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Code · REGISTER · 2006-04-24 · Agricultural Marketing Service, USDA · Rules and Regulations

Rules and Regulations. Notice of hearing on proposed rulemaking

23,220 words·~106 min read·/register/2006/04/24/06-3867

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BILLING CODE 3510-22-S 71 78 Monday, April 24, 2006 Proposed Rules DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 984 [Docket No. AO-192-A7; FV06-984-1] Walnuts Grown in California; Hearing on Proposed Amendment of Marketing Agreement and Order No. 984 AGENCY: Agricultural Marketing Service, USDA. ACTION: Notice of hearing on proposed rulemaking. SUMMARY: Notice is hereby given of a public hearing to receive evidence on proposed amendments to Marketing Order No. 984, which regulates the handling of walnuts grown in California.
The amendments are proposed by the Walnut Marketing Board (Board), which is responsible for local administration of order 984. The amendments would: Change the marketing year; include “pack” as a handler function; restructure the Board and revise nomination procedures; rename the Board and add authority to change Board composition; modify Board meeting and voting procedures; add authority for marketing promotion and paid advertising; add authority to accept contributions, and to carry over excess assessment funds; broaden the scope of the quality control provisions and add the authority to recommend different regulations for different market destinations; add authority for the Board to appoint more than one inspection service; replace outdated order language with current industry terminology; and other related amendments.
The USDA proposes three additional amendments: To establish tenure limitations for Board members, to require that continuance referenda be conducted on a periodic basis to ascertain producer support for the order, and to make any changes to the order as may be necessary to conform with any amendment that may result from the hearing. The proposed amendments are intended to improve the operation and functioning of the marketing order program. DATES: The hearing will be held on May 17, 2006, in Modesto, California, beginning at 8:30 a.m. and ending at 4:30 p.m.
The hearing will continue, if necessary, on May 18, 2006, commencing at 8:30 a.m. ADDRESSES: The hearing location is: Stanislaus County Farm Bureau, 1201 L Street, Modesto, CA, 95353, telephone:
(209)522-7278. FOR FURTHER INFORMATION CONTACT: Melissa Schmaedick, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, P.O. Box 1035, Moab, Utah; telephone:
(435)259-7988, Fax:
(435)259-4945; or Kathleen M. Finn, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237; telephone:
(202)720-2491, Fax
(202)720-8938. Small businesses may request information on this proceeding by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237; telephone:
(202)720-2491, Fax:
(202)720-8938. SUPPLEMENTARY INFORMATION: This administrative action is instituted pursuant to the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” This action is governed by the provisions of sections 556 and 557 of title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866. The Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) seeks to ensure that within the statutory authority of a program, the regulatory and informational requirements are tailored to the size and nature of small businesses. Interested persons are invited to present evidence at the hearing on the possible regulatory and informational impacts of the proposals on small businesses. The amendments proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have retroactive effect. If adopted, the proposed amendments would not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with the proposals. The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling. The hearing is called pursuant to the provisions of the Act and the applicable rules of practice and procedure governing the formulation of marketing agreements and orders (7 CFR part 900). The proposed amendments are the result of a committee appointed by the Board to conduct a review of the order. The committee met several times in 2005 and drafted proposed amendments to the order and presented them at industry meetings. The proposed amendments were then forwarded to the Board, which unanimously approved them. The amendments are intended to streamline organization and administration of the marketing order program. The Board's request for a hearing was submitted to USDA on March 3, 2004. The Board's proposed amendments to Marketing Order No. 984 (order) are summarized below. 1. Amend the order to change the marketing year from August 1 through July 31 to September 1 through August 31. This proposal would amend § 984.7, Marketing year, and would result in conforming changes being made to § 984.36, Term of Office, and § 984.48 Marketing estimates and recommendations. 2. Amend the order by specifying that the act of packing walnuts is considered a handling function. This proposal would amend § 984.13, To handle, as well as clarify the definition of “pack” in § 984.15 by including the term “shell.” 3.
(a)Amend all parts of the order that refer to cooperative seats on the Board, redistribute member seats among districts, and provide designated seats for a major handler, if such handler existed. A major handler would have to handle 35 percent or more of the crop. This proposal would amend § 984.35, Walnut Marketing Board and § 984.14, Handler. 3.
(b)Amend the Board member nomination process to reflect proposed changes in the Board structure, as outlined in 3(a). This proposal would amend § 984.37, Nominations, and § 984.40, Alternate. 4. Require Board nominees to submit a written qualification and acceptance statement prior to selection by USDA. This proposal would amend § 984.39, Qualify by acceptance. 5. Change the name of the Walnut Marketing Board to the California Walnut Board. This proposal would amend § 984.6, Board, and § 984.35, Walnut Marketing Board. 6. Add authority to reestablish districts, reapportion members among districts, and revise groups eligible for representation on the Board. This proposal would add a new paragraph
(d)to § 984.35, Walnut Marketing Board. 7. Amend Board quorum and voting requirements to add percentage requirements, add authority for the Board to vote by “any other means of communication” (including facsimile) and add authority for Board meetings to be held by telephone or by “any other means of communication”, providing that all votes cast at such meetings shall be confirmed in writing. This proposal would amend § 984.45, Procedure and would result in a conforming change in § 984.48(a), Marketing estimates and recommendations. 8. Amend the order to add authority to carry over excess assessment funds. This proposal would amend § 984.69, Assessments. 9. Amend the order by adding authority to accept contributions. This proposal would add a new § 984.70, Contributions. 10. Amend the order to clarify that members and alternate members may be reimbursed for expenses incurred while performing their duties and that reimbursement includes per diem. This proposal would amend § 984.42, Expenses. 11. Amend the order to add authority for the Board to appoint more than one inspection service as long as the functions performed by each service are separate and do not conflict with each other. This proposal would amend § 984.51, Inspection and certification of inshell and shelled walnuts. 12.
(a)Amend the order by broadening the scope of the quality control provisions and by adding authority to recommend different regulations for different market destinations. This proposal would amend § 984.50, Grade and size regulations. 12.
(b)Amend the order by adding authority that would allow for shelled walnuts to be inspected after having been sliced, chopped, ground or in any other manner changed from shelled walnuts, if regulations for such walnuts are in effect. This proposal would amend § 984.52, Processing of shelled walnuts. 13. Amend the order by adding authority for marketing promotion and paid advertising. This proposal would amend § 984.46, Research and development. 14. Amend the order to replace the terms “carryover” with “inventory,” and “mammoth” with “jumbo,” to reflect current day industry procedures. This proposal would amend § 984.21, Handler inventory, § 984.67, Exemption, and would also result in conforming changes being made to § 984.48, Marketing estimates and recommendations, and § 984.71, Reports of handler carryover. 15.
(a)Amend the order to clarify the term “transfer” and to add authority for the Board to recommend methods and procedures, including necessary reports, for administrative oversight of such transfers. This proposal would amend § 984.59, Interhandler transfers. 15.
(b)Amend the order to add authority to require reports of interhandler transfers. This proposal would amend § 984.73, Reports of walnut receipts. 16. Update and simplify the language in § 984.22, Trade demand, to state “United States and its territories,” rather than name “Puerto Rico” and “The Canal Zone”. 17. Amend the order by adding language that would acknowledge that the Board may deliberate, consult, cooperate and exchange information with the California Walnut Commission. Any information sharing would be kept confidential. This would add a new § 984.91, Relationship with the California Walnut Commission. The Board works with USDA in administering the orders. These proposals have not received the approval of the Department. The Board believes that the proposed changes would improve the administration, operation, and functioning of the programs in effect for walnuts grown in California. In addition, USDA proposes adding three provisions that would help assure that the operation of the program conforms to current Department policy and that USDA can make any necessary conforming changes. These provisions would: 18. Establish tenure requirements for Board members. This proposal would amend § 984.36, Term of office. 19. Require that continuance referenda be conducted on a periodic basis to ascertain industry support for the order and add more flexibility in the termination provisions. This proposal would amend § 984.89 Effective time and termination. 20. Make such changes as may be necessary to the order to conform with any amendment thereto that may result from the hearing. The public hearing is held for the purpose of:
(i)Receiving evidence about the economic and marketing conditions which relate to the proposed amendments of the order;
(ii)determining whether there is a need for the proposed amendments to the order; and
(iii)determining whether the proposed amendments or appropriate modifications thereof will tend to effectuate the declared policy of the Act. Testimony is invited at the hearing on all the proposals and recommendations contained in this notice, as well as any appropriate modifications or alternatives. All persons wishing to submit written material as evidence at the hearing should be prepared to submit four copies of such material at the hearing and should have prepared testimony available for presentation at the hearing. From the time the notice of hearing is issued and until the issuance of a final decision in this proceeding, USDA employees involved in the decisional process are prohibited from discussing the merits of the hearing issues on an *ex parte* basis with any person having an interest in the proceeding. The prohibition applies to employees in the following organizational units: Office of the Secretary of Agriculture; Office of the Administrator, AMS; Office of the General Counsel, except any designated employee of the General Counsel assigned to represent the Committee in this proceeding; and the Fruit and Vegetable Programs, AMS. Procedural matters are not subject to the above prohibition and may be discussed at any time. List of Subjects in 7 CFR Part 984 Walnuts, Marketing agreements, Nuts, Reporting and recordkeeping requirements. PART 984—WALNUTS GROWN IN CALIFORNIA 1. The authority citation for 7 CFR part 984 continues to read as follows: Authority: 7 U.S.C. 601-674. 2. Testimony is invited on the following proposals or appropriate alternatives or modifications to such proposals. Proposals submitted by the Walnut Marketing Board are as follows: Proposal Number 1 3. Revise § 984.7 to read as follows: § 984.7 Marketing year. *Marketing year* means the twelve months from September 1 to the following August 31, both inclusive, or any other such period deemed appropriate and recommended by the Board for approval by the Secretary. 4. Revise § 984.36 to read as follows: § 984.36 Term of office. The term of office of Board members, and their alternates shall be for a period of two years ending on August 31 of odd-numbered years, but they shall serve until their respective successors are selected and have qualified. 5. Revise § 984.48 to read as follows: § 984.48 Marketing estimates and recommendations.
(a)Each marketing year the Board shall hold a meeting, prior to October 20, for the purpose of recommending to the Secretary a marketing policy for such year. Each year such recommendation shall be adopted by the affirmative vote of at least six members of the Board and shall include the following, and where applicable, on a kernelweight basis:
(1)Its estimate of the orchard-run production in the area of production for the marketing year;
(2)Its estimate of the handler carryover on September 1 of inshell and shelled walnuts;
(3)Its estimate of the merchantable and substandard walnuts in the production;
(4)Its estimate of the trade demand for such marketing year for shelled and inshell walnuts, taking into consideration trade carryover, imports, prices, competing nut supplies, and other factors;
(5)Its recommendation for desirable handler carryover of inshell and shelled walnuts on August 31 of each marketing year;
(6)Its recommendation as to the free and reserve percentages to be established for walnuts;
(7)Its recommendation of the percentage of reserve walnuts that may be exported pursuant to § 984.56, when it determines that the quantity of reserve walnuts that may be exported should be limited;
(8)Its opinion as to whether grower prices are likely to exceed parity; and
(9)Its recommendation for change, if any, in grade and size regulations.
(b)[Reserved]. Proposal Number 2 6. Revise § 984.13 to read as follows: § 984.13 To handle. *To handle* means to pack, sell, consign, transport, or ship (except as a common or contract carrier of walnuts owned by another person), or in any other way to put walnuts, inshell or shelled, into the current of commerce either within the area of production or from such area to any point outside thereof, or for a manufacturer or retailer within the area of production to purchase directly from a grower: The term “to handle” shall not include sales and deliveries within the area of production by growers to handlers, or between handlers. 7. Revise § 984.15 to read as follows: § 984.15 Pack. *Pack* means to bleach, clean, grade, shell or otherwise prepare walnuts for market as inshell or shelled walnuts. Proposal Number 3(a) 8. Revise § 984.35 to read as follows: § 984.35 Walnut Marketing Board.
(a)A Walnut Marketing Board is hereby established consisting of 10 members selected by the Secretary, each of whom shall have an alternate nominated and selected in the same way and with the same qualifications as the member. The members and their alternates shall be selected by the Secretary from nominees submitted by each of the following groups or from other eligible persons belonging to such groups:
(1)Two handler members from District 1;
(2)Two handler members from District 2;
(3)Two grower members from District 1;
(4)Two grower members from District 2;
(5)One member nominated at-large from the production area; and,
(6)One member and alternate who shall be selected after the selection of the nine handler and grower members and after the opportunity for such members to nominate the tenth member and alternate. The tenth member and his or her alternate shall be neither a walnut grower nor a handler.
(b)In the event that one handler handles 35% or more of the crop the membership of the Board shall be as follows:
(1)Two handler members to represent the handler that handles 35% or more of the crop;
(2)Two members to represent growers who market their walnuts through the handler that handles 35% or more of the crop;
(3)Two handler members to represent handlers that do not handle 35% or more of the crop;
(4)One member to represent growers from District 1 who market their walnuts through handlers that do not handle 35% or more of the crop;
(5)One member to represent growers from District 2 who market their walnuts through handlers that do not handle 35% or more of the crop;
(6)One member to represent growers who market their walnuts through handlers that do not handle 35% or more of the crop shall be nominated at large from the production area; and,
(7)One member and alternate who shall be selected after the selection of the nine handler and grower members and after the opportunity for such members to nominate the tenth member and alternate. The tenth member and his or her alternate shall be neither a walnut grower nor a handler.
(c)Grower Districts:
(1)*District 1.* District 1 encompasses the counties in the State of California that lie north of a line drawn on the south boundaries of San Mateo, Alameda, San Joaquin, Calaveras, and Alpine Counties.
