The Department's regulation at 14 CFR 259.5 requires U.S. and foreign airlines to have and adhere to a customer service plan that identifies the services that an airline provides to mitigate passenger hardships resulting from flight cancellations and misconnections. Under this regulation, airlines are free to choose the services to provide passengers affected by flight disruptions. In 2022, after an unacceptable level of flight delays and cancellations, the Department carefully reviewed these plans to determine how U.S. airlines were caring for their passengers and found that the airlines' commitments in these plans did not guarantee adequate services even for flight delays and cancellations within the airline's control. However, after a two-year DOT push to improve the passenger experience, today, almost all of the largest U.S. airlines voluntarily commit in their customer service plan to provide services such as meals, lodging, and free rebooking to passengers impacted by cancellations and lengthy delays when airlines are responsible. 1 While the Department had also urged U.S. airlines to voluntarily commit to compensating passengers experiencing significant flight disruptions due to circumstances within the airline's control, no U.S. airline currently guarantees cash compensation, and only three airlines guarantee compensation in credits or frequent flyer miles for airline-caused delays and cancellations.

The ability of airlines to choose the services that they provide to mitigate passenger inconveniences resulting from flight disruptions under current U.S. law contrasts with consumer protection regimes in other jurisdiction like the European Union (EU) and Canada, where airlines are required to provide compensation and assistance to consumers affected by flight disruptions. In the EU, airlines must provide compensation to consumers facing cancellations or lengthy delays unless the airline proves that the cancellation or delay is “caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.”  2 Under that regime, airlines must also provide services, including meals, hotels, and ground transportation to and from the hotel (for overnight cancellations and delays) to passengers facing lengthy delays or cancellations and rebooking to passengers whose flights are cancelled, regardless of the cause of the delay or cancellation and whether it is unavoidable by the airline. 3 United Kingdom regulations impose similar requirements and also use the “extraordinary circumstances” construct for compensation, with compensation amounts established in pounds. 4 Current Canadian Air Passenger Protection Regulations (APPRs) require airlines to provide compensation for lengthy delays and cancellations that are controllable by the airline and not required for safety purposes and to provide services, including meals, overnight accommodations, and ground transportation to and from the hotel (for overnight cancellations and delays), to passengers for lengthy delays and cancellations that are controllable by the airline, regardless of whether the controllable delay or cancellation is required for safety. 5 Brazilian regulations also contain similar protections for air passengers, including a right to compensation, meals, and hotel accommodations for cancellations and lengthy flight delays. 6

In developing this ANPRM, Department staff met with individuals from the Canadian Transportation Agency (CTA) on June 1, 2023, and the European Commission (EC) on June 12, 2023, to better understand the requirements under those existing regulatory regimes. On July 19, 2023, at the request of the International Air Transport Association (IATA) and Airlines for America (A4A), Department staff met with representatives of those groups to hear their perspective on compensation and assistance to passengers in the event of flight delays and cancellations. On May 10, 2024, at the request of AirHelp, Department staff met with representatives from that organization about its experience filing claims on behalf of passengers with airlines covered by compensation requirements in foreign jurisdictions, including the EU. On September 10, 2024, Department staff attended a panel discussion moderated by the National Consumers League, supported by a grant from AirHelp, and featuring speakers from the Travel Technology Association, U.S. Public Interest Research Group, the White House, and AirHelp, at which those groups discussed this contemplated rulemaking. Senator Edward Markey also gave remarks at that event. All documents submitted to the Department pertaining to these meetings and a summary of the panel discussion have been added to the rulemaking docket. 7

Cancellations and lengthy flight delays pose significant inconvenience, stress, and financial cost to impacted passengers. Such delays and cancellations cause passengers to lose time, may disrupt other reservations (such as hotel reservations), and may cause passengers to miss important events. 8 Flight cancellations, delays, and missed connections occurred in significant numbers as airlines adjusted their operations to meet the post-COVID pandemic air travel demand and have been the subject of a large number of the complaints about airlines that consumers have submitted to the Department since then. 9

According to flight performance data reported by the largest U.S. carriers to the Department's Bureau of Transportation Statistics (BTS), in calendar year 2022, the carriers combined cancelled 190,038 domestic scheduled passenger flights (approximately 2.7 percent of their total domestic scheduled passenger flights), and over 1.4 million of their domestic scheduled passenger flights (more than 20 percent of their total domestic scheduled passenger flights) were delayed in arriving by 15 minutes or more. 10 Of the more than1.4 million delayed flights, 85,892 (approximately 6.1 percent) were delayed three hours or more. 11

In calendar year 2023, these carriers combined cancelled 93,897 domestic scheduled passenger flights (approximately 1.3 percent of their total domestic scheduled passenger flights). 12 Further, more than 1.4 million of the carriers' domestic scheduled passenger flights (approximately 20 percent of their total domestic scheduled passenger flights) were delayed 15 minutes or more that year. 13 Of the more than 1.4 million delayed flights, 95,024 of them were delayed three hours or more, which was approximately 6.8 percent of total flights delayed that year. 14

A significant percentage of the domestic cancellations that air carriers reported to BTS in 2022 and 2023 were reported as “air carrier”-caused and most of the domestic delays of three hours or more that air carriers reported to BTS listed “air carrier” as a cause of the delay. Carriers reported to BTS that 38 percent of their domestic scheduled passenger flight cancellations were “air carrier”-caused in calendar year 2022, and 28 percent of their domestic scheduled passenger flight cancellations were “air carrier”-caused in calendar year 2023. 15 For domestic scheduled passenger flight delays of three hours or more, the carriers reported to BTS that 65 percent of those delays included an “air carrier” cause of delay in 2022, and 62 percent included an “air carrier” cause of delay in 2023. 16 These delay percentages do not include additional delays that were reported by carriers as caused by “late arriving aircraft.” Such delays are not reported as “air carrier”-caused even when the reason for the “late arriving aircraft” was within the carrier's control.

In April 2023, the U.S. Government Accountability Office (GAO) published a report describing its examination of controllable cancellations and delays following the initial disruption to air transportation in 2020 due to the global COVID pandemic and documented concerns with the gap in consumer protections available to passengers facing cancellations and lengthy delays. 17 GAO reviewed data from the Department's BTS and concluded that as airlines recovered in 2021 and 2022 “[s]ustained cancellation events, or a series of days where an airline cancelled a large percentage of daily flights, lasted longer and became more common as travel demand increased.”  18 GAO estimated that flight cancellations from July 2021 through April 2022 potentially affected over 15 million passengers, and flight delays during that time period potentially affected over 116 million passengers. 19 The 2023 GAO report also concluded that: “[b]eyond DOT's requirement for airlines to provide cash refunds to passengers for cancelled or significantly changed flights, airline compensation to passengers is generally limited. Airlines are not required to provide accommodations for flight disruptions unless specified in an airline's contract of carriage or customer service plan, although airlines may provide additional accommodations in certain circumstances. As we have previously reported, airline assistance to affected passengers can vary significantly. Flight disruptions, particularly if they are long lasting, can significantly inconvenience passengers.”  20

The Department's Office of Aviation Consumer Protection investigates large-scale and sustained disruptive events that impact large numbers of passengers to ensure compliance with aviation consumer protection requirements. At times, these investigations can also reveal gaps in protections for aviation consumers, such as the importance for consumers to know whether a cancellation or delay is considered controllable and would entitle them to promised services and amenities. For example, from late December 2022 through early January 2023, Southwest Airlines cancelled 16,900 flights and stranded over two million passengers, reporting most of the cancelled flights to BTS as due to circumstances within the carrier's control. 21 In July 2024, following a global information technology (IT) systems issue, Delta Air Lines cancelled more than 5,550 flights over a five-day period. 22 The Department immediately notified U.S. carriers that it considers the flight disruptions resulting from the IT outage to be “controllable” since the issue is a computer outage of the carrier's equipment and informed carriers that DOT expected the carriers to make good on the commitments that they voluntarily made to customers affected by controllable cancellations and delays. Notably, the Department saw a significant uptick in consumer complaints following each of these events, reflecting significant consumer harm, including financial harm from these controllable cancellations and delays.

The Department is exploring in this ANPRM how to determine which delays and cancellations are controllable such that airlines are held responsible for free rebooking, compensation, and payment for services such as meals, lodging, or transportation to and from lodging. Currently, when a flight disruption involves more than one cause, airlines determine whether the event was or was not controllable in different ways. For example, one airline might look at the first cause, another the longest cause, and another may use yet a different method to deem a multi-factor event controllable or not controllable, potentially ignoring factors that were within their control that caused or exacerbated consumer harm.

At the December 2021 meeting of the Department's Aviation Consumer Protection Advisory Committee (ACPAC), presentations by a representative of the Arizona Attorney General's Office (AAG) and representatives of A4A, among others, addressed the causes of cancellation and delay when weather is involved. The AAG representative explained that airlines have incentive to blame delays on weather because, when a delay is attributed to weather, the airline would not have to provide vouchers, meals, or hotels, and other amenities, if guaranteed in its customer service plan or contract of carriage for controllable events, and air travelers likely are more understanding about weather delays than delays due to mismanagement or short staffing. Also at that meeting, representatives of A4A explained that a weather event can affect multiple areas of airline planning in a scope and scale unique to each circumstance, including scheduling, flight planning, crew planning, aircraft routing, maintenance planning, gate sequencing, and aircraft and passenger support. One A4A representative stated that FAA data indicates that 70 percent of all air traffic delays are caused by weather, which in the representative's view explains why airlines often described weather as the root cause of a delay. The representative asserted that there is no clear demarcation of when a weather event stops being the original or primary factor for a delay associated with a flight or sequence of flights. An additional A4A representative added that some airlines' contracts of carriage, to the extent they provide for amenities for flight irregularities, exclude delays or cancellations where the cause is outside the airline's control, such as weather. He said that if weather is the original or primary factor, an airline's contractual obligation to provide amenities may not apply based on the wording of the contract of carriage.

Section 512 of the FAA Reauthorization Act of 2024 (2024 FAA Act) requires the Department to direct certain air carriers “to establish policies regarding reimbursement for lodging, transportation between such lodging and the airport, and meal costs incurred due to a flight cancellation or significant delay directly attributable to the air carrier.” The statute does not further describe what “directly attributable” to the air carrier means, including when multiple causal factors are involved in a flight disruption. A regulation would be necessary to require air carriers to establish policies under section 512. The regulation could also clarify which cancellations and delays are directly attributable to a carrier.

As previously discussed, current Department regulations do not require an airline to provide compensation, services, notifications of services due, or reimbursements to passengers impacted by cancellations and lengthy delays that are within its control unless the airline voluntarily commits to do so. Many airlines, including foreign airlines, have not made voluntary guarantees in their customer service plans to provide needed services and compensation to their customers affected by controllable cancellations or delays. In addition, airlines that have made enforceable commitments to their customers for controllable flight cancellations and lengthy controllable delays, including those reflected on the Department's Airline Customer Service Dashboard, 23 can remove these commitments from their customer service plan at any time. Further, the competition encouraged by the Dashboard has not resulted in any U.S. airline committing to provide cash compensation to passengers for controllable flight cancellations and lengthy controllable flight delays. Also, while many U.S. airlines have committed to providing free rebooking on partner airlines, meals, hotels for passengers affected by overnight cancellations or delays, and transportation to and from the hotel, not all U.S. airlines have, demonstrating a potential need for protections in this area.

In addition, on May 16, 2024, the President signed the 2024 FAA Act into law. 24 Section 512 of the 2024 FAA Act requires the Department to “direct all air carriers providing scheduled passenger interstate or intrastate air transportation to establish policies regarding reimbursement for lodging, transportation between such lodging and the airport, and meal costs incurred due to a flight cancellation or significant delay directly attributable to the air carrier.” Before the 2024 FAA Act was passed by Congress, the Executive Office of the President released a Statement of Administration Policy explaining that the Act “include[d] key consumer protection provisions on airline reimbursement for incurred costs due to controllable disruptions . . . that would set a floor that the Department of Transportation could build on as deemed appropriate by the Secretary of Transportation.”  25

This ANPRM requests public comment to assist the Department in its consideration of what regulations may be needed to implement the requirements of section 512 of the 2024 FAA Act, ensure that airlines do not engage in unfair or deceptive practices or unfair methods of competition by establishing minimum requirements for when and how airlines must compensate passengers and make relevant reimbursements and services available to them, ensure that these protections are not subject to removal at an airline's discretion, and ensure passengers are protected from financial loss whether scheduled to be on a domestic or international flight that is cancelled or significantly delayed due to circumstances within an airline's control.

The Department is also issuing this ANPRM to assist its consideration of what regulations may be needed to ensure that passengers receive timely notifications of available compensation, rebooking, and services such as meals, lodging, and transportation to and from lodging. Some airlines currently condition service guarantees in their customer service plans on affirmative requests by consumers for those services. 26 Many passengers may not know the intricacies of airlines' customer service plan guarantees, and, even when passengers are aware of an airline's commitments, they may not know that a particular cancellation or delay is within the airline's control and so a service is owed.

The Department's ACPAC recently considered the quality and quantity of information on the causes of air carrier delays and cancellations provided to passengers adversely affected by an airline cancellation or delay, focusing on whether it is an unfair or deceptive practice for an air carrier to inform a passenger that a flight is delayed or cancelled due to weather alone when other factors are involved. At the December 2021 ACPAC meeting, a representative of the AAG and representatives of A4A, among others, presented to the ACPAC on the topic. The AAG stated that consumers need accurate information about the reasons for a delay so that they can exercise their rights and make an informed decision about their options at the time and whether to use that airline in the future. Also at that meeting, an A4A representative stated that he did not find withholding information on cause of delay meets the Department's test for unfair or deceptive practices in air transportation. The representative stated that the Department's regulation that requires airlines to provide passengers flight status notification in the event of a known delay, cancellation, or diversion, 14 CFR 259.8, is sufficient to inform consumers of the material information. The representative noted that the current regulation does not require airlines to provide the cause of a flight disruption but addresses material information, such as information that would assist the passenger in deciding when to go to the airport or when to request a refund or rebooking on another flight. The representative added that some airlines' contracts of carriage, to the extent they provide for amenities for flight irregularities, exclude delays or cancellations where the cause is outside the airline's control, such as weather. He said that if weather is the original or primary factor, an airline's contractual obligation to provide amenities may not apply based on the wording of the contract of carriage. The representative raised concern should airlines be required to provide real-time detailed explanations of all subsidiary factors contributing to the delay that was fundamentally caused by weather, stating that airlines may be compelled to publish unsubstantiated information that the airlines lacked adequate time to confirm, which he believed would be a disservice to consumers.

At the December 2022 ACPAC meeting, the ACPAC deliberated on the topic of information provided to consumers adversely affected by airline delays or cancellations. The ACPAC member representing consumers asked that the ACPAC consider recommending that airlines notify passengers when a service or amenity becomes available due to a controllable delay or controllable cancellation. This member stated that his proposal reflected concern that, without such notifications, passengers would be required to understand an airline's customer service plan or contract of carriage and affirmatively request amenities from the airline. The member representing airlines opposed the recommendation, noting that information about services and amenities is available through the Department's Airline Customer Service Dashboard, and expressed concern about whether an airline would have contact information for the passenger to provide a notification for tickets sold through ticket agents. The member representing consumers responded that the Dashboard is useful to consumers, but some may not know about the Dashboard and those who do would be unsure whether the commitments apply to them because they would not know the cause of the delay or cancellation. After discussion, the ACPAC adopted a recommendation that the Department issue a regulation requiring airlines to notify affected consumers of the availability of services and amenities for controllable delays and cancellations, with the member representing airlines voting against the recommendation.

In April 2024, the Department published a final rule, Refunds and Other Consumer Protections, codifying and clarifying its longstanding interpretation that, under 49 U.S.C. 41712, airlines must provide refunds to passengers for flights that are cancelled or significantly changed, regardless of whether the cancellation or change is within the airline's control. 27 In August 2024, the Department issued a second final rule, Refunds and Other Consumer Protections (2024 FAA Reauthorization) to implement the refund-related provisions of the 2024 FAA Act. 28 These final rules (collectively “Refund Rules”) provide, among other things, that passengers are entitled to an automatic refund if their flight is cancelled and they do not accept any alternatives offered. The Refund Rules also provide that passengers are entitled to an automatic refund if they decide not to travel on a changed itinerary when the change results in a flight departing from the origination airport three hours or more for domestic itineraries and six hours or more for international itineraries earlier or later than the original scheduled departure time, or results in the flight departing from a different origination airport or arriving at a different destination airport. 29

In addition, under the Department's Refund Rules, an airline must provide an automatic refund to an individual with a disability (and others in that individual's reservation) upon notification that the individual decides not to travel on a changed itinerary because: (1) the individual with a disability is downgraded to a lower class of service that results in one or more accessibility features needed by the individual becoming unavailable, (2) the airline changes the aircraft to a substitute aircraft on which one or more accessibility features needed by the individual are unavailable, or (3) the airline changes the flight to schedule the passenger to travel through one or more connecting airports different from the original itinerary. 30

The Department's recent Refund Rules provide important new refund protections for passengers who are negatively impacted by a change in an airline itinerary. Those rules, however, do not require airlines to accommodate passengers by offering rebooking to meet the passenger's needs, including the accessibility needs of passengers with disabilities. In the rulemaking on Refunds and Other Consumer Protections, the Paralyzed Veterans of America submitted a comment requesting the Department require airlines to “expeditiously locate and offer alternative transportation that meets the specific needs of the passenger with a disability,” explaining that a “refund is purposeless if the passenger is stranded.”

The Department is using this ANPRM to assist in its assessment of whether it should require airlines to provide rebooking without charge to a passenger when the airline makes a significant change to the passenger's itinerary. This includes an assessment of whether an airline should be required to provide rebooking without charge to a passenger with a disability, and others in the same travel party, when the carrier makes changes that result in the unavailability of an accessibility feature needed by the passenger with a disability or when the carrier makes other significant changes to the itinerary of an individual with a disability, like a change in the origination or destination airport or cancels a flight.

The Department's rulemaking would be based on several statutory authorities.

Section 41712 of title 49 of the U.S. Code authorizes the Department to prohibit unfair and deceptive practices and unfair methods of competition by air carriers, foreign air carriers, and ticket agents in air transportation and the sale of air transportation. The Department's rule at 14 CFR 399.79 outlines its policies related to unfair and deceptive practices and defines the terms “unfair” and “deceptive.” A practice is “unfair” to consumers if it causes or is likely to cause substantial injury, which is not reasonably avoidable, and the harm is not outweighed by benefits to consumers or competition. 31 A practice is “deceptive” to consumers if it is likely to mislead a consumer, acting reasonably under the circumstances, with respect to a material matter. 32 A matter is material if it is likely to have affected the consumer's conduct or decision with respect to a product or service. 33 Proof of intent is not necessary to establish unfairness or deception. 34 The Department elaborated further on the elements of “unfair” and “deceptive” in a 2022 guidance document. 35

The Department may address unfair and deceptive practices under 49 U.S.C. 41712 and 49 U.S.C. 40113(a), which authorizes the Secretary to “take action the Secretary . . . considers necessary to carry out [part A of chapter 49 of the U.S. Code, which contains section 41712], including . . . prescribing regulations, standards, and procedures.”

The Department is exploring through this ANPRM whether requirements for services such as rebooking, meals, lodging, and transportation to and from lodging or reimbursements for those services, or compensation are needed to prevent unfair and deceptive practices or unfair methods of competition in the event of cancellations and lengthy delays that are within the airline's control. The Department is also examining whether notifications by airlines to passengers of available services, reimbursements, and compensation when such services are due are necessary to address unfair and deceptive practices. Additionally, the Department is considering whether it may be an unfair or deceptive practice for an airline to fail to provide free rebooking for significant changes, including changes applicable to passengers with disabilities and others in the same travel party when a change in class of service or aircraft affects available accessibility features or a change in airport occurs. Finally, the Department is weighing whether any other unfair methods of competition should be addressed in this rulemaking. If the Department decides to propose regulations declaring a practice unfair or deceptive, then notice and an opportunity to petition the Department for a hearing will be provided in accordance with procedures found in 14 CFR 399.75.

As described previously, section 512 of the 2024 FAA Act requires the Department to “direct all air carriers providing scheduled passenger interstate or intrastate air transportation to establish policies regarding reimbursement for lodging, transportation between such lodging and the airport, and meal costs incurred due to a flight cancellation or significant delay directly attributable to the air carrier.” This ANPRM explores how the Department should implement this statutory requirement.

In addition, section 505 of the 2024 FAA Act requires that certain air carriers must maintain, without charge and available at all times: (1) a customer service telephone line staffed by live agents, (2) a customer chat option that allows for customers to speak to a live agent within a reasonable time, to the greatest extent practicable, or (3) a monitored text messaging number that enables customers to communicate and speak with a live agent directly. Section 505 authorizes DOT to issue such rules as may be necessary to carry out the requirement and provides that airlines must comply with section 505's requirements “without regard to whether the Secretary has promulgated any rules to carry out” section 505. This ANPRM explores whether the Department should propose provisions regarding the manner and timeliness of airline customer service during flight disruptions, whether controllable or not, under this statutory requirement.

This ANPRM also involves topics related to air carriers  36 that may involve the Secretary's authority under 49 U.S.C. 41702, which states that “[a]n air carrier shall provide safe and adequate interstate air transportation.”  37 The Civil Aeronautics Board (CAB), the predecessor to the Department, had the authority to ensure that air carriers provide “safe and adequate service, equipment and facilities” under section 404(a) of the Federal Aviation Act of 1958, which was later codified in 49 U.S.C. 41702. 38 The CAB relied on section 404(a) to adopt a regulation that restricted smoking on flights by dividing aircraft cabins into smoking and nonsmoking sections. The CAB reasoned that its authority to require air carriers to provide “adequate service” under section 41702 includes ensuring that the service does not cause passenger discomfort. 39 The CAB's regulation and interpretation of “adequate service” was later challenged by a passenger, but the U.S. Court of Appeals for the Fifth Circuit found that “adequate service” referred both to the number of flights provided by an air carrier and the quality of service provided to passengers. 40

More recently, the Department relied on its authority to provide safe and adequate interstate transportation in section 41702 in its 2016 final rule prohibiting the use of e-cigarettes on-board aircraft. 41 In that final rule, the Department reasoned that it had the authority to rely on the “adequate” prong in section 41702 to ban the use of e-cigarettes. The Department argued that discomfort from e-cigarettes was like the discomfort described by the CAB when it chose to restrict smoking on aircraft in 1973. 42

Through this ANPRM, the Department is exploring whether providing rebooking, meals, lodging, and transportation to and from lodging during flight disruptions is necessary to ensure that passengers are provided with adequate interstate transportation. In addition, the Department is exploring whether an airline is failing to provide adequate interstate air transportation when it doesn't offer and, if accepted, provide free rebooking to passengers when there is a significant change to the flight itinerary, including to passengers with disabilities and others in the same travel party when a change in airport, class of service, or aircraft affects available accessibility features.

