since it was first adopted in 2000. NMPF reviewed its own testimony at the hearing on what it believes were the appropriate regional considerations used to propose deviations from the USDSS results. According to NMPF, adoption of Proposal 19 would only raise the regulated cost of Class I milk under FMMOs by slightly less than 8 percent.
NMPF reiterated the importance of Class I prices remaining the highest priced class to ensure producers move surplus milk to deficit regions to meet Class I demand. Without such pricing
A witness representing the AFBF testified in support of Proposal 19. The witness concurred with NMPF testimony on the increased costs of servicing the market since the differentials were adopted in 2000. In offering support for the differential adjustments, the witness said the purpose of the USDSS model was to mimic an ideal market solution, so it would be expected that actual market costs are higher. The witness mentioned that given the seasonality of milk demand, it could be considered more appropriate to start with the USDSS October 2021 results, rather than the average. In its post-hearing brief, the AFBF stressed that regulated Class I differentials provide for long-term stability; something that cannot be assured if a larger portion of milk prices is negotiated through over-order premiums.
A witness representing IDFA testified in opposition to Proposal 19. The witness was of the opinion NMPF did not use a consistent methodology when determining differential level adjustments from the USDSS model results. Additionally, stressed the witness, some of the factors NMPF considered are not relevant and/or are unevenly applied (dairy farm production costs, private business relationships, blend price impacts, and regional dairy farm competitiveness), or were already factored into the USDSS model (transportation costs and maintaining handler equity). The witness was of the opinion that if milk suppliers and cooperatives experienced transportation costs higher than those provided for in the differentials, the additional cost reimbursement should be negotiated through over-order premiums with milk buyers. The witness also took issue with what they deemed an undefined base differential, which was proposed at $1.60 in some areas and $2.20 in other areas, with what they saw as no cost justification for the difference.
The IDFA witness argued the purpose of Class I differentials is to bring forth an adequate supply of milk for fluid use. According to the witness, with an FMMO Class I utilization of 27 percent, the current milk supply is more than adequate to serve Class I needs and there is no justification for increasing Class I differentials. The IDFA witness cited a recent retail milk demand study that found milk demand is elastic and, thus, the quantity demanded is sensitive to price changes. The witness argued any increase in price would not only hurt Class I sales, but also increase government purchase costs for milk used in nutrition and feeding programs. The witness stressed retail fluid milk sales have been declining and USDA should not hasten the decline by increasing Class I prices. The witness also added that eliminating or reducing the depooling of milk should not be a consideration when evaluating Class I differential levels. The witness said depooling is a necessary tool for manufacturing handlers when the Class III or Class IV price exceeds the blend price. They estimated that in some FMMO areas the Class I differential would have to increase to $41.32 per cwt in order to disincentivize depooling.
The IDFA witness was of the opinion that if USDA recommends differential increases, they should not be increased in the three southeastern FMMOs as those provisions already require fluid milk handlers to pay transportation credits and distributing plant delivery credit assessments to encourage producers to service Class I demand in those deficit markets. The witness estimated those assessments already account for approximately 42 to 46 percent of the differential increases contained in Proposal 19.
The IDFA witness also argued the $0.40 portion of the base differential attributed to maintaining Grade A status is no longer relevant given over 99 percent of all milk currently produced is Grade A. Consequently, said the witness, there is no longer a need to incentivize farms to become Grade A in order to service the Class I market and the base differential should be lowered to $1.20 per cwt.
Two witnesses representing IDFA, Saputo and Plains Dairy, testified in opposition to Proposal 19 and offered support for the arguments put forth by the IDFA witness. The Saputo witness said increasing fluid milk prices may reduce the retail price spread between fluid milk and plant-based products, further depress fluid milk sales, and ultimately force fluid plants to switch from HTST to ESL processing. The witness speculated a further decline in HTST facilities will force cultured products to be made elsewhere and increase costs to consumers. In regard to obtaining milk supplies, the witness said Saputo pays over-order premiums when necessary. The witness also opposed any increases in minimum regulated prices on the grounds that nonuniform increases would put some of its plants at a cost disadvantage. The Plains Dairy witness stated the increase from the model average results would impact consumer prices by $0.07 per gallon. Plains Dairy is a fluid milk processing facility in Texas.
A witness representing MIG also testified in opposition to Proposal 19 for many of the same reasons articulated by the IDFA witness. The MIG witness said NMPF failed to cost-justify any elements of the base differential, either at the $1.60 or $2.20 level, to support why it should be maintained. In echoing IDFA's arguments, the MIG witness also objected to NMPF's use of the USDSS averages as a starting point. As the FMMO system provides for minimum prices, the witness was of the opinion any evaluation of differential changes should start with the USDSS May model results, which represent the flush season for milk production. The witness said Proposal 19's problems are compounded because NMPF failed to use a consistent set of principles to justify its deviations from the USDSS results. In addition, many of the factors used to justify deviations, the witness said, were already factors considered by the model and, thus, are being double counted.
The MIG witness characterized the NMPF deviations as substantial and presented a series of maps to visualize the magnitude of the disparate changes. The witness also pointed to areas where price changes are more dramatic between neighboring counties, and suggested such price disparities could create incentives for disorderly marketing. The witness deemed the Proposal 19 differentials to be significantly different from current differentials, and argued the increases are being proposed despite a lack of evidence from NMPF that there is a shortage of milk available to meet Class I demand. Class I differentials should reflect the minimum cost of serving Class I milk, stressed the witness. If there are additional transportation costs not provided for under the current differential as alleged by NMPF, the witness testified, those would be reflected in negotiated over-order premiums in the market. Instead, many areas of the country have no over-order premiums, which the MIG witness interpreted as an indication that FMMO prices are not minimums, but price enhancing. Similar to the IDFA witness, the MIG witness was of the opinion no changes should be made to the differentials in the three southeastern FMMOs until the full impact of the recent amendments to the transportation credits and establishment of the distributing plant delivery credits are known.
Three witnesses representing Organic Valley testified in opposition to
The Organic Valley witnesses described the differences between the organic and conventional milk markets (both at the producer and processors level). They were of the opinion Proposal 19 fails to account for these differences and would result in inefficient milk movements if adopted. The witnesses countered arguments that the conventional market balances the organic market, claiming only around 2 percent of organic milk finds its way into conventional products.
A witness from Aurora testified in opposition to Proposal 19. Aurora is a vertically integrated organic milk supplier with four organic dairy farms located in Colorado and Texas. The witness was of the opinion no justification exists to increase Class I differentials as the areas surrounding the Aurora plants have adequate organic milk supplies, something that was not accounted for in the USDSS model. The witness explained the organic milk market and argued its structural differences from the conventional milk market make any change to the Class I differentials as applied to organic milk unwarranted. Similar arguments were made by a MIG witness on behalf of Danone and Crystal Creamery.
A witness for Maple Hill Creamery (Maple Hill) testified in opposition to Proposal 19. Maple Hill purchases grass-fed organic milk for processing and national distribution but does not own a fluid milk plant. The witness opposed the proposed Class I differentials and estimated their Class I marketwide pool obligation could increase up to 80 percent as a result. The witness made arguments similar to other organic processors and concluded that increasing Class I differentials would result in a choice between paying a lower organic fixed price to its dairy farm suppliers and jeopardizing supply, or raising retail prices and jeopardizing sales.
A witness representing Shamrock, a member of MIG, testified in opposition to Proposal 19. The witness said adoption of Proposal 19 would increase their raw milk costs anywhere from 29 to 62 percent. The witness testified Shamrock pays over-order premiums which they believe cover any additional costs associated with servicing their plants in excess of the Class I differential value. The witness noted an inconsistency in NMPF methodology, as the differential for their Virginia plant is proposed at the USDSS model average, while the differential at their Arizona plant is $0.65 greater than the average.
A witness for AE, a MIG member, also testified in opposition to Proposal 19. The witness was of the opinion NMPF had not provided justification for the Class I differential increases. They specifically objected to the Class I differential changes that would, in the witness' opinion, give its nearest competitor a $0.15 greater advantage than currently exists.
A MIG member witness for HP Hood testified in opposition to Proposal 19. HP Hood also operates four standalone Class II plants in the northeast. Similar to the AE witness, the HP Hood witness testified the proposed Class I differentials would create competitive disadvantages for their plants in relation to nearby cooperative owned plants. The witness criticized what they believe was the lack of uniformity used by NMPF in developing differentials that deviated from USDSS results. The witness said there are ample milk supplies to meet Class I needs and any increase in the Class I price would only serve to decrease fluid milk sales.
A witness from Turner Dairy, a MIG member, testified in opposition of Proposal 19. The witness objected to the continued relevance of the three base differential components. The witness said Turner Dairy has not had difficulty finding adequate milk supplies through its independent dairy farm supply. The witness said any Class I differential increases would be paid into the FMMO marketwide pool, not to its direct suppliers. The witness said this would make it harder to compete for dairy farm suppliers, particularly with competitors in the unregulated area to their east. Similar to other witnesses, the Turner Dairy witness detailed how the proposed Class I differentials would create competitive disadvantages for their plants relative to nearby cooperative plants, as well as decrease fluid milk consumption.
A MIG witness testifying on behalf of fairlife opposed Proposal 19. The witness argued that if more money is needed to attract fluid milk supplies, it should be negotiated in the marketplace, not mandated in FMMO pricing provisions. The witness said fairlife regularly pays over order premiums for even day receiving, transportation costs, and quality attributes. In the witness' opinion, there are ample fluid milk supplies and any increase in differential would only serve to create market winners and losers.
A witness from Shehadey, testified in opposition to Proposal 19. Shehadey operates four manufacturing plants in California, Nevada, and Oregon, producing Class I and Class II products. The witness argued the Class I differentials proposed for their plant locations should not be increased as the local milk supply is adequate to meet their fluid needs. The witness took particular objection with the disproportionate increase by the Fresno, California, plant in relation to their competitors located farther from the state's primary milk supply in the Central Valley. The witness added that their Oregon plant has a more distant milk supply relative to their other plants, and over-order premiums are used to compensate dairy farmers for the additional costs of servicing the plant.
A witness representing United Dairy, Inc. (United) testified in opposition to Proposal 19. United is a fluid milk processor operating three plants in West Virgina, Ohio, and Pennsylvania, which are primarily supplied by independent dairy farms. The witness testified their plants receive adequate milk supplies and pay over-order premiums when needed to ensure their milk needs are met. The witness opined the market should depend on over-order premiums, not unduly high regulated prices, to direct milk where needed. Similar to other witnesses, the United witness argued FMMO prices should not be increased because it would negatively impact Class I sales. The witness objected to the uneven application of differential increases, highlighting the differential increases for the United plants are higher than every other plant in the region, even when United has had no milk supply shortages. A West Virginia independent dairy farm supplier of United also testified in opposition to Proposal 19. The witness expressed concern the proposed differential increases would ultimately lead to the closure of the independent fluid milk processors in the State, leaving local dairy farmers with few, if any, local market outlets, and would widen the nutritional gap that already exists in the Appalachian area as higher prices would reduce fluid milk consumption.
A witness representing Lamer's testified in opposition to Proposal 19. The witness said increasing Class I differentials would not benefit consumers or processors as higher prices would lead to a decline in fluid milk consumption and the closure of more fluid milk plants. The witness was
A series of academic researchers testified regarding milk price elasticity. One researcher testified on behalf of NMPF regarding the potential impact to fluid milk demand as a result of regulated price changes. The witness referred to this as price elasticity, which estimates the percentage change in demand (quantity) due to a 1 percent change in price. The witness said any price elasticity less than the absolute value of 1 is considered price inelastic—a 1 percent change in price would result in less than a 1 percent change in demand—implying increased revenue due to the price change would more than offset the decreased revenue from fewer sales.
The NMPF witness reviewed 38 empirical studies, conducted between 1964 and 2022, measuring milk price elasticity at the retail level. The witness found the study average elasticity of 0.35 percent, and a median of 0.2 percent, concluding milk demand is inelastic. The witness said consumers remain price insensitive because milk continues to be considered a staple food. To illustrate its price inelasticity, the witness elaborated the real price of milk relative to all goods and services has declined 7 percent since 2013, during which time milk demand has decreased 18.3 percent. If milk was elastic, said the witness, a decline in price should have resulted in an increase in demand. The witness reviewed other factors which they believe are driving decreased milk consumption, including increased competition in the beverage market from new products and alternative beverages, an increase in the amount of food consumed away from home, and the lower proportion of young kids in the population.
The NMPF witness evaluated the average increase in differentials contained in Proposal 19, $1.49 or an 8.6 percent Class I price increase, to estimate the impact on demand. Assuming a 55 percent retail price transmission rate (1 percent change in the Class I price would cause a 0.55 percent change in the retail price), the witness estimated Proposal 19 would lead to a 1.6 percent decrease in demand. The witness concluded the decrease in demand would be lower than the increase in Class I revenue, resulting in a net increase of dairy farmer revenue.
Another researcher testified on behalf of IDFA. The witness presented the results of a study evaluating the impact milk price changes have on the consumption of milk (in five disaggregated varieties) and various alternatives, including soft drinks, bottled, water, juices, and for the first time considered plant-based alternatives. The witness utilized weekly scanner data from 2017 through August 2023 to evaluate three distinct time periods (pre-COVID, COVID and post-COVID). The witness estimated the data represented approximately 84 percent of the milk volume sold at retail outlets, or 64 percent of overall milk volume. The witness attributed the remaining 36 percent to milk sales through untracked retail, foodservice, schools, and shrinkage. The witness noted it is likely the elasticity for the unaccounted milk volume was highly inelastic.
The IDFA witness said the study found the own-price elasticities for traditional white, flavored, and lactose-free milk to be elastic, and when all five categories of milk were combined, it had an elasticity of −1.26 in the post-COVID time period. Utilizing some of the NMPF researcher's assumptions (8.6 percent increase in Class I prices and a retail price transmission rate of .55 percent), the witness estimated adoption of Proposal 19 would result in an overall 5.98 percent decrease in fluid milk sales and a 2.1 percent increase in gross dairy farmer revenue. The witness concluded this study revealed retail fluid milk sales are more sensitive to price changes than previously thought. The witness also noted other demand studies that utilize AMS estimated fluid milk sales, not weekly scanner data, do not reflect the current retail marketplace because they incorporate highly inelastic sales to schools, colleges and universities, long-term care and senior living facilities, hospitals, and correctional institutions.
A third academic researcher, also testifying on behalf of IDFA, provided results of a study evaluating the market effects of Proposal 19. Looking at milk production, fluid milk consumption, and producer price statistics since 2000, the witness concluded there are sufficient milk supplies nationally to meet Class I demands. The witness was also of the opinion sufficient milk supplies, at reasonable prices, exist for the high Class I utilization FMMOs (the Appalachian, Southeast, and Florida), because retail prices in the three markets were below those of a 30-city average retail milk price when compared to other regions of the country. The witness commented that elasticity studies not accounting for non-dairy alternatives are not representative of the current retail market. The witness reviewed recent fluid demand studies and concluded adoption of Proposal 19 would increase fluid milk prices, decrease consumption, and result in more milk use in manufactured products.
A post-hearing brief submitted on behalf of Select supported increasing Class I differentials, but not to the levels contained in Proposal 19. Select contended deviations from the USDSS results made by NMPF may be appropriate but disagreed with the type and extent of those included in Proposal 19. Select took exception to the proposed adjustments in the mideast and southwest regions where they have member farms. Select noted reasons for making deviations were not applied uniformly, especially in areas that have similar supply and demand environments. Select stated increased transportation costs and shifts in milk production and processing locations justify increasing Class I differentials and offered support for using the average of the May and October 2021 USDSS results, with minor adjustments and smoothing of the surface as the USDA would find appropriate.
A post-hearing brief submitted on behalf of MIG opposed adoption of Proposal 19, arguing hearing evidence supports lowering, not raising, Class I differentials. MIG cites the abundance of milk available to serve the Class I market and FMMO adjustments to shipping percentages as evidence to deny Proposal 19. MIG reiterated its objection to the methodology used and deviations made by NMPF in developing the proposed differentials. The brief contended raising Class I differentials would be disorderly because it would lower Class I demand and aggravate challenges already faced by fluid milk processors. MIG also noted Class I differential changes should not be considered until the impact of recent changes to transportation cost-related provisions in the Appalachian, Florida, and Southeast FMMOs were known.
A post-hearing brief submitted on behalf of IDFA opposed Proposal 19 on the grounds its adoption would cause market disorder by raising fluid milk prices, decreasing fluid milk consumption, harm consumers, and divert milk into manufacturing uses. IDFA reiterated hearing testimony in its
Similarly, IDFA objected to NMPF's methodology in determining the differential levels offered in Proposal 19. IDFA objected to NMPF's use of dairy farm production costs to justify increases to the Class I differentials and referenced existing milk production as more than adequate to meet fluid milk demand. IDFA maintained Class I differentials should instead be lowered by $0.40 per cwt because the Grade A maintenance cost consideration is obsolete and inaccurate.
A MIG witness testified in support of Proposal 20, seeking to reduce the base differential to $0.00. The witness' testimony centered around the continued relevance of the cost components currently provided for in the base differential: Grade A maintenance, balancing, and Class I incentive costs. The witness was of the opinion the base differential results in market enhancing prices that induce overproduction and reduce fluid milk consumption. The witness said that since almost all U.S. produced milk meets Grade A standards, it is no longer necessary to provide compensation through Class I differentials for those costs as they are not unique to producers supplying the Class I market. They argued these costs are already provided for in market-clearing Class III and IV prices where most of the U.S. milk supply is utilized.
The MIG witness said the balancing cost factor is no longer justified as fluid milk processors have either invested in infrastructure to balance their own milk supply or pay over-order premiums to their suppliers for balancing services. The witness was of the opinion incorporating balancing costs within the Class I price results in processors paying for balancing services they do not receive or paying twice for such services—once through the Class I price and again in an over-order premium. Lastly, the MIG witness argued the $0.60 Class I incentive cost factor is no longer necessary to attract adequate supplies of fluid milk given the low, and continually declining Class I utilization.
Witnesses from MIG member companies testified in support of Proposal 20. MIG's members echoed the previous MIG testimony on the relevance of the base differential cost factors in the current market environment. In particular, the MIG witnesses argued that through plant investments, particularly ESL processing or additional milk silos, combined with over-order premiums paid to their milk suppliers, they are directly paying for their individual milk balancing needs. The witnesses all opined that through the base differential they are being double charged for such services. All MIG members testified that if additional monies are needed for balancing services or to obtain adequate milk supplies, it is more appropriate for those costs to be negotiated in the marketplace and paid directly to their milk suppliers, rather than as part of a regulated minimum price shared with all pooled producers.
Another MIG witness testified regarding the relevancy of the base differential in the current marketplace. The witness was of the opinion the base differential should be reduced to $0.00, and if cost recovery is needed by producers, it can be negotiated with milk buyers. The witness utilized the USDSS model to compare the value of Class I and Class III milk at the county level. The witness presented the results and explained in some parts of the country, where Class III milk is more valuable, it would take additional incentives to service a Class I plant rather than remain at the higher valued manufacturing plant. In other areas of the country, namely the southeast, northeast, and California, the value of Class I is higher, representing the cost to balance the region's Class I demand. The witness said the national average value of the differences was negative $0.38, indicating nationally, it is more valuable for milk to service Class III plants. The witness drew the conclusion this analysis supports the argument for lowering the base differential to $0.00 and allowing fluid plants to negotiate and pay premiums directly to their milk suppliers.
A post-hearing brief submitted on behalf of MIG reiterated its witnesses' testimony that the base differential is no longer economically justified. MIG stated the current oversupply of Class I milk is caused, in part, from high FMMO blend prices. According to MIG, adoption of Proposal 20 would correct this disorder by allowing a greater proportion of fluid milk costs to be negotiated and paid directly to suppliers. The brief reviewed MIG witness testimony on the relevancy of the costs associated with the base differential and the steps taken by its fluid milk processor members to balance and obtain a milk supply.
A Lone Star witness, appearing on behalf of NMPF, testified in opposition to Proposal 20. The witness argued a base differential of $0.00 would result in the elimination of any Class I differential for large portions of the U.S., amounting to approximately $650 million annually, with no guarantee the money could be recovered through over-order premiums. Additionally, said the witness, the lower differentials would lead to disorderly marketing conditions through increased occurrences of negative PPDs, higher volumes of depooled milk, and reduced or eliminated incentives to supply the Class I market. The witness stressed that costs to maintain Grade A status and balance the market's milk supply are real and significant. The witness said adoption of Proposal 20 would be akin to adopting individual handler pools in much of the country, an idea which they said has been found to cause disorderly marketing conditions.
The NMPF witness maintained milk has an inelastic demand, so any reduction in Class I prices will not have a significant impact on Class I sales. The witness also said that despite opposition testimony regarding the perils of setting regulated prices too high, there are also negative consequences for setting the regulated price too low. In the witness's opinion, dairy farmers still face a market power imbalance when negotiating prices above FMMO minimums, reiterating previous testimony on the difficulty cooperatives have faced when negotiating and maintaining over-order premiums.
The NMPF witness concluded by emphasizing the objective of the FMMO system is to set prices to ensure a sufficient quantity of milk for fluid use. The witness stressed providing for prices that reflect the current costs of supplying the market as demonstrated through NMPF testimony should be a priority of this proceeding.
In their post-hearing brief, NMPF argued Proposal 20 incorrectly assumes the cost of servicing Class I demand has not increased and reiterated witness testimony on the continued relevancy and need for the base differential. NMPF stressed that costs recognized in the base differential continued to be incurred by dairy farmers in servicing the Class I market and took exception with the position such costs could be adequately recovered through over-order premiums. NMPF maintained Class I demand is inelastic and reiterated the need for Class I prices to continue to be the highest priced class in order to ensure an adequate supply.
The AFBF witness also expressed opposition to Proposal 20. The witness testified the cost factors provided for in the base differential are still relevant and in fact higher than when the differential was adopted. The witness
A post-hearing brief filed by Lamers offered support for Proposal 20. Lamers stated its adoption would better reflect the real value of milk and all four classes would have a closer price relationship. Lamers asserted high Class I differentials are no longer needed to supply the fluid market given that 98 percent of milk produced is Grade A. A post-hearing brief submitted by New Dairy also offered support for Proposal 20.
Select's post-hearing brief expressed opposition to Proposal 20 and asserted a base differential of $1.60 should be maintained. Select opined the cost of maintaining Grade A status still exists and has increased, as have the costs associated with balancing and competing for a milk supply.
A post-hearing brief submitted by Edge, while not offering support or opposition to Proposals 19 or 20, did contend Class I milk prices should not be raised beyond necessary levels and not be raised merely to offset the negative producer impact of increasing make allowances.
The AFBF witness also testified in support of Proposal 21, seeking to increase the Class II differential from $0.70 to $1.56 per cwt. The witness explained the proposed differential reflects updated drying costs based on the current NFDM make allowance. The witness did not believe the proposed increase would lead to the substitution of Class IV powders in lieu of Class II fresh milk. The witness estimated that adoption of Proposal 21 would increase annual FMMO marketwide pool values by $122 million and reduce the likelihood of negative PPDs and depooling. These views were reiterated in AFBF's post-hearing brief.
Several witnesses representing MIG including Turner Dairy; HP Hood; AE; Shamrock; CROPP; Aurora; Shehadey; Crystal Creamery; and fairlife testified in opposition to Proposal 21. The MIG witnesses indicated adoption of Proposal 21 would result in Class II standalone plants choosing not to participate in the FMMO system, putting fully regulated Class I plants with Class II production at a competitive disadvantage. This sentiment was emphasized by witnesses from Turner Dairy and Shehadey, whose fully regulated Class I plants also produce notable volumes of Class II products. The witness from Crystal Creamery provided an analysis of CME NFDM and Class II nonfat solids prices, projecting an increase of 20 to 50 percent in the use of Class IV nonfat solids if Proposal 21 was adopted. Lastly, a witness from fairlife predicted adoption of Proposal 21 would cause some manufacturers to reformulate products in order to avoid paying the higher Class II price.
In its post-hearing brief, MIG reiterated hearing testimony and added that cream, a Class II product, must be made with fluid milk in accordance with the standards of identity established by the U.S. Food and Drug Administration. As such, according to MIG, a pooled Class II manufacturer of cream could not reformulate and, further, would experience an estimated 3.5 percent increase in its FMMO marketwide pool obligations.
Several witnesses representing IDFA, including Saputo, Galloway, and Lakeview Farms, also testified in opposition to Proposal 21. The witness for Saputo indicated the demand for Class II skim solids is likely to decrease if Proposal 21 is adopted, as alternative milk solids would have a greater substitution value. Further, according to the witness, costs to consumers for cream would likely increase.
The witness for Galloway testified that adoption of Proposal 21 would not increase blend prices or limit depooling and negative PPDs, as alleged, because Class II manufacturers would instead utilize more Class IV powder ingredients in lieu of fresh milk. In the witness' opinion, increasing the Class II differential would only serve to promote disorderly marketing through the displacement of the local milk supply and permanent investment of equipment to enable the use of Class IV ingredients. The witness said once a manufacturer makes the costly capital investment decision, they do not switch back to use fresh milk in the future. The witness estimated adoption of Proposal 21 would result in a $99.4 million loss to producers through the use of lower valued Class IV ingredients. A witness from Lakeview Farms supported the statements of other witnesses, emphasizing the likely increase in costs to the customer. This witness added that innovation of more oil-based formulations to offset the price volatility of dairy fat would lead to a disruption in the dairy supply chain.
In its post-hearing brief, IDFA reiterated testimony from the hearing which stressed that there is already an adequate supply of milk for Class I and Class II needs, and opined the current Class II price formula is working well as is. As such, according to IDFA, there is no evidence that suggests a need to increase the Class II differential. IDFA argued further that farmers are likely to receive lower net prices as a result of Proposal 21 due to the anticipated substitution of lower cost Class IV NFDM for Class II nonfat solids. Lastly, IDFA focused on the likely disproportionate impact of Proposal 21 on Class I handlers that also manufacture Class II products. Without the ability to depool, these handlers could not take advantage of lower NFDM prices, IDFA wrote.