(2)*District 2.* District 2 shall consist of all other walnut producing counties in the State of California south of the boundary line set forth in paragraph (c)(1) of this section. 9. Revise § 984.14 to read as follows: § 984.14 Handler. Handler means any person who handles inshell or shelled walnuts. Proposal Number 3(b) 10. Revise § 984.37 to read as follows: § 984.37 Nominations.
(a)Nominations for all grower members shall be submitted by ballot pursuant to an announcement by press releases of the Board to the news media in the walnut producing areas. Such releases shall provide pertinent voting information, including the names of candidates and the location where ballots may be obtained. Ballots shall be accompanied by full instructions as to their markings and mailing and shall include the names of incumbents who are willing to continue serving on the Board and such other candidates as may be proposed pursuant to methods established by the Board with the approval of the Secretary. Each grower, regardless of the number and location of his or her walnut orchard(s), shall be entitled to cast only one ballot in the nomination and each vote shall be given equal weight. If the grower has orchard(s) in both grower districts, he or she shall advise the Board of the district in which he/she desires to vote. The person receiving the highest number of votes for each grower position shall be the nominee.
(b)Nominations for handler members shall be submitted on ballots mailed by the Board to all handlers in their respective Districts. All handlers' votes shall be weighted by the kernelweight of walnuts certified as merchantable by each handler during the preceding marketing year. Each handler in the production area may vote for handler member nominees and their alternates. However, no handler with less than 35% of the crop shall have more than one member and one alternate member. The person receiving the highest number of votes for each handler member position shall be the nominee for that position.
(c)In the event that one handler handles 35% or more of the crop the membership of the Board, nominations shall be as follows:
(1)Nominations of growers who market their walnuts to the handler that handles 35% or more of the crop shall be conducted by that handler in such a manner that is consistent with the requirements of nominations of growers conducted by the Board. The two persons receiving the highest number of votes for the grower positions attributed to that handler (Group (b)(2) of § 984.35) shall be the nominees. The two persons receiving the third and fourth highest number of votes shall be designated as alternates.
(2)Nominations for the two handler members representing the major handler shall be conducted by the major handler in such a manner that is consistent with the requirements of nominations of handlers conducted by the Board. The two
(2)persons receiving the highest number of votes for the major handler positions shall be the nominees. The two persons receiving the third and fourth highest number of votes shall be designated as alternates.
(3)Nominations on behalf of all other grower members (Groups
(b)(4),
(5)and
(6)of § 984.35) shall be submitted after ballot by such growers pursuant to an announcement by press releases of the Board to the news media in the walnut producing areas. Such releases shall provide pertinent voting information, including the names of candidates and the location where ballots may be obtained. Ballots shall be accompanied by full instructions as to their markings and mailing and shall include the names of incumbents who are willing to continue serving on the Board and such other candidates as may be proposed pursuant to methods established by the Board with the approval of the Secretary. Each grower in Groups (Groups
(b)(4),
(5)and
(6)of § 984.35), regardless of the number and location of his or her walnut orchard(s), shall be entitled to cast only one ballot in the nomination and each vote shall be given equal weight. If the grower has orchard(s) in both grower districts he or she shall advise the Board of the district in which he or she desires to vote. The person receiving the highest number of votes for grower position shall be the nominee.
(4)Nominations for handler members representing handlers that do not handle 35% or more of the crop shall be submitted on ballots mailed by the Board to those handlers. The votes of these handlers shall be weighted by the kernelweight of walnuts certified as merchantable by each handler during the preceding marketing year. Each handler in the production area may vote for handler member nominees and their alternates of this subsection. However, no handler shall have more than one person on the Board either as member or alternate member. The person receiving the highest number of votes for a handler member position of this subsection shall be the nominee for that position.
(d)Each grower is entitled to participate in only one nomination process, regardless of the number of handler entities to whom he or she delivers walnuts. If a grower delivers walnuts to more than one handler entity, the grower must choose which nomination process he or she participates in.
(e)The nine members shall nominate one person as member and one person as alternate for the tenth member position. The tenth member and alternate shall be nominated by not less than 6 votes cast by the nine members of the Board.
(f)Nominations in the foregoing manner received by the Board shall be reported to the Secretary on or before June 15 of each odd-numbered year, together with a certified summary of the results of the nominations. If the Board fails to report nominations to the Secretary in the manner herein specified by June 15 of each odd-numbered year, the Secretary may select the members without nomination. If nominations for the tenth member are not submitted by September 1 of any such year, the Secretary may select such member without nomination.
(g)The Board, with the approval of the Secretary, may change these nomination procedures should the Board determine that a revision is necessary. 11. Revise § 984.40 to read as follows: § 984.40 Alternate.
(a)An alternate for a member of the Board shall act in the place and stead of such member in his or her absence or in the event of his or her death, removal, resignation, or disqualification, until a successor for his or her unexpired term has been selected and has qualified.
(b)In the event any member of the Board and his or her alternate are both unable to attend a meeting of the Board, any alternate for any other member representing the same group as the absent member may serve in the place of the absent member, or in the event such other alternate cannot attend, or there is no such other alternate, such member, or in the event of his or her disability or a vacancy, his or her alternate may designate, subject to the disapproval of the Secretary, a temporary substitute to attend such meeting. At such meeting such temporary substitute may act in the place of such member. Proposal Number 4 12. Revise § 984.39 to read as follows: § 984.39 Qualify by acceptance. Any person nominated to serve as a member or alternate member of the Board shall, prior to selection by USDA, qualify by filing a written qualification and acceptance statement indicating such person's willingness to serve in the position for which nominated. Proposal Number 5 13. Revise § 984.6 to read as follows: § 984.6 Board. *Board* means the California Walnut Board established pursuant to § 934.35. 14. In addition to the Board's recommended changes as set forth in Proposal No. 3(a), revise § 984.35(a) introductory text to read as follows: § 984.35 California Walnut Board.
(a)A California Walnut Board is hereby established consisting of 10 members selected by the Secretary, each of whom shall have an alternate nominated and selected in the same way and with the same qualifications as the member. The members and their alternates shall be selected by the Secretary from nominees submitted by each of the following groups or from other eligible persons belonging to such groups: Proposal Number 6 15. In addition to the Board's recommended changes as set forth in Proposal No.3(a) and Proposal No. 5, add a new paragraph
(d)to § 984.35 to read as follows: § 984.35 California Walnut Board.
(d)The Secretary, upon recommendation of the Board, may reestablish districts, may reapportion members among districts, and may revise the groups eligible for representation on the Board specified in paragraphs
(a)and
(b)of this section: Provided, That any such recommendation shall require at least six concurring votes of the voting members of the Board. In recommending any such changes, the following shall be considered:
(1)Shifts in acreage within districts and within the production area during recent years;
(2)The importance of new production in its relation to existing districts;
(3)The equitable relationship between Board apportionment and districts;
(4)Changes in industry structure and/or the percentage of crop represented by various industry entities resulting in the existence of two or more major handlers;
(5)Other relevant factors. Proposal Number 7 16. Revise § 984.45 to read as follows: § 984.45 Procedure.
(a)The members of the Board shall select a chairman from their membership, and shall select such other officers and adopt such rules for the conduct of Board business as they deem advisable. The Board shall give the Secretary the same notice of its meetings as is given to members of the Board.
(b)All decisions of the Board, except where otherwise specifically provided, shall be by a sixty-percent (60%) super-majority vote of the members present. A quorum of six members, or the equivalent of sixty percent (60%) of the Board, shall be required for the conduct of Board business.
(c)The Board may vote by mail or telegram, or by any other means of communication, upon due notice to all members. When any proposition is to be voted on by any of these methods, one dissenting vote shall prevent its adoption. The Board, with the approval of the Secretary, shall prescribe the minimum number of votes that must be cast when voting is by any of these methods, and any other procedures necessary to carry out the objectives of this paragraph.
(d)The Board may provide for meetings by telephone, or other means of communication and any vote cast at such a meeting shall be confirmed promptly in writing: Provided, That if any assembled meeting is held, all votes shall be cast in person. 17. In addition to the Board's recommended changes as set forth in Proposal No. 1, revise § 984.48(a) introductory text to read as follows: § 984.48 Marketing estimates and recommendations.
(a)Each marketing year the Board shall hold a meeting, prior to October 20, for the purpose of recommending to the Secretary a marketing policy for such year. Each year such recommendation shall be adopted by the affirmative vote of at least 60% of the Board and shall include the following, and where applicable, on a kernelweight basis: Proposal Number 8 18. Revise § 984.69 to read as follows: § 984.69 Assessments.
(a)*Requirement for payment* . Each handler shall pay the Board, on demand, his or her pro rata share of the expenses authorized by the Secretary for each marketing year. Each handler's pro rata share shall be the rate of assessment per kernelweight pound of walnuts fixed by the Secretary times the kernelweight of merchantable walnuts he or she has certified. At any time during or after the marketing year the Secretary may increase the assessment rate as necessary to cover authorized expenses and each handler's pro rata share shall be adjusted accordingly.
(b)*Reserve walnut pool expenses* . The Board is authorized temporary use of funds derived from assessments collected pursuant to paragraph
(a)of this section to defray expenses incurred in disposing of reserve walnuts pooled. All such expenses shall be deducted from the proceeds obtained by the Board from the sale or other disposal of pooled reserve walnuts.
(c)*Accounting* . If at the end of a marketing year the assessments collected are in excess of expenses incurred, such excess shall be accounted for in accordance with one of the following:
(1)If such excess is not retained in a reserve, as provided in paragraph (c)(2) or (c)(3) of this section, it shall be refunded to handlers from whom collected and each handler's share of such excess funds shall be the amount of assessments he or she has paid in excess of his or her pro rata share of the actual expenses of the Board.
(2)Excess funds may be used temporarily by the Board to defray expenses of the subsequent marketing year: Provided, That each handler's share of such excess shall be made available to him or her by the Board within five months after the end of the year.
(3)The Board may carry over such excess into subsequent marketing years as a reserve: Provided, That funds already in reserve do not exceed approximately two years' budgeted expenses. In the event that funds exceed two marketing years' budgeted expenses, future assessments will be reduced to bring the reserves to an amount that is less than or equal to two marketing years' budgeted expenses. Such reserve funds may be used:
(i)To defray expenses, during any marketing year, prior to the time assessment income is sufficient to cover such expenses;
(ii)To cover deficits incurred during any year when assessment income is less than expenses;
(iii)To defray expenses incurred during any period when any or all provisions of this part are suspended;
(iv)To meet any other such costs recommended by the Board and approved by the Secretary.
(d)*Termination* . Any money collected from assessments hereunder and remaining unexpended in the possession of the Board upon termination of this part shall be distributed in such manner as the Secretary may direct. Proposal Number 9 19. Add a new § 984.70 to read as follows: § 984.70 Contributions. The Board may accept voluntary contributions but these shall only be used to pay expenses incurred pursuant to § 984.46, Research and development. Furthermore, such contributions shall be free from any encumbrances by the donor and the Board shall retain complete control of their use. Proposal Number 10 20. Revise § 984.42 to read as follows: § 984.42 Expenses. The members and their alternates of the Board shall serve without compensation, but shall be allowed their necessary expenses incurred by them in the performance of their duties under this part. Proposal Number 11 21. Revise § 984.51 to read as follows: § 984.51 Inspection and certification of inshell and shelled walnuts.
(a)Before or upon handling of any walnuts for use as free or reserve walnuts, each handler at his or her own expense shall cause such walnuts to be inspected to determine whether they meet the then applicable grade and size regulations. Such inspection shall be performed by the inspection service or services designated by the Board with the approval of the Secretary; Provided, That if more than one inspection service is designated, the functions performed by each service shall be separate, and shall not conflict with each other. Handlers shall obtain a certificate for each inspection and cause a copy of each certificate issued by the inspection service to be furnished to the Board. Each certificate shall show the identity of the handler, quantity of walnuts, the date of inspection, and for inshell walnuts the grade and size of such walnuts as set forth in the United States Standards for Walnuts (Juglans regia) in the Shell. Certificates covering reserve shelled walnuts for export shall also show the grade, size, and color of such walnuts as set forth in the United States Standards for Shelled Walnuts (Juglans regia). The Board, with the approval of the Secretary, may prescribe such additional information to be shown on the inspection certificates as it deems necessary for the proper administration of this part.
(b)Inshell merchantable walnuts certified shall be converted to the kernelweight equivalent at 45 percent of their inshell weight. This conversion percentage may be changed by the Board with the approval of the Secretary.
(c)Upon inspection, all walnuts for use as free or reserve walnuts shall be identified by tags, stamps, or other means of identification prescribed by the Board and affixed to the container by the handler under the supervision of the Board or of a designated inspector and such identification shall not be altered or removed except as directed by the Board. The assessment requirements in § 984.69 shall be incurred at the time of certification.
(d)Whenever the Board determines that the length of time in storage or conditions of storage of any lot of merchantable walnuts which has been previously inspected have been or are such as normally to cause deterioration, such lot of walnuts shall be reinspected at the handler's expense and recertified as merchantable prior to shipment. Proposal Number 12(a) 22. Revise § 984.50 to read as follows: § 984.50 Grade, quality and size regulations.
(a)*Minimum standard for inshell walnuts.* Except as provided in § 984.64, no handler shall handle inshell walnuts unless such walnuts are equal to or better than the requirements of U.S. No. 2 grade and baby size as defined in the then effective United States Standards for Walnuts (Juglans regia) in the Shell. This minimum standard may be modified by the Secretary on the basis of a Board recommendation or other information.
(b)*Minimum standard for shelled walnuts.* Except as provided in § 984.64, no handler shall handle shelled walnuts unless such walnuts are equal to or better than the requirements of the U.S. Commercial grade as defined in the then effective United States Standards for Shelled Walnuts (Juglans regia) and the minimum size shall be pieces not more than 5 percent of which will pass through a round opening 6/64 inch in diameter. This minimum standard may be modified by the Secretary on the basis of a Board recommendation or other information.
