Rules and Regulations. Final rule

46,634 words·~212 min read·/register/2006/09/08/06-7502

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BILLING CODE 4910-13-C DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-25513; Directorate Identifier 99-NE-61-AD; Amendment 39-14753; AD 2006-18-14] RIN 2120-AA64 Airworthiness Directives; Rolls-Royce Deutschland Ltd & Co KG Tay 650-15 and Tay 651-54 Turbofan Engines AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: The FAA is superseding an airworthiness directive

(AD)for Rolls-Royce Deutschland Ltd & Co KG

(RRD)Tay 650-15 and Tay 651-54 turbofan engines. That AD currently establishes cyclic life limits for certain part number (P/N) stage 1 high pressure turbine

(HPT)discs and stage 1 low pressure turbine

(LPT)discs operating under certain flight plan profiles. This AD requires calculating and re-establishing the achieved cyclic life of stage 1 HPT discs, P/N JR32013 or P/N JR33838, and stage 1 LPT discs, P/N JR32318A, that have been exposed to different flight plan profiles. This AD also requires removing from service those stage 1 HPT discs and stage 1 LPT discs operated under Tay 650-15 engine flight plan profiles A, B, C, and D, and operated under Tay 651-54 engine datum flight profile, at reduced cyclic life limits, using a drawdown schedule. This AD results from RRD updating their low-cycle-fatigue analysis for stage 1 HPT discs and stage 1 LPT discs and reducing their cyclic life limits. We are issuing this AD to prevent cracks leading to turbine disc failure, which could result in an uncontained engine failure and damage to the airplane. DATES: This AD becomes effective October 13, 2006. The Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulations as of October 13, 2006. ADDRESSES: You can get the service information identified in this AD from Rolls-Royce Deutschland Ltd & Co KG, Eschenweg 11, 15872 Blankenfelde-Mahlow, Germany, telephone 49-0-33-7086-1768; fax 49-0-33-7086-3356. You may examine the AD docket on the Internet at *http://dms.dot.gov* or in Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Jason Yang, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; telephone

(781)238-7747, fax

(781)238-7199. SUPPLEMENTARY INFORMATION: The FAA proposed to amend 14 CFR part 39 with a proposed AD. The proposed AD applies to RRD Tay 650-15 and Tay 651-54 turbofan engines. We published the proposed AD in the **Federal Register** on May 4, 2006 (71 FR 26282). That action proposed to require calculating and re-establishing the achieved cyclic life of stage 1 HPT discs, P/N JR32013 or P/N JR33838, and stage 1 LPT discs, P/N JR32318A, that have been exposed to different flight plan profiles. That action also proposed to require removing those stage 1 HPT discs and stage 1 LPT discs at reduced cyclic life limits, using a drawdown schedule. Examining the AD Docket You may examine the docket that contains the AD, any comments received, and any final disposition in person at the Docket Management Facility Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone

(800)647-5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES . Comments will be available in the AD docket shortly after the DMS receives them. Comments We provided the public the opportunity to participate in the development of this AD. We have considered the comment received. Request for Clarification of Flight Plan Profiles RRD requests we clarify that engine flight plan profiles A, B, C, and D, apply to Tay 650-15 engines, and that an engine datum flight profile applies to Tay 651-54 engines. We agree and clarified the profiles in the Summary paragraph of this AD. It now reads “This AD requires calculating and re-establishing the achieved cyclic life of stage 1 HPT discs, P/N JR32013 or P/N JR33838, and stage 1 LPT discs, P/N JR32318A, that have been exposed to different engine flight plan profiles. This AD also requires removing from service those stage 1 HPT discs and stage 1 LPT discs operated under Tay 650-15 engine flight plan profiles A, B, C, and D, and operated under Tay 651-54 engine datum flight profile, at reduced cyclic life limits, using a drawdown schedule”. We also clarified the references to the flight plan profiles and engine datum flight profile in the compliance section. Change in Compliance Time In the Notice of Proposed Rulemaking, we required initial compliance with the proposed rule on or before August 31, 2006. Because that date has past, we have changed the initial compliance date requirement to start after the effective date of this AD. Docket Number Change We are transferring the docket for this AD to the Docket Management System as part of our on-going docket management consolidation efforts. The new Docket No. is FAA-2006-25513. The old Docket No. became the Directorate Identifier, which is 99-NE-61-AD. This final rule might get logged into the DMS docket, ahead of the proposed AD and comments received, as we are in the process of sending those items to the DMS. Conclusion We have carefully reviewed the available data, including the comment received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD. Costs of Compliance We estimate that this AD will affect 50 Tay 650-15 and Tay 651-54 turbofan engines installed on airplanes of U.S. registry. We also estimate that it will take about one work-hour per engine to calculate and re-establish the achieved cyclic life for a disc, and that the average labor rate is $80 per work-hour. We estimate that the prorated cost of the life reduction per engine will be $15,000. Based on these figures, we estimate that if all of the engines required calculating and re-establishing achieved cyclic life, the total cost of the AD to U.S. operators will be $752,000. 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 AD will not have federalism implications under Executive Order 13132. This AD will 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 this AD:

(1)Is not a “significant regulatory action” under Executive Order 12866;

(2)Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

(3)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 summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary at the address listed under ADDRESSES . List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration amends 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 adding the following new airworthiness directive: ** 2006-18-14 Rolls-Royce Deutschland Ltd & Co KG (formerly Rolls-Royce plc)** : Amendment 39-14753. Docket No. FAA-2006-25513; Directorate Identifier 99-NE-61-AD. Effective Date

(a)This airworthiness directive

(AD)becomes effective October 13, 2006. Affected ADs

(b)This AD supersedes AD 2000-08-01, Amendment 39-11687. Applicability

(c)This AD applies to Rolls-Royce Deutschland Ltd & Co KG

(RRD)Tay 650-15 and Tay 651-54 turbofan engines with stage 1 high pressure turbine

(HPT)discs, part number (P/N) JR32013 or P/N JR33838, and stage 1 low pressure turbine

(LPT)discs, P/N JR32318A, installed. These engines are installed on, but not limited to, Fokker Model F.28 Mark 0100, and Boeing 727-100 series airplanes modified in accordance with Supplemental Type Certificate

(STC)SA8472SW (727-QF). Unsafe Condition

(d)This AD results from RRD updating their low-cycle-fatigue analysis for stage 1 HPT discs and stage 1 LPT discs and reducing their cyclic life limits. We are issuing this AD to prevent cracks leading to turbine disc failure, which could result in an uncontained engine failure and damage to the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified unless the actions have already been done.

(f)Information on the referenced Tay 650-15 engine flight plan profiles A, B, C, and D and Tay 651-54 engine datum flight profile, can be found in RRD Tay Engine Manual, Section 70-01-10. Calculating and Re-Establishing Within 30 Days, the Achieved Cyclic Life of a Stage 1 HPT Disc or Stage 1 LPT Disc Previously Exposed to Different Flight Plan Profiles

(g)If a stage 1 HPT disc or stage 1 LPT disc was previously exposed to flight plan profile(s) different than the currently operated flight plan:

(1)You must calculate and re-establish the achieved cyclic life for that disc, within 30 days after the effective date of this AD.

(2)Use paragraphs 3.A. through 3.D.(2)(c) of Accomplishment Instructions of RRD Alert Service Bulletin

(ASB)No. Tay-72-A1676, Revision 1, dated August 16, 2005, to calculate and re-establish the achieved cyclic life. After an Engine Flight Plan Profile Changeover, Calculating and Re-Establishing Within 30 Days, the Achieved Cyclic Life of Stage 1 HPT Discs and Stage 1 LPT Discs

(h)After an engine has a flight plan profile changeover:

(1)You must calculate and re-establish the achieved cyclic life for the stage 1 HPT disc and stage 1 LPT disc, within 30 days after the flight plan changeover.

(2)Use paragraphs 3.A. through 3.D.(2)(c) of Accomplishment Instructions of RRD ASB No. Tay-72-A1676, Revision 1, dated August 16, 2005, to calculate and re-establish the achieved cyclic life. Removal of Stage 1 HPT Discs and Stage 1 LPT Discs From Service Tay 650-15 Engine Flight Plan Profile A

(i)Remove from service Tay 650-15 stage 1 HPT discs and stage 1 LPT discs operated under flight plan profile A, before accumulating 23,000 cycles-since-new (CSN), and replace with serviceable parts. Tay 650-15 Engine Flight Plan Profile B

(j)Remove from service Tay 650-15 stage 1 HPT discs operated under flight plan profile B and replace with serviceable parts:

(1)On or before July 31, 2007, before accumulating 21,000 CSN; and

(2)After July 31, 2007, before accumulating 20,000 CSN.

(k)Remove from service Tay 650-15 stage 1 LPT discs operated under flight plan profile B, before accumulating 21,000 CSN, and replace with serviceable parts. Tay 650-15 Engine Flight Plan Profile C

(l)Remove from service Tay 650-15 stage 1 HPT discs operated under flight plan profile C and replace with serviceable parts:

(1)After the effective date of this AD, before accumulating 15,800 CSN; and

(2)After July 31, 2007, before accumulating 14,700 CSN.

(m)Remove from service Tay 650-15 stage 1 LPT discs operated under flight plan profile C, before accumulating 18,000 CSN, and replace with serviceable parts. Tay 650-15 Engine Flight Plan Profile D

(n)Remove from service Tay 650-15 stage 1 HPT discs operated under flight plan profile D and replace with serviceable parts after the effective date of this AD, before accumulating 11,000 CSN.

(o)Remove from service Tay 650-15 stage 1 LPT discs operated under flight plan profile D, before accumulating 14,250 CSN, and replace with serviceable parts. Tay 651-54 Engine Datum Flight Profile

(p)Remove from service Tay 651-54 stage 1 HPT discs operated under the engine datum flight profile, and replace with serviceable parts after the effective date of this AD, before accumulating 12,600 CSN.

(q)Remove from service Tay 651-54 stage 1 LPT discs before accumulating 20,000 CSN and replace with serviceable parts. Alternative Methods of Compliance

(r)The Manager, Engine Certification Office, FAA, 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

(s)Luftfahrt-Bundesamt airworthiness directive No. D-2005-252R1, dated August 31, 2005, also addresses the subject of this AD. Material Incorporated by Reference

(t)You must use Rolls-Royce Deutschland Ltd & Co KG Alert Service Bulletin No. Tay-72-A1676, Revision 1, dated August 16, 2005, to perform the actions required by this AD. The Director of the Federal Register approved the incorporation by reference of this service bulletin in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You can get a copy from Rolls-Royce Deutschland Ltd & Co KG, Eschenweg 11, 15872 Blankenfelde-Mahlow, Germany, telephone 49-0-33-7086-1768; fax 49-0-33-7086-3356. You may review copies at the FAA, New England Region, Office of the Regional Counsel, 12 New England Executive Park, Burlington, MA; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal-register/cfr/ibr-locations.html* . Issued in Burlington, Massachusetts, on August 30, 2006. Francis A. Favara, Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E6-14685 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-24951; Directorate Identifier 2005-NM-184-AD; Amendment 39-14752; AD 2006-18-13] RIN 2120-AA64 Airworthiness Directives; Gulfstream Model GV and GV-SP Series Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: The FAA is adopting a new airworthiness directive

(AD)for certain Gulfstream Model GV and GV-SP series airplanes. This AD requires repairing the force link assembly wire harness. This AD results from a report indicating that the wiring harness outer shield and insulation on the primary conductors may have been inadvertently cut due to an improper method used to remove the wiring outer jacket. We are issuing this AD to prevent the loss of the hardover prevention system

(HOPS)in the roll axis due to a short circuit in the wiring harness, which could result in reduced controllability of the airplane. DATES: This AD becomes effective October 13, 2006. The Director of the Federal Register approved the incorporation by reference of certain publications listed in the AD as of October 13, 2006. ADDRESSES: You may examine the AD docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC. Contact Gulfstream Aerospace Corporation, Technical Publications Dept., P.O. Box 2206, Savannah, Georgia 31402-2206, for service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Darby Mirocha, Aerospace Engineer, Systems and Equipment Branch, ACE-119A, FAA, Atlanta Aircraft Certification Office, One Crown Center, 1895 Phoenix Boulevard, suite 450, Atlanta, Georgia 30349; telephone

(770)703-6095; fax

(770)703-6097. SUPPLEMENTARY INFORMATION: Examining the Docket You may examine the airworthiness directive

(AD)docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone

(800)647-5227) is located on the plaza level of the Nassif Building at the street address stated in the ADDRESSES section. Discussion The FAA issued a notice of proposed rulemaking

(NPRM)to amend 14 CFR part 39 to include an AD that would apply to certain Gulfstream Model GV and GV-SP series airplanes. That NPRM was published in the **Federal Register** on June 6, 2006 (71 FR 32487). That NPRM proposed to require repairing the force link assembly wire harness. Comments We provided the public the opportunity to participate in the development of this AD. We received no comments on the NPRM or on the determination of the cost to the public. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed. Costs of Compliance There are about 99 airplanes of the affected design in the worldwide fleet. The following table provides the estimated costs for U.S. operators to comply with this AD. Estimated Costs Work hours Average labor rate per hour Parts Cost per airplane Number of U.S.-registered airplanes Fleet cost 3 $80 The manufacturer states that it will supply required parts to the operators at no cost $240 77 $18,480 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 AD will not have federalism implications under Executive Order 13132. This AD will 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 this AD:

(1)Is not a “significant regulatory action” under Executive Order 12866;

(2)Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

(3)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 AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 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): **2006-18-13 Gulfstream Aerospace Corporation:** Amendment 39-14752. Docket No. FAA-2006-24951; Directorate Identifier 2005-NM-184-AD. Effective Date

(a)This AD becomes effective October 13, 2006. Affected ADs

(b)None. Applicability

(c)This AD applies to the following Gulfstream Aerospace Corporation airplanes, certificated in any category: Table 1.—Applicability Model Serial Nos. GV series airplanes 674 through 693 inclusive. GV-SP series airplanes 5001 through 5072 inclusive. Unsafe Condition

(d)This AD results from a report indicating that the wiring harness outer shield and insulation on the primary conductors may have been inadvertently cut due to an improper method used to remove the wiring outer jacket. We are issuing this AD to prevent the loss of the hardover prevention system

(HOPS)in the roll axis due to a short circuit in the wiring harness, which could result in reduced controllability of the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Repair

(f)Within 12 months after the effective date of this AD, repair the force link assembly wire harness by doing all actions specified in the Accomplishment Instructions of the applicable service information identified in Table 2 of this AD, except as required by paragraph

(g)of this AD. Table 2.—Service Information For Model— Use— GV-SP series airplanes Gulfstream G500 Customer Bulletin 14, dated June 23, 2005. GV-SP series airplanes Gulfstream G550 Customer Bulletin 14, dated June 23, 2005. GV series airplanes Gulfstream GV Customer Bulletin 135, dated June 23, 2005. Note 1: The Gulfstream customer bulletins identified in Table 2 of this AD include Vought Service Bulletin SB-VAIGV/GVSP-27-PG0098, dated May 9, 2005, as an additional source of service information for the repair. Exception to Service Bulletin Specifications

(g)During the inspection of the environmental seal around the installed wires required by paragraph

(f)of this AD: If any nick or other damage is found, repair before further flight using a method approved by the Manager, Atlanta Aircraft Certification Office (ACO), FAA. For a repair method to be approved by the Manager, Atlanta ACO, as required by this paragraph, the Manager's approval letter must specifically refer to this AD. Alternative Methods of Compliance (AMOCs) (h)(1) The Manager, Atlanta ACO, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Material Incorporated by Reference

(i)You must use the service information identified in Table 3 of this AD to perform the actions that are required by this AD, unless the AD specifies otherwise. Each Gulfstream customer bulletin listed in Table 3 of this AD includes Vought Aircraft Industries Service Bulletin SB-VAIGV/GVSP-27-PG0098, dated May 9, 2005. The Director of the Federal Register approved the incorporation by reference of these documents in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Gulfstream Aerospace Corporation, Technical Publications Dept., P.O. Box 2206, Savannah, Georgia 31402-2206, for a copy of this service information. You may review copies at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Room PL-401, Nassif Building, Washington, DC; on the Internet at *http://dms.dot.gov* ; or at the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.* Table 3.—Material Incorporated by Reference Customer bulletin Date Gulfstream G500 Customer Bulletin 14 June 23, 2005. Gulfstream G550 Customer Bulletin 14 June 23, 2005. Gulfstream GV Customer Bulletin 135 June 23, 2005. Issued in Renton, Washington, on August 28, 2006. Kalene C. Yanamura, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-14688 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. 2003-NM-114-AD; Amendment 39-14751; AD 2006-18-12] RIN 2120-AA64 Airworthiness Directives; Saab Model SAAB-Fairchild SF340A (SAAB/SF340A) and SAAB 340B Airplanes AGENCY: Federal Aviation Administration, DOT. ACTION: Final rule. SUMMARY: This amendment adopts a new airworthiness directive (AD), applicable to certain Saab Model SAAB-Fairchild SF340A (SAAB/SF340A) and SAAB 340B airplanes, that requires modification and repetitive inspections of the hot detection system of the tail pipe harness of the engine nacelles. The actions specified by this AD are intended to prevent false warning indications to the flightcrew from the hot detection system due to discrepancies of the harness, which could result in an unnecessary aborted takeoff on the ground or in-flight engine shutdowns. This action is intended to address the identified unsafe condition. DATES: Effective October 13, 2006. The incorporation by reference of a certain publication listed in the regulations is approved by the Director of the Federal Register as of October 13, 2006. ADDRESSES: The service information referenced in this AD may be obtained from Saab Aircraft AB, SAAB Aircraft Product Support, S-581.88, Linköping, Sweden. This information may be examined at the Federal Aviation Administration (FAA), Transport Airplane Directorate, Rules Docket, 1601 Lind Avenue, SW., Renton, Washington. FOR FURTHER INFORMATION CONTACT: Mike Borfitz, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-2677; fax