An MMPA witness appearing on behalf of NMPF also testified in opposition to Proposal 21. The witness' testimony mirrored other witnesses cautioning that adoption could cause substitution with Class IV powder ingredients. The witness said not only does the Class II and Class IV price difference need to be considered, but so does the significantly lower transportation cost of powder versus fresh milk. Under the current Class II differential, Class II milk already has an incentive not to be pooled, said the witness. Increasing the differential would only heighten the incentive and create competitive disadvantages for Class I plants making Class II products, while simultaneously lowering marketwide pool values. In its post-hearing brief, NMPF added that adoption of Proposal 21 may incent the practice of substituting less expensive milk powder for fresh milk to make Class II products. NMPF also elaborated on its members' concerns regarding the likely increase in depooling of Class II milk if Proposal 21 was adopted.
USDA received post-hearing briefs related to Proposal 21 from three additional stakeholders: New Dairy; Select; and Lamers. New Dairy expressed its opposition to the AFBF's Proposal 21, emphasizing that the current milk supply is sufficient, and it shared the concerns of other hearing participants regarding the potential competitive disadvantages for Class I handlers manufacturing Class II products. Select explained that the AFBF's proposal deviates from the rationale and methodology USDA utilized to establish the Class II differential during Order Reform and, thus, according to Select, Proposal 21 likely overstates an appropriate Class II
An FMMO (or “order”) is a regulation issued by the Secretary of Agriculture (Secretary) that places certain requirements on the handling of milk in a defined geographic marketing area. FMMOs are authorized by the AMAA. The declared policy of the AMAA is to “. . . establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce. . . .” 7 U.S.C. 602(1). As specified by the AMAA, the principal means of meeting the objectives of the FMMO program are through classified milk pricing and the marketwide pooling of returns. This rulemaking concerns and is limited to classified milk pricing.
FMMOs announce prices each month for milk received by plants during that month, according to its use classification. Since 2000, the FMMO program has used product price formulas that rely on the wholesale price of bulk products to determine the minimum classified prices handlers pay for raw milk in the four classes of utilization. Class III and Class IV prices are announced on or before the 5th day of the following month to which they apply. The Class III and Class IV price formulas form the base, also known as the mover, from which Class I and Class II prices are determined.
The Class I price is announced in advance of the applicable month. It is determined by adding the Class I differential assigned to the plant's location, plus the average of advanced Class III and Class IV prices (computed by using the most recent two weeks' DPMRP data released on or before the 23rd of the preceding month), plus $0.74. The Class II skim milk price, announced at the same time as the Class I price, is determined by adding $0.70 per cwt to the advanced Class IV skim milk price. Thus, the advanced prices pertaining to milk marketed in a particular month use the same formulae as the calculation of Class III and IV prices for milk marketed in that same month, but the specific data are from different time periods. The Class II butterfat price is announced at the end of the month, at the same time as the Class III and Class IV prices, by adding $0.007 per pound to the Class IV butterfat price.
Component prices are based on prices for the selected bulk products collected through the AMS-administered DPMRP, which collects weekly wholesale prices for four manufactured dairy products in various bulk package sizes (cheese, butter, NFDM, and dry whey powder). Weekly average prices for cheddar cheese (the weighted average of block and barrel prices), butter, NFDM, and dry whey are reported in the NDPSR.
The butterfat, protein, other solids, and nonfat solids prices are derived through the weighted average monthly NDPSR survey prices of each corresponding commodity, minus a manufacturing (make) allowance, multiplied by a yield factor. The make allowance factor represents the fixed and variable processing costs manufacturers incur in making raw milk into one pound of product. The yield factor represents the approximate quantity of product that can be made from a cwt of milk received at the plant, assuming a certain component composition of the milk and the final products. Among other factors used to determine yield, the milk received at a plant is adjusted to reflect farm-to-plant shrinkage compared to farm weights. This relates to the basic question of how much milk is required to make a pound of product.
This product pricing system was implemented as a part of Order Reform on January 1, 2000. 64 FR 70868 (Dec. 17, 1999). While individual pieces of the price formulas have been updated occasionally since that time, this proceeding is the first time since their adoption that the Department is considering a comprehensive update to all four classified price formulas 68 FR 7063 (Feb. 12, 2003); 71 FR 78333 (Dec. 29, 2006); 78 FR 24334 (Apr. 25, 2013).
The objective of this proceeding is to evaluate whether market or other economic conditions have changed and if the price formulas need to be updated to reflect current conditions, including economic and technological factors related to processing, transportation, and other relevant market functions or services. Twenty-one proposals, divided into five main topic areas, were considered: milk composition factors—two proposals; surveyed commodity products—four proposals; Class III and Class IV formula factors—six proposals; base Class I skim milk price (often referred to as the “higher of”)—six proposals; and Class I and Class II differentials—three proposals.
The record supports the findings that some price formula factors should be amended to reflect current market conditions that were evidenced in this proceeding. The recommended changes, which are discussed in detail below, include:
1.
2.
3.
a. Update the manufacturing allowances as follows:
i.
ii.
iii.
iv.
b. Update the butterfat recovery factor to 91 percent.
4.
a.
b.
5.
Milk composition factors contained in the product price formulas represent assumed component levels of skim milk on a cwt basis. These factors were adopted on January 1, 2000. Currently, the formulas assume 3.1 pounds of true
The level of assumed components in milk ultimately impacts minimum regulated prices paid by handlers, although the impact varies since there are variations in how components are used to value milk between FMMOs. All handlers regulated by the Arizona, Southeast, Florida, and Appalachian FMMOs pay for milk used in all four classes on a volume (cwt) basis, regardless of the components contained in the skim milk (referred to as skim/fat pricing). Simply put, handlers pay for the pounds of skim and pounds of butterfat in milk they purchase from dairy farmers. In the remaining seven FMMOs, handlers pay for manufacturing milk based on the actual pounds of components in milk they purchase (referred to as multiple component pricing). Milk used in fluid milk products (Class I) is paid based on the skim and butterfat pounds delivered, regardless of the components contained in the milk. Changing the milk component factors primarily impacts Class I minimum prices paid by fluid milk processors in all 11 FMMOs, and to a lesser extent manufacturing handlers purchasing milk for Class II, III, and IV uses on skim/fat FMMOs.
Proponents of changing the milk component factors argue actual average milk component levels in farm milk have increased since January 1, 2000, and milk should be priced to buyers to reflect the value of those components. NMPF proposes (Proposal 1) component levels at observed 2022 levels (3.39 true protein, 6.02 other solids, and 9.41 pounds of nonfat solids). NMPF also proposes an updated methodology whereby components could be updated once every three years, without a rulemaking proceeding, if the nonfat solids levels in FMMO producer skim milk changed by 0.07 percentage points or more from the level stated in regulation. In its proposal, NAJ seeks an automatic annual update, with no change threshold to be met (Proposal 2).
Both NMPF and NAJ argue that because component levels in producer milk have risen but are still accounted for in the price formulas at 2000 levels, the difference between Class I prices and manufacturing milk prices (Class III and IV) has narrowed. Put another way, milk used in manufacturing in the multiple component FMMOs is paid based on actual component levels, so producers are paid for all component pounds delivered to manufacturing plants (approximately 85 percent of FMMO manufacturing milk is pooled on the 7 multiple component orders). Consequently, payments for milk delivered to manufacturing plants increase as component levels delivered to those plants increase. However, milk delivered to Class I plants is paid on a fat/skim basis whose formulas contain the assumed component levels at issue in this proceeding. Thus, as milk component levels have risen, Class I plants have continued to pay for milk based on the static component levels contained in the formulas. Proponents argue the result has been a narrowing between fluid and manufacturing prices causing marketing challenges, especially in the milk deficit markets in the southeastern region that must compete to procure a supplemental Class I milk supply with manufacturing milk demands in multiple component orders. Proponents also stressed the narrowing of the difference between Class I and manufacturing milk prices increases the occurrence of price inversions and depooling.
The record of this proceeding reveals FMMO component levels in raw milk have increased since January 1, 2000, most notably since the mid-2010s. Milk component data is not available before 2000 because the prior methodology for pricing milk did not require milk composition-level assumptions. The Order Reform decision did not address specifically why these assumptions were adopted. However, since component levels observed in FMMO skim milk in 2000 were 3.1 percent true protein, 5.9 percent other solids, and 9.0 percent nonfat solids, it is reasonable to assume they were set at those levels because at the time they were representative of all pooled milk in the FMMO system. Evidence reveals that from 2000, component levels were relatively flat with only a slight increase through the mid-2010s. Beginning in 2016, observed data show a marked increase in component levels. The data also clearly show component levels throughout the country vary by season, with levels lower in the spring and summer, and higher in the fall and winter. Hearing testimony revealed numerous reasons for the recently observed milk component increases, including genomics in dairy cattle selection and breeding, higher cull rates of less productive cattle, and improvements in cattle nutrition and animal husbandry.
Opponents of increasing component levels, primarily fluid milk handlers, argued three general reasons an increase is not justified. First, fluid milk handlers, who would be primarily impacted by these proposals, do not receive producer milk at the proposed component levels. They contend higher component milk is delivered to manufacturing plants, leaving the lower component milk for fluid milk handlers. Second, fluid milk handlers testified they receive no additional market revenue for higher components in milk because their sales are on a volume basis (
First, opponents of increasing component levels argued fluid milk handlers do not receive milk containing the levels of components proposed. Testimony from fluid milk handlers during the hearing was mixed. Some fluid milk handlers would not reveal component levels for the Department to consider, citing confidentiality concerns. Other fluid handlers, who did offer data, showed a range of average component levels in skim milk received: true protein ranged from 3.03 to 3.63 and other solids ranged from 5.83 to 6.10. Many producers who testified also discussed the rise in their farm component levels because of the decisions and investments made at the farm. While some producers could cite data, for example true protein tests ranged from 3.12 to 3.83, many who could not cite specifics did discuss a general increase in their component levels.
Second, opponents argued that because component levels have no bearing on the volume of milk sold, they should not be required to pay higher Class I prices for higher components that provide no additional market revenue. The record clearly shows fluid milk handlers sell fluid milk products based on volume, which is why prices are based on skim and butterfat pounds purchased. Proponents of changing the composition levels provided anecdotal evidence, such as marketing claims and product description, to assert fluid milk products can garner additional market revenue for higher component levels. However, no data were provided to prove there is a general industry-accepted norm or practice that allows handlers to recover a value for nonfat
Finally, opponents claimed that increasing component levels in minimum price calculations would unduly harm manufacturing handlers in the skim/fat orders. The record contains actual component tests of producer milk in the multiple component pricing orders because producers in those orders are paid based on the pounds of components sold. However, component data for the four skim/fat orders could only be estimated as producers in those orders are paid based on the volume of skim milk and butterfat produced, not component levels. Record evidence contains USDA estimated data showing component levels in milk have consistently been above the current assumptions in all four fat/skim orders. Estimated protein and other solids levels of skim milk pooled in the three southeastern orders have been above the assumed levels in most months since January 2018, and below the levels contained in Proposal 1 in all months. Estimated protein and other solids levels of skim milk pooled in the Arizona Order have been above the assumed levels in all months since January 2018, and above the levels contained in Proposal 1 some months. Dairy Herd Improvement Association component data offered at the hearing, although by no means all encompassing, is consistent with estimated data provided by USDA. In the four skim/fat orders, average protein levels from 2020-2022 were above the current formula assumptions but below those contained in Proposal 1.
This decision considers how the price formulas should be updated to reflect current market conditions. Milk composition levels are only one piece of the formulas being addressed. However, as with all the factors adopted at the time of Order Reform and updated through subsequent rulemakings, the question before the Department is what level is representative of current supply and demand conditions as required by the AMAA. Some parties argued milk composition factors should not be changed because not all milk would meet the levels proposed by NMPF. Price formulas in the FMMO system have never had factors that assumed all milk was identical. Since FMMOs utilize a national pricing system, price formulas have always relied on averages to set levels representative of market conditions. The nature of an average means some milk will fall above or below the specified level. This was true with the milk composition levels that were adopted in 2000, and similar to other factors, such as make allowances, survey commodity prices, and butterfat recovery percentages.
With sufficient data showing increasing milk composition levels, the record supports updating the formulas to reflect current market conditions. The question becomes what levels best represent the entire U.S. market. The review of record evidence described earlier reveals many factors should be considered: the average component levels of pooled producer milk, the variability in milk components regionally and seasonally, the discrepancy in milk component levels received by fluid milk handlers compared to manufacturing handlers, and the variability of component levels from farm to farm. These factors were not specifically mentioned as being considered in the Order Reform decision when the current levels were set. However, given the evolution of the dairy industry in the past 24 years, they are relevant for consideration in this proceeding.
Fluid milk handlers argued the component levels should not be increased because Class I plants do not receive component levels as high as proposed. While the record does not contain a comprehensive data set of milk component levels received at fluid milk plants, it does contain data on milk component levels of all milk pooled on the FMMOs, as well as evidence submitted by producers on the component levels in their milk, and information from fluid milk handlers on the component levels they receive. Importantly, many fluid plant operators testified the milk components received at their respective plants are higher than currently assumed in the formulas, but less than what has been proposed.
While this decision finds milk composition levels should be increased, the levels in Proposal 1 are not appropriate, assumed component levels applicable to the raw milk whose price is impacted by these assumptions. Given the variability and seasonality of component level information contained in the record, this decision finds an average of component levels in skim milk over a recent time period appropriate. Based on evidence that component levels have been increasing at a more rapid rate since the mid-2010s, this decision finds the average component levels from 2016-2022 the most appropriate time period to represent producer milk currently priced on a skim/fat basis. Accordingly, this decision recommends the following: 3.3 percent true protein, 6.0 percent other solids, and 9.3 percent nonfat solids. Estimated data for the three southeastern orders show component levels exceeding these proposed levels in recent months, thus addressing opponents' claims that manufacturing handlers in the southeastern orders receive lower component milk than other FMMOs. The recommendation balances the cumulative body of evidence and testimony presented at the hearing.
During the hearing and in their post-hearing brief, Edge proposed, in addition to updating skim component levels, that the assumed butterfat level of 3.5 percent should also be updated to facilitate risk management. Updating butterfat levels is outside the scope of this proceeding as no proposal contained in the hearing notice offered such a change. As risk management programs utilizing FMMO prices are maintained in the private sector, such programs can adapt as necessary to facilitate the use of updated price formulas.
NMPF and NAJ also proposed alternative updating and implementation schedules for the milk composition levels. NMPF proposed the composition levels be updated once every three years, but only if there was a 0.07 percent or greater change in nonfat solids levels, compared to what was in regulation. For example, if Proposal 1 was adopted, milk composition factors could only be updated three years later if the average nonfat solids levels in pooled FMMO milk was 9.48 percent (9.41 × 1.007). NAJ proposed the levels be updated annually, regardless of the magnitude of increase. Both proponents requested a 12-month implementation lag because of the implications such a change could have on producer risk management positions. Edge proposed a longer implementation lag of 15
The development and use of dairy risk management tools is relatively new, and the Department has never before been asked to delay implementation of FMMO changes in consideration of risk management. However, testimony made clear producers' concern regarding the negative financial impact that could occur if regulatory changes did not account for the growing use of risk management tools.
Producers testified to the use of numerous market-based risk management tools, including the CME futures and options, and the two USDA-Risk Management Agency approved insurance products, DRP and Livestock Gross Margin—Dairy (LGM-Dairy). Use of risk management tools by producers testifying at the hearing varied sharply, with some not using any tools, some
Record evidence depicted the concern regulatory changes could have on risk management tools, particularly the impact on the usability of these tools during a transition period. Risk management usage must be considered against the interest of other producers who do not use risk management tools, since it would delay recognition of the higher components in producer milk. While risk management use is not a factor in determining what the milk component levels should be, it is appropriate when determining an implementation timeframe to attempt to mitigate potential financial harm to producers who utilize risk management tools. Accordingly, this decision finds a 12-month implementation lag appropriate, beginning when other changes from this proceeding become effective. This delayed implementation should cover hedge positions for the vast majority of producers utilizing these tools. In addition, as this recommended decision indicates the Department's initial position, producers making risk management decisions are aware of the potential changes, should they be approved by producers.
Lastly, this decision does not support an automatic update of the milk composition levels, as contained in Proposal 1 or Proposal 2. It is clear from the record that many factors, as described earlier, should be considered when making a change. Those factors can only be considered through the course of a rulemaking.
USDA administers the DPMRP to gather weekly wholesale prices of four manufactured dairy products. Average survey prices are released weekly in the NDPSR, and monthly average commodity prices are released by AMS on or before the 5th of the following month. The monthly product prices are then used in the FMMO price formulas to determine component values in raw milk. The same four commodities have been surveyed since 2000. NASS administered the survey from 2000 to 2012; submitting data was voluntary until 2008, and then mandatory and verified from 2008 to 2012. AMS has administered the survey since 2012 with the data being mandatory and audited 73 FR 34175 (June 17, 2008).
This proceeding is considering four proposals that would add or remove a variety of products in the DPMRP survey. Because FMMOs enforce minimum raw milk pricing, the overarching question for the Department in this decision is whether the current surveyed commodities are an appropriate representation of market clearing, wholesale commodity products whose prices provide an accurate reflection of the minimum value of raw milk. DPMRP currently surveys cheddar cheese, butter, nonfat dry milk, and dry whey. Proposals submitted in this proceeding offer changes to the cheese survey (Proposals 3, 4, and 6) and changes to the butter survey (Proposal 5). No proposals seek changes to the NFDM or dry whey surveys.
Currently, FMMOs utilize a weighted average DPMRP survey price of 40-lb cheddar cheese blocks and 500-lb cheddar cheese barrels to determine the protein price used in the Class III price formula. Although both products meet the definition of cheddar cheese, the different package styles reflect that their intended uses are different. Cheddar cheese barrels are intended to be further processed into processed cheeses. Cheddar cheese blocks can also be used for that purpose, but they are produced with the intention of use in a natural cheese with minimal further processing (for example cutting into consumer packages or shredding.) DPMRP weights the cheese price by the volume of surveyed blocks and barrels, which according to record evidence, is typically around 50 percent blocks and 50 percent barrels.
Proposal 3 seeks to drop barrels from the survey and solely rely on a survey of 40-lb blocks. Proponents offered a few reasons for dropping barrels. First, they believe barrels are overrepresented in the survey because the weighting methodology is based on the production percentages included in the survey and not actual production across the entire cheddar cheese market. Proponents believe the percentage of cheddar cheese manufactured and priced off 40- pound block prices is significantly higher than 50 percent of the U.S. natural cheese market. Second, proponents argue that having what amounts to two products in the survey results in an average price that is not representative of either blocks or barrels. They say this has been particularly evident since 2017, when market prices between blocks and barrels began to significantly diverge, both in magnitude and direction, from the historical average difference of $0.03. Barrel prices were even occasionally higher than blocks (historically, block prices have been higher than barrel prices). Proponents argued that when barrel prices have been well below the assumed $0.03 difference, the current weighting methodology results in a lower average cheddar price than would have been if the two prices were weighted in accordance with actual, total production of each product. Members of NMPF testified a block-only survey would contain adequate survey volume to be representative of the cheese market.
Opponents of dropping barrels asserted: (1) it is not appropriate to eliminate approximately half of the current cheese survey volume; (2) barrels are a market-clearing product and should continue to be included in the survey; and (3) blocks and barrels together represent the national cheese market as they are both commodity products with different commercial uses. Opponents also disputed the claim that most cheese is priced off the block market.
During the hearing, Edge offered an alternative that would reweight the survey average price based on the U.S. production volume of blocks and barrels as determined by NASS, instead of volume from respondents to the AMS survey. They opined barrels should not be removed from the survey because in months where the barrel price exceeded blocks, the Class III price would have been lower than it otherwise was, and consequently producer revenue would be less. Instead, Edge argued a better solution to the issue of overweighting barrels was to use a weighting methodology reflective of actual U.S. cheddar cheese production.
Proposal 4, submitted by AFBF, seeks to add 640-lb blocks of cheddar cheese to the survey. This type of cheddar cheese is made using the same process as 40-lb blocks and differs only in the final container for the cheese curd. Both sizes represent an intermediate product requiring further processing before it
Opponents to adding 640-lb blocks argued: (1) most 640-lb blocks are already priced off 40-lb blocks, so their inclusion would not enhance price discovery; and (2) 640-lb blocks are typically customer-specific which would exclude those blocks from the survey. The opposition is premised on the additional survey volume not adding new price information either because the prices are already reflected in the 40-pound block price, or because the customized products are value-added and should not be included for minimum pricing.
Proposal 6, offered by CDC, seeks to add mozzarella cheese to the survey. Proponents argue mozzarella is the largest volume of cheese produced in the U.S., and revenue from mozzarella products should be captured in the survey and ultimately reflected in prices paid by Class III handlers. Further, proponents argued a higher Class III price should be reflected in producer prices to offset increasing farm production costs.
Opponents argued there is no one standard of identity for mozzarella cheese, making it difficult to delineate what mozzarella product would have a substantial volume of reportable sales to represent the market value of mozzarella cheese. In addition, opponents stated no manufacturing cost data is available to be evaluated for inclusion in the manufacturing allowance calculation for cheese. Lastly, opponents asserted mozzarella is not a market-clearing product and therefore should not be considered when determining minimum prices.
While there were three proposals offering changes to the cheese survey, two of them lack data and evidence to support adoption. First, the addition of mozzarella is not supported by the record. The record reveals multiple standards for different mozzarella cheese products, but no evidence was presented to show which of those would be appropriate to survey as an improvement in finding a minimum value for milk. Furthermore, no evidence was presented on what would define a commodity mozzarella product, rather than a value-added product, which is a general rule for inclusion in the DPMRP. Proponents offered information on mozzarella in consumer sized packages (
The record lacks evidence to support adoption of Proposal 4, adding 640-lb blocks. The record reflects widespread industry consensus that 640-lb blocks are typically priced off 40-lb blocks. Because of this price relationship, numerous industry witnesses testified that no new price information would be captured by including 640-lb blocks. In addition, several witnesses testified 640-lb blocks are largely made-to-order on long-term price contracts which would exclude the sales from the survey because of these marketing characteristics. No data was presented to evaluate whether any additional price information gained through inclusion of 640-lb blocks would offset the burden (lack of efficiency) to both the industry and USDA for their inclusion. Accordingly, Proposal 4 is denied.
The Department considered the idea presented by Edge to reweight blocks and barrels in the survey to reflect total U.S. cheddar cheese production volumes by packaging type, instead of survey volumes. However, the record lacks evidence regarding the market dynamics of barrel production to analyze how this idea would be implemented, or the impact it may have on prices, to evaluate whether it would result in a more appropriate cheese price. In addition, as is made clear below, this decision finds that surveying two cheese products is no longer an appropriate method for providing orderly marketing in today's marketplace, rendering further discussion of a more proper weighting methodology unnecessary.
What is left to consider is whether 500-lb barrels should remain in the survey. When determining which products are appropriate to be included in surveys, the Order Reform Final Decision is instructive. As described in the decision, “The importance of using minimum prices that are market-clearing for milk used to make cheese and butter/nonfat dry milk cannot be overstated. The prices for milk used in these products must reflect supply and demand and must not exceed a level that would require handlers to pay more for milk than needed to clear the market and make a profit.” 64 FR 16026, 16094 (April 2, 1999). To effectuate that objective, FMMOs use survey prices of market-clearing commodity products.
In the Order Reform decision, both block and barrel cheese were included in the survey to increase the sample size and give a better representation of the cheese market. Since Order Reform was implemented, an evaluation of which products should be included in the cheese survey has occurred twice. In 2000, shortly after implementation of Order Reform, the Department considered both the addition and subtraction of cheese products into the survey, which at that time was administered by the NASS. 65 FR 20094 (April 14, 2000) In 2007, the Department again considered changing the products in the cheese survey, including the removal of 500-lb cheddar cheese barrels. 72 FR 6179 (Feb. 9, 2007) In both proceedings, the Department maintained that inclusion of both 40-lb blocks and 500-lb barrels was representative of the cheese market at the time.
While not contained in the hearing notice of the 2000 proceeding, there was testimony at the hearing for incorporation of other cheeses in addition to cheddar. The idea was denied because “If the survey included other descriptions of cheddar and other types of cheese, such as mozzarella, it would not be possible to consider the reported price as representative of the value of any particular product.” 67 FR 67906, 67926 (Nov. 7, 2002) This reasoning illustrates an important consideration of which products should be contained in the survey; products whose resulting prices are representative of a distinct product.
For all other product pricing formulas (butter, nonfat dry milk, and dry whey), DPMRP only surveys one product. The butter survey collects prices of 80 percent salted Grade AA butter, the NFDM survey collects prices of USDA Extra Grade NFDM, and the dry whey survey collects prices for USDA Extra Grade dry whey. While all three of these products can be in varying bulk packaging sizes as specified in regulation, the product itself is
The same cannot be said of the two cheddar cheese products surveyed. Forty-pound block cheddar cheese is typically colored, and primarily sent for further processing into consumer type packages such as “cut and wrap” and shredded products. Barrel cheese, on the other hand, is typically white (uncolored) and used primarily for processed cheese and cheese-flavored products. The hearing record demonstrates the two products are not interchangeable but rather are produced for two distinctly different uses which have their own supply and demand factors. These fundamental qualities have not significantly changed since Order Reform. At the time of Order Reform, and during the subsequent two rulemakings considering changes to the cheese survey, the prices of blocks and barrels were relatively close, and it was determined the additional volume added with the inclusion of barrels was a benefit to orderly marketing as it ensured a robust survey sample.
Testimony and evidence presented showed the historical price alignment of the two products, estimated at $0.03 per pound, until 2017. Proponents argued the market changed significantly in 2017 when there was a dramatic increase in price volatility both within each product and in the relationship between the two products. To determine statistical validity of that claim, the differences in the monthly average block and barrel prices from 2001-2023 were analyzed to identify breaks in the structure of the block-barrel spread. The analysis found December 2016 to be a statistically significant month, indicating the period between 2001 to 2016 and 2017 to 2023 were statistically different in terms of the block-barrel spread volatility. Historically, prices for blocks and barrels were similarly priced. From 2001-2016, the block-barrel spread averaged $0.01 per pound, while from 2017-2023 the spread significantly increased to $0.115 per pound.