(c)*Effective period* . The minimum standards established pursuant to paragraphs
(a)and
(b)of this section and the provisions of this part relating to the administration thereof, shall continue in effect irrespective of whether the season average price for walnuts is above the parity level specified in section 2(1) of the Act.
(d)*Additional grade, size or other quality regulation* . The Board may recommend to the Secretary additional grade, size or other quality regulations, and may also recommend different regulations for different market destinations. If the Secretary finds on the basis of such recommendation or other information that such additional regulations would tend to effectuate the declared policy of the Act, he or she shall establish such regulations.
(e)*Minimum requirements for reserve* . The Board, with the approval of the Secretary, may specify the minimum kernel content and related requirements for any lot of walnuts acceptable for disposition for credit against a reserve obligation: Provided, That reserve walnuts exported must meet the requirements of paragraph
(a)of this section if inshell, or paragraph
(b)of this section if shelled. Proposal Number 12(b) 23. Revise § 984.52 to read as follows: § 984.52 Processing of shelled walnuts.
(a)No handler shall slice, chop, grind, or in any manner change the form of shelled walnuts unless such walnuts have been certified as merchantable or unless such walnuts meet quality regulations established under § 984.50(d) if such regulations are in effect.
(b)Any lot of shelled walnuts which, upon inspection, fails to meet the minimum standard effective pursuant to § 984.50 solely due to excess shriveling may be certified for processing provided that the total amount of shrivel does not exceed 20 percent, by weight, of the lot. All such walnuts must be reinspected after processing and shall be certified as merchantable if the processed material meets the effective minimum standard. The provisions of this paragraph may be modified by the Secretary, upon recommendation of the Board or other information.
(c)The Board shall establish such procedures as are necessary to insure that all such walnuts are inspected prior to being placed into the current of commerce. Proposal Number 13 24. Revise § 984.46 to read as follows: § 984.46 Research and development. The Board, with the approval of the Secretary, may establish or provide for the establishment of production research, marketing research and development projects, and marketing promotion, including paid advertising, designed to assist, improve, or promote the marketing, distribution, and consumption or efficient production of walnuts. The expenses of such projects shall be paid from funds collected pursuant to § 984.69 and § 984.70. Proposal Number 14 25. Revise § 984.21 to read as follows: § 984.21 Handler inventory. Handler inventory as of any date means all walnuts, inshell or shelled (except those held in satisfaction of a reserve obligation), wherever located, then held by a handler or for his or her account. 26. Revise § 984.67 to read as follows: § 984.67 Exemptions.
(a)*Exemption from volume regulation* . Reserve percentages shall not apply to lots of merchantable inshell walnuts which are of jumbo size or larger as defined in the then effective United States Standards for Walnuts in the Shell, or to such quantities as the Board may, with the approval of the Secretary, prescribe.
(b)*Exemptions from assessments, quality, and volume regulations* :
(1)*Sales by growers direct to consumers* . Any walnut grower may handle walnuts of his or her own production free of the regulatory and assessment provisions of this part if he or she sells such walnuts in the area of production directly to consumers under the following types of exemptions.
(i)At roadside stands and farmers' markets;
(ii)In quantities not exceeding an aggregate of 500 pounds of inshell walnuts or 200 pounds of shelled walnuts during any marketing year (at locations other than those specified in (b)(i) of this section); and
(iii)If shipped by parcel post or express in quantities not exceeding 10 pounds of inshell walnuts or 4 pounds of shelled walnuts to any one consumer in any one calendar day.
(2)*Green walnuts* . Walnuts which are green and which are so immature that they cannot be used for drying and sale as dried walnuts may be handled without regard to the provisions of this part.
(3)*Noncompetitive outlets* . Any person may handle walnuts, free of the provisions of this part, for use by charitable institutions, relief agencies, governmental agencies for school lunch programs, and diversion to animal feed or oil manufacture pursuant to an authorized governmental diversion program.
(c)*Rules and modifications* . The Board may establish, with the approval of the Secretary, such rules, regulations and safeguards and such modifications as will promote the objectives of this subpart. 27. In addition to the Board's recommended changes set forth in Proposal Nos. 1 and 7, revise § 984.48 (a)(2), (a)(4), and (a)(5) to read as follows: § 984.48 Marketing estimates and recommendations.
(a)* * *
(1)* * *
(2)Its estimate of the handler inventory on September 1 of inshell and shelled walnuts;
(3)* * *
(4)Its estimate of the trade demand for such marketing year for shelled and inshell walnuts, taking into consideration trade inventory, imports, prices, competing nut supplies, and other factors;
(5)Its recommendation for desirable handler inventory of inshell and shelled walnuts on August 31 of each marketing year; 28. Revise § 984.71 to read as follows: § 984.71 Reports of handler inventory. Each handler shall submit to the Board in such form and on such dates as the Board may prescribe, reports showing his or her inventory of inshell and shelled walnuts. Proposal Number 15(a) 29. Revise § 984.59 to read as follows: § 984.59 Interhandler transfers. For the purposes of this part, transfer means the sale of inshell and shelled walnuts within the area of production by one handler to another. The receiving handler shall comply with the regulations made effective pursuant to this part. The Board, with the approval of the Secretary, may establish methods and procedures, including necessary reports, for such transfers. Proposal Number 15(b) 30. Revise § 984.73 to read as follows: § 984.73 Reports of walnut receipts. Each handler shall file such reports of his or her walnut receipts from growers, handlers, or others in such form and at such times as may be requested by the Board with the approval of the Secretary. Proposal Number 16 31. Revise § 984.22 to read as follows: § 984.22 Trade demand.
(a)*Inshell.* The quantity of merchantable inshell walnuts that the trade will acquire from all handlers during a marketing year for distribution in the United States and its territories.
(b)*Shelled.* The quantity of merchantable shelled walnuts that the trade will acquire from all handlers during a marketing year for distribution in the United States and its territories. Proposal Number 17 32. Add a new § 984.91 to read as follows: § 984.91 Relationship with the California Walnut Commission. In conducting Board activities and other objectives under this part, the Board may deliberate, consult, cooperate and exchange information with the California Walnut Commission, whose activities compliment those of the Board. Any sharing of information gathered under this subpart shall be kept confidential in accordance with provisions under section 10(i) of the Act. Proposals submitted by USDA are as follows: Proposal Number 18 33. Revise § 984.36 to read as follows: § 984.36 Term of office. The term of office of Board members, and their alternates shall be for a period of two years ending on June 30 of odd-numbered years, but they shall serve until their respective successors are selected and have qualified. Board members may serve up to four consecutive, two-year terms of office. In no event shall any member serve more than eight consecutive years on the Board. For purposes of determining when a Board member has served four consecutive terms, the accrual of terms shall begin following any period of at least twelve consecutive months out of office. The limitation on tenure shall not apply to alternates. Proposal Number 19 34. Amend § 984.89 by redesignating the current paragraph (b)(4) as (b)(5), and adding a new paragraph (b)(4) to read as follows: § 984.89 Effective time and termination.
(a)* * *
(b)* * *
(1)* * *
(2)* * *
(3)* * *
(4)Within six years of the effective date of this part the Secretary shall conduct a referendum to ascertain whether continuance of this part is favored by producers. Subsequent referenda to ascertain continuance shall be conducted every six years thereafter. The Secretary may terminate the provisions of this part at the end of any fiscal period in which the Secretary has found that continuance of this part is not favored by a two thirds (2/3) majority of voting producers, or a two thirds (2/3) majority of volume represented thereby, who, during a representative period determined by the Secretary, have been engaged in the production for market of walnuts in the production area. Such termination shall be announced on or before the end of the production year. Proposal Number 20 Make such changes as may be necessary to the order to conform with any amendment thereto that may result from the hearing. Dated: April 18, 2006. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E6-6071 Filed 4-21-06; 8:45 am] BILLING CODE 3410-02-P DEPARTMENT OF ENERGY 10 CFR Part 626 RIN 1901-AB16 Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve AGENCY: Office of Petroleum Reserves, Department of Energy. ACTION: Notice of proposed rulemaking. SUMMARY: The Energy Policy Act of 2005 directs the Secretary of Energy to develop procedures for the acquisition of petroleum for the Strategic Petroleum Reserve
(SPR)in appropriate circumstances. The Department of Energy
(DOE)is today proposing procedures for the acquisition of petroleum for the SPR, including acquisition by direct purchase and transfer of royalty oil from the Department of the Interior. The proposed rule also has provisions concerning the deferral of scheduled deliveries of petroleum for the SPR. DATES: Comments are due on May 24, 2006. ADDRESSES: You may submit comments, identified by RIN Number 1901-AB16 by any of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments. • E-Mail: *nancy.marland@hq.doe.gov.* Include RIN Number 1901-AB16 in the subject line of the message. • Mail: Office of Petroleum Reserves, FE-40, U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, DC 20585. You may obtain electronic copies of this notice of proposed rulemaking and review comments received by DOE at the following Web sites: *http://www.fe.doe.gov/programs/reserves* and *http://www.spr.doe.gov.* Those without Internet access may access this information by visiting the DOE Freedom of Information Reading Room, Rm. 1E-190, 1000 Independence Avenue SW., Washington, DC,
(202)586-3142, between the hours of 9 a.m and 4 p.m., Monday to Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Lynnette le Mat, Director, Operations and Readiness, Office of Petroleum Reserves, FE-43, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585,
(202)586-4398. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction A. Background B. Energy Policy Act of 2005 II. Proposed Acquisition Procedures A. Discussion of Acquisition Principles B. Vehicles for Petroleum Acquisition C. Description of the Proposed Rule III. Regulatory Review A. Executive Order 12866 B. National Environmental Policy Act C. Regulatory Flexibility Act D. Paperwork Reduction Act E. Unfunded Mandates Reform Act of 1995 F. Treasury and General Government Appropriations Act, 1999 G. Executive Order 13132 H. Executive Order 12988 I. Treasury and General Government Appropriations, 2001 I. Introduction A. Background The Strategic Petroleum Reserve was established pursuant to the Energy Policy and Conservation Act
(EPCA)(42 U.S.C. 6201 *et seq.* ) to store petroleum to diminish the impact on the United States of disruptions in petroleum supplies and to carry out the obligations of the United States under the International Energy Program. EPCA authorizes the storage of up to one billion barrels of petroleum and permits the Secretary of Energy to acquire petroleum for storage in the SPR by a variety of methods. Since its authorization, the Federal Government has created six crude oil storage sites and subsequently decommissioned two of the six. The SPR currently consists of underground storage caverns located in the four Government-owned sites. The locations are Bryan Mound and Big Hill in Texas and West Hackberry and Bayou Choctaw in Louisiana. These four storage locations have salt dome caverns with 727 million barrels of useable storage capacity. Over the last thirty years, the Government has acquired approximately 800 million barrels of petroleum for the SPR. Over 100 million barrels of oil have been withdrawn from the SPR for sale or exchange. The inventory reached its highest level of 700.7 million barrels in August 2005 before the drawdown, exchange and sale of 20.8 million barrels in the aftermath of Hurricane Katrina. Crude oil was initially acquired for the SPR by direct purchases on the open market. Through an Interagency Agreement, the Department of Defense served as DOE's agent to acquire crude oil using appropriated funds to attempt to meet a series of target fill rates specified by Congress. Petroleum was acquired through a combination of spot market purchases and term contracts, including a matching purchase and sale involving the Government's share of production from the Naval Petroleum Reserve in California. Except for various pauses occasioned by geopolitical events, e.g., Desert Storm, the Defense Fuel Supply Center (currently the Defense Energy Support Center) continued to function as DOE's acquisition agent for direct purchases through 1994, at which time funds from direct appropriations and receipts from sales in 1990 and 1991 were exhausted. In December 1981, DOE entered into the first of a series of four country-to-country contracts with Petroleos Mexicanos (PEMEX), the state-owned oil company of Mexico. These term contracts—under which deliveries of approximately 220 million barrels of petroleum were completed in 1990—employed commercial market terms and were priced according to a formula indexed to prices of globally-traded petroleum. In 1996, in a series of congressionally-mandated sales, an aggregate 28 million barrels of SPR inventory were sold to fund SPR programmatic requirements and for general deficit reduction purposes. Subsequently, pursuant to a 1999 Memorandum of Understanding
(MOU)between the Department of the Interior
(DOI)and DOE, DOE initiated a program to replace the 28 million barrels by the transfer to DOE of crude oil royalties collected in-kind on production from Federal leases in the Gulf of Mexico Outer Continental Shelf. Under this MOU, DOE contracted with commercial entities to receive the royalty oil at offshore production facilities and transfer it to the SPR, either directly or by exchange for other crude oil meeting SPR quality specifications. In 1998, in order to improve the efficiency of drawdown operations at the Bryan Mound site, DOE conducted a competition under the exchange authority in EPCA to trade crude oil of one type for another type of superior quality. Although this resulted in a net decrease in the number of barrels in inventory, the upgrade in oil quality maintained the value of the Government's assets and enhanced emergency response capabilities. In the fall of 2000, again under the EPCA exchange authority, DOE conducted a time exchange of oil from the SPR. Through open competition, DOE entered into agreements with nine companies to exchange 30 million barrels of oil. Under these agreements, oil delivered to companies from SPR sites was to be repaid the following year with oil of comparable quality and quantity plus additional premium barrels paid as interest. In November 2001, the Administration announced it would extend the royalty-in-kind program to fill the SPR to a level of 700 million barrels. To accomplish this, a new MOU was signed with the Department of Interior and DOE issued a series of competitive solicitations for six-month terms, similar to those used to acquire the previous 28 million barrels. At various times since 1999, when the market moved into steep backwardation (prices for future barrels remained consistently low relative to near term prices), suppliers under both the time exchange and royalty-in-kind transfer programs requested that contractually scheduled deliveries to the SPR be delayed. DOE granted these deferral requests through individual negotiations for the future return of the originally scheduled barrels plus additional premium barrels. In addition, there have been periods when catastrophic events, most recently severe weather, have prompted requests for loans of oil from the SPR. These loans have been conducted as time exchanges in a manner similar to deferred deliveries, in that the loaned oil is returned plus additional barrels as interest. B. Energy Policy Act of 2005 The acquisition authority in section 160 of EPCA requires that the Secretary of Energy, to the greatest extent practicable, acquire petroleum products for the SPR in a manner consonant with the following objectives: • Minimization of the cost of the SPR; • Minimization of the Nation's vulnerability to a severe energy supply interruption; • Minimization of the impact of such acquisition upon supply levels and market forces; and • Encouragement of competition in the petroleum industry. (42 U.S.C. 6240). The recently enacted Energy Policy Act of 2005 (Pub. L. 109-58) generally directs the Secretary of Energy to acquire petroleum to fill the SPR to the one billion barrel capacity authorized by section 154(a) of EPCA (42 U.S.C. 6234(a)) as expeditiously as practicable, without incurring excessive cost or appreciably affecting the price of petroleum products to consumers. DOE estimates that the acquisition of the approximately 300 million barrel difference between the current and authorized SPR inventory would likely take approximately 15 years. The rate of acquisition depends on the availability of capacity to receive and hold the oil and by the availability of oil either through transfer from the Department of the Interior to DOE or through purchases, which will be affected by the availability of funds. In addition, section 301(e)(2) of the Energy Policy Act of 2005 amends EPCA by adding a new subsection
(c)to section 160. Subsection
(c)directs the Secretary of Energy to develop, with public notice and opportunity for comment, procedures consistent with the objectives of section 160 to acquire petroleum for the SPR. Such procedures must take into account the need to—
(1)Maximize overall domestic supply of crude oil (including quantities stored in private sector inventories);