(425)227-1149. SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive

(AD)that is applicable to certain Saab Model SAAB-Fairchild SF340A (SAAB/SF340A) and SAAB 340B airplanes was published as a supplemental notice of proposed rulemaking

(NPRM)in the **Federal Register** on June 26, 2006 (71 FR 36252). That action proposed to require modification and repetitive inspections of the hot detection system of the tail pipe harness of the engine nacelles. Comments We provided the public the opportunity to participate in the development of this AD. We received no comments on the supplemental NPRM or on the determination of the cost to the public. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed in the supplemental NPRM. Cost Impact We estimate that 280 airplanes of U.S. registry will be affected by this AD. It will take about 10 work hours per airplane to accomplish the modification, at an average labor rate of $80 per work hour. Required parts cost will be between $218 and $2,253. Based on these figures, the cost impact of the modification on U.S. operators is estimated to be between $285,040 and $854,840, or between $1,018 and $3,053 per airplane. It will take about 1 work hour per airplane to accomplish the inspection and application of sealant, at an average labor rate of $80 per work hour. Based on these figures, the cost impact of this action on U.S. operators is estimated to be $22,400, or $80 per airplane, per inspection cycle. The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions. 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 Impact The regulations adopted herein will 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. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132. For the reasons discussed above, I certify that this action

(1)is not a “significant regulatory action” under Executive Order 12866;

(2)is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

(3)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. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES . List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (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. Section 39.13 is amended by adding the following new airworthiness directive: **2006-18-12 Saab Aircraft AB:** Amendment 39-14751. Docket 2003-NM-114-AD. Applicability Model SAAB-Fairchild SF340A (SAAB/SF340A) airplanes, serial numbers -004 through -159 inclusive, and SAAB 340B airplanes, serial numbers -160 through -459 inclusive, certificated in any category. Compliance Required as indicated, unless accomplished previously. To prevent false warning indications to the flightcrew from the hot detection system of the tail pipe harness of the engine nacelles due to discrepancies of the harness, which could result in an unnecessary aborted takeoff on the ground or in-flight engine shutdowns, accomplish the following: Modification/Repetitive Inspections

(a)Within 12 months after the effective date of this AD: Modify the hot detection system of the tail pipe harness of the engine nacelles (including a general visual inspection of the heat shrink sleeve, thixotropic sealant, and connectors for damage and/or corrosion, and all applicable repairs), by doing all the actions specified in the Accomplishment Instructions of Saab Service Bulletin 340-26-030, Revision 01, dated November 14, 2003. All applicable repairs must be done before further flight in accordance with the service bulletin. Repeat the general visual inspection thereafter at intervals not to exceed 12 months. Note 1: For the purposes of this AD, a general visual inspection is defined as: “A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to enhance visual access to all exposed surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.”

(b)Accomplishing the modification/repetitive inspections specified in Saab Service Bulletin 340-26-030, dated October 28, 2002; or Saab Service Bulletins 340-26-018, Revision 02, and 340-26-029, both dated October 28, 2002; before the effective date of this AD, is considered acceptable for compliance with the modification required by paragraph

(a)of this AD. Reporting Requirement

(c)Within 30 days after any false warning indication to the flightcrew from the hot detection system of the tail pipe harness of the engine nacelles occurs: Submit a report containing the information specified in paragraphs (c)(1), (c)(2), (c)(3), and (c)(4) of this AD to the Swedish Civil Aviation Authority (Luftfartsstyrelsen)—Attn: Mr. Christer Sundqvist, SAAB 340 Certification Manager, SE-601 79, Norrköping, Sweden. Under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ), the Office of Management and Budget

(OMB)has approved the information collection requirements contained in this AD and has assigned OMB Control Number 2120-0056.

(1)The date and time, weather conditions, and phase of flight of the warning.

(2)The action taken by the flightcrew to address the warning (aborted takeoff, high speed/high energy abort requiring inspection, return for landing, in-flight diversion, declared emergency, air traffic control

(ATC)priority handling requested or given, or engine shutdown).

(3)The action taken by maintenance to address/correct the warning.

(4)Time-in-service on the airplane since the last inspection accomplished in accordance with paragraph

(a)of this AD. Alternative Methods of Compliance (AMOCs) (d)(1) In accordance with 14 CFR 39.19, the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, is authorized to approve AMOCs for this AD.

(2)Before using any AMOC approved in accordance with 14 CFR 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Note 2: The subject of this AD is addressed in Swedish airworthiness directive 1-184, effective October 28, 2002. Incorporation by Reference

(e)Unless otherwise specified in this AD, the actions must be done in accordance with Saab Service Bulletin 340-26-030, Revision 01, dated November 14, 2003. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. To get copies of this service information, contact Saab Aircraft AB, SAAB Aircraft Product Support, S-581.88, Linköping, Sweden. To inspect copies of this service information, go to the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington; or to the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . Effective Date

(f)This amendment becomes effective on October 13, 2006. Issued in Renton, Washington, on August 28, 2006. Kalene C. Yanamura, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-14690 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-25244; Directorate Identifier 2006-NE-25-AD; Amendment 39-14754; AD 2006-18-15] RIN 2120-AA64 Airworthiness Directives; Hartzell Propeller Inc. ( )HC-( )2Y( )-( ) Series Propellers AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule; request for comments. SUMMARY: The FAA is adopting a new airworthiness directive

(AD)for Hartzell Propeller Inc. ( )HC-( )2Y( )-( ) series propellers with non-suffix serial number

(SN)propeller hubs installed on Lycoming O-, IO-, LO-, and AEIO-360 series reciprocating engines. This AD requires initial and repetitive eddy current inspections

(ECI)of the front cylinder half of the propeller hub for cracks and removing cracked hubs from service before further flight. In addition, this AD allows installation of an improved design propeller hub (suffix SN “A” or “B”) as terminating action to the repetitive ECI. This AD results from a report of a propeller blade separating from a propeller hub. We are issuing this AD to prevent failure of the propeller hub causing blade separation and subsequent loss of airplane control. DATES: This AD becomes effective September 25, 2006. The Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulations as of September 25, 2006. We must receive any comments on this AD by November 7, 2006. ADDRESSES: Use one of the following addresses to comment on this 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. Contact Hartzell Propeller Inc. Technical Publications Department, One Propeller Place, Piqua, OH 45356; telephone

(937)778-4200; fax

(937)778-4391, for the service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Tim Smyth, Aerospace Engineer, Chicago Aircraft Certification Office, FAA, Small Airplane Directorate, 2300 East Devon Avenue, Des Plaines, IL 60018-4696; telephone

(847)294-7132; fax

(847)294-7834. SUPPLEMENTARY INFORMATION: In April 2006, we received a report of a propeller blade separation on a Hartzell Propeller Inc. two blade, aluminum hub, “compact” ( )HC-( )2Y( )-( ) series propeller. Also, to date, we received seven reports of excessive vibration determined to be caused by cracks in the propeller hub fillet. Those propellers were manufactured before December 1991 (non-suffix SN propeller hubs) and are installed on Lycoming O-, IO-, LO-, and AEIO-360 series reciprocating engines. This condition, if not corrected, could result in blade separation and subsequent loss of airplane control. Relevant Service Information We have reviewed and approved the technical contents of Hartzell Propeller Inc. Service Bulletin

(SB)HC-SB-61-269, dated April 18, 2005. That SB describes procedures for eddy current inspections of propeller hubs on affected propellers. That SB also lists improved design replacement propeller hub part numbers. FAA's Determination and Requirements of This AD The unsafe condition described previously is likely to exist or develop on other Hartzell Propeller Inc. ( )HC-( )2Y( )-( ) series propellers of the same type design. For that reason, we are issuing this AD to prevent failure of the propeller hub causing blade separation and subsequent loss of airplane control. This AD requires, within 50 operating hours time-in-service (TIS), an initial ECI of the front cylinder half of non-suffix SN propeller hubs for cracks. This AD also requires, within every 100 operating hours TIS or annual inspection, whichever occurs first, repetitive ECIs of the front cylinder half of non-suffix SN propeller hubs for cracks. This AD also requires removing cracked hubs from service before further flight. You must use the service information described previously to perform the actions required by this AD. FAA's Determination of the Effective Date Since an unsafe condition exists that requires the immediate adoption of this AD, we have found that notice and opportunity for public comment before issuing this AD are impracticable, and that good cause exists for making this amendment effective in less than 30 days. Comments Invited This AD is a final rule that involves requirements affecting flight safety and was not preceded by notice and an opportunity for public comment; however, we invite you to send us any written relevant data, views, or arguments regarding this AD. Send your comments to an address listed under ADDRESSES . Include “AD Docket No. FAA-2006-25244; Directorate Identifier 2006-NE-25-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify it. 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 with FAA personnel concerning this AD. Using the search function of the DMS Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78) or you may visit *http://dms.dot.gov.* Examining the AD Docket You may examine the docket that contains the AD, any comments received, and any final disposition in person at the Docket Management Facility Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone

(800)647-5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES . Comments will be available in the AD docket shortly after the DMS receives them. 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 AD will not have federalism implications under Executive Order 13132. This AD will 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 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 summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary at the address listed under ADDRESSES . List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Under the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (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 adding the following new airworthiness directive: **2006-18-15 Hartzell Propeller Inc.:** Amendment 39-14754. Docket No. FAA-2006-25244; Directorate Identifier 2006-NE-25-AD. Effective Date

(a)This airworthiness directive

(AD)becomes effective September 25, 2006. Affected ADs

(b)None. Applicability

(c)This AD applies to Hartzell Propeller Inc. ( )HC-( )2Y( )-( ) series propellers with non-suffix serial number

(SN)propeller hubs installed on Lycoming O-, IO-, LO-, and AEIO-360 series reciprocating engines. These propellers and engines could be installed on, but not limited to: O-360-A1A Piper Aircraft Comanche (PA-24). Lake Aircraft Colonial (C-2, LA -4, 4A, or 4P). Mooney Aircraft Mark “20B” (M-20B). Earl Horton Pawnee (Piper PA-25). Partenavia Oscar (P-66). Siai-Marchetti (S-205). Procaer Picchio (F-15-A). S.A.A.B. Safir (91-D). Malmo Vipan (MF-10B). Aero Boero AB-180. Beagle Airedale (A-109). DeHavilland Drover (DHA-3MK3). Kingsford-Smith Bushmaster (J5-6). O-360-A1AD S.O.C.A.T.A. Tabago TB-10. O-360-A1D Piper Aircraft Comanche (PA-24). Lake Aircraft Colonial (LA -4, 4A, or 4P). Doyn Aircraft Doyn-Beech (Beech 95). Mooney Aircraft Master “21” (M-20E). Mark “20B”, “20D”, (M20B, M20C), Mooney Statesman (M-20G). O-360-A1F6 Cessna Aircraft Cardinal. O-360-A1F6D Cessna Aircraft Cardinal 177. Teal III TSC (1A3). O-360-A1G6 Aero Commander O-360-A1G6D Beech Aircraft Duchess 76. O-360-A1H6 Piper Aircraft Seminole (PA-44). O-360-A1P Aviat Husky. O-360-A2A Avion Jodel D-140-B. S.O.C.A.T.A. Rallye Commodore (MS-893). Partenavia Oscar (P-66). Beagle Husky (D5-180) (J1-U). O-360-A2D Piper Aircraft Comanche (PA-24), Cherokee “C” (PA-28 “180”). Mooney Aircraft Master “21” (M-20D), Mark “21” (M-20E). O-360-A2F Dynac Aerospace Corp Aero Commander Model 100. O-360-A2G Beech Aircraft Sport. O-360-A3A C.A.A.R.P.S.A.N. (M-23III). Robin Regent (DR400/180), Remorqueur (DR400/180R), R-3170. S.O.C.A.T.A. Rallye 180GT, Sportavia Sportsman (RS-180). Norman Aeroplace Co. NAC-1 Freelance. Nash Aircraft Ltd. Petrel. O-360-A3AD S.O.C.A.T.A. TB-10. Robin Aiglon (R-1180T). O-360-A4A Piper Aircraft Cherokee “D” (PA-28 “180”). O-360-A4D Varga Kachina. O-360-A4G Beech Aircraft Musketeer Custom III. O-360-A4K Grumman American Tiger. Beech Aircraft Sundowner 180. O-360-A4M Piper Aircraft Archer II (PA-28 “18”). Valmet PIK-23. O-360-A4N Cessna Aircraft 172 (Optional). O-360-A4P Penn Yan Super Cub Conversion. O-360-A5AD C. Itoh and Co. Fuji FA -200. O-360-B2C Seabird Aviation SB7L. O-360-C1A Intermountain Mfg. Co. Call Air (A-6). O-360-C1E Bellanca Aircraft Scout (8GCBC-CS). O-360-C1F Maule Star Rocket MX-7-180. O-360-C1G Christen Husky (A-1). O-360-C2E Bellanca Aircraft Scout (8GCBC FP). O-360-C4F Maule MX-7-180A. O-360-C4P Penn Yan Super Cub Conversion. O-360-F1A6 Cessna Aircraft Cutlass RG. O-360-J2A Robinson R22. IO-360-B1A Beech Aircraft Travel-Air (B-95A). Doyn Aircraft Doyn-Piper (PA -23 “200”). IO-360-B1B Beech Aircraft Travel-Air (B-95B). Doyn Aircraft Doyn-Piper (PA -23 “200”). Fuji (FA-200). IO-360-B1D United Consultants See-Bee. IO-360-B1E Piper Aircraft Arrow (PA-28 “180R”). IO-360-B1F Utva 75. IO-360-B2E C.A.A.R.P. C.A.P. (10). IO-360-B1F6 Great Lakes Trainer. IO-360-B1G6 American Blimp Spector 42. IO-360-B2F6 Great Lakes Trainer. LO-360-A1G6D Beech Aircraft Duchess. LO-360-A1H6 Piper Aircraft Seminole (PA-44). IO-360-E1A T.R. Smith Aircraft Aerostar. IO-360-M1A Diamond Aircraft DA-40. IO-360-M1B Vans Aircraft RV6, RV7, RV8. Lancair 360. AEIO-360-B1F F.F.A. Bravo (200). Grob G115/Sport-Acro. AEIO-360-B1G6 Great Lakes AEIO-360-B2F Mundry CAP-10. AEIO-360-B4A Pitts S-1S. AEIO-360-H1A Bellanca Aircraft Super Decathalon (8KCAB-180). AEIO-360-H1B American Champion Super Decathalon.

(d)The parentheses appearing in the propeller model number indicates the presence or absence of an additional letter(s) that varies the basic propeller model. This AD still applies regardless of whether these letters are present or absent in the propeller model designation. Propellers Not Affected by This AD

(e)Hartzell Propeller Inc. ( )HC-( )2Y( )-( ) series propellers installed on the following aircraft are not affected by this AD, but are affected by AD 2001-23-08 which addresses the same unsafe condition:

(1)Aerobatic aircraft (including certificated aerobatic aircraft, military trainers, or any aircraft routinely exposed to aerobatic usage).

(2)Agricultural aircraft.

(3)Piper PA-32( ) series aircraft with Lycoming 540 series reciprocating engines rated at 300 HP or higher.

(4)Britten Norman BN-2( ) series aircraft with Lycoming 540 series reciprocating engines. Unsafe Condition

(f)This AD results from a report of a propeller blade separating from a propeller hub. We are issuing this AD to prevent failure of the propeller hub causing blade separation and subsequent loss of airplane control. We are issuing this AD to prevent failure of the propeller hub causing blade separation and subsequent loss of airplane control. Compliance

(g)You are responsible for having the actions required by this AD performed within the compliance times specified unless the actions have already been done. Initial Propeller Hub Eddy Current Inspection

(h)Within 50 operating hours time-in-service

(TIS)after the effective date of this AD, perform an initial ECI of the front cylinder half of the propeller hub for cracks.