When surveying prices of two products that recently are so divergent, the resulting average cheese price does not represent either of the products surveyed. For example, in October 2020, cheddar block prices averaged $2.5692 per pound and cheddar barrel prices averaged $0.6052 per pound lower at $1.9640 per pound. The weighted average cheese price for October used to compute FMMO component prices was $2.2921, a price reflecting neither of the two survey products. Accordingly, after careful analysis of the record, this decision finds the DPMRP cheese survey should only include 40-lb cheddar cheese blocks. Evidence reveals a clear and statistically significant shift in the cheddar markets occurred in 2017, which witness testimony attributed to a number of market factors including plant investments and increased production of white whey. As a result, inclusion of both blocks and barrels in the cheese survey has resulted in average cheese prices used in FMMO formulas that are not representative of any one cheese product. Therefore, this decision recommends adoption of Proposal 3.
There was significant testimony regarding how cheddar barrel makers would be impacted if 500-lb barrels were no longer surveyed. It was clear there was no industry consensus, not even between barrel makers, on the impact. What is paramount to any rulemaking is to ensure FMMO provisions provide for orderly marketing conditions, as required by the AMAA. The ultimate consideration is which set of bulk, market-clearing, commodity type dairy products provide the most accurate and efficient means of determining the minimum value of milk components. One facet of this is to ensure prices used in the formula best represent the fundamental products selected for their purpose. As described above, that goal is not being met by using both blocks and barrels in the survey.
One concern expressed by some barrel cheese manufacturers is that the Class III price resulting from a block-only calculation would often be too high to ensure a profitable return to barrel cheese makers. Multiple considerations are worth noting. One, there are numerous styles of cheese represented in Class III. Manufacturers of each have no guarantees on their net returns, and, hence, manage their business by taking minimum pricing into account. To that end, there are many steps remaining in this rulemaking process, including publication of a final decision, producer referendum, and if passed, an implementation period. These steps should allow barrel manufacturers ample time to determine if changes are needed in their business practices to adjust to the prices that would result from this recommended price survey. As FMMOs only enforce minimum regulated prices on pooled milk, it should not be overlooked that barrel manufacturers choose whether to pool milk subject to minimum prices.
Currently, FMMOs utilize the monthly average DPMRP survey price of 80 percent salted Grade AA butter in 25-kilogram and 68-pound boxes to determine the butterfat price used in all 4 classified pricing formulas. Proposal 5 seeks to add unsalted butter to the survey. Proponents argue the volume of U.S. butter production captured by the survey has been decreasing, and adding unsalted butter would increase the sample size and yield more robust survey results.
Testimony in opposition to Proposal 5 asserted the production of unsalted butter is mostly manufactured to a particular customer order. Because the lack of salt results in a shorter shelf life, unsalted butter is generally not manufactured unless its sale is imminent. On the other hand, because salted butter can be stored, when milk needs to clear the market and butter manufacturers lack a buyer, they will make salted butter to store and sell later. Opponents also noted unsalted butter is typically exported, often facilitated through premium-assisted sales, rendering those sales unreportable.
The record lacks evidence to support adoption of Proposal 5. Although data was entered showing the amount of unsalted butter graded by the USDA Dairy Grading Program tripled between 2005 and 2022, the USDA butter grading program is voluntary; hence, the data does not give a complete picture of the U.S. butter market. Furthermore, there was no indication regarding what percentage of the graded butter volume would be reportable given testimony noting the structure of the unsalted butter market would likely make a large share of it nonreportable. No data was presented to evaluate whether any additional price information gained through inclusion of unsalted butter would outweigh the burden to both the industry and USDA for its inclusion. In fact, the record demonstrates that unsalted butter is not a market clearing product given its shorter shelf-life and on-demand production.
The record evidence supports salted butter as the market clearing butter product and continuation as the only butter product in the survey. In addition, as discussed in evaluating the cheese survey, having two commodity products surveyed (such as blocks and barrels) can have the unintended consequence of resulting in a component price that does not represent either product produced. As no price information was entered into evidence to evaluate how salted and unsalted butter prices compare, the Department
The Class III and IV formula factors include four distinct elements—manufacturing (make) allowance, butterfat recovery, farm-to-plant shrinkage, and nonfat solids yield.
Make allowances represent the costs of converting raw milk into the four manufactured dairy products surveyed by USDA. The current make allowance levels were determined through a 2007 rulemaking that became effective October 1, 2008, and are as follows ($/per pound): cheese—0.2003; butter—0.1715; NFDM—0.1678; and dry whey—0.1991. The 2007 rulemaking used an average of two surveys: a voluntary, unaudited 2006 nationwide cost survey conducted by the Cornell Program on Dairy Markets and Policy (CPDMP), and a mandatory, audited 2006 cost survey of plants located in California conducted by the CDFA. This proceeding must determine whether manufacturing costs have increased such that a change from the current levels is warranted, and if so, what are appropriate levels.
Four manufacturing cost data sets were entered into the record for consideration in this proceeding. The first was conducted by the University of Wisconsin, on behalf of USDA, and was a voluntary survey of manufacturing plants throughout the U.S. (2021 survey). This survey was similar to the 2006 CPDMP survey used to determine current make allowances, as the primary researcher authored both. The 2021 survey collected cost information provided from manufacturing plants of cheese (10 plants), butter (12 plants), NFDM (27 plants) and dry whey (8 plants). Annual data submitted by plants primarily represented calendar year 2019, and included labor, utilities, non-labor processing, packaging, general and administrative, and return on investment cost categories. The 2021 survey results were presented as total averages, and high and low-cost plant averages.
The 2021 survey methodology was similar to the 2006 study, except for the allocation of non-allocated costs. Some fixed or overhead costs could not be allocated directly. Some costs were inherently direct costs but were not collected in a manner that allowed them to be assigned to a particular processing activity or product. When that occurred in previous studies, unallocated costs were allocated on a solids basis, which testimony revealed to be a common practice, according to some manufacturers. In some facilities making multiple products, such as butter and powder plants, not all plant operators had the infrastructure to allocate costs to the different products. A common example was plant utilities wherein the plant only had a single electric meter. If an operator utilized 70 percent of the solids received at the plant in butter, then 70 percent of the unallocated costs (
In the 2021 survey, the author used what they believed to be a better method for addressing costs the manufacturer could not directly allocate. Unallocated costs were allocated based on an estimation of the degree of processing transformation the raw milk underwent to transform into a manufactured product. On a scale from 1 to 10, products with minimum processing (liquid whey) were assigned a 1, while products with a high degree of transformation (whey protein concentrate) were assigned a 10. The survey author argued this somewhat subjective and ordinal measure of costs could provide a more logical allocation of certain costs that were inarguably not properly attributed through the non-transformation cost allocation method. The most obvious example was the highly energy consuming process of drying for NFDM powders. For example, operating a milk dryer requires significant energy, resulting in an assumption that it was more appropriate for a higher percentage of the plant's energy costs to be attributed to its powder production.
A second data set was a survey conducted by the same author, administered on behalf of IDFA, seeking to capture more current costs and increase the number of respondents. This survey, referred to as the 2023 survey, was similar to the 2021 survey except for two elements. First, the plants that voluntarily submitted data were different in number and type: 18 cheese, 13 butter, 15 NFDM, and 9 dry whey plants participated. The survey author explained that while the number of participating plants were similar for butter and whey across both surveys, the structure of the plants was noticeably different. Consequently, most of the variability in average costs between the 2021 and 2023 surveys is attributed to the plant sample, rather than actual cost increases over time. For example, the 2021 butter plants surveyed tended to be larger than the 2023 butter plants surveyed, accounting for a significant portion of the cost difference between the two surveys. Some witnesses at hearing also noted the 2023 survey captured 2022 costs, a time of historically high inflation which has since moderated.
The second notable difference was the 2023 survey used the non-transformation methodology of allocating unallocated costs on a solids basis. The survey author indicated mixed industry feedback on the transformation allocation methodology used in the 2021 survey, as many participants stated allocating costs on a solids basis is standard practice. To facilitate comparison of the two surveys the author also presented updated 2021 survey results using the non-transformation allocation methodology.
In support of a separate data set, mandatory and audited 2004-2016 California manufacturing cost survey results, conducted by the CDFA, were entered. These surveys formed the historical data used to forecast current costs in the CA Forecast described below. The 2006 CDFA study was used by USDA when determining the current FMMO make allowances.
The fourth data set, entered on behalf of IDFA, was a result of a statistical model that used data from the 2004-2016 California manufacturing cost surveys and other known input prices and productivity data (for example, the producer price index) to project future California manufacturing costs, referred to hereinafter as the CA Forecast. The study author testified the model predictions were a better estimate of costs than a simple trend analysis since they accounted for the impacts of other factors, such as accelerating inflation, that are known to describe changes in manufacturing costs in California. Unlike the 2021 and 2023 surveys which evaluated six cost categories (processing labor, utilities, packaging, non-labor or utilities processing, general and administrative, and return on investment), the CA Forecast only estimated three cost categories (labor, utility, and other). Other costs were defined as the remaining costs after labor and utility costs were deducted. Inasmuch as the CDFA results were used by USDA when previously amending make allowances, proponents argued this statistical estimation of what CA manufacturing costs might have been for 2022 would be a helpful indicator to validate other manufacturing cost data entered into the record.
These data sets were the basis of the manufacturing allowance levels proposed by stakeholders at the hearing. Two sets of make allowance levels were offered ($/pound):
NMPF asserted that their proposed levels take a balanced approach between recognizing increased manufacturing costs and the impact to producers if there is a significant increase from current levels. They testified that while they evaluated the 2021 survey when developing their proposal, the levels they ultimately proposed were a consensus judgment of all NMPF members. By their own description, the proposal is not intended to reflect the entirety of current manufacturing costs. NMPF witnesses argued that their proposal would update make allowances to be a closer reflection of manufacturing costs, but further increases could not be justified because of the potential impact to producers. They argued that until a mandatory cost survey can be conducted to provide assurances of accuracy in the calculation of manufacturing costs, any increases larger than they proposed would reduce producer revenue, lower already slim (if any) margins, and negatively impact the availability of adequate supplies of milk for fluid use. They considered such consequences disorderly.
NMPF stressed current make allowances are too low and have resulted in cooperative reblending as a method of sharing losses among cooperative members who own manufacturing plants. NMPF witnesses also testified to receiving reduced premiums from manufacturing plant customers as they attempt to recoup costs not covered by the current make allowance levels. Reduced and/or deferred plant investment caused by inadequate make allowances was also a theme discussed by many witnesses. Cooperative witnesses spoke of the disproportionate burden on cooperatives with balancing plants, which inherently have higher manufacturing costs as they do not operate continuously at full capacity because of the market-wide balancing role they necessarily assume.
NMPF cooperative witnesses and dairy farmer members presented evidence on increasing farm production costs and slim farm margins. They opined that the impact to producers should be considered when determining appropriate make allowance levels.
WCMA and IDFA offered separate, but identical proposals. Their proposed make allowance levels were derived from the average of the 2023 study and the CA Forecast, plus a $0.0015 marketing cost factor. The proposals contained a 4-year implementation schedule with 50 percent of the increase implemented in year 1 and the remaining 50 percent implemented evenly across the next 3 years. Proponents offered a phased implementation schedule in recognition of the impact that sudden, large increases in make allowances would have on producer revenue.
WCMA and IDFA witnesses asserted there are limits to a manufacturing handler's ability to lower costs through efficiencies. As make allowances have not been increased in over 15 years, the witnesses stated plants have reached the limit on capturing cost efficiencies, and inadequate make allowances are now impacting innovation and capital investments. Manufacturing handlers testified their costs of manufacturing have increased and are in line with the 2021 and 2023 survey results. As a consequence of inadequate make allowances, the witnesses said classified prices are overvaluing raw milk. To substantiate the claim, witnesses compared producer mailbox prices with FMMO blend prices. In regions where mailbox prices (which contain premiums and deductions reflecting reblending) are below blend prices, the witnesses asserted regulated prices are too high, as manufacturers have lowered market premiums to make up for high manufacturing costs.
The record clearly demonstrates that make allowance levels are not reflective of the costs manufacturers incur in processing raw milk into the finished bulk products of cheese, butter, NFDM, and dry whey. This was one of the only facts to which all participating parties agreed and offered evidence in support, as discussed above. However, there were divergent views on what should constitute adequate make allowance values going forward.
Since 2000, when product pricing was adopted, FMMO decisions have consistently relied on surveys of observed manufacturing costs to determine proper make allowance levels. Previous make allowances have been derived in whole, or in combination with, surveys conducted by CPDMP, CDFA, and the USDA Rural Business Cooperative Service. The importance of relying on actual, observed costs cannot be overstated. FMMO price formulas determine the classified prices handlers pay to dairy farmers. It is important that all variables reflect actual market conditions.
While the use of modeling is helpful for policy analysis, the evidentiary record of this proceeding contains adequate observed market data to determine make allowance levels without the need to rely on model assumptions. Modeling involves a host of assumptions made by the modeler, as was described by the CA Forecast author, which result in estimates with a wide confidence interval. In other words, cost estimates could have a wide range of possible values consistent with the model. The confidence interval for the cost estimates widens when some indexes used to forecast are not specific to dairy manufacturing. Economic modeling was considered and rejected during Order Reform as a replacement for the Basic Formula Price. This decision affirms the Department's long-held position that this type of modeling, requiring extensive assumptions, is not an appropriate methodology for determining make allowances when superior information is available. As it is common for participants to not reveal confidential information such as manufacturing costs, the cost surveys contained in evidence provide the best available information on observed costs for this proceeding. Accordingly, this decision does not find justification for
In opposition to Proposals 8 and 9, cooperatives and dairy farmer members offered substantial testimony regarding the potential impact to dairy farmers should make allowances be significantly increased. Accordingly, they recommend adoption of the NMPF proposal as it attempts to temper the impact to producers.
FMMOs are designed to provide for orderly marketing through classified prices paid by handlers and marketwide pooling to determine average minimum blend prices paid to producers. As FMMO formulas are market-oriented, the product prices that drive classified prices are chosen to reflect current supply and demand conditions. This was last reiterated by the Department in 2013, writing “when the supply of milk is insufficient to meet the demand for Class III and Class IV products, the prices for these products increase as do regulated minimum milk prices paid to dairy farmers; because the milk is more valuable and the greater value is captured in the pricing formulas.” 78 FR 9248 (Feb. 7, 2013). Further, the Secretary is expressly authorized in the AMAA to set prices to reflect “. . . the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk or its products. . . .” 7 U.S.C. 608c(18). This concept was discussed and validated by a Federal court and is relevant to this proceeding.
Accordingly, record evidence does not support adoption of Proposal 7, whose make allowances levels are not reflective of observed costs provided in evidence and is designed to dampen the impact to producers.
A vast majority of hearing participants supported a USDA-administered, mandatory, and audited survey as the most appropriate method for obtaining observed cost data to determine make allowance levels. Some witnesses asserted make allowances should not be changed until such a survey is administered and results published. Conducting such a survey is not currently authorized by law. The lack of a mandatory survey has not been reason to delay two previous updates to make allowance levels, and its continued lack of existence now is not a reason for delaying such an update in this proceeding. As discussed, the record of this proceeding clearly demonstrates manufacturing costs have increased since make allowance levels were last changed. Given the body of evidence, this decision finds it appropriate to increase make allowances to ensure the price formulas better reflect manufacturing costs and provide for more orderly marketing conditions.
The record reveals the voluntary, unaudited nature of the 2021 and 2023 surveys are met with reluctance by some stakeholders, particularly the producer community. Questions regarding plant sampling, cost allocation methodology, and capturing of a high-cost time period expressed on the record are legitimate considerations. Issues with the results of voluntary, unaudited surveys are not new to the process of determining make allowances. Similar situations occurred in both the 2006 and 2007 rulemakings. In both instances, make allowances were determined by using parts of different survey results. The record of this proceeding supports the same considerations.
What remains for this recommended decision to determine are proper make allowance levels given the survey data contained in evidence: the 2021 survey; the 2023 survey; and the 2016 CA survey. The record does not support consideration of the 2021 survey results that relied on the transformation cost allocation method for allocating unallocated costs. Hearing participants expressed skepticism of this method as it is standard industry practice to allocate costs on a solids basis. Although the study author explained how the transformation numbers were assigned to products, the record does not contain sufficient evidence to validate the new methodology. Whether or not the transformation methodology is theoretically more accurate is not relevant. What is germane is that manufacturers allocate costs, manage their plants, and make marketing and pricing decisions in accordance with the traditional method of allocating fixed and unallocated costs on a pro-rata basis of milk solids in the final products. Accordingly, the 2021 survey results utilizing this methodology were not considered when determining the levels recommended in this decision. The revised 2021 and 2023 surveys, using non-transformed survey results, and the 2016 CA survey results were used in determining the make allowances recommended in this decision. Relying on a combination of these survey results provides a consensus set of data to determine appropriate make allowance levels and is superior to relying only on one survey.
This decision recommends a $0.2504 per pound cheese make allowance, derived from the average of the 2021 and 2023 non-transformed survey results. The 2023 survey incorporates a representative sample size, accounting for 55.6 percent of NASS cheddar cheese production. The record indicates the 2023 survey, which collected cost data primarily from 2022, covered a period of relatively high inflation and rising input costs. An example is packaging costs—lumber and corrugated materials—which testimony indicates have receded since peaking in 2022. Absent any other data on the record, this decision finds it appropriate to utilize an average of the 2023 and 2021 non-transformed survey results to ensure the recommended cheese make allowance is not disproportionately affected by higher 2022 costs that have since moderated. The decision finds use of the 2021 and 2023 surveys provides a manufacturing allowance reflective of the national cheddar cheese market. In 2022, California cheddar cheese production represented approximately 6.9 percent of reported NASS cheddar cheese production. As incorporation of the 2016 CA survey would result in an over representation of California cheese
This decision recommends a $0.2257 per pound butter make allowance, derived from the average of the 2021 and 2023 non-transformed survey results. While the 2021 and 2023 surveys had roughly the same number of reporting plants and represented roughly the same volume of NASS U.S. butter production (approximately 80-82 percent), the plant samples differed significantly. The study author claimed sampling was the main driver for the notably different survey results. The 2023 survey captured data from both smaller and larger plants while the 2021 survey consisted of a more homogenous sample of larger and more efficient plants. The record indicates the 2023 survey, which collected cost data primarily from 2022, covered a period of relatively high inflation and rising input costs. According to the Producer Price Index for All Commodities (PPI), published by the Bureau of Labor Statistics, prices have moderated since their June 2022 peak. Thus, this decision finds it appropriate to average the 2023 and 2021 non-transformed surveys to ensure the recommended butter make allowance is not disproportionately affected by higher 2022 input costs that have since moderated and account for the differences in plant sampling. The decision finds use of the 2021 and 2023 surveys provides a manufacturing allowance reflective of the national butter market, as both surveys represent over 80 percent of 2022 NASS butter production volumes. This decision does not support incorporating the 2016 CA survey in the calculation as it would overrepresent California butter manufacturing costs.
This decision recommends a $0.2268 per pound NFDM make allowance, derived from the average of the 2021 non-transformed survey and 2016 CDFA cost of processing survey results. In 2022, California represented 43.7 percent of U.S. NFDM production. This supports hearing testimony describing the importance of California manufacturing facilities in the total U.S. production of NFDM powder. Therefore, this decision finds it appropriate to place more emphasis on California NFDM plant costs considering the dominant share of NFDM production by California plants. As 2016 was the last CDFA study published, and it contains audited data, unlike the 2021 and 2023 surveys, it is appropriate to use as one of the surveys to determine the recommended average make allowance. As stated previously, given all the cost surveys contained in the evidentiary record have shortcomings, this decision finds it appropriate to use an average of two surveys when recommending make allowances. Regarding a NFDM make allowance, what remains is consideration of either the 2021 or 2023 survey. In the 2023 survey, significantly fewer plants participated and record evidence suggests at least one large NFDM manufacturer did not participate. The record reveals the 2021 survey to be a better representation of plants producing NFDM in the U.S. than the 2023 survey. Additionally, as NFDM production is heavily energy dependent, the 2023 survey captured the historically high energy costs, particularly natural gas, that have since moderated. Utilizing the 2021 survey figures moderates the influence of the high inflationary period experienced in 2022, particularly for energy and utilities.
This decision recommends a $0.2653 per pound dry whey make allowance, derived from the 2021 non-transformed survey and 2023 non-transformed low-cost survey result. Similar to NFDM, dry whey production is heavily energy dependent, and the same concerns regarding the 2023 survey results exist for dry whey. The record reflects incrementally higher drying costs are incurred when drying whey compared to NFDM due to the higher moisture content in whey. Natural gas prices increased substantially between 2019 and 2022. The Henry Hub Natural Gas Spot Price increased 153 percent between 2019 and 2022. However, prices declined in 2023, with the spot
The record does not support inclusion of a $0.0015 per pound marketing cost for any of the four make allowances. While supported by a few participants in both testimony and post-hearing briefs, no data was provided to validate $0.0015 as an appropriate estimation of marketing costs.
The make allowances recommended in this decision are more representative of manufacturing costs than current make allowances, which were last changed in 2008. Record evidence clearly supports updates; however, as previously mentioned, each of the surveys of observed costs has weaknesses. The recommended make allowance levels are the best approximation of manufacturing costs given publicly available data and evidence contained in this proceeding's record. In accordance with long-standing practice, this decision does not recommend delaying the implementation of make allowances determined to best reflect current conditions. Should these make allowances be approved by producers, they would be implemented through the publication of a final rule.
Currently, the Class III formulas contain a 90-percent butterfat recovery assumption. This represents the percentage of butterfat in raw milk that can be recovered during the cheesemaking process, recognizing that for both theoretical and practical reasons, 100% of utilization of butterfat (or any other raw milk component) in the production of a dairy product is impossible. Proposal 10 seeks to increase the butterfat recovery assumption to 93 percent. Proponents claimed modern cheesemaking equipment and better cheese handling techniques make a higher butterfat recovery not only attainable, but common in practice.
Opponents mainly consisted of manufacturers asserting that while some cheese plants attain butterfat recovery percentages in excess of 90 percent, yield assumptions that increase producer revenue, such as butterfat recovery, should not be amended outside a comprehensive review of all assumptions that determine yield factors. Multiple opponents mentioned the overvaluation of whey cream as an example of a potential issue.
This rulemaking proceeding sought to consider changes to the FMMO pricing formulas. Industry participants were invited to submit proposals concerning the current pricing provisions of the FMMOs. Those opposing changes to the butterfat recovery percentage had an opportunity to submit proposals on any of the yield factors, as they fall within the provisions of the pricing formulas. None, other than those submitted by Select, were received. This decision does not find it appropriate to deny consideration of any yield related proposal presented in this proceeding on the basis of a potential future evaluation of all yield factors.
The record contains testimony from several expert witnesses explaining the cheesemaking process and use of more modern cheese equipment and technology, including improvements in coagulants and curd handling, allowing handlers the ability to capture a larger percentage of butterfat in cheese. As butterfat recovery numbers are considered confidential information, the record does not contain a well-developed picture of recovery levels in U.S. cheese plants. The record indicates the age of equipment and technology used in cheese plants varies widely. While evidence was submitted describing high butterfat retention rates that are achievable using new equipment, it does not demonstrate those rates are reflective of the general industry conditions. Other than a few new, very modern plants, the record does not support a 93 percent butterfat recovery factor as attainable by most cheese plants.
The record contains considerable testimony estimating current butterfat recovery rates in the universe of cheese plants with varying ages of equipment and technology. Expert witnesses estimated butterfat recovery in cheddar plants ranged from 88 to 93 percent, attributing much of the difference to cheddar vat equipment. It is important that the product price formulas reflect current, not theoretical, conditions for the general population of plants. Experts generally offered that most commodity cheddar cheese plants can obtain greater than 90 percent recovery, but few obtain 93 percent, with a 91 percent butterfat recovery rate considered the industry average. Accordingly, this decision recommends a 91 percent butterfat recovery rate. Such an increase necessitates a change to the butterfat yield factor in cheese from 1.572 to 1.589.
Currently, the FMMO formulas assume a farm-to-plant shrinkage factor of 0.25 percent. This represents normal milk losses that occur when milk is delivered from the farm to a plant. Under the FMMO system, most handlers purchase milk from producers based on farm weights and tests. The shrinkage factor recognizes that when milk is pumped from a farm bulk tank to a milk tanker, and then from milk tanker to the plant silo, milk sticks to the sides of the pipes and tanks. Milk can also be lost in the milk hauling process when milk haulers must make multiple farm stops to fill a load. As a result, plants often physically receive less milk than was measured at the farm. In recognition of this reality, the yields are slightly reduced to reflect the amount of milk actually available to make a product, as compared to the amount of milk picked up on farms.
The proponents asserted that producers shipping full tanker loads is common in the Southwest where they operate. They testified to and provided cooperative data regarding the steps they have taken to reduce shrinkage. Proponents said increased average farm size results in fewer stops by the milk hauler to fill up a load, thus lowering overall shrinkage. They opined shrinkage should no longer be a reality for farms as losses can be managed on any size farm through adoption of farm scales, flow measurements, and other technologies to improve accuracy.
Opponents argued only a small percentage of dairy farms are able to produce enough milk to fill an entire tanker load. While the number of large farms has grown, opponents testified removing the shrinkage factor could further incentivize manufacturers to prefer large over small farms. Consequently, they opined the farm-to-plant shrinkage factor should remain.
Record evidence reveals most dairy farms are unable to fill a tanker load per day. According to the NASS, daily milk production per cow averaged 66.5 pounds in 2022. Assuming an average tanker load of milk is approximately 48,000 pounds, it would require a milking herd of 722 cows to fill a tanker. In 2022, of the 24,470 U.S. dairy farms
For the approximately 90 percent of farms that are not able to ship full tanker loads of milk, the record indicates farm-to-plant losses remain a reality for most producers and cooperatives operating within the FMMO system. As most handlers pay producers based on farm weights and tests, it remains appropriate to provide recognition in the formulas for milk solids paid for but not physically received at the handler's facility. Accordingly, Proposal 10 is not recommended for adoption.