(2)Avoid incurring excessive cost or appreciably affecting the price of petroleum products to consumers;
(3)Minimize the costs to the Department of the Interior and DOE in acquiring such petroleum products (including foregone revenues to the Treasury when petroleum products for the SPR are obtained through the royalty-in-kind program);
(4)Protect national security;
(5)Avoid adversely affecting current and futures prices, supplies, and inventories of oil; and
(6)Address other factors that the Secretary determines to be appropriate. The Energy Policy Act of 2005 further provides that the procedures developed under section 160(c) shall include procedures and criteria for the review of requests for the deferrals of scheduled deliveries. Along with the direction to expand the SPR to one billion barrels, section 303 of the Energy Policy Act of 2005 requires the Secretary of Energy to complete a proceeding to select sites “necessary to enable acquisition by the Secretary of the full authorized volume of the Strategic Petroleum Reserve.” (42 U.S.C. 6201 note.) This activity is currently underway. Consistent with the principles set forth in EPCA and the objectives of the Energy Policy Act of 2005, DOE now proposes procedures for oil acquisition by direct purchase and by royalty oil transfers from the Department of the Interior. Additionally, the procedures address deferrals of deliveries. II. Proposed Acquisition Procedures A. Discussion of Acquisition Principles DOE will consider a wide range of factors consonant with the objectives set forth in section 160
(b)of EPCA and the new section 160
(c)added by the Energy Policy Act of 2005. Careful and deliberative consideration of these factors will occur prior to acquisition of petroleum for the SPR or deferral of scheduled deliveries. While the mission of the SPR is to provide energy security by storing substantial quantities of petroleum, the acquisition of petroleum to meet this long term objective must be conducted using the criteria set forth in EPCA, as amended by the Energy Policy Act of 2005. When acquiring petroleum, whether by purchase or royalty transfer, DOE will seek to balance the objectives of assuring adequate security and minimizing market stress. To this end, DOE will consider various factors that may be affecting market fundamentals, current and projected SPR and commercial receipt capabilities, and the geopolitical climate. Consistent with the SPR mission, however, energy security will be the overriding objective as long as it does not result in undue impact on markets. Whether acquiring by purchase or royalty transfer, DOE will seek to maximize the overall domestic supply of crude oil. Assuming the necessary authorizations and appropriations have been made, DOE decisions on crude oil acquisition will take into consideration the current level of the SPR and private inventories, national and regional import dependency, the outlook for international and domestic production levels, oil acquisition by other stockpiling entities, the added security value of the marginal barrel in storage, incipient disruptions of supply or refining capability, the level of market volatility, the demand and supply elasticity to price changes, logistics and economics of petroleum movement, and any other considerations that may be pertinent to the balance of petroleum supply and demand. More indirect considerations, such as monetary policy, the current and projected rate of economic growth, and impacts on specific domestic market segments, as well as foreign policy considerations may also be pertinent to near-term acquisition strategy. All of these factors are recognized as having an impact, at some level, on U.S. energy security. The timing of DOE entry into the market, its sustained presence, and the quantities sought will all be sensitive to these factors. DOE will remain aware of the extent to which the SPR fill rate and prices paid for its own acquisitions will impact supply availability and prices for other market participants. DOE will strive to avoid incurring excessive cost or appreciably affecting the price of petroleum products to consumers by analyzing market activity for crude oil and related commodities and prices of oil for delivery in future months as well as the perceived availability of near term and forward supplies. For purchases or exchanges, DOE will ensure the use of commercially reasonable terms and conditions. B. Vehicles for Petroleum Acquisition DOE may acquire oil for the SPR through direct purchase, the transfer of royalty-in-kind oil, through deferrals and exchanges, or other means authorized in EPCA (42 U.S.C. 6239, 6240). In order to acquire oil, DOE may enter into agreements with other Federal agencies with relevant expertise and resources to acquire oil for the SPR consistent with the provisions of part 626. 1. Direct Purchases Use of the direct purchase method for oil acquisition is contingent on the availability of funds. If funds are made available, DOE proposes to provide public notice of its intent to issue a solicitation for the acquisition of crude oil. The quantity and quality of oil to be purchased would be identified in the solicitation. When acquiring by direct purchase, DOE would use competitive solicitations to assure that prices paid are fair and reasonable in a global market, and in line with contemporaneous commercial transactions for comparable quality crude oils. The use of open, continuous solicitations that allow entry into price and delivery negotiations would enable DOE to increase the rate of purchases if price volatility reduces prices below trend and offers the opportunity to reduce the average cost of oil acquisition. Under the proposed procedures, DOE also may decrease the rate of purchase if volatility or future price projections indicate a delay would result in better economy and less stress on seasonal markets. DOE's decision to enter the market, delay purchases or defer deliveries would follow the careful analysis of the effect of such a decision on current and futures prices, supplies and inventories of oil. 2. Royalty-in-Kind Transfers Oil acquisition by royalty-in-kind transfer is conducted in coordination with the Minerals Management Service of the Department of the Interior. The Department of the Interior is responsible for collecting royalties on production from leases on Federally-owned properties. The Federal Government receives royalties of a defined percentage of the amount or value of the oil produced from the leases. Under the royalty-in-kind acquisition method, the royalties are paid “in kind”, in the oil itself, and transferred to the SPR. In most cases, the royalty oil is provided to private companies under exchange agreements. In turn, these companies are bound by contract to provide oil of suitable quality to the SPR. If the royalty oil is of suitable quality and transportation logistics are amenable, it may be directly transferred to the SPR. DOE expects this would be a small proportion of the total oil transferred. When using royalty production to fill the SPR, DOE would minimize the cost to the Department of the Interior and DOE through its analysis of royalty values, as well as a comparative analysis of the relative market values of crude oil offered in exchange. Both agencies will encourage the direct transfer of royalty oil to the SPR when in the Government's interest. 3. Deferrals Secretary of Energy may defer scheduled deliveries to the SPR for the purpose of obtaining additional crude oil. Under the proposed rule, DOE could defer scheduled crude oil deliveries to the SPR to a later date in exchange for a premium, which would be paid to DOE in oil. The precise amount of that premium would be negotiated with the contractor by a DOE contracting officer. The determination of an appropriate premium would take into consideration the length of deferral as well as prevailing market conditions. C. Description of the Proposed Rule This portion of the supplementary information discusses certain provisions of the proposed rule. Section 626.03 (Applicability) This section limits the applicability of these procedures to the acquisition of petroleum for the SPR through direct purchase or transfer of royalty-in-kind oil, as well as to deferrals of contractually scheduled deliveries. The procedures do not apply to the following transactions during which oil may be acquired:
(1)Country-to-country oil purchases;
(2)facility leases with payments in oil; and
(3)contracts for oil not owned by the United States as provided for by section 171 of the Energy Policy and Conservation Act. These transactions generally are not conducted primarily for the acquisition of oil by DOE. Section 626.04 (General Acquisition Strategy) This proposed section addresses the indicators which will be reviewed by DOE for likely market impacts prior to acquisition of petroleum for the SPR. Section 626.05 (Notice of Acquisition) This section describes the contents of the acquisition solicitation and issuance activities. The proposed section also discusses the duration of the solicitation, definition of quality specifications, quantity determination, offer procedures and delivery. Section 626.06 (Acquiring Oil by Direct Purchase) This proposed section addresses in more detail the development of an acquisition strategy taking into account specific SPR quantitative and qualitative requirements. This proposed section also addresses the method by which solicitations are issued and offers evaluated. Section 626.07 (Royalty Transfer and Exchange) This proposed section describes how DOE, in coordination with the Department of the Interior, would proceed to fill the SPR with the Government's share of U.S. Gulf of Mexico offshore royalty production, either by direct transport to SPR facilities or through a competitive exchange with industry. Successful exchange offers generally would be those which provide the greatest value of exchange oil to the Government relative to the value of the royalty oil delivered to the contractor. Section 626.08 (Deferrals of Contractually Scheduled Deliveries) This proposed section addresses the conditions in which DOE would consider and the process by which it would delay deliveries scheduled under existing contracts to the mutual benefit of the Government and other market participants. III. Regulatory Review A. Executive Order 12866 Today's proposed rule has been determined to be a “significant regulatory action” under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993). Accordingly, this action was subject to review under that Executive Order by the Office of Information and Regulatory Affairs of the Office of Management and Budget. B. National Environmental Policy Act DOE has determined that this proposed rule is covered under the Categorical Exclusion found in the Department's National Environmental Policy Act regulations at paragraph A.6 of Appendix A to Subpart D, 10 CFR part 1021, which applies to rulemakings that are strictly procedural. Accordingly, neither an environmental assessment nor an environmental impact statement is required. C. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) requires preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process (68 FR 7990). DOE has made its procedures and policies available on the Office of General Counsel's Web site: *http://www.gc.doe.gov.* DOE has reviewed today's proposed procedures under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. These proposed procedures would not directly affect small businesses or other small entities. The proposed procedures would apply only to individuals who are engaged in the acquisition of petroleum products for the Strategic Petroleum Reserve. On the basis of the foregoing, DOE certifies that the proposed procedures, if implemented would not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE's certification and supporting statement of factual basis will be provided to the Chief Counsel for Advocacy of the Small Business Administration pursuant to 5 U.S.C. 605(b). D. Paperwork Reduction Act This proposed rule would not impose any new collection of information subject to review and approval by the Office of Management and Budget
(OMB)under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 *et seq.* E. Unfunded Mandates Reform Act of 1995 The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. Subsection 101(5) of title I of that law defines a Federal intergovernmental mandate to include any regulation that would impose upon State, local, or tribal governments an enforceable duty, except a condition of Federal assistance or a duty arising from participating in a voluntary federal program. Title II of that law requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and tribal governments, in the aggregate, or to the private sector, other than to the extent such actions merely incorporate requirements specifically set forth in a statute. Section 202 of that title requires a Federal agency to perform a detailed assessment of the anticipated costs and benefits of any rule that includes a Federal mandate which may result in costs to State, local, or tribal governments, or to the private sector, of $100 million or more. Section 204 of that title requires each agency that proposes a rule containing a significant Federal intergovernmental mandate to develop an effective process for obtaining meaningful and timely input from elected officers of State, local, and tribal governments. These proposed procedures would not impose a Federal mandate on State, local or tribal governments. The proposed rule would not result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995. F. Treasury and General Government Appropriations Act, 1999 Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule that may affect family well being. These proposed procedures apply only to Federal employees involved in the acquisition of petroleum products for the SPR. While some of these individuals may be members of a family, the proposed rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment. G. Executive Order 13132 Executive Order 13132 (64 FR 43255, August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined this proposed rule and has determined that it would not preempt State law and would not have a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. No further action is required by Executive Order 13132. H. Executive Order 12988 With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, Civil Justice Reform, 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements:
(1)Eliminate drafting errors and ambiguity;
(2)write regulations to minimize litigation; and
(3)provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation:
(1)Clearly specifies the preemptive effect, if any;
(2)clearly specifies any effect on existing Federal law or regulation;
(3)provides a clear legal standard for affected conduct while promoting simplification and burden reduction;
(4)specifies the retroactive effect, if any;
(5)adequately defines key terms; and
(6)addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed procedures meet the relevant standards of Executive Order 12988. I. Treasury and General Government Appropriations Act, 2001 The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today's notice under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. List of Subjects in 10 CFR Part 626 Government contracts, Oil and gas reserves, Strategic and critical materials. Issued in Washington, DC, on April 6, 2006. Thomas D. Shope, Acting Assistant Secretary for Fossil Energy. For the reasons stated in the preamble, DOE hereby proposes to amend chapter II of title 10 of the Code of Federal Regulations by adding a new part 626 as set forth below: PART 626—PROCEDURES FOR ACQUISITION OF PETROLEUM FOR THE STRATEGIC PETROLEUM RESERVE Sec. 626.01 Purpose. 626.02 Definitions. 626.03 Applicability. 626.04 General Acquisition Strategy. 626.05 Acquisition Proce—General. 626.06 Acquiring Oil by Direct Purchase. 626.07 Royalty Transfer and Exchange. 626.08 Deferrals of Contractually Scheduled Deliveries. Authority: 42 U.S.C. 6240(c); 42 U.S.C. 7101, *et seq.* § 626.01 Purpose. This part establishes the procedures for acquiring petroleum for, and deferring contractually scheduled deliveries to, the Strategic Petroleum Reserve. § 626.02 Definitions. *Backwardation* means a market situation in which prices are progressively lower in succeeding delivery months than in earlier months. *Contango* means a market situation in which prices are progressively higher in the succeeding delivery months than in earlier months. *Contract* means the agreement under which DOE acquires SPR petroleum, consisting of the solicitation, the contract form signed by both parties, the successful offer, and any subsequent modifications, including those granting requests for deferrals. *Contracting Officer* means the person executing acquisition contracts on behalf of the Government, including the authorized representative of a Contracting Officer acting within the limits of his or her authority. *DEAR* means the Department of Energy Acquisition Regulation. *Deferral* means a process whereby petroleum scheduled for delivery to the SPR in a specific contract period is rescheduled for later delivery, outside of that period and encompasses the future delivery of the originally scheduled quantity plus an in-kind premium. *DOE* means the Department of Energy. *Exchange* means a process whereby petroleum owned by or due to the SPR is provided to a person or contractor in return for petroleum of comparable quality plus a premium quantity of petroleum delivered to the SPR in the future, or when SPR petroleum is traded for petroleum of a different quality for operational reasons based on the relative values of the quantities traded. *FAR* means the Federal Acquisition Regulation. *Government* means the United States Government. *International Energy Program* means the program established by the Agreement on an International Energy Program, signed by the United States on November 18, 1974, including any subsequent amendments and additions to that Agreement. *OPR* means the Office of Petroleum Reserves within the DOE Office of Fossil Energy whose responsibilities include the operation of the Strategic Petroleum Reserve. *Petroleum* means crude oil, residual fuel oil, or any refined product (including any natural gas liquid, and any natural gas liquid product) owned, or contracted for, by DOE and in storage in any permanent SPR facility, or temporarily stored in other storage facilities. *Secretary* means the Secretary of Energy. *Strategic Petroleum Reserve* or *SPR* means the DOE program established by Title I, Part B, of the Energy Policy and Conservation Act, 42 U.S.C. 6201 *et seq.* § 626.03 Applicability. The procedures in this part apply to the acquisition of petroleum by DOE for the Strategic Petroleum Reserve through direct purchase or transfer of royalty-in-kind oil, as well as to deferrals of contractually scheduled deliveries. § 626.04 General acquisition strategy.