The Department's questions in this ANPRM about rebooking for passengers with disabilities, and individuals in the same travel party, relate to the Department's authority under the Air Carrier Access Act (ACAA), in addition to the other authorities previously discussed. 43 The ACAA prohibits discrimination in airline service because of disability by U.S. and foreign air carriers. When it enacted the ACAA, Congress directed the Department “to promulgate regulations to ensure non-discriminatory treatment of qualified handicapped individuals consistent with safe carriage of all passengers on air carriers.”  44 The Department responded by issuing a final rule that required carriers to provide nondiscriminatory service to individuals with disabilities. 45 The Department is exploring in this ANPRM whether imposing rebooking requirements on airlines is necessary to ensure individuals with disabilities are not denied reasonable access to air transportation when a change in class of service or aircraft affects available accessibility features or when a change in airport occurs.

The Department is considering whether to impose any reporting requirements under 49 U.S.C. 41708 or recordkeeping requirements under 49 U.S.C. 41709. Among other things, section 41708(b) authorizes the Secretary to require U.S. and foreign air carriers to file annual, monthly, periodical, and special reports in the form and way prescribed by the Secretary and to provide specific answers to questions on which the Secretary considers information to be necessary. Section 41709 authorizes the Secretary to prescribe the form of records to be kept by an air carrier.

In carrying out aviation economic programs, the Department is required to consider the factors identified in 49 U.S.C. 40101 as being in the public interest and consistent with public convenience and necessity. Among other things, under 49 U.S.C. 40101(a)(4), the Department is required to consider the availability of a variety of adequate, economic, efficient, and low-priced services without unreasonable discrimination or unfair or deceptive practices as being in the public interest. Under section 40101(a)(9), it is also in the public interest to prevent unfair, deceptive, predatory, or anticompetitive practices in air transportation. The Department is also required by section 40101(a)(12) to consider as being in the public interest encouraging, developing, and maintaining an air transportation system relying on actual and potential competition to provide efficiency, innovation, and low prices.

Which carriers should be covered if DOT were to issue a rule requiring compensation, services such as meals or lodging, or reimbursements for such services when there are controllable cancellations and lengthy, controllable delays? As its primary option, the Department is considering covering certificated carriers, commuter carriers, and foreign air carriers operating to, from, or within the United States, conducting scheduled passenger service with at least one aircraft having a designed seating capacity of 30 or more seats. This would ensure the requirements would apply to substantially all scheduled passenger air traffic to, from, or within the United States. 46 This coverage would be consistent with the carriers currently required to have a customer service plan under 14 CFR 259.5, which addresses the services airlines voluntarily commit to provide their passengers to mitigate passenger inconveniences resulting from flight cancellations or misconnections. 47

Alternatively, should the Department exclude from coverage carriers that exclusively provide air transportation with aircraft of a designed seating capacity of 60 seats or less and who are considered small businesses for purposes of the Regulatory Flexibility Act?  48 Or should any requirements cover all certificated air carriers, commuter air carriers, and foreign air carriers, regardless of size? Rather than excluding only the smallest carriers entirely, should the Department impose less stringent requirements on U.S. carriers who comprise less than 10 percent of the domestic scheduled passenger revenue  49 or foreign air carriers who have fewer than two million total enplanements to and from the United States?  50 That approach would be like current Canadian regulations discussed further in the following sections, which impose requirements for flight cancellations and delays, and have modified rebooking and compensation requirements for small carriers based on the number of passengers transported. 51 What, if any, other approaches should the Department consider when determining airline coverage requirements?

The Department also seeks information about whether it may be necessary and appropriate to impose any requirements on ticket agents or indirect air carriers. For example, should the Department require ticket agents or indirect air carriers to notify consumers of available services, reimbursements, or compensation provided by airlines for controllable delays or cancellations or refund the fare to consumers if the ticket agent or indirect air carrier is the merchant of record and the passenger elects to return to his or her origination point after the passenger is delayed at a connecting airport?

To which flights should any requirements apply? The Department is considering as its primary option applying any requirements to flight itineraries to, from, or within the United States, including itineraries with brief and incidental stopover(s) at a foreign point without a break in the journey.

The Department is considering defining break in journey consistent with the Department's recently issued Refund Rules. 52 Under those rules, a “break in journey” is any deliberate interruption by a passenger of a journey between a point in the United States and a point in a foreign country where there is a stopover at a foreign point that is scheduled to exceed 24 hours. If the stopover at a foreign point is 24 hours or less, those rules specify that whether the stop is a break in journey would depend on various factors, such as whether the segment between two foreign points and the segment between a foreign point and the United States were purchased in a single transaction and as a single ticket/itinerary, whether the segment between two foreign points is operated or marketed by a carrier that has no codeshare or interline agreement with the carrier operating or marketing the segment to or from the United States, and whether the stopover at a foreign point involves the passenger picking up checked baggage, leaving the airport, and continuing the next segment after a substantial amount of time.

Should the Department impose requirements on airlines to provide services and compensation to consumers experiencing significant flight disruptions to, from, or within the United States? If so, should those requirements apply to itineraries with brief and incidental stopover(s) at a foreign point without a break in the journey like the Refund Rules? Under that approach, delays or cancellations to flight segments not initiated by the passenger, whether controllable by the airline or not, would not result in a break in journey as only deliberate interruptions by the passenger would constitute a break in journey. The Department solicits comment on whether there is any reason not to cover brief stopovers at a foreign point without a break in the journey. The Department also asks whether there are flight segments or itineraries involving a point in the United States that should be excluded from coverage for any areas being contemplated by this rulemaking. If so, why? Alternatively, should the Department consider establishing a bright line rule on coverage of flights with a break in journey of less than 24 hours rather than relying on a multi-factor test if airlines would be required to promptly offer to provide rebooking and reimbursements? If so, why?

Which carrier should bear responsibility for providing compensation or services such as meals or hotels if required during a controllable cancellation or delay when one carrier “sold” the airline ticket ( i.e., the merchant of record for the ticket transaction), 53 but the flight is operated by a different carrier? What if the merchant of record is a ticket agent? Which option would be the easiest and clearest for the consumer? Based on comments provided by the American Society of Travel Advisors in the Department's Refund Rule, it is the Department's understanding that the ticket agent's name appears as the merchant of record in five to eight percent of all airline ticket transactions by credit cards facilitated by ticket agents, the majority of which involve group bookings, air-inclusive tour packages, or resale of consolidated fares. 54

Should the Department consider requiring the merchants of record to be responsible for providing compensation for controllable delays and cancellations? How would the Department account for situations where the merchant of record is a ticket agent with no control on whether a flight is delayed or canceled? The Department requires merchants of record to be responsible for providing required refunds for airline ticket transactions because they have direct visibility of the passengers' payment instruments information and the total amounts paid for the itineraries. Does that rationale apply to compensation?

One option under consideration is for the operating carrier to be responsible for compliance. Would holding the operating carrier responsible ensure that the carrier that is making the operational decisions that affect the flight's performance is accountable? Are there reasons the “marketing carrier” should be responsible? For example, do “marketing carriers” often make planning decisions such as which flights are cancelled? Should responsibility be tied to consumer perception of which carrier is in control? Do consumers associate branded codeshare partners and their marketing partners, for example SkyWest operating as United Express, or Jazz Aviation operating as Air Canada Express, as the same carrier? If the operating carrier were responsible, should the operating carrier be allowed to rely on their marketing codeshare partner to issue compensation to consumers or assist in providing services such as meals or hotels to consumers on their behalf? The Department notes that the assignment of responsibility to the operating carrier would be consistent with carrier responsibility for providing compensation and services under the EU and Canadian regulations. 55 Please provide any relevant information regarding the EU or Canadian regulations that the Department should consider.

Should the Department consider assigning responsibility differently, such as by assigning joint responsibility to carriers with certain arrangements? If so, under what carrier arrangements would joint responsibility be appropriate for domestic or foreign air carriers, and what would be the appropriate terminology to describe the relationship for which joint responsibility would apply ( e.g., fee-for-service arrangements, branded codeshare partnerships, or another terminology)? Should carrier responsibility vary depending on the service, reimbursement, or compensation owed? For example, should the operating carrier be responsible for providing any rebooking, while the marketing carrier bears responsibility for compensation and reimbursements, which the carrier could have more time to provide? Should the Department require joint and several liability in some or all circumstances? Should any special considerations apply to the assignment of responsibility for multi-carrier itineraries? Should the final airline in a multi-carrier itinerary be responsible for any compensation requirements, similar to how airlines have generally handled responsibility for mishandled baggage traveling on multi-carrier itineraries?

The Department is considering defining “controllable” cancellations or delays to be those due in whole or in part to any circumstance within the control of the airline. Under this approach, the requirements of any rule would apply if a delay or cancellation involves any factors or event within the control of the airline, including its operating partner, and their employees, subcontractors, or other persons working on their behalf. This approach is being considered to create a standard that can be applied consistently across carriers. It could also address concerns that were noted by a State AG office at the December 2021 ACPAC public meeting that airlines may choose to attribute a delay to weather when the delay is also directly attributable to an airline. This approach is also consistent with the requirements of section 512 of the 2024 FAA Act, which instructs the Department to direct air carriers to establish policies for reimbursements for costs of meals, lodging, and transportation to and from that lodging that are due to flight cancellations and significant delays directly attributable to the air carrier.

The Department seeks comment on whether this approach for consideration is the most appropriate or whether it should adopt any alternatives. How should the Department treat cancellations or delays with multiple causes, including when some airline cause is involved? The Department's Bureau of Transportation Statistics (BTS), which requires U.S. carriers that account for at least 0.5 percent of the domestic scheduled-passenger revenues to report monthly on the causes of delayed and cancelled flights, allows multiple causes to be reported for delays but requires one cause to be reported for a cancellation. 56 Generally, airlines report on the predominant cause of a cancellation when there are multiple causes for a cancellation. As such, instead of treating a delay or cancellation as controllable if any cause is within the airline's control, should the Department treat a delay or cancellation as controllable only if the predominant cause of the delay or cancellation is within the airline's control? If so, how should the Department define predominant cause? What effect, if any, would each of those approaches likely have on airline performance?

Also, BTS requires airlines to report on the causes of delayed flights in five broad categories—air carrier, extreme weather, National Aviation System, security, and late arriving aircraft. 57 Airlines may use the reporting category of “late arriving aircraft” even if the cause of the late arriving aircraft was due to a circumstance within control of the air carrier. How should the Department treat a delay caused by a late arriving aircraft for the purposes of determining which delays are controllable under any rule? Should the Department consider the root cause of any late arriving aircraft for the purposes of determining whether a delay resulting from an aircraft arriving late is controllable? Flight disruptions occurring early in the day can disrupt multiple flights using the same aircraft downline. If attributing the root cause of a late arriving aircraft is appropriate, should there be a cut-off point at which a root cause should not be considered for down-line delays? “Late arriving aircraft” is not available as a causal category to airlines when reporting causes for cancellations to BTS. 58 U.S. carriers are required to report causes of cancellations to BTS in four broad categories—air carrier, extreme weather, National Aviation System, and security. 59

The Department is of the tentative view that it would not be sufficient to define controllable cancellations or delays without providing examples of the delay and cancellation causes that it believes are within the control of the carrier. It is considering basing these examples on a non-exclusive list used by BTS as a guide for the type of occurrences that should be reported as “air carrier delay or cancellation” when U.S. carriers categorize delays and cancellations of domestic scheduled passenger flights and report these delays to BTS. This list is available in the latest comprehensive BTS reporting directive discussing causal reporting dated December 12, 2018. 60 The BTS reporting categories, which were first developed by the Department in 2002 through notice-and-comment rulemaking, are further explained in reporting directives issued by BTS. 61

Under the December 2018 BTS directive, the following events are considered air carrier-caused, or in other words, due to circumstances within air carrier control: aircraft cleaning, aircraft damage (except bird strikes, lightening/hail damage), airport curfew, awaiting the arrival of connecting passengers or crew, awaiting alcohol test, awaiting gate space, baggage loading, cabin servicing, cargo loading, catering, computer outages involving carrier equipment, crew legality (pilot or attendant rest), damage by hazardous goods, engineering inspection, public health, flight paperwork, fueling, gate congestion, government forms not properly completed (INS, FAA, Agriculture), ground equipment out of service, hot brakes restriction, last minute passenger, late mail from post office, late crew, lavatory servicing, maintenance, medical emergency, out of service aircraft, oversales, positive passenger baggage match, passenger services, potable water servicing, pre-flight check, ramp congestion (blocked by another aircraft under carrier's control), ramp service, removal of unruly passenger, revised weight sheet, shortage of ramp equipment, slow boarding or seating, snow removal (when it is a carrier ramp service function), stowing carry-on baggage, and weight and balance delays. 62 While not currently listed in the BTS directive, the Department is also considering clarifying that delays and cancellations caused by labor strikes of airline personnel are controllable because the Department believes airlines are best capable of addressing or mitigating such delays and cancellations through effective labor management. The Department invites comment on this issue.

Section 511 of the 2024 FAA Act instructed BTS to revise its regulation covering the “air carrier” category for the purposes of airline reporting to BTS under 14 CFR 234.4. Section 511 further provides a list of causes of delay that shall not be included in the “air carrier” reporting category in the revised BTS reporting regulation: (1) aircraft cleaning necessitated by the death of a passenger; (2) aircraft damage caused by extreme weather, foreign object debris, or sabotage; (3) a baggage or cargo loading delay caused by an outage of a bag system not controlled by a carrier or its contractor; (4) cybersecurity attacks (provided that the air carrier is in compliance with applicable cybersecurity regulations); (5) a shutdown or system failure of government systems that directly affects the ability of an air carrier to safely conduct flights and is unexpected; (6) overheated brakes due to a safety incident resulting in the use of emergency procedures; (7) unscheduled maintenance, including in response to an airworthiness directive, manifesting outside a scheduled maintenance program that cannot be deferred or must be addressed before flight; (8) an emergency that required medical attention through no fault of the carrier; (9) the removal of an unruly passenger; and (10) an airport closure due to the presence of volcanic ash, wind, or wind shear. The Department issued the rule addressing the reportable causes of delay and cancellation in 14 CFR 234.4 under different statutory authorities than those it relies upon in this rulemaking, and the 2024 FAA Act does not require the Department to incorporate those statutory exclusions from the “air carrier” reporting category described in section 511 in this rulemaking. 63 Nevertheless, the Department welcomes comments on whether it should or shouldn't consider the aforementioned causes of delay as airline-caused for purposes of this rulemaking.

The Department notes that the EU and Canada have requirements for services and compensation in similar circumstances to those addressed in this ANPRM. The EU currently requires compensation for cancellations and delays of three hours or more, unless the airline proves that the cancellation or delay is “caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.”  64 The term “extraordinary circumstances” has been interpreted and narrowly construed in a series of decisions by the Court of Justice of the European Union. 65 In 2013, the European Commission proposed to revise its regulation, EC 261, to provide a list of causes that would be included and excluded from the definition of “extraordinary circumstances,” but that proposal was not finalized. 66

The Canadian APPRs currently require airlines to provide compensation for cancellations and delays of three hours or more that are within the airline's control and not required for safety purposes. 67 In 2023, the Canadian Transportation Agency (CTA) began a consultation to revise the APPRs. In its consultation paper, the CTA proposed to eliminate the categories in the existing APPRs and to move to a mode more similar to EC 261, requiring “compensation for inconvenience for all flight disruptions unless there are exceptional circumstances.”  68 To fall within the proposed definition of exceptional circumstances, the CTA consultation paper would require that the event causing the disruption “must have been outside the airline's control, and not inherent to the normal exercise of the activities of the airline,” and that the “event could not be avoided even if the airline took all reasonable measures to do so.”  69 The CTA consultation paper provided a proposed list of events that would and would not constitute exceptional circumstances. 70

The Department seeks comment on whether this approach under consideration, which is to rely largely on the list of “air carrier” causes from the 2018 BTS directive, is the most appropriate approach for the Department to use to determine whether a delay or cancellation is controllable and asks for feedback on potential alternatives. Are there benefits to using the currently applicable EU or Canadian categories or any categories for assessing delays and cancellations that those jurisdictions have proposed but not enacted? In addition to the Department's requests for comment on specific EU and Canadian requirements throughout this ANPRM, the Department also requests comment on whether there are any additional elements of any current or proposed EU or Canadian regulations covering controllable cancellations and delays (including services and compensation available to passengers during such delays) that the Department should adopt in any rule.

Should the Department consider any alternatives for defining controllable? Should the Department consider applying requirements for services when a delay or cancellation is not within the control of the airline? For example, the Department is considering requiring airlines to provide certain services, such as rebooking, meals, and hotels on domestic flights, regardless of the reason for the flight disruption, as failing to provide those services may not be “adequate” service under 49 U.S.C. 41702. If so, what provisions should apply and why?

Should the Department require airlines to offer rebooking, at no additional cost, to a passenger whose trip is disrupted because of a lengthy, controllable flight delay or cancellation and, if so, under what circumstances should rebooking be required? One option the Department is considering is requiring airlines to promptly offer rebooking without charge on the next available flight to any passenger: (1) whose flight is cancelled due to circumstances, in whole or in part, attributable to the carrier; (2) whose flight is delayed due to circumstances, in whole or in part, attributable to the carrier resulting in the passenger missing a connection on a single ticket; and (3) whose departure on a flight is significantly delayed ( i.e., delayed three hours or more for domestic flight or delayed six hours or more for an international flight), in whole or in part, attributable to the carrier.

This method is generally consistent with the commitments the largest U.S. airlines have already made in their customer service plans to provide rebooking at no additional cost in the event of a controllable cancellation or a significant controllable delay as reflected on the Department's Airline Customer Service Dashboard. 71 However, unlike some customer service commitments that do not define when a delay is significant, the Department is considering requiring airlines to offer rebooking when the passenger's departure is delayed three hours or more for domestic flights and six hours or more for international flights due to a lengthy, controllable flight delay or cancellation. Additionally, regardless of the length of delay if a controllable delay results in a missed connection, the Department is considering requiring airlines to offer rebooking on the next available flight.

Under this approach, the rebooking offered to a passenger whose departure on a flight is significantly delayed would be prompt and without charge on the next available flight. The Department is considering defining significant delay to be a delay of three hours or more for domestic flight or a delay of six hours or more for an international flight, in whole or in part, attributable to the carrier. This is consistent with section 512 of the 2024 FAA Act, which requires the Department to direct certain air carriers to establish policies regarding reimbursements for the costs of meals, lodging, and transportation to and from that lodging incurred by passengers whose flights are cancelled or “significantly delayed.” Section 512 defines “significantly delayed” to mean delayed three hours or more for a domestic flight and six hours or more for an international flight. These thresholds are also consistent with the definition of a significantly delayed flight in section 503 of the 2024 FAA Act and Department's recent Refund Rules. 72 The Department is considering whether to apply the delay standards in section 512 of the 2024 FAA Act not only to rebooking requirements but also to compensation requirements and invites comment on whether it should do so. Would a consistent definition of significant delay that would entitle consumers to services or compensation promote awareness of passenger rights and reduce logistical burdens for airlines?

The Department requests comment on the appropriateness of this approach under consideration. Should the Department adopt this approach or should it adopt a different approach? For example, EU and Canadian rules provide for rebooking when a scheduled flight is cancelled, regardless of the reason for the cancellation. 73 Should the Department, like the EU and Canada, require airlines to provide rebooking regardless of the reason for the cancellation based on its authority to require safe and adequate interstate transportation in 49 U.S.C. 41702? The Canadian rules require airlines to rebook passengers on another flight if their original flight is delayed for three hours or more whether that flight is domestic or international or if the original flight is cancelled. 74 Should requirements to provide rebooking for controllable delays of international flights be based on three-hour delays instead of six-hour delays?

Are there any circumstances in which rebooking requirements for controllable flight disruptions should not apply? What rebooking requirements, if any, should apply when a passenger does not accept the initial rebooking offered by the airline after a controllable delay or cancellation? Under what circumstances do airlines typically offer free rebooking? Under what circumstances do airlines typically charge for rebooking?

The Department is considering requiring an airline to offer an affected passenger the next available flight among flights operated by the airline and its branded codeshare partners. As discussed earlier in this ANPRM, a “branded codeshare partner” typically operates flights for the mainline carrier using the mainline carrier's name. The mainline carrier in this arrangement is generally responsible for selling the tickets for the flight, and consumers likely would consider the two carriers to be one entity when purchasing airline tickets.

If no flight operated by that airline or its branded codeshare partner would depart within 24 hours of the passenger's original scheduled departure time, the Department is also considering requiring an airline to offer rebooking on the next available departing flight among those operated by that airline, its branded codeshare partner, and any carrier with which the airline has a commercial agreement, interline or codeshare, to transport the airline's passengers. An “interline agreement” is a commercial agreement that enables the airlines to work together in providing services to passengers when the passengers travel on multiple airlines on a single itinerary. The agreement typically covers baggage handling, so passengers can check bags seamlessly to their final destination, and a ticketing agreement, to allow a passenger to obtain boarding passes to their destination. Typically, interline agreements enable the airlines to rebook passengers on one another's flights at a pre-negotiated below-market cost when there is an irregular operation.

Several of the largest U.S. airlines have committed in their customer service plans to rebook passengers on a partner airline or another airline with which it has an agreement at no additional cost when there is a controllable cancellation or significant controllable delay. 75 Some airlines condition their commitment to use partner carriers on their own flights not being available until the next day. This is consistent with the option under consideration of requiring an airline to offer rebooking on any carrier by with which the airline has a commercial agreement to transport the airline's passengers only if the airline cannot provide rebooking within 24 hours using its own branded network. 76 Some airlines do not have interline or rebooking agreements with other carriers and have not made these commitments. Usually, ultra low-cost carriers (ULCCs) do not have these agreements.

The Department requests comment on whether it should adopt the options described for rebooking or if it should adopt an alternate option and why. What effect, if any, would a requirement to provide rebooking on a carrier with which an airline has an interline or rebooking agreement have on competition among airlines, including those who do not have interline agreements? If the Department should require an airline to offer rebooking on a carrier with which it has an interline or rebooking agreement, should the Department require airlines to publish a list of their interline partners?

At what point, if at all, should the Department require an airline to offer rebooking on another carrier that is not its partner airline? The Canadian APPRs require large airlines to use any carrier to rebook passengers if they cannot rebook passengers on their own or a partner's next available flight leaving that airport within nine hours for controllable cancellations and controllable delays of three hours or more. For cancellations and delays outside the carrier's control, the Canadian APPR requires large airlines to use a non-partner carrier if the airline cannot rebook passengers on their own or a partner's next available flight leaving that airport within 48 hours of the departure time on the passenger's ticket for cancellations and delays of three hours or more. 77 Also, under the Canadian APPRs, if the airline cannot provide rebooking from the airport where the passenger is located that departs within 48 hours, large airlines must use any airline leaving from a nearby airport for rebooking and must get the passenger to the other airport free of charge. 78 Should DOT impose similar requirements? What effect, if any, would a requirement to provide rebooking on any carrier, including non-partner carriers, have on competition among airlines?