(i)Use paragraphs 3.A. through 3.A.(4)(g) of the Accomplishment Instructions of Hartzell Propeller Inc. Service Bulletin

(SB)HC-SB-61-269, dated April 18, 2005, to perform the ECI inspection.

(j)If any cracks are found, remove the propeller hub from service before further flight.

(k)If no cracks are found, mark the propeller using paragraph 3.A.(6)(a) of the Accomplishment Instructions of Hartzell Propeller Inc. Service Bulletin

(SB)HC-SB-61-269, dated April 18, 2005, to indicate compliance with Hartzell Propeller Inc. SB HC-SB-61-269, dated April 18, 2005. Repetitive Propeller Hub ECIs

(l)Within every 100 operating hours TIS after the last propeller hub ECI inspection, or at every annual inspection, whichever occurs first, perform repetitive ECIs of the front cylinder half of the propeller hub for cracks.

(m)If any cracks are found, remove the propeller hub from service before further flight. Optional Terminating Action

(n)As optional terminating action to the repetitive ECIs required by this AD:

(1)Replace the non-suffix SN propeller hub with a propeller hub identified by an “A” or “B” suffix letter in the propeller hub SN; except

(2)Do not install a suffix “A” propeller hub that was previously installed on an aircraft affected by the original issue or later revision of Hartzell Propeller Inc. SB HC-SB-61-227.

(3)Replacement propeller hub part numbers can be found in paragraph 2.A., Material Information, of Hartzell Propeller Inc. SB HC-SB-61-269, dated April 18, 2005. Alternative Methods of Compliance

(o)The Manager, Chicago Aircraft Certification Office, 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

(p)Hartzell Propeller Inc. SB HC-SB-61-227, Revision 2, dated April 18, 2005, and AD 2001-23-08 pertain to the subject of this AD. Material Incorporated by Reference

(q)You must use Hartzell Propeller Inc. Service Bulletin HC-SB-61-269, dated April 18, 2005, to perform the ECI inspections required by this AD. The Director of the Federal Register approved the incorporation by reference of this service bulletin in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Hartzell Propeller Inc. Technical Publications Department, One Propeller Place, Piqua, OH 45356; telephone

(937)778-4200; fax

(937)778-4391, for a copy of this service information. You may review copies at the FAA, New England Region, Office of the Regional Counsel, 12 New England Executive Park, Burlington, MA; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal-register/cfr/ibr-locations.html.* Issued in Burlington, Massachusetts, on August 30, 2006. Francis A. Favara, Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E6-14691 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-24640; Directorate Identifier 2006-CE-26-AD; Amendment 39-14755; AD 2006-18-16] RIN 2120-AA64 Airworthiness Directives; Raytheon Aircraft Company Model 390 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: We are adopting a new airworthiness directive

(AD)for certain Raytheon Aircraft Company Model 390 airplanes. This AD requires you to inspect the spigot bearing, part number (P/N) MS14104-16, for the proper position in the spigot fitting assembly and to install the wing spigot bearing retainer kit, P/N 390-4304-0001. We are issuing this AD to detect spigot bearings that are not positioned flush with the fitting assembly. This condition could result in the spigot bearing becoming disengaged from the fitting assembly, which could cause motion between the wing and the fuselage and degrade the structural integrity of the wing attachment to the fuselage. This could lead to wing separation and loss of control of the airplane. DATES: This AD becomes effective on October 13, 2006. As of October 13, 2006, the Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulation. ADDRESSES: For service information identified in this AD, contact Raytheon Aircraft Company, 9709 East Central, Wichita, Kansas 67201. 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 20590-001 or on the Internet at *http://dms.dot.gov.* The docket number is FAA-2006-24640; Directorate Identifier 2006-CE-26-AD. FOR FURTHER INFORMATION CONTACT: David Ostrodka, Senior Aerospace Engineer, Wichita Aircraft Certification Office, Airframe and Services Branch, ACE-118W, 1801 Airport Road, Wichita, Kansas 67209; telephone:

(316)946-4129; facsimile:

(316)946-4107; e-mail: *david.ostrodka@faa.gov.* SUPPLEMENTARY INFORMATION: Discussion On May 17, 2006, 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 certain Raytheon Aircraft Company Model 390 airplanes. This proposal was published in the **Federal Register** as a notice of proposed rulemaking

(NPRM)on May 23, 2006 (71 FR 29595). The NPRM proposed to require you to inspect the spigot bearing, P/N MS14104-16, for the proper position in the spigot fitting assembly and to install the wing spigot bearing retainer kit, P/N 390-4304-0001. Comments We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections: • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and • Do not add any additional burden upon the public than was already proposed in the NPRM. Costs of Compliance We estimate that this AD affects 78 airplanes in the U.S. registry. We estimate the following costs to do the installation of the spigot bearing retainer kit, P/N 390-4304-0001: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators 8 work-hours × $80 per hour = $640 $1,442 $2,082 $162,396 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 AD. Regulatory Findings We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will 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 this AD: 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 summary of the costs to comply with this AD (and other information as included in the Regulatory Evaluation) and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “Docket No. FAA-2006-24640; Directorate Identifier 2006-CE-26-AD” in your request. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (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. FAA amends § 39.13 by adding the following new AD: **2006-18-16 Raytheon Aircraft Company:** Amendment 39-14755; Docket No. FAA-2006-24640; Directorate Identifier 2006-CE-26-AD. Effective Date

(a)This AD becomes effective on October 13, 2006. Affected ADs

(b)None. Applicability

(c)This AD affects Model 390 airplanes, serial numbers RB-1 and RB-4 through RB-139, that are certificated in any category. Unsafe Condition

(d)This AD is the result of two reports of the spigot bearing not being positioned flush with the fitting assembly, but protruding outside of the fitting assembly. The actions specified in this AD are intended to detect spigot bearings that are not positioned flush with the fitting assembly. This condition could result in the spigot bearing becoming disengaged from the fitting assembly, which could cause motion between the wing and the fuselage and degrade the structural integrity of the wing attachment to the fuselage. This could lead to wing separation and loss of control of the airplane. Compliance

(e)To address this problem, you must do the following: Actions Compliance Procedures

(1)Inspect to determine whether the spigot bearing, part number (P/N) MS14104-16, is positioned flush inside the spigot fitting assembly and not protruding outside of the fitting assembly Within 50 hours time-in-service

(TIS)after October 13, 2006 (the effective date of this AD), and repetitively inspect thereafter every 50 hours TIS until the installation in paragraph (e)(2) of this AD is done Follow Raytheon Aircraft Company Mandatory Service Bulletin SB 53-3765, issued: November, 2005.

(2)Install the spigot bearing retainer kit, P/N 390-4304-0001. This installation terminates the inspection requirements in paragraph (e)(1) of this AD At whichever of the following occurs first, unless already done:

(i)Before further flight after any inspection required by this AD where the spigot bearing, P/N MS14104-16, is found not to be flush with the spigot fitting assembly; or

(ii)Within 200 hours TIS or one calendar year October 13, 2006 (the effective date of this AD), whichever occurs first Follow Raytheon Aircraft Company Mandatory Service Bulletin SB 53-3765, issued: November, 2005. Alternative Methods of Compliance (AMOCs)

(f)The Manager, Wichita Aircraft Certification Office (ACO), FAA, ATTN: David Ostrodka, Senior Aerospace Engineer, Wichita ACO, Airframe and Services Branch, ACE-118W, 1801 Airport Road, Wichita, Kansas 67209; telephone:

(316)946-4129; facsimile:

(316)946-4107, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Related Information

(g)None. Material Incorporated by Reference

(h)You must do the actions required by this AD following the instructions in Raytheon Aircraft Company Mandatory Service Bulletin SB 53-3765, issued: November, 2005. The Director of the **Federal Register** approved the incorporation by reference of this service bulletin in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. To get a copy of this service information, contact Raytheon Aircraft Company, 9709 East Central, Wichita, Kansas 67201. To review copies of this service information, go to the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* or call

(202)741-6030. 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 20590-001 or on the Internet at *http://dms.dot.gov.* The docket number is FAA-2006-24640; Directorate Identifier 2006-CE-26-AD. Issued in Kansas City, Missouri, on August 30, 2006. James E. Jackson, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-14781 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-23873; Directorate Identifier 2005-NM-110-AD; Amendment 39-14756; AD 2006-18-17] RIN 2120-AA64 Airworthiness Directives; Boeing Model 747-400, 747-400D, and 747-400F Series Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: The FAA is superseding an existing airworthiness directive (AD), which applies to certain Boeing Model 747-400, 747-400D, and 747-400F series airplanes. The existing AD currently requires reviewing airplane maintenance records; inspecting the yaw damper actuator portion of the upper and lower rudder power control modules

(PCMs)for cracking, and replacing the PCMs if necessary; and reporting all airplane maintenance records review and inspection results to the manufacturer. This new AD expands the applicability and discontinues certain requirements of the existing AD. This AD adds repetitive inspections of the PCMs, and replacement of the PCMs if necessary. This AD results from manufacturer findings that the inspections required by the existing AD must be performed at regular intervals. We are issuing this AD to detect and correct cracking in the yaw damper actuator portion of the upper and lower rudder PCMs, which could result in an uncommanded left rudder hardover, consequent increased pilot workload, and possible runway departure upon landing. DATES: This AD becomes effective October 13, 2006. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in the AD as of October 13, 2006. ADDRESSES: You may examine the AD docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street SW., Nassif Building, Room PL-401, Washington, DC. Contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207, for service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Douglas Tsuji, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)917-6487; fax

(425)917-6590. SUPPLEMENTARY INFORMATION: Examining the Docket You may examine the airworthiness directive

(800)647-5227) is located on the plaza level of the Nassif Building at the street address stated in the ADDRESSES section. Discussion The FAA issued a notice of proposed rulemaking

(NPRM)to amend 14 CFR part 39 to include an AD that supersedes AD 2003-23-01, amendment 39-13364 (68 FR 64263, November 13, 2003). The existing AD applies to certain Boeing Model 747-400, 747-400D, and 747-400F series airplanes. That NPRM was published in the **Federal Register** on February 13, 2006 (71 FR 7446). That NPRM proposed to continue to require certain requirements of the existing AD. That NPRM also proposed to expand the applicability and discontinue certain requirements of the existing AD. That NPRM also proposed to require repetitive inspections of the power control modules

(PCMs)and replacement of the PCMs if necessary. Comments We provided the public the opportunity to participate in the development of this AD. We have considered the comments that have been received on the NPRM. Support for the NPRM One commenter, Northwest Airlines (NWA), expresses support for the NPRM, stating that the type of failure event addressed in the NPRM has occurred on a NWA airplane. Request to Cite Revised Service Information Three commenters, Boeing, South African Airways, and NWA request that we revise the NPRM to refer to current service information. The commenters state that Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005, has been issued. We agree with this request. We have determined that Boeing Service Bulletin 747-27A2397, Revision 2, shows changes of operators in the effectivity and clarifies the compliance information, but does not add any further actions or increase the economic burden on operators. Therefore, we have revised the AD to refer to Boeing Service Bulletin 747-27A2397, Revision 2, as the appropriate source of service information for accomplishing the requirements of the AD. We have also revised paragraph

(k)of the AD to indicate that actions done previously in accordance with Boeing Alert Service Bulletin 747-27A2397, Revision 1, dated March 31, 2005, are also acceptable for compliance with the corresponding requirements of this AD. Request to Remove Certain Part Numbers (P/Ns) One commenter, Boeing, requests that two P/Ns be removed from the NPRM. Boeing states that P/Ns 332700-1009 and 333200-1009 are internal supplier P/Ns that are stamped on the PCM manifold and are not PCM top assembly P/Ns. Boeing states that these P/Ns are not referenced on the equipment identification plate for either the upper or lower PCM. We agree with this request. Though all revisions of the Boeing service bulletin specify P/Ns 332700-1009 and 333200-1009 as replacement P/Ns for cracked PCMs, we have determined that these P/Ns do not refer to PCM top assemblies; instead, these P/Ns refer only to the PCM manifolds. Only top assembly P/Ns of the upper or lower rudder PCMs should be identified in the AD; that is P/N 332700-1003, -1005, or -1007; or P/N 333200-1003, -1005, or -1007. Therefore, to prevent confusion on the part of operators attempting to track PCM installations, we have removed the reference to P/Ns 332700-1009 and 333200-1009 as top assembly P/Ns from paragraph

(l)of the AD. Request to Revise Paragraph (j)(2) of the NPRM One commenter, Fortner Engineering, requests that we revise paragraph (j)(2) of the NPRM to read “PCMs or manifolds” rather than “PCMs” only. Fortner Engineering states that certified repair stations in addition to Parker Hannifin, which is the PCM original equipment manufacturer (OEM), overhaul the valve (manifold) and that those repair stations should not be required to send the entire PCM to the OEM if a crack is discovered in the manifold. Fortner Engineering asserts that, as long as all information required by paragraph (j)(1) of the NPRM is included with the manifold, there is no need to send the entire PCM to the OEM. We agree with this request. The intent of paragraph (j)(2) of this AD is to return PCMs having cracked manifolds to the manufacturer for analysis of the cause of the cracking. If the PCM can be returned to service with a new or serviceable manifold, there is no need to send the entire assembly to the OEM. Therefore, we have revised paragraph (j)(2) of the AD to read “PCMs or manifolds.” Request to Revise Paragraph

(l)of the NPRM The same commenter requests that we delete the phrase, “either by the operator or the supplier” from paragraph (l), “Parts Installation,” of the NPRM. Fortner Engineering asserts that the operator should be free to determine whether the PCMs will be inspected by the operator, the supplier, or any other appropriately rated and equipped facility. We agree with this request. The intent of paragraph

(l)of the AD is to ensure that all affected PCMs are inspected for cracks before any return to service. The primary concern is not which facility inspects the PCMs, but rather that the inspections are performed by properly equipped and authorized facilities in accordance with the applicable service information. Therefore, we have revised paragraph

(l)by deleting the phrase specified by Fortner Engineering. Request to Include Alternative Method of Inspection The same commenter requests that we include an alternative method of inspecting for cracking of the manifolds of suspected PCMs. Fortner Engineering states that a dye penetrant inspection performed in accordance with ASTM-E474, Type 1, Method A, Sensitivity Level 4, will better ensure detection of any manifold defects. Further, Fortner Engineering asserts that the OEM, Parker Hannifin, has already received approval of this dye penetrant method as an alternative method of compliance

(AMOC)with AD 2003-23-01. We agree that a dye penetrant inspection is an acceptable alternative to the ultrasonic inspection specified by the AD, because the dye penetrant technique provides a more thorough method for detecting cracking of the area of interest on the PCM manifold. However, we do not agree that ASTM-E474, Type 1, Method A, Sensitivity Level 4, has already been approved as an AMOC with AD 2003-23-01. In fact, the AMOC using dye penetrant inspection that was requested by Parker Hannifin and approved as of November 21, 2003, was in accordance with ASTM-E1417, Type 1, Method A, Sensitivity Level 4, and does not actually specify that it applies to the manifold. We are not aware of the dye penetrant inspection specification ASTM-E474, Type 1, Method A, Sensitivity Level 4; therefore, no change is necessary to the AD in this regard. However, as specified in paragraph

(m)of the AD, a further AMOC may be requested if data are submitted to substantiate that ASTM-E474, Type 1, Method A, Sensitivity Level 4, specifies an acceptable method of inspection for compliance with the requirements of this AD. Notification of Compliance Time Conflict The Air Transport Association (ATA), on behalf of its member NWA, states that there are errors in a chronology described in the preamble of the NPRM. NWA points out an apparent conflict between the compliance times specified in different sections of the NPRM. NWA notes that the third paragraph of the “Actions Since Existing AD Was Issued” section of the preamble states, “The compliance time for the initial inspection (for airplanes not previously inspected as required by AD 2003-23-01) has been revised to the earlier of 56,000 total flight hours or 9,000 total flight cycles * * *.” NWA then notes that paragraph

(h)of the NPRM states, “For airplanes not inspected prior to the effective date of this AD as specified in paragraph

(g)of this AD: At the later of the times specified * * * prior to the accumulation of 56,000 total flight hours or 9,000 total flight cycles * * *.” We acknowledge NWA's concern; however, we do not agree that there is a conflict in the compliance time statements. Paragraph

(h)of the AD more fully states, “For airplanes not inspected prior to the effective date of this AD as specified in paragraph

(g)of this AD, At the later of the times specified in paragraph (h)(1) or (h)(2) of this AD * * *.” Paragraph (h)(1) of the AD states, “Prior to the accumulation of 56,000 total flight hours or 9,000 total flight cycles, whichever occurs first.” Paragraph (h)(2) of the AD states, “Within 24 months after the effective date of this AD.” The “later of the times” statement of paragraph