(a)*Criteria for commencing acquisition.* To reduce the potential for negative impacts from market participation, DOE shall review the following factors prior to commencing acquisition of petroleum for the SPR:
(1)The current inventory of the SPR;
(2)The current level of private inventories;
(3)Days of net import protection;
(4)Current price levels for crude oil and related commodities;
(5)The outlook for international and domestic production levels;
(6)Existing or potential disruptions in supply or refining capability;
(7)The level of market volatility;
(8)Futures market price differentials for crude oil and related commodities; and
(9)Any other factor the consideration of which the Secretary deems to be necessary or appropriate.
(b)*Review of rate of acquisition.* DOE shall review the appropriate rate of oil acquisition each time an open market acquisition has been suspended for more than three months, and every six months in the case of ongoing or suspended royalty-in-kind transfers.
(c)*Acquisition through other Federal agencies.* DOE may enter into arrangements with another Federal agency for that agency to acquire oil for the SPR on behalf of DOE. § 626.05 Acquisition procedures—general.
(a)*Notice of acquisition.*
(1)Except when DOE has determined there is good cause to do otherwise, DOE shall provide advance public notice of its intent to acquire petroleum for the SPR. The notice of acquisition is usually in the form of a solicitation. DOE shall state in the notice of acquisition the general terms and details of DOE's crude oil acquisition and, to the extent feasible, shall inform the public of its overall fill goals, so that they may be factored into market participants' plans and activities.
(2)The notice of acquisition generally states:
(i)The method of acquisition to be employed;
(ii)The time that the solicitations will be open;
(iii)The quantity of oil that is sought;
(iv)The minimum crude oil quality requirements;
(v)The acceptable delivery locations; and
(vi)The necessary instructions for the offer process.
(b)*Method of acquisition.*
(1)DOE shall define the method of crude oil acquisition, direct purchase or royalty-in-kind transfer and exchange, in the notice of acquisition.
(2)DOE shall determine the method of crude oil acquisition after taking into account the availability of appropriated funds, current market conditions, the availability of oil from the Department of the Interior, and other considerations DOE deems to be relevant.
(c)*Solicitation.*
(1)To secure the economic benefit and security of a diversified base of potential suppliers of petroleum to the SPR, DOE shall maintain a listing, developed through on-line registration and personal contact, of interested suppliers. Upon the issuance of a solicitation, DOE shall notify potential suppliers via their registered e-mail addresses.
(2)DOE shall make the solicitation publicly available on the Web sites of the DOE Office of Fossil Energy *http://www.fe.doe.gov/programs/reserves* and the OPR *http://www.spr.doe.gov.*
(d)Timing and *duration of solicitation* .
(1)DOE shall determine crude oil requirements on nominal six-month cycles, and shall review and update these requirements prior to each solicitation cycle.
(2)DOE may terminate all solicitations and contracts pertaining to the acquisition of crude oil at the convenience of the Government, and in such event shall not be responsible for any costs incurred by suppliers, other than for oil delivered to the SPR.
(e)*Quality.*
(1)DOE shall define minimum crude oil quality specifications for the SPR. DOE shall include such specifications in acquisition solicitations, and shall make them available on the Web sites of the DOE Office of Fossil Energy *http://www.fe.doe.gov/programs/reserves* and the OPR *http://www.spr.doe.gov* .
(2)DOE shall periodically review the quality specifications to ensure, to the greatest extent practicable, the crude oil mix in storage matches the demand of the United States refining system.
(f)*Quantity.* In determining the quantities of oil to be delivered to the SPR, DOE shall:
(1)Take into consideration market conditions and the availability of transportation systems; and
(2)Seek to avoid adversely affecting other market participants or crude oil market fundamentals.
(g)*Offer and evaluation procedures* .
(1)Each solicitation shall provide necessary instructions on offer format and submission procedures. The details of the offer, evaluation and award procedures may vary depending on the method of acquisition.
(2)DOE shall use relative crude values and time differentials to the maximum extent practicable to manage acquisition and delivery schedules to reduce acquisition costs.
(3)DOE shall evaluate offers based on prevailing market prices of specific crude oils, and shall award contracts on a competitive basis.
(4)Whether acquisition is by direct purchase or royalty transfer and exchange on a term contract basis, DOE shall use a price index to account for fluctuations in absolute and relative market prices at the time of delivery to reduce market risk to all parties throughout the contract term.
(h)*Scheduling and delivery* .
(1)Except as provided in paragraph
(4)of this section, DOE shall accept offers for crude oil delivered to specified SPR storage sites via pipeline or as waterborne cargos delivered to the terminals serving those sites.
(2)Except as provided in paragraph
(4)of this section, DOE shall generally establish schedules that allow for evenly spaced deliveries of economically-sized marine and pipeline shipments within the constraints of SPR site and commercial facilities receipt capabilities.
(3)DOE shall strive to maximize U.S. flag carrier utilization through the terms of its supply contracts.
(4)DOE reserves the right to accept offers for other methods of delivery if, in DOE's sole judgment, market conditions and logistical constraints require such other methods. § 626.06 Acquiring oil by direct purchase.
(a)*General.* For the direct purchase of crude oil, DOE shall, through certified contracting officers, conduct crude oil acquisitions in accordance with the FAR and the DEAR.
(b)*Acquisition strategy* .
(1)DOE solicitations:
(i)May be either continuously open or fixed for a period of time (usually no longer than 6 months); and
(ii)May provide either for prompt delivery or for delivery at future dates.
(2)DOE may alter the acquisition plan to take advantage of differentials in prices for different qualities of oil, based on a consideration of the availability of storage capacity in the SPR sites, the logistics of changing delivery streams, and the availability of ships, pipelines and terminals to move and receive the oil.
(3)Based on the market analysis described in paragraph
(d)of this section, DOE may suspend competition or reject offers on the basis of Government estimates that project substantially lower oil prices in the future than those contained in offers. If DOE determines there is a high probability that the cost to the Government can be reduced without significantly affecting national energy security goals, DOE may either contract for delivery at a future date or delay purchases to take advantage of projected future lower prices. Conversely, DOE may increase the rate of purchases if prices fall below recent price trends or futures markets present a significant contango and prices offer the opportunity to reduce the average cost of oil acquisitions in anticipation of higher prices.
(4)Based on the market analysis described in paragraph
(d)of this section, DOE may suspend the solicitation or refuse offers or decrease the rate of purchase if DOE determines acquisition will add significant upward pressure to prices either regionally or on a world-wide basis. DOE may consider recent price changes, private inventory levels, oil acquisition by other stockpiling entities, the outlook for world oil production, incipient disruptions of supply or refining capability, logistical problems for moving petroleum products, macroeconomic factors, and any other considerations that may be pertinent to the balance of petroleum supply and demand.
(c)*Fill requirements determination* . DOE shall develop SPR fill requirements for each solicitation based on an assessment of national energy security goals, the availability of storage capacity, and the need for specific grades and quantities of crude oil.
(d)*Market analysis* .
(1)DOE shall establish a market value for each crude type to be acquired based on a market analysis at the time of contract award.
(2)In conducting the market analysis, DOE may use prices on futures markets, spot markets, recent price movements, current and projected shipping rates, forecasts by the DOE Energy Information Administration, and any other analytic tools available to DOE to determine the most desirable purchase profile.
(3)A market analysis supporting a suspension decision may consider recent price changes, private inventory levels, oil acquisition by other stockpiling entities, the outlook for world oil production, incipient disruptions of supply or refining capability, logistical problems for moving petroleum products, macroeconomic factors, and any other considerations that may be pertinent to the balance of petroleum supply and demand.
(e)*Evaluation of offers* .
(1)DOE shall evaluate offers using:
(i)The criteria and requirements stated in the solicitation; and
(ii)The market analysis under paragraph
(d)of this section.
(2)DOE shall require financial guarantees from contractors. § 626.07 Royalty transfer and exchange.
(a)*General* . DOE shall conduct royalty transfers pursuant to an agreement between DOE and the Department of the Interior for the transfer of royalty oil.
(b)*Acquisition strategy* .
(1)DOE and the Department of the Interior shall select a royalty volume from specified leases for transfer usually over six-month periods, beginning April 1 and October 1.
(2)If logistics and crude oil quality are compatible with SPR receipt capabilities and requirements respectively, DOE may take the royalty oil directly from the Department of the Interior and place it in SPR storage sites. Otherwise, DOE may competitively solicit suppliers to deliver oil of comparable value to the SPR in exchange for the receipt of royalty-in-kind oil.
(3)If, based on the market analysis described in paragraph
(d)of this section, DOE determines there is a high probability that the cost to the Government can be reduced without significantly affecting national energy security goals, DOE may contract for delivery at a future date in expectation of lower prices and a higher quantity of oil in exchange. Conversely, it may schedule deliveries at an earlier date under the contract in anticipation of higher prices at later dates.
(4)Based on the market analysis in paragraph
(d)of this section, DOE may, after consultation with the Department of the Interior, suspend the transfer of royalty oil to DOE if it appears the added demand for oil will add significant upward pressure to prices either regionally or on a world-wide basis.
(c)*Fill requirements determination* . DOE shall develop SPR fill requirements for each solicitation based on an assessment of national energy security goals, the availability of royalty oil and storage capacity, and need for specific grades and quantities of crude oil.
(d)*Market analysis* .
(1)DOE may use prices on futures markets, spot markets, recent price movements, current and projected shipping rates, forecasts by the DOE Energy Information Administration, and any other analytic tools to determine the most desirable acquisition profile.
(2)A market analysis supporting a suspension decision may consider recent price changes, private inventory levels, oil acquisition by other stockpiling entities, the outlook for world oil production, incipient disruptions of supply or refining capability, logistical problems for moving petroleum products, macroeconomic factors, and any other considerations that may be pertinent to the balance of petroleum supply and demand.
(e)*Evaluation of royalty exchange offers* .
(1)DOE shall evaluate offers using:
(i)The criteria and requirements stated in the solicitation; and
(ii)The market analysis under paragraph
(d)of this section.
(2)DOE shall require financial guarantees from contractors prior to evaluation. § 626.08 Deferrals of contractually scheduled deliveries.
(a)*General* .
(1)DOE prefers to take deliveries of petroleum for the SPR at times scheduled under applicable contracts. However, in the event the market is distorted by disruption to supply or other factors, DOE may defer scheduled deliveries or request or entertain deferral requests from contractors.
(2)A contractor seeking to defer scheduled deliveries of oil to the SPR may submit a deferral request to DOE.
(b)*Deferral criteria* . DOE shall only grant a deferral request for negotiation if the Government can increase the volume of oil in the SPR and, if DOE determines, based on DOE's deferral analysis, that at least one of the following conditions exists:
(1)The Government can reduce the cost of its oil acquisition per barrel and increase the volume of oil being delivered to the SPR by means of the premium barrels required by the deferral process.
(2)The Government anticipates private inventories are approaching a point where unscheduled outages may occur.
(3)There is evidence that refineries are reducing their run rates for lack of feedstock.
(4)There is an unanticipated disruption to crude oil supply.
(c)*Negotiating terms* .
(1)If DOE decides to negotiate a deferral of deliveries, DOE shall estimate the market value of the deferral and establish a strategy for negotiating with suppliers the minimum percentage of the market value to be taken by the Government.