Currently, the FMMO Class IV price formula contains a NFDM yield factor of 0.99, representing the pounds of NFDM that can be made from one pound of nonfat solids of raw milk delivered from the farm. This factor is less than 1.0, as it recognizes both farm-to-plant shrinkage and the portion of nonfat solids utilized in NFDM.
Select offered Proposal 12 to adjust the NFDM yield factor to account for both the NFDM and buttermilk powder that can be manufactured from the same pound of nonfat solids, and proposed an NFDM yield factor of 1.02. Proponents claim producers are not compensated for nonfat solids that end up in buttermilk powder since such production is not accounted for in the yield factor.
A review of previous rulemakings reveals numerous changes to the NFDM yield factor both during and since Order Reform. The Order Reform recommended decision contained a nonfat solids yield factor of 0.96 as a divisor (equivalent to a 1.04 multiplier) in the nonfat solids price equation. It represented the percent of nonfat solids in a pound of NFDM. In other words, if a NFDM plant had 1 pound of nonfat solids, it could make 1.04 pounds of NFDM due to the moisture content in the final product. The factor was changed in the Order Reform final decision to 1.02 (equivalent to a 0.98 multiplier) as stakeholders commented it should represent both the NFDM and buttermilk powder that could be produced from one pound of nonfat solids.
The nonfat solids yield factor was again considered in a 2000 rulemaking. Initially, the factor was amended to 1.00. 65 FR 82832 (Dec. 28, 2000). During that proceeding, stakeholders argued the yield factor should reflect that more than one pound of NFDM can be manufactured from one pound of nonfat solids, resulting in a divisor less than one, or a multiplier greater than one. Evidence from that proceeding was used to demonstrate a calculation using only the NFDM price, NFDM make allowance, and a multiplier of 1.00 would be equivalent to a more complex formula attempting to combine the NFDM and buttermilk net prices using corresponding yield factors.
The final decision in the 2000 rulemaking changed all yield factors, including the nonfat solids yield, from divisors to multipliers. 67 FR 67906 (Nov. 7, 2002). Keeping in line with only reflecting the nonfat solids used in NFDM, the nonfat solids yield multiplier changed from 1.0 to 0.99, with the incorporation of a farm-to-plant shrinkage factor of 0.25 percent. As calculated, for 1 pound of nonfat solids leaving the farm, 0.9975 pounds entered the plant (1.00−0.0025 = 0.9975). Subtracting an estimated 0.0479 pounds of nonfat solids ending up in buttermilk powder left 0.9496 pounds of nonfat solids in NFDM (0.9975−0.0479 = 0.9496). It was assumed NFDM is 96.2 percent nonfat solids, resulting in a NFDM yield factor calculation of 0.9496/0.962 = 0.9871, which was rounded to 0.99. The final decision made clear the 0.99 should be considered a NFDM yield factor, no longer a nonfat solids yield factor as was the case when Order Reform was implemented.
Proposal 12 requests buttermilk powder again be incorporated into the NFDM yield. Proponents testified that without accounting for buttermilk powder, producers are not compensated for all the nonfat solids they sell to a Class IV manufacturer. Record evidence does not support such a claim. Class IV manufacturers are required to pay the nonfat solids price for pooled milk purchased, regardless of whether those nonfat solids end up in NFDM, butter, buttermilk powder, or any other Class IV product. The same can be said for other classified products whose component prices are computed similarly, even if there are numerous products in the category. For example, the other solids price is determined through a survey of dry whey prices and a dry whey make allowance. Manufacturers pay the other solids price even if they are making other products in the category, such as whey protein concentrate or whey protein isolate.
Additionally, while the rulemaking history of the NFDM and nonfat solids yield factors is complex, evidence does not support that attempting to reflect two products (buttermilk powder and NFDM) in the NFDM yield would provide for more orderly marketing conditions. Recommendations are made throughout this recommended decision attempting to simplify, where possible, an already complex set of pricing formulas. As such, this decision finds it appropriate to maintain the current NFDM yield factor that only reflects one product. Accordingly, Proposal 12 is not recommended for adoption.
Currently, the base Class I skim milk price, also referred to as the “Class I mover” or “mover,” is the simple average of the monthly advanced Class III and Class IV skim milk pricing factors, plus an adjuster of $0.74 per cwt. This formula was implemented under the 2018 Farm Bill, which amended the AMAA to revise the provisions related to determining the monthly Class I skim milk price. Public Law 115-334, 132 Stat. 4490 § 1403. Congress exempted this amendment from the formal rulemaking process, and USDA implemented the change through a final rule. The formula has been in effect for milk marketed on and after May 1, 2019. 84 FR 8590 (March 11, 2019). Prior to the change, the base Class I skim milk price was the higher of the advanced Class III or Class IV skim milk prices (the “higher-of”), announced on or before the 23rd of the prior month. The higher-of formula had been in effect since January 1, 2000.
Industry stakeholders offered six proposals to amend the Class I mover. Proposal 13 would return to the previous higher-of Class I mover. NMPF explained the change to the average-of was supported at the time by both NMPF and IDFA, as it was intended to be revenue neutral for producers and provide Class I processors the ability to utilize hedging for risk management.
IDFA and MIG proposed maintaining the average-of mover but recommended different calculations for the adjuster. Proposal 14, offered by IDFA, incorporates an adjuster that resets every January and would be the higher of either: (1) $0.74; or (2) the 24-month average difference between the higher-of and the average-of the advanced Class III and Class IV skim milk pricing factors. The 24-month calculation would run from August of three years prior to July of the previous year. For example: the 2024 adjuster would have been calculated by subtracting the average of the advanced Class III and IV skim pricing factors from the higher of the advanced Class III or Class IV skim pricing factor for each month of August 2021 through July 2023, then averaging the differences of the 24 months. The result for the August 2021 to July 2023
Proposal 15, offered by MIG, incorporates a monthly rolling average adjuster calculated as the difference between the higher-of and the average-of, for 24 months, with a 12-month lag. For example, the adjuster for January 2024 would have been $1.01 per cwt, calculated from the 24-month average difference of the higher of the advanced Class III or Class IV skim pricing factor less the average of the advanced Class III and IV skim pricing factors from January 2021 to December 2022. The January 2024 advanced Class III skim pricing factor was $5.74 per cwt and advanced Class IV skim pricing factor was $9.25 per cwt, resulting in an average of $7.50 per cwt. The average-of, with the addition of the adjuster, would result in a January 2024 base Class I skim milk price of $8.51 per cwt ($7.50 + $1.01) under Proposal 15.
Edge offered Proposals 16 and 17. The Class I mover in Proposal 16 would be the announced Class III skim milk price, plus an adjuster reflecting the 36-month average of the difference between the higher-of the advanced
The AFBF offered Proposal 18, which is nearly identical to Proposal 17. Both Edge and the AFBF stressed the importance of eliminating advanced pricing as a means for limiting price inversions that result in significant volumes of milk not pooled.
NMPF presented testimony describing how the 2019 mover change was not revenue neutral, which is why they seek a return to the higher-of. NMPF and dairy farmers described volatile markets in response to the COVID-19 pandemic. Even as the COVID-19 pandemic has ended, prices have remained volatile, and stakeholders opined they expect volatility to continue. NMPF witnesses asserted that because of the current formula and volatile markets, there is no way for the impact to dairy farmers to be revenue neutral in the long term.
According to NMPF, an unanticipated consequence of the average-of mover is the asymmetric risk borne by dairy farmers. NMPF explained the static nature of the $0.74 adjuster means that dairy farmers only benefit from the average-of when the difference between the advanced Class III and Class IV skim milk prices is less than $1.48. When the difference is greater, producers are paid less, sometimes significantly less, than they would have been under the higher-of mover. During the 50-month period from May 2019-June 2023, the average-of mover was lower than the higher-of in 27 months. NMPF asserted when the average-of exceeded the higher-of, it did so by no more than $0.74, regardless of the magnitude of the difference between Class III and Class IV skim milk prices. However, when the average-of was lower than the higher-of, the reduction could be significantly more than $0.74. NMPF cited October 2022 as an example. At that time, the average-of was lower than the higher-of by $2.08. According to NMPF, from May 2019 to August 2023, producers were paid $998.3 million less than they would have if the higher-of mover had been in place.
Both IDFA and MIG asserted their adjusters would result in revenue neutrality to producers over time because of regular updates to better reflect current market conditions, whereas the current static $0.74 adjuster reflects market conditions from 2000-2018. IDFA further claimed the $0.74 floor contained in Proposal 14 ensures producers would receive Class I skim milk prices at least equating to what they receive under the current formula. MIG opined a rolling average adjuster would provide better dynamic market signals while also stabilizing prices through more gradual monthly changes.
In justifying these methods to continue an average-of mover, IDFA and MIG witnesses stressed the importance of maintaining the ability for Class I processors to hedge their future prices. The use of an average-of mover would allow them to continue to spread risk by taking equal positions in the Class III and Class IV futures and options markets. IDFA and MIG maintained hedging is a critical tool for certain processors, particularly ESL, to remain competitive with alternative beverages, such as bottled water, juice, and milk alternatives that do not face the same regulatory pricing framework as fluid milk. The ability to lock in a future price makes their cost known and allows a longer price horizon. They further asserted promoting and growing the sale of milk is a goal of the AMAA, which can be achieved using hedging. Both proponents explained a processor's ability to hedge is not negatively impacted by the adjuster calculation (whether monthly or annually), so long as it is announced well in advance. IDFA was amenable to either adjuster calculation, so long as the average-of mover is maintained.
Proponents of maintaining an average-of mover argued Congress amended the AMAA to facilitate risk management for Class I, and as it directed the Department to adopt the average-of mover, the Department must now continue that policy and refrain from taking action that would inhibit risk management. However, in the 2018 Farm Bill, Congress stipulated the average-of mover must be maintained for a period of not less than two years, at which time the formula could be modified through the standard FMMO amendment process. Congress did not direct that risk management consideration must be maintained beyond the two years following implementation of the 2018 Farm Bill.
To evaluate the NMPF claim regarding asymmetric risk, AMS analyzed May 2019-December 2023 prices (56 months). The analysis found the current average-of mover to be greater than the higher-of mover in 23 months, resulting in $334 million in additional revenue paid to producers in those months. The two movers were equal in 2 months, and in the remaining 31 months, the average-of mover was less than the higher-of mover, resulting in $1.4 billion less in revenue paid to producers in those months than would have been without the mover change. The net result to dairy farmers during those 56 months was negative $1.066 billion. Further, in months when the
The record reveals the $0.74 static adjuster was adopted because, at the time, it represented the additional value paid to producers through the higher-of versus what would have been the average-of mover from 2000-2017. Evidence shows $0.74 is no longer representative of the additional higher-of value to producers as Class III and IV prices have become significantly more divergent in recent years. A comparison of advanced Class III skim and Class IV skim milk prices from January 2000-April 2019 and from May 2019-December 2023 illustrates the increased volatility. From January 2000-April 2019, when the Class I skim milk price was determined by the higher-of mover, the monthly difference in advanced prices ranged from $0 to $6.77. From May 2019 through December 2023, the range was $0 to $11.86, equating to an increase of slightly more than 75 percent.
Testimony described rapidly changing Class III and IV prices resulting not only in months when the Class I mover was significantly lower than it would have been under the higher-of formula, but times when the Class I price (announced before the month) was less than the Class III and/or Class IV price (announced after the month). As handlers have the option to pool Class III and Class IV milk, this price inversion led to many months when the higher-valued manufacturing milk was not pooled. Testimony on the record described several consequences: (1) manufacturing handlers opted out of pool participation, keeping the higher market revenue instead of sharing it with all pooled producers; (2) instances when a manufacturing handler opted out of pool participation, and the historically high market revenue was not shared with their own producer suppliers; and (3) significant disparity in payments to pooled and nonpooled producers in some months.
Testimony detailed the conditions in 2020 when the demand for cheese relative to butter rapidly widened the spread between Class III and Class IV Prices. For example, the base Class I skim milk price for June 2020 (announced May 20, 2020) was $7.08 (based on an $6.68 advanced Class III skim milk price and an $5.99 advanced Class IV skim milk price). Cheese prices rose rapidly during the month, resulting in a $15.06 Class III skim milk price and $6.62 Class IV skim milk price. According to record evidence, high volumes of Class III milk were not pooled in order to avoid paying the higher valued Class III price into the marketwide pool.
Record data reveals a significant increase in the estimated volume of milk not pooled in 2020 and 2021, which NMPF attributed to price volatility. Data shows milk volumes not pooled in 2020 and 2021 were approximately 60 percent greater than in 2019. Testimony and evidence pointed to pronounced price volatility being considered the norm, not the exception, going forward.
Record evidence also shows how the lower average-of mover value resulted in muted blend prices in some regions of the county, making it difficult to attract milk supplies for fluid use. This was particularly a concern in the southeastern FMMOs which experienced a disproportionate reduction in blend prices relative to other FMMOs because of their high Class I utilization. Testimony described how blend prices between the Southeast FMMO and nearby orders narrowed, making it difficult to attract supplemental milk to meet the fluid demand in the milk deficit region.
During Order Reform, the Department considered numerous options for determining Class I prices as it evaluated an appropriate Class I pricing system. In the Order Reform recommended decision, several variations of an average mover were considered, including a moving average and a declining average weighted most heavily by the current month's price, along with a higher-of option based on the second preceding month's prices. When considering its recommendation, the Department evaluated each option's ability to improve price stability while maintaining appropriate producer price signals to ensure an adequate supply of milk for fluid use.
The Department initially recommended a 6-month declining average of the higher-of the Class III and Class IV skim milk prices. The goal was to “decrease monthly Class I price volatility while minimally affecting the long-run price.” 63 FR 4802, 4886 (Jan. 30, 1998). Analysis of that option compared to the higher-of option showed only a two-cent difference based on data from 1992-1997, thus supporting the notion an average-of price would not impact prices in the long run. Public comments in response to the recommended decision cautioned the Class I price should be closely and directly linked to manufacturing prices. Commenters opposed a six-month declining average because it would delay the linkage with the Class I price, resulting in counter-cyclical pricing—something noted in the final decision, which stated that, for example, if Class I prices are undervalued, “it reduces producers' pay prices at a time when the producers should be receiving a positive price signal.” 64 FR 16026, 16102 (Apr. 2, 1999). Analysis conducted for the Order Reform final decision evaluated prices post-1998 and found using a 6-month average mover during times of increased price volatility would have led to price inversions. The decision explained how price inversions could lead to depooling under which disorderly marketing conditions may arise. As a result, the final decision also articulated, on the same page as the most recently noted quotation, “because handlers compete for the same milk for different uses, Class I prices should exceed Class III and Class IV prices to assure an adequate supply of milk for fluid use.” Accordingly, the final decision recommended the higher-of mover which remained in place until May 2019.
Record evidence clearly shows that the price inversions and depooling predicted in the Order Reform final decision occurred after the average-of mover was implemented in 2019. The principle of maintaining a proper link between Class I and manufacturing prices to avoid price inversions and depooling remains an important consideration in evaluating change to the Class I mover in this rulemaking.
Proponents offering modifications to the average-of mover acknowledge price inversions and depooling have occurred with greater frequency and duration. However, they maintain hedging is a critical risk management tool that should be preserved and cannot be achieved using the higher-of mover. Record evidence highlights that although both HTST and ESL are fluid milk products, there are notable differences between HTST and ESL processing and sales. ESL products require unique processing techniques and packaging that significantly increase product shelf-life. The record indicates ESL products have a shelf-life of at least 65 days; some ESL processors stated their products have a shelf-life of 120 days or more.
ESL processors described marketing differences between the two types of products. ESL products: (1) have a longer shelf-life which facilitates a wider distribution; (2) are typically
ESL processors explained the average-of mover has enabled them to meet customer demand for long-term price-fixed contracts by using the futures and options market to hedge the risk associated with changes in monthly FMMO Class I prices. They credit the ability to manage risk as a factor in the growth of ESL products. Before adoption of the average-of mover, processors of ESL products took on a significant amount of price risk to meet the long-term, fixed price contracts required by customers because they had no way of knowing when they negotiated contracts whether the advanced Class III or Class IV price would become the base Class I skim milk price. The record contains no similar evidence that HTST processors face the same constraints. In fact, record evidence shows advanced Class I pricing with monthly sales negotiations was, and remains, standard practice for these products.
Given all the record evidence, this decision must determine the best method for determining Class I skim milk prices that ensure adequate fluid milk supplies and orderly marketing conditions. The earlier discussion of record evidence clearly highlights the disorderly marketing conditions that occurred as a result of the average-of mover. However, when considering how to provide for more orderly marketing conditions, this decision cannot ignore how the Class I market has evolved since 2000.
Prior to FMMO Reform, fluid milk products were almost exclusively HTST, which have a shorter shelf-life and move from farm to retail in a relatively short time. Advanced pricing ensures equity among fluid milk handlers, allowing them to know their regulated minimum raw milk cost at the time they negotiate prices with their buyers and ensure equal raw milk cost between similarly situated handlers.
The record reflects significant development and growth of ESL products since Order Reform. The record also highlights marketing ESL products is significantly different than HTST products. Evidence shows the different distribution pattern (
FMMOs are tasked with ensuring minimum prices reflect supply and demand conditions, which is accomplished, in part, through weekly surveys of wholesale bulk commodity products. Weekly survey prices provide signals to market participants on the changing value relationships between dairy product markets. FMMOs do not control those market-based relationships. As monthly average prices are determinants of Class III and IV prices, it is expected there will be periods when Class III values will be higher, and other times when Class IV values will be higher. Under a monthly pricing system that allows for voluntary pooling of manufactured milk and advanced Class I pricing, there will be occasions when these value differences are large enough to have price inversions and/or incentivize handlers to not pool milk during a particular month. The record clearly shows such situations occurred prior to May 2019. However, record data highlights the shift in duration and magnitude of these occurrences since the average-of mover was adopted. The record reveals large and prolonged value differences can cause significant differences in pay prices between producers and reduced willingness to supply the Class I market. The record of this proceeding supports returning to the higher-of Class I mover for HTST products. The higher-of would provide a better link between Class I and manufacturing prices and better ensure Class I prices remain the highest to bring forth an adequate supply of fluid milk. Therefore, this decision recommends adoption of Proposal 13 for HTST fluid milk products.
Returning to the higher-of mover for ESL products would deepen the pricing inequity that naturally exists for those products, as described earlier. For example, under the higher-of mover, a handler processing and selling an ESL product in January 2023 would have faced a base Class I skim milk price of $11.62 per cwt. However, handlers who processed ESL products two or four months before, which are also being sold in January 2023, would have faced a base Class I skim milk price of $12.61 and $13.82 per cwt, respectively. This results in a difference of base raw milk costs of up to $2.20 per cwt for ESL products competing for sales during January 2023.
Given the marketing characteristics of ESL products, short of providing for fixed minimum prices, price differences between these competing products will always exist. However, this decision strives to recognize the evolution of the ESL market since Order Reform with a pricing structure for ESL products that would narrow differences, make them more predictable, and provide for more orderly marketing conditions. This decision finds pricing differences would be reduced through adoption of a Class I ESL adjustment that would equate to a Class I price for all ESL products equal to the average-of mover contained in Proposal 15. The Class I ESL adjustment will provide more long-run pricing equity for ESL product by better ensuring handlers whose ESL products compete for sales during the same month, but whose raw milk may have been purchased and processed during different time periods, have more similar costs.
In practice, the higher-of Class I mover would be announced on or before the 23rd of the prior month. A Class I ESL adjustment would be announced at the same time, and equal the difference between the higher-of mover and the average-of the advanced Class III and Class IV skim pricing factors plus a rolling monthly adjuster. The rolling monthly adjuster would be calculated as the average of the differences between the higher-of and the average-of calculations for the prior 13 to 36 months. All milk used in ESL products with a shelf-life no less than 60 days, regardless of the type of Class I plant
For example, the advanced Class III and IV skim pricing factors for January 2023 were $9.54 per cwt and $11.62 per cwt, respectively.
• The average-of the two factors (applicable to ESL milk) would have been $10.58 plus the rolling adjuster reflecting the average of the differences between the higher-of and the average-of from January 2020 to December 2021 ($1.58 per cwt), for a total of $12.16 per cwt.
• The higher-of mover (applicable to HTST milk) would have been $11.62 per cwt.
• The January 2023 Class I ESL adjustment would have been $0.54 ($12.16−$11.62), calculated by subtracting the higher-of announced price from the average plus rolling average calculation.
The effect of the adjustment would be a base Class I skim price for HTST milk of $11.62, and an effective base Class I skim milk price for ESL milk of $12.16. While this example computes a positive adjustment resulting in a higher effective price for ESL milk, it is to be expected in some months the adjustment will be negative, resulting in a lower effective price. The objective of the ESL adjustment is not to create a higher or lower effective Class I price, but rather to reduce the range of base Class I skim prices paid for milk used in ESL products being sold during a month. Evidence on the record indicates the Class I ESL adjustment will tend to moderate the price highs and lows, thus providing improved price equity between handlers of ESL products. The record indicates ESL products represent approximately 8 to 10 percent of the Class I market and would be subject to the Class I ESL adjustment.
This decision finds the Class I ESL adjustment, combined with the higher-of mover price for HTST products will provide for more orderly marketing and better ensure price equity for handlers of similar Class I products.
This decision also recommends maintaining advanced Class I pricing. Proponents of Proposals 16, 17, and 18 argued advanced pricing should be eliminated to prevent short term inversions between the monthly Class I price and Class III and/or IV prices, and subsequent incentives for depooling. Opponents, both independent and cooperative Class I processors along with a majority of producers, supported the continued use of advanced pricing. As discussed previously, advanced Class I pricing provides equity to regulated Class I processors by informing them of their regulated minimum raw milk cost in advance of the sale of their product. This ensures all dairy processors have an opportunity to align their raw milk costs with the sale prices of their products, which are generally negotiated before the start of the month. In the case of Class I products and the nonfat solids portion of Class II products, this alignment is facilitated by advanced pricing. Accordingly, Proposals 16, 17, and 18 are denied.
Select argued USDA should omit a recommended decision on the Class I mover following a finding by the Secretary “on the basis of the record that due and timely execution of his functions imperatively and unavoidably requires such omission.” (Select Post Hearing Brief, 2024, pp. 46-47) (citing 7 CFR 900.12(d)). The Secretary finds no sufficient information on the record to determine that skipping the recommended decision is unavoidable and is therefore issuing a recommended decision on the Class I mover.
The current Class I price structure was developed during the Order Reform process when Congress directed the Department to review the Class I price structure as part of larger FMMO consolidation efforts. Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-127, 110 Stat. 888. The Department considered several objectives when determining an appropriate Class I price surface, including: being national in scope, while also accounting for local and regional conditions; recognizing the location value of milk; recognizing all uses of milk; and meeting AMAA requirements. The Department met AMAA requirements governing classified pricing by ensuring the price surface would “reflect enough of the milk value to maintain sufficient revenue for producers to maintain an adequate supply of milk and provide equity to handlers with regards to raw product costs.” 64 FR 16026, 16109 (Apr. 2, 1999)
Class I milk pricing consists of two pieces: the base Class I mover applied uniformly to all Class I milk (as discussed previously) and a location specific differential which represents the location value of milk at a specific plant location. The differentials provide producers a financial incentive to supply the Class I market, which tends to be closer to the population centers, rather than delivering milk to a manufacturing plant typically closer to the farm. The location specific differential consists of two parts: a base value (also referred to as the “base differential”) applied uniformly to all Class I milk, and a location value.
The base differential is currently $1.60 per cwt, representing three costs whose values were determined to reflect market conditions during the late 1990s. First, the cost of maintaining Grade A farm status ($0.40) which includes costs associated with the labor, resources and utility expenses for maintaining required equipment and facilities, and adherence to certain management practices. Second, marketing costs (also referred to as balancing costs) ($0.60) which include, among other things, the costs associated with seasonal and daily reserve balancing of milk supplies and transportation to more distant processing plants. Lastly, a competitive factor ($0.60) is included to represent a portion of the competitive costs incurred by fluid plants to compete with manufacturing plants for a milk supply.
The location values were developed during the Order Reform process through an analysis conducted with the USDSS, maintained at the time by Cornell University. The USDSS was used to evaluate the geographic or “spatial” value of milk and milk components across the U.S. under the assumption of efficient markets. The model used 240 supply locations, 334 consumption locations, 622 dairy processing plant locations, 5 product groups, 2 milk components, and transportation and distribution costs among all locations to determine mathematically consistent location values for milk and components. Model results provided county specific information regarding the relationship of prices between geographic locations based on May and October 1995 data.
Since adoption on January 1, 2000, only differentials in the Appalachian, Florida, and Southeast FMMOs have been amended. The amendments, effective May 1, 2008, were the result of a region-specific rulemaking evaluating transportation costs in servicing those milk deficit orders. 73 FR 14153 (Mar. 17, 2008).
The record reflects consensus among hearing participants that the dairy marketplace has evolved significantly over the past 25 years. However, there remains strong disagreement on how the market changes should be interpreted and recognized in the Class I differentials. The producer community argued Class I differentials no longer reflect the cost of servicing fluid milk
Proposal 19 would increase the Class I differentials based in part on updated USDSS results reflecting the current dairy market structure and transportation costs. NMPF witnesses explained USDSS result averages were the foundation of their deliberations, and deviations were made to account for a variety of factors they believed were not accounted for, including producer price impacts, competitive relationships, blend price alignment, private supply arrangements, and unique local market conditions such as traffic or geography. Although NMPF began with results from a mathematical model, the process thereafter was primarily subjective. They started by selecting a series of cities, which they called “anchor cities,” to represent areas which bordered multiple FMMO regions. Then, regional committees adjusted model-derived location values to better align location values and reflect local marketing and transportation conditions within their region, respecting the anchor cities as starting points. NMPF combined the independently derived regional results and made further refinements to ensure smooth pricing transitions between the regions. Ultimately, NMPF proposed that the lowest differential increase from $1.60 per cwt to $2.20 per cwt. NMPF maintains the cost factors provided for in the base differential value remain relevant and presented testimony from member cooperatives that such costs have increased.