(h)refers to the relationship between paragraphs (h)(1) and (h)(2). In paragraph (h)(1), the statement, “whichever occurs first” is consistent with the statement “the earlier of” that appears in the “Actions Since Existing AD Was Issued” section of the preamble. Paragraph (h)(2) is the grace period for airplanes not inspected prior to the effective date of the AD. No change is needed to the AD in this regard. Request to Withdraw NPRM ATA, on behalf of its member United Airlines (UAL), states that it is opposed to the NPRM. UAL states that, based on the original AD 2003-23-01, there have been no further reports of cracked PCM manifolds. UAL asserts that the original incident of a cracked PCM manifold airplane failure was an isolated event, and further asserts that the event was controllable. Although UAL made no specific statement to this effect, we infer that UAL considers the AD to be unnecessary and requests us to withdraw the NPRM. We do not agree with this request. Although UAL correctly states that no other cracked PCM manifolds have been discovered since the release of AD 2003-23-01, the root cause for the premature fatigue failure of the lower rudder PCM on the event airplane has yet to be determined; and although analysis of the results of accomplishing AD 2003-23-01 did not yield that root cause, that analysis highlighted a previously unidentified single point failure of the PCMs. This new AD is intended to protect against such a single point failure occurring on the upper rudder PCM. Without the on-going inspections required by this AD, a developing crack of either the upper or lower PCM could remain latent and grow to the point of failure, which, under certain phases of flight, could be catastrophic. For these reasons, we have determined that this AD is necessary to maintain safety of the fleet and will not be withdrawn. Further, the inspection reports required by this AD will enable the manufacturer to obtain better insight into the nature, cause, and extent of the cracking, and to possibly develop final action to address the unsafe condition. Once final action has been identified, we may consider further rulemaking. Recommendation to Develop In-Flight Procedures to Deal with a Failed PCM Air Line Pilots Association

(ALPA)recommends that procedures to deal with an in-flight situation of a failed rudder PCM be developed and provided to the flightcrews. ALPA states that this procedure would aid pilot workload in the event of a failed rudder PCM. ALPA submitted the same comment to the docket for AD 2003-23-01, asserting that “industry must develop a set of operational procedures to allow flightcrews to deal with such an in-flight situation.” ALPA states that no such procedures have yet been provided and reiterates its recommendation that industry supply such procedures. We acknowledge ALPA's concern. We understand that any such procedures would be provided by industry; in this case, Boeing. However, we have concluded, and Boeing concurs, that the repetitive inspections required by this AD will detect any cracking or potential cracking of the PCM before any PCM failure. Therefore, non-normal operational procedures are not needed to maintain fleet safety in this regard. As ALPA did not request any specific change to the NPRM, we have not changed the AD as regards this comment. Request to Reduce Compliance Time The same commenter, ALPA, requests that we change the compliance time of the NPRM from 24 months to 12 months. ALPA states that the potential hazard for an “uncommanded rudder hardover, consequent increased pilot workload, and possible runway departure upon landing” warrants a more conservative initial inspection period. ALPA asserts that allowing a longer initial time period may allow failed yaw damper actuators to remain in operation much longer than necessary and put may aircraft at risk of experiencing a failure similar to the one on the incident airplane. We do not agree. AD 2003-23-01 has already required the inspection of Model 747-400 airplanes with suspected high usage rudder PCMs, and the compliance period to complete the original inspections has passed with no additional failures detected. This, along with the knowledge the rudder PCMs have undergone extensive investigation, provides us with a degree of confidence that there are no imminent failures predicted. Instead, we have determined that on-going inspections are needed because the root cause for the premature fatigue failure on the incident airplane has not been determined. Further, this AD is intended to protect against a failure condition not previously analyzed: failure of the upper rudder PCM. The existing initial compliance time of 24 months provides a balance between further possible failures due to the unknown cause of the failed part and the additional burden of on-going inspections. No revision is needed to the AD in this matter. Clarification of Parts Installation Paragraph The clear intent of this AD is that PCMs having cracked manifolds must be removed from service and replaced with serviceable PCMs having manifolds without cracks. To prevent confusion and ensure conformity with the intent of the AD, we have added the phrase “and found to be without cracks” to paragraph

(l)of the AD. Conclusion We have reviewed the available data, including the comments that have been received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD. Interim Action Because the root cause of the cracking addressed in AD 2003-23-01 has not yet been determined, we consider this AD to be interim action and have continued the requirement to return cracked PCMs or manifolds to Parker Hannifin in paragraph (j)(2) of this AD. If final action is later identified, we may consider further rulemaking then. Costs of Compliance There are approximately 636 airplanes of the affected design in the worldwide fleet. We estimate that 86 airplanes of U.S. registry will be affected by this AD, and that it will take approximately 4 work hours per airplane to accomplish the ultrasonic inspection, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the inspection is estimated to be $22,360, or $260 per airplane, per inspection cycle. 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 AD will not have federalism implications under Executive Order 13132. This AD will 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 this AD:

(1)Is not a “significant regulatory action” under Executive Order 12866;

(2)Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

(3)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 AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 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 removing amendment 39-13364 (68 FR 64263, November 13, 2003) and adding the following new airworthiness directive (AD): **2006-18-17 Boeing:** Amendment 39-14756. Docket No. FAA-2006-23873; Directorate Identifier 2005-NM-110-AD. Effective Date

(a)This AD becomes effective October 13, 2006. Affected ADs

(b)This AD supersedes AD 2003-23-01. Applicability

(c)This AD applies to all Boeing Model 747-400, 747-400D, and 747-400F series airplanes, certificated in any category. Unsafe Condition

(d)This AD results from manufacturer findings that the inspections required by AD 2003-23-01 must be performed at regular intervals. We are issuing this AD to detect and correct potential cracking in the yaw damper actuator portion of the upper and lower rudder power control modules (PCMs), which could result in an uncommanded left rudder hardover, consequent increased pilot workload, and possible runway departure upon landing. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Verification of Rudder PCM/Main Manifold Time-in-Service

(f)For any affected airplane, if it can be positively verified that any rudder PCM or PCM main manifold installed on that airplane has accumulated a different total of flight hours or flight cycles than the totals accumulated by that airplane, the flight cycles or flight hours accumulated by the rudder PCM or PCM main manifold will be acceptable as valid starting points for meeting the compliance times required by this AD. Inspection Accomplished Prior to the Issuance of This AD

(g)For airplanes which, prior to the effective date of this AD, have received an ultrasonic inspection for cracking of the yaw damper actuator portion of the upper and lower rudder PCM, in accordance with Boeing Alert Service Bulletin 747-27A2397, dated July 24, 2003, as required by AD 2003-23-01: Do paragraphs (g)(1), (g)(2), (g)(3), and (g)(4) of this AD, as applicable, in accordance with the Accomplishment Instructions of Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005.

(1)Perform the ultrasonic inspection described in paragraph

(g)of this AD at the later of the times specified in paragraph (g)(1)(i) or (g)(1)(ii) of this AD, then do paragraph (g)(2) or (g)(3) of this AD, as applicable; and paragraph (g)(4) of this AD.

(i)Within 28,000 flight hours or 4,500 flight cycles after the date of the prior inspection, whichever occurs first.

(ii)Within 24 months after the effective date of this AD.

(2)If no cracking is found during any inspection required by paragraph (g)(1) or

(h)of this AD: Apply sealant and a torque stripe and install a lockwire on the rudder PCM in accordance with the Accomplishment Instructions and Figure 1 or Figure 2, as applicable, of Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005.

(3)If any cracking is found during any inspection required by paragraph (g)(1) or

(h)of this AD: Before further flight, replace the affected PCM with a new or serviceable PCM and submit the report required by paragraph

(i)of this AD.

(4)Repeat the ultrasonic inspection described in paragraph

(g)of this AD at intervals not to exceed 28,000 flight hours or 4,500 flight cycles, whichever occurs first, and repeat the actions in paragraph (g)(2) or (g)(3) of this AD, as applicable. Initial Inspection

(h)For airplanes not inspected prior to the effective date of this AD as specified in paragraph

(g)of this AD: At the later of the times specified in paragraph (h)(1) or (h)(2) of this AD, perform an ultrasonic inspection for cracking of the yaw damper actuator portion of the upper and lower rudder PCM main manifold; and do the actions specified in paragraph (g)(2) or (g)(3) of this AD, as applicable; in accordance with the Accomplishment Instructions of Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005. Repeat the inspection thereafter at intervals not to exceed 28,000 flight hours or 4,500 flight cycles, whichever occurs first.

(1)Prior to the accumulation of 56,000 total flight hours or 9,000 total flight cycles, whichever occurs first.

(2)Within 24 months after the effective date of this AD. Reporting Requirements and Damaged Parts Disposition

(i)For all airplanes: At the applicable time specified in paragraph (i)(1) or (i)(2) of this AD, accomplish the actions in paragraph

(j)of this AD.

(1)If the inspection was done after the effective date of this AD: Submit the report and part, if applicable, within 30 days after the inspection.

(2)If the inspection was done before the effective date of this AD: Submit the report and part, if applicable, within 30 days after the effective date of this AD.

(j)At the applicable time specified in paragraph

(i)of this AD: Do the requirements of paragraphs (j)(1) and (j)(2) of this AD. Information collection requirements contained in this regulation have been approved by the Office of Management and Budget

(OMB)under the provisions of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) and have been assigned OMB Control Number 2120-0056.

(1)If any inspection required by this AD reveals any indication of a cracked or broken part, submit a report to: The Boeing Company, Service Engineering—Mechanical Systems. The report must contain the airplane and rudder PCM serial numbers, the total flight hours and flight cycles for each rudder PCM (and rudder PCM main manifold, if known), and a description of any damage found. Submission of the Inspection Report Form (Figure 3 of Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005) is one acceptable method of complying with this requirement.

(2)Send any cracked or broken PCMs or manifolds to Parker Hannifin Corporation in accordance with the shipping instructions specified in Appendix A of Boeing Alert Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005. Prior Accomplishment of Requirements

(k)Actions accomplished before the effective date of this AD in accordance with Boeing Alert Service Bulletin 747-27A2397, dated July 24, 2003; or Revision 1, dated March 31, 2005; are considered acceptable for compliance with the corresponding requirements of this AD. Parts Installation

(l)As of the effective date of this AD, no person shall install on any airplane a rudder PCM having a top assembly part number (P/N) 332700-1003, -1005, or -1007; or P/N 333200-1003, -1005, or -1007; unless the PCM has been ultrasonically inspected and found to be without cracks; in accordance with the Accomplishment Instructions of Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005. Alternative Methods of Compliance (AMOCs) (m)(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(3)AMOCs approved previously according to AD 2003-23-01 are approved as AMOCs with this AD. Material Incorporated by Reference

(n)You must use Boeing Service Bulletin 747-27A2397, Revision 2, dated September 1, 2005, to perform the actions that are required by this AD, unless the AD specifies otherwise. The Director of the Federal Register approved the incorporation by reference of this document in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207, for a copy of this service information. You may review copies at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Room PL-401, Nassif Building, Washington, DC; on the Internet at *http://dms.dot.gov;* or at the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.* Issued in Renton, Washington, on August 30, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-14782 Filed 9-7-06; 8:45 am] BILLING CODE 4910-13-P RAILROAD RETIREMENT BOARD 20 CFR Part 320 RIN 32207-AB58 Electronic Filing of Reconsideration Requests by Railroad Employers AGENCY: Railroad Retirement Board. ACTION: Final rule. SUMMARY: The Railroad Retirement Board (Board) amends its regulations to include the option of electronic filing by railroad employers of requests for reconsideration of initial decisions under the Railroad Unemployment Insurance Act (RUIA). Part 320 currently requires that reconsideration requests be submitted in writing. The amended rule allows reconsideration requests to be made by railroad employers either in writing or electronically. In addition, § 320.10(c) and 320.10(d) inadvertently contain inaccurate references. This amended rule corrects those references. DATES: *Effective Date:* This regulation will be effective September 8, 2006. ADDRESSES: Beatrice Ezerski, Secretary to the Board, Railroad Retirement Board, 844 Rush Street, Chicago, Illinois 60611. FOR FURTHER INFORMATION CONTACT: Marguerite P. Dadabo, Assistant General Counsel, Railroad Retirement Board, 844 Rush Street, Chicago, Illinois 60611,

(312)751-4945, TDD

(312)754-4701. SUPPLEMENTARY INFORMATION: Part 320 of the Board's regulations deals generally with administrative review of initial determinations of claims or requests for waiver of recovery of overpayments under the Railroad Unemployment Insurance Act (RUIA). Currently, the regulations require all requests for reconsideration of initial decisions to be made in writing. The Railroad Retirement Board amends its regulations to allow railroad employers to use updated technology, such as computers and e-mail, to request reconsideration of an initial decision. Specifically, the Board amends section 320.10(a) to allow railroad employers to file requests for reconsideration under the RUIA via an electronic program that has been approved by the agency. In addition, the Railroad Retirement Board amends section 320.10(c) to change the incorrect reference of “§ 310.12” to the correct references of “§ 320.12” in the last two sentences of this section. Section 320.10(d) is amended to change the incorrect references of “§ 310.5” to the correct reference of “§ 320.5” in the first sentence of this section. This section is also amended to provide that a railroad employer's request for reconsideration can be made in writing or electronically. The Board published the proposed rule on July 25, 2005 (70 FR 42517) and invited comments by September 23, 2005. No comments were received. Accordingly, the proposed rule is being published as a final rule without change. Collection of Information Requirements There is an information collection impacted by the amended rule: The Railroad Retirement Board is providing notice that OMB has approved the information collection requirements contained in the affected sections of these final rules. The OMB Control Number for this collection is 3220-0171, expiring June 30, 2008. The Board, with the concurrence of the Office of Management and Budget (OMB), has determined that this is not a significant regulatory action under Executive Order 12866. Therefore, no regulatory impact analysis is required. List of Subjects in 20 CFR Part 320 Administrative practice and procedure, Claims, Railroad unemployment insurance, Reporting and recordkeeping requirements. For the reasons set out in the preamble, the Railroad Retirement Board amends title 20, Chapter II, subchapter C, part 320 of the Code of Federal Regulations as follows: PART 320-INITIAL DETERMINATIONS UNDER THE RAILROAD UNEMPLOYMENT INSURANCE ACT AND REVIEWS OF AND APPEALS FROM SUCH DETERMINATIONS 1. The authority citation for part 320 continues to read as follows: Authority: 45 U.S.C. 355 and 362(1). 2. Section 320.10 is amended as follows: a. Add a new sentence at the end of paragraph (a); b. Amend paragraph

(c)by removing the reference to “§ 310.12” and adding a reference to “§ 320.12” in its place wherever it appears; and c. Revise paragraph (d). The addition and revision read as follows: § 320.10 Reconsideration of initial determination.

(a)* * * A railroad employer may fulfill the written request requirement by using an electronic system that has been approved by the agency in the manner prescribed by the agency.

(d)Right to further review of initial determination. The right to further review of a determination made under § 320.5 or § 320.9 of this part shall be forfeited unless a written request for reconsideration is filed within the time period prescribed in this section or good cause is shown by the party requesting reconsideration for failing to file a timely request for reconsideration. A railroad employer may fulfill the written request requirement by using an electronic system approved by the agency in the manner prescribed by the agency. Dated: September 5, 2006. By Authority of the Board. Beatrice Ezerski, Secretary to the Board. [FR Doc. E6-14883 Filed 9-7-06; 8:45 am] BILLING CODE 7905-01-P RAILROAD RETIREMENT BOARD 20 CFR Part 341 RIN 3220-AB60 Electronic Filing of Settlement and Final Judgment Notices by Railroad Employers AGENCY: Railroad Retirement Board. ACTION: Final rule. SUMMARY: The Railroad Retirement Board (Board) amends its regulations to include the option of electronic notification by railroad employers of settlements and final judgments based on an injury for which sickness benefits have been paid under the Railroad Unemployment Insurance Act (RUIA). Part 341 currently requires that notifications of settlements and final judgments be submitted to the Board in writing. This rule allows these notifications to be made by railroad employers either in writing or by sending an electronic message, *e.g.* via e-mail. DATES: *Effective Date:* This regulation shall be effective September 8, 2006. ADDRESSES: Beatrice Ezerski, Secretary to the Board, Railroad Retirement Board, 844 Rush Street, Chicago, Illinois 60611. FOR FURTHER INFORMATION CONTACT: Marguerite P. Dadabo, Assistant General Counsel, Railroad Retirement Board, 844 Rush Street, Chicago, Illinois 60611,

(312)751-4945, TDD

(312)751-4701. SUPPLEMENTARY INFORMATION: Part 341 of the Board's regulations deals with the notification of settlements and final judgments based on an injury for which sickness benefits have been paid under the Railroad Unemployment Insurance Act (RUIA). Currently, the regulations require all individuals or companies to make notifications of settlements and final judgments in writing to the Board. These revisions allow railroad employers to also notify the Board electronically in these instances, *e.g.* via e-mail. Section 341.6(a) is amended to allow railroad employers to notify the Board, in writing or electronically in the manner prescribed by the agency, of a settlement or final judgment based on an injury for which the employee received sickness benefits. In addition, this rule amends sections 341.8(a) and 341.8(b) to allow a railroad employer to notify the Board electronically or in writing. Also, sections 341.8(b) and

(c)are amended to change the outdated references of “Division of Claims Operations” and “Bureau of Unemployment and Sickness Insurance” to the correct reference of “Sickness and Unemployment Benefits Section”. The Board, with the concurrence of the Office of Management and Budget (OMB), has determined that this is not a significant regulatory action under Executive Order 12866. Therefore, no regulatory impact analysis is required. There is an information collection impacted by the amended rule. The Railroad Retirement Board is providing notice that OMB has approved the information collection requirements contained in the affected sections of this final rule. The OMB Control Number for this collection is 3220-0036, expiring January 31, 2009. The Board published the proposed rule on December 9, 2005 (70 FR 73176) and invited comments by February 7, 2006. No comments were received. Accordingly, the proposed rule is being published as a final rule. List of Subjects in 20 CFR Part 341 Railroad unemployment insurance, Reporting and recordkeeping requirements. For the reasons set out in the preamble, the Railroad Retirement Board amends title 20, Chapter II, subchapter C, part 341 of the Code of Federal Regulations as follows: PART 341—STATUTORY LIEN WHERE SICKNESS BENEFITS PAID 1. The authority citation for part 341 continues to read as follows: Authority: 45 U.S.C. 362(o). 2. Revise § 341.6(a) introductory text to read as follows: § 341.6 Report of settlement or judgment.