The Canadian APPRs currently do not require small airlines to rebook passengers using a non-partner airline. 79 In 2023, the CTA initiated a consultation to revise the APPRs. In its consultation paper, the CTA proposed to expand requirements to rebook using any airline to small airlines, if they cannot rebook on their flight or their partner's flight within 24 hours. 80 In addition, the CTA proposed expanding the requirement to use nearby airports after 48 hours to small carriers. 81

Public comments on the Canadian proposal highlight consumer organizations' general support for eliminating distinctions between large and small airlines to better protect passengers. 82 Small airlines raised issues that rebooking on another airline and/or rebooking within 24 hours is not realistic if one airline operates from the airport or there is a low volume of flights. 83 Some industry members proposed that rebooking obligations only apply when there are viable rebooking options. 84 One airline suggested that rebooking on an unaffiliated airline should not be a requirement and that the passenger should be able to choose the rebooking options that best suits their needs, including being able to choose to rebook with the same airline versus a different one. 85

The Department's options under consideration currently apply the same rebooking requirements to smaller airlines as to larger airlines. However, the Department invites comment on whether it should adopt that approach or a different one. Should the Department not impose any requirements or have reduced requirements to rebook passengers on other airlines after controllable flight disruptions by small airlines given these airlines may not have interline agreements and may need to pay the ticket price to transport their passengers on another airline? Is it fair to passengers flying on small airlines not to be provided rebooking on other airlines for controllable flight disruptions, particularly when the network of a small airline may be more limited? How, if at all, can the Department incentivize large airlines to provide rebooking reciprocity to small airlines during cancellations and lengthy delays, or disincentivize large airline practices that prevent reciprocity, in order to improve the options for consumers and facilitate competition? What additional requirements might be necessary to ensure that small carriers are not disadvantaged by the size and scale of their networks or other competitive factors that impact their ability to rebook passengers at the same general rate and cost as larger carriers? If small airlines are not required to rebook on other airlines, how should the Department determine which airlines are small—based on size of aircraft, number of U.S. enplanements, revenue, number of employees, or other criteria? Also, what is the best way to ensure passengers are aware of a two-tiered approach? For example, what sorts of disclosures, if any, should passengers flying on small airlines be provided regarding rebooking should there be flight disruptions under any two-tiered approach?

In the alternative, should the Department require rebooking on other airlines by small airlines but consider more stringent rebooking requirements for large U.S. and foreign airlines with flights to, within, and from the United States? For example, should the Department require large U.S. and foreign airlines to provide rebooking on any carrier if the airline cannot rebook passengers on their own or a partner's next available flight within nine hours instead of within 24 hours? This would be similar to the current Canadian APPRs, which apply that requirement to large airlines. If the Department were to adopt more stringent requirements for large airlines, how should the Department determine which airlines are large—based on size of aircraft, number of U.S. enplanements, revenue, or other criteria? If based on revenue, should the focus be on any U.S. carrier that accounts for at least 10 percent of the domestic scheduled passenger revenue in the most recently reported 12-month period?  86 If based on enplanements, is the appropriate threshold for foreign air carriers at least two million total enplanements to or from the United States?  87

The option under consideration is to require airlines to offer to rebook affected passengers on their next available departing flight in the passenger's reserved class of service that would advance the passenger to the final stop of their itinerary. Does this option ensure passengers are reaccommodated as soon as possible on a reasonable and productive route, without adversely affecting passengers with confirmed seats or passengers that might need priority or blocked seats, such as passengers with disabilities? If the Department should require rebooking on the next available flight, how should the Department define available? How, if at all, should the Department address rebooking for multiple passengers traveling on the same reservation? How do airlines currently approach free rebooking during controllable disruptions? How long from the time of a cancellation or significant delay does it typically take for an airline to place a passenger on a replacement flight? How do the airlines decide which passengers to rebook when upcoming flights have limited capacity? Are there current industry rebooking practices that the Department should consider either incorporating into a regulation or prohibiting as part of this rulemaking? Would rebooking a passenger on the next available flight be feasible for airlines in practice? Is this option appropriate to best serve affected passengers? Should any rebooking requirement provide more flexibility for passengers? Even if the airline can rebook the passenger within 24 hours, should the Department require an airline to offer a passenger the option to select any comparable future rebooking on that airline in case the original itinerary no longer meets the passenger's travel needs? If so, how long should airlines be required to make that option available, and how far in the future should the passenger be permitted to rebook without charge? For example, should the passenger be required to rebook within 24 hours of the flight disruption, a week, or another time period? Should the future flight selected be limited to comparable flights departing within a month, a year, or another time period? How would the Department define comparable future rebooking? If rebooking is not comparable, should airlines explicitly be required in a rule to also provide a refund to account for any difference in cost or value? For example, should airlines explicitly be required in a rule to rebook and refund the difference in fare if the passenger is downgraded in fare class?

The Department is considering requiring that, when a passenger misses a connection because of a controllable flight cancellation or flight delay and the rebooking offered by the airline would cause the passenger to be delayed in arriving at their final stop 24 hours or more, the airline must offer the passenger the option of the next available return flight to the passenger's original departure point of that portion of their itinerary (outbound, intermediate, return) at no additional cost and a refund of the cost of the entire portion of their itinerary with the missed connection (including used segments of that portion) and all subsequent portions of their itinerary. This would be similar to a provision of the Canadian APPRs, which require an airline to provide a refund and return to the point of origin if the passenger's travel no longer serves its purpose because of the cancellation or lengthy delay and the passenger is no longer at the point of origin ( e.g., is delayed departing at a connecting point). 88 Should the Department impose a requirement on airlines to return consumers to the point of origin when the passenger is delayed at a connecting point and no longer wishes to continue their journey? Why or why not? If the Department were to impose such a requirement, should it apply only for extended delays or, similar to the Canadian APPRs, be based on whether the passenger states that his or her travel no longer serves its purpose? Should delays at a connecting point of 24 hours or more be considered extended delays or is there a more appropriate threshold on what is an extended delay? Are there reasons the Department should not require a refund for portions of the itinerary already traveled?

What rebooking protections should apply when an airline makes significant changes to a passenger's itinerary, including a significant change that affects accessibility for a passenger with a disability? The Department is considering proposing to require airlines to promptly offer rebooking at no additional cost to a passenger who is an individual with a disability (and any individuals in the same travel party) upon notification that the individual decides not to travel on the flight due to any of the following changes: the individual with a disability (1) is downgraded to a lower class of service that results in one or more accessibility features needed by the individual becoming unavailable; (2) is scheduled to depart from, arrive to, or connect through one or more airports that are different from the original itinerary; or (3) is scheduled to travel on substitute aircraft on which one or more accessibility features available on the original aircraft needed by the individual are unavailable. The Department is considering proposing that the airline must offer rebooking on the next departing flight by that airline or its branded codeshare partner that advances the passenger to the final stop of their itinerary, accommodates the individual with a disability, and has open seats for the individual and for all other in the same travel party. The Department is considering proposing to apply this requirement regardless of whether the reason for the change was within the airline's control. In addition, if no flight operated by that airline or its branded codeshare partner would depart within 24 hours of the passenger's original scheduled departure time, the Department is also considering requiring an airline to offer rebooking on the next available departing flight among those operated by that airline, its branded codeshare partner, and any carrier with which the airline has a commercial agreement, interline or codeshare, to transport the airline's passengers.

In the rulemaking, Refunds and Other Consumer Protections, two disability rights advocacy groups, Paralyzed Veterans of America and United Spinal Association, commented that, from the perspective of passengers with disabilities, any change to the origination, connection, and destination airport should be considered a “significant change of flight itinerary.”  89 These commenters stated that when booking flights, passengers with disabilities may rely on the specific accessibility features of an airport to select the flights and itinerary, and this may include selecting a particular connecting airport based on the accessibility features needed to accommodate their disabilities during the layover time. In addition, the Paralyzed Veterans of America noted that a “refund” is purposeless if the passenger is stranded and requested the Department require airlines to “expeditiously locate and offer alternative transportation that meets the specific needs of the passenger with a disability.”  90

For example, when finding alternative transportation for individuals with disabilities who use wheelchairs, it is imperative that the alternative transportation selected is one where the passenger's wheelchair can be safely stowed. In February 2022, the Department's Air Carrier Access Act (ACAA) Advisory Committee issued a report that recognized the importance of logistical planning to ensure that wheelchairs are safely accommodated on aircraft. The Advisory Committee unanimously agreed on the benefit of passengers with disabilities completing airline forms describing their wheelchairs ( e.g., device dimensions, battery type) and recommended that a group that includes disability organizations, airlines, airports, aircraft manufacturers, and wheelchair manufacturers work together to improve consistency within existing airline forms for handling wheelchairs. It is the Department's understanding that this working group, led by the International Air Transport Association (IATA), intends to complete its work by the end of 2024. 91 To ensure that any rebooking requirements provide equitable access to air transportation to people with disabilities, there may be a need for consistent forms for wheelchairs. Should the Department require a consistent wheelchair handling form across airlines for air transportation to, from and within the United States? If so, what information should be included? Should the Department adopt the form developed by the working group led by IATA?

Should the Department propose the rebooking requirements for passengers with disabilities regardless of whether the reason for the cancellation or significant change was within the airline's control as stated earlier in this section? Should the Department only require airlines to provide rebooking without charge to passengers who are individuals with disabilities when lengthy delays and cancellations are within the airline's control or responsibility? Are there circumstances in which airlines should not be required to accommodate passengers by rebooking the passenger on another carrier with which the airline has a codeshare or interline agreement? Are there circumstances in which airlines should be required to accommodate passengers on a carrier with which the airline does not have a codeshare, interline, or any other agreement? If the Department proposes that airlines must provide free rebooking to members in the same travel party as a passenger with a disability, how should the Department define “travel party,” and how can airlines determine which passengers belong to the same “travel party?” Should the travel party be determined based on whether the passengers purchased their tickets in a single transaction, are on the same reservation or on linked Passenger Name Record (“PNR”), or based on other criteria?

Should airlines be required to offer the option of free rebooking for any cancellation or significant delay or change of a domestic flight that qualifies for a refund under section 503 of the 2024 FAA Act or under the Department's Refund Rules?

The Department is considering requiring airlines to pay cash compensation to passengers whose trip is disrupted because of a cancellation or delay due, in whole or in part, to any circumstance within the control of the airline. The Department seeks comment on the effect that requiring compensation for lengthy, controllable delays and cancellations may have on airline performance and profitability as well as the effect that such requirements would have on consumers. A working paper by the European University Institute supports that European compensation and service requirements (discussed later in this ANPRM) have reduced the likelihood and duration of flight delays under that regime, finding “an economically important and statistically significant effect of EC261 regulation [covering compensation and services] on both departure and arrival delay, as well as on-time performance.”  92 In reaching that conclusion, the working paper compared flights operating on the same route around the same time that were covered by EC 261 with those that were not. 93 A separate study contracted by the European Commission documented an overall increase in the number of cancellations and lengthy delays of flights covered by the EU regulation between 2011 and 2018. 94 That study also documented reduced delays on flights covered by the EU regulation compared with those that were not, concluding that it was “possible” that the EU regulation “has a marginal impact on the proportion of flights delayed” but stating that the impact “does not appear to be significant compared to other factors.”  95 In addition, the Department requests comment on how requiring cash compensation may impact consumer behavior. For example, would requiring cash compensation make consumers impacted by cancellations and lengthy flight delays more likely to continue to travel by air in the future?

The Department is contemplating proposing that cash compensation would be due to a passenger whose arrival at the final stop of the itinerary is delayed by three hours or more for a domestic flight and six hours or more for an international flight because of a controllable flight cancellation or delay. This structure is similar to that used in the Canadian APPRs. 96 In addition, using a three-hour delay threshold for domestic flights and six-hour thresholds for international flights to determine whether compensation is owed is consistent both with the definition of significantly delayed in section 512 of the 2024 FAA Act and with the definition of significantly delayed flight in the Department's recent Refund Rules. 97 The Department invites comment on these time thresholds for compensation, including whether any compensation should be required for delays of less than three hours.

To determine the compensation amounts that should be paid to consumers, the Department is considering two options. The first option is using amounts comparable to Canadian amounts of compensation applicable to large airlines. The second option is to base the cash compensation amounts on the value of passenger time and the weighted average flight delay. The Department seeks public comment on these options and will also consider additional options recommended by commenters.

For the first option, the Department is considering using the same compensation amounts required for large airlines under the Canadian APPRs, converted from Canadian to U.S. dollars. Canada currently applies the following tiers of cash compensation requirements to cancellations and flight delays that are within the airline's control and not required for safety:  98

The Department is considering whether to use amounts similar to Canada to ensure U.S. passenger compensation requirements are in line with other similar international requirements.

Under this first option, the Department is considering requiring an airline to pay compensation of $300 USD to a passenger whose arrival at the final stop of a domestic flight is delayed at least three hours but less than six hours; $525 USD to a passenger whose arrival at the final stop of a domestic flight is delayed at least six hours but less than nine hours; and $750 USD to a passenger whose arrival at the final stop of a domestic flight is delayed at least nine hours. 100 The Department is considering requiring an airline to pay $525 USD to a passenger whose arrival at the final stop of an international flight is delayed at least six hours but less than nine hours; and $750 USD to a passenger whose arrival at the final stop of an international flight is delayed at least nine hours. If the Department proposes this option, should it also include reduced compensation amounts for small airlines like the Canadian APPRs? Why or why not?

The second option the Department is considering is to require airlines to pay compensation based on the Department's hourly value of travel time savings for air travel from DOT's Benefit-Cost Analysis Guidance for Discretionary Grant Programs  101 and the weighted average flight segment delay of flights delayed at least three but less than six hours, at least six hours but less than nine hours, and nine hours or more on flight segments within the United States using 2022 and 2023 full-year domestic flight performance data collected by BTS. 102 Under this second option the Department would require an airline to pay compensation of $200 to a passenger whose arrival at the final stop of a domestic flight is delayed at least three hours but less than six hours; $375 to a passenger whose arrival at the final stop of a domestic flight is delayed at least six hours but less than nine hours; and $775 to a passenger whose arrival at the final stop of a domestic flight is delayed at least nine hours. The Department is considering requiring an airline to pay $375 to a passenger whose arrival at the final stop of an international flight is delayed at least six hours but less than nine hours; and $775 to a passenger whose arrival at the final stop of an international flight is delayed at least nine hours.

In calculating the compensation amounts for the second option, the Department relies on the BTS data because that data is reported and certified correct by U.S. airlines to the Department. The Department recognizes that BTS data have some limitations as applied to this rulemaking. Notably, BTS only collects flight performance data from U.S. airlines for domestic flight segments, and the data does not reflect passenger trip delay. Accordingly, the data used to establish any compensation amounts from BTS data would necessarily be limited to domestic segment-based delays, not overall delays for passengers arriving at their destinations. The Department invites comment on whether it should use BTS data to establish any compensation amounts or whether an alternate data source would provide information more appropriate to establishing compensation amounts.

To arrive at the dollar value for compensation for purposes of soliciting comment on option two in this ANPRM, the Department multiplied its estimated weighted average arrival delay for each compensation tier (3-5:59 hours; 6-8:59 hours; 9+ hours)  103 by the Department's hourly value of travel time savings for air travel from DOT's Benefit-Cost Analysis Guidance for Discretionary Grant Programs. This hourly value of travel time savings for air transportation is $51.54. 104 The Department developed its value of travel time savings “to be used in all DOT benefit-cost or cost-effectiveness analyses.”  105 Although the value of travel time savings was not specifically developed for the purpose of assessing the value of time lost due to air travel delays, the Department views the factors used to establish the value of travel time savings—trip purpose, passenger characteristics, passenger income, mode and distance of transportation, and passenger comfort—are also potentially relevant to time lost due to air travel delays. 106

The Department also closely reviewed the EU compensation regime when developing this ANPRM. The EU, like Canada, uses a three-tiered compensation system, but those compensation regimes have different criteria. Canadian compensation requirements are based on the length of a passenger's delayed arrival and whether the carrier is a large or small carrier. 107 The EU compensation amounts are based on the distance and location of the flight ( i.e., whether the flight is entirely within the EU), with a reduction of 50 percent if passengers arrive with delays of less than two, three, or four hours depending upon the distance and location of the flight. 108 The EU applies the following requirements for compensation in the form of cash, electronic bank transfer, bank order or bank check for cancellations and delays of three hours or more unless the airline proves that the cancellation or delay is “caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.”  109

Should the Department use a tiered model if it imposes compensation requirements or should the Department require a single level of compensation for all lengthy, controllable delays and controllable cancellations? A tiered approach based on the length of delay as under options one and two would be similar to Canadian regulatory requirements. It would also reflect that passengers lose more time and are likely to experience greater inconvenience and discomfort during longer delays and may provide added incentive for airlines to rebook delayed and cancelled passengers on replacement flights arriving close to the passengers' originally scheduled arrival times. Instead of a tiered approach based on length of delay, should the Department adopt a different compensation model, such as a model more similar to the EU, with different compensation amounts applicable to domestic and international flights?

If the Department requires airlines to pay compensation, what methodology should the Department use to establish compensation amounts? Should the Department establish compensation amounts using a methodology that provides compensation based on the value of a passenger's lost time, such as the methodology in option two discussed above that would calculate compensation amounts using the Department's hourly value of travel time savings for air travel from DOT's Benefit-Cost Analysis Guidance for Discretionary Grant Programs and BTS data on flight segment delays?  111 Or, instead of determining any compensation amounts based on the value of a passenger's time, should the Department establish any compensation amounts with reference to the rates used in other jurisdictions as under option one? Are there additional or alternate data sources that the Department should examine in order to establish any compensation amounts? Should the Department consider a compensation requirement that includes periodic updates to compensation amounts, such as for inflation using the consumer price index or based on another method?

Should any compensation methodology impose lower compensation requirements on some airlines, similar to the current Canadian regulatory requirements which apply lower compensation requirements to small airlines, or exclude some airlines entirely?  112 For example, should the Department impose lower compensation requirements on airlines that meet the definition of a small entity for purposes of the Regulatory Flexibility Act or airlines that are small based on other criteria?  113

Should the Department apply higher compensation requirements to those carriers that comprise a large percentage of domestic scheduled-service passenger revenues ( e.g., 10 percent or greater)  114 or comprise a large number of total enplanements to and from the United States ( e.g., have two million or more total enplanements to and from the United States)?  115 Would higher compensation requirements further incentivize the largest carriers to make operational changes to reduce the prevalence of controllable cancellations and delays?

Are there circumstances in which compensation requirements should not apply? For example, should compensation requirements not apply if the airline provides sufficient advance notice of the cancellation or delay? Among other options, the Department is considering not requiring compensation if the airline notifies the passenger of the flight cancellation or arrival delay at least eight days before the first scheduled departure for that part of the trip ( e.g., before the scheduled departure for the first flight segment of an inbound or outbound portion of the itinerary). An eight-day time period is consistent with the BTS reporting rule which defines a cancelled flight as a flight not operated, but that was listed in the carrier's computer reservation system within seven calendar days of the scheduled departure. 116 Under those rules, a flight removed for the carrier's reservation system more than seven days out are not reportable to the Department. Should the Department instead adopt a longer or shorter period during which any exclusion would apply, such as 14 days before the first scheduled departure? If commenters recommend a period longer than eight days, please provide a rationale for the recommended approach along any available data source that the Department can consult to estimate the number of flights that are cancelled more than eight days in advance of the flight. Should higher compensation requirements apply to cancellations and delays that occur closer in time to the scheduled flight to reflect the likelihood of greater inconvenience and costs to passengers from last-minute cancellations and delays? If so, at what point in time should higher compensation requirements apply?

What compensation, if any, should be required if a passenger does not accept any flight offered by the airline and instead elects to receive a refund? In that circumstance, should the Department require compensation in the full amount that would otherwise be required based on the earliest arriving rebooking offered by the airline? Is there any reason for compensation not to be required when a passenger decides not to continue travel because of a controllable delay or cancellation and receives a refund? Canadian regulations require the airline to pay the lowest level of its tiered compensation structure if the passenger elects to accept a refund rather than rebooking. 117 Should the Department similarly require reduced compensation in those circumstances? If the passenger elects to receive a refund, should the Department require different compensation if the airline is unable to offer prompt rebooking (for example, because alternate flights are unavailable) than if the airline offers prompt rebooking?

What compensation, if any, should be required if a passenger accepts rebooking, but does not accept the earliest flight offered by the airline? Should the compensation amount be calculated based on the earliest scheduled arrival of the itinerary offered by the carrier? The Department requests comment on whether there are other options that the Department should consider.

Do certain groups of passengers, such as passengers with disabilities, encounter unique costs associated with significant cancellations and delays? If so, should a compensation requirement address the potential for increased costs for certain groups of passengers, and how should it address these costs?

The Department is contemplating requiring airlines to pay compensation in the form of cash or a cash equivalent for controllable flight disruptions rather than in alternative formats such as travel credits or vouchers or airline miles. In the Department's recent Refund Rules, the Department defined “cash equivalent” as a form of payment that can be used like cash, including but not limited to a check, a prepaid card, funds transferred to the passenger's bank account, funds provided through digital payment methods ( e.g., PayPal, Venmo), or a gift card that is widely accepted in commerce. 118 The Department does not consider a form of payment to be “cash equivalent” if consumers bear the burden for transaction, maintenance, or usage fees related to the payment. The Department notes that cash or a cash equivalent would provide the highest degree of flexibility to a consumer inconvenienced by a controllable cancellation or delay in how and when to spend the required compensation.

Should the Department propose to allow airlines to provide compensation in a form other than cash or cash equivalent, and if so, under what circumstances would a non-cash option provide more benefit to consumers? Given that cash or a cash equivalent has no restriction on how and where it can be spent, under what conditions, if any, might non-cash compensation with limited use represent a better option? If non-cash or non-cash equivalent compensation is an acceptable compensation option, are additional consumer protections needed to ensure consumers are treated fairly and to ensure fair competition? How would the Department determine whether consumers have received the required compensation value with non-cash alternative compensation options? For example, if airlines were to offer miles or rewards points, how would the Department determine whether the miles or points represent a dollar value equivalent to or greater than the compensation amount required, particularly for miles or points that expire, cannot be converted into cash or a cash equivalent, and/or have a dynamic dollar value that changes at the discretion of the airline? How would the Department ensure that any vouchers or airline miles provided as an alternative to cash or cash equivalent compensation provide a benefit and maintain a value equal to or greater than cash or a cash equivalent? What misleading or unfair practices, if any, may occur when airline miles, travel credits or vouchers, or other similar types of compensation are offered in lieu of cash or cash equivalent compensation?