Opposition to Proposal 19 centered on several areas. First, opponents argued there is more than an adequate supply of milk nationally to meet Class I needs, therefore adoption of Proposal 19, or any increase to Class I differentials, is not warranted. Second, opponents contended raising Class I prices would be disorderly because it would further decrease already declining Class I consumption and, they argued, the FMMO objective of ensuring adequate milk supplies implies FMMOs should adopt provisions that encourage Class I consumption. One such opponent presented an econometric study which found fluid milk demand is elastic, concluding that increasing Class I prices would decrease consumption and violate FMMO objectives. Third, opponents took exception to NMPF's proposal development process and what they considered a lack of unifying principles used to adjust the USDSS results, believing NMPF had failed to provide cost justification for maintaining a base differential. Independent fluid milk processors further argued the entire development process led to results with a favorable bias towards NMPF member-owned plants. Lastly, organic milk processors and some organic cooperatives argued organic milk should not be treated similarly to conventional milk in the FMMO program because it has different and unrelated market structures. In its post-hearing brief, MIG reiterated its position on organic milk and further argued that because NMPF did not demonstrate current Class I differentials create disorderly marketing conditions the evidentiary threshold for increasing differentials had not been met.
MIG offered Proposal 20, which would lower the base differential value to $0.00, contending FMMO Class I prices are too high and have resulted in an oversupply of milk that they believe is disorderly. According to MIG, there is more than an adequate supply of milk to meet fluid demand. Given 99 percent of U.S. milk production meets Grade A standards, MIG argued compensation for Grade A maintenance is already provided for in manufacturing milk prices and therefore the $0.40 Grade A factor is no longer justified.
Additionally, MIG members' testimony detailed efforts they have adopted to balance their own milk supply, including infrastructure investments, creating more uniform receiving and processing schedules, and paying over-order premiums. Organic and ESL MIG members testified their fluid milk products function as wholly distinct markets with their own balancing and supply challenges. Therefore, MIG concluded the balancing cost and Class I competitive factors should no longer be recognized in the Class I price. Lastly, MIG and its members argued that if additional money is needed to compensate dairy farmers and cooperatives for balancing costs or to incentivize milk to serve Class I plants, those costs should be negotiated between the buyer and seller and paid through over-order premiums, not as part of the regulated price.
A vast majority of producers and their cooperatives opposed Proposal 20. They maintained, both in witness testimony and post-hearing briefs, there is relevancy of costs associated with the base differential. NMPF stressed the costs, while difficult to precisely quantify, are still relevant and have increased since adopted in 2000. NMPF described the disorder that would arise if the base differential was reduced to $0.00 and a greater portion of market-wide cost reimbursement was forced to be negotiated in the market. While some NMPF members testified to receiving over-order premiums, they stressed establishing and maintaining premiums is difficult because there remains a market imbalance of power between milk sellers and buyers.
Opponents of any change to Class I prices, either through a change to Class I differentials or other FMMO amendments, raised several overarching objections. First, they alleged disorderly marketing must first be proven to justify any changes to FMMO provisions. They cited a lack of instances of fluid demand not being met as an indication disorder is not present in the fluid milk market.
The declared policy of the AMAA is to “. . . establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce. . . .” FMMOs accomplish this mandate through the classified pricing of milk products and marketwide pooling of those classified use values. Through these mechanisms, orderly marketing conditions are provided so handlers are assured of uniform minimum raw milk costs and producers receive minimum uniform payments for their raw milk, regardless of its use. While previous FMMO amendatory proceedings may have found market disorder to warrant changes to provisions, the AMAA does not contain an express or implied declaration that a finding of disorderly marketing conditions is required before an order can be amended. Second, opponents argued Class I prices cannot be amended until the FMMO system is modified to recognize the organic milk sector. However, potential amendments that would adopt disparate treatment of organic milk were not within the scope of this proceeding, as defined in the hearing notice.
Third, Class I processors and manufacturers argued the Department should consider the impact to Class I sales when evaluating changes as they allege the AMAA objective of ensuring adequate milk supplies implies the FMMO should encourage fluid consumption. They further argue that demand for fluid milk is elastic and, therefore, raising Class I differentials would be disorderly as it would result in a decline in Class I sales. The AMAA
As to whether or not fluid milk has an inelastic or elastic demand, numerous studies were entered into the record, some drawing opposite conclusions. An econometric study entered on behalf of MIG found the retail level demand for fluid milk to be elastic. The study looked at cross sectional data over relatively short periods of time. In contrast, an NMPF witness reviewed numerous studies published within the last 20 years that evaluated time series data, concluding the studies support the assertion that fluid milk demand remains inelastic with respect to prices for those products. An analysis of the MIG study indicates that other than product prices and quantities, no other variables were considered that could explain changes in demand. Such variables which are generally recognized to be determinants of demand outside of price include, but are not limited to, household income, demographics, and measures of preferences. While the MIG study found retail price affects retail milk demand, it did not demonstrate price was the only factor that impacts demand. By design, the study estimated that only prices for milk and competing products could account for changes in quantities sold. Certainly, more study may be warranted given the evolution of the dairy industry in the last 25 years. However, a conclusion of the long-term demand elasticity of fluid milk cannot be drawn from one study of cross-sectional data, given the overwhelming body of studies contained in this hearing record which found otherwise.
Finally, opponents opined that milk is typically more valuable when used in Class III products, rather than Class I, and therefore the record lacks justification to increase Class I differentials. Testimony was given comparing USDSS model results (utilizing 2016 data) showing, outside of the southeastern region, higher marginal location values for milk used at Class III manufacturing locations than for milk used in Class I processing in the same locations. No evidence was presented as to how the Class III location values could or should be implemented to achieve the purposes of the AMAA. Unlike estimated Class I location values which have been historically relied upon to determine Class I differentials, this was the first time the USDSS model results were utilized to calculate location values for Class III milk, and the first time testimony was offered to suggest how the correlation between Class III and Class I location values should impact pricing decisions. The record lacks evidence to validate the interpretation of Class III location values, as further indicated by the differing views of the study authors as to whether this would be an appropriate interpretation of the various sets of USDSS results.
The record of this proceeding indicates the cost of servicing the Class I market is no longer sufficiently reflected by existing Class I differentials. This was evident in the USDSS results and validated through firsthand testimony of cooperative milk suppliers who described increased servicing costs. Current Class I differentials were established based on 1995 data. In the nearly thirty years since, the record reflects the market has substantially changed in size and structure. While milk production has increased approximately 45 percent from 1995 until 2022, during the same time period the number of dairy farms has decreased by approximately 74 percent, and the average herd size has increased from 68 to 261 cows.
Consolidation has also occurred on the processing and manufacturing side. The record describes plant closures, particularly on the fluid processing side, and plant investment, especially in large manufacturing plants. Considerable testimony and evidence were given describing increased distances milk must travel to find a market outlet. Because of the greater distances between supply locations and fluid processing plants, cooperative witnesses testified to increasing costs to ensure fluid demand is met. The witnesses also described in detail how the increasing costs are disproportionately borne by cooperative members who often see deductions on their milk checks to cover increased organizational and individual transportation costs, which some witnesses attested more than doubled in the past 20 years.
There was little to no rebuttal to the claim the market has consolidated on both the producer and processor side, resulting in increased transportation costs. The USDSS study authors themselves attributed the observed differences in the 2022 results, when compared to the current differentials, to four primary factors: change in milk production locations, change in compositions of dairy product demand, change in demand locations, and increased transportation costs per mile. What is at issue is the justification for increasing Class I differentials. While only one witness described a situation in which they were unable to procure enough milk to meet the demand of their fluid milk processor, the record is full of testimony on the difficulty cooperatives have faced to ensure fluid milk demand is met. Cooperative witnesses discussed needing to reach out to more distant supply locations to find available milk supplies willing to serve the Class I market instead of remaining at a manufacturing plant, and the inability to recoup a large portion of the additional transportation costs through over-order premiums.
FMMOs were established in the 1930s when the market contained many sellers and few buyers of milk. The highly perishable nature of raw milk resulted in producers engaging in pricing behavior that lowered farm prices as producers undercut one another in order to find a market outlet, a condition generally described as destructive competition. This unavoidable competitive behavior was among the reasons producers petitioned Congress to authorize a marketing order program to provide orderly marketing through known terms of trade and the pooling of market returns, which in turn provided a more equitable balance of power between buyers and sellers.
While the record of this proceeding reveals continued consolidation on both the producer and processing sides of the market, it also contains evidence the fundamental elements that were the genesis of the FMMO program still exist. Raw milk remains a highly perishable product, produced every day, that cannot be stored for any significant length of time and incurs high costs when transported over long distances. No substantive evidence was presented to indicate there is no longer an imbalance of market power between buyers and sellers. Processors spoke of the abundance of milk produced as a reason Class I prices should not be increased. However, that reality also highlights how the dairy marketplace continues to place processors in a price setting role. As a price taker, the record reflects considerable testimony attesting to the difficulty dairy farmers have had and continue to have in obtaining and maintaining over-order premiums at levels sufficient to cover actual and/or opportunity costs.
It is natural for buyers of milk to want to pay less and for sellers of milk to want to be paid more. The role of FMMOs is to determine minimum prices that provide for orderly marketing conditions that balance these natural competitive desires. The AMAA
The first step in evaluating appropriate Class I differential levels is the base differential. While the USDSS model is appropriate to show the value differences of milk between two fluid plant locations, as will be discussed later, it is not designed to inform the level of the minimum value needed to service Class I plants. Proposal 20 seeks to reduce the base differential to $0.00 on the premise the costs represented either are no longer relevant (Grade A maintenance) or should be left up to negotiation with the fluid milk processor and their supplier (balancing and Class I incentive cost). While the record does not precisely describe how much the cost components of the base differential have increased, it lacks evidence to demonstrate those costs have decreased. In fact, discussion of various costs throughout the proceeding indicates that costs have instead increased. Given the lack of clear record evidence specific to costs accounted for in the base differential, this decision recommends continuation of the $1.60 base differential.
Despite arguments Grade A maintenance costs should no longer be covered because 99 percent of U.S. milk production is Grade A, this decision continues to find it appropriate to recognize the additional costs for maintaining Grade A status in a regulatory pricing system requiring Grade A standards be met for participation. When the Grade A factor was incorporated into the base differential, it was specifically for Grade A maintenance costs, not costs associated with conversion to Grade A status. Proponents argue that because almost all milk meets Grade A standards, it is no longer necessary to provide a recognition of that cost in the base differential. Whether 99 percent of milk production today is Grade A, or 96 percent as it was at the time of Order Reform, is irrelevant. The record demonstrates dairy producers incur costs to maintain Grade A standards which are a requirement for participating in the FMMO system. As only Class I milk is required to participate and raw milk used in fluid milk products is required to meet Grade A standards, it is appropriate for the Class I price to continue to recognize those costs.
The record does not demonstrate the remaining two base differential factors, balancing costs and additional monies needed to compete for a milk supply, are no longer relevant. All parties testified to their continued existence. Proposal 20 would require those costs to be negotiated in the market.
Proponents of Proposal 20 argued they have made capital investments to balance their supply and/or pay over-order premiums to their suppliers to meet their milk needs, and/or provide balancing services. While their testimony acknowledges these costs exist, proponents argued the FMMO is making them pay twice for such services—once through the regulated price and again through their negotiated over-order premium. They further argued that if cost reimbursement is needed for such services, they should be able to pay that value to their suppliers directly through over-order premiums, not into the marketwide pool.
Cooperative witnesses testified at length on the costs associated with ensuring daily, weekly, monthly, and seasonal fluctuating needs of the fluid market are met. While their balancing costs were considered confidential information, cooperative witnesses testified to the overall increase in costs associated with providing those services. In particular, cooperative witnesses spoke to the higher costs incurred to operate regional balancing plants. These plants often do not run at full capacity year-round in order to ensure capacity to balance excess supply during flush periods or provide additional milk to fluid processing plants during months of increased demand. The record reflects these marketing costs are incurred for the benefit of balancing the entire market's milk supplies, thus providing for the orderly marketing of milk for fluid use. It has always been the case that an individual processor may find it necessary and/or advantageous to pay premiums above the minimum value to suit their individual and fluctuating needs. FMMO pricing balances the value needed to be reflected in the minimum regulated prices, without an over-reliance on over-order premiums that can undermine marketwide revenue pooling and lead to unequal raw product costs between similarly situated handlers and non-uniform payments to producers.
An additional function of the base differential, as described in the Order Reform Recommended Decision, is to generate the additional monies necessary for the FMMO pools to balance the reliance on over-order premiums. This was of particular concern in marketing orders with low Class I differentials and low Class I utilization, for which the decision noted “there is a risk that handlers may not face equal raw product costs for various reasons. Thus, having a larger proportion of the actual value of Class I milk in the market order pool in these areas, than is now the case, should promote pricing equity among market participants.” 63 FR 4802, 4909 (Jan. 30, 1998). As this decision seeks to update Class I differentials, maintaining the balance of what proportion of the value of Class I should be reflected in the marketwide pool remains a consideration. Negotiations for over-order premiums are not conducted in a vacuum, but are done with the benefit of both parties knowing minimum FMMO values and the costs represented in the minimum values the plant is responsible for paying. If Class I processors believe they are being double charged, they can use that information in their over-order premium negotiations.
Maintaining the $1.60 base differential would ensure Class I prices typically remain the highest, which is of particular importance in locations where the base differential is the effective differential. Without a base differential value in these locations, there would be little difference between the Class I price and the manufacturing price, and thus no financial incentive to serve the fluid market would exist to ensure the FMMO policy objective is met. Accordingly, this decision finds a $1.60 base differential remains an appropriate minimum value to ensure Class I demand is met.
While the Department appreciates the effort put forth to submit a comprehensive option in Proposal 19, the record of this proceeding does not support its adoption. Proposal 19 contains a base differential of $2.20, which is an increase of $0.60 from the current level. However, the record lacks data to quantify costs in excess of the $1.60 base value.
Proponents described using the average of the USDSS May and October results as a starting point for consideration but did not provide evidence as to why, under a minimum pricing system, the average rather than the minimum values observed in the May results was appropriate or preferable. Furthermore, the record does not contain evidence to support how the deviations made from the USDSS averages are appropriate. Proponents
However, this decision finds evidence to support raising the Class I differentials from the current levels. The record of this proceeding reveals the cost of servicing the Class I market has increased since the Class I differentials were adopted in 2000 and amended in the southeastern FMMOs in 2008. Evidence reflects the market structure of Class I plants and the milk supply have changed considerably in the last 25 years. That was supported in witness testimony, as well as USDSS model results, which clearly show the location value of milk has changed. The Department continues to find the USDSS model the best available tool for determining the location value of milk given the vast array of factors that contribute to how milk is produced, transported, processed, and distributed in the U.S.
When the differentials were adopted during Order Reform, testimony reflects the Department used USDSS model results as a starting point and made adjustments for various reasons. The Order Reform Recommended Decision described several options the Department considered. Of the differential surface ultimately adopted, AMS wrote, “Nine differential zones provide the basis for establishing the price structure. These zones were established based on results of the USDSS model, knowledge of current supply and demand conditions, and recognition of other marketing conditions such as fluid versus manufacturing markets, urban versus rural areas, and surplus versus deficit markets.” 63 FR 4802, 4905 (Jan. 30, 1998). The decision went on to outline additional reasons for adjustments including ensuring price alignment with neighboring zones and adequate marketwide pool draws.
The USDSS model estimates results for an efficient milk supply and distribution network, provided at its lowest cost. The USDSS study authors acknowledged when using the model results to determine Class I differentials, adjustments would be appropriate as there are factors unaccounted for in the model, such as FMMO provisions, abnormal traffic patterns, and competitive relationships.
Accordingly, this decision recommends Class I differentials be changed to better reflect the current cost of serving the Class I market. When determining appropriate levels, the Department began with the USDSS May results, referred to hereinafter as “May results.” The May results are the lower of the two months provided in evidence, which is an appropriate starting point for determining minimum prices. The Department then evaluated the results on a regional basis and made adjustments based on three principles and two additional considerations.
First, adjustments were made where necessary to better align Class I handler equity. This means the proposed Class I differentials should not give one handler an uneconomic cost advantage relative to an actual or potential competing handler. Second, adjustments were made to maintain producer equity and prevent uneconomic rewards or penalties to producers who deliver or could deliver milk to the same plant or market. Third, adjustments were made to ensure the marketwide pools continue to provide orderly marketing conditions. The combination of handler and producer equity goals is further achieved through the size and shape of pricing zones. The USDSS values are determined at specific locations, or “nodes,” in the model. Model results can be displayed on a map or in a list of counties to convey the price surface, but the methodology for doing so, as explained by the study authors, was a mathematical tool which interpolated values between distances. Additional information about markets can be added to the model results through knowledge about the economic or geographic (roads, natural barriers, etc.) conditions in specific locations. This may lead to a decision to change the shape or contours of the pricing surface that is estimated from the model results. Lastly, adjustments were made to reflect unique challenges associated with servicing dense urban environments. The changes by regions are described below.
The general process began with roughly $0.20 differential bands generated from the May results. The May and October results formed a soft boundary for differential adjustments. The current differentials formed a hard lower boundary, which were rounded to the nearest dime to eliminate $0.05 differences between zones, consistent with the USDSS model results which were in $0.10 increments.
The recommended differentials in the Northeast region largely follow the May results with minimal changes. The differential for Portland, Maine, was raised to $4.50 to match the results in Concord, New Hampshire, to ensure handler equity. Albany County, New York, and Rensselaer County, New York, were moved to the same differential by increasing the Albany differential $0.10 to meet the Rensselaer differential, as plants in those counties are located just across a bridge from one another but were assigned different prices by the model. Differentials in most New Jersey counties are proposed to be $0.10 to $0.20 above the May results, but within the May and October range, to reflect testimony on the cost of servicing urban areas and transportation concerns. The differential for Washington, DC, is also proposed to be $0.10 above the May result to reflect testimony on servicing an urban area.
The variation between the model results in May and October are more significant in the three southeastern orders. As discussed by several witnesses, this region experiences unique marketing conditions with high Class I utilization and deficit local milk supply. Due to the substantial seasonality of the local milk supply, it requires significant but variable volumes of supplemental milk supplies from outside the region as well as changes in milk movements of regular suppliers to the market throughout the year. The Transportation Credit Balancing Fund (TCBF) and the recently implemented Distributing Plant Delivery Credit (DPDC) are programs to compensate handlers for some of the additional and variable transportation costs associated with supplying the Class I markets in these orders during different periods of the year. The reimbursement rates for these programs include adjustments for any gain in Class I differentials from supply point to receiving plant. Therefore, any changes in difference in Class I differentials would be reflected in the calculated rate for eligible payments in both the TCBF and DPDC in all three southeastern orders.
The recommended differentials in the Appalachian region are largely formed in $0.20 and $0.30 bands based on the May results starting with $3.70 in Southern Indiana and, moving southeast, increasing to $6.00 along the Carolina coast. In most areas, the proposed differentials are within $0.10 (+/−) of the May results. There are a few exceptions where the proposed differentials are $0.20 less than the May results to better align handler equity. For example, in Spartanburg County, South Carolina, the proposed differential is $5.60, $0.20 less than the
The proposed differentials in the Southeast FMMO start at $3.20 in southwest Missouri and increase moving southeast to $6.00 in southeast Georgia. The proposed differentials follow the May results closely, within $0.10 (+/−), with a few modifications. The East Baton Rouge Parish differential was reduced by $0.20 from the May results to be consistent with the May result of $5.20 for competing areas such as Lafayette Parish. Tangipahoa Parish was placed in the $5.40 zone, or $0.30 below the May result. These decreases are meant to ensure handler equity while still acknowledging the thinner and steeper surface reflected in the May results in the southeastern U.S.
Rutherford County, Tennessee, is also proposed to be modified to be consistent with neighboring Davidson County, Tennessee, at $4.60 ($0.20 below the May result) to provide for handler equity. In Missouri, Webster County was placed in the $3.20 zone to match the Greene, Hickory, and Polk County differentials. This addresses handler equity concerns and results in a $0.10 proposed decrease for Webster County from the May result.
The proposed differentials for Florida largely follow the May results with modification to address handler equity concerns. The differentials start at $6.00 in the Florida panhandle region and increase going south with mostly $0.40 bands ending at $7.40 in south Florida. Processing plants in central Florida were placed in the same $6.80 band to match the May result in Volusia County due to handler equity concerns. This necessitated decreases from the May results of $0.10 in Orange County, $0.10 in Hillsborough County, and $0.20 in Polk County. For similar handler equity concerns, Broward County is proposed to match the May result in Dade County of $7.40 in the southernmost part of Florida.
In the Upper Midwest region, deviations from the May results are proposed to ensure producer equity and ensure the marketwide pool provides for orderly marketing. The Upper Midwest FMMO is unique in its low Class I utilization, which creates challenges in setting a differential surface that sends the proper signals to producers supplying the Class I market while also ensuring producer equity and orderly marketing among producers supplying the region's plants. Estimates indicate a large differential range in the region would not result in equity between producers and could result in disorderly marketing. Therefore, the differential surface was flattened from the May results, in general, by raising the differentials in the western part of the region—in the eastern Dakotas and much of Minnesota—and lowering the differentials in the eastern part—in northern Illinois, southeastern Minnesota, and Wisconsin.
Differentials in five counties, Dakota, Hennepin, Ramsey, Scott, and Washington, in the Minneapolis/St. Paul metropolitan area of Minnesota, are raised $0.10 higher than neighboring counties to reflect higher costs of serving an urban area and incentivize Class I service relative to surrounding manufacturing plants. In addition, they are set at the same differential of $2.90 to promote handler equity among fluid processing plants in the metropolitan area. The new differential for these counties, except for Hennepin, are $0.10 to $0.20 above the May results. The differential for Hennepin, $0.30 above the May results, is set the same as its peer counties to ensure that handlers in this county are able to compete for available milk supplies on an equitable basis.
Differentials in the regions supplying the Chicago, Illinois, area are adjusted to ensure handler equity. Generally, the differentials in this area are set at $3.10 to $3.20. The record reflects bottling plants in eastern Iowa, northern Illinois, southeastern Wisconsin, northern Indiana, and southwest Michigan all compete for Class I sales into the Chicago area. Thus, Class I differentials in northern Illinois are lowered $0.20 and $0.10 in Kane and Winnebago counties, respectively, from the May results. Similarly, comparisons and adjustments were made to the May results to align with northern Indiana and southwest Michigan counties supplying the Chicago area.
The proposed differentials in the Central FMMO start at $2.30 in western Colorado and increase moving east to $4.00 in southern Illinois. The proposal aligns the production area of northern Colorado with the large production areas of New Mexico, the Texas Panhandle, and southwest Kansas at $2.50. This required increasing the differential in Weld, Boulder, and Morgan counties of Colorado by $0.10 to $0.20 from the May model results. In order to encourage milk to service Class I demand, some counties in the greater Denver area, including Colorado Springs, are proposed at the May results of $2.70, while others are proposed to increase as much as $0.20 above the May results to provide for handler equity.
In southern Illinois, testimony reflects plants compete for sales within a similar distribution area. Therefore, counties were grouped into a $3.60 zone. This represents an increase of $0.10 for some plants, while others remained at the May result of $3.60. In Iowa, all counties with distributing plants are set at the May result of $2.70.
Douglas County, Nebraska, and Minnehaha County, South Dakota, proposed differentials are $2.70 and $2.60, an increase of $0.20 and $0.10, respectively, from the May results. These increases recognize handler equity both to the east with Polk County, Iowa, and to the north with Cass County, North Dakota.
In Kansas, the two counties with distributing plants, Reno and Sedgwick, are proposed to be $2.90, as they are neighboring counties, and the same differential levels would provide for handler equity. This increase also provides handler equity and price alignment with Oklahoma plants to the south.
In Oklahoma, Lincoln, Cleveland, and Grady counties are proposed at the same differential of $3.30. Lincoln and Cleveland counties are proposed at the May results, while this represents a $0.20 increase for Grady County. The $3.30 differential for these three counties provides for handler equity and price alignment both to the north in Kansas and the south in Texas.
Differentials in the Mideast region were evaluated on a state-by-state basis. Michigan differentials are set at the May results, $3.00 in the upper peninsula and $3.30 in the lower peninsula, because there were no additional producer or handler equity issues to address. Indiana is divided into three differential zones moving north to south ($3.30, $3.60, and $3.70) which align with the May results. The differentials for Lake and Huntington counties are proposed to be lowered by $0.40 and $0.10, respectively, from the May results to provide handler equity in the northern Indiana zone. The differentials in Madison and Wayne counties are proposed to increase $0.10 and $0.20, respectively, from the May results to provide handler equity in the central Indiana zone of $3.60. Southern Indiana
Proposed differentials in Ohio generally follow the May results within $0.10 (+/−) and zones were determined based on handler equity concerns. Moving northwest to southeast, proposed differential zones are $3.30, $3.60, $3.80, $4.00, and $4.30. The five differential zones align within a $0.10 (+/−) range of the May results. The exception is Cuyahoga County with a proposed $0.20 decrease from the May result to provide for hander equity with Wayne and Stark counties.
Proposed differentials in western Pennsylvania are generally consistent with the May results to provide for handler equity, either in a $3.90 or $4.00 zone. Butler, Fayette, Lawrence, and Mercer counties are proposed to be lowered by $0.10 from the May results to the $4.00 zone. West Virgina differentials range from $4.00 to $4.80, moving northwest to southeast, consistent with the May results as there were no additional producer and handler equity to address.