(a)When a person or company makes a settlement or must satisfy a final judgment based on an injury for which the employee received sickness benefits, the person or company shall notify the Board of the settlement or final judgment. That notice shall be in writing and submitted within five days of the settlement or final judgment. A railroad employer may fulfill the written notice requirement by sending an electronic message in the manner prescribed by the agency. That notification shall contain: 3. Amend § 341.8 as follows: a. Add a new sentence to the end of paragraph (a); b. Revise paragraph (b); and c. Amend paragraph

(c)by removing the phrase “Division of Claims Operations” and adding the phrase “Sickness and Unemployment Benefits Section” in its place. The additions and revisions read as follows: § 341.8 Termination of sickness benefits due to a settlement.

(a)* * * A railroad employer may file the required report by sending an electronic message in the manner prescribed by the agency.

(b)A report of settlement shall be made to the Sickness and Unemployment Benefits Section and shall include the information required in § 341.6. Where the report is an oral report, and the informant is neither the employee nor his or her representative, the informant shall be told that written confirmation containing the information called for by § 341.6 must be submitted to the Board within 5 days from the date of the oral report. A railroad employer may fulfill the written report requirement by sending an electronic message in the manner prescribed by the agency. Dated: September 5, 2006. By Authority of the Board. Beatrice Ezerski, Secretary to the Board. [FR Doc. E6-14884 Filed 9-7-06; 8:45 am] BILLING CODE 7905-01-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Parts 556 and 558 New Animal Drugs; Zilpaterol AGENCY: Food and Drug Administration, HHS. ACTION: Final rule. SUMMARY: The Food and Drug Administration

(FDA)is amending the animal drug regulations to reflect approval of a new animal drug application

(NADA)filed by Intervet Inc. The NADA provides for use of a zilpaterol hydrochloride Type A medicated article to formulate Type B and Type C medicated feeds for cattle fed in confinement for slaughter. DATES: This rule is effective September 8, 2006. FOR FURTHER INFORMATION CONTACT: Eric S. Dubbin, Center for Veterinary Medicine (HFV-120), Food and Drug Administration, 7500 Standish Pl., Rockville, MD 20855, 301 827-1600, e-mail: *eric.dubbin@.fda.hhs.gov* . SUPPLEMENTARY INFORMATION: Intervet Inc., P.O. Box 318, 29160 Intervet Lane, Millsboro, DE 19966, filed NADA 141-258 for the oral use of ZILMAX (zilpaterol hydrochloride 4.8%) Type A medicated article to formulate Type B (liquid and dry) and Type C medicated cattle feeds used for increased rate of weight gain, improved feed efficiency, and increased carcass leanness in cattle fed in confinement for slaughter during the last 20 to 40 days on feed. The NADA is approved as of August 10, 2006, and the regulations are amended in part 556 (21 CFR part 556) and part 558 (21 CFR part 558) by adding new §§ 556.765 and 558.665 and by amending § 558.4 to reflect the approval. The basis of approval is discussed in the freedom of information summary. In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday. The agency has carefully considered the potential environmental impact of this action and has concluded that the action will not have a significant impact on the human environment and that an environmental impact statement is not required. FDA's finding of no significant impact and the evidence supporting that finding, contained in an environmental assessment, may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday. Under section 512(c)(2)(F)(i) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 360b(c)(2)(F)(i)), this approval qualifies for 5 years of marketing exclusivity beginning August 10, 2006. This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808. List of Subjects 21 CFR Part 556 Animal drugs, Foods. 21 CFR Part 558 Animal drugs, Animal feeds. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR parts 556 and 558 are amended as follows: PART 556—TOLERANCES FOR RESIDUES OF NEW ANIMAL DRUGS IN FOOD 1. The authority citation for 21 CFR part 556 continues to read as follows: Authority: 21 U.S.C. 342, 360b, 371. 2. Add § 556.765 to read as follows: § 556.765 Zilpaterol.

(a)*Acceptable daily intake (ADI)* . The ADI for total residues of zilpaterol is 0.083 micrograms per kilogram of body weight per day.

(b)*Tolerances* —(1) *Cattle* —(i) *Liver (the target tissue)* . The tolerance for zilpaterol freebase (the marker residue) is 12 parts per billion (ppb).

(ii)[Reserved]

(2)[Reserved] PART 558—NEW ANIMAL DRUGS FOR USE IN ANIMAL FEEDS 3. The authority citation for 21 CFR part 558 continues to read as follows: Authority: 21 U.S.C. 360b, 371. 4. In paragraph

(d)of § 558.4, in the “Category II” table, alphabetically add an entry for “Zilpaterol” to read as follows: § 558.4 Requirement of a medicated feed mill license.

(d)* * * **CATEGORY II** Drug Assay limits percent 1 Type A Type B maximum

(100x)Assay limits percent 1 Type B/C 2 * * * * * * * Zilpaterol 90-110 680 g/t (0.075%) 80-110/75-115 1 Percent of labeled amount. 2 Values given represent ranges for either Type B or Type C medicated feeds. For those drugs that have two range limits, the first set is for a Type B medicated feed and the second set is for a Type C medicated feed. These values (ranges) have been assigned in order to provide for the possibility of dilution of a Type B medicated feed with lower assay limits to make Type C medicated feed. 5. Add § 558.665 to read as follows: § 558.665 Zilpaterol.

(a)*Specifications* . Type A medicated articles containing 21.77 grams

(g)zilpaterol hydrochloride per pound.

(b)*Approvals* . See No. 057926 in § 510.600(c) of this chapter.

(c)*Tolerances* . See § 556.765 of this chapter.

(d)*Special considerations* —(1) Labeling of Type B and Type C cattle feeds shall bear the following:

(i)Do not allow horses or other equines access to feed containing zilpaterol.

(ii)Not for use in animals intended for breeding.

(iii)Do not use in veal calves.

(2)Type B Liquid Feeds can be manufactured containing 68 to 680 g zilpaterol hydrochloride/ton. The liquid Type B feeds must be maintained at a pH of 3.8 to 7.5. For liquid feeds stored in recirculating tank systems: Recirculate immediately prior to use for not less than 10 minutes, moving not less than 1 percent of the tank contents per minute from the bottom of the tank to the top. Recirculate daily as described even when not used. For liquid feeds stored in mechanical, air or other agitation-type tank systems: Agitate immediately prior to use for not less than 10 minutes, creating a turbulence at the bottom of the tank that is visible at the top. Agitate daily as described even when not used.

(3)Do not pellet medicated feeds containing zilpaterol.

(e)*Conditions of use in cattle* —(1) *Amount* . 6.8 g/ton of feed to provide 60 to 90 milligrams zilpaterol hydrochloride per head per day.

(2)*Indications for use* . For increased rate of weight gain, improved feed efficiency and increased carcass leanness in cattle fed in confinement for slaughter during the last 20 to 40 days on feed.

(3)*Limitations* . Feed continuously as the sole ration during the last 20 to 40 days on feed. Withdrawal period: 3 days. Dated: August 29, 2006. Stephen F. Sundlof, Director, Center for Veterinary Medicine. [FR Doc. E6-14899 Filed 9-7-06; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 558 New Animal Drugs For Use in Animal Feed; Oxytetracycline AGENCY: Food and Drug Administration, HHS. ACTION: Final rule. SUMMARY: The Food and Drug Administration

(FDA)is amending the animal drug regulations to reflect approval of a supplemental new animal drug application

(NADA)filed by Phibro Animal Health. The supplemental NADA revises labeling of oxytetracycline Type A medicated article with the current genus for the causative bacteria for American foulbrood of honeybees. DATES: This rule is effective September 8, 2006. FOR FURTHER INFORMATION CONTACT: Joan C. Gotthardt, Center for Veterinary Medicine (HFV-130), Food and Drug Administration, 7500 Standish Pl., Rockville, MD 20855, 301-827-7571, e-mail: *joan.gotthardt@fda.hhs.gov* . SUPPLEMENTARY INFORMATION: Phibro Animal Health, 65 Challenger Rd., 3d floor, Ridgefield Park, NJ 07660, filed a supplement to NADA 95-143 that provides for use of TERRAMYCIN 100MR (oxytetracycline dihydrate) Type A medicated article for treatment of various bacterial diseases of livestock. The supplemental NADA revises labeling with the current genus for the causative bacteria for American foulbrood of honeybees. The supplemental NADA is approved as of August 11, 2006, and the regulations in 21 CFR 558.450 are amended to reflect the approval. Approval of this supplemental NADA did not require review of additional safety or effectiveness data or information. Therefore, a freedom of information summary is not required. FDA has determined under § 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808. List of Subjects in 21 CFR Part 558 Animal drugs, Animal feeds. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR part 558 is amended as follows: PART 558—NEW ANIMAL DRUGS FOR USE IN ANIMAL FEEDS 1. The authority citation for 21 CFR part 558 continues to read as follows: Authority: 21 U.S.C. 360b, 371. § 558.450 [Amended] 2. In § 558.450, in the table in paragraph (d)(1)(xiv) in the “Indications for use” column, remove “ *Bacillus* ” and add in its place “ *Paenibacillus* ”. Dated: August 30, 2006. Steven D. Vaughn, Director, Office of New Animal Drug Evaluation, Center for Veterinary Medicine. [FR Doc. E6-14898 Filed 9-7-06; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF STATE 22 CFR Part 181 RIN 1400-AC21 [Public Notice: 5527] Publication, Coordination, and Reporting of International Agreements: Amendments AGENCY: State Department. ACTION: Final rule. SUMMARY: The Department of State is updating the regulations implementing 1 U.S.C. 112a and 112b in order to reflect amendments to the statutes governing publication of U.S. international agreements and their transmittal to the Congress. It will not be publishing certain categories of international agreements in the compilation entitled “United States Treaties and Other International Agreements” or in the “Treaties and Other International Acts Series.” Further, the regulations are being amended to reflect adjustments to certain internal procedures within the State Department on the reporting of international agreements to Congress. Finally, the Department is adding a new requirement concerning procedures for consultation with the Secretary of State in the negotiation and conclusion of international agreements. Where an international agreement could reasonably require for its implementation the issuance of a significant domestic regulatory action, agencies proposing the agreement are to consult in a timely manner with the Office of Management and Budget (OMB), and the Department of State should confirm that timely consultations were undertaken. DATES: *Effective Date:* This rule is effective October 10, 2006. FOR FURTHER INFORMATION CONTACT: John Kim, Assistant Legal Adviser for Treaty Affairs, Office of the Legal Adviser, Department of State, Washington, DC 20520, 202-647-1660, or at *kimmjj@state.gov* . SUPPLEMENTARY INFORMATION: Two statutes set forth the Secretary's unique role and important responsibilities in the area of publishing, coordinating, and reporting international agreements. Pursuant to 1 U.S.C. 112a, the Secretary of State is required to publish annually a compilation of all treaties and international agreements to which the United States is a party that were signed, proclaimed, or “with reference to which any other final formality ha[d] been executed” during the calendar year. The Secretary of State, however, may determine that certain categories of agreements should not be published if certain criteria are met. Any such determination must be published in the **Federal Register** . Under the second statute, 1 U.S.C. 112b, the Secretary of State is required to transmit to the Congress the text of any international agreement other than a treaty to which the United States is a party as soon as practicable but no later than 60 days after it enters into force. Those agreements that the President determines should be classified are to be transmitted, not to Congress as a whole, but to the House Committee on International Relations (at that time called “the House Committee on Foreign Affairs”) and to the Senate Foreign Relations Committee under an injunction of secrecy. The statute further recognizes the Secretary of State's special role in the negotiation and conclusion of all U.S. international agreements, providing that “[n]otwithstanding any other provision of law, an international agreement may not be signed or otherwise concluded on behalf of the United States without prior consultation with the Secretary of State. Such consultation may encompass a class of agreements rather than a particular agreement.” The Department of State has issued regulations to implement these statutory provisions. These regulations are codified in Part 181 of Chapter 22 of the Code of Federal Regulations (CFR). Congress has amended both 1 U.S.C. 112a and 1 U.S.C. 112b several times, most recently in section 7121 of the Intelligence Reform and Terrorism Prevention Act of 2004, Public Law 108-458 (Dec. 17, 2004). The State Department is amending sections of 22 CFR Part 181 in order to reflect

(1)the changes made to 1 U.S.C. 112a and 112b in December 2004;

(2)certain changes made to internal Departmental procedures; and

(3)four additional categories of international agreements that meet the non-publication criteria of 1 U.S.C. 112a. In addition, the Department is amending the procedures regarding the negotiation and conclusion of international agreements. These procedures are set forth in 22 CFR 181.4 and in the Circular 175 procedure referenced therein. In particular, if a proposed international agreement embodies a commitment that could reasonably be expected to require (for its implementation) the issuance of a “significant regulatory action” (as defined in section 3 of Executive Order 12866), the agency proposing the agreement shall consult in a timely manner with the OMB regarding such commitment. This amendment is aimed at ensuring that OMB is apprised of international commitments that may have a significant regulatory impact on domestic entities or persons prior to the negotiation or conclusion of the international agreement containing the commitment. A proposed rule on these subjects was published in the **Federal Register** on May 18, 2006 (71 FR 28831), which contains a more detailed discussion. Only one comment was received on the proposed regulations. The comment supported the proposed amendment to the consultation procedures in 22 CFR 181.4(e) with respect to proposed international agreements that reasonably may result in a “significant regulatory action.” The commenter expressed the view that the amendment to the regulations would ensure a greater level of transparency in the negotiation and conclusion of international agreements that may lead to significant regulatory impacts on domestic U.S. entities. Further, the comment made two recommendations relating to the implementation of the amendment once it was finalized. First, the commenter said that agencies should be required to consult with OMB at the earliest possible stage in the discussions of a possible international agreement. Second, the commenter requested that the State Department require agencies to publish a short notice in the **Federal Register** when consultation has been initiated with OMB, asking for public comment where appropriate. In the commenter's view, such a notice would ensure that the public and other interested agencies are made aware of consultations with OMB, thereby fostering the transparency of an agency's development of international agreements. As there has been no objection to the proposed rule, the State Department will promulgate the final rule without change. The Department nevertheless has considered the commenter's suggestions. With respect to the first suggestion, the Department believes that the term “timely” is sufficient to indicate the need for agencies to consult with OMB at an appropriate stage in the discussions concerning proposed international agreements. The Department and OMB already have agreed to develop inter-agency procedures to best implement the final rule and ensure that OMB has a sufficient opportunity to be consulted prior to the authorization of the negotiation or conclusion of international agreements under these regulations. With respect to the second suggestion in the comment, the Department does not provide notices in the **Federal Register** of proposed negotiations of international agreements nor does it believe that such notices would be appropriate given the nature of the conduct of foreign relations and international negotiations. The time for public notice in the **Federal Register** is the occasion of the agency's rulemaking. Finally, no comments were received concerning the other aspects of the State Department's proposed rule; therefore, the final rule will be published also without any change to those aspects. In particular, no comments were received with respect to the Department's determination that four additional categories of international agreements meet the criteria for non-publication in 1 U.S.C. 112a(b). Also, no comments were received with respect to adjustments to certain internal procedures within the State Department on the reporting of international agreements to Congress. Regulatory Analysis Administrative Procedure Act In accordance with provisions of the Administrative Procedure Act governing rules promulgated by Federal agencies that affect the public (5 U.S.C. 553), the Department is publishing these proposed regulations and inviting public comment. Regulatory Flexibility Act/Executive Order 13272: Small Business These proposed changes to the regulations are hereby certified as not expected to have a significant impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act, 5 U.S.C. 601-612, and Executive Order No. 13272, section 3(b). The Small Business Regulatory Enforcement Fairness Act of 1996 These proposed regulations do not constitute a major rule, as defined by 5 U.S.C. 804, for purposes of congressional review of agency rulemaking under the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121. These regulations would not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based companies to compete with foreign based companies in domestic and export markets. The Unfunded Mandates Reform Act of 1995 Section 202 of the Unfunded Mandates Reform Act of 1995 (UFMA), Public Law 104-4, 109 Stat. 48, 2 U.S.C. 1532, generally requires agencies to prepare a statement before proposing any rule that may result in an annual expenditure of $100 million or more by State, local, or tribal governments, or by the private sector. These proposed regulations would not result in any such expenditure nor would it significantly or uniquely affect small governments. Executive Orders 12372 and 13132: Federalism These regulations would not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Nor would the regulations have federalism implications warranting the application of Executive Order No. 12372 and No. 13132. Executive Order 12866: Regulatory Review Because a portion of this proposed rule directly involves the participation of OMB, the Department of State has submitted it to OMB for its review. Executive Order 12988: Civil Justice Reform The Department has reviewed the regulations in light of sections 3(a) and 3(b)(2) of Executive Order No. 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden. The Paperwork Reduction Act of 1995 Under the Paperwork Reduction Act of 1995

(PRA)(44 U.S.C. 3501 *et seq.* ), Federal agencies must obtain approval from OMB for each collection of information they conduct, sponsor, or require through regulation. The Department of State has determined that this proposal contains no new collection of information requirements for the purposes of the PRA. List of Subjects in 22 CFR Part 181 Treaties. For the reasons set forth above, part 181 is amended as follows: PART 181—COORDINATION, REPORTING AND PUBLICATION OF INTERNATIONAL AGREEMENTS 1. The authority citation for part 181 continues to read as follows: Authority: 1 U.S.C. 112a, 112b; and 22 U.S.C. 2651a. 2. § 181.2 is amended by: A. Removing the third and fourth sentences of paragraph

(a)(2); B. Adding a new third sentence of paragraph

(a)(2); and C. Adding new paragraph (f). The additions read as follows: § 181.2 Criteria.