Should the Department require airlines to make automatic cash or cash equivalent compensation payments to consumers who are entitled to receive compensation? Under what circumstances, if any, should the Department require airlines to pay cash or cash equivalent compensation automatically, without requiring the submission of information by the consumer? What should a regulatory framework establishing automatic cash or cash equivalent compensation payment process look like to ensure automatic payments are provided effectively and efficiently to affected passengers? What information would airlines need to process automatic cash and cash equivalent compensation payments? Would cash-equivalent compensation ( e.g., a Visa gift card) enable airlines to provide compensation without having to obtain passenger information, such as bank account information? If automatic compensation is required, how should the regulatory framework address disagreements between an airline and passenger about the compensation amounts or whether a given cancellation or delay was outside of the airline's control? Further, in cases where compensation is owed under the laws of multiple jurisdictions, how could a regulatory framework for automatic compensation enable passenger choice to receive compensation under the passenger's preferred regime?

Instead of requiring automatic compensation, should the Department allow airlines to require passengers to submit requests for compensation? What would be the necessary elements of such claims process, if needed? Should airlines be required to accept compensation requests through airline websites, by email, or by phone? If the Department were to allow airlines to require passengers to request compensation, are there ways to ensure that all passengers get the compensation they are entitled to receive? For example, if one passenger submits a compensation request, should that be sufficient to trigger a requirement that all passengers on the flight receive compensation if owed? Should airlines be required to proactively provide a way to request compensation as part of a notification process? What other requirements might be necessary to ensure that a request process results in all passengers getting the compensation they are entitled to, ensure that the request process is easy to navigate, and ensure that compensation disbursement is prompt?

In circumstances in which a third party, such as a private- or public-sector employer, has paid for a passenger's ticket, should any compensation be paid to the passenger or should it be paid to the third-party payor? Are there challenges to either approach?

As reflected on the Department's Airline Customer Service Dashboard, the largest U.S. airlines all currently guarantee in their customer service plans that they will cover a meal for passengers affected by a cancellation or delay within the airline's control that results in a passenger waiting three hours or more, and all but one of the largest U.S. carriers currently commit to providing hotel accommodations and travel to and from the hotel when there are controllable overnight delays and cancellations. 119 Some of those airline policies contain limitations, for example, limiting their hotel guarantees to non-local passengers and limiting any reimbursements for hotels to reasonable costs. 120

Section 512 of the 2024 FAA Act requires the Department to “direct all air carriers providing scheduled passenger interstate or intrastate air transportation to establish policies regarding reimbursement for lodging, transportation between such lodging and the airport, and meal costs incurred due to a flight cancellation or significant delay directly attributable to the air carrier.” For the purposes of section 512, “significantly delayed” means, “the departure or arrival at the originally ticketed destination associated with such transportation has changed—(1) in the case of a domestic flight, three or more hours after the original scheduled arrival time; and (2) in the case of an international flight, six or more hours after the original scheduled arrival time.” As explained earlier in this ANPRM, the Administration views the 2024 FAA Act to “set a floor that the Department of Transportation could build on as deemed appropriate by the Secretary of Transportation.”  121

Consistent with the Administration's position that the 2024 FAA Act is a floor, the Department is considering requiring airlines to guarantee in their customer service plans that they will cover the cost of meals when a controllable cancellation results in passengers waiting for three hours or more for a new flight or when a flight delay results in passengers waiting for three hours or more. This is consistent with the commitments that the large U.S. airlines have made at the urging of DOT. Should the Department use the three-hour delay threshold from the Dashboard for any meal requirements for both domestic and international delays? Or should it apply different thresholds, such as requiring airlines to cover the cost of meals for domestic delays of three hours or more and international delays of six hours or more?

Canadian, EU, and United Kingdom regulatory meal requirements consider waiting time. 122 Should the Department similarly require airlines to cover more than one meal for longer delays based on actual or expected length of delay, based on a daily per diem allotment per passenger, or based on another metric? Should the Department consider requirements ensuring airlines cover a meal with certain qualities, for example that the meal includes a non-alcoholic beverage and an entrée or that the meal meets the dietary restrictions of the affected passenger?

The Department is also considering requiring airlines to guarantee in their customer service plans that they will cover lodging for passengers affected by an overnight delay or cancellation or reimburse passengers for expenses incurred for lodging. If the Department proposes this approach, how should “overnight delay or cancellation” be defined? The Department notes that neither the EU nor Canadian regulations define when a delay is overnight for purposes of their requirements for overnight accommodations. How do those requirements apply in practice in those jurisdictions? Should the Department consider passengers delayed past 10 p.m. or 11 p.m. to be affected by an overnight delay or cancellation and thus entitled to receive lodging, or is there another measure that the Department should consider? Should the original scheduled time of the flight and length of delay be considered in making this determination ( e.g., a flight was originally scheduled for 9 p.m. and is delayed for two hours to 11 p.m.)? Should the Department use the three hours for domestic delays and six hours for international delays from the 2024 FAA Act to establish a minimum waiting time that must occur before a passenger would be entitled to receive overnight accommodation? How should the length of the delay impact lodging requirements when a consumer experiences excessive delay ( e.g., 12 hours) but the delay is not overnight? Should any requirement to cover lodging be based on the duration of the delay because the passenger may need to obtain lodging for multiple nights during an extended cancellation or delay?

How should the Department define lodging? Should the Department define lodging to include types of accommodation beyond traditional hotels and motels, and if so, what types of accommodation should be included? Are there circumstances when an airline should be required to cover lodging with more than one bedroom for a traveling party, and if so, in what circumstances? How should a traveling party be defined?

In addition, the Department is considering requiring any lodging provided by the airline must be reasonable in quality ( i.e., a safe and healthy environment that is accessible to a passenger who self identifies as a person with a disability) and be nearby to the airport, when available. The Department seeks comment on any options that would ensure lodging requirements appropriately address passenger needs, including any standards to determine what is reasonable and nearby for the purposes of lodging, as well as any additional or different requirements that the Department should apply. The Department also requests comment on whether airlines should be required to cover ancillary lodging costs such as extra bedding, a baby crib, or parking at the lodging, and if so, which ancillary costs should be required to be covered.

The Department is considering allowing airlines to limit lodging to non-local travelers as provided in some current airline policies. If the Department allows airlines to limit lodging to non-local travelers, how should the Department define which travelers are “local”? If the Department does not require airlines to cover the cost of lodging for local travelers, should the Department require airlines to cover travel to and from the passenger's residence or airport parking costs associated with a controllable cancellation or lengthy, controllable delay for those travelers?

The Department is also considering requiring airlines to guarantee in their customer service plans that they cover transportation to and from lodging to affected passengers, including transportation that is accessible to a passenger who self identifies as a person with a disability. What costs to and from lodging should airlines be required to cover? For example, should airlines be required to cover the cost of shuttle service, driver service such as taxi or ride share, rental car, or gas mileage for the passenger's vehicle or for friend's vehicle if picking up the passenger? Should the Department require airlines to cover the cost of a driver service such as a taxi or ride share to and from the lodging in all circumstances, or some circumstances, and if so, which circumstances should not be covered and why? The Department is considering allowing airlines to provide in their policies that they will not cover services if the passenger is provided sufficient advance notice of a cancellation or delay. If the Department proposes this approach, what time period should constitute sufficient advance notice? For example, should the Department allow airlines not to cover meals if the passenger is notified of the delay or cancellation at least 12 hours in advance of the scheduled departure because the passenger is less likely to need to purchase a meal at the airport in that circumstance? Should any differing time periods apply to any requirements for meals and lodging and transportation to and from lodging? If so, why?

What requirements for meals, lodging, and transportation to and from lodging, if any, should apply if a passenger accepts a refund, rather than rebooking, in the event of a controllable cancellation or a lengthy, controllable flight delay?

Should the Department, under its authority to ensure “adequate” transportation in 49 U.S.C. 41702, extend any requirement that airlines cover the costs of meals, and lodging for overnight delays, and transportation to and from lodging to all cancellations and lengthy flight delays when the passengers are flying domestically, regardless of whether the cancellation or delay is controllable? Why or why not? Are there additional circumstances in which the Department should consider requiring these services?

The Department is seeking comment on the best way to ensure that passengers receive the services they are entitled to, with minimal expense and hassle. The Department is considering proposing a multi-tiered approach for airlines to provide meals, lodging, and transportation to and from lodging to passengers. Under this approach, an airline would be required to dispense all upfront vouchers or credits for these services as soon as the airline becomes aware of the flight disruption that triggers a passenger's entitlement to services, and, if the airline does not offer and provide those services upfront, then the airline would be required to reimburse passengers for the cost of those services.

The Department is of the tentative view that passengers are best served when airlines cover the upfront costs of meals, lodging, and travel to and from lodging during flight disruptions so that passengers do not have to pay out of pocket for those services. Passengers may not have the means to pay for these unexpected costs, and some passengers may not be able to navigate the process of procuring some or all these services on their own. Under this option, the required services would be provided by airlines directly through physical or electronic vouchers, e-credits, or other mechanisms that ensure passengers receive the services upfront. The Department is concerned that airlines' current policies and procedures for distributing services upfront may be inadequate for meeting passengers' needs and may not be consistently or evenly provided, particularly during widespread flight disruptions. Airlines have disparate policies and processes for distribution and may not plan appropriately to have enough vouchers or credits to provide them to all affected passengers who are entitled to them. Moreover, frontline staff may lack training or instruction regarding when passengers are entitled to each of these services, what services are available upfront, who to prioritize when vouchers or credits are limited, and what costs will be reimbursed when vouchers or credits run out or are not provided. Additionally, long waits to receive vouchers or credits for services may result in passengers giving up and paying for these services directly themselves.

How should the Department define “upfront” in terms of process and timing? What, if any, requirements might be necessary to ensure that the manner and timeliness of distribution is adequately meeting passengers' needs? Does this option best address the Department's concerns, or would an alternate approach better ensure that passengers receive needed services with minimal expense and hassle?

The Department is contemplating proposing to require airlines to reimburse passengers for costs incurred for meals, lodging, and transportation to and from lodging when the airline fails to offer those services or those services are not offered and provided in a timely manner. In lieu of providing vouchers or credits, some airlines currently reimburse passengers for the costs of the services during wide-spread controllable disruptions. However, airlines do not consistently disclose when passengers are eligible for reimbursements for services and what costs the airlines will reimburse for and how much they will cover. Moreover, because the process for requesting reimbursement is different for each airline, it can be difficult for passengers to navigate, and the timing of the reimbursement payment is discretional and often lengthy.

The Department believes frustrated and inconvenienced passengers may purchase a service that the airline should be providing if the passenger is unaware of when and where a service or voucher is available. How should any proposed requirements ensure that passengers are aware of the airlines' obligations to provide a service, so that the consumer would not purchase the service out-of-pocket expecting reimbursement? How should any requirements for airlines to provide reimbursements apply, if at all, if the passenger purchased the service themselves before the airline notifies the passenger that the airline will provide the service? Should the Department require airlines to offer passengers the option of choosing reimbursements even if the airline also offers to provide a service or a voucher for the service? Should airlines be required to provide documentation that the passenger received the service upfront in lieu of reimbursement, if so, what kind of documentation should be required?

The Department is considering how reimbursements for services should be provided, including whether reimbursements should be automatic or requested by the passenger. Due to concerns that the process for requesting reimbursements can be cumbersome for passengers, one option would be to require automatic reimbursements in some circumstances without submission of information by the passenger. The Department is considering requiring automatic reimbursement for a minimum amount after an established time period if an affected passenger does not submit receipts of their costs for meals, lodging, or transportation to and from lodging, and the airline has no documentation of the passenger receiving the service upfront. On the other hand, if the passenger submits receipts during that time period, the Department is considering proposing that the airline must reimburse the passenger for those expenses up to a pre-established maximum threshold for each service. The Department invites comment on what time period should apply to the submission of receipts and the minimum and maximum amounts for reimbursement if the Department proposes this approach. In addition, in both scenarios, the Department would consider requiring the airline to provide the reimbursement within a defined period and solicits comment on what that time period should be.

The Department is seeking comment on this approach and what requirements would be necessary to ensure that it produces the expected outcomes for passengers. Under what circumstances, if any, should the Department require airlines to pay reimbursements automatically, without requiring the submission of information by the consumer? How would the automatic payment process work? Would an airline need to obtain a passenger's bank account information to process a reimbursement? Would cash-equivalent compensation ( e.g., a Visa gift card) enable airlines to provide reimbursements without having to obtain passenger information, such as bank account information?

Would establishing minimums and maximums make obtaining meals, lodging, and transportation to and from lodging more predictable for consumers during a cancellation or lengthy delay compared with current airline practices? If it proposes this approach, how should the Department determine the minimum and maximum amounts that airlines must reimburse consumers for these services? Should these values be nationwide or regional? Should the Department adjust these minimum and maximum values periodically to account for market pricing? Should the values for lodging be adjusted seasonally? Should any minimum payments for meals, lodging, and transportation to and from lodging, apply regardless of whether the consumer submits receipts? If the Department establishes minimum reimbursement amounts, should the Department require that if the airline offers a meal, lodging, or transportation to and from the lodging instead of providing reimbursement for that service, the airline must provide a service with equal value to the minimum reimbursement amount? How should that value be determined? Should the airline be required to provide reimbursement unless they present the passenger with documentation that the passenger received the service upfront?

Instead of requiring reimbursements based on minimum and maximum cost thresholds, should the Department require airlines to provide reimbursements for “reasonable” costs? If so, how should the Department establish the amount of reasonable reimbursements in any proposal? For example, should the Department establish reasonable reimbursement amounts for lodging or meals based on what airlines provide their own crews, based on per diem rates established by the U.S. General Services Administration, or using another methodology?  123

For passenger claims for reimbursements supported by receipts, the Department is considering whether it is appropriate to require airlines to approve and pay a complete claim or deny a complete claim, with a written explanation of the airline's reason for denying the claim if it does so, no later than a set timeframe after the complete claim is received. The Department invites comment on what timeframe should apply if the Department proposes this approach. If the Department does not propose automatic reimbursements for services during a set time period, should it establish a set time period during which passengers must submit claims for reimbursement, and, if so, what should that time period be?

Should the Department place any limits on information that airlines may request from passengers to process their claims or establish a minimum basis for what qualifies as a “claim” the airline must accept? What other requirements, if any, should the Department establish for any process for consumer-provided information? For example, should the Department require airlines to establish their own policies and procedures for which reimbursements will be approved and not approved, provide opportunity for passengers to resubmit claims if corrections are needed and establish an internal appeals process? Should the Department require that airlines make any claims process streamlined, easy to access, available at any time, and with clear and conspicuous instructions and disclosures of airline policies for compensation or reimbursements? Are there circumstances in which the Department should permit airlines to reject, rather than respond to, submissions that do not provide sufficient information to process the claim? If an airline rejects a claim for reimbursement because they provided the service upfront, should the airline be required to present documentation of the passenger having received the service?

As previously discussed, EU and Canadian regulations require services and compensation similar to those on which the Department solicits comment in this ANPRM. How can the Department best avoid duplicative burdens on airlines? Are there provisions that are needed to ensure passengers receive favorable outcomes when more than one law applies to a controllable cancellation or lengthy controllable delay?

Both the EU and Canadian regulations limit entitlement to compensation if the passenger has already received compensation for the same delay or cancellation in another jurisdiction. 124 The EU regulation also limits entitlement to other services if the passenger has already received that service for the same delay or cancellation under another regime. 125 The European Commission has further clarified that if a passenger accepts only compensation or a service (but not both) under a different regime, the passenger's entitlement to receive the compensation or service not accepted is unaffected under EU law. 126 Should the Department adopt similar limits to those under EU and Canadian regulations? How do these limits operate in practice? Can airlines efficiently provide a consumer their choice of benefits when more than one jurisdiction's regulation applies to an event?

The Department is considering whether to require the airline to notify passengers of any differences in value of reimbursements, services, and compensation owed under any DOT requirements and the law of a foreign jurisdiction, if applicable, so that passengers would have the ability to accept a reimbursement, service, or compensation on an informed basis when the laws of multiple jurisdictions apply. The Department seeks comment on whether these options are appropriate, feasible for airlines, and benefit consumers, particularly if the Department were to decide to require automatic compensation and reimbursements. Would the value of services, such as lodging or a meal, likely be the same under any DOT-imposed requirement and the law of a foreign jurisdiction?

The Department is concerned that airlines do not sufficiently inform passengers about their rights when there are controllable cancellations and lengthy delays that entitle passengers to services such as meals, lodging, and rebooking. To address harm to consumers, the Department solicits comment on whether to require airlines to: (1) notify passengers of the required or promised services, (2) disclose proactively whether the cancellation or delay is controllable and would entitle passengers to services, (3) respond to passengers' questions about reasons for disruptions and whether they qualify for services, (4) make information about services and reimbursements clear, easy to find, and accurate, and (5) explain the differences, if there are any, in the policies between codeshare partners for services and reimbursements.

If the Department requires airlines to provide compensation or rebooking without charge or to cover the costs of meals, lodging, and transportation to and from lodging, should the Department require notifications of available compensation, rebooking, or costs of meals, lodging, and transportation to and from lodging? As discussed earlier in this ANPRM, at the December 2022 ACPAC meeting, the ACPAC recommended that the Department issue a regulation requiring airlines to notify affected consumers of the availability of services and amenities for controllable delays and cancellations, with three of the four members voting in favor of the recommendation. 127 The Department is considering requiring airlines to promptly notify consumers when a required service, reimbursement, or compensation is owed. The Department is considering requiring airlines to provide such notification when the airline expects that an entire flight segment will be subject to a controllable cancellation or delay that would entitle the passengers to services, reimbursements, and compensation. As an alternative, the Department is also considering instead requiring individualized notifications when only some passengers on a flight would be owed compensation, rebooking, or a service ( e.g., when some passengers on a flight miss a connecting flight due to a controllable cancellation or delay) and seeks comment on whether it is feasible for airlines to do so. Are there challenges to providing individualized notifications or to providing these notifications to passengers who purchase air transportation from ticket agents, and if so, how should the Department address such challenges? What would be the costs for airlines to provide individualized notifications?

Where and by what means should any required notifications be provided? The Department is considering requiring that airlines provide notifications on the carrier's primary website, to passengers who contact the airline's customer service representative, at the boarding gate area, and/or through a method that the passenger has elected to receive flight status notifications. Should these or different notification methods apply? Should the Department require airlines to establish reasonable policies, procedures, and/or training for airline customer service staff to ensure that staff provide passengers proper notification of available reimbursements, compensation, and services and provide services promptly where applicable? If airlines are permitted to require passengers to affirmatively request compensation or services, should airlines be required to proactively provide information on how to make that request or provide a link or other avenue for submitting the request in any notification regarding the cancellation or delay? The Department also requests comment on what requirements are needed to ensure passengers who identify to airlines as persons with disabilities receive effective notification.

What timing requirements, if any, should apply to any notifications? The Department is considering a proposal that notifications for reimbursements, services, and compensations must be promptly provided to consumers. If the Department should require prompt notifications, is additional clarification needed regarding when a notification is “prompt?” Should the Department establish a set timeframe following the occurrence of a cancellation or delay during which an airline must provide any required notifications? The Department would expect airlines to begin to provide notifications soon after the delay or cancellation rather than hours after it. Should different timeframes apply to any notifications about compensation and to any notifications about rebooking or services that are likely needed during or soon after the delay or cancellation?

Should the Department require airlines to notify passengers in real time of the specific cause of a lengthy delay or cancellation? If so, how can the Department ensure that information provided by the airline is accurate?

Section 505 of the 2024 FAA Act requires that air carriers selling tickets for scheduled passenger air transportation on an aircraft that, as originally designed, has a passenger capacity of 30 or more seats must maintain, without charge and available at all times: (1) a customer service telephone line staffed by live agents, (2) a customer chat option that allows for customers to speak to a live agent within a reasonable time, to the greatest extent practicable, or (3) a monitored text messaging number that enables customers to communicate and speak with a live agent directly. Section 505 authorizes DOT to issue such rules as may be necessary to carry out the requirement and provides that airlines must comply with section 505's requirements “without regard to whether the Secretary has promulgated any rules to carry out” section 505.

In enforcement matters, the Department has taken the position that the practice of not providing adequate customer service assistance when a carrier cancels or significantly changes a passenger's flight is an unfair practice and also that the practice is deceptive when a carrier advertises a particular service to consumers as an available means of obtaining customer service assistance and fails to provide that service or fails to provide the service within a reasonable time period. 128 However, the Department's regulations do not currently set forth specific requirements for timely customer service assistance or contain provisions addressing section 505 of the 2024 FAA Act. The Department is considering whether to propose minimum timely customer service requirements, particularly for passengers affected by cancellations and delays. Should the Department establish specific minimum wait times for customer service during or after a cancellation or lengthy delay, and what should the minimum wait times be or what should minimum wait times be based on? Should any minimum customer service wait time be based on the type of customer service the passenger seeks, for example, customer service about rebooking, refunds, compensation, etc.? Should the Department consider requiring airlines to make call center service available at all times during a disruption, regardless of whether the other means of assistance are available as well? Should the Department consider as an option letting airlines determine a minimum standard of customer service and requiring the airline to put it in their customer service plan? The Department invites comments on these options for improving the timeliness of customer service.

What recordkeeping and reporting requirements should apply to the areas covered by this ANPRM, if any? The Department is considering proposing that airlines must submit periodic reports regarding compliance with any requirements adopted. The intent of this option would be to enable the Department to monitor airline implementation of and compliance with any requirements effectively and efficiently and to facilitate enforcement of noncompliance, when appropriate. Such reports may include, for example, information about cancellations and lengthy flight delays that the airline determined were controllable and not controllable and the specific bases for the carrier's determinations; information about notifications, services, reimbursements, and compensation provided; and information about requests for services and claims for reimbursements and/or compensation, including the airline's responses. Should the Department require reports and, if so, should the Department require airlines to report on a fixed interval? Should different reporting requirements, if any, apply to foreign carriers, and, if so, why?

The Office of Management and Budget (OMB) has determined that this ANPRM is a significant regulatory action under Executive Order 12866. Executive Order 12866 requires agencies to provide a meaningful opportunity for public participation. Accordingly, we have asked commenters to answer a variety of questions to elicit practical information about alternative approaches and relevant data. These comments will help the Department evaluate whether a NPRM is needed and if so, the content of the NPRM. If the Department issues a NPRM after the completion of the comment period on this ANPRM, it will prepare a regulatory impact analysis for the proposed rule, assessing the potential benefits, costs, and transfers. The Department seeks any information, data, and analysis that would help the Department understand the economic impacts of the potential regulatory options discussed within this ANPRM.

This ANPRM has been analyzed in accordance with the principles and criteria contained in Executive Order 13132 (“Federalism”). This ANPRM does not propose any requirement that (1) has substantial direct effects on the States, the relationship between the National Government and the States, or the distribution of power and responsibilities among the various levels of government, (2) imposes substantial direct compliance costs on State and local governments, or (3) preempts State law. States are already preempted from regulating in this area by the Airline Deregulation Act, 49 U.S.C. 41713. Therefore, the consultation and funding requirements of Executive Order 13132 do not apply.