The proposed differentials in the Southwest FMMO start at $2.30 in northwest New Mexico and increase moving southeast to $4.80 in southeast Texas. Bernalillo County, New Mexico, is proposed to increase $0.30 from the May result to provide for handler and producer equity with nearby manufacturing plants. Testimony reflects the Texas Panhandle and southeastern New Mexico regions contain mostly manufacturing plants and draw milk from the same supply region in the Panhandle. For producer equity concerns, these regions are proposed to be in a $2.50 zone. This matches the May results for the eastern New Mexico plant locations, necessitating a proposed increase of $0.10 to $0.30 in counties within the Panhandle region to reach a uniform $2.50 zone. In Lubbock County, Texas, the differential is proposed at $2.60, a decrease of $0.20 from the May result, recognizing handler equity in the Panhandle region and producer equity considerations with manufacturing plants competing for milk supplies. Dallas County, Texas, is proposed at the May result of $3.70 and a $0.10 increase is proposed for Tarrant County to maintain handler equity. Bexar County, Texas is proposed at $4.30, a $0.10 increase from the May result, and Harris and Montgomery counties are proposed at $4.80, a $0.20 increase from the May result to reflect difficulties in servicing congested urban areas.
In Arizona, the metropolitan area of Phoenix encompasses both Maricopa and Pinal counties. The differentials for these counties are proposed to increase $0.30 and $0.20, respectively, above the May results to reflect the higher cost of servicing an urban area, in addition to providing handler equity with Clark County, Nevada. The differential for Yuma County is proposed at $2.50, an increase of $0.40 from the May result to maintain handler equity between Maricopa County, Arizona, and Los Angeles, California.
For California, testimony was given regarding additional transportation costs from excessive traffic congestion and geographic obstacles in southern California that were not accounted for in the model. Accordingly, the differential in San Diego is proposed to increase $0.20 from the May result to $2.80. To maintain handler equity within the southern California region, the differentials for Orange, Riverside, and Los Angeles counties are proposed to be $2.80. This is $0.40, $0.50 and $0.60 above the May results in Orange, Riverside, and Los Angeles counties, respectively. Ventura County is proposed to increase $0.40 from the May result, to $2.60, to address producer equity concerns and ensure price alignment with the surrounding counties. For Kern County, the primary milk supply area for much of this region, the differential is proposed to be $2.50. This also serves to encourage Kern County milk to move south to distributing plants, rather than north to manufacturing plants where the proposed differential is $2.20.
The differentials in the remaining San Joaquin Valley counties, Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin, are proposed to be $2.20 based on testimony indicating these counties are considered one supply area. Of these counties, Madera County has the highest increase from the May result, $0.40, to maintain handler equity as well as maintain producer equity for the producer milk in this area.
The proposed $2.20 differential zone is then carried into the Sacramento Valley counties of Sacramento, Yolo, Colusa, and Glenn, an increase of $0.20 to $0.30 from the May results. These counties, along with those in the San Joaquin Valley, supply milk for distributing plants in the San Francisco Bay area. The proposed differentials for Alameda, Contra Costa, Solano, Napa, Marin, and Sonoma counties are set at $2.40 to encourage milk to service the San Francisco Bay area. This represents an increase of $0.40 to $0.50 from the May model results for these supply counties to maintain handler equity.
San Francisco and counties south along the central California coast are further from a milk supply. The differentials in that area are proposed at $2.50 and include San Francisco, San Mateo, Santa Cruz, Santa Clara, San Benito, Monterey, San Luis Obispo, and Santa Barbara counties, representing increases from the May results of $0.20 to $0.50.
Similar to the Sacramento Valley, the differentials for the counties of Mendocino, Lake, and Humboldt, which are located along the northeast California coast and supply the San Francisco Bay area, are proposed to be $2.20 to provide for producer equity.
Differentials in Nevada generally follow the May results, except for a few modifications. In northern Nevada, to provide for handler equity, Washoe County is proposed to increase $0.10 from the May result to align with the neighboring $2.00 California zone. Eureka, Nye, and Esmerelda counties are proposed at $2.20, resulting in changes from the May results of plus or minus $0.10.
The proposed differentials in Utah start at $2.00 in the north and increase moving south up to $2.50 in the southwest part of the State. While most of the proposed differentials are aligned with the May results, the counties of Davis, Morgan, Salt Lake, Tooele, Utah, and Weber are recommended at $2.20, an increase of $0.10. This aligns those counties with counties to the north and west, ensuring both producer and handler equity.
The proposed differentials in the state of Montana start at $1.70 and increase to $2.40 in the southeast part of the state. Most of the proposed differentials are aligned with the May results. The only county with a proposed differential more than $0.10 different from the May result is Golden Valley which is lowered $0.20 to ensure handler equity with the counties to its north and south.
The proposed differentials in the unregulated portions of the state of Idaho start at $1.70 and increase to $2.20. While most of the proposed differentials are within $0.10 of the May results, the county of Cassia is decreased $0.20 for handler equity with plants to the south into Utah. This brings the unregulated Idaho counties in alignment with counties to the north and south, ensuring both producer and handler equity with those areas.
Lastly, the proposed differentials in Wyoming generally follow the May results as there were no producer or handler equity concerns to address. Except for Laramie, Wyoming, which is proposed at $2.50 to align with neighboring Northeast Colorado. This represents a $0.20 increase compared to the May results.
In the Pacific Northwest, the proposed differential in Seattle was increased $0.30 above the May result to reflect unique geography and the cost of serving an urban market. Likewise, the proposed differential in Portland, Oregon, was increased from the May result to align with Seattle to provide for producer and handler equity. Testimony reflected both cities are equidistant to milk supplies in south central Washington, and both have similar supply issues. The remaining proposed differentials reflect a $0.20 banding around the May results.
Summary
In total, the differentials proposed by this decision reflect a simple average $0.01 higher than the USDSS model May results ($3.81 versus $3.80) for the 3,108 counties in the contiguous U.S.
The following is a general description of the changes from the USDSS model May results:
An analysis shows the proposed differentials, on a weighted average basis for FMMO Class I milk (2019-2023), increased $1.24/cwt. Based on pooled Class I milk during 2019-2023, the current weighted Class I differential was $2.63 per cwt. The proposed differentials would have increased the weighted average to $3.87 per cwt.
In post-hearing briefs, some stakeholders objected to NMPF's use of producer costs of production for proposing updated Class I differential levels. As described above, such costs were not considered in the development of the Class I differentials recommended in this decision.
Another argument made in post-hearing briefs centered on the amended TCBF provisions in the Appalachian and Southeast FMMOs and newly established DPDC provisions in the Appalachian, Florida, and Southeast FMMOs. These provisions became effective March 1, 2024, and were a result of a regional rulemaking proceeding to address the chronic milk supply issues of those regions. 89 FR 6401 (Feb. 1, 2024). As the proceeding resulted in increased transportation cost related assessments on Class I handlers, some stakeholders argue no changes should be made to the Class I differentials until the impact of these regional changes can be observed.
The Appalachian, Florida, and Southeast FMMOs adopted marketwide service payment provisions that authorize year-round assessments on Class I milk, paid by handlers, for payment to handlers for Class I deliveries made to their plants according to the TCBF and DPDC provisions. Under the marketwide service provisions of the AMAA, marketwide service programs are only authorized to pay monies to handlers. 7 U.S.C. 608c(5)(J). Therefore, it would not be appropriate to delay consideration of Class I differential levels, monies which are paid to producers (both cooperative and independent), for TCBF and DPDC payments which are made only to handlers. If Class I differential levels are changed as a result of this proceeding, thus impacting the market conditions which led to the creation of the marketwide service programs, stakeholders could petition USDA to make changes to the TCBF and DPDC provisions.
The FMMO system currently prices milk used in Class II products uniformly. The Class II skim milk price is computed as the advanced Class IV skim price plus $0.70 per cwt. The Class II butterfat price is the Class III butterfat price for the month, plus the same amount expressed as $0.007 per pound. The $0.70 differential between the Class IV and Class II skim milk prices, adopted in the Order Reform Final Decision, was based on an estimate of the cost of drying condensed milk and re-wetting the solids for use in Class II products, which was seen as an economic, upper-bound constraint on the use of fresh milk in Class II processing.
Proposal 21, submitted by AFBF, seeks to update the Class II differential to $1.56 per cwt. AFBF derived the proposed level by updating the factors originally used to determine drying cost. Those include the NFDM make allowance and the nonfat solids yield factor used in the FMMO formulas, and butterfat and nonfat solids levels in FMMO pooled milk. As rewetting solids, the practice of first reconstituting powdered milk with water, is no longer a common practice, AFBF argued such cost no longer needs to be considered. AFBF opined a $1.56 Class II differential would not be high enough to incentivize the substitution of Class IV products for fresh milk. AFBF claimed the additional Class II value added to the marketwide pool because of the higher differential would reduce the occurrence of negative PPDs and depooling.
Opponents of Proposal 21 argued such a large Class II differential increase would incentivize the substitution of Class IV products in the manufacture of Class II products. Class I processors, who also have Class II production, argued such an increase would put them at a competitive disadvantage with standalone Class II manufacturers. They indicated processors who produce both products are required to pool all milk received at the plant but processors who only produce Class II products can opt to pool milk.
Record evidence does not support adoption of Proposal 21. Mathematically, the formula used by AFBF to compute an updated Class II differential mimics the calculation from Order Reform. However, it is clear from record testimony that more than doubling the current Class II differential, as proposed by AFBF,
Proposal 22, authored by AMS, would authorize changes, where necessary, in the respective marketing orders to conform with any amendments resulting from this proceeding. The record contains no opposition to the proposal. Accordingly, this decision recommends a series of conforming changes to ensure the proposed amendments to the uniform pricing formulas applicable to the respective marketing orders can be effectuated. The proposed changes are as follows:
1. Amending 7 CFR 1000.43 to remove references to 1135.11, as the order is no longer in effect. Also adding 7 CFR 1000.43(e) which would define skim milk used in ultra-pasteurized or aseptically processed and packaged fluid milk products eligible for the Class I ESL adjustment be limited to available Class I producer milk classified pursuant to the allocation process contained in Section1000.44(a);
2. Amending 7 CFR 1000.50 to remove all references to NASS and replace them with AMS;
3. Amending the following counties (and FIPS code) in 7 CFR 1000.52, to be consistent with the Federal Information Procession Series maintained by the Federal Communication Commission: Yellowstone, MT (30113) has been merged into Gallatin and Park Counties, MT (30031) (30067), Shannon, SD (46113) has been renamed Oglala Lakota, SD (46102), Bedford City, VA (51515) has been merged into Bedford County, VA (51019), and Clifton Forge City, VA (51560) has been merged into Alleghany County, VA (51005). Additionally, amending the FIPS code for Pierce, WA (53053) as it was original printed incorrectly.
4. Amending 7 CFR 1000.76, provisions governing partially regulated distributing plants to add “applicable” to references to the Class I price throughout the section to indicate application of a Class I ESL adjustment, when applicable, and remove the reference in 7 CFR 1000.76(b)(1)(i) to 7 CFR 1135.11 as the latter is no longer in effect;
5. Amend the introductory paragraphs of 7 CFR 1001.60, 1005.60, 1006.60, 1007.60, 1030.60, 1032.60, 1033.60, 1051.60, 1124.60, 1126.60, and 1131.60, sections which calculate the handler's value of milk in each FMMO. Section .60 of each order would be revised with the addition of an instruction to compute an adjustment to a handler's producer milk obligation for Class I producer milk eligible for the Class I ESL adjustment. The adjustment would be calculated by multiplying the monthly Class I ESL adjustment by the monthly pounds of eligible Class I skim milk. The instruction would be inserted prior to the instruction regarding reconstituted milk for each order. Other paragraphs are proposed to be redesignated to reflect the insertion;
6. Further amending 7 CFR 1005.60(g), 1006.60(g)-(i), and 1007.60(g) to remove language pertaining to transportation cost reimbursement during the months of January 2005 through March 2005 and September 2017, which is no longer in effect; and
7. Amending 7 CFR 1005.51, 1006.51, and 1007.51 to remove Class I price adjustments in the Appalachian, Florida, and Southeast FMMOs. The order language would no longer be necessary with the proposed amendments to the Class I differentials.
Briefs, proposed findings, and conclusions were filed on behalf of certain interested parties. These briefs, proposed findings, conclusions, and the evidence in the record were considered in making the findings and conclusions set forth above. To the extent that the suggested findings and conclusions filed by interested parties are inconsistent with the findings and conclusions set forth herein, the claims to make such findings or reach such conclusions are denied for the reasons previously stated in this decision.
The findings and determinations hereinafter set forth supplement those that were made when the Northeast, Southeast, Appalachian, Florida, Upper Midwest, Central, Mideast, California, Southwest, Pacific Northwest, and Arizona FMMOs were first issued and when they were amended. The previous findings and determinations are hereby ratified and confirmed, except where they may conflict with those set forth herein.
The following findings are hereby made with respect to the aforenamed marketing agreements and orders:
a. The tentative marketing agreements and the orders, as hereby proposed to be amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
b. The parity prices of milk as determined pursuant to section 2 of the Act are not reasonable with respect to the price of feeds, available supplies of feeds, and other economic conditions that affect market supply and demand for milk in the marketing area, and the minimum prices specified in the proposed marketing agreements and the orders are such prices as will reflect the aforesaid factors, ensure a sufficient quantity of pure and wholesome milk, and be in the public interest; and
c. The proposed marketing agreements and the orders will regulate the handling of milk in the same manner as and will be applicable only to persons in the respective classes of industrial and commercial activity specified in, the marketing agreements upon which a hearing have been held.
d. All milk and milk products handled by handlers, as defined in the marketing agreements and the orders as hereby proposed to be amended, are in the current of interstate commerce or directly burden, obstruct, or affect interstate commerce in milk or its products.
The recommended marketing agreements are not included in this decision because the regulatory provisions thereof would be the same as those contained in the orders, as hereby proposed to be amended. The following orders regulating the handling of milk in Northeast, Appalachian, Florida, Southeast, Upper Midwest, Central, Mideast, California, Pacific Northwest, Southwest, and Arizona marketing areas are recommended as the detailed and appropriate means by which the foregoing conclusions may be carried out.
Milk marketing orders.
For the reasons set forth in the preamble, AMS proposes to amend 7 CFR parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1051, 1124, 1126, and 1131 as follows:
7 U.S.C. 601-674, and 7253.
(e) Any skim milk used in ultra-pasteurized or aseptically processed and packaged fluid milk products shall be allocated in combination with Class I milk and the quantity of producer milk eligible to be priced shall be limited to available Class I producer milk classified pursuant to § 1000.44(a).
Class prices per hundredweight of milk containing 3.5 percent butterfat, component prices, and advanced pricing factors shall be as follows. The prices and pricing factors described in paragraphs (a), (b), (c), (e), (f), and (q) of this section shall be based on a weighted average of the most recent 2 weekly prices announced by the Agriculture Marketing Service (AMS) before the 24th day of the month. These prices shall be announced on or before the 23rd day of the month and shall apply to milk received during the following month. The prices described in paragraphs (g) through (p) of this section shall be based on a weighted average for the preceding month of weekly prices announced by AMS on or before the 5th day of the month and shall apply to milk received during the preceding month. The price described in paragraph (d) of this section shall be derived from the Class II skim milk price announced on or before the 23rd day of the month preceding the month to which it applies and the butterfat price announced on or before the 5th day of the month following the month to which it applies.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(1) The U.S. average AMS survey price for 40-lb. block cheese reported by the Department for the month;
(2) Subtract 25.04 cents from the price computed pursuant to paragraph (n)(1) of this section and multiply the result by 1.383;
(3) Add to the amount computed pursuant to paragraph (n)(2) of this section an amount computed as follows:
(i) Subtract 25.04 cents from the price computed pursuant to paragraph (n)(1) of this section and multiply the result by 1.589; and
(ii) Subtract 0.91 times the butterfat price computed pursuant to paragraph (l) of this section from the amount computed pursuant to paragraph (n)(3)(i) of this section; and
(iii) Multiply the amount computed pursuant to paragraph (n)(3)(ii) of this section by 1.17.
(o)
(p)
(1) Multiply 0.0005 by the weighted average price computed pursuant to paragraph (n)(1) of this section and round to the 5th decimal place;
(2) Subtract the somatic cell count of the milk (reported in thousands) from 350; and
(3) Multiply the amount computed in paragraph (p)(1) of this section by the amount computed in paragraph (p)(2) of this section and round to the nearest full cent.
(q)
(1) An advanced Class III skim milk price per hundredweight, rounded to the nearest cent, shall be computed as follows:
(i) Following the procedure set forth in paragraphs (n) and (o) of this section, but using the weighted average of the 2 most recent AMS U.S. average weekly survey prices announced before the 24th
(ii) Multiply the protein price computed in paragraph (q)(1)(i) of this section by 3.30;
(iii) Multiply the other solids price per pound computed in paragraph (q)(1)(i) of this section by 6.0; and
(iv) Add the amounts computed in paragraphs (q)(1)(ii) and (iii) of this section.
(2) An advanced Class IV skim milk price per hundredweight, rounded to the nearest cent, shall be computed as follows:
(i) Following the procedure set forth in paragraph (m) of this section, but using the weighted average of the 2 most recent AMS U.S. average weekly survey prices announced before the 24th day of the month, compute a nonfat solids price; and
(ii) Multiply the nonfat solids price computed in paragraph (q)(2)(i) of this section by 9.30.
(3) An advanced butterfat price per pound rounded to the nearest one-hundredth cent, shall be calculated by computing a weighted average of the 2 most recent U.S. average AMS AA Butter survey prices announced before the 24th day of the month, subtracting 22.57 cents from this average, and multiplying the result by 1.211.
(r)
(1) Compute the simple average of the advanced pricing factors computed in paragraphs (q)(1) and (2) of this section;
(2) Add the following:
(i) Determine the higher of the advanced pricing factors computed in paragraphs (q)(1) and (2) of this section, for each of the preceding 13 to 36 months;
(ii) Calculate the average of the advanced pricing factors computed in paragraphs (q)(1) and (2) of this section, for each of the preceding 13 to 36 months;
(iii) For each of the preceding 13 to 36 months, subtract the amount computed in paragraph (r)(2)(ii) of this section from the amount computed in paragraph (r)(2)(i) of this section; and
(iv) Compute the average of the differences computed in paragraph (r)(2)(iii) of this section.
(3) Subtract the higher of the advanced pricing factors computed in paragraphs (q)(1) and (2) of this section.
The Class I differential adjusted for location to be used in § 1000.50(b) and (c) shall be as follows:
(a) * * *
(2) For orders with multiple component pricing, compute a Class I differential price by subtracting Class III price from the current month's applicable Class I price. Multiply the pounds remaining after the computation in paragraph (a)(1)(iii) of this section by the amount by which the Class I differential price exceeds the producer price differential, both prices to be applicable at the location of the partially regulated distributing plant except that neither the adjusted Class I differential price nor the adjusted producer price differential shall be less than zero;
(3) For orders with skim milk and butterfat pricing, multiply the remaining pounds by the amount by which the applicable Class I price exceeds the uniform price, both prices to be applicable at the location of the partially regulated distributing plant except that neither the adjusted Class I price nor the adjusted uniform price differential shall be less than the lowest announced class price; and
(4) Unless the payment option described in paragraph (d) of this section is selected, add the amount obtained from multiplying the pounds of labeled reconstituted milk included in paragraph (a)(1)(iii) of this section by any positive difference between the applicable Class I price at the location of the partially regulated distributing plant (less $1.00 if the reconstituted milk is labeled as such) and the Class IV price.
(c) The operator of a partially regulated distributing plant that is subject to marketwide pooling of returns under a milk classification and pricing program that is imposed under the authority of a State government shall pay on or before the 25th day after the end of the month (except as provided in § 1000.90) to the market administrator for the producer-settlement fund an amount computed as follows: after completing the computations described in paragraphs (a)(1)(i) and (ii) of this section, determine the value of the remaining pounds of fluid milk products disposed of as route disposition in the marketing area by multiplying the hundredweight of such pounds by the amount, if greater than zero, that remains after subtracting the State program's class prices applicable to such products at the plant's location from the applicable Federal order Class I price at the location of the plant.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (i) of this section and subtracting from that total amount the value computed in paragraph (j) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(i) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
(a) The Class I differential shall be the differential established for Mecklenburg County, North Carolina, which is reported in § 1000.52 of this chapter. The Class I price shall be the price computed pursuant to § 1000.50(a) of
(b) [Reserved]
The revisions and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (f) of this section and subtracting from that total amount the value computed in paragraph (g) of this section. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk that were classified in each class pursuant to § 1000.44(c) of this chapter by the applicable skim milk and butterfat prices, and add the resulting amounts;
(f) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
(a) The Class I differential shall be the differential established for Hillsborough County, Florida, which is reported in § 1000.52 of this chapter. The Class I price shall be the price computed pursuant to § 1000.50(a) of this chapter for Hillsborough County, Florida.
(b) [Reserved]
The revisions and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (f) of this section and subtracting from that total amount the value computed in paragraph (g) of this section. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk that were classified in each class pursuant to § 1000.44(c) of this chapter by the applicable skim milk and butterfat prices, and add the resulting amounts;
(f) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
(a) The Class I differential shall be the differential established for Fulton County, Georgia, which is reported in § 1000.52 of this chapter. The Class I price shall be the price computed pursuant to § 1000.50(a) of this chapter for Fulton County, Georgia.
(b) [Reserved]
The revisions and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (f) of this section and subtracting from that total amount the value computed in paragraph (g) of this section. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk that were classified in each class pursuant to § 1000.44(c) of this chapter by the applicable skim milk and butterfat prices, and add the resulting amounts;
(f) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk,
(j) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (j) of this section and subtracting from that total amount the value computed in paragraph (k) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(j) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (j) of this section and subtracting from that total amount the value computed in paragraph (k) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(j) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (i) of this section and subtracting from that total amount the value computed in paragraph (j) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(i) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (i) of this section and subtracting from that total amount the value computed in paragraph (j) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(i) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (j) of this section and subtracting from that total amount the value computed in paragraph (k) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(j) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
7 U.S.C. 601-674, and 7253.
The revision and addition read as follows:
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (f) of this section and subtracting from that total amount the value computed in paragraph (g) of this section. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(f) Compute an adjustment for eligible Class I producer milk pursuant to § 1000.43(e) of this chapter by multiplying the Class I skim milk price adjuster computed in § 1000.50(r) of this chapter by the pounds of skim milk eligible in Class I.
Federal Energy Regulatory Commission.
Advance notice of proposed rulemaking.
The Federal Energy Regulatory Commission (Commission) is issuing an advance notice of proposed rulemaking presenting potential reforms to implement dynamic line ratings and, thereby, improve the accuracy of transmission line ratings. These potential reforms would require transmission line ratings to reflect solar heating based on the sun's position and forecastable cloud cover and require transmission line ratings to reflect forecasts of wind conditions on certain transmission lines. The potential reforms would also ensure transparency in the development and implementation of dynamic line ratings and enhance data reporting practices related to congestion in non-regional transmission organization/independent system operator regions to identify candidate transmission lines for the requirement to reflect forecasts of wind conditions. The Commission invites all interested persons to submit comments on the potential reforms and in response to specific questions.
Comments are due October 15, 2024 and Reply Comments are due November 12, 2024.
Comments, identified by docket number, may be filed in the following ways. Electronic filing through
•
• For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery.
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The Comment Procedures section of this document contains more detailed filing procedures.
1. In this advance notice of proposed rulemaking (ANOPR), the Federal Energy Regulatory Commission (Commission), pursuant to its authority under section 206 of the Federal Power Act (FPA),
2. In 2021, the Commission issued Order No. 881, to revise its
3. Building upon past Commission actions designed to improve the accuracy and transparency of transmission line ratings, this ANOPR raises questions and explores potential reforms to further enhance transmission line ratings and congestion reporting practices. We preliminarily propose and seek comment on a DLR framework for reforms to improve the accuracy of transmission line ratings and ensure transparency in the development and implementation of transmission line ratings. These potential DLR reforms would require transmission line ratings to reflect the impacts of solar heating by considering the sun's position and forecastable cloud cover. They would also require transmission line ratings to reflect forecasts of wind conditions—wind speed and wind direction—on certain transmission lines. The potential reforms also would enhance data reporting practices related to congestion in non-regional transmission organization (RTO)/independent system operator (ISO) regions to identify candidate transmission lines for any wind requirement. We seek comment on this framework and whether any reforms to alter the requirements for transmission line ratings are needed to ensure rates for Commission-jurisdictional service are just and
4. This ANOPR proposes a DLR framework for reforms that would build upon past Commission actions designed to improve the accuracy of transmission line ratings and ensure transparency in the development and implementation of transmission line ratings. This section describes those past actions, related Commission proceedings, how transmission line ratings are determined, including the incorporation of weather variables into thermal ratings and the use of sensors, and how transmission services are provided and procured in the bulk electric system to provide context for the reforms proposed herein.
5. In December 2021, the Commission issued Order No. 881, which reformed both the
6. With respect to DLRs, the Commission in Order No. 881 adopted as the definition of DLR: a transmission line rating that applies to a time period of not greater than one hour and reflects up-to-date forecasts of inputs such as (but not limited to) ambient air temperature, wind, solar heating intensity, transmission line tension, or transmission line sag.
7. The Commission agreed with commenters that highlighted the benefits of DLR implementation. The Commission stated that, absent RTOs/ISOs having the capability to incorporate DLRs, voluntary implementation of DLRs by transmission owners in some RTOs/ISOs would be of limited value, as their more dynamic ratings and resulting benefits would not be incorporated into RTO/ISO markets.
8. The Commission required implementation of the requirements adopted in Order No. 881 by July 12, 2025, three years after compliance filings were due.
9. On February 17, 2022, the Commission issued a Notice of Inquiry
10. Comments in response to the NOI suggest potential net benefits of implementing DLRs in certain circumstances. Various commenters state that DLRs would reduce congestion costs.
11. Commenters assert that DLR implementation can help mitigate congestion associated with planned and/or unplanned long-term outages of generation or transmission.
12. Commenters also note that weather sensors (which measure,
13. Some commenters discuss different considerations and challenges with DLRs, which are described in more detail below.
14. Transmission line ratings are determined by the most limiting element among the components that make up the transmission facility, which includes the conductors and the associated equipment necessary for the transfer or movement of electric energy across a transmission facility (
15. Transmission line ratings are based on the most limiting of three types of limits: thermal limits; voltage limits; and stability limits. The thermal limit reflects the maximum amount of power that can safely flow on a transmission line without it overheating. Each transmission line may have several thermal limits depending on the duration of power flow considered, with a lower thermal limit for normal operations and higher thermal limits for long-term and short-term emergency operations. However, voltage and stability limits are typically fixed values that limit the power flow on a transmission line from exceeding the point above which there is an unacceptable risk of a voltage or stability problem.