(a)* * *

(2)* * * The duration of the activities pursuant to the undertaking or the duration of the undertaking itself shall not be a factor in determining whether it constitutes an international agreement. * * *

(f)Notwithstanding the other provisions of this section, arrangements that constitute international agreements within the meaning of this section include

(1)Bilateral or multilateral counterterrorism agreements and

(2)Bilateral agreements with a country that is subject to a determination under section 6(j)(1)(A) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)(A)), section 620A(a) of the Foreign Assistance Act of 1961 (22 U.S.C. 2371(a)), or section 40(d) of the Arms Export Control Act (22 U.S.C. 2780(d)). 3. § 181.4 is amended in paragraph

(e)as follows: A. By designating the existing text as paragraph (e)(1); and B. Adding a new paragraph (e)(2) to read as follows: § 181.4 Consultations with the Secretary of State. (e)(1) * * *

(2)If a proposed agreement embodies a commitment that could reasonably be expected to require (for its implementation) the issuance of a significant regulatory action (as defined in section 3 of Executive Order 12866), the agency proposing the arrangement shall state what arrangements have been planned or carried out concerning timely consultation with the Office of Management and Budget

(OMB)for such commitment. The Department of State should receive confirmation that OMB has been consulted in a timely manner concerning the proposed commitment. § 181.7 [Amended] 4. § 181.7 is amended as follows: A. In paragraph (b): By removing “Assistant Secretary of State for Congressional Relations” and adding in its place “Assistant Legal Adviser for Treaty Affairs”; and removing “House Committee on Foreign Affairs” and adding in its place “House Committee on International Relations”. B. In paragraph (c): 1. By removing “, the negotiations, the effect of the agreement,” in the third sentence; and 2. By removing, in the last sentence the phrase “Assistant Secretary of State for Congressional Relations” and adding in its place “Assistant Legal Adviser for Treaty Affairs”, and removing the phrase“House Committee on Foreign Affairs” and adding in its place “House Committee on International Relations”. C. In paragraph (d), by removing “Assistant Secretary of State for Congressional Relations” and “Assistant Secretary for Congressional Relations” wherever each appears and adding in its place “Assistant Legal Adviser for Treaty Affairs”. 5. § 181.8 is amended as follows by: A. Adding paragraphs (a)(10) through (13); B. Adding a sentence to the end of paragraph (b); and C. Adding a new paragraph

(d)to read as follows: § 181.8 Publication.

(a)* * *

(10)Bilateral agreements with other governments that apply to specific activities and programs financed with foreign assistance funds administered by the United States Agency for International Development pursuant to the Foreign Assistance Act, as amended, and the Agricultural Trade Development and Assistance Act of 1954, as amended;

(11)Letters of agreements and memoranda of understanding with other governments that apply to bilateral assistance for counter-narcotics and other anti-crime purposes furnished pursuant to the Foreign Assistance Act, as amended;

(12)Bilateral agreements that apply to specified education and leadership development programs designed to acquaint U.S. and foreign armed forces, law enforcement, homeland security, or related personnel with limited, specialized aspects of each other's practices or operations; and

(13)Bilateral agreements between aviation agencies governing specified aviation technical assistance projects for the provision of managerial, operational, and technical assistance in developing and modernizing the civil aviation infrastructure; and

(b)* * * Agreements on the subjects listed in paragraphs (a)(10) through

(13)of this section that had not been published as of September 8, 2006.

(d)The Assistant Legal Adviser for Treaty Affairs shall annually submit to Congress a report that contains an index of all international agreements, listed by country, date, title, and summary of each such agreement (including a description of the duration of activities under the agreement and the agreement itself), that the United States:

(1)Has signed, proclaimed, or with reference to which any other final formality has been executed, or that has been extended or otherwise modified, during the preceding calendar year; and

(2)Has not been published, or is not proposed to be published, in the compilation entitled “United States Treaties and Other International Agreements.” 6. Add new § 181.9 to read as follows: § 181.9 Internet Web site publication. The Office of the Assistant Legal Adviser for Treaty Affairs, with the cooperation of other bureaus in the Department, shall be responsible for making publicly available on the Internet Web site of the Department of State each treaty or international agreement proposed to be published in the compilation entitled “United States Treaties and Other International Agreements” not later than 180 days after the date on which the treaty or agreement enters into force. Dated: August 21, 2006. John J. Kim, Assistant Legal Adviser for Treaty Affairs, Department of State. [FR Doc. E6-14850 Filed 9-7-06; 8:45 am] BILLING CODE 4710-08-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 [TD 9286] RIN 1545-BE91 Railroad Track Maintenance Credit AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Temporary regulations. SUMMARY: This document contains temporary regulations that provide rules for claiming the railroad track maintenance credit under section 45G of the Internal Revenue Code for qualified railroad track maintenance expenditures paid or incurred by a Class II railroad or Class III railroad and other eligible taxpayers during the taxable year. These temporary regulations reflect changes to the law made by the American Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005. The text of these temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section in this issue of the **Federal Register** . DATES: *Effective Date:* These regulations are effective September 8, 2006. *Applicability Date:* For dates of applicability, see § 1.45G-1T(g). FOR FURTHER INFORMATION CONTACT: Winston H. Douglas,

(202)622-3110 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act These temporary regulations are being issued without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). For this reason, the collection of information contained in these regulations has been reviewed, and pending receipt and evaluation of public comments, approved by the Office of Management and Budget under control number 1545-2031. Responses to this collection of information are mandatory. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. For further information concerning this collection of information, and where to submit comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble to the cross-referencing notice of proposed rulemaking published in the Proposed Rules section of this issue of the **Federal Register** . Books and records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background This document contains amendments to 26 CFR part 1 to provide regulations under section 45G of the Internal Revenue Code (Code). Section 45G was added to the Code by section 245(a) of the American Jobs Creation Act of 2004, Public Law 108-357 (118 Stat. 1418) (AJCA), and was modified by section 403(f) of the Gulf Opportunity Zone Act of 2005, Public Law 109-135 (119 Stat. 2577). General Overview Section 38 allows a credit for the taxable year for, among other things, the current year business credit. The current year business credit is the sum of the credits listed in section 38(b). Section 245(c)(1) of the AJCA amended section 38(b) of the Code to add to the list of credits the railroad track maintenance credit

(RTMC)determined under section 45G(a). Section 45G(a) provides that, for purposes of section 38, the RTMC for the taxable year is an amount equal to 50 percent of the qualified railroad track maintenance expenditures (QRTME) paid or incurred by an eligible taxpayer during the taxable year. Section 45G(d) defines the term QRTME to mean expenditures (whether or not chargeable to capital account) for maintaining railroad track owned by, or leased to, a Class II railroad or Class III railroad as of January 1, 2005. Section 45G(e) defines the terms Class II railroad and Class III railroad to have the respective meanings given those terms by the Surface Transportation Board (STB). Section 45G(c) defines an eligible taxpayer to mean any Class II railroad or Class III railroad, and any person who transports property using the rail facilities of such a railroad, or who furnishes railroad-related property or services to such a railroad, but only with respect to miles of railroad track assigned to such person by such a railroad. Section 45G(b) imposes limitations on the amount of the RTMC for any taxable year. The credit allowed under section 45G(a) may not exceed $3,500 multiplied by the sum of

(1)the number of miles of railroad track owned by, or leased to, the eligible taxpayer as of the close of the taxable year, and

(2)the number of miles of railroad track assigned to the eligible taxpayer by a Class II railroad or Class III railroad that owns or leases the track as of the close of the taxable year. Section 45G applies to QRTME paid or incurred during taxable years beginning after December 31, 2004, and before January 1, 2008. Scope The temporary regulations define several terms, including eligible taxpayer, QRTME, rail facilities, railroad-related property, and railroad-related services. The temporary regulations also instruct an eligible taxpayer how to determine the RTMC for the taxable year. Further, the temporary regulations provide guidance on assignments of miles of railroad track for purposes of section 45G, adjustments to basis for the RTMC, and the treatment of controlled groups under section 45G. Explanation of Provisions Eligible Taxpayer The temporary regulations provide that only an eligible taxpayer may claim the RTMC. An eligible taxpayer is defined in the temporary regulations as:

(1)A Class II railroad or Class III railroad during the taxable year;

(2)any person that transports property using the rail facilities of a Class II railroad or Class III railroad during the taxable year; or

(3)any person that furnishes railroad-related property or railroad-related services to a Class II railroad or Class III railroad during the taxable year. A Class I railroad is an eligible taxpayer only if the Class I railroad is in the second or third category above and is assigned miles of railroad track for the taxable year by a Class II railroad or Class III railroad. A taxpayer in the second or third category is an eligible taxpayer only with respect to the miles of railroad track assigned to the person for the taxable year by a Class II railroad or Class III railroad. Consistent with section 45G(e)(1), the temporary regulations provide that the terms Class II railroad and Class III railroad have the respective meanings given these terms by the STB. As determined by the STB, Class II railroads have annual carrier operating revenues of less than $250 million but in excess of $20 million after applying the railroad revenue deflator formula (Current Year's Revenues x (1991 Average Railroad Freight Price Index/Current Year's Average Railroad Freight Price Index)). 49 CFR part 1201, subpart A, § 1-1(a). In general, Class III railroads have annual carrier operating revenues of $20 million or less after applying the railroad revenue deflator formula. 49 CFR part 1201, subpart A, § 1-1(a). The temporary regulations also provide that the rail facilities of a Class II railroad or Class III railroad include railroad yards, tracks, bridges, tunnels, wharves, docks, stations, and other related assets that are used in the transport of freight by a railroad and that are owned or leased by the Class II railroad or Class III railroad. Railroad-related property is defined in the temporary regulations as meaning property that is provided directly to, and is unique to, a railroad. Further, this property must be property that, in the hands of a Class II railroad or Class III railroad, is described in asset classes 40.1 through 40.54 of Rev. Proc. 87-56 (1987-2 CB 674), with certain modifications, and is described in the STB property accounts for grading, tunnels and subways, and storage warehouses. The temporary regulations define railroad-related services as meaning services that are provided directly to, and are unique to, a railroad. In addition, these services must relate to railroad shipping, loading and unloading of railroad freight, or repairs of rail facilities or railroad-related property. Examples of railroad-related services are the transport of freight by rail, the loading and unloading of freight transported by rail, locomotive leasing or rental, and maintenance of a railroad's right-of-way (including vegetation control). Examples of services that are not railroad-related services are general business services, cleaning services, banking services (including financing of railroad-related property), and office building rental. Computation of Railroad Track Maintenance Credit For purposes of section 38, the temporary regulations provide that the RTMC generally is equal to 50 percent of the QRTME paid or incurred by an eligible taxpayer during the taxable year. However, this credit amount cannot exceed the credit limitation provided by the temporary regulations. The credit limitation for a Class II railroad or Class III railroad differs from the credit limitation for other eligible taxpayers. If an eligible taxpayer is a Class II railroad or Class III railroad, the temporary regulations provide that the RTMC cannot exceed $3,500 multiplied by the sum of:

(1)The number of miles of railroad track owned or leased by the Class II railroad or Class III railroad within the United States at the close of its taxable year (“eligible railroad track”), reduced by the number of miles of eligible railroad track assigned by the Class II railroad or Class III railroad to another eligible taxpayer for that year; and

(2)the number of miles of eligible railroad track owned or leased by another Class II railroad or Class III railroad that are assigned to the Class II railroad or Class III railroad for the taxable year. If an eligible taxpayer is not a Class II railroad or Class III railroad, the temporary regulations provide that the RTMC cannot exceed $3,500 multiplied by the number of miles of eligible railroad track assigned to the eligible taxpayer by a Class II railroad or Class III railroad for the taxable year. Determination of QRTME Paid or Incurred The temporary regulations provide that QRTME is equal to the amount of expenditures paid or incurred during the taxable year by an eligible taxpayer for maintaining railroad track, roadbed, bridges, and related track structures that are located within the United States and owned or leased as of January 1, 2005, by a Class II railroad or Class III railroad. These expenditures may or may not be chargeable to a capital account. The regulations also define railroad track, roadbed, bridges, and related track structures as meaning property described in certain STB property accounts (“qualifying railroad structure”). The temporary regulations also define the term “paid or incurred” with respect to a taxpayer using an accrual method of accounting. In this case, paid or incurred means a liability incurred within the meaning of § 1.446-1(c)(1)(ii). Consequently, a liability may not be taken into account under section 45G prior to the taxable year during which the liability is incurred. Further, the temporary regulations provide that QRTME is not paid or incurred during the taxable year to the extent that a taxpayer is entitled to reimbursement of any such expenditures. The temporary regulations provide that reimbursements may consist of amounts paid either directly or indirectly to the taxpayer. Examples of indirect reimbursements are discounted freight shipping rates, price markups of railroad-related property, debt forgiveness, or other similar arrangements. Thus, the temporary regulations limit the QRTME paid or incurred to the actual out-of-pocket expenditures paid or incurred by a taxpayer. If an eligible taxpayer (assignee) pays a Class II railroad or Class III railroad (assignor) an amount in exchange for an assignment of one or more miles of eligible railroad track, the temporary regulations provide that the amount is treated as QRTME paid or incurred by the assignee, and not the assignor railroad, at the time and to the extent the assignor pays or incurs QRTME. Consistent with the preceding paragraph, this QRTME would be reduced by any direct or indirect reimbursements made to the assignee during the taxable year with respect to that assignment. Assignment of Railroad Track Miles For purposes of section 45G, the temporary regulations provide that an assignment of a mile of railroad track is not a legal transfer of title, but merely a designation. This designation must be in writing and must include the names and taxpayer identification numbers of the Class II railroad or Class III railroad (assignor) making, and the eligible taxpayer (assignee) receiving, the assignment of eligible railroad track miles, the date of this assignment, and the number of miles of eligible railroad track that is assigned by the assignor to the assignee for a taxable year. The regulations also provide that the designation need not specify the location of the assigned mile of eligible railroad track and the assigned mile of eligible railroad track does not have to correspond to the mile of eligible railroad track on which the QRTME is paid or incurred by an eligible taxpayer. Consistent with section 45G(b), the temporary regulations provide that only a Class II railroad or Class III railroad may assign a mile of eligible railroad track. Thus, if a Class II railroad or Class III railroad assigns a railroad track mile to an eligible taxpayer, the assignee is not permitted to reassign any eligible railroad track mile to another eligible taxpayer. The regulations also provide that the maximum number of miles of eligible railroad track that may be assigned by a Class II railroad or Class III railroad (assignor) for any taxable year are the total miles of eligible railroad track owned by, or leased to, the assignor reduced by the eligible railroad track miles that the assignor retains for itself in determining the RTMC. The temporary regulations also provide that the assignment is treated as being made by the Class II railroad or Class III railroad at the close of Class II railroad's or Class III railroad's taxable year in which the assignment is made. The assignee takes the assignment into account for its taxable year that includes the date the assignment is treated as being made by the assignor railroad under the preceding sentence. The temporary regulations require that a taxpayer must file Form 8900, “Qualified Railroad Track Maintenance Credit,” with its timely filed (including extensions) Federal income tax return for the taxable year for which the taxpayer:

(1)Claims the RTMC;

(2)assigns any miles of eligible railroad track; or

(3)receives an assignment of any miles of eligible railroad track. Thus, for example, a Class II railroad or Class III railroad (assignor) that assigns all of its miles of eligible railroad track during a taxable year will need to file Form 8900 even though the assignor is not claiming any RTMC for that year. As required by the temporary regulations, an assignor must attach to its Form 8900 an information statement identifying the name and taxpayer identification number

(TIN)of each assignee, the total number of the assignor's eligible railroad track miles, the number of eligible railroad track miles assigned by the assignor to each assignee for the taxable year, and the total number of eligible railroad track miles assigned by the assignor to all assignees for the taxable year. Further, an eligible taxpayer (assignee) that received an assignment of railroad track miles during its taxable year from an assignor Class II railroad or Class III railroad and that claims the RTMC for that taxable year must attach to its Form 8900 a statement providing the total number of eligible railroad track miles assigned to the assignee for the taxable year and attesting that the assignee has in writing, and has retained as part of the assignee's records for purposes of § 1.6001-1(a), information identifying the name and TIN of each assignor railroad, the date of each assignment, and the number of eligible railroad track miles assigned by each assignor railroad for the assignee's taxable year. If the Federal income tax return of a Class II railroad or Class III railroad, or another eligible taxpayer, for a taxable year ending after December 31, 2004, and ending before September 7, 2006, is filed before October 10, 2006, and the Class II railroad, Class III railroad, or other eligible taxpayer wants to apply the temporary regulations to that taxable year but did not include with that return the applicable information statement specified above, the regulations require the information statement to be attached to the taxpayer's next filed Federal income tax return or to the taxpayer's amended Federal income tax return filed pursuant to the effective date provisions in the temporary regulations (discussed later), provided this amended return is filed before the taxpayer's next filed Federal income tax return. The temporary regulations also address situations in which a Class II railroad or Class III railroad (assignor) assigns more miles of eligible railroad track than the total number of miles that it owns or that are leased to it at the end of the taxable year in which the assignment is made. If the assignor does not own or have leased to it any eligible railroad track at the end of that year, the temporary regulations provide that any assignment made during that year is not valid, regardless of whether the assignment is properly reported. Similarly, if an assignor assigns more miles of eligible railroad track than it owned or are leased to it as of the end of the taxable year in which the assignment is made, the temporary regulations provide that the assignment is valid only with respect to the name of the assignee and the number of miles listed by the assignor on the information statement attached to its Form 8900 for that year and only to the extent of the maximum number of miles of eligible railroad track that may be assigned by the assignor Class II railroad or Class III railroad for the taxable year. Special Rules The temporary regulations provide rules for adjusting basis for the amount of the RTMC claimed by an eligible taxpayer. All or some of the QRTME paid or incurred by an eligible taxpayer during the taxable year may be required to be capitalized under section 263(a) as a tangible asset or as an intangible asset (see, for example, § 1.263(a)-4(d)(8), which generally requires capitalization of amounts paid or incurred by a taxpayer to produce or improve real property owned by another). The basis of the tangible asset or intangible asset includes the capitalized amount of the QRTME. Thus, for purposes of section 45G(e)(3), the regulations provide that railroad track is qualifying railroad structure (railroad track, roadbed, bridges, and related track structures) and intangible assets to which the QRTME is capitalized. Consequently, if an eligible taxpayer claims the RTMC, the temporary regulations provide that the adjusted basis of these tangible and intangible assets must be reduced by the amount of the RTMC allowable. This reduction is taken into account at the time the QRTME is paid or incurred by an eligible taxpayer and before the depreciation deduction is determined for the taxable year for which the RTMC is allowable. If the amount of the QRTME is capitalized to more than one asset (for example, railroad track and bridges), whether tangible or intangible, the reduction to the basis of these assets is allocated among each of the assets subject to the reduction in proportion to the unadjusted basis of each asset at the time the QRTME is paid or incurred during that taxable year. The temporary regulations also address the issue of how section 45G coordinates with section 61. Except as specifically provided in the Code, section 61 and § 1.61-1(a) provide that gross income means all income from whatever source derived. Section 1.61-1(a) further provides that gross income includes income realized in any form, whether in money, property, or services. Section 45G does not provide, and its legislative history does not refer to, any exception to this rule. Accordingly, pursuant to section 61 and the regulations under section 61, the owner of the tangible assets (for example, railroad track and roadbed) with respect to which the QRTME is paid or incurred by another person that does not have a depreciable interest in those assets has gross income in the amount of that QRTME. However, the application of section 61 to QRTME paid or incurred with respect to eligible railroad track that is leased by a Class II railroad or Class III railroad raises a question as to under what circumstances the owner or lessee should recognize gross income with respect to QRTME. The IRS and Treasury Department request comments on this issue. Finally, if an eligible taxpayer is a member of a controlled group of corporations, section 45G(e)(2) provides that rules similar to rules of section 41(f)(1) apply. Accordingly, the temporary regulations provide rules similar to those of § 1.41-6T for determining the amount of the controlled group's RTMC, and rules for allocating the credit among members of the group. Effective Date These temporary regulations apply to taxable years ending on or after the date these regulations are filed in the **Federal Register** and beginning before January 1, 2008. However, a taxpayer may apply the temporary regulations to taxable years beginning after December 31, 2004, and ending before these regulations are filed in the **Federal Register** , provided that the taxpayer applies all provisions in these regulations to the taxable year. Special Analyses It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the Special Analyses section of the preamble to the cross-reference notice of proposed rulemaking published in the Proposed Rules section in this issue of the **Federal Register** . Pursuant to section 7805(f), these temporary regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Drafting Information The principal author of these regulations is Winston H. Douglas, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 602 Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR parts 1 and 602 are amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 1.45G-0T is added to read as follows: § 1.45G-0T Table of contents for the railroad track maintenance credit rules (temporary). This section lists the major paragraphs contained in § 1.45G-1T. § 1.45G-1T Railroad track maintenance credit (temporary).

(a)In general.

(b)Definitions.

(1)Class II railroad and Class III railroad.

(2)Eligible railroad track.

(3)Eligible taxpayer.

(4)Qualifying railroad structure.

(5)Qualified railroad track maintenance expenditures.

(6)Rail facilities.

(7)Railroad-related property.

(8)Railroad-related services.

(9)Railroad track.

(10)Form 8900.

(11)Examples.

(c)Determination of amount of railroad track maintenance credit for the taxable year.

(1)General amount.

(2)Limitation on the credit.

(i)Eligible taxpayer is a Class II railroad or Class III railroad.

(ii)Eligible taxpayer is not a Class II railroad or Class III railroad.

(iii)Effect of double track.

(3)Determination of amount of QRTME paid or incurred.

(i)In general.

(ii)Effect of reimbursements.

(4)Examples.

(d)Assignment of track miles.

(1)In general.

(2)Assignment eligibility.

(3)Effective date of assignment.

(4)Assignment information statement.

(i)In general.

(ii)Assignor.

(iii)Assignee.

(iv)Special rule for 2005 returns.

(5)Special rules.

(i)Effect of subsequent dispositions of eligible railroad track during the assignment year.

(ii)Effect of multiple assignments of eligible railroad track miles during the same taxable year.

(6)Examples.

(e)Special rules.

(1)Adjustments to basis.

(i)In general.

(ii)Basis adjustment made to railroad track.

(iii)Examples.

(2)Coordination with section 61.

(f)Controlled groups.

(1)In general.

(2)Definitions.

(i)Trade or business.

(ii)Group and controlled group.

(iii)Group credit.

(iv)Consolidated group.

(v)Credit year.

(3)Computation of the group credit.

(4)Allocation of the group credit.

(i)In general.

(ii)Stand-alone entity credit.

(5)Special rules for consolidated groups.

(i)In general.

(ii)Special rule for allocation of group credit among consolidated group members.

(6)Tax accounting periods used.

(i)In general.

(ii)Special rule when timing of QRTME is manipulated.

(7)Membership during taxable year in more than one group.

(8)Intra-group transactions.

(i)In general.

(ii)Payment for QRTME.

(g)Effective date.

(1)In general.

(2)Application of regulation project REG-142270-05 to pre-effective date.

(3)Special rules for 2005 returns. **Par. 3.** Section 1.45G-1T is added to read as follows: § 1.45G-1T Railroad track maintenance credit (temporary).

(a)*In general.* For purposes of section 38, the railroad track maintenance credit

(RTMC)for qualified railroad track maintenance expenditures (QRTME) paid or incurred by an eligible taxpayer during the taxable year is determined under this section. A taxpayer claiming the RTMC must do so by filing Form 8900, “Qualified Railroad Track Maintenance Credit,” with its timely filed (including extensions) Federal income tax return for the taxable year for which the RTMC is claimed. Paragraph

(b)of this section provides definitions of terms. Paragraph

(c)of this section provides rules for computing the RTMC, including rules regarding limitations on the amount of the credit. Paragraph

(d)of this section provides rules for assigning miles of railroad track. Paragraph

(e)of this section contains special rules. Paragraph

(f)of this section contains rules for computing the amount of the RTMC in the case of a controlled group, and for the allocation of the group credit among members of the controlled group.

(b)*Definitions.* For purposes of section 45G and this section, the following definitions apply:

(1)*Class II railroad and Class III railroad* have the respective meanings given to these terms by the Surface Transportation Board (STB).

(2)*Eligible railroad track* is railroad track located within the United States that is owned or leased by a Class II railroad or Class III railroad at the close of its taxable year. For purposes of section 45G and this section, a Class II railroad or Class III railroad owns railroad track if the railroad track is subject to the allowance for depreciation under section 167 by the Class II railroad or Class III railroad.

(3)*Eligible taxpayer* is—

(i)A Class II railroad or Class III railroad during the taxable year;

(ii)Any person that transports property using the rail facilities of a Class II railroad or Class III railroad during the taxable year, but only with respect to the miles of eligible railroad track assigned to the person for that taxable year by that Class II railroad or Class III railroad under paragraph

(d)of this section; or

(iii)Any person that furnishes railroad-related property or railroad-related services to a Class II railroad or Class III railroad during the taxable year, but only with respect to the miles of eligible railroad track assigned to the person for that taxable year by that Class II railroad or Class III railroad under paragraph

(d)of this section.

(4)*Qualifying railroad structure* is property located within the United States that is described in the following STB property accounts in 49 CFR part 1201, subpart A:

(i)Property Account 3, Grading.

(ii)Property Account 4, Other right-of-way expenditures.

(iii)Property Account 5, Tunnels and subways.

(iv)Property Account 6, Bridges, trestles, and culverts.

(v)Property Account 7, Elevated structures.

(vi)Property Account 8, Ties.

(vii)Property Account 9, Rails and other track material.

(viii)Property Account 11, Ballast.

(ix)Property Account 13, Fences, snowsheds, and signs.

(x)Property Account 27, Signals and interlockers.

(xi)Property Account 39, Public improvements; construction.

(5)*Qualified railroad track maintenance expenditures (QRTME)* are expenditures for maintaining, repairing, and improving qualifying railroad structure that is owned or leased as of January 1, 2005, by a Class II railroad or Class III railroad. These expenditures may or may not be chargeable to a capital account.

(6)*Rail facilities* of a Class II railroad or Class III railroad are railroad yards, tracks, bridges, tunnels, wharves, docks, stations, and other related assets that are used in the transport of freight by a railroad and that are owned or leased by the Class II railroad or Class III railroad.

(7)*Railroad-related property* is property that is provided directly to, and is unique to, a railroad and that, in the hands of a Class II railroad or Class III railroad, is described in—

(i)The STB property accounts 3, Grading; 5, Tunnels and subways; and 22, Storage warehouses, in 49 CFR part 1201, subpart A; and

(ii)Asset classes 40.1 through 40.54 in the guidance issued by the Internal Revenue Service under section 168(i)(1) (for further guidance, for example, see Rev. Proc. 87-56 (1987-2 CB 674), and § 601.601(d)(2)(ii)( *b* ) of this chapter), except that any office building, any passenger train car, and any miscellaneous structure if such structure is not provided directly to, and is not unique to, a railroad are excluded from the definition of railroad-related property.

(8)*Railroad-related services* are services that are provided directly to, and are unique to, a railroad and that relate to railroad shipping, loading and unloading of railroad freight, or repairs of rail facilities or railroad-related property. Examples of railroad-related services are the transport of freight by rail; the loading and unloading of freight transported by rail; railroad bridge services; railroad track construction; providing railroad track material or equipment; locomotive leasing or rental; maintenance of railroad's right-of-way (including vegetation control); piggyback trailer ramping; rail deramping services; and freight train cars repair services. Examples of services that are not railroad-related services are general business services, such as, accounting and bookkeeping, marketing, legal services; cleaning services; office building rental; banking services (including financing of railroad-related property); and purchasing of, or services performed on, property not described in paragraph (b)(7) of this section.

(9)Except as provided in paragraph (e)(1) of this section, *railroad track* is property described in STB property accounts 8 (ties), 9 (rails and other track material), and 11 (ballast) in 49 CFR part 1201, subpart A.

(10)*Form 8900.* If Form 8900 is revised or renumbered, any reference in this section to that form shall be treated as a reference to the revised or renumbered form.

(11)*Examples.* The application of this paragraph

(b)is illustrated by the following examples. In all examples, the taxpayers use a calendar taxable year, and are not members of a controlled group: Example 1. A is a manufacturer that in 2006, transports its products by rail using the railroad tracks owned by B, a Class II railroad that owns 500 miles of railroad track within the United States on December 31, 2006. B properly assigns for purposes of section 45G 100 miles of eligible railroad track to A in 2006. A is an eligible taxpayer for 2006 with respect to the 100 miles of eligible railroad track. Example 2. C is a bank that loans money to several Class III railroads. In 2006, C loans money to D, a Class III railroad, who in turn uses the loan proceeds to purchase track material. Because providing loans is not a service that is unique to a railroad, C is not providing railroad-related services and, thus, C is not an eligible taxpayer, even if D assigns miles of eligible railroad track to C for purposes of section 45G. Example 3. E leases locomotives directly to Class I, Class II, and Class III railroads. In 2006, E leases locomotives to F, a Class II railroad that owns 200 miles of railroad track within the United States on December 31, 2006. F properly assigns for purposes of section 45G 200 miles of eligible railroad track to E. Because locomotives are property that is unique to a railroad, and E leases these locomotives directly to F in 2006, E is an eligible taxpayer for 2006 with respect to the 200 miles of eligible railroad track assigned to E by F.

(c)*Determination of amount of railroad track maintenance credit for the taxable year* —(1) *General amount.* Except as provided in paragraph (c)(2) of this section, for purposes of section 38, the RTMC determined under section 45G(a) for the taxable year is equal to 50 percent of the QRTME paid or incurred (as determined under paragraph (c)(3) of this section) by an eligible taxpayer during the taxable year.

(2)*Limitation on the credit* —(i) *Eligible taxpayer is a Class II railroad or Class III railroad.* If an eligible taxpayer is a Class II railroad or Class III railroad, the RTMC determined under paragraph (c)(1) of this section for the Class II railroad or Class III railroad for any taxable year must not exceed $3,500 multiplied by the sum of—

(A)The number of miles of eligible railroad track owned or leased by the Class II railroad or Class III railroad, reduced by the number of miles of eligible railroad track assigned under paragraph

(d)of this section by the Class II railroad or Class III railroad to another eligible taxpayer for that taxable year; and

(B)The number of miles of eligible railroad track owned or leased by another Class II railroad or Class III railroad that are assigned under paragraph

(d)of this section to the Class II railroad or Class III railroad for the taxable year.

(ii)*Eligible taxpayer is not a Class II railroad or Class III railroad.* If an eligible taxpayer is not a Class II railroad or Class III railroad, the RTMC determined under paragraph (c)(1) of this section for the eligible taxpayer for any taxable year must not exceed $3,500 multiplied by the number of miles of eligible railroad track assigned under paragraph

(d)of this section by a Class II railroad or Class III railroad to the eligible taxpayer for the taxable year.

(iii)*Effect of double track.* For purposes of this paragraph (c)(2), double track is treated as multiple lines of railroad track, rather than as a single line of railroad track. Thus, one mile of single track is one mile, but one mile of double track is two miles.

(3)*Determination of amount of QRTME paid or incurred* —(i) *In general.* The term *paid or incurred* means, in the case of a taxpayer using an accrual method of accounting, a liability incurred (within the meaning of § 1.446-1(c)(1)(ii)). A liability may not be taken into account under section 45G and this section prior to the taxable year during which the liability is incurred.