This ANPRM has been analyzed in accordance with the principles and criteria contained in Executive Order 13175 (“Consultation and Coordination with Indian Tribal Governments”). Because none of the options on which we are seeking comment would significantly or uniquely affect the communities of the Indian Tribal governments or impose substantial direct compliance costs on them, the funding and consultation requirements of Executive Order 13175 do not apply.

When a Federal agency is required to publish a notice of proposed rulemaking (5 U.S.C. 553), the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq. ) requires the agency to conduct an initial regulatory flexibility analysis (IRFA). An IRFA describes the impact of the rule on small entities (5 U.S.C. 603). An IRFA is not required if the agency head certifies that a rule will not have a significant economic impact on a substantial number of small entities (5 U.S.C. 605). Under the Regulatory Flexibility Act, carriers that exclusively provide air transportation with aircraft originally designed to have a maximum passenger capacity of 60 seats or less or a maximum payload capacity of 18,000 pounds or less are small businesses. 129 If the Department proposes to adopt the consumer protections discussed in this ANPRM, it is possible that it may have some impact on small entities. We invite comment to facilitate DOT's assessment of the potential impact of adopting the possible regulatory requirements discussed in this ANPRM on small entities.

Under the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ), no person is required to respond to a collection of information unless it displays a valid OMB control number. This ANPRM is not covered by the Paperwork Reduction Act because it does not propose any new information collection burdens. If the Department proposes to adopt information collections in a NPRM, the burdens associated with such a collection will be analyzed at that time.

The Department has determined that the requirements of Title II of the Unfunded Reform Act of 1995 do not apply to this document.

The Department has analyzed the environmental impacts of this ANPRM pursuant to the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq. ) and has determined that it is categorically excluded pursuant to DOT Order 5610.1C, Procedures for Considering Environmental Impacts (44 FR 56420, Oct. 1, 1979). Categorical exclusions are actions identified in an agency's NEPA implementing procedures that do not normally have a significant impact on the environment and therefore do not require either an environmental assessment (EA) or environmental impact statement (EIS). 130 In analyzing the applicability of a categorical exclusion, the agency must also consider whether extraordinary circumstances are present that would warrant the preparation of an EA or EIS. 131 Paragraph 4(c)(6)(i) of DOT Order 5610.1C provides that “actions relating to consumer protection, including regulations” are categorically excluded. The Department does not anticipate any environmental impacts, and there are no extraordinary circumstances present in connection with this rulemaking.

This document contains proposed additions and amendments to 26 CFR part 1 (Income Tax Regulations) addressing the application of section 987 of the Internal Revenue Code (Code) and related provisions (the “proposed regulations”). The additions and amendments are issued under sections 987 and 989, pursuant to the express delegations of authority provided under those sections. The express delegations relied upon are referenced in the Background section of this preamble. The proposed regulations are also issued under the express delegation of authority under section 7805 of the Code.

This document contains proposed regulations under section 987 of the Code. Section 987 applies to any taxpayer that has a qualified business unit (QBU) with a functional currency other than the dollar. Section 987(1) and (2) provide rules for determining and translating taxable income or loss (“section 987 taxable income or loss”) with respect to the QBU. In addition, foreign currency gain or loss must be determined under section 987(3) (“section 987 gain or loss”), which requires proper adjustments (as prescribed by the Secretary) for transfers of property between QBUs of the taxpayer having different functional currencies.

Sections 987 and 989 provide several explicit grants of regulatory authority. The statute does not specify how the proper adjustments should be made under section 987(3), but instead directs the Secretary to prescribe the proper adjustments needed to determine the taxable income of the owner of a section 987 QBU. Section 989(c) directs the Secretary to “prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subpart.”  1 The grants of authority in section 989(c) include regulations providing for the appropriate treatment of related party transactions (including transactions between QBUs of the same taxpayer). Section 989(c)(5).

Concurrently with the publication of these proposed regulations, the Treasury Department and the IRS are publishing in the rules and regulations section of this edition of the Federal Register (RIN 1545-BO07) final regulations under sections 861, 985, 987 through 989, and 1502 of the Code (the “final regulations”). On November 14, 2023, the Treasury Department and the IRS published proposed regulations (REG-132422-17) under those same sections of the Code (the “2023 proposed regulations”) in the Federal Register (88 FR 78134). The comments received in response to the 2023 proposed regulations, and the revisions made in response to those comments, are summarized in the Summary of Comments and Explanation of Revisions in the preamble to the final regulations. In response to certain comments, the Treasury Department and the IRS are publishing this notice of proposed rulemaking to provide additional proposed rules under section 987 and to request comments relating to the application of section 987 to partnerships and controlled foreign corporations (“CFCs”).

The proposed regulations provide an election under which, in certain cases, taxpayers can translate a group of frequently recurring transfers between a section 987 QBU and its owner using the yearly average exchange rate (rather than the spot rate applicable on the date of each transfer). The proposed regulations also would simplify the computation of unrecognized section 987 gain or loss under § 1.987-4 for taxpayers that make this election.

Under the final regulations, an asset is treated as transferred to a section 987 QBU from its owner if, because of a disregarded transaction, the asset is reflected on the books and records of the section 987 QBU. See § 1.987-2(c)(2)(i). Similarly, an asset is treated as transferred from a section 987 QBU to its owner if, because of a disregarded transaction, the asset ceases to be reflected on the books and records of the section 987 QBU. Thus, for example, if a section 987 QBU purchases inventory from its owner (or another eligible QBU of its owner) in a disregarded transaction, the section 987 QBU is treated as distributing cash to its owner, and the owner is treated as contributing the inventory to the section 987 QBU. Disregarded transactions, however, do not give rise to items of income, gain, deduction, or loss that are taken into account in determining section 987 taxable income or loss under § 1.987-3. See § 1.987-2(c)(2)(iii).

The final regulations provide rules for determining the basis of an asset or the amount of a liability that has been transferred by an owner to a section 987 QBU. In general, marked items are translated into the section 987 QBU's functional currency at the spot rate applicable on the date of the transfer, while historic items are translated at the applicable historic rate. See § 1.987-2(d). Similarly, when an asset or liability is transferred from a section 987 QBU to its owner, marked items are translated into the owner's functional currency at the spot rate applicable on the date of transfer, while historic items are translated at the applicable historic rate. See § 1.987-5(f). These rules apply to all transfers of assets and liabilities between a section 987 QBU and its owner, including transfers made in connection with ordinary course disregarded transactions (for example, sales of inventory).

The definition of a marked item under the final regulations includes an asset or liability denominated in, or determined by reference to, the functional currency of the section 987 QBU that would be a section 988 transaction if it were held or entered into directly by the owner of the section 987 QBU; it also includes several other categories of assets and liabilities. See § 1.987-1(d)(1). However, the final regulations provide an election to treat all items of a section 987 QBU as marked items (the “current rate election”). See § 1.987-1(d)(2).

Section 1.987-4 provides rules for computing net unrecognized section 987 gain or loss with respect to a section 987 QBU. Under § 1.987-4(b), net unrecognized section 987 gain or loss is equal to the sum of (i) the unrecognized section 987 gain or loss for the current taxable year and (ii) net accumulated unrecognized section 987 gain or loss for all prior taxable years.

Section § 1.987-4(d) provides a ten-step formula for computing unrecognized section 987 gain or loss for the current taxable year. The first step of this formula is to determine the change in owner functional currency net value (“OFCNV”) of the section 987 QBU for the taxable year, computed using end-of-year exchange rates for marked items and historic rates for historic items. See § 1.987-4(d)(1) and (e). The other steps adjust for amounts comprising the separate components of the annual change in OFCNV (other than changes in the exchange rate). Steps 2 through 5 relate to transfers of assets and liabilities between a section 987 QBU and its owner, and steps 6 through 9 relate to items of income or loss of the section 987 QBU. See § 1.987-4(d)(2) through (9). Step 10 is a residual adjustment for any remaining increase or decrease to the section 987 QBU's functional currency balance sheet. This residual adjustment is translated into the owner's functional currency using the yearly average exchange rate for the taxable year. See § 1.987-4(d)(10).

In applying steps 2 through 5, an owner must account for all transfers of assets and liabilities between a section 987 QBU and its owner, including transfers made in connection with ordinary course disregarded transactions. See § 1.987-4(d)(2) through (5). For this purpose, marked items are translated into the owner's functional currency at the spot rate applicable on the date of the transfer, while historic items are translated at the applicable historic rate.

A comment to the 2023 proposed regulations asserted that it is burdensome for taxpayers to track and translate disregarded transactions between a section 987 QBU and its owner (or between different section 987 QBUs of the same owner) that arise in the ordinary course of a section 987 QBU's trade or business. The comment recommended that, for taxpayers that make a current rate election, unrecognized section 987 gain or loss for the taxable year should be computed by applying only two of the steps provided in § 1.987-4(d): step 1 (determining the change in OFCNV) and step 10 (reducing or increasing the amount determined in step 1 by the change in QBU net value, translated into the owner's functional currency at the yearly average exchange rate). The comment asserted that, under this approach, it would not be necessary to track ordinary course disregarded transactions between a section 987 QBU and its owner (or different section 987 QBUs of the same owner), because those transactions would be eliminated from the computation of unrecognized section 987 gain or loss.

As explained in the preamble to the final regulations, the effect of the comment's recommended rule would be to translate the net amount of all transfers between a section 987 QBU and its owner at the yearly average exchange rate under step 10. See part V.A.3 of the Summary of Comments and Explanation of Revisions in the preamble to the final regulations. By contrast, § 1.987-4(d) requires each transfer to be translated at the appropriate exchange rate in applying steps 2 through 5. Under the final regulations, if a current rate election is in effect, the basis of each asset and the amount of each liability transferred is translated at the spot rate applicable on the date of transfer (because all assets and liabilities are treated as marked items). The final regulations do not adopt the rule recommended by the comment because the applicable spot rate could be significantly higher or lower than the yearly average exchange rate, in which case the comment's recommended rule could substantially distort the computation of unrecognized section 987 gain or loss.

Notwithstanding the concern described in part II.A of this Explanation of Provisions, the Treasury Department and the IRS are of the view that, in certain cases, a group of frequently recurring transfers between a section 987 QBU and its owner could be translated using the yearly average exchange rate without creating significant distortions. Further, permitting taxpayers to use the yearly average exchange rate in lieu of the applicable spot rate would reduce the compliance burden of the section 987 regulations.

Therefore, the proposed regulations would provide that a taxpayer that has made a current rate election may elect to use the yearly average exchange rate to translate assets that are transferred between a section 987 QBU and its owner as part of a recurring transfer group (a “recurring transfer group election”). Proposed § 1.987-2(f)(1). The recurring transfer group election would be subject to the general timing and consistency requirements provided in § 1.987-1(g) of the final regulations.

If a recurring transfer group election is in effect, assets transferred between a section 987 QBU and its owner as part of a recurring transfer group (“grouped assets”) are translated under §§ 1.987-2(d), 1.987-4(d)(2), and 1.987-5(f) using the yearly average exchange rate in lieu of the applicable spot rate. Proposed § 1.987-2(f)(4). In addition, proposed § 1.987-2(f)(5)(i) would provide that transfers made as part of a recurring transfer group are disregarded for purposes of § 1.987-4(d)(2) and (3) (steps 2 and 3). Proposed § 1.987-2(f)(5). That is, because all transfers that are part of a recurring transfer group are translated at the yearly average exchange rate, these transfers do not need to be separately tracked and translated for purposes of determining unrecognized section 987 gain or loss.

Transfers that are part of a recurring transfer group are also disregarded when applying steps 2 and 3 in the functional currency of the section 987 QBU for purposes of determining the residual increase or decrease to net assets under § 1.987-4(d)(10). Proposed § 1.987-4(d)(10)(ii)(D). To the extent that these transfers increase or reduce the year-end net assets of the section 987 QBU (determined in the section 987 QBU's functional currency), the residual increase or decrease to net assets will be translated at the yearly average exchange rate under § 1.987-4(d)(10) (step 10).

Under the proposed regulations, if a recurring transfer group election is in effect, and the only transfers between a section 987 QBU and its owner are part of a recurring transfer group, the owner would determine unrecognized section 987 gain or loss for the taxable year by applying only steps 1 and 10 (as recommended by the comment). Transfers that are not part of a recurring transfer group must be taken into account at the applicable spot rate under steps 2 through 5. However, the final regulations permit taxpayers to use a spot rate convention based on the average of spot rates for a reasonable period (which can be as long as three months), which should reduce the compliance burden of accounting for these transfers. See § 1.987-1(c)(1)(ii).

The special rule for computing unrecognized section 987 gain or loss in proposed § 1.987-2(f)(5)(i) would not apply if the owner of a section 987 QBU determines QBU net value using the formula provided in § 1.987-4(e)(2)(iii). Proposed § 1.987-2(f)(5)(ii). Taxpayers using this formula must separately track each transfer for purposes of computing QBU net value, and therefore disregarding the transfers for purposes of § 1.987-4(d)(2) and (3) would not reduce the compliance burden for these taxpayers.

The proposed regulations also would modify the recordkeeping requirements in § 1.987-9 to provide that taxpayers are not required to maintain records concerning amounts transferred between an owner and a section 987 QBU unless the transferred amounts are taken into account in applying § 1.987-4 or § 1.987-5. Proposed § 1.987-9(b)(5) and (6). Therefore, if a taxpayer makes a recurring transfer group election and uses the alternative calculation provided in § 1.987-5(c)(2) (under which the remittance for a taxable year is determined by reference to the change in QBU net value, adjusted for income or loss of the section 987 QBU), the taxpayer generally would not be required to maintain records with respect to transfers of grouped assets.

Under the proposed regulations, a recurring transfer group would be defined as a group of frequently recurring transfers between a section 987 QBU and its owner (or another eligible QBU of the owner) that are made in the ordinary course of a trade or business. Proposed § 1.987-2(f)(2)(i). Only transfers made in connection with sales of inventory, payments for services, or rent or royalty transactions in which arm's length compensation (determined by applying the principles of the arm's length standard of § 1.482-1(b)(1)) has been paid would be included in a recurring transfer group. Proposed § 1.987-2(f)(2)(ii). For this purpose, the principles of the arm's length standard apply as if the section 987 QBU were a corporation that is separate from its owner and, thus, as if the disregarded transaction were a controlled transfer within the meaning of § 1.482-1(i)(8). A recurring transfer group would not include a transfer between the section 987 QBU and its owner if the transfer (or a portion of the transfer) would be treated as a distribution with respect to stock, or an exchange for stock (or a contribution to capital), for U.S. tax purposes if the QBU were treated as a separate corporation. Proposed § 1.987-2(f)(2)(iii). Those transfers are unlikely to be made in the ordinary course of a trade or business and could be used to manipulate the computation of unrecognized section 987 gain or loss.

The definition of a recurring transfer group in § 1.987-2(f)(2) is tailored to identify ordinary business transactions for which the use of the yearly average exchange rate would not cause significant distortions and which could be burdensome to account for under the rules of the final regulations. The Treasury Department and the IRS request comments as to whether other transfers should be included in a recurring transfer group. For example, comments are requested as to whether intercompany lending transactions (or other transactions) of a bank or other financial entity should be included in a recurring transfer group and, if so, how the scope of the covered transactions should be defined. Although lending transactions are made in the ordinary course of a bank's trade or business, it may be difficult to distinguish between ordinary course loans and extraordinary transactions that could be used to manipulate a taxpayer's unrecognized section 987 gain or loss.

The rules of proposed § 1.987-2(f)(4) and (5) would not apply in a taxable year in which a disproportionate amount of the assets transferred as part of a recurring transfer group are transferred during one or more quarters of the taxable year. Proposed § 1.987-2(f)(6). In particular, proposed § 1.987-2(f)(4) and (5) would not apply if either (i) more than 50 percent of the total amount transferred during the taxable year is transferred during one quarter of the taxable year or (ii) more than 80 percent of the total amount transferred during the taxable year is transferred during two quarters of the taxable year.

The exception in proposed § 1.987-2(f)(6) is intended to prevent significant distortions that could arise from using the yearly average exchange rate to translate transfers that primarily occur in only part of the taxable year, while being flexible enough to accommodate ordinary course disregarded transactions between a section 987 QBU and its owner. The Treasury Department and the IRS request comments as to whether other standards could be used to identify transfers that can appropriately be translated at the yearly average exchange rate. For example, comments are requested as to whether more flexibility should be provided in taxable years in which exchange rates do not significantly fluctuate.

Once finalized, the regulations would apply to taxable years beginning after the date the Treasury Decision adopting these rules as final regulations is published in the Federal Register . A taxpayer may rely on these proposed regulations for a taxable year in which the final regulations (that is, the final regulations that are being published concurrently with the proposed regulations) apply, provided the taxpayer and each member of its consolidated group and section 987 electing group, as applicable, consistently follow the proposed regulations in their entirety and in a consistent manner.

In addition, for a taxable year in which the final regulations apply, a taxpayer may continue to rely on the parts of the proposed regulations published in the Federal Register (REG-128276-12, 81 FR 88882) on December 8, 2016 (the “2016 proposed regulations”) that have not been finalized or withdrawn, provided that the taxpayer and each member of its consolidated group and section 987 electing group, as applicable, consistently follow these parts in their entirety and in a consistent manner. The following parts of the 2016 proposed regulations have not been finalized or withdrawn: (1) rules regarding QBUs with the U.S. dollar as their functional currency ( see §§ 1.987-1 and 1.987-6 of the 2016 proposed regulations); and (2) rules requiring the deferral of certain section 988 loss that arises with respect to related-party loans ( see § 1.988-2 of the 2016 proposed regulations).

Before these proposed regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. In addition to the specific requests for comments in parts II.C and II.D of the Explanation of Provisions, the Treasury Department and the IRS request comments on all other aspects of the proposed regulations as well as on the specific issues identified in part II of this Comments and Request for Public Hearing section. Any comments submitted will be made available at https://www.regulations.gov or upon request.

A public hearing concerning the proposed regulations will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register .

The final regulations do not provide detailed rules concerning the application of section 987 to partnerships, and they reserve on the treatment of a partnership as a QBU under section 989(a). See part VIII.B.1 of the Summary of Comments and Explanation of Revisions in the preamble to the final regulations. See also part VIII of the Explanation of Provisions in the preamble to the 2023 proposed regulations. The Treasury Department and the IRS continue to study those issues and therefore request comments on the following topics:

1. Should section 987 be applied to partnerships using an entity approach, an aggregate approach, or a hybrid approach? Comments recommending an entity approach should address the concerns raised in the preamble to the 2023 proposed regulations regarding the potential for unrecognized section 987 gain or loss to be shifted between partners upon a sale of a partnership interest. See part VIII.C of the Explanation of Provisions in the preamble to the 2023 proposed regulations.

2. Should a partnership be treated as a per se QBU under section 989(a) and § 1.989(a)-1(b)(2)(i)?

3. Should different rules be provided for purposes of sections 987 and 989(a) depending on whether the partners in the partnership are related parties? Comments recommending an entity approach for partnerships owned by related parties should address the concerns raised in the preamble to the 2023 proposed regulations regarding the potential for a group of related parties to hold an eligible QBU through a partnership (rather than directly) in order to alter the section 987 treatment of the eligible QBU without meaningfully altering the group's economic position. See part VIII.E of the Explanation of Provisions in the preamble to the 2023 proposed regulations.

4. Under an entity approach, if a partnership's functional currency differs from that of its partners, how should the partners account for currency gain or loss with respect to their partnership interests?

Comments submitted in response to the 2023 proposed regulations do not need to be resubmitted in response to these proposed regulations.

As discussed in part II.A.3 of the Summary of Comments and Explanation of Revisions in the preamble to the final regulations, a comment on the 2023 proposed regulations recommended that the application of section 987 be simplified by applying rules similar to section 986(c) to section 987 QBUs owned by CFCs in lieu of applying section 987. In response to this comment, the preamble to the final regulations explained that the Treasury Department and the IRS are of the view that it would not be feasible to adopt this comment, but nonetheless are studying whether there are instances in which it would be possible to simplify the application of section 987 by modifying the application of section 987(3) (and the related regulations, including §§ 1.987-4 through 1.987-6, 1.987-8, and 1.987-11 through 1.987-13) to certain entities.

In considering the appropriateness of such a rule, it is helpful to consider United States persons (“U.S. persons”) and foreign persons separately. In the case of a U.S. person, except to the extent that the Code specifically provides otherwise, the taxable income of the U.S. person should reflect that person's accession to wealth, as measured in the U.S. dollar. Accordingly, when the amount of the U.S. person's basis in its assets or the amount of its liabilities fluctuates as a result of fluctuations in the functional currency of a section 987 QBU, section 987(3) is necessary to ensure that currency gain or loss is taken into account to prevent these fluctuations from artificially increasing or decreasing the taxpayer's income, gain, deduction, and loss, as measured in the U.S. dollar. In contrast, in the case of a foreign person, such as a CFC or a partnership with only foreign partners, the Treasury Department and the IRS are studying whether the U.S. tax system appropriately tracks and taxes the foreign person's accession to wealth given that its functional currency may not be the U.S. dollar.

The Treasury Department and the IRS agree with the comment that the compliance and administrative burdens of the section 987 regulations would be substantially reduced if section 987(3) and the related regulations did not apply to CFCs or to partnerships with only foreign partners. Under such an approach, a CFC or a partnership with only foreign partners would not calculate net unrecognized section 987 gain or loss with respect to a section 987 QBU and would not recognize section 987 gain or loss on a remittance or termination. Instead, if a section 987 QBU owned by the CFC or partnership transferred assets or liabilities to its owner, the CFC or partnership would merely take a basis in the assets or measure the amount of the liabilities by translating from the section 987 QBU's functional currency into the CFC or partnership's functional currency at the spot rate on the date of the transfer.

Relatedly, the Treasury Department and the IRS are concerned about the ability of foreign entities to manipulate the recognition of section 987 gain and loss under section 987(3) and the related regulations. This concern is not entirely alleviated by the loss-to-the-extent-of-gain-rule in § 1.987-11, which suspends the recognition of section 987 loss for taxpayers that make a current rate election.

Accordingly, the Treasury Department and the IRS are studying whether, in certain cases, it would be appropriate to not apply section 987(3) and the related regulations to CFCs and partnerships with only foreign partners. However, the Treasury Department and the IRS have a number of concerns, including that, under this approach, the amount of currency gain (or loss) that would have been taken into account under section 987(3) would give rise to an increase (or decrease) in a CFC's aggregate inside asset basis without a corresponding change in the CFC's earnings and profits, and the resulting mismatch between inside asset basis and earnings and profits could produce inappropriate results.