(2)DOE shall only agree to amend the contract if the negotiation results in an agreement to give the Government a fair and reasonable share of the market value. [FR Doc. E6-6102 Filed 4-21-06; 8:45 am] BILLING CODE 6450-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-23578; Directorate Identifier 2006-CE-01-AD] RIN 2120-AA64 Airworthiness Directives; Mitsubishi Heavy Industries MU-2B Series Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Supplemental notice of proposed rulemaking (NPRM); Reopening of the comment period. SUMMARY: The FAA proposes to revise an earlier proposed airworthiness directive
(AD)that applies to all Mitsubishi Heavy Industries MU-2B series airplanes. The earlier NPRM would have required you to do the following: Remove and visually inspect the wing attach barrel nuts, bolts, and retainers for cracks, corrosion, and fractures; replace any cracked, corroded, or fractured parts; inspect reusable wing attach barrel nuts and bolts for deformation and irregularities in the threads; replace any deformed or irregular parts; and install new or reusable parts and torque to the correct value. The earlier NPRM resulted from a recent safety evaluation that used a data-driven approach to evaluate the design, operation, and maintenance of the MU-2B series airplanes in order to determine their safety and define what steps, if any, are necessary for their safe operation. This proposed AD would retain the actions from the earlier NPRM, add airplanes to the applicability, revise the serial numbers of the affected airplanes, and update the manufacturer's contact information. This proposed AD results from the manufacturer revising the service information to include two additional airplane models. Since these actions impose an additional burden over that proposed in the NPRM, we are reopening the comment period to allow the public the chance to comment on these additional actions. DATES: We must receive comments on this proposed AD by May 25, 2006. ADDRESSES: Use one of the following addresses to comment on this proposed AD: • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this proposed AD, contact Mitsubishi Heavy Industries America, Inc., 4951 Airport Parkway, Suite 800, Addison, Texas 95001; telephone:
(972)934-5480; fax:
(972)934-5488, or Turbine Aircraft Services, Inc., 4550 Jimmy Doolittle Drive, Addison, Texas 75001; telephone:
(972)248-3108; facsimile:
(972)248-3321. FOR FURTHER INFORMATION CONTACT: Andrew McAnaul, Aerospace Engineer, ASW-150 (c/o MIDO-43), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; telephone:
(210)308-3365; facsimile:
(210)308-3370. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments regarding this proposed airworthiness directive (AD). Send your comments to an address listed under the ADDRESSES section. Include the docket number, “FAA-2006-23578; Directorate Identifier 2006-CE-01-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov* , including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive concerning this proposed AD. Discussion Recent accidents and the service history of the Mitsubishi Heavy Industries
(MHI)MU-2B series airplanes prompted the Federal Aviation Administration
(FAA)to conduct an MU-2B Safety Evaluation. This evaluation used a data-driven approach to evaluate the design, operation, and maintenance of MU-2B series airplanes in order to determine their safety and define what steps, if any, are necessary for their safe operation. The safety evaluation provided an in-depth review and analysis of MU-2B incidents, accidents, safety data, pilot training requirements, engine reliability, and commercial operations. In conducting this evaluation, the team employed new analysis tools that provided a much more detailed root cause analysis of the MU-2B problems than was previously possible. Part of that evaluation was to identify unsafe conditions that exist or could develop on the affected type design airplanes. One of these conditions is the discovery of the right wing upper forward and lower forward barrel nuts found cracked during routine maintenance on one of the affected airplanes. The manufacturer conducted additional investigations of the wing attach barrel nuts on other affected airplanes. The result of this investigation revealed no other cracked barrel nuts. However, it was discovered that several airplanes had over-torqued barrel nuts, which could result in cracking. This condition, if not detected and corrected, could result in failure of the wing barrel nuts and/or associated wing attachment hardware. This failure could lead to in-flight separation of the outer wing from the center wing section and result in loss of controlled flight. We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to all MHI MU-2B series airplanes. This proposal was published in the **Federal Register** as a notice of proposed rulemaking
(NPRM)on January 25, 2006 (71 FR 4072). The NPRM proposed to require you to do the following: • Remove and visually inspect the wing attach barrel nuts, bolts, and retainers for cracks, corrosion, and fractures; • Replace any cracked, corroded, or fractured wing attach barrel nuts, bolts, and retainers with new parts; • Inspect reusable barrel nuts and bolts for deformation and irregularities in the threads; • Replace any deformed or irregular wing attach barrel nuts or bolts with new parts; and • Install new or reusable parts and torque to the correct value. Comments The FAA encouraged interested persons to participate in developing this amendment. The following presents the comments received on the proposal and FAA's response to each comment: Comment Issue No. 1: Incorporate Revised Service Bulletin The manufacturer revised the MU-2 Service Bulletin referenced as FAA T.C.: No. 103/57-004, dated August 2, 2004, to add two airplane models to the effectivity. The change in the model effectivity accurately reflects the airplanes for that service bulletin. The manufacturer requests the revised service bulletin, MU-2 Service Bulletin referenced as FAA T.C.: No. 103/57-004A, dated March 10, 2006, be incorporated into the NPRM. We agree with the commenter and will incorporate the revised service bulletin into the supplemental NPRM. Comment Issue No. 2: Revise the Manufacturer Contact Information The manufacturer requests that we revise the manufacturer contact information from Mitsubishi Heavy Industries in Nagoya, Japan, to Mitsubishi Heavy Industries America, Inc. in Addison Texas. We agree with the commenter and will incorporate the change into the supplemental NPRM. Comment Issue No. 3: Revise the Serial Numbers of the Affected Airplanes The manufacturer requests that we revise the serial numbers of the affected airplanes based on additional information submitted for clarification. We agree with the commenter and will incorporate the change into the supplemental NPRM. Comment Issue No. 4 The manufacturer requests that we revise the proposed requirement in the NPRM for “replacing any bolts or barrel nuts with deformation or irregularities in the threads” to include a “or that do not meet the minimum breakaway torque check.” We agree with the commenter and will incorporate the change into the supplemental NPRM. Events That Caused FAA To Issue a Supplemental NPRM The manufacturer revised the service information to include two additional airplane models. Relevant Service Information We have reviewed Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletin referenced as JCAB T.C.: No. 241, dated July 14, 2004, and MU-2 Service Bulletin referenced as FAA T.C.: No. 103/57-004A, dated March 10, 2006. These service bulletins describe procedures for: • Removing and inspecting the wing attach barrel nuts and retainer for cracks, corrosion, and fractures; • Replacing any wing attach barrel nuts and retainer with cracks, corrosion, or fractures; • Inspecting reusable wing attach barrel nuts and bolts for deformation or irregularities in the threads; • Checking the minimum breakaway torque of the wing attach barrel nuts; • Replacing any bolts or wing attach barrel nuts with deformation or irregularities in the threads or that do not meet the minimum breakaway torque check; and • Reinstalling the wing attach barrel nuts and hardware to the correct torque value. Foreign Airworthiness Authority Information The MU-2B series airplane was initially certificated in 1965 and again in 1976 under two separate type certificates
(TC)that consist of basically the same type design. Japan is the State of Design for TC No. A2PC, and the United States is the State of Design for TC No. A10SW. The affected models are as follows (where models are duplicated, specific serial numbers are specified in the individual TCs): Type certificate Affected models A10SW MU-2B-25, MU-2B-26, MU-2B-26A, MU-2B-35, MU-2B-36, MU-2B-36A, MU-2B-40, and MU-2B-60. A2PC MU-2B, MU-2B-10, MU-2B-15, MU-2B-20, MU-2B-25, MU-2B-26, MU-2B-30, MU-2B-35, and MU-2B-36. The Japan Civil Airworthiness Board (JCAB), which is the airworthiness authority for Japan, approved Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletin referenced as JCAB T.C.: No. 241, dated July 14, 2004, and MU-2 Service Bulletin referenced FAA T.C.: No. 103/57-004A, dated March 10, 2006, to ensure the continued airworthiness of these airplanes in Japan. FAA's Determination and Requirements of the Proposed AD After examining the circumstances and reviewing all available information related to the incidents described above, we have determined that: • The unsafe condition referenced in this document exists or could develop on other Mitsubishi MU-2B series airplanes of the same type design that are on the U.S. registry; • We should change the NPRM to incorporate the concerns addressed by the commenters and incorporate the revised service information; and • We should take AD action to correct this unsafe condition. The Supplemental NPRM Adding airplanes to the applicability section of the NPRM goes beyond the scope of what was originally proposed in the NPRM. Therefore, we are reopening the comment period and allowing the public the chance to comment on these additional actions. This proposed AD would require you to do the following: • Remove and visually inspect the wing attach barrel nuts, bolts, and retainers for cracks, corrosion, and fractures; • Replace any cracked, corroded, or fractured wing attach barrel nuts, bolts, and retainers with new parts; • Inspect reusable wing attach barrel nuts and bolts for deformation and irregularities in the threads; • Check the minimum breakaway torque of the wing attach barrel nuts; • Replace any deformed or irregular wing attach barrel nuts or bolts with new parts; and • Install new or reusable parts and torque to the correct value. The FAA is committed to updating the aviation community of expected costs associated with the MU-2B series airplane safety evaluation conducted in 2005. As a result of that commitment, the accumulating expected costs of all ADs related to the MU-2B series airplane safety evaluation may be found in the Final Report section at the following Web site: *http://www.faa.gov/aircraft/air_cert/design_approvals/small_airplanes/cos/mu2_foia_reading_library/.* Costs of Compliance We estimate that this proposed AD affects 399 airplanes in the U.S. registry. We estimate the following costs to do the proposed inspection: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators 12 workhours × $80 per hour = $960 N/A $960 $960 × 399 = $383,040 We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of airplanes that may need this replacement: Labor cost Parts cost Total cost per airplane to replace all 8 wing attach barrel nuts No additional labor cost. Any necessary replacements will be done at the time of inspection $60 for each barrel nut. There are 8 barrel nuts on each airplane. Possible total cost of: $60 × 8 = $480 $480 Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. Examining the AD Docket You may examine the AD docket that contains the proposed AD, the regulatory evaluation, any comments received, and other information on the Internet at *http://dms.dot.gov;* or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone
(800)647-5227) is located at the street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Mitsubishi Heavy Industries, Ltd.:** Docket No. FAA-2006-23578; Directorate Identifier 2006-CE-01-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by May 25, 2006. Affected ADs
(b)None. Applicability
(c)This AD affects the following Mitsubishi Heavy Industries, Ltd. airplane models and serial numbers that are certificated in any category: Model Serial numbers MU-2B-10 101 through 120 (Except 102, 114, 115, and 118). MU-2B-15 114, 115, and 118. MU-2B-20 102, and 121 through 238. MU-2B-25 239 through 318 (Except 313), and 313SA. MU-2B-26 319 through 347 (Except 321), and 349SA. MU-2B-26A 321SA, 348SA, and 350SA through 394SA (Except 365SA). MU-2B-30 502 through 547. MU-2B-35 548 through 654 (Except 652), and 652SA. MU-2B-36 501, and 655 through 696 (Except 661). MU-2B-36A 661SA, and 697SA through 730SA (Except 700SA). MU-2B-40 365SA. MU-2B-60 700SA. Unsafe Condition
(d)This AD results from a recent safety evaluation that used a data-driven approach to evaluate the design, operation, and maintenance of the MU-2B series airplanes in order to determine their safety and define what steps, if any, are necessary for their safe operation. Part of that evaluation was to identify unsafe conditions that exist or could develop on the affected type design airplanes. The actions specified in this AD are intended to detect and correct cracks, corrosion, fractures, and incorrect torque values in the wing attach barrel nuts, which could result in failure of the wing attach barrel nuts and/or associated wing attachment hardware. This failure could lead to in-flight separation of the outer wing from the center wing section and result in loss of controlled flight. Compliance
(e)To address this problem, you must do the following, unless already done: Actions Compliance Procedures
(1)Remove each wing attach barrel nut, bolt, and retainer and do a detailed visual inspection for cracks, corrosion, and fractures Within the next 200 hours time-in-service
(TIS)or 12 months after the effective date of this AD, whichever occurs first, unless already done Follow Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletins referenced as JCAB T.C.: No. 241, dated July 14, 2004, and FAA T.C.: No. 103/57-004A, dated March 10, 2006, as applicable.
(2)If any signs of cracks, corrosion, or fractures are found on any wing attach barrel nut during the inspection required in paragraph (e)(1) of this AD, replace that wing attach barrel nut, bolt, and retainer with new parts and install to the correct torque value Before further flight after the inspection required in paragraph (e)(1) of this AD, unless already done Follow Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletins referenced as JCAB T.C.: No. 241, dated July 14, 2004, and FAA T.C.: No. 103/57-004A, dated March 10, 2006, as applicable, and the appropriate maintenance manual.