(ii)*Effect of reimbursements.* The amount of QRTME treated as paid or incurred during the taxable year shall be reduced by any amount to which the taxpayer is entitled to be reimbursed, directly or indirectly, whether or not such reimbursement takes place during the taxable year in which the QRTME is, but for this sentence, paid or incurred by the taxpayer. Examples of indirect reimbursements include discounted freight shipping rates, markup of the price for track materials, and debt forgiveness. Similarly, any amount that an eligible taxpayer (assignee) pays a Class II railroad or Class III railroad (assignor) in exchange for an assignment of one or more miles of eligible railroad track under paragraph

(d)of this section, is treated, for purposes of this section, as QRTME paid or incurred by the assignee, and not by the assignor, at the time and to the extent the assignor pays or incurs QRTME.

(4)*Examples.* The application of this paragraph

(c)is illustrated by the following examples. In all examples, the taxpayers use an accrual method of accounting and a calendar taxable year, and are not members of a controlled group: Example 1. *Computation of RTMC; section 45G credit limitation is not exceeded.*

(i)G is a Class II railroad that owns or has leased to it 1,000 miles of railroad track within the United States on December 31, 2006. H is a manufacturer that in 2006, transports its products by rail using the rail facilities of G. In 2006, for purposes of section 45G, G assigns 100 miles of eligible railroad track to H and does not make any other assignments of railroad track miles. H did not receive any other assignments of railroad track miles in 2006. During 2006, G incurred QRTME in the amount of $2.5 million and H incurred QRTME in the amount of $200,000.

(ii)For 2006, G determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $1,250,000 (50% multiplied by $2,500,000 QRTME incurred by G during 2006). G further determines G's credit limitation under paragraph (c)(2)(i) of this section for 2006 to be $3,150,000 ($3,500 multiplied by 900 miles of eligible railroad track (1,000 miles owned by, or leased to, G on December 31, 2006, less 100 miles assigned by G to H in 2006)). Because G's tentative amount of RTMC does not exceed G's credit limitation amount for 2006, G may claim a RTMC for 2006 in the amount of $1,250,000.

(iii)For 2006, H determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $100,000 (50% multiplied by $200,000 QRTME incurred by H during 2006). H further determines H's credit limitation under paragraph (c)(2)(ii) of this section for 2006 to be $350,000 ($3,500 multiplied by 100 miles of eligible railroad track assigned by G to H in 2006). Because H's tentative amount of RTMC does not exceed H's credit limitation amount for 2006, H may claim a RTMC in the amount of $100,000. Example 2. *Computation of RTMC; section 45G credit limitation is exceeded.*

(i)The facts are the same as in *Example 1,* except that G assigned for purposes of section 45G only 50 miles of railroad track to H in 2006 and, during 2006, H incurred QRTME in the amount of $400,000.

(ii)For 2006, G determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $1,250,000 (50% multiplied by $2,500,000 QRTME incurred by G during 2006). G further determines G's credit limitation under paragraph (c)(2)(i) of this section for 2006 to be $3,325,000 ($3,500 multiplied by 950 miles of eligible railroad track (1,000 miles owned by, or leased to, G on December 31, 2006, less 50 miles assigned by G to H in 2006)). Because G's tentative amount of RTMC does not exceed G's credit limitation amount for 2006, G may claim a RTMC in the amount of $1,250,000.

(iii)For 2006, H determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $200,000 (50% multiplied by $400,000 QRTME incurred by H during 2006). H further determines H's credit limitation under paragraph (c)(2)(ii) of this section for 2006 to be $175,000 ($3,500 multiplied by 50 miles of eligible railroad track assigned by G to H in 2006). Because H's tentative amount of RTMC exceeds H's credit limitation amount for 2006, H may claim a RTMC in the amount of $175,000 (the credit limitation amount). There is no carryover of the amount of $25,000 (the tentative amount of $200,000 less the credit limitation amount of $175,000). Example 3. *Railroad track miles assigned for payment.*

(i)J is a Class II railroad that owns or has leased to it 1,000 miles of railroad track within the United States on December 31, 2006. K is a corporation that sells ties, ballast, and other track material to Class I, Class II, and Class III railroads. During 2006, K sold these items to J and J incurred QRTME in the amount of $1 million. Also, on December 6, 2006, J assigned for purposes of section 45G 150 miles of eligible railroad track to K and K paid J $800,000 for that assignment. K did not pay or incur any QRTME during 2006.

(ii)For 2006, in accordance with paragraph (c)(3)(ii) of this section, J is treated as having incurred QRTME in the amount of $200,000 ($1 million QRTME actually incurred by J less the $800,000 paid by K to J for the assignment of the railroad track miles in 2006). For 2006, J determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $100,000 (50% multiplied by $200,000 QRTME treated as incurred by J during 2006). J further determines J's credit limitation amount under paragraph (c)(2)(i) of this section for 2006 to be $2,975,000 ($3,500 multiplied by 850 miles of eligible railroad track (1,000 miles owned by, or leased to, J on December 31, 2006, less 150 miles assigned by J to K in 2006)). Because J's tentative amount of RTMC does not exceed J's credit limitation amount for 2006, J may claim a RTMC in the amount of $100,000.

(iii)For 2006, K is an eligible taxpayer because, during 2006, K provided railroad-related property to J and received an assignment of eligible railroad track miles from J. Under paragraph (c)(3)(ii) of this section, K is treated as having incurred QRTME in the amount of $800,000 (the amount paid by K to J for the assignment of the railroad track miles in 2006). For 2006, K determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $400,000 (50% multiplied by $800,000 QRTME treated as incurred by K during 2006). K further determines K's credit limitation amount under paragraph (c)(2)(ii) of this section for 2006 to be $525,000 ($3,500 multiplied by 150 miles of eligible railroad track assigned by J in 2006). Because K's tentative amount of RTMC does not exceed K's credit limitation amount for 2006, K may claim a RTMC in the amount of $400,000. Example 4. *Reimbursement of QRTME.*

(i)L is a Class III railroad that owns or has leased to it 500 miles of railroad track within the United States on December 31, 2006. M is a manufacturer that in 2006 transports its products by rail using the rail facilities of L. During 2006, L did not incur any QRTME. Also, in 2006, L assigned for purposes of section 45G 200 miles of eligible railroad track to M and agreed to reduce L's freight shipping rates to M by $250,000 in exchange for M upgrading these railroad track miles. Consequently, during 2006, M incurred QRTME of $500,000 to upgrade these 200 miles of railroad track and L reduced L's freight shipping rates for M by $250,000.

(ii)For 2006, M is an eligible taxpayer because, during 2006, M transported property using the rail facilities of L and received an assignment of eligible railroad track miles from L. Under paragraph (c)(3)(ii) of this section, the amount of QRTME paid or incurred by M during 2006 is $250,000 ($500,000 QRTME actually incurred by M, less the reimbursement of $250,000 by L to M). For 2006, M determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $125,000 (50% multiplied by $250,000 QRTME incurred by M during 2006). M further determines M's credit limitation amount under paragraph (c)(2)(ii) of this section for 2006 to be $700,000 ($3,500 multiplied by 200 miles of eligible railroad track assigned by L to M in 2006). Because M's tentative amount of RTMC does not exceed M's credit limitation amount for 2006, M may claim a RTMC in the amount of $125,000.

(d)*Assignment of track miles* —(1) *In general.* An assignment of any mile of eligible railroad track under this paragraph

(d)is a designation by a Class II railroad or Class III railroad that is made solely for purposes of section 45G and this section of a specific number of miles of eligible railroad track as being assigned to another eligible taxpayer for a taxable year. A designation must be in writing and must include the name and taxpayer identification number of the assignee, and the information required under the rules of paragraph (d)(4)(iii)(B) of this section. A designation requires no transfer of legal title or other indicia of ownership of the eligible railroad track, and need not specify the location of any assigned mile of eligible railroad track. Further, an assigned mile of eligible railroad track need not correspond to any specific mile of eligible railroad track with respect to which the eligible taxpayer actually pays or incurs the QRTME. For purposes of this paragraph (d), double track is treated as multiple lines of railroad track, rather than as a single line of railroad track. Thus, one mile of single track is one mile, but one mile of double track is two miles.

(2)*Assignment eligibility.* Only a Class II railroad or Class III railroad may assign a mile of eligible railroad track. If a Class II railroad or Class III railroad assigns a mile of eligible railroad track to an eligible taxpayer, the assignee is not permitted to reassign any mile of eligible railroad track to another eligible taxpayer. The maximum number of miles of eligible railroad track that may be assigned by a Class II railroad or Class III railroad for any taxable year is its total miles of eligible railroad track less the miles of eligible railroad track that the Class II railroad or Class III railroad retains for itself in determining its RTMC for the taxable year.

(3)*Effective date of assignment.* If a Class II railroad or Class III railroad assigns a mile of eligible railroad track, the assignment is treated as being made by the Class II railroad or Class III railroad at the close of its taxable year in which the assignment was made. With respect to the assignee, the assignment of a mile of eligible railroad track is taken into account for the taxable year of the assignee that includes the date the assignment is treated as being made by the assignor Class II railroad or Class III railroad under this paragraph (d)(3).

(4)*Assignment information statement* —(i) *In general.* A taxpayer must file Form 8900, “Qualified Railroad Track Maintenance Credit,” with its timely filed (including extensions) Federal income tax return for the taxable year for which the taxpayer assigns any mile of eligible railroad track, even if the taxpayer is not itself claiming the RTMC for that taxable year.

(ii)*Assignor.* Except as provided in paragraph (d)(4)(iv) of this section, a Class II railroad or Class III railroad (assignor) that assigns one or more miles of eligible railroad track during a taxable year to one or more eligible taxpayers must attach to the assignor's Form 8900 for that taxable year an information statement providing—

(A)The name and taxpayer identification number of each assignee;

(B)The total number of miles of the assignor's eligible railroad track;

(C)The number of miles of eligible railroad track assigned by the assignor to each assignee for the taxable year; and

(D)The total number of miles of eligible railroad track assigned by the assignor to all assignees for the taxable year.

(iii)*Assignee.* Except as provided in paragraph (d)(4)(iv) of this section, an eligible taxpayer (assignee) that has received an assignment of miles of eligible railroad track during its taxable year from a Class II railroad or Class III railroad, and that claims the RTMC for that taxable year, must attach to the assignee's Form 8900 for that taxable year a statement—

(A)Providing the total number of miles of eligible railroad track assigned to the assignee for the assignee's taxable year; and

(B)Attesting that the assignee has in writing, and has retained as part of the assignee's records for purposes of § 1.6001-1(a), the following information from each assignor: ( *1* ) The name and taxpayer identification number of each assignor; ( *2* ) The date of each assignment made by each assignor (as determined under paragraph (d)(3) of this section) to the assignee; and ( *3* ) The number of miles of eligible railroad track assigned by each assignor to the assignee for the assignee's taxable year.

(iv)*Special rule for 2005 returns.* If an eligible taxpayer's Federal income tax return for a taxable year beginning after December 31, 2004, and ending before September 7, 2006, is filed before October 10, 2006, and the eligible taxpayer wants to apply paragraph (g)(2) of this section but did not include with that return the information specified in paragraph (d)(4)(ii) or

(iii)of this section, as applicable, the eligible taxpayer must attach a statement containing the information specified in paragraph (d)(4)(ii) or

(iii)of this section, as applicable, to either—

(A)The eligible taxpayer's next filed original Federal income tax return; or

(B)The eligible taxpayer's amended Federal income tax return that is filed pursuant to paragraph (g)(2) of this section, provided that amended Federal income tax return is filed by the eligible taxpayer before its next filed original Federal income tax return.

(5)*Special rules* —(i) *Effect of subsequent dispositions of eligible railroad track during the assignment year.* If a Class II railroad or Class III railroad assigns one or more miles of eligible railroad track that it owned or leased as of the actual date of the assignment, but does not own or lease any eligible railroad track at the close of the taxable year in which the assignment is made by the Class II railroad or Class III railroad, the assignment is not valid for that taxable year for purposes of section 45G and this section.

(ii)*Effect of multiple assignments of eligible railroad track miles during the same taxable year.* If a Class II railroad or Class III railroad assigns more miles of eligible railroad track than it owned or leased as of the close of the taxable year in which the assignment is made by the Class II railroad or Class III railroad, the assignment is valid for purposes of section 45G and this section only with respect to the name of the assignee and the number of miles listed by the assignor Class II railroad or Class III railroad on the statement required under paragraph (d)(4)(ii) of this section and only to the extent of the maximum miles of eligible railroad track that may be assigned by the assignor Class II railroad or Class III railroad as determined under paragraph (d)(2) of this section. If the total number of miles on this statement exceeds the maximum miles of eligible railroad track that may be assigned by the assignor Class II railroad or Class III railroad (as determined under paragraph (d)(2) of this section), the total number of miles on the statement shall be reduced by the excess amount of miles. This reduction is allocated among each assignee listed on the statement in proportion to the total number of miles listed on the statement for that assignee.

(6)*Examples.* The application of this paragraph

(d)is illustrated by the following examples. In none of the examples are the taxpayers members of a controlled group: Example 1. *Assignor and assignee have the same taxable year.*

(i)N, a calendar year taxpayer, is a Class II railroad that owns 500 miles of railroad track within the United States on December 31, 2006. O, a calendar year taxpayer, is not a railroad, but is a taxpayer that provides railroad-related property to N during 2006. On November 7, 2006, N assigns for purposes of section 45G 300 miles of eligible railroad track to O. O receives no other assignment of eligible railroad track in 2006. O pays or incurs QRTME in the amount of $100,000 in November 2006, and $50,000 in February 2007. N and O each file Form 8900 with their timely filed Federal income tax returns for 2006 and attach the statement required by paragraph (d)(4)(ii) and (iii), respectively, of this section reporting the assignment of the 300 miles of eligible railroad track to O.

(ii)The assignment of the 300 miles of eligible railroad track made by N to O on November 7, 2006, is treated as made on December 31, 2006 (at the close of the N's taxable year). Consequently, the assignment is taken into account by O for O's taxable year ending on December 31, 2006. For 2006, O is an eligible taxpayer because, during 2006, O provides railroad-related property to N and receives an assignment of 300 eligible railroad track miles from N. For 2006, O determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $50,000 (50% multiplied by $100,000 QRTME paid or incurred by O during 2006). O further determines the credit limitation amount under paragraph (c)(2)(i) of this section for 2006 to be $1,050,000 ($3,500 multiplied by 300 miles of eligible railroad track assigned by N to O on December 31, 2006). Because O's tentative amount of RTMC does not exceed O's credit limitation amount for 2006, O may claim a RMTC for 2006 in the amount of $50,000. Example 2. *Assignor and assignee have different taxable years.*

(i)The facts are the same as in *Example 1,* except that O's taxable year ends on March 31.

(ii)The assignment of the 300 miles of eligible railroad track made by N to O on November 7, 2006, is treated as made on December 31, 2006. As a result, the assignment is taken into account by O for O's taxable year ending on March 31, 2007. Thus, for the taxable year ending on March 31, 2007, O determines the tentative amount of RMTC under paragraph (c)(1) of this section to be $75,000 (50% multiplied by $150,000 QRTME incurred by O during its taxable year ending March 31, 2007). Because O's tentative amount of RTMC does not exceed O's credit limitation amount for 2006, O may claim a RMTC for 2006 in the amount of $75,000. Example 3. *Assignment location differs from QRTME location.*

(i)P, a calendar-year taxpayer, is a Class III railroad that owns or has leased to it 200 miles of railroad track within the United States on December 31, 2006. P owns 50 miles of this railroad track and leases 150 miles of this railroad track from Q, a Class I railroad. On February 8, 2006, P assigns for purposes of section 45G 50 miles of eligible railroad track to R. R is not a railroad, but is a taxpayer that ships products using the 50 miles of eligible railroad track owned by P, and R paid $100,000 in 2006 to P to enable P to upgrade these 50 miles of eligible railroad track. In March 2006, P also assigns for purposes of section 45G 150 miles of eligible railroad track to S. S is not a railroad, but is a taxpayer that provides railroad-related property to P, and S paid $400,000 to P to enable P to upgrade P's 200 miles of eligible railroad track. For 2006, P pays or incurs QRTME in the amount of $500,000 to upgrade the 150 miles of eligible railroad track that it leases from Q and pays or incurs no QRTME on the 50 miles of eligible railroad track that it owns. For 2006, P receives no other assignment of eligible railroad track miles and did not retain any eligible railroad track miles for itself. Also, R and S do not pay or incur any other amounts that would qualify as QRTME during 2006. P, R, and S each file Form 8900 with their timely filed Federal income tax returns for 2006 and attach the statement required by paragraph (d)(4)(ii) or

(iii)of this section, whichever applies, reporting the assignment of eligible railroad track by P to R or S in 2006.

(ii)For 2006, in accordance with paragraph (c