For example, over time, it would be common for a CFC's aggregate inside asset basis to be greater or less than the sum of its (i) earnings and profits determined under the principles of § 1.367(b)-2(d) but without regard to whether the exchanging shareholder is a U.S. person or foreign person, (ii) total basis in the stock of the CFC; and (iii) the amount of the CFC's liabilities. Although it is possible for a CFC to have aggregate inside asset basis in excess of these amounts (“excess asset basis”)  2 under current law, the Treasury Department and the IRS are concerned that, if CFCs were not required to recognize currency gain or loss under section 987(3), excess asset basis would become more prevalent. If the United States shareholder (“U.S. shareholder”) ultimately sells its stock in the CFC, the U.S. shareholder would generally recognize the appropriate amount of gain or loss on the sale of stock (notwithstanding the potential excess asset basis of the CFC). However, if, in lieu of a sale of stock, the CFC merges or liquidates into a domestic corporation pursuant to an inbound asset reorganization or liquidation described in § 1.367(b)-3, the excess asset basis could be imported into the United States without a corresponding inclusion of income or gain under § 1.367(b)-3, and thus permanently escape U.S. taxation.

Accordingly, the Treasury Department and the IRS request comments concerning the following topics:

1. Should the final regulations be modified to provide that section 987(3) and the related regulations do not apply to CFCs or to partnerships with only foreign partners? If so, how should currency gain or loss be recognized with respect to the section 987 QBU (if at all)?

2. If section 987(3) did not apply to CFCs and partnerships with only foreign partners, what other rules would be needed to prevent value equal to the amount of excess asset basis from permanently escaping U.S. taxation upon an inbound transaction such as an asset reorganization or liquidation described in § 1.367(b)-3? For example, should the importation of excess asset basis trigger the recognition of gain in the same manner that § 1.367(b)-3 triggers a deemed dividend to a shareholder? If so, are there circumstances in which excess asset basis should not trigger gain (such as excess asset basis arising by reason of section 362(e) or by reason of minority interests)? How should excess asset basis be computed? What additional rules would be needed to similarly prevent taxpayers from planning into the permanent avoidance or indefinite deferral of gain or acceleration of losses?

3. If section 987(3) and the related regulations continue to apply to CFCs and partnerships with only foreign partners generally, are any modifications needed to the calculation of section 987 gain and loss for these entities?

Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) requires that a Federal agency obtain the approval of the Office of Management and Budget (OMB) before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the OMB.

The collections of information in the proposed regulations with respect to section 987 are in proposed § 1.987-2(f)(1) (and the related election rules in § 1.987-1(g) of the final regulations). The likely respondents are individuals who file a Form 1040 and businesses that file a Form 1065 or Form 1120.

The collection of information in proposed § 1.987-2(f)(1) is required only when a taxpayer makes or revokes a recurring transfer group election under proposed § 1.987-2(f)(1). In the first year in which the section 987 regulations apply to a taxpayer, or the first year in which the taxpayer or a member of its consolidated group or section 987 electing group is the owner of a section 987 QBU, the taxpayer is permitted to make a recurring transfer group election without the Commissioner's consent. Thereafter, the taxpayer may make or revoke a recurring transfer group election only with the consent of the Commissioner, which may be granted with a private letter ruling. When a taxpayer makes or revokes an election, the collection of information is mandatory. The collection of information required by proposed § 1.987-2(f)(1) will be used by the IRS for tax compliance purposes.

The Treasury Department and the IRS intend that the information required by § 1.987-1(g) with respect to a recurring transfer group election under proposed § 1.987-2(f)(1) will be collected by attaching a statement to a taxpayer's return (such as the appropriate Form 1040, Form 1120, Form 1065, or other appropriate forms). For purposes of the PRA, the reporting burden associated with those collections of information will be reflected in the PRA submissions associated with those forms. The OMB Control Numbers for the forms will be approved under 1545-0074 for individuals and under 1545-0123 for business entities.

To the extent that a taxpayer makes or revokes an election by obtaining a private letter ruling, the reporting burden associated with those collections of information will be reflected in the PRA submissions associated with revenue procedures governing private letter rulings. The OMB Control Number for those revenue procedures is control number 1545-1522. The proposed regulations would only require taxpayers to follow the procedures under Revenue Procedure 2024-1, IRB 2024-1 (or future revenue procedures governing private letter rulings) and would not change the collection requirements of the Revenue Procedure.

Books or records relating to a collection of information must be retained as long as 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.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this rulemaking will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act. The proposed regulations affect individuals and corporations (other than S corporations) with foreign branch operations.

The number of small entities potentially affected by the proposed regulations is unknown; however, it is unlikely to be a substantial number because taxpayers with wholly owned foreign operations are typically larger businesses. The Treasury Department and the IRS estimate that the total number of corporations (other than S corporations) with a foreign branch subject to section 987 is approximately 2,000. This estimate is based on the number of corporations (other than S corporations) that filed a Form 8858 in 2022 that showed that the filer: (1) owned at least one disregarded entity or branch with a functional currency different from the functional currency of the owner, and (2) indicated that the disregarded entity or branch was a section 989 QBU. As shown in the following table, only a small percentage of those filers are small entities.

The number of affected corporations (other than S corporations) with total receipts of less than $25 million represents 0.02% of all corporations (other than S corporations) with total receipts of less than $25 million.

These proposed regulations generally modify the rules that would otherwise apply under the final regulations by providing taxpayers with an election that reduces the compliance burden of applying section 987. Small entities generally would not be affected by these rules unless they choose to make an election to reduce their compliance burden.

A portion of the economic impact of the proposed regulations may derive from the collection of information requirements imposed under proposed § 1.987-2(f)(1) (and the related election rules in § 1.987-1(g) of the final regulations). The Treasury Department and the IRS have determined that the average burden is 1.95 hours per response. The IRS's Research, Applied Analytics, and Statistics division estimates that the appropriate wage rate for this set of taxpayers is $99.87 per hour. Thus, the annual burden per taxpayer from each collection of information requirement is $194.75. The requirements of proposed § 1.987-2(f)(1) apply only if a taxpayer chooses to make or revoke an election (and only in the year of the election or revocation).

Pursuant to section 7805(f) of the Code, this proposed regulation will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. The proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. The proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.

The principal authors of these proposed regulations are Adam G. Province and Raphael J. Cohen of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 as follows:

On June 22, 2010, the EPA revised the primary SO 2 NAAQS, establishing a new 1-hour primary standard of 75 parts per billion (ppb). 1 Under the EPA's regulations at title 40 of the Code of Federal Regulations (CFR) part 50, the 2010 1-hour SO 2 NAAQS is met at a monitoring site when the 3-year average of the annual 99th percentile of daily maximum 1-hour average concentrations is less than or equal to 75 ppb (based on the rounding convention in 40 CFR part 50, appendix T). 2 Ambient air quality monitoring data for the 3-year period must meet a data completeness requirement. A year meets data completeness requirements when all four quarters are complete, and a quarter is complete when at least 75 percent of the sampling days for each quarter have complete data. A sampling day has complete data if 75 percent of the hourly concentration values, including State-flagged data affected by exceptional events which have been approved for exclusion by the Administrator, are reported. 3

Upon promulgation of a new or revised NAAQS, the CAA requires the EPA to designate as nonattainment any area that does not meet (or that contributes to ambient air quality in a nearby area that does not meet) the NAAQS. 4 On August 5, 2013, the EPA designated a portion of Allegheny County, Pennsylvania (hereafter the “Allegheny County NAA”), as nonattainment for the 2010 1-hour primary SO 2 NAAQS, effective October 4, 2013. 5 The designation was based on violating air quality monitoring data for calendar years 2009-2011. The Allegheny County NAA consists of 22 municipalities including: the Borough of Braddock, Borough of Dravosburg, Borough of East McKeesport, Borough of East Pittsburgh, Borough of Elizabeth, Borough of Glassport, Borough of Jefferson Hills, Borough of Liberty, Borough of Lincoln, Borough of North Braddock, Borough of Pleasant Hills, Borough of Port Vue, Borough of Versailles, Borough of Wall, Borough of West Elizabeth, Borough of West Mifflin, City of Clairton, City of Duquesne, City of McKeesport, Elizabeth Township, Forward Township, and North Versailles Township. 6 This action established an attainment date five years after the effective date for the areas designated as nonattainment for the 2010 SO 2 NAAQS ( i.e., by October 4, 2018). The Commonwealth was also required to submit an attainment SIP revision for the Allegheny County NAA to the EPA that meets the requirements of CAA sections 110, 172(c) and 191-192 within 18 months following the October 4, 2013, effective date of designation ( i.e., by April 6, 2015).

The EPA did not receive an attainment SIP revision for the Allegheny County NAA by the April 6, 2015 deadline and subsequently on March 18, 2016, the EPA published a finding of failure to submit indicating that Pennsylvania did not submit the required SO 2 attainment plan. 7 This finding initiated a clock under CAA section 179(a) for the potential imposition of new source review sanctions 18 months after the effective date of the finding and the potential imposition of highway funding sanctions 6 months following that, in accordance with CAA section 179(b) and 40 CFR 52.31. Additionally, under CAA section 110(c), the finding triggered a requirement for the EPA to promulgate a Federal implementation plan (FIP) within two years of the effective date of the finding unless, by that time, Pennsylvania made the necessary complete submittal, and the EPA approved the submittal.

Pursuant to Pennsylvania's October 3, 2017 attainment plan submittal, and the EPA's October 6, 2017 letter to Pennsylvania finding the submittal complete and noting the stopping of the sanctions' deadline, these CAA section 179(b) sanctions were not imposed as Pennsylvania did not miss the original deadline. 8 The EPA proposed approving the SIP revision submittal on November 19, 2018, 9 and issued a final approval on April 23, 2020. 10 This approval ended the requirement for the EPA to promulgate a FIP under CAA section 110(c). On November 14, 2023, PADEP, on behalf of ACHD, submitted a revision to its SIP for the inclusion of a maintenance plan for the 2010 1-hour primary SO 2 NAAQS and requested a concurrent redesignation of the Allegheny County NAA to attainment for the 2010 1-hour primary SO 2 NAAQS.

After a State has submitted a redesignation request for a nonattainment area, the EPA must assess if the statutory criteria identified in CAA section 107(d)(3)(E) have been met to redesignate the area to attainment. These conditions include: (1) the EPA has determined that the applicable NAAQS has been attained; (2) the applicable SIP has been fully approved by the EPA under CAA section 110(k); (3) the EPA has determined that the improvement in the area's air quality is due to permanent and enforceable reductions in emissions; (4) the area has a fully approved maintenance plan, including a contingency plan, under CAA section 175A; and (5) the State has met all applicable requirements for the area under CAA section 110 and part D. The EPA has provided direction for how it would consider if these conditions have been met in the April 23, 2014 memorandum “Guidance for 1-Hour SO 2 Nonattainment Area SIP Submissions” (2014 SO 2 Guidance). 11

CAA section 175A and additional EPA guidance, including the September 4, 1992 memorandum “Procedures for Processing Requests to Redesignate Areas to Attainment” (Calcagni Memo), 12 identify the required elements for an approvable maintenance plan for areas seeking redesignation from nonattainment to attainment. Under CAA section 175A, the plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after the EPA approves a redesignation request to attainment. Eight years after the redesignation, the State must submit a revised maintenance plan demonstrating that attainment will continue to be maintained for an additional 10 years following the initial 10-year period. To address the possibility of future NAAQS violations, the maintenance plan must contain contingency measures, as the EPA deems necessary, to assure prompt correction of any future 2010 1-hour SO 2 violations. The Calcagni Memo provides further guidance on the content of a maintenance plan, explaining that a maintenance plan should address five requirements: (1) an attainment emissions inventory that identifies the level of emissions in the area which is sufficient to attain the NAAQS; (2) a maintenance demonstration that shows future emissions of a pollutant will not exceed the level of the attainment inventory; (3) the continued operation of a monitoring network that conforms to 40 CFR part 58; (4) a means for verifying the continued attainment of the NAAQS; and (5) a contingency plan to correct any violation of the NAAQS in the area following redesignation of the area.

The EPA's evaluation of Pennsylvania's redesignation request and maintenance plan is based on consideration of the five redesignation criteria provided under CAA section 107(d)(3)(E) and relevant guidance, including the aforementioned 2014 SO 2 Guidance and Calcagni Memo.

CAA section 107(d)(3)(E)(i) requires that the EPA determine if a nonattainment area has attained the applicable NAAQS in order to redesignate the area to attainment. In assessing if the area has attained the NAAQS, the 2014 SO 2 Guidance stipulates that the EPA can interdependently consider two components to support an attainment determination: air quality monitoring data and air quality modeling data. 13

The Allegheny County NAA contains two operational SO 2 monitor sites: the Liberty site (Air Quality System (AQS) Site ID 42-003-0064) and the North Braddock site (AQS Site ID 42-003-1301). The Liberty monitor is located centrally within the Allegheny County NAA and has been in operation since 1969, while the North Braddock monitor is located in the northern segment of the Allegheny County NAA and has been in operation since 2014. Both monitors have been in attainment of the 2010 1-hour primary SO 2 NAAQS since the 2019-2021 period, with Liberty recording a design value of 63 ppb for the 2021-2023 period and North Braddock recording a design value of 54 ppb for the 2021-2023 period. 14 Design values for the past 10 years are reported in Table 1 in this document. Although both monitors are currently in attainment of the NAAQS, prior analysis has determined that neither of these monitoring sites are located in the area of maximum concentration, 15 and as such, additional air quality modeling is generally needed to estimate SO 2 concentrations within the area.

Pennsylvania's 2017 attainment plan contained an attainment demonstration which utilized allowable SO 2 emission limits from stationary sources within the Allegheny County NAA to inform several modeling analyses for SO 2 emissions. 16 These modeling analyses were based on emissions limits for large, stationary sources of SO 2 , which, if enacted, would ensure that the Allegheny County NAA would attain the 2010 1-hour primary SO 2 NAAQS. The 2014 SO 2 Guidance states that the EPA may make a determination of attainment based on this attainment plan modeling, eliminating the need for separate actual emissions-based modeling to support a redesignation request—provided that the source characteristics are still reasonably represented. 17 The source characteristics are still reasonably represented  18 and from 2020-2021, large, stationary SO 2 sources  19 within the Allegheny County NAA were meeting their allowable emission limits for attainment. 20 As such, the 2017 attainment demonstration modeling submitted by Pennsylvania will allow for the EPA's determination of attainment. The 2014 SO 2 Guidance further states that a demonstration that the control strategy in the SIP has been fully implemented will also be pertinent for making the determination of attainment. 21 Pennsylvania has submitted information detailed in its redesignation request and maintenance plan to confirm that the control strategy outlined in the SIP has been fully implemented. The specific measures identified in the control strategy include upgrades to the Vacuum Carbonate Unit equipment at the U.S. Steel (USS) Clairton Plant, the implementation of a tail gas recycling project at the USS Clairton Plant, and a new stack and combined flue system for select boilers at the USS Edgar Thomson Plant. 22 Additionally, lower permitted SO 2 emission rates were implemented for nearly all processes at the primary stationary SO 2 sources in the Allegheny County NAA, including the USS Clairton Plant, the USS Edgar Thomson Plant, the USS Irvin Plant, and Harsco Metals. These implemented, permanent and federally enforceable control measures have aided in reducing the actual total emissions from large, stationary USS SO 2 sources to 2,373 tons per year (as of 2021), 23 which is below the revised total emissions limits proposed for USS facilities in the 2017 attainment demonstration modeling (2,669 tons per year), 24 thus contributing to bringing the Allegheny County NAA into attainment.

In this action, the EPA proposes to find that the air quality monitoring data and air quality modeling data demonstrate that the Allegheny County NAA has attained the 2010 1-hour primary SO 2 NAAQS.

CAA section 107(d)(3)(E)(ii) requires that the EPA fully approve the applicable implementation plan for the area under CAA section 110(k) in order to redesignate that area to attainment. The EPA has fully approved the applicable Pennsylvania SIP for the Allegheny County NAA under section 110(k) of the CAA for all requirements applicable for purposes of redesignation. An area cannot be redesignated to attainment if a required element of the SIP is the subject of a disapproval; a finding of failure to submit, or failure to implement the SIP; or a partial, conditional, or limited approval. 25 The 2017 attainment plan SIP was initially proposed for EPA approval on November 19, 2018  26 and received final EPA approval on April 23, 2020. 27 The approved elements from the 2017 attainment plan include a 2011 base year emissions inventory, a control strategy and air quality modeling demonstration, a reasonable available control measures/reasonably available control technology (RACM/RACT) analysis, a reasonable further progress (RFP) analysis, contingency measures, and nonattainment new source review (NNSR) regulations.

For redesignating a nonattainment area to attainment, CAA section 107(d)(3)(E)(iii) requires the EPA to determine that the air quality improvement in the area is due to permanent and enforceable reductions in emissions resulting from implementation of the SIP, applicable Federal air pollution control regulations, and other permanent and enforceable reductions. The EPA proposes to find that Pennsylvania has demonstrated that the requirements of CAA section 107(d)(3)(E)(iii) have been met.

Specifically, the implementation of multiple permanent and federally enforceable control measures at stationary point sources of SO 2 identified in the EPA-approved 2017 attainment demonstration aided in a substantial decrease in SO 2 emissions, and consequently lower SO 2 concentrations in the Allegheny County NAA. These measures include upgrades to the Vacuum Carbonate Unit equipment at the USS Clairton Plant, the implementation of a tail gas recycling project at the USS Clairton Plant, and a new stack and combined flue system for select boilers at the USS Edgar Thomson Plant. Furthermore, the Guardian Glass Plant ceased operations in August 2015 and its operating permit was terminated in November 2015. 28 The Calcagni Memo states that “[e]mission reductions from source shutdowns can be considered permanent and enforceable to the extent that those shutdowns have been reflected in the SIP and all applicable permits have been modified accordingly,” and therefore the Guardian shutdown is considered permanent and enforceable. 29 Any future operations at this location would require a new permit and a new source evaluation, as described in ACHD Article XXI, sections 2102.04 and 2103.13. 30 Additionally, Emissions Reductions Credits for SO 2 were not requested for the Guardian Glass Plant, preventing the transfer or sale of associated emission credits to another entity in Pennsylvania or some surrounding states.

Allegheny County also established lower SO 2 emissions limits for nearly all processes at the USS facilities in the Allegheny County NAA, including USS Clairton, USS Edgar Thomson, and USS Irvin, as well as the Harsco (Braddock Recovery) facility, located on the property of USS Edgar Thomson. These emissions limits are embedded in the installation permits issued by ACHD for these facilities and are federally enforceable as they have been approved into Pennsylvania's SIP, and they are permanent because they cannot be altered without an additional SIP submittal. 31 Details on the imposed emissions limits were included as copies of the installation permits in Appendix K of the 2017 attainment plan submittal and are available in the docket for this action. 32

Collectively, the implemented controls and lower permitted SO 2 emissions rates resulted in an actual decrease of 835 tons of SO 2 emitted per year from 2011 to 2017. This is approximately a 25% reduction from 2011 levels of 3,418 tons of SO 2 emitted per year. 33 As this reduction comes from EPA-approved SIP controls and permit-controlled emission limits, the EPA finds the air quality improvement in the Allegheny County NAA to be due to permanent and enforceable reductions in emissions.

To redesignate a NAA to attainment, CAA section 107(d)(3)(E)(iv) requires the EPA to determine that the area has a fully approved maintenance plan pursuant to section 175A of the CAA. In conjunction with its request to redesignate the Allegheny County NAA to attainment for the 2010 1-hour primary SO 2 NAAQS, the State submitted a SIP revision to provide for the maintenance of the 2010 1-hour primary SO 2 NAAQS for at least 10 years after the effective date of redesignation to attainment. The EPA is proposing to find that this maintenance plan meets the requirements for approval under section 175A of the CAA.

CAA section 175A sets forth the elements of a maintenance plan. Under section 175A, the plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after the Administrator approves a redesignation request to attainment. Eight years after the redesignation, the State must submit a revised maintenance plan demonstrating that attainment will continue to be maintained for an additional 10 years following the initial 10-year period. To address the possibility of future NAAQS violations, the maintenance plan must contain contingency measures as the EPA deems necessary to assure prompt correction of any future 2010 1-hour primary SO 2 NAAQS violations. The Calcagni Memo provides further guidance on the content of a maintenance plan, explaining that a maintenance plan should address five requirements: the attainment emissions inventory, maintenance demonstration, monitoring, verification of continued attainment, and a contingency plan. 34 As is discussed more fully later in this section, the EPA is proposing to determine that Pennsylvania's maintenance plan meets the requirements in CAA section 175A and is thus proposing to approve it as a revision to the Allegheny County portion of the Pennsylvania SIP.

In a maintenance plan, states are required to submit an emissions inventory to identify the level of emissions in the area which is sufficient to attain and maintain the SO 2 NAAQS, which is called the attainment inventory. This inventory is used as the basis for future, projected emission inventories that are used to show the area will remain in attainment. Pennsylvania submitted a 2017 SO 2 emissions inventory as the attainment inventory with its maintenance plan. The year 2017 was selected because it was the first year in which emissions were at levels required to demonstrate attainment of the 2010 SO 2 NAAQS, with the exception of emissions associated with malfunctions of the desulfurization facility at the USS Clairton Plant. Additionally, 2017 was a year in which a fully reviewed National Emission Inventory (NEI) was released. The NEI is a comprehensive, triennial estimate of emissions. Generally, the attainment year is selected as a year within the attaining design value period ( i.e., 2019-2021). However, alternate years from 2018-2022 were less ideal than 2017 for the attainment year for a variety of factors, including excess emissions from sources due to equipment breakdowns, atypical emissions during the COVID pandemic, and incomplete emissions compilations for recent years. Additional details for choosing 2017 as the attainment year are available in the submitted redesignation request. 35

For the 2017 attainment year inventory, Pennsylvania directly used point and area source emissions reported in the 2017 NEI, except for corrections identified in Appendix B of the submitted redesignation request. 36 The point source emissions for the Allegheny County NAA were verified against the EPA's emissions inventory system (EIS) and the EPA found them to be acceptable. 37 Area source emissions were estimated based on the relative percentage of the Allegheny County population residing in the Allegheny County NAA and the resulting factor allocated the appropriate fraction of the County's total emissions to the Allegheny County NAA.

Nonroad and onroad mobile source emissions for 2017 were obtained from the EPA's Motor Vehicle Emissions Simulator (MOVES) model, specifically the MOVES3 version. PADEP executed the MOVES3 modeling runs for nonroad mobile sources and utilized a contractor to run the model for onroad mobile source emissions.

Natural SO 2 emission sources, such as fires and biogenics, were also compiled. Fire emissions data was pulled from the EPA's Fires  38 inventory, while biogenic emissions from soils and vegetation were predicted by the Biogenic Emission Inventory System  39 (BEIS) model.