(3)If no signs of cracks, corrosion, or fractures are found during the inspection required in paragraph (e)(1) of this AD, you may reuse the wing attach barrel nuts and bolts if they have been inspected and are free of deformation and irregularities in the threads and meet the minimum breakaway torque requirement. Reinstall inspected parts to the correct torque value. If the wing attach barrel nuts and bolts are not free of deformation and irregularities in the threads or do not meet the minimum breakaway torque requirement, install new parts to the correct torque value Before further flight after the inspection required in paragraph (e)(1) of this AD, unless already done Follow Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletins referenced as JCAB T.C.: No. 241, dated July 14, 2004, and FAA T.C.: No. 103/57-004A, dated March 10, 2006, as applicable, and the appropriate maintenance manual. Alternative Methods of Compliance (AMOCs)
(f)The Manager, Fort Worth Airplane Certification Office, FAA, ATTN: Andrew McAnaul, Aerospace Engineer, ASW-150 (c/o MIDO-43), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; telephone:
(210)308-3365; facsimile:
(210)308-3370, has the authority to approve alternative methods of compliance for this AD, if requested using the procedures found in 14 CFR 39.19. Related Information
(g)Mitsubishi Heavy Industries, Ltd. MU-2 Service Bulletins JCAB T.C.: No. 241, dated July 14, 2004, and FAA T.C.: No. 103/57-004A, dated March 10, 2006, pertain to the subject of this AD. To get copies of the documents referenced in this AD, contact Mitsubishi Heavy Industries America, Inc., 4951 Airport Parkway, Suite 800, Addison, Texas 95001; telephone:
(972)934-5480; fax:
(972)934-5488, or Turbine Aircraft Services, Inc., 4550 Jimmy Doolittle Drive, Addison, Texas 75001; telephone:
(972)248-3108; facsimile:
(972)248-3321. To view the AD docket, go to the Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC, or on the Internet at *http://dms.dot.gov* . The docket number is Docket No. FAA-2006-23578; Directorate Identifier 2006-CE-01-AD. Issued in Kansas City, Missouri, on April 18, 2006. William J. Timberlake, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-6054 Filed 4-21-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-24094; Directorate Identifier 2006-CE-20-AD] RIN 2120-AA64 Airworthiness Directives; Pilatus Aircraft Ltd. Models PC-6, PC-6-H1, PC-6-H2, PC-6/350, PC-6/350-H1, PC-6/350-H2, PC-6/A, PC-6/A-H1, PC-6/A-H2, PC-6/B-H2, PC-6/B1-H2, PC-6/B2-H2, PC-6/B2-H4, PC-6/C-H2, and PC-6/C1-H2 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: We propose to revise Airworthiness Directive
(AD)68-17-03, which applies to all Pilatus Aircraft Ltd. PC-6 series airplanes. AD 68-17-03 currently requires you to repetitively inspect the rudder end rib for cracks and replace the rudder end rib with a modified rudder end rib when you find cracks. Installing the modified rudder end rib terminates the repetitive inspection requirements of AD 68-17-03. Under a licensing agreement with Pilatus, Fairchild Republic Company (also identified as Fairchild Industries, Fairchild Heli Porter, or Fairchild-Hiller Corporation) produced Model PC-6 series airplanes (manufacturer serial numbers 2001 through 2092) in the United States. AD 68-17-03 was intended to apply to all affected serial numbers of Model PC-6 series airplanes listed on Type Certificate Data Sheet
(TCDS)No. 7A15, including the Fairchild-produced airplanes. Consequently, this proposed AD would clarify that all models of the PC-6 airplane on TCDS No. 7A15 (including those models produced under the licensing agreement by Fairchild Republic Company) are included in the applicability. We are proposing this AD to detect and correct cracks in the rudder end rib, which could result in failure of the rudder end rib. This failure could result in loss of directional control. DATES: We must receive comments on this proposed AD by May 24, 2006. ADDRESSES: Use one of the following addresses to comment on this proposed AD: • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this proposed AD, contact Pilatus Aircraft Ltd., Customer Liaison Manager, CH-6371 Stans, Switzerland; telephone: +41 41 619 63 19; facsimile: +41 41 619 6224. FOR FURTHER INFORMATION CONTACT: Doug Rudolph, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:
(816)329-4059; facsimile:
(816)329-4090. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments regarding this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include the docket number, “FAA-2006-24094; Directorate Identifier 2006-CE-20-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive concerning this proposed AD. Discussion Fatigue cracks found in the bottom nose rib on the rudders of certain Model PC-6 series airplanes prompted us to issue AD 68-17-03, Amendment 39-634. AD 68-17-03 currently requires the following on all Pilatus Aircraft Ltd. (Pilatus) Model PC-6 series airplanes: • Repetitively inspecting the rudder end rib for cracks; • Replacing the rudder end rib with a modified rudder end rib when you find cracks; and • Terminating the repetitive inspections when the modified rudder end rib is installed. The Federal Office for Civil Aviation (FOCA), which is the airworthiness authority for Switzerland, notified the FAA of the need to revise AD 68-17-03 to address an unsafe condition that may exist or could develop on all Pilatus Model PC-6 series airplanes. The FOCA reports that clarification is needed to assure the applicability of AD 68-17-03 to all Model PC-6 series airplanes listed on Type Certificate Data Sheet
(TCDS)No. 7A15, including those produced in the United States through a licensing agreement between Pilatus and Fairchild Republic Company (also identified as Fairchild Industries, Fairchild Heli Porter, or Fairchild-Hiller Corporation). This condition, if not detected and corrected, could result in failure of the rudder end rib. This failure could result in loss of directional control. Foreign Airworthiness Authority Information The FOCA recently issued Swiss AD Number HB 2005-289, effective date August 23, 2005, to ensure the continued airworthiness of all Model PC-6 series airplanes listed on TC No. 7A15, including those produced in the United States under a licensing agreement with Pilatus and Fairchild Republic Company (also identified as Fairchild Industries, Fairchild Heli Porter, or Fairchild-Hiller Corporation). The State of Design for Pilatus Model PC-6 series airplanes is Switzerland and the airplanes are type-certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Under this bilateral airworthiness agreement, the FOCA has kept us informed of the situation described above. FAA's Determination and Requirements of This Proposed AD We are proposing this AD because we have examined the FOCA's findings, evaluated all information and determined the unsafe condition described previously is likely to exist or develop on other products of the same type design that are certificated for operation in the United States. This proposed AD would revise AD 68-17-03 with a new AD that would retain all actions currently required by AD 68-17-03 and would clarify the applicability of the affected airplanes by: • Identifying those airplanes produced in the United States through a licensing agreement with the Fairchild Republic Company; and • Listing all Pilatus Model PC-6 series airplanes on TCDS No. 7A15 in the applicability section. Costs of Compliance We estimate that this proposed AD would affect 49 airplanes in the U.S. registry. We estimate the following costs to do the proposed inspection: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators 1 work hour × $80 per hour = $80 Not applicable $80 $80 × 49 = $3,920 We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of airplanes that may need this replacement: Labor cost Parts cost Total cost per airplane 9 work hours × $80 per hour = $720 $821 $1,541 Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in subtitle VII, part A, subpart III, section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. Examining the AD Docket Where Can I Go To View the Docket Information? You may examine the AD docket that contains the proposed AD, the regulatory evaluation, any comments received, and other information on the Internet at *http://dms.dot.gov;* or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone
(800)647-5227) is located at the street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by removing Airworthiness Directive
(AD)68-17-03, Amendment 39-634, and adding the following new AD: **Pilatus Aircraft LTD** : Docket No. FAA-2006-24094; Directorate Identifier 2006-CE-20-AD. Comments Due Date
(a)We must receive comments on this proposed airworthiness directive
(AD)action by May 24, 2006. Affected ADs
(b)This AD revises AD 68-17-03, Amendment 39-634. Applicability
(c)This AD affects the following airplane models, all manufacturer serial numbers (MSN), that are certificated in any category. Note: MSNs 2001 through 2092 were manufactured by Fairchild Republic Company (also identified as Fairchild Industries, Fairchild Heli Porter, and Fairchild-Hiller Corporation) in the United States under a license agreement and are covered by Type Certificate Data Sheet No. 7A15.
(1)PC-6
(2)PC-6-H1
(3)PC-6-H2
(4)PC-6/350
(5)PC-6/350-H1
(6)PC-6/350-H2
(7)PC-6/A
(8)PC-6/A-H1
(9)PC-6/A-H2
(10)PC-6/B-H2
(11)PC-6/B1-H2
(12)PC-6/B2-H2
(13)PC-6/B2-H4
(14)PC-6/C-H2
(15)PC-6/C1-H2 Unsafe Condition
(d)This AD results from fatigue cracks found in the bottom nose rib on the rudders of certain PC-6 airplanes. We are issuing this AD to detect and correct cracks in the rudder end rib, which could result in failure of the rudder. This failure could lead to loss of rudder control. Compliance
(e)To address this problem, you must do the following: Actions Compliance Procedures
(1)With the aid of a mirror, inspect the rudder end rib, part number (P/N) 6302.27 (or FAA-approved equivalent P/N) for crack(s) Within the next 50 hours time-in-service
(TIS)after August 19, 1968 (the effective date of AD 68-17-03). Repetitively inspect thereafter at intervals not to exceed 50 hours TIS Follow Pilatus Service Bulletin No. 80, dated April 1968.
(2)If you detect crack(s) during any inspection required in paragraph (e)(1) of this AD, replace the rudder end rib with a modified rudder end rib assembly, P/N 6302.26 Pos. 2, channel reinforcement, P/N 113.40.06.002, and torque tube, P/N 113/40.06.003 (or FAA-approved equivalent P/Ns) Before further flight after any inspection required in paragraph (e)(1) of this AD in which you find cracks. Installing the modified rudder end rib terminates the repetitive inspection requirement in paragraph (e)(1) of this AD Follow Pilatus Service Bulletin No. 80, dated April 1968.
(3)14 CFR 21.303 allows for replacement parts through parts manufacturer approval (PMA). The phrase “or FAA-approved equivalent part number” in this AD is intended to signify those parts that are PMA parts approved through identicality to the design of the part under the type certificate and replacement parts to correct the unsafe condition under PMA (other than identicality). If parts are installed that are identical to the unsafe parts, then the corrective actions of the AD affect these parts also. In addition, equivalent replacement parts to correct the unsafe condition under PMA (other than identicality) may also be installed provided they meet current airworthiness standards, which include those actions cited in this AD Not applicable Not applicable.
(4)Installing the modified rudder end rib assembly terminates the repetitive inspection requirement in paragraph (e)(1) of this AD Not applicable Not applicable. Alternative Methods of Compliance (AMOCs)
(f)The Manager, Standards Office, Attn: Doug Rudolph, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:
(816)329-4059; facsimile:
(816)329-4090, has the authority to approve alternative methods of compliance (AMOCs) for this AD, if requested using the procedures found in 14 CFR 39.19.