16. Thermal ratings are determined based on the physical characteristics of the conductor and assumptions about environmental conditions (
17. Thermal ratings are calculated using formulas, which are based on forecast- or assumption-based inputs that require the use of confidence levels. Confidence levels represent the likelihood that the actual real-time value of that input is less than or equal to the assumption or forecast. For some inputs in thermal ratings formulas, forecast uncertainty may not be normally distributed. In other words, there may be more forecast uncertainty as the input approaches a historic limit or extreme level. For example, if an ambient air temperature forecast approaches an extreme level (
18. Thermal ratings are affected by a variety of factors, including ambient air temperatures, solar heating, and wind speed.
19. Transmission line thermal ratings generally decrease with warmer ambient air temperatures and generally increase with cooler ambient air temperatures, because the heat generated within the conductor due to resistive losses dissipates to the environment more quickly at lower ambient temperatures.
20. Transmission line thermal ratings generally decrease when exposed to more intense solar heating conditions and generally increase when exposed to less intense solar heating conditions, because lower solar heating allows the conductor to carry more power without overheating. Solar heating is most intense when there are clear-sky conditions, and the sun is at its peak position in the sky.
21. Wind cools a transmission line, which dissipates the heat generated from resistive losses more quickly and results in greater transmission transfer capability on that line. Transmission line thermal ratings generally increase when wind speed is higher and when wind direction is perpendicular to a line and generally decrease when wind speed is lower and when wind direction is parallel to a line. According to research presented by Idaho National Laboratory at the Commission's 2019 DLR Workshop, consideration of wind speed and direction could theoretically increase transmission line ratings by more than 100% in certain periods.
22. Because a variety of weather variables affect thermal ratings, DLRs can incorporate weather variables that “reflect transfer capability even more accurately” than static line ratings.
23. DLR implementation requires making reliable short-term forecasts
24. DLRs are implemented through the following steps: identifying candidate transmission lines; installing any needed sensors and data communication systems; forecasting short-term weather conditions; revising thermal ratings formulas; and validating thermal ratings and integrating them in an energy management system (EMS).
25. Generally, two types of sensors can be used to implement DLRs: (1) weather sensors that measure factors like wind speed, wind direction, and/or cloud cover; and (2) conductor sensors that measure the condition of the transmission line itself, such as conductor temperature, sag, or tension.
26. Sensors can be positioned either on the ground or on the transmission line. Each option has advantages and disadvantages.
27. The real-time data acquired from either type of sensor can provide many benefits to the DLR systems and the transmission providers using them. For example, data from sensors can provide real-time operational awareness to grid operators, helping to identify
28. However, some weather elements can be incorporated into a transmission line rating without a sensor. For instance, in addition to ambient air temperature, initial outreach indicates that solar heating based on the sun's position and some forecasts of cloud cover can be incorporated into transmission line ratings without sensors.
29. The effective use of sensors to determine DLRs requires at least four key considerations: what type of sensors and where to place them; how many sensors are needed; how to configure them; and how to ensure physical security and cybersecurity. Sensor placement requires a careful assessment of the sensor type, the number of sensors needed, and the location for each of the sensors to be installed.
30. The appropriate quantity and configuration of sensors depends on the type of sensors used and the weather variables they measure. Weather-based DLR systems may incorporate real-time measurements and/or forecasts of wind conditions because wind conditions have the greatest effect on the thermal rating of a transmission line.
31. Generally, placing more sensors at rating-limiting elements or spans ensures more granular data to calculate transmission line ratings.
32. DLR implementation also involves physical security and cybersecurity risks. Therefore, as with other transmission systems, protections must be put in place to ensure the physical security and cybersecurity of the communications equipment, computer hardware, and computer software required to integrate and manage DLR systems, which can include sensors and/or alternative data sources, and associated data in the transmission provider's EMS. DLR systems may rely upon numerous routable devices, each of which may be vulnerable to cyberattack. Physical security and cybersecurity protections must be installed to protect and ensure that the new sensor system is not tampered with or compromised. Moreover, transmission providers implementing DLRs may not be able to use the off-the-shelf computer systems, cloud solutions, and/or services offered by vendors.
33. While DLRs that rely on weather forecasts may offer significant value, forecasting local weather may present several challenges, with related opportunities for solutions. First, because all transmission line ratings—including DLRs—depend upon the transmission line's most-limiting element, the location of the most-limiting element must be determined to identify which local weather forecast is needed. Further, changes in the local weather may change which of the weather-sensitive elements is most limiting.
34. Second, incorporating additional weather variables into transmission line ratings will require preparing forecasts for each variable, which may be more resource intensive. For example, due to increased variability and micro-geographic differences, forecasting wind speed and direction may require more
35. Third, relying on weather forecasts for calculating transmission line ratings exposes transmission providers to forecasting uncertainty. In most instances, reductions in forecasted transmission line ratings can be identified hours or days ahead of the operating hour, giving transmission providers and market participants time to act to ensure flows do not exceed transmission line ratings. However, in some instances, when changes in forecasts happen at or close to the operating hour and cause potential reliability concerns, transmission system operators may need to issue curtailment or redispatch instructions to manage the shortage in transmission capability, which could be operationally similar to transmission line derates that do not involve DLRs. This challenge can be managed through specification of appropriate forecast confidence levels and related forecast margins.
36. As discussed further in the Need for Reform section below, numerous DLRs have already been deployed domestically and internationally, with resulting benefits to the transmission system and customers, including increased transmission capacity, reduced congestion, and reduced costs.
37. As relevant here, transmission line ratings are used by transmission providers
38. Because the preliminary proposals discussed herein—both for identifying the congested transmission lines that would be subject to a DLR requirement and the transmission services that would be impacted by such a DLR requirement—relate to the details of transmission service and congestion management practices under the
39. There are two types of transmission service provided under the
40. Point-to-point transmission service is the reservation and transmission of capacity and energy from the point(s) of receipt to the point(s) of delivery.
41. The transmission line rating of a given transmission line is the primary input into determining its TTC and, thus, is a key determinant of the transmission line's ATC. ATC on a path is not a single, static value; rather, it has different values based on the requested point-to-point transmission service duration (hourly, daily, weekly, monthly, annual), time (when service is requested to start and end), and priority (firm or non-firm). For example, firm annual ATC starting January 1 of a given year might be zero because of high levels of ETC during the summer months, while firm monthly, weekly, and daily ATC on the same path may be higher during non-summer months.
42. In the event a transmission provider is unable to accommodate a request for long-term (
43. Network integration transmission service or network service allows a network customer to use the transmission system in a manner comparable to how the transmission provider uses its own transmission system to serve its native load. Specifically, network service allows a network customer's network resources (generators, firm energy purchases, etc.) to be integrated and economically dispatched to serve its network load.
44. Network service is provided from a fleet of network resources to a set of network loads rather than from a single point-of-receipt to a single point-of-delivery.
45. Congestion is managed under the
46. All RTO/ISO tariffs reflect Commission-approved variations from the
47. The availability of data measuring the cost of congestion on the transmission system, or proxies that could be used to estimate the cost of congestion, varies between RTO/ISO and non-RTO/ISO regions.
48. In RTO/ISO markets, at least two types of congestion metrics are computed and publicly reported. First, as part of solving their real-time and day-ahead markets, RTOs/ISOs compute and publish locational marginal prices (LMP) that include a “congestion component,” indicating how much congestion has increased (or decreased) a locational price at a node compared to reference node(s).
49. Non-RTO/ISO regions do not publish nodal prices in the same manner as RTOs/ISOs, which can result in less public information available on congestion costs outside of RTOs/ISOs. However, practices to manage congestion and redispatch of internal resources may be used to assess congestion costs in non-RTO/ISO regions.
50. Section 37.6 of the Commission's regulations requires transmission providers to calculate and post certain information, including ATC and TTC.
51. Section 37.6(b)(1)(ii) of the Commission's regulations defines constrained posted paths as any posted paths that have ATC less than or equal to 25 percent of TTC at any time during the preceding 168 hours or for which ATC has been calculated to be less than or equal to 25 percent of TTC for any period during the current hour or the next 168 hours.
52. Under these requirements, depending on whether the paths are constrained or unconstrained, transmission providers are required to post firm and non-firm ATC and related data for many different timeframes (
53. Under the
54. As a result of the continued development of DLR technology, the record gathered in the NOI, and outreach conducted since the issuance of the NOI, we believe that it is appropriate to examine whether transmission line ratings that fail to reflect forecasts of solar heating and wind speed and direction result in sufficiently accurate transmission line ratings and whether reforms may be necessary to improve the accuracy of transmission line ratings and ensure transparency of their development and implementation. Without these reforms, we believe that transmission line ratings may be insufficiently accurate and may unjustly and unreasonably increase the cost to reliably serve wholesale electric customers by forgoing many potential benefits. As the Commission has previously found, inaccurate transmission line ratings result in Commission-jurisdictional rates that are unjust and unreasonable.
55. DLRs have been deployed nationally and internationally, with resulting benefits to the transmission system and customers, including increased transmission capacity, reduced congestion, and reduced costs. Existing DLR projects and data demonstrating their benefits strengthen the potential need for reform.
56. In the United States, some transmission providers and system operators report using DLR systems to curb congestion, increase transmission capacity, and reduce costs. Below, we detail four specific examples of DLR use. These examples illustrate how DLRs can more accurately reflect the capability of a transmission facility and result in cost savings where congestion is decreased due to increased transmission capability.
57. First, PPL, which owns transmission facilities in PJM, has spent approximately $1 million implementing DLRs, using 18 sensors on more than 31 miles of three 230 kV transmission line segments, and has integrated DLRs for these transmission lines into PJM's real-time and day-ahead markets.
58. PJM notes that, during Winter Storm Elliott, DLRs on the previously mentioned PPL transmission lines proved higher than the AARs, and that, had PJM not had the higher DLRs, PJM would have had to redispatch the system to maintain reliability. PJM adds that such action would have been very difficult under the critical operating conditions caused by the winter storm.
59. In a DLR deployment study of a single 115 kV transmission line owned by National Grid in Massachusetts, DLRs were found to increase transmission capacity by approximately 16% above AARs (excluding periods when DLRs were lower than AARs). However, the project also recorded that DLRs were below AARs 22% of the time in the summer and 27% of the time in the winter (at times when wind speed was low and the AAR would have been overstated).
60. A Department of Energy (DOE) report described implementation of DLRs using tension sensors along five 345 kV transmission lines and three 138 kV transmission lines by Oncor Electric Delivery Company's (Oncor), a transmission owner in ERCOT. The report noted that DLRs increased the available capacity of the lines by between 6% and 14% beyond the transmission lines' AARs, on average. As described in the report, Oncor determined that the cost of installing DLRs ranged from $16,000 to $56,000 per mile, depending on the type of transmission towers upon which DLR equipment was installed.
61. In August 2021, Duquesne Light Company (Duquesne), a transmission owner in PJM, partnered with LineVision on a DLR pilot project.
62. In addition, a recent report on an initial deployment of DLRs by subsidiaries of AES Corporation in Indiana and Ohio shows that estimated costs to implement DLRs on the studied transmission lines are generally lower than reconductoring alternatives and that DLRs can be implemented more quickly than reconductoring.
63. Many transmission providers elsewhere in the world have similar, or greater, levels of experience with DLRs as those in the United States, with some running pilot projects and others using DLRs in operations. Like the U.S. examples cited above, these projects illustrate the potential for DLRs to more accurately estimate transmission transfer capability and reduce costs due to decreased congestion.>
64. Elia (Belgium's system operator) uses DLRs on 33 transmission lines that range from 70 kV to 380 kV.
65. Austria has installed DLR on 15% of its transmission system, leading to almost $17 million in congestion cost savings in 2016.
66. In 2020, LineVision and the European Commission's FARCROSS consortium, a project to boost cross-border transmission in the European Union, announced a partnership to install DLR in Hungary, Greece, Slovenia, and Austria.
67. The United Kingdom's National Grid has installed DLR on a 275 kV circuit in Cumbria, with estimated savings of £1.4 million per year.
68. Analysis of four AltaLink transmission lines in Canada found
69. We are considering reforms that would require implementation of certain DLR practices, including: requiring transmission line ratings to reflect solar heating based on the sun's position and forecastable cloud cover; requiring transmission line ratings to reflect forecasts of wind conditions—wind speed and wind direction—on certain transmission lines; and enhancing data reporting practices to identify candidate transmission lines for the wind requirement in non-RTO/ISO regions. Such reforms may ensure that transmission line ratings result in jurisdictional rates that are just and reasonable.
70. In Order No. 881, the Commission found that transmission line ratings, and the rules by which they are established, are practices that directly affect the rates for the transmission of electric energy in interstate commerce and the sale of electric energy at wholesale in interstate commerce (hereinafter referred to collectively as “wholesale rates”).
71. In Order No. 881, the Commission recognized that, in addition to ambient air temperatures and daytime/nighttime solar heating, other weather conditions such as wind, cloud cover, solar heating intensity, precipitation, and transmission line conditions such as tension and sag, can affect the amount of transfer capability of a given transmission facility. The Commission explained that incorporating these additional inputs provides transmission line ratings that are closer to the true thermal transmission line limits than AARs.
72. We preliminarily find that transmission line ratings that do not reflect solar heating based on the sun's position and up-to-date forecasts of forecastable cloud cover may result in unjust and unreasonable wholesale rates. We further preliminarily find that transmission line ratings that do not reflect up-to-date forecasts of wind conditions on certain transmission lines may also result in unjust and unreasonable wholesale rates. We seek comment on both of these preliminary findings.
73. We also preliminarily find that transmission line ratings that better reflect solar heating and, where appropriate, wind conditions would result in more accurate system transfer capability, thereby resulting in just and reasonable rates. As the Commission noted in Order No. 881, increasing transfer capability will, on average, reduce congestion costs because transmission providers will be able to import less expensive power into what were previously constrained areas, resulting in cost savings, as discussed above, and wholesale rates that avoid unnecessary congestion costs.
74. The use of DLRs may also provide benefits to customers by mitigating the need for more expensive upgrades. PPL's internal estimate to reconductor the Susquehanna-Harwood double-circuit line discussed above was approximately $12 million. In contrast, the cost to install DLRs on that line was less than $500,000.
75. Likewise, the ability to increase transmission flows into load pockets may reduce a transmission provider's reliance on local reserves inside load pockets. This may reduce local reserve requirements and the costs to maintain that required level of reserves, which, in turn, may result in cost reductions and wholesale rates that avoid unnecessary congestion costs.
76. DLRs can also provide reliability benefits by increasing the transfer capability on the existing transmission system in a way that provides system operators with more options during stressed system conditions. For example, as PJM explained, the presence of DLRs on its system during Winter Storm Elliott contributed to system reliability because the higher transmission line ratings allowed it to avoid re-dispatching its system.
77. The Commission also explained that decreasing transfer capability when it is overstated can avoid placing transmission lines at risk of inadvertent overload and can signal to the market that more generation and/or transmission investment may be needed in the long term.
78. Finally, we preliminarily find that certain transparency reforms are necessary to ensure accurate transmission line ratings. As discussed below, the record indicates a lack of transparency for congestion costs in non-RTO/ISO regions. Understanding if, and how much, congestion may exist on a transmission line is essential to understanding whether that transmission line may benefit from the preliminary proposals in this rulemaking. As the Commission explained in Order No. 881, if a stakeholder does not know the basis for a given transmission line rating, particularly for a transmission line that frequently binds and elevates prices, it cannot determine whether the transmission line rating is accurately calculated.
79. As detailed above in section II.C.3. Current Use of DLRs and below in sections IV.A.2. Potential Solar Requirement and IV.A.3. Potential Wind Requirement, the current record suggests that DLRs can result in more accurate transmission line ratings
80. As noted above, in Order No. 881, the Commission, in effect, required RTOs/ISOs to be able to accept DLRs.
81. We preliminarily propose a DLR framework for reforms to improve the accuracy of transmission line ratings.
82. The NOI asked whether other weather conditions should be part of a potential DLR requirement.
83. We preliminarily propose to require that all transmission line ratings used for evaluating transmission service that ends not more than 10 days after the transmission service request date (hereinafter “near-term transmission service”)
84. This proposal would apply to all transmission line ratings because it is our understanding that the solar requirement can be incorporated without installing sensors, enabling the benefit of additional transfer capability through more accurate accounting of solar heating with only minimal implementation costs. Further, this proposal would apply the solar requirement to near-term transmission service because the requirement effectively would subsume the daytime/nighttime solar heating requirement set forth in Order No. 881, which applies to near-term transmission service. The currently effective Attachment M of the
85. We preliminarily propose to require that all transmission line ratings used for near-term transmission service reflect solar heating based on the sun's position accounting for the relevant geographic location, date, and hour. Under this approach, transmission line ratings would reflect the potential for the sun to heat the transmission lines during each hour based on its position in the sky, assuming zero cloud cover. Stated another way, transmission providers will need to calculate, for each hour, the effect of the sun's position on its transmission line ratings. Transmission providers would have the discretion to calculate the effect of the sun's position on their transmission line ratings using more granular time increments. Because solar heating based on the sun's position starts at close to zero in the hours shortly after sunrise, rises throughout the morning hours to the midday peak, and then decreases through the afternoon to near zero again in the hours shortly before sunset, requiring all transmission line ratings used for near-term transmission service to reflect solar heating based on the sun's position may produce more accurate transmission line ratings than the daytime/nighttime assumptions required under Order No. 881.
86. As the Commission explained in Order No. 881,
87. However, upon considering the NOI comments, and based on subsequent outreach and further research, we preliminarily find that the benefits of more accurate transmission line ratings that reflect solar heating based on the sun's position are significant. This is particularly true during the hours right after sunrise and right before sunset—hours with relatively little solar heating. Because electric demand often peaks in the hours just before sunset, assuming midday solar heating during these hours may understate the amount of transfer capability available and increase the costs and challenges of reliably meeting peak demand. Additionally, regions with high levels of solar generation may benefit from the additional transmission capacity as load rises and solar generation declines, which further demonstrates that understating the amount of transfer capability available during these hours may increase the costs and challenges of maintaining reliability.
88. The record in the Order No. 881 proceeding indicates that considering solar heating based on the sun's position can affect a transmission line's rating by as much as 5% to 11%.
89. We seek comment on our preliminary proposal to require that all transmission line ratings used for near-term transmission service reflect solar heating based on the sun's position for the relevant geographic location, date, and hour under a clear sky. We also seek comment on the costs, non-financial burdens, and financial and non-financial benefits of this requirement.
90. As noted in section III. The Potential Need for Reform above, we preliminarily find that transmission line ratings used for near-term transmission service that do not reflect solar heating based on the sun's position may result in unjust and unreasonable wholesale rates. In addition to the requests for comments on specific aspects of this preliminary proposal, we seek comment on whether reflecting solar heating based on the sun's position in transmission line ratings used for near-term transmission service would result in more accurate transmission line ratings and would, in turn, better reflect system transfer capability. We also seek comment on whether the greater accuracy of transmission line ratings would result in cost savings and just and reasonable wholesale rates. Further, given that the sun's position is forecastable without uncertainty, we seek comment on whether transmission providers should reflect solar heating based on the sun's position for transmission service longer than 10 days forward.
91. We preliminarily propose to require that all transmission line ratings used for near-term transmission service reflect solar heating based on up-to-date forecasts of forecastable cloud cover. Transmission providers will need to reflect, for each hour, the effect of forecastable cloud cover on its transmission line ratings. Transmission providers would have the discretion to calculate the effect of the sun's position on their transmission line ratings using more granular time increments. This proposal does not imply that the cloud cover must be forecastable for the entire 10 days, but rather that transmission providers should reflect forecastable cloud cover in their up-to-date forecasts as that information becomes available.
92. We preliminarily propose to define forecastable cloud cover as cloud cover that is reasonably determined, in accordance with good utility practice, to be forecastable to a sufficient level of confidence to be reflected in transmission line ratings. We clarify that we are not proposing to require that transmission providers seek to forecast individual clouds, or even most cloud formations. We seek comment on this definition of forecastable cloud cover and the level of confidence that is necessary to incorporate and benefit from a cloud cover forecast.
93. We also seek comment on whether sensors are needed to accurately forecast cloud cover. If commenters believe local sensors are required to accurately forecast cloud cover events, we seek comment on how such sensors improve such forecasts.
94. We note that some cloud cover events may be more easily forecast forward than other cloud cover events. Some overcast conditions will not be forecastable at all. For many or most weather systems that produce forecastable cloud cover conditions, such conditions may be forecastable only for a short time ahead of a given operating hour, rather than for the full 10 days forward. For other very large weather systems, or for periods of seasonal overcast conditions in some parts of the country, such conditions may be forecastable for longer periods.
95. Therefore, we propose to limit the proposed requirement to reflect up-to-date forecasts of
96. We seek comment on the costs, non-financial burdens, and financial and non-financial benefits of reflecting solar heating through the use of up-to-date forecasts of forecastable cloud cover in transmission line ratings used for near-term transmission service, and the extent to which this practice would increase the accuracy of the resulting transmission line rating. Further, we seek comment on whether transmission providers should reflect up-to-date forecasts of forecastable cloud cover in transmission line ratings used for transmission service up to 10 days forward or whether these forecasts should be reflected only in the transmission line ratings used for a shorter time frame, such as 36 or 48 hours forward. If parties believe sensors are required to accurately forecast cloud cover, we seek comment on whether cloud cover should alternatively be reflected only in transmission line ratings for transmission lines that exceed a congestion threshold, and what that threshold should be. We seek comment on whether, alternatively, up-to-date forecasts of forecastable cloud cover should be reflected only in the ratings of the more limited set of transmission lines we propose would be subject to a wind requirement (described below).
97. We preliminarily propose to additionally require certain transmission lines to reflect up-to-date forecasts of wind conditions, including wind speed and direction, in their transmission line ratings for use in 48-hour transmission service, as defined below in section IV.A.3.a.i.a 48-Hour Transmission Service. We preliminarily propose that this wind requirement would be implemented only on transmission lines
98. We preliminarily propose that, for each transmission line that is subject to the wind requirement, individual transmission providers apply good utility practice to determine which specific electric system equipment associated with that line—beyond the conductor—is affected by wind conditions and thus also would be subject to the wind requirement. This approach is similar to that taken by the Commission in Order No. 881 with respect to AARs.
99. We preliminarily propose to require transmission providers to reflect up-to-date forecasts of wind speed and wind direction in transmission line ratings on lines subject to the wind requirement. We propose to apply this wind requirement to only transmission lines exceeding thresholds for wind speed and congestion. A potential final rule imposing such a wind requirement would modify
100. As noted in section III. The Potential Need for Reform above, we preliminarily find that certain transmission line ratings that do not reflect up-to-date forecasts of wind speed and direction may result in unjust and unreasonable wholesale rates.
101. For transmission lines subject to a wind requirement, we preliminarily propose to require transmission providers to use transmission line ratings that account for wind speed and direction as the basis for evaluating requests for transmission services that will end within 48 hours of the transmission service request (48-hour transmission service). For those transmission lines, this approach would require transmission providers to use transmission line ratings that reflect up-to-date forecasts of wind speed and direction to evaluate requests for hourly and daily point-to-point transmission services under the
102. In the NOI, the Commission asked about the timeframes (and corresponding types of transmission service) for which DLRs should be used. In response, some commenters argue that DLRs should be used for a variety of transmission services, including hourly, daily, and weekly services.
103. Accordingly, we seek comment on the appropriateness of the proposed 48-hour time horizon. We note that current DLR implementations reflect the use of DLRs across timeframes sufficient to include DLRs in the real-time and day-ahead markets of RTOs/ISOs. For example, PPL uses DLRs in the PJM real-time and day-ahead energy markets.
104. The appropriate time horizon for which transmission service evaluations should incorporate a wind requirement depends on whether the accuracy benefit of incorporating wind forecasts exceeds the burden of calculating and managing the ratings for such forward hours. At longer time horizons, forecast uncertainty increases, perhaps resulting in the need for larger forecast margins to ensure the necessary level of confidence in the forecasts.
105. Because the bulk of the effort of calculating and archiving of transmission line ratings on transmission lines subject to the wind requirement is in the setup of the automated systems, we anticipate that the data burdens of this option would not vary significantly depending on the time horizons.
106. Considering all of these factors, we preliminarily find that a 48-hour time horizon provides a reasonable balance between the benefits and burdens associated with a wind requirement and may therefore be appropriate for a potential wind requirement. Such a timeframe seems to strike the right balance of creating significant benefits by covering important transmission service transactions, such as those in the RTO/ISO day-ahead markets, while reflecting that implementing a wind requirement for longer timeframes may not supply sufficient value to justify the burden. We seek comment on whether the 48-hour time horizon is the appropriate timeframe or whether the Commission should consider requiring a longer time horizon (
107. We preliminarily propose that transmission providers, for their transmission lines subject to the wind requirement, install sensors that measure wind speed and direction as
108. We seek comment on whether the Commission should require a transmission provider to determine what sensors, if any, need to be installed for forecast validation and forecast training in order to ensure that forecasts of wind speed and direction are sufficiently accurate. We propose that, in doing so, transmission providers should consider a non-exhaustive list of factors including: average ambient wind speed at the relevant altitude(s), distribution of wind direction at the relevant altitude(s), length and configuration of conductors, local topography, local vegetation, and position of weather stations. We seek comment on what other factors transmission providers should be required to consider when determining what sensors, if any, need to be installed.
109. Further, if commenters believe that detailed sensor configuration requirements are not necessary for transmission lines subject to a wind requirement, we seek comment on why that approach is preferable and how such requirements should be constructed.
110. We also seek comment on whether the Commission should mandate sensors at all. We understand that some vendors are offering approaches to DLRs that do not use sensors.