Projection inventories predicted from the attainment inventory demonstrate that the area will continue to remain in attainment during the maintenance period. Pennsylvania developed 2026 and 2035 emission projections for the interim and maintenance plan end year, respectively. Projected emissions for these years—as well as the base year inventory—are available in Table 2 in this document. Projected emissions for point and area sources were estimated from the 2017 base year emissions and growth factors developed by the Mid-Atlantic Regional Air Management Association, Inc., and other sources. These growth factors are developed based on forecasts from various databases and tools, including the Energy Information Administration's Annual Energy Outlook 2022, Pennsylvania Industry Employment 2018-2028 Long-Term Projections, National Inventory Collaborative 2016v1 Emissions Modeling Platform, and the Federal Aviation Administration's Terminal Area Forecast. Projected emissions were subject to the same corrections utilized in the 2017 base year inventory for consistency. Furthermore, point sources with implemented enforceable controls or shutdowns since the 2017 base year were excluded from the 2026 and 2035 projections. Specifically, the Koppers Clairton tar refining facility ceased operation in 2017 and its permit expired in 2021. Additionally, Coke Batteries 1, 2, and 3 at the USS Clairton Plant ceased operation in March 2023. Conversely, projections for the 2026 and 2035 inventories included the permitted plantwide SO 2 emissions limit of 23.89 tons/year for a new major source facility—the Invenergy Allegheny Energy Center. However, the permit for this facility was terminated on November 9, 2023, 40 and construction of this facility is not expected to proceed at this time. As such, the actual emissions in 2026 and 2035 should be even lower than the anticipated values reported in the maintenance year projections. Nonroad and onroad mobile source emissions for the projected years 2026 and 2035 were also obtained from the MOVES3 version. MOVES3 modeling runs were once again executed by PADEP for nonroad mobile source emissions and by the contractor for onroad mobile source emissions. Additional details on some of the assumptions and inputs to the model are available in the redesignation request and its associated Appendix B. 41 Fire and biogenic sources are typically not projected for future case scenarios and therefore emissions were held constant from 2017 to 2026 and 2035.

The Calcagni memo describes two ways for a State to demonstrate maintenance of the NAAQS for a period of at least 10 years following the redesignation of the area: (1) the State can show that future emissions of a pollutant will not exceed the level of the attainment inventory, or (2) the State can model to show that the future mix of sources and emission rates will not cause a violation of the standard. 42 Pennsylvania's projected actual emissions for the interim year of 2026 and for the maintenance year of 2035 are both below the total attainment inventory, which is acceptable for showing maintenance in the Allegheny County NAA.

The 2014 SO 2 Guidance indicates that once an area has been redesignated to attainment, the state should continue to operate an appropriate air quality monitoring network as provided under 40 CFR part 58 to verify the attainment status of the area. ACHD has committed to continued operation of its SO 2 monitoring network in the Allegheny County NAA to verify the attainment status. Also, ACHD will continue to submit an annual monitoring network plan to the EPA for approval, in accordance with 40 CFR 58.10. No changes will be made to the existing network unless pre-approved by the EPA.

The 2014 SO 2 Guidance states that each air agency should ensure that it has the legal authority to implement and enforce all measures necessary to attain and maintain the 2010 SO 2 NAAQS. The air agency's submittal should indicate how it will track the progress of the maintenance plan for the area either through air quality monitoring or modeling.

Article XXI, section 2101.07(a) grants the ACHD legal authority to implement and enforce all measures necessary to maintain the 2010 1-hour primary SO 2 NAAQS. In addition, ACHD has indicated it will track the progress of the maintenance plan through an integrated approach utilizing monitoring data and emissions inventories.

As previously indicated, ACHD will continue to operate its SO 2 monitoring network to verify the attainment status of the Allegheny County NAA. Monitored concentrations will serve as the primary indicator for verifying continued attainment and will also act as the triggering mechanism for contingency measures.

ACHD will also use emissions inventories—developed annually by ACHD for point sources and triennially by PADEP for area and mobile sources—and compare these inventories to the 2017 attainment inventory for assessing continued attainment. It is anticipated that future inventories will remain below the levels of the attainment inventory. However, if future inventories exceed the attainment inventory levels, ACHD will conduct a study to evaluate if the increased emissions have caused increased monitored concentrations within the Allegheny County NAA and, if so, ACHD will determine if any additional emission control measures should be enacted. Emissions data will not serve as a triggering mechanism for contingency measures for two reasons. Primarily, increased emissions may not directly affect monitored concentrations, as SO 2 concentrations can be impacted by meteorological conditions. Additionally, emissions inventory reporting is slower than monitoring data reporting, and the use of emissions data as a contingency initiator would not provide for a prompt response to any potential NAAQS violations.

Under ACHD's new source review program, any major new sources or modifications to existing sources that would affect emissions must provide a modeling demonstration that illustrates new emissions will not cause or contribute to a violation of the 2010 1-hour primary SO 2 NAAQS, as described in ACHD Article XXI, section 2102.04(b). ACHD will not approve any modifications that would lead to expected violations of the 2010 1-hour primary SO 2 NAAQS in the Allegheny County NAA.

The EPA proposes to find that these proposed measures will provide for verifying continued attainment within the Allegheny County NAA.

Section 175A(d) of the CAA requires that a maintenance plan include such contingency measures as the EPA deems necessary to assure that the State will promptly correct a violation of the NAAQS that occurs after redesignation. The maintenance plan should identify the contingency measures to be adopted, a schedule and procedure for adoption and implementation, and a time limit for action by the State. A State should also identify specific indicators to be used to determine when the contingency measures need to be implemented. The maintenance plan must also include a requirement that a State will continue to implement all measures with respect to control of the pollutant that were contained in the SIP before redesignation of the area to attainment.

ACHD has committed to continuing implementation of all measures indicated in the SIP after redesignation of the Allegheny County NAA. 43 Furthermore, ACHD has identified triggering indicators for its contingency measures, a schedule for implementing these potential measures, and has specified multiple potential options to correct any NAAQS violation. 44

Fully validated and quality assured SO 2 monitoring data will serve as the primary trigger for any responses to prevent or correct a NAAQS violation in the Area. ACHD has established both warning level and action level responses with specific triggering indicators for each.

Warning level responses are sub-divided into two tiers. A first-level warning will occur when the 99th percentile daily maximum 1-hour SO 2 concentration exceeds 75 ppb at any monitor site in the Allegheny County NAA in a single calendar year. This first-level warning will prompt an ACHD study to determine if the trigger indicates a trend toward increasing SO 2 concentrations in the Allegheny County NAA. If there seems to be a rising trend in SO 2 concentrations, the study will examine if the trend is likely to continue and if so, the needed measures that could reverse the trend. A second-level warning will occur when the average of two consecutive years of 99th percentile daily maximum 1-hour SO 2 concentrations exceeds 75 ppb at any monitor in the Allegheny County NAA. This second-level warning will result in ACHD evaluating the chance of a violation of the NAAQS and the need for supplemental control measures to be activated. Both first- and second-level warnings will allow for ACHD to consider the early adoption of measures to permit the expeditious implementation of these measures in the event of a NAAQS violation. This early adoption could allow for implementation of the measures within 30 to 90 days following the potential occurrence of a NAAQS violation.

An action level response will occur when the 1-hour design value, based on the average of three consecutive years of 99th percentile daily maximum 1-hour SO 2 concentrations, violates the 2010 1-hour SO 2 NAAQS at any monitor site in the Allegheny County NAA. This response will include the adoption and implementation of additional control measures as needed to promptly correct the violation. If regulatory measures are selected, these measures will conform to all Federal, State, and local rules and regulations. Both non-regulatory and regulatory measures are expected to be implemented within one year following a violation of the NAAQS. 45

ACHD has specified multiple potential regulatory and non-regulatory contingency measures for this maintenance plan—including both area-wide and USS Mon Valley Works measures. 46 Selection will be based on several factors, including but not limited to, the degree of the violation, the emission reduction potential, and cost. ACHD has identified non-regulatory, area-wide measures such as wood burning-related programs and alternative fuel promotions as potential options for correcting a NAAQS violation. Additionally, ACHD has proposed USS Mon Valley Works regulatory measures, including but not limited to, additional desulfurization controls for coke oven gas at USS Clairton, additional fugitive controls at USS Mon Valley Works plants, and restrictions on fuel usage at USS Mon Valley Works plants. All of these measures can be individually implemented or in conjunction with others to ensure correction of any NAAQS violation.

The EPA proposes to find that ACHD's submitted maintenance plan meets the requirements set forth in CAA section 175A and EPA guidance and is proposing to approve the maintenance plan as a revision to the Pennsylvania SIP.

In accordance with section 107(d)(3)(E)(v) of the CAA, to redesignate the Allegheny County NAA to attainment, Pennsylvania must meet all requirements applicable to the Allegheny County NAA under CAA section 110 (general SIP requirements) and part D of title I of the CAA (SIP requirements for nonattainment areas).

Pursuant to CAA section 110(a)(1), whenever new or revised NAAQS are promulgated, the CAA requires States to submit a plan ( i.e., SIP) for the implementation, maintenance, and enforcement of such NAAQS. Section 110(a)(2) of title I of the CAA contains the general requirements for a SIP, also known as “infrastructure” requirements. These requirements include, but are not limited to, the following: submittal of a SIP that has been adopted by the state after reasonable public notice and hearing; provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality; implementation of a source permit program; provisions for the implementation of part C requirements (Prevention of Significant Deterioration (PSD)) and provisions for the implementation of part D requirements (New Source Review (NSR) permit programs); provisions for air pollution modeling; and provisions for public and local agency participation in planning and emission control rule development.

Section 110(a)(2)(D) requires that SIPs contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state. To implement this provision, the EPA has required certain states to establish programs to address the interstate transport of air pollutants. 47 The section 110(a)(2)(D) requirements for a state are not linked with a particular nonattainment area's designation and classification in that state. The EPA has concluded that the requirements linked with a particular nonattainment area's designation and classifications are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. Thus, the EPA has concluded that the CAA's interstate transport requirements should not be construed to be applicable requirements for purposes of redesignation.

In addition, the EPA has concluded other section 110 elements—those that are neither connected with nonattainment plan submissions nor linked with an area's attainment status—are not applicable requirements for purposes of redesignation. The area will still be subject to these requirements after the area is redesignated. The section 110 and part D requirements which are linked with a particular area's designation and classification are the relevant measures to evaluate in reviewing a redesignation request. This approach is consistent with the EPA's existing policy on applicability ( i.e., for redesignations) of conformity and oxygenated fuels requirements, as well as with section 184 ozone transport requirements. See Reading, Pennsylvania, proposed and final rules (61 FR 53174-53176, October 10, 1996), (62 FR 24826, May 7, 2008); Cleveland-Akron-Loraine, Ohio, final rule (61 FR 20458, May 7,1996); and Tampa, Florida, final rule (60 FR 62748, December 7, 1995). See also the discussion on this issue in the Cincinnati, Ohio, redesignation (65 FR 37890, June 19, 2000), and in the Pittsburgh, Pennsylvania, redesignation (66 FR 50399, October 19, 2001).

The EPA approved elements of Pennsylvania's June 15, 2014 SO 2 infrastructure SIP submittal on August 5, 2015. 48 As explained previously, certain general requirements of CAA section 110(a)(2) are statewide requirements that are not linked to the nonattainment status of the Allegheny County NAA and are therefore not “applicable requirements” for the purpose of reviewing Pennsylvania's redesignation request. Because Pennsylvania satisfies the general SIP elements and requirements set forth in CAA section 110(a)(2) applicable to and necessary for SO 2 redesignation, the EPA proposes to conclude that Pennsylvania has satisfied the criterion of section 107(d)(3)(E)(v) related to section 110(a)(2) of the CAA.

In addition to the CAA section 110 requirements, section 107(d)(3)(E)(v) requires that the state meet all the requirements applicable to the nonattainment area “under part D of this subchapter” for the nonattainment area to be redesignated. Both section 107 and part D are within subchapter 1 of the CAA. Part D, entitled “Plan Requirements for Nonattainment Areas,” consists of six subparts, of which only subparts 1 and 5 are applicable to SO 2 nonattainment areas. Subpart 1 (sections 171 through 179B) contains provisions that can apply to all nonattainment areas for all criteria pollutants, while subpart 5 (sections 191 through 192) contains additional provisions for SO 2 , NO X , or lead nonattainment areas. The requirements applicable to this redesignation are discussed below.

CAA section 172 requires states with nonattainment areas to submit plans that provide for timely attainment of the NAAQS. More specifically, CAA section 172(c) contains general requirements for nonattainment plans. A thorough discussion of these requirements is found in the General Preamble for Implementation of title I. 49

As noted in the General Preamble, certain attainment-related planning requirements under section 172(c) no longer have meaning for an area that is already attaining the NAAQS, and therefore are not applicable for purposes of redesignation. For example, for an area that is already attaining the NAAQS, there would be nothing for the State to provide to show reasonable further progress to attainment in that area. Similarly, the CAA section 172 requirements for the attainment demonstration, implementation of reasonably available control measures, including reasonably available control technology, and contingency measures that are triggered if an area fails to meet RFP or fails to attain are also not applicable for purposes of redesignation.

With respect to CAA section 172(c)(3), Pennsylvania was required to submit an actual current emissions inventory with its attainment plan. Pennsylvania had submitted a base year inventory with its attainment plan SIP on October 3, 2017 and the EPA approved this element on April 23, 2020. 50

Section 173 of the CAA includes requirements for permit programs that are required in a nonattainment area for new sources as required by section 172(c)(5), known as nonattainment new source review (NNSR). However, the EPA has a longstanding interpretation that because the NNSR permit program is replaced by the PSD permit program upon an area's redesignation to attainment, nonattainment areas seeking redesignation to attainment do not need a fully approved part D NNSR program to be redesignated. A more detailed rationale for this view is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D New Source Review Requirements for Areas Requesting Redesignation to Attainment.”  51 Nevertheless, the EPA notes that the ACHD's Article XXI Rules and Regulations for Air Pollution Control have SIP-approved NNSR and PSD programs found in section 2102.06 for NNSR and section 2102.07 for PSD. Allegheny County has incorporated by reference Pennsylvania's NNSR provisions at 25 Pa. Code 127.201-127.218 and also Pennsylvania's PSD regulations found at 25 Pa. Code 127.81-127.83. Pennsylvania's PSD regulations merely incorporate by reference the Federal PSD regulations found at 40 CFR part 52. Allegheny County has therefore addressed all required provisions for the permitting of sources in NAAs, including NNSR. See 40 CFR 52.2020(c). Pennsylvania's PSD program will become applicable for SO 2 in the Allegheny County NAA upon redesignation to attainment.

CAA section 175A requires that states seeking redesignation of an area to attainment submit a “maintenance plan” containing certain elements. Pennsylvania included a maintenance plan for the Allegheny County NAA with its November 14, 2023 redesignation request, which the EPA is proposing to approve in conjunction with the redesignation, and it is discussed in detail in section II, Criterion (4) of this document.

Section 176(c) of the CAA requires that Federal actions conform to the air quality planning goals in the applicable SIP. The requirement to determine conformity applies to transportation plans, programs, and projects that are developed, funded, or approved under title 23 of the United States Code and the Federal Transit Act (transportation conformity) as well as to all other Federally-supported or funded projects (general conformity). Section 176(c) of the CAA also requires that states establish criteria and procedures to ensure that Federally-supported or funded transportation plans, transportation improvement programs (TIPs) and projects conform to the goals of the applicable SIP. This is referred to as a transportation conformity SIP. In the preamble to the January 1993 proposed transportation conformity rule, the EPA stated that, “Based on available emissions information, EPA believes highway and transit motor vehicles are not significant sources of lead or sulfur dioxide. Therefore, transportation plans, TIPs, and projects are presumed to conform to the applicable implementation plans for these pollutants.”  52 In November 1993, the EPA finalized its transportation conformity regulations. One section of those regulations addressed the geographic applicability of the transportation conformity regulations. The regulation stated at that time that, “The provisions of this subpart apply with respect to emissions of the following criteria pollutants: Ozone, carbon monoxide, nitrogen dioxide, and particles with an aerodynamic diameter less than or equal to a nominal 10 micrometers (PM 10 ).”  53 Based on this provision, transportation conformity does not apply in nonattainment or maintenance areas for SO 2 . Therefore, a transportation conformity SIP is not required for SO 2 nonattainment and maintenance areas and is not necessary for an SO 2 nonattainment area to be redesignated to attainment, and the EPA's transportation conformity rules do not apply to SO 2 for the Allegheny County NAA.

Section 179(a) of the CAA addresses potential sanctions for the failure of a State to submit certain required SIP elements by statutory deadlines. The EPA is not aware of any missing or incomplete Allegheny County planning elements subject to Section 179(a) of the CAA.

The subpart 5 requirements, which consist of sections 191 and 192 of the CAA, are specific provisions applicable to SO 2 , NO 2 or lead nonattainment areas. Section 191 of the CAA requires states with areas designated nonattainment for SO 2 , NO 2 or lead after November 15, 1990, to submit within 18 months of the designation an implementation plan meeting the requirements of part D. The substance of the required plans is established by section 172(c). Section 192 sets forth attainment dates for nonattainment areas under section 191.

For SO 2 , section 192(a) requires that attainment plans provide for attainment of the primary standard as expeditiously as possible, but no later than five years from the date of the nonattainment designation. The EPA designated the Allegheny County NAA as nonattainment on August 5, 2013, with an attainment date of October 4, 2018. However, because the EPA is reviewing a redesignation request under section 107(d)(3)(E), rather than a determination of attainment under section 179(c), the determination of whether the Area attained by the attainment date set forth in section 192 is not applicable to this action proposing approval of Pennsylvania's redesignation request.

Based on the above, the EPA is proposing to find that Pennsylvania has satisfied the applicable requirements for the redesignation of the Allegheny County NAA under section 110 and part D of title I of the CAA.

Within its redesignation request and maintenance plan, ACHD provided supplemental information regarding environmental justice considerations within the Allegheny County NAA. Utilizing the Environmental Justice Index (EJI) tool developed by ACHD's Bureau of Assessment, Statistics, & Epidemiology, ACHD identified areas within the Allegheny County NAA with higher environmental health risks. The EJI tool uses Allegheny County-specific factors to evaluate environmental justice concerns, including the following indicators: race, education, median household income, housing vacancy, lead paint risk, greenness, air quality, and flood risk. Six municipalities within the Allegheny County NAA were designated as “highest need” areas according to EJI, while seven other municipalities were designated as “high need” areas. ACHD has indicated that its SO 2 monitoring network provides enhanced surveillance in vulnerable communities, and the two current SO 2 monitors in the Allegheny County NAA are located within or directly downwind of areas labeled as “highest need.” Furthermore, ACHD states that the controls specified in its 2017 attainment demonstration as well as the shutdowns denoted in the maintenance demonstration illustrate the greatest emissions reductions in the “highest need” areas.

As explained in the EJ Legal Tools to Advance Environmental Justice 2022 document, the CAA provides states with the discretion to consider environmental justice in developing rules and measures related to redesignation requests and maintenance plans. In this instance, ACHD exercised this discretion, as is described above in summary. In reviewing ACHD's analysis, the EPA defers to ACHD's reasonable exercise of its discretion in considering EJ in this way. The EPA is taking proposed action to approve the SIP revision because it meets minimum requirements pursuant to the CAA and relevant implementing regulations. The EPA also finds that ACHD's consideration of EJ analyses in this context is reasonable. The EPA encourages air agencies generally to evaluate environmental justice considerations of their actions and carefully consider impacts to communities. The EJ analyses submitted by the air agency were considered but were not the basis for the EPA's decision making and the SIP met the minimum applicable requirements, as explained above.

The EPA's review of this material indicates that the Allegheny County NAA has met the criteria necessary under CAA section 107(d)(3)(E) for the EPA to redesignate the Area from nonattainment to attainment for the 2010 1-hour primary SO 2 NAAQS. The EPA is proposing to approve the Pennsylvania redesignation request for the Allegheny County NAA, which was submitted on behalf of ACHD on November 14, 2023. Final approval of Pennsylvania's redesignation request would change the legal designation of the portion of Allegheny County designated nonattainment at 40 CFR 81.339 to attainment for the 2010 1-hour primary SO 2 NAAQS. The EPA is also proposing to approve ACHD's maintenance plan, which is designed to ensure that the potentially redesignated Allegheny County NAA will continue to maintain the SO 2 NAAQS. The EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action.

Under the CAA, the redesignation of an area to attainment and the accompanying approval of the maintenance plan under CAA section 107(d)(3)(E) are actions that affect the status of geographical area and do not impose any additional regulatory requirements on sources beyond those required by state law. A redesignation to attainment does not in and of itself impose any new requirements, but rather results in the application of requirements contained in the CAA for areas that have been redesignated to attainment. Moreover, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:

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

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

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

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

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

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

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

Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 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. The 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.” The 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.”

ACHD evaluated environmental justice considerations as part of its SIP submittal even though the CAA and applicable implementing regulations neither prohibit nor require an evaluation. The EPA's evaluation of ACHD's environmental justice considerations is described above in the section titled, “Environmental Justice Considerations.” The analysis was done for the purpose of providing additional context and information about this rulemaking to the public, not as a basis of the action. The EPA is taking action under the CAA on bases independent of ACHD's evaluation of environmental justice. 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. In addition, there is no information in the record upon which this decision is based that is inconsistent with the stated goal of Executive Order 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.

In addition, this proposed rulemaking, for the redesignation and approval of the maintenance plan for the Allegheny County NAA, does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the State, and the EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

The FOIA, 5 U.S.C. 552, provides a right of access to certain records that Federal agencies maintain and control. The FOIA directs each Federal agency to publish regulations that describe how the agency will process FOIA requests it receives from members of the public.

CEQ first adopted its FOIA regulations in 1977. 1 In 2010, CEQ amended its regulation to reflect legislative amendments to the FOIA, a 2009 Presidential Memorandum regarding FOIA policy, and additional guidance from the Department of Justice (DOJ) and the Office of Management and Budget (OMB). 2 CEQ's current FOIA regulation is codified at 40 CFR part 1515.

CEQ is proposing to revise and republish its FOIA regulation in its entirety in order to make several improvements to the current rule. First, CEQ is proposing updates to reflect a number of important changes to the FOIA made by the FOIA Improvement Act of 2016 (Pub. L. 114-185). Section 3(a) of the Act directs each agency to review its FOIA regulations and update them to implement the changes set forth in the Act. Second, CEQ is proposing to include a number of provisions to improve the usefulness and readability of its FOIA regulations consistent with DOJ's 2017 revised Template for Agency Regulations (the Template). 3 CEQ modeled this proposed rule on the Template, which also incorporates the FOIA Improvement Act of 2016's amendments to the FOIA.

Third, CEQ is proposing updates to better convey the FOIA's and CEQ's requirements to members of the public who are interested in CEQ's operations and activities, so they can easily understand and use CEQ's FOIA process. 4 Specifically, CEQ referred to the Plain Writing Act of 2010 and the Federal Plain Language Guidelines  5 in preparing the proposed rule.

Finally, the proposed rule reflects updates to CEQ's FOIA policies and procedures, as well as the practical experience of CEQ's FOIA staff. As it does under its current regulations, CEQ would administer the FOIA under the proposed regulations with a presumption of openness, consistent with the Memorandum of the Attorney General dated March 15, 2022. 6

The Privacy Act, 5 U.S.C. 552a, governs each Federal agency's collection, maintenance, use, and dissemination of any information about individuals that it maintains in a system of records. The Privacy Act directs each Federal agency to publish regulations that describe the agency's procedures for carrying out the provisions of the Privacy Act. CEQ first adopted a Privacy Act regulation in 1977, 7 codified at 40 CFR part 1516.