(g)AMOCs approved for AD 68-17-03 are approved for this AD. Related Information
(h)Swiss AD Number HB 2005-289, effective date August 23, 2005, also addresses the subject of this AD. To get copies of the documents referenced in this AD, contact Pilatus Aircraft Ltd., Customer Liaison Manager, CH-6371 Stans, Switzerland; telephone: +41 41 619 63 19; facsimile: +41 41 619 6224. To view the AD docket, go to the Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC, or on the Internet at *http://dms.dot.gov* . The docket number is Docket No. FAA-2006-24094; Directorate Identifier 2006-CE-20-AD. Issued in Kansas City, Missouri, on April 17, 2006. John R. Colomy, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-6055 Filed 4-21-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF HOMELAND SECURITY DEPARTMENT OF THE TREASURY Bureau of Customs and Border Protection 19 CFR Parts 24 and 111 RIN 1505-AB62 [USCBP-2006-0035] Fees for Certain Services AGENCY: Customs and Border Protection, Homeland Security; Treasury. ACTION: Proposed rule. SUMMARY: This document proposes to amend the rules dealing with customs financial and accounting procedures by revising the fees charged for certain customs inspectional services under section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. These revisions propose to exercise authority provided under recent changes in the pertinent statutory provisions. DATES: Written comments must be received by May 24, 2006. ADDRESSES: You may submit comments, identified by docket number, by one of the following methods: • *Federal eRulemaking Portal: http://www.regulations.gov.* Follow the instructions for submitting comments via docket number USCBP-2006-0035. • *Mail:* Trade and Commercial Regulations Branch, Office of Regulations and Rulings, Bureau of Customs and Border Protection, 1300 Pennsylvania Avenue, NW. (Mint Annex), Washington, DC 20229. *Instructions:* All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to *http://www.regulations.gov* , including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the SUPPLEMENTARY INFORMATION section of this document. *Docket:* For access to the docket to read background documents or comments received, go to *http://www.regulations.gov* . Submitted comments may also be inspected during the regular business days between the hours of 9 a.m. and 4:30 p.m. at the Office of Regulations and Rulings, Bureau of Customs and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Mr. Joseph Clark at
(202)572-8768. FOR FURTHER INFORMATION CONTACT: For information concerning user fee policy and rates, contact Mr. Jerry Petty, Director, Cost Management Division, 1300 Pennsylvania Avenue, NW., Room 4.5A, Washington, DC 20229. Telephone:
(202)344-1317. SUPPLEMENTARY INFORMATION: Public Participation Interested persons are invited to participate in this rule-making by submitting written data, views, or arguments on all aspects of the proposed rule. The Bureau of Customs and Border Protection
(CBP)also invites comments that relate to the economic, environmental, or federalism effects that might result from this proposed rule. If appropriate to a specific comment, the commenter should reference the specific portion of the proposed rule, explain the reason for any recommended change, and include data, information, or authority that support such recommended change. Background CBP collects fees to pay for the costs incurred in providing customs services in connection with certain activities under the authority of section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as amended, codified at section 19 U.S.C. 58c. On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (Pub. L. 108-357). Section 892 of the American Jobs Creation Act amended 19 U.S.C. 58c to renew the fees provided under COBRA, which would have otherwise expired March 1, 2005, and to allow the Secretary of the Treasury to increase such fees by an amount not to exceed 10 percent in the period beginning fiscal year 2006 through the period for which fees are authorized by law. It is noted that the law specifically mentions the Secretary of the Treasury, even though CBP is now a component of the Department of Homeland Security. Regulations concerning user fees, among other customs revenue functions, were retained by the Secretary of the Treasury pursuant to Treasury Department Order No. 100-16. In accordance with the current statutory provisions, CBP is proposing to amend the regulations by increasing the fees for customs services provided in connection with
(1)the arrival of certain commercial vessels, commercial trucks, railroad cars, private aircraft and private vessels, passengers aboard commercial aircraft and commercial vessels, and barges or other bulk carrier arrivals,
(2)each item of dutiable mail for which a customs officer prepares documentation, and
(3)annual customs brokers permits. CBP is proposing to increase the fees by the amounts authorized so that they more accurately reflect the actual costs of providing the services for which they are charged. None of the user fees being raised in this package have been adjusted since their implementation in 1986. However, the costs incurred by CBP in performing certain customs inspection services have continued to grow because of higher volumes, greater varieties of cargo and increased security concerns which require inspections of individuals and conveyances entering the United States. As a result, CBP currently collects COBRA fees covering only thirty-two percent of the costs incurred by the agency. With this proposed increase, we estimate COBRA fees will generate an additional $26 million annually. Approximately 84 percent of these fees come from individual travelers, which are categorized as individual user fees. As such, the impact on business will be minimal. It must be noted that the proposed fee changes would only apply to customs inspection fees charged by CBP under COBRA and do not impact the administration of any other user fees charged by CBP. Certain user fees, by statute, have annual caps that were not included in the legislation authorizing these increases and, as such, the amount of the annual caps remain unchanged. Discussion of Changes Following is a summary of the user fees affected and a description of customs services each fee covers. Commercial Vessel User Fee (Vessel of 100 Net Tons or More) CBP inspects commercial vessels of 100 net tons or more arriving at ports of entry in the customs territory of the United States. Vessel owners or operators pay a user fee for each arrival, up to a calendar year maximum amount. The current CBP user fee for each commercial vessel arrival is $397 and a calendar year maximum of $5,955. The current fee became effective in 1985 and has not been adjusted prior to this rule. The user fee is proposed to be raised to $437 per arrival while retaining the maximum of $5,955 each calendar year. User Fees for Commercial Trucks CBP inspects commercial trucks arriving at all land ports in the customs territory of the United States. The United States Department of Agriculture
(USDA)also assesses a commercial truck user fee for arrivals at certain land ports. Commercial truck owners or operators can elect to pay a per arrival fee or pay a fee to cover the entire calendar year. The annual payment covers an unlimited number of entries during the calendar year. Upon payment of the annual fee, which includes both CBP and USDA user fees, the truck owner or operator receives a transponder to place on the truck windshield. This indicates that both the CBP and USDA user fees for the truck have been paid for that calendar year. The current CBP commercial truck user fee is $5.00 for each arrival and $100 for the annual fee. The current fee became effective in 1985. This document proposes to raise the CBP user fee to $5.50 for each arrival and $100 for the calendar year fee. An electronic transponder recently replaced the paper decal formerly used. Questions about the transponder should be directed to “Decal” Inquiries, National Finance Center,
(317)298-1245. Railroad Car Passenger/Freight User Fee and Decal CBP inspects railroad cars, carrying passengers or commercial freight, arriving at land ports in the customs territory of the United States. However, CBP does not assess a fee on empty railroad cars. There is a calendar year maximum that applies to railroad cars and a decal may be purchased for the entire calendar year. The current user fee is $7.50 for the arrival of each railroad car carrying passengers or commercial freight and $100 for a decal that covers the calendar year. The current fee became effective in 1986. The fee is proposed to be raised to $8.25 for the arrival of each railroad car carrying passengers or commercial freight and to $100 for a decal for the calendar year. Private Aircraft and Private Vessel Decal Fees CBP inspects private aircraft and private vessels arriving in the customs territory of the United States. Owners and operators of both private aircraft and private vessels are required to purchase a decal each calendar year. Those parties currently pay $25 for all arrivals made during a calendar year by a private vessel or aircraft. The current fee became effective in 1985. This document proposes to raise the decal fee to $27.50 for all arrivals made during a calendar year by a private vessel or aircraft. User Fee Passenger Aboard a Commercial Aircraft CBP inspects commercial airline passengers arriving at airports in the customs territory of the United States. Millions of travelers pass through U.S. airports daily. Our overall goal, keeping in mind airport security, is a timely, seamless inspection process that is integrated with the clearance processes of other Federal agencies with inspection responsibilities. Our joint goal is to enhance security and improve enforcement and regulatory processes in order that international air passengers are cleared through the entire Federal inspection process as quickly as possible without jeopardizing our security requirements. Currently, the user fee for international airline passenger clearance is $5.00 per passenger. The fee is proposed to be raised to $5.50 per passenger. User Fee Passenger Aboard a Commercial Vessel (Non-Exempt) CBP inspects commercial vessel passengers arriving at ports in the customs territory of the United States. Our overall goal, keeping in mind port security, is a timely, seamless inspection process that is integrated with the clearance processes of other Federal agencies with inspection responsibilities. Our joint goal is to enhance security and improve enforcement and regulatory processes in order that commercial vessel passengers are cleared through the entire Federal inspection process as quickly as possible without jeopardizing our security requirements. Currently, the user fee for commercial vessel passenger clearance is $5.00 per passenger. The fee is proposed to be increased to $5.50 per passenger. Passenger Commercial Vessel User Fee (Canada, Mexico, Territory or Possession of the U.S., or Adjacent Island as Defined in 8 U.S.C. 1101(b)(5)) CBP inspects commercial vessel passengers arriving at ports in the customs territory of the United States from Canada, Mexico, territory or possession of the U.S., or adjacent island as defined in the aforementioned statute. Currently, the user fee for commercial vessel passenger processing relating to the above locations is $1.75 per passenger. The current fee became effective in 1999. The fee is proposed to be increased to $1.93 per passenger. Dutiable Mail Entries User Fee All international mail is subject to inspection by CBP; however, we assess a user fee only on packages and/or mail containing dutiable merchandise. Currently, the user fee for dutiable mail is $5.00 per item. The current fee became effective in 1985. The fee is proposed to be raised to $5.50 per item. Customs Broker Permits Brokers are required to pay an annual fee to maintain their license for customs purposes. The fees are applicable for each district permit and each national permit held by an individual, partnership, association, or corporation. Currently, the user fee for a broker permit is $125.00 per permit. The current fee became effective in 1985. The fee is proposed to be raised to $138.00 per permit. Barges and Other Bulk Carriers (From Canada or Mexico) CBP inspects barges and other bulk carriers from Canada and Mexico. Currently, the user fee for barge and bulk carrier inspection is $100 per arrival and a calendar year maximum of $1,500. The current fee became effective in 1986. The fee is proposed to be raised to $110 per arrival and a calendar year maximum of $1,500. New Fee Structure Table 1 indicates the customs inspection user fees currently in effect and the proposed user fee rates. Table 1.—Summary of New Fee Rates Customs services Current fees/ annual cap Proposed fees Commercial Vessels $397.00/$5,955 $437.00/$5,955 Commercial Trucks $5.00/$100.00 $5.50/$100.00 Railroad Cars $7.50/$100.00 $8.25/$100.00 Private Aircraft (Decal) $25.00 $27.50 Private Vessel (Decal) $25.00 $27.50 Commercial Aircraft Passenger $5.00 $5.50 Commercial Vessel Passenger (Non-Exempt) $5.00 $5.50 Commercial Vessel Passenger $1.75 $1.93 Dutiable Mail $5.00 $5.50 Broker Permit $125.00 $138.00 Barges and other bulk carriers $100.00/$1,500 $110.00/$1,500 Standard for Setting Fees As noted above, Section 892 of the American Jobs Creation Act specifically gives the Secretary of the Treasury the authority to increase the COBRA fees by an amount not to exceed 10 percent in the period beginning fiscal year 2006 through the period for which fees are authorized by law. In addition, this provision requires that the amounts of fees charged
(a)be reasonably related to the costs of providing customs services in connection with the activity or item for which the fee is charged,
(b)may not exceed, in the aggregate, the amounts paid in that fiscal year for the costs incurred in providing customs services in connection with the activity or item for which the fee is charged, and
(c)may not be collected except to the extent such fee will be expended to pay the costs incurred in providing customs services in connection with the activity or item for which the fee is charged. Accordingly, CBP has compared the amounts of user fees charged and the corresponding costs incurred in providing customs services in connection with the activity or item for which the fee is charged to ensure that the fees accurately reflect the actual costs incurred in providing each service. The fees are proposed to be increased by the amounts necessary to align them with the costs incurred by CBP in performing such services, subject to the 10 percent increase limit set by law. Table 2 shows the collections received and obligations incurred by CBP, in Fiscal Year 2004, in performing customs inspectional services. Table 2.—Summary of Fee Collections and Obligations Customs services Fiscal year 2004 collection by type Fiscal year 2004 obligation by type Commercial Vessels $18,915,411 $87,816,021 Commercial Trucks 18,576,419 224,047,446 Railroad Cars 7,737,910 27,052,069 Private Aircraft 755,390 32,908,142 Private Vessel 729,678 5,934,279 Commercial Aircraft Passenger 236,939,037 494,340,066 Commercial Vessel Passenger (Non-Exempt) 1,475,810 8,409,194 Commercial Vessel Passenger 12,431,417 13,276,642 Dutiable Mail 344,510 49,038,824 Broker Permit 494,170 10,858,344 Barges and Other Bulk Carriers* 451,475 1,271,805 * Barge/Bulk Carrier obligations for Fiscal Year 2002. The Regulatory Flexibility Act Based on the supplementary information set forth in the preceding section and as illustrated in Table 2 above, this proposed rule generally affects individuals and large commercial carriers. The proposed increase, if adopted, would only increase fees by 10 percent over the amounts currently paid by users of the customs services for which each fee is charged. The American Jobs Creation Act specifically provides that the Secretary of the Treasury shall charge fees that are reasonably related to these activities. Accordingly, CBP certifies that this proposed rule will not have a significant impact on a substantial number of small entities because the majority of fees will come from individual travelers into the United States. Therefore, it is not subject to the analysis provisions of the Regulatory Flexibility Act, as amended (5 U.S.C. 601 *et seq.* ). Executive Order 12866 For the same reasons stated above, the proposed amendments do not meet the criteria for a “significant regulatory action” as specified in E.O. 12866. Accordingly, a regulatory impact analysis is not required thereunder. Signing Authority This document is being issued in accordance with § 0.1(a) of Chapter I of Title 19, Code of Federal Regulations (19 CFR 0.1) pertaining to the exercise of authority to approve regulations in 19 CFR chapter I. List of Subjects 19 CFR Part 24 Accounting, Claims, Customs duties and inspection, Fees, Financial and accounting procedures, Imports, Taxes, User fees. 19 CFR Part 111 Administrative practice and procedure, Brokers, Customs duties and inspection, Imports, Licensing. Proposed Amendments to the Regulations For the reasons stated in the preamble, parts 24 and 111 of the Customs and Border Protection Regulations (19 CFR parts 24 and 111) are proposed to be amended as follows: PART 24—CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE 1. The authority citation for part 24 continues to read in part as follows: Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1505, 1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 9701; Public Law 107-296, 116 Stat. 2135 (6 U.S.C. 1 *et seq.* ). § 24.22 [Amended] 2. Amend § 24.22 as follows: a. In paragraph (b)(1)(i), the figure “$397” is removed and, in its place, the figure “$437” is added. b. In paragraph (b)(2)(i), the figure “$100” is removed and, in its place, the figure “$110” is added. c. In paragraph (c)(1), the figure “$5” is removed and, in its place, the figure “$5.50” is added. d. In paragraph (d)(1), the figure “$7.50” is removed and, in its place, the figure “$8.25” is added. e. In paragraph (e)(1), the figure “$25” is removed and, in its place, the figure “$27.50” is added. f. In paragraph (e)(2), the figure “$25” is removed and, in its place, the figure “$27.50” is added. g. In paragraph (f), the figure “$5” is removed and, in its place, the figure “$5.50” is added. h. In paragraph (g)(1)(i), the figure “$5” is removed and, in its place, the figure “$5.50” is added. i. In paragraph (g)(1)(ii), the figure “$1.75” is removed and, in its place, the figure “$1.93” is added. j. In the table under paragraph (g)(2), in both columns headed “Fee status for arrival from SL”, all the figures reading “$1.75” are removed and, in their place, the figure “$1.93” is added; and, in the column headed “Fee status for arrival from other than SL”, all the figures reading “$5” are removed and, in their place, the figure “$5.50” is added. k. In paragraph (g)(5)(v), the figure “$5” is removed and, in its place, the figure “$5.50” is added; and, the figure “$1.75” is removed and, in its place, the figure “$1.93” is added. l. In paragraph (i)(7), the figure “$5” is removed and, in its place, the figure “$5.50” is added. m. In paragraph (i)(8), the figure “$1.75” is removed and, in its place, the figure “$1.93” is added. PART 111—CUSTOMS BROKERS 3. The authority citation for part 111 continues to read in part as follows: Authority: 19 U.S.C. 66, 1202, (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624, 1641. Section 111.96 also issued under 19 U.S.C. 58c; 31 U.S.C. 9701. § 111.19 [Amended] 4. Section 111.19 is amended in paragraph
(c)by removing all the figures reading “$125” and adding in their place the figure “$138”. § 111.96 [Amended] 5. Section 111.96 is amended in paragraph
(c)by removing all the figures reading “$125” and adding in their place the figure “$138”. Approved: April 19, 2006. Deborah J. Spero, Acting Commissioner, Customs and Border Protection. Timothy E. Skud, Deputy Assistant Secretary of the Treasury. [FR Doc. 06-3867 Filed 4-21-06; 8:45 am]
Connectionstraces to 25
Traces to 25 documents
15 references not yet in our index
  • 7 CFR 984
  • 7 USC 601-674
  • 7 CFR 900
  • 10 CFR 626
  • Pub. L. 109-58
  • 10 CFR 1021
  • Pub. L. 104-4
  • Pub. L. 105-277
  • 14 CFR 39
  • Pub. L. 108-357
  • 19 CFR 24
  • 19 CFR 111
  • 19 USC 58a-58c
  • Pub. L. 107-296
  • 116 Stat. 2135
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U.S.C.§ 6234
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