111. We also seek comment on whether, if a wind requirement generally requires the use of sensors, the Commission should give transmission providers the discretion to determine that
112. We seek comment on the applicability of NERC Facility Ratings Reliability Standard FAC-008-5 and NERC Transmission Relay Loadability Reliability Standard PRC-023-4 to the wind requirement and whether any changes would need to be made to these or other NERC Reliability Standards to accommodate a potential wind requirement.
113. Further, we seek comment on the type and costs of needed communications equipment, computer hardware, and computer software required to integrate sensors and associated data into the transmission provider's EMS. We seek comment on whether changes are needed to the NERC Critical Infrastructure Protection (CIP) Reliability Standards or other industry practices to ensure the physical security and cybersecurity of the sensors, data communications, transmission line rating and forecasting systems, and EMS improvements used to implement a wind requirement. In particular, we seek comment on whether additional controls are necessary to validate that sensors are operating correctly and that any changes in ratings based on sensor data are appropriate for that particular transmission line, taking all relevant considerations into account. Further, we seek comment on whether entities should have a backup or other means to acquire the data or establish transmission line ratings if the DLR systems are compromised or not functioning properly.
114. As discussed in section II.C.3. Current Use of DLRs, research and select experience suggest that incorporating a wind requirement could provide significant benefits through more accurate line ratings. However, the record gathered through the NOI suggests that implementing the wind requirement would produce significant benefits only under certain circumstances.
115. We recognize that implementing the wind requirement may present some challenges (particularly during the initial implementation), such as siting
116. For purposes of counting a transmission provider's total number of transmission lines and determining the number of transmission lines that would be subject to a wind requirement in a given year, we preliminarily propose to define a single transmission line as the transmission conductor that runs between its substation or switchyard start and end points (
117. We seek comment on the preliminary proposal to require that transmission providers implement the wind requirement, for any transmission lines that meet the thresholds, on at least 0.25% of their transmission lines in each annual cycle. We seek comment on approximately how many jurisdictional transmission lines 0.25% represents, and how many transmission lines the average transmission provider operates. We seek comment on whether the Commission should adopt a different initial annual percentage. Alternatively, should the Commission consider a requirement for transmission providers, after a few years of DLR experience, to review their pace of implementation? We also seek comment on whether the Commission would need to adjust this approach if it determines that sensors are not needed for the wind requirement. We seek comment on whether we should consider alternative approaches to limiting a transmission provider's annual implementation requirements, such as limits based on the peak load on the transmission provider's transmission system or other appropriate criteria or metrics. We also seek comment on whether and how considerations such as staffing, supply chains, vendor availability, and limited experience with sensor technology for many transmission providers should factor into any such annual limitation on implementation of the wind requirement. We also seek comment on the appropriateness of establishing a limit on the number of transmission lines subject to a wind requirement.
118. We preliminarily propose to apply a wind requirement only to transmission lines where at least 75% of the length of the transmission line is located in areas with historical average wind speeds of at least 3 meters per second (m/s) (6.7 miles per hour) measured at 10 meters above the ground, roughly the height of most transmission lines. While we believe that requiring application of a wind speed threshold over the entire length of the line could be too limiting, ultimately excluding transmission lines where application of the wind requirement would yield net benefits, we also believe that including too long of a non-windy portions of the line will cause those segments to bind more often and limit the additional capacity from the wind requirement. Thus, we have proposed 75% of the line length located in areas with wind as the threshold. In NOI comments, WATT/CEE suggests using a similar wind speed threshold of 4 m/s.
119. We note that historical wind speed data are published in graphical and raster format for the continental United States by the National Renewable Energy Laboratory
120. We seek comment on the proposed wind speed threshold of 3 m/s, on average, including whether another wind speed would be a more appropriate threshold. We also seek comment on the proposal to apply the wind requirement only on transmission lines where at least 75% of the transmission line length is located in areas with average wind speeds at or above the threshold, including whether another approach to applying the wind speed threshold would be more appropriate for transmission lines located in areas both above and below the threshold. Further, we seek comment on the preliminary proposal to require that transmission providers use NREL data for historical wind speeds at 10 meters above the ground for purposes of evaluating whether a transmission line is above or below the wind speed threshold, and whether an alternative data source would be more appropriate.
121. Finally, we acknowledge that wind direction is another important factor. Wind moving perpendicular to a transmission line cools the line much more effectively than wind moving parallel to the line. However, we preliminarily find that establishing a threshold that includes an average historical wind direction would be much more burdensome to calculate because it would require that the transmission provider determine the wind direction relative to the position of each transmission line. We seek comment on whether wind direction should also be considered when identifying transmission lines subject to a wind requirement, and if so, how such consideration should be structured and what data sources should be used.
122. We preliminarily propose to use congestion caused by a transmission line rating as a second threshold for identifying the transmission lines that would be subject to a wind requirement. Below, we discuss how to calculate a congestion value for each transmission line in RTO/ISO regions and, separately, in non-RTO/ISO regions, and how to establish a threshold to identify congested transmission lines in each region. Transmission lines that have no congestion or congestion levels below the proposed threshold would not be subject to any wind requirement even if they meet the wind speed threshold because, absent sufficient levels of congestion, we do not expect the benefits resulting from a more accurate transmission line rating to exceed the costs.
123. We seek comment on the appropriate congestion cost threshold to use in the RTO/ISO regions. In response to the NOI, some commenters propose to directly use congestion costs to indicate which transmission lines should be subject to a DLR requirement in RTO/ISO regions, and even propose specific annual congestion cost thresholds. At the low end of the range of suggestions, WATT/CEE and Clean Energy Parties recommend requiring DLRs on any transmission line with congestion costs of at least $500,000 over the past year.
124. At this point, the Commission has a limited record on the best approach for calculating congestion costs in RTOs/ISOs for purposes of defining a congestion threshold for a wind requirement. As discussed above in section II.D.2. Existing Data Reporting on Congestion, or Proxies of Congestion, RTOs/ISOs regularly compute and publish various congestion metrics, but these metrics generally relate to marginal congestion costs rather than the total congestion costs caused by a transmission constraint. Thus, we seek comment on what approaches to calculating or estimating congestion costs caused by a transmission constraint would be most appropriate to use as part of a congestion threshold for a potential wind requirement in RTOs/ISOs. Relatedly, we seek comment on whether congestion costs caused by a transmission constraint should be determined based on the real-time markets, day-ahead markets, or a combination of the two.
125. Further, we seek comment on what congestion threshold the Commission should establish in RTO/ISO regions for a potential wind requirement, recognizing that the appropriate level of the congestion threshold could vary depending on the method used to calculate congestion costs. For example, were the Commission to use an annual congestion method as assumed by some commenters in response to the NOI, we seek comment on the values proposed and approximately how many transmission lines would meet the various thresholds. We note that WATT/CEE proposed $500,000 per year,
126. We seek comment on how RTOs/ISOs should measure congestion costs at interties and whether the same congestion threshold should be used for both intertie and internal congestion costs measurements. We also seek comment on how entities in non-RTO/ISO market constructs, such as the Western Energy Imbalance Market, should measure congestion costs at their interties.
127. Finally, we seek comment on whether a different congestion threshold would be appropriate if it is determined that the wind requirement does not require sensors. If the wind requirement can be met without sensors, this may lower the costs necessary to comply with the requirement. The lower costs may in turn provide more net benefits at lower levels of congestion.
128. In non-RTO/ISO regions, congestion costs are not reflected separately as a component in market
129. We preliminarily propose to require that transmission providers record information for five types of triggering events where firm transmission service is denied or disrupted because of a transmission line's line rating. This information would provide the basis to identify transmission lines that are subject to a wind requirement.
130. In particular, the five events where firm transmission service is denied or disrupted because of a transmission line's line rating are: (1) denials of requested firm point-to-point transmission service; (2) denials of requests to designate network resources or load; (3) curtailment of firm point-to-point transmission service under section 13.6 of the
131. While we preliminarily propose to reflect each hour of a firm point-to-point transmission service reservation that is denied in the calculation of LER, in practice transmission customers do not typically schedule transmission service for every hour of their long-term reservations. For example, a transmission customer requesting a 100 MW reservation for annual transmission service may intend to use that service only during select hours totaling only six months of that year. Recognizing that fact, we seek comment on whether, for denials of requested firm point-to-point transmission service, the number of hours reflected in the LER calculations should reflect a discount from the number of hours reflected in the actual request. If so, we seek comment on what such discount factor(s) should be, and whether a specific discount factor should apply to all such denied firm point-to-point services, or if such a discount factor should vary by service type (daily, weekly, monthly, or yearly) to reflect how different service types might be scheduled at different rates.
132. We seek comment on whether it would be appropriate to include a sixth triggering event as a proxy for congestion in the LER. This event would account for times when ATC in the operating hour
133. For any triggering event, we preliminarily propose to require the transmission provider to record the: (1) date/time of the record being added to its database of transmission line ratings;
134. The details of how the transmission provider would determine the impacted MWh vary by event type. For instances of denied firm point-to-point service, the transmission provider would determine the impacted MWh by multiplying the MW of the service requested by the duration of the request in hours.
135. We seek comment on what LER metric threshold would be appropriate to identify transmission lines that are sufficiently congested to be subject to a wind requirement, along with an estimate of how many transmission lines would meet any discussed threshold. As proposed above, the LER measurement that will be compared to such a threshold would be measured in impacted MWh. One potential approach is to attempt to identify an LER threshold that would be the rough equivalent of any congestion cost threshold that we might ultimately adopt for RTO/ISO regions (discussed above), given an assumed cost of impacted MWh. For example, if one assumes a cost of an impacted MWh of $100, then an LER threshold that would be the rough equivalent of a $1 million RTO/ISO congestion cost threshold would be calculated as ($1,000,000)/($100/MWh) = 10,000 MWh. However, this would only be a rough equivalence because what is measured by LER and the congestion cost that we propose to be measured for RTO/ISO regions are not reflective of the exact same events, and any assumption for the cost of an impacted MWh will necessarily need to be some estimate of the average cost of such MWh. Another potential approach is to use hourly systemwide incremental costs, which are already required to be used for both energy imbalances under Schedule 4 and generator imbalances under Schedule 9 of the
136. We seek comment on alternatives to our preliminary proposal of using LER as a proxy for congestion in non-RTO/ISO regions. In particular, we seek comment on the possibility of using information that is currently non-public, such as redispatch costs, to measure actual congestion costs that are incurred in non-RTO/ISO regions.
137. As an alternative to the LER metric, we seek comment on whether non-RTO/ISO regions could measure congestion costs to identify candidate transmission lines for a potential wind requirement. Under section 33.2 of the
138. We also seek comment on whether measuring congestion costs in non-RTO/ISO regions should be used in
139. Finally, we seek comment on additional methods for calculating congestion costs both within non-RTO/ISO regions and at interties connecting with non-RTO/ISO regions. For instance, average hourly incremental/decremental cost (that transmission providers are required to use under
140. We preliminarily propose to allow transmission providers to self-except a transmission line from the wind requirement if it determines, consistent with good utility practice: (1) that the transmission line rating is not affected by wind conditions; or (2) that implementing the wind requirement on such a transmission line would not produce net benefits. These self-exceptions recognize that there may be instances where the congestion threshold and wind speed threshold criteria identify transmission lines that would nonetheless not be good candidates for implementation of a wind requirement. For example, certain transmission lines that might not benefit from the wind requirement, such as a partially underground transmission line where the cable is the limiting element, may nonetheless trigger the proposed criteria. As another example, applying the wind requirement to a particular transmission line may only relieve thermal constraints slightly before a voltage or stability constraint bind, resulting in little value for the cost of implementing the wind requirement.
141. Under either self-exception category, a transmission provider would log the self-exception and justification in its transmission line rating database (as outlined below). This proposal is supported by NOI comments that argue a wind requirement should provide exceptions for cost, reliability, and other negative impacts, and assert that the
142. We seek comment on the concept of allowing a transmission provider to self-except transmission lines from the wind requirement.
143. The first self-exception category—that the transmission line rating is not affected by wind speed—is similar to the exception to the AAR requirement established by Order No. 881 and set forth in Attachment M of the
144. To implement the second self-exception category, we preliminarily propose that transmission providers conduct a net benefit analysis that sums all of the anticipated benefits attributable to the implementation of the wind requirement on the relevant line and, similarly, sums all of the costs attributable to the wind requirement on the relevant line. If the benefits do not exceed the costs, then a transmission provider may self-except the transmission line. Examples of benefits that could be considered in a net benefit analysis include: production cost savings (including increased transmission capacity, reduced congestion costs, reduced dispatch costs, and other related factors), and deferred costs of new transmission lines. Examples of costs in a net benefit analysis include: the installation of sensors, as well as the communications equipment or other costs attributable to implementing the wind requirement at the specified location or on the specified transmission lines. We preliminarily propose that transmission providers would not include, in the net benefit analysis, costs that they must incur to implement DLRs generally,
145. We also preliminarily propose that a transmission provider that makes a self-exception finding must document, in its database of transmission line ratings and transmission line rating methodologies on OASIS or another website with authentication control including multi-factor authentication,
146. Under this preliminary proposal, a transmission provider would not be required to implement the wind requirement on a specific transmission line if it takes a self-exception for that particular transmission line, but a self-exception would not reduce the transmission provider's overall implementation burden with respect to the wind requirement that year. A transmission provider would still be required to implement the wind requirement on its next most congested transmission line, unless no further transmission lines met the criteria for the wind requirement that year.
147. Furthermore, under our preliminary proposal, a transmission provider would be required to reevaluate and log any exceptions taken every year during the annual wind requirement implementation cycles for the wind requirement as discussed in the IV.B. Compliance and Transition and Implementation Timelines section. In some instances, this proposal may merely require a review of the inputs and assumptions to the original self-exception analysis, to verify that they have not changed. In other instances, if such inputs and assumptions have changed, then analyses would need to be updated. If the technical basis for an exception is found to no longer apply, the transmission provider would be required to update the relevant transmission line rating(s) in a timely manner. We seek comment on this proposal for annual re-evaluations of self-exceptions, including whether another timeframe is more appropriate. We seek comment on the information that should be included in the transmission line rating log to justify a self-exception under either self-exception finding.
148. We note that Order No. 881 and the System Reliability section of the
149. We propose to allow any person that disagrees with a transmission provider's self-exception to challenge that self-exception by filing a complaint with the Commission under FPA section 206. Examples of potential complaints concerning a transmission provider's self-exceptions could include that a transmission provider improperly claimed that the transmission line is not affected by wind speed, or that a transmission provider made a faulty demonstration that the transmission line ratings subject to wind requirement would not produce net benefits on the transmission line, such as through improper calculations of costs or benefits. The Commission could also institute an investigation under FPA section 206 on its own motion to examine any self-exception. We seek comment on whether there should be another means to challenge a self-exception.
150. In cases when a transmission provider determines that a transmission line subject to a wind requirement no longer exceeds the thresholds for high levels of congestion and wind speed, we preliminarily propose that the wind requirement no longer apply to the transmission line and that transmission providers will no longer be required to include wind conditions when calculating the transmission line rating. For example, the transmission provider would be permitted,
151. We preliminarily propose new transparency reforms, including requirements to enhance data reporting practices related to congestion in non-RTO/ISO regions to identify candidate transmission lines for a wind requirement, and posting and retention of congestion data in both RTO/ISO and non-RTO/ISO regions. The proposed reforms will provide transparency into the transmission providers' identification of transmission lines that would be subject to the wind requirement and enable the Commission and stakeholders to verify the transmission providers' analysis. Order No. 881 already requires a database of transmission line ratings and methodologies to be posted.
152. Some commenters in the NOI proceeding support adopting the same transparency measures for transmission lines subject to a wind requirement as the Commission adopted in Order No. 881.
153. As noted in section III. The Potential Need for Reform above, we preliminarily find that existing transmission line ratings and transmission line rating methodologies may result in unjust and unreasonable wholesale rates that result from inaccurate transmission line ratings. In addition to the preliminarily proposed reforms described above, we make a concomitant preliminary finding that certain transparency reforms are necessary to implement the preliminary proposal. In addition to the requests for comments on specific aspects of the preliminary proposal, we seek comment on whether the proposed data reporting practices related to congestion in non-RTO/ISO regions that would identify transmission lines that are candidates for a wind requirement and the posting
154. As preliminarily proposed above in section IV.A.3.b.iii.b.1. Limiting Element Rate, transmission providers would be required to maintain a database of the following events: (1) denials of requested firm point-to-point transmission service; (2) denials of requests to designate network resources or load; (3) curtailment of firm point-to-point transmission service under section 13.6 of the
155. As discussed below in section IV.4. Requirements for Reflecting Solar and/or Wind in Transmission Line Ratings in RTOs/ISOs, we preliminarily propose that RTOs/ISOs would use the LER metric only for congestion at their seams, and not on the internal transmission lines for which they have explicit congestion data. However, we also preliminarily propose to require that transmission providers in RTOs/ISOs maintain data on annual overall congestion costs caused by binding constraints on each transmission line. Finally, we also seek comment on whether any changes or additional data requirements would be needed to track congestion costs, or causes of congestion costs, in RTO/ISO regions.
156. Similar to the Commission's determination in Order No. 881, we preliminarily propose to require transmission providers to post on OASIS or another website with authentication control including multi-factor authentication the new congestion databases associated with this rulemaking, such as an LER metric database, with a data retention requirement of at least five years. We preliminarily find that, without further transparency, the Commission and market participants would not have the information needed to determine the transmission lines on which transmission providers in non-RTO/ISO regions are required to implement the wind requirement.
157. We seek comment on this congestion data transparency proposal, including whether the congestion data proposed to be recorded in the congestion databases or other elements should be posted on OASIS or another website with authentication control including multi-factor authentication. We also seek comment on posting on OASIS or another website with authentication control including multi-factor authentication the data associated with the alternative methods to estimate congestion costs in non-RTO/ISO regions and at seams with non-RTO/ISO regions discussed above in section IV.A.3.b.iii.b.2.i Non-RTO/ISO Congestion Costs such as recording redispatch costs caused by a given transmission constraint. We also seek comment on whether posting of additional congestion cost data, beyond the overall congestion costs caused by binding constraints on each transmission line, should be required in RTO/ISO regions. We seek comment on whether a different data posting, access restrictions, and data retention requirement is appropriate.
158. In Order No. 881, the Commission required the maintenance and posting of all transmission line ratings in a line rating database.
159. However, given the unique circumstances surrounding a potential wind requirement, including the need to be able to evaluate the effectiveness of such a requirement, we preliminarily propose that, for transmission lines subject to a wind requirement, the transmission provider would be required to post the transmission line ratings for each period calculated both with
160. In Order No. 881, the Commission required AARs to be used (1) in the day-ahead and real-time energy markets, (2) in any reliability or intra-day reliability unit commitment processes, and (3) for transmission service over RTO/ISO seams.
161. For the solar requirement, which we propose to apply to all transmission lines, we preliminarily propose that RTOs/ISOs use transmission line ratings that reflect solar heating based on the sun's position and forecastable cloud cover in their day-ahead and real-time markets as well as for seams transactions that are near-term transmission service (
162. For the wind requirement, which we propose to apply only to select transmission lines, we preliminarily propose a different approach. Specifically, we preliminarily propose that RTOs/ISOs comply with the wind requirement
163. We seek comment on these preliminary proposals for applying the proposed solar and wind requirements to transmission line ratings in RTOs/ISOs. In particular, we seek comment on whether RTOs/ISOs should instead
164. In Order No. 881, the Commission required that transmission providers use uniquely determined emergency ratings for contingency analysis in the operations horizon and in post-contingency simulation of constraints. The Commission also required that such emergency ratings include separate AAR calculations for each emergency rating duration used.
165. We preliminarily propose to require that all uniquely determined emergency ratings used for contingency analysis in the operations horizon and in post-contingency simulation of constraints must reflect solar heating based on the sun's position and up-to-date forecasts of forecastable cloud cover. We preliminarily find that applying the solar requirement to both normal and emergency ratings will enhance the accuracy of transmission line ratings. We seek comment on this proposed approach.
166. In addition, for transmission lines subject to a wind requirement, we preliminarily propose to require that all uniquely determined emergency ratings used for contingency analysis in the operations horizon and in post-contingency simulation of constraints must reflect up-to-date forecasts of wind speed and direction, consistent with the wind requirement for normal ratings. We preliminarily find that, for transmission lines that will be subject to a wind requirement, reflecting wind conditions in both normal and emergency ratings will enhance the accuracy of transmission line ratings. We seek comment on this proposed approach.
167. In statistical forecasting, “quantile forecasting” is the practice of forecasting upper or lower limits of a particular future observation.
168. We understand that line ratings always have an associated confidence level. Because such confidence levels are typically relatively high, such as 98%, in most instances the forecasted transmission line ratings are conservative, such that the observed weather (when that forecasted hour becomes the operating hour) is within the range predicted by the forecast. However, infrequently, as the forecast for a given hour is updated it could cause a transmission provider to have to manage (through curtailments or other actions) a reduction in transmission capability from what had been previously forecasted.
169. The Commission's outreach and research indicate that it is commonplace for DLRs to be calculated to a default confidence of 98%. We preliminarily believe that there may be some benefit to having a default confidence level for calculations of transmission line ratings subject to the solar and/or wind requirement across regions: first, to discourage the use of overly conservative confidence levels, which will erode the benefits of using weather forecasts;
170. Given the importance of confidence levels to transmission line ratings accuracy and reliability, we seek comment on whether the Commission should establish a default confidence level transmission providers are required to use when calculating transmission line ratings subject to the solar and/or wind requirement, unless they document a particular reason for needing and using a different confidence level. If so, we seek comment on what such a default confidence level should be, and how the use of confidence levels different from the default should be documented by transmission providers to justify such deviations.
171. If such a default confidence level were adopted, we preliminarily propose that it apply
172. We preliminarily propose to promulgate these potential reforms through revisions to the
173. While the requirements we preliminarily propose here would be imposed on transmission providers, we recognize as we did in Order No. 881 that transmission owners determine transmission line ratings.
174. Recognizing that the proposed solar requirement may not require installing sensors, we preliminarily propose that this requirement be met no more than twelve months after any final rule is published in the
175. We preliminarily propose to require transmission providers to undertake an annual wind requirement implementation cycle. Starting with the effective date of any potential final rule, transmission providers would gather congestion data for each transmission line for one year, as described above in section IV.A.3.b.iii. Congestion Threshold, and determine during that year which of their transmission lines meet the wind speed threshold, as described above in section IV.A.3.b.ii. Wind Speed Threshold. Finally, for any transmission lines that meet the determined wind speed and congestion thresholds, transmission providers would have six months to implement the necessary systems, based on the minimum implementation requirement as described above in section IV.A.3.b.i. Number of Transmission Lines Subject to the Wind Requirement Annually, to implement the wind requirement. This proposal aims to provide ample time for transmission providers to use congestion data that reflect implementation of AARs as required by Order No. 881, while also ensuring that a wind requirement is applied to transmission lines that would benefit from a wind requirement within a reasonable timeframe. We seek comment on this proposed approach. We specifically seek comment on the duration of the data collection period, and implementation period. While we believe one year of congestion data will be sufficient for the first implementation cycle, we seek comment on whether this is the appropriate time period for data collection and whether the Commission should mandate a different timeframe for subsequent cycles (
176. Most commenters argue that the Commission should not require implementation of any DLR requirements until after transmission providers have implemented AARs in July 2025 and gained experience with the use of AARs.
177. We seek comment on the preliminary proposal to use an annual implementation cycle. We also seek comment on whether the proposed annual implementation period would accurately identify transmission lines for implementation of the wind requirement or if the Commission should require (or allow, if preferred) a lower frequency (such as every two to three years) of cycles and higher lines-per-cycle limit for the wind requirement cycle.
178. As described above in section IV.A.3.b.i. Number of Transmission Lines Subject to the Wind Requirement Annually, we preliminarily propose that transmission providers be required to implement the wind requirement on the whole number greater than 0.25% (or 1 in 400) of the transmission provider's transmission lines in each annual implementation cycle. As described above, transmission providers would be required to implement the wind requirement only on transmission lines that meet the congestion threshold and wind speed threshold.
179. We preliminarily propose to require transmission providers to implement the wind requirement on candidate transmission lines starting with the most highly congested transmission line (based on the congestion metric value, as discussed above) and moving on to the next most highly congested transmission line, and so on. This process would continue until either the yearly implementation requirement is met or there are no more candidate transmission lines waiting for implementation of the wind requirement.
180. Transmission providers (or transmission owners in cases where the transmission owners and transmission provider are not the same entity) that are operating company subsidiaries of the same public utility holding company may operate their transmission facilities as a single transmission system. We seek comment on whether such transmission systems should be counted together for purposes of the transmission providers' compliance with any wind requirement, such as for counting the transmission providers' total number of transmission lines and for determining the number of transmission lines that would be included in the transmission providers' implementation cycle. This may result in implementation of the wind requirement being distributed unevenly across transmission providers that are operating company subsidiaries of the same public utility holding company. We seek comment on whether transmission providers in such situations, or the RTOs/ISOs of which they are members, should propose on compliance how they would treat such transmission providers and transmission systems.
181. The Commission invites interested persons to submit comments on the matters and issues proposed in this ANOPR to be adopted, including any related matters or alternative proposals that commenters may wish to discuss. Comments are due October 15, 2024 and Reply Comments are due November 12, 2024. Comments must refer to Docket No. RM24-6-000, and must include the commenter's name, the organization they represent, if applicable, and their address in their comments. All comments will be placed in the Commission's public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters.
182. The Commission encourages comments to be filed electronically via the eFiling link on the Commission's website at
183. Commenters that are not able to file comments electronically may file an original of their comment by USPS mail or by courier-or other delivery services. For submission sent via USPS only, filings should be mailed to: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street NE, Washington, DC 20426. Submission of filings other than by USPS should be delivered to: Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
184. In addition to publishing the full text of this document in the
185. From the Commission's Home Page on the internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.
186. User assistance is available for eLibrary and the Commission's website during normal business hours from the Commission's Online Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at
Electric power rates, Electric utilities, Reporting and recordkeeping requirements.
By direction of the Commission. Commissioner Rosner is not participating.
The following appendix will not appear in the Code of Federal Regulations.