CEQ is proposing to revise and republish its Privacy Act regulation in its entirety to make it easier for the public to understand and use and to reflect updates to CEQ's Privacy Act procedures over the past five decades.

Section 1515.1 — What is the purpose of the rules in this part? This section describes the purpose of part 1515, which is to set forth CEQ's FOIA procedures, and explains the limitations of the regulations.

Section 1515.2—What kind of records does CEQ maintain? This section explains CEQ's activities and legal authorities.

Section 1515.3—Are there any CEQ records for which I do not have to make a request? This section describes CEQ information the public can access without filing a FOIA request.

Section 1515.4—Who is responsible for processing FOIA requests and appeals to CEQ? This section explains the roles of Chief FOIA Officer and FOIA Appeals Officer at CEQ.

Section 1515.5—Who can help me with my FOIA request to CEQ? This section explains that FOIA requesters can obtain assistance from CEQ's FOIA Public Liaison and dispute resolution services from the National Archives and Records Administration's Office of Government Information Services.

Section 1515.6—What are CEQ's procedures for preserving records? This section explains CEQ's procedures for preserving records in connection with its administration of the FOIA.

Section 1515.11—How do I make a FOIA request to CEQ? This section explains how members of the public may request CEQ records under the FOIA. It also describes CEQ's procedures for clarifying requests that do not reasonably describe the records that the requester is seeking.

Section 1515.12—Will CEQ keep my request confidential? This section notes that FOIA requests and the identities of FOIA requesters are generally matters of public record.

Section 1515.13—When will CEQ respond to my request? This section describes CEQ's timeline for responding to FOIA requests, including circumstances in which CEQ will extend or pause the ordinary time period for processing FOIA requests.

Section 1515.14—What if my request is urgent? This section explains how to ask CEQ to expedite its processing of a FOIA request or appeal.

Section 1515.15—How will CEQ process my request? This section describes CEQ's procedures for processing requests and circumstances in which CEQ will deny requests.

Section 1515.16—How does CEQ determine when to withhold records or portions of a record? This section describes CEQ's procedures for applying the statutory exemptions from disclosure set forth in the FOIA.

Section 1515.17—What if I request records that involve another government office or agency? This section describes CEQ's procedures for consulting with other Federal agencies regarding whether to disclose or withhold particular records in response to a FOIA request, as well as CEQ's procedures for referring records to another agency for processing.

Section 1515.18—What happens if CEQ grants my request in full or in part? This section describes CEQ's procedure for disclosing records in response to a FOIA request.

Section 1515.19—What happens if CEQ denies my request in full or in part? This section describes CEQ's procedure for withholding records in response to a FOIA request.

Section 1515.20—Can I appeal CEQ's response to my request? This section describes how a FOIA requester may appeal a determination that CEQ made in processing the requester's request.

Section 1515.21—How will CEQ process my appeal? This section describes CEQ's procedures for upholding, reversing, or modifying a prior determination on appeal.

Section 1515.31—Can CEQ charge fees for processing FOIA requests and appeals? This section explains that CEQ charges fees for processing FOIA requests, but not appeals, and describes the rules that CEQ will follow in determining whether to charge a fee and the amount of the fee. As in CEQ's current FOIA regulation, the provisions of this section and the subsequent sections reflect OMB's Uniform Freedom of Information Act Fee Schedule and Guidelines.

Section 1515.32—What is the amount of the fee for processing a request? This section describes how CEQ will determine the amount of the fee for processing a FOIA request.

Section 1515.33—Are there any exceptions for non-commercial requests? This section describes the services that CEQ will exclude from the calculation of fees for non-commercial requesters, in general, and for representatives of non-commercial scientific institutions, educational institutions, and the news media, in particular.

Section 1515.34—Can I apply for a fee waiver? This section describes the availability of fee waivers and explains the criteria CEQ will apply in determining whether to grant a fee waiver.

Section 1515.35—When will CEQ contact me about fee-related matters? This section describes CEQ's procedures for contacting FOIA requesters to resolve fee-related matters.

Section 1515.36 — Do I have to pay fees if CEQ misses the deadline for responding to my request? This section describes the circumstances in which CEQ will not charge fees for processing a FOIA request because CEQ did not respond to the request within the time period set forth in the FOIA.

Section 1515.37—When are fees due and how do I pay them? This section describes when and how FOIA requesters must pay fees to CEQ, including the circumstances in which CEQ may require a FOIA requester to pay fees in advance.

Section 1515.38—What will CEQ do if I do not promptly pay the fee? This section explains when CEQ will charge interest and use debt collection procedures.

Section 1515.41—How does CEQ handle confidential commercial information? This section implements the requirements of Executive Order (E.O.) 12600, Predisclosure Notification Procedures for Confidential Commercial Information, 8 which directs Federal agencies to allow submitters of information to designate records that contain confidential commercial information and to notify submitters when a FOIA requester seeks disclosure of confidential commercial information.

Section 1516.1—What is the purpose of these rules? This section describes the purpose of part 1516, which is to set forth CEQ's Privacy Act procedures.

Section 1516.2—What records do these rules cover? This section explains when part 1516 applies and explains the meaning of “record” and “system of records” for purposes of part 1516.

Section 1516.3—When will CEQ disclose records about me? This section describes the conditions under which CEQ will disclose records, which are (1) in response to an individual's request for the individual's own records; (2) as part of a routine use of records; or (3) pursuant to one of the other bases for disclosure that appear in section 3 of the Privacy Act, 5 U.S.C. 552a(b).

Section 1516.4—How can I obtain access to CEQ's records about me? This section describes the procedures for an individual to request access to the individual's own records.

Section 1516.5—How can I obtain information about how CEQ has used its records about me? This section describes the procedures for an individual to request an accounting of disclosures of the individual's own records.

Section 1516.6—How can I ask CEQ to correct my records? This section describes the procedures for an individual to request an amendment of the individual's own records and explains how CEQ will review such a request.

Section 1516.7—How can I appeal CEQ's decision to deny my request to access or correct records about me? This section describes the procedures for an individual to appeal CEQ's denial of the individual's request to amend the individual's own records.

Section 1516.8—Will CEQ charge me a fee for a copy of my records? This section describes the fees CEQ will charge for copies of records.

The Regulatory Flexibility Act (RFA), as amended, 5 U.S.C. 601 et seq., and E.O. 13272, Proper Consideration of Small Entities in Agency Rulemaking, 9 require agencies to assess the impacts of proposed and final rules on small entities. Under the RFA, small entities include small businesses, small organizations, and small governmental jurisdictions. An agency must prepare an Initial Regulatory Flexibility Analysis (IRFA) unless it determines and certifies that a proposed rule, if promulgated, would not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). The FOIA authorizes Federal agencies to charge fees only to certain requesters, and only in order to recover the direct costs of searching for, reviewing, and duplicating agency records. Under the proposed rule, CEQ would continue to charge fees in accordance with the FOIA and guidelines from DOJ and OMB. The Privacy Act authorizes Federal agencies to charge fees only to individuals, and accordingly CEQ will not charge fees under the Privacy Act to small entities within the meaning of the RFA.

The fees that CEQ assesses for processing FOIA requests are nominal and will not have a significant impact on a substantial number of small entities within the meaning of the RFA. Accordingly, CEQ hereby certifies that the proposed rule, if finalized, would not have a significant economic impact on a substantial number of small entities.

Section 201 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1531), requires Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments, and the private sector to the extent that such regulations incorporate requirements specifically set forth in law. Before promulgating a rule that may result in the expenditure by a State, Tribal, or local government, in the aggregate, or by the private sector of $100 million, adjusted annually for inflation, in any 1 year, an agency must prepare a written statement that assesses the effects on State, Tribal, and local governments and the private sector. 2 U.S.C. 1532. This proposed rule would apply only to requesters under the FOIA or the Privacy Act and would not result in expenditures of $100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in any 1 year. This proposed action also would not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of 2 U.S.C. 1531-1538.

E.O. 12866, as supplemented and affirmed by E.O. 13563 and amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs will review any regulatory action that qualifies as a “significant regulatory action” within the meaning of the E.O. 10 The proposed rule does not qualify as a significant regulatory action.

Under section 3(a) of E.O. 12988, 11 agencies must review their proposed regulations to eliminate drafting errors and ambiguities, draft them to minimize litigation, and provide a clear legal standard for affected conduct. Section 3(b) provides a list of specific matters that agencies must consider when conducting the review required by section 3(a). CEQ has conducted this review and determined that this proposed rule complies with the requirements of E.O. 12988.

This proposed rule would not impose any new information collection burden that would require additional review or approval by OMB under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq.

The National Environmental Policy Act of 1969 (NEPA) (Pub. L. 118-5, 42 U.S.C. 4321 et seq. ), as amended, and the CEQ regulations that implement NEPA, 40 CFR parts 1500 through 1508, require consideration of the environmental effects of proposed actions in agency decision making. NEPA provides for three levels of review. First, agencies may establish in their agency-specific NEPA procedures categorical exclusions (CEs) for categories of actions that normally do not have a significant effect on the human environment, individually or in the aggregate, and apply CEs to individual actions, as appropriate. 12 If an agency proposes to take an action that does not fall within a CE but is not likely to have significant environmental effects (or the significance of whose effects is unknown), CEQ's NEPA regulations direct the agency to prepare an environmental assessment (EA). 13 If, as a result of this assessment, the agency determines that the proposed action will not have significant effects, the agency may make a finding of no significant impact (FONSI), in which case the agency may proceed with the action. 14 Otherwise, the agency must prepare an environmental impact statement (EIS). 15

CEQ has not established a CE for the dissemination of information under the FOIA; the disclosure of records under the Privacy Act; or the preparation, revision, and adoption of regulations generally. Accordingly, CEQ has prepared an EA to determine whether the proposed revisions to CEQ's FOIA and Privacy Act regulations would have a significant effect on the human environment. Because, as set forth below, the proposed regulation will likely result in a small reduction in the use of resources in CEQ's administration of the FOIA and the Privacy Act, CEQ proposes finding that the proposed regulation will have no significant impact on the human environment and that it is therefore unnecessary to prepare an EIS.

Purpose and Need: As set forth above in the Summary of the Proposed Rule, CEQ adopted its FOIA regulations in 1977 and has not updated them to reflect developments in FOIA law, policy, and practice since 2010. As such, the current regulations fail to reflect current FOIA requirements, including those set forth in the FOIA Improvement Act of 2016. Furthermore, CEQ's current FOIA regulations do not conform in all points to the Template and the directions in the Plain Writing Act of 2010, and do not fully reflect CEQ's current policy and practice with respect to the FOIA. Likewise, CEQ adopted its Privacy Act regulations in 1977, and has not updated them since that time to reflect updates to CEQ's Privacy Act procedures.

Proposed Action and Alternatives: A summary of the proposed action is set forth above in the Summary of the Proposed Rule. Under a “no action” alternative, CEQ would continue to operate under its current regulations, addressing inconsistencies between the regulations and current law and agency procedure on a case-by-case basis. CEQ has decided that this approach is undesirable because it is confusing to the public and requires CEQ staff to address inconsistencies between the regulation, the law, and agency procedure that CEQ can obviate by updating the regulation.

CEQ considered an alternative of making only narrowly tailored amendments to its current FOIA regulations in order to implement the FOIA Improvement Act of 2016. While this alternative would eliminate direct inconsistencies between CEQ's regulations and the FOIA, it would not address inconsistencies between CEQ's FOIA regulations, the Template and CEQ's FOIA policies and procedures, or inconsistencies between CEQ's Privacy Act regulations and CEQ's practice in implementing the Privacy Act.

CEQ's preferred alternative is to amend its regulations as proposed in this notice of proposed rulemaking, for the reasons set forth in parts I and II of this preamble.

Environmental Effects of Alternatives: CEQ's FOIA and Privacy Act programs affect the environment primarily through requesters' use of paper and energy in submitting requests and CEQ's use of paper and energy in searching for, reviewing, and duplicating responsive records. CEQ's use of paper and energy for these purposes has remained within the range typical of the operations of a small office. Currently, CEQ accepts FOIA and Privacy Act requests by mail and fax, which require the use of paper and energy to print and transmit requests to CEQ. The proposed regulations would direct FOIA and Privacy Act requesters to submit their requests electronically if they are able to do so, thereby reducing the use of paper and energy associated with mailed and faxed requests. CEQ receives requests by fax or mail infrequently, however, so any reduction in the use of resources is likely to be modest. In addition, by improving the public's timely access to information contained in CEQ records, the proposed regulations support the meaningful involvement of all communities, including communities with environmental justice concerns, in Federal decision-making processes.

List of Agencies and Persons Consulted: CEQ's NEPA staff reviewed and commented on this EA and this notice of proposed rulemaking.

Based on the foregoing EA, which this FONSI incorporates by reference, CEQ proposes to find that implementation of the proposed regulations in this document would reduce the use of paper and energy resources in CEQ's FOIA and Privacy Act programs, streamline CEQ's FOIA and Privacy Act procedures, make CEQ more accessible and responsive to the public, and improve the opportunity for all communities to access information and be meaningfully involved in Federal decision-making processes. Thus, there would be no significant effects associated with implementation of the proposed action, and it is not necessary for CEQ to prepare an EIS.

CEQ further finds that the proposed action is not one that normally requires the preparation of an EIS, closely similar to such an action, or an action without precedent. CEQ invites public comment on this environmental assessment.

For the reasons discussed in the preamble, the Council on Environmental Quality proposes to revise and republish 40 CFR parts 1515 and 1516 to read as follows:

Why we need to publish a rule. Under the Act, a species warrants reclassification from endangered to threatened if it no longer meets the definition of an endangered species (in danger of extinction throughout all or a significant portion of its range). The rough popcornflower is listed as endangered, and we are proposing to reclassify (downlist) the rough popcornflower as threatened. We have determined the rough popcornflower does not meet the Act's definition of an endangered species, but it does meet the Act's definition of a threatened species (likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range). Reclassifying a species as a threatened species can be completed only by issuing a rule through the Administrative Procedure Act rulemaking process (5 U.S.C. 551 et seq. ).

What this document does. This rule proposes to downlist the rough popcornflower from endangered to threatened, with a rule issued under section 4(d) of the Act (a “4(d) rule”), based on the species' current status, which has been improved through implementation of conservation actions.

The basis for our action. Under the Act, we may determine that a species is an endangered species or a threatened species because of any of five factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence. We may reclassify a species if the best available commercial and scientific data indicate the species no longer meets the applicable definition in the Act. Based on the status review, the current threats analysis, and evaluation of conservation measures discussed in this proposed rule, we conclude that the rough popcornflower no longer meets the Act's definition of an endangered species and should be reclassified to a threatened species. The species is no longer in danger of extinction throughout all or a significant portion of its range, but it is likely to become so within the foreseeable future.

We have determined that rough popcornflower is a threatened species due to the following threats: destruction or alteration of habitat by development and hydrological changes, competition from native and nonnative plant species, and impacts due to climate change.

We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other governmental agencies, Native American Tribes, the scientific community, industry, or any other interested parties concerning this proposed rule.

We particularly seek comments concerning:

(1) Reasons we should or should not downlist the rough popcornflower as a threatened species.

(2) New information on the historical and current status, range, distribution, and population size of the species.

(3) New information on the known and potential threats to the species, including habitat loss, habitat modification, competition, or climate change.

(4) New information regarding the life history, ecology, and habitat use of the species.

(5) Current or planned activities within the geographic range of the species that may have adverse or beneficial impacts on the species.

(6) Information to assist with applying or issuing protective regulations under section 4(d) of the Act that may be necessary and advisable to provide for the conservation of the rough popcornflower.

(a) In particular, information concerning the extent to which we should include any of the section 9 prohibitions in the 4(d) rule; or

(b) whether we should consider any additional or different exceptions from the prohibitions in the 4(d) rule.

Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.

Please note that submissions merely stating support for, or opposition to, the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or a threatened species must be made solely on the basis of the best scientific and commercial data available.

You may submit your comments and materials concerning this proposed rule by one of the methods listed in ADDRESSES . We request that you send comments only by the methods described in ADDRESSES .

If you submit information via https://www.regulations.gov, your entire submission—including any personal identifying information—will be posted on the website. If your submission is made via a hardcopy that includes personal identifying information, you may request at the top of your document that we withhold this information from public review. However, we cannot guarantee that we will be able to do so. We will post all hardcopy submissions on https://www.regulations.gov.

Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on https://www.regulations.gov.

Our final determination may differ from this proposal because we will consider all comments we receive during the comment period, as well as any information that may become available after this proposal. Based on the new information we receive (and if relevant, any comments on that new information), we may conclude that the species should remain listed as endangered instead of being reclassified as threatened, or we may conclude that the species no longer warrants listing as either an endangered species or a threatened species. In addition, we may change the parameters of the prohibitions or the exceptions to those prohibitions in the protective regulations under section 4(d) of the Act if we conclude it is appropriate in light of comments and new information received. For example, we may expand the prohibitions if we conclude that the protective regulation as a whole, including those additional prohibitions, is necessary and advisable to provide for the conservation of the species. Conversely, we may establish additional or different exceptions to the prohibitions in the final rule if we conclude that the activities would facilitate or are compatible with the conservation and recovery of the species. In our final rule, we will clearly explain our rationale and the basis for our final decision, including why we made changes, if any, that differ from this proposal.

Section 4(b)(5) of the Act provides for a public hearing on this proposal, if requested. Requests must be received by the date specified in DATES . Such requests must be sent to the address shown in FOR FURTHER INFORMATION CONTACT . We will schedule a public hearing on this proposal, if requested, and announce the date, time, and place of the hearing, as well as how to obtain reasonable accommodations, in the Federal Register and local newspapers at least 15 days before the hearing. We may hold the public hearing in person or virtually via webinar. We will announce any public hearing on our website, in addition to the Federal Register . The use of these virtual public hearings is consistent with our regulations at 50 CFR 424.16(c)(3).

Section 12 of the Act directed the Secretary of the Smithsonian Institution to prepare a report on plants considered to be endangered, threatened, or extinct in the United States. This report, designated as House Document No. 94-51, was presented to Congress on January 9, 1975. On July 1, 1975, we published a notice in the Federal Register (40 FR 27823) of our acceptance of the report as a petition within the context of section 4(c)(2) (now section 4(b)(3)) of the Act and our intention to review the status of the plant species named in the report.

On June 16, 1976, we published a proposed rule in the Federal Register (41 FR 24523) to designate approximately 1,700 vascular plant species, including rough popcornflower, as endangered pursuant to section 4 of the Act. In 1978, amendments to the Act required that all proposals over 2 years old be withdrawn. On December 10, 1979, we published a notice in the Federal Register (44 FR 70796) of the withdrawal of that portion of the June 16, 1976, proposal that had not been made final, along with four other proposals that had expired.

On December 15, 1980, we published an updated notice of review for plants in the Federal Register (45 FR 82480) that included rough popcornflower as a category 1 candidate species. On November 28, 1983, we published a supplement to the December 15, 1980, notice of review in the Federal Register (48 FR 53640) in which we changed the status of rough popcornflower to a category 2 candidate species, and this species remained a category 2 candidate species until 1996. On January 20, 1984, we published a notice in the Federal Register (49 FR 2485) that the petitioned listing of this species was warranted but precluded by other pending listing actions. On February 28, 1996, we published a notice of review in the Federal Register (61 FR 7596) that discontinued the designation of category 2 species as candidates. In that notice of review, we retained rough popcornflower as a candidate species.

On November 20, 1997, we published a proposed rule in the Federal Register (62 FR 61953) to list this species as an endangered species under the Act, and on January 22, 1998, we announced a public hearing on, and reopened and extended the comment period for, that proposal (63 FR 3301). On January 25, 2000, we published a final rule in the Federal Register (65 FR 3866) to list the rough popcornflower as an endangered species without designating critical habitat.

On January 28, 2003, we published in the Federal Register (68 FR 4228) a notice of availability of the draft recovery plan for the rough popcornflower (hereafter “recovery plan”). We published the notice of availability for the final recovery plan on September 25, 2003 (68 FR 55410). On October 25, 2019, we published a notice of availability of a draft amendment updating the recovery criteria in the recovery plan (84 FR 57468), and that recovery plan amendment was signed on December 20, 2019.

On April 29, 2008, we published in the Federal Register (73 FR 23264) a notice of initiation of a 5-year review for rough popcornflower. A 5-year review was completed on August 11, 2010, recommending no change in the plant's endangered status. On February 12, 2016, we again published in the Federal Register (81 FR 7571) a notice of initiation of a 5-year review for rough popcornflower. In the most recent 5-year status review completed on April 14, 2021, we determined the species no longer met the Act's definition of an endangered species and should be reclassified to a threatened species. The 2021 5-year status review is available at https://www.regulations.gov under Docket No. FWS-R1-ES-2024-0005 and at https://ecosphere-documents-production-public.s3.amazonaws.com/sams/public_docs/species_nonpublish/949.pdf.

For additional details on previous Federal actions, see https://ecos.fws.gov/ecp/species/2500 for the species profile for this plant.

A species status assessment (SSA) team prepared an SSA report for the rough popcornflower. The SSA team was composed of Service biologists, in consultation with other species experts. The SSA report represents a compilation of the best scientific and commercial data available concerning the status of the species, including the impacts of past, present, and future factors (both negative and beneficial) affecting the species.

In accordance with our joint policy on peer review published in the Federal Register on July 1, 1994 (59 FR 34270), and our August 22, 2016, memorandum updating and clarifying the role of peer review in listing actions under the Act, we solicited independent scientific review of the information contained in the rough popcornflower SSA report. We sent the SSA report to three independent peer reviewers and received two responses. The peer reviews can be found at https://www.regulations.gov. In preparing this proposed rule, we incorporated the results of these reviews, as appropriate, into the SSA report, which is the foundation for this proposed rule.

As discussed above in Peer Review, we received comments from two peer reviewers on the draft SSA report. We reviewed all comments we received from the peer reviewers for substantive issues and new information regarding the information contained in the SSA report. The peer reviewers generally concurred with our methods and provided additional information, clarifications, and editorial suggestions. Two specific comments were to include a description of the role of natural disturbances in the species' habitat and to offer an explanation of the downlisting criteria as they relate to a minimum population size. We clarified these aspects in the SSA report. Otherwise, no substantive changes to our analysis and conclusions within the SSA report were deemed necessary, and peer reviewer comments are addressed in version 1.0 of the SSA report (USFWS 2021, entire).

Rough popcornflower ( Plagiobothrys hirtus ) is an herbaceous plant in the borage or “forget-me-not” family (Boraginaceae) and is endemic to the Umpqua River basin in Douglas County, Oregon. Rough popcornflower is closely associated with emergent wetlands within seasonally wet meadows or prairie and relatively level, open habitats formed from poor draining clay-loam soils, concentrated in the Sutherlin Creek sub-watershed in Oregon (see figure 1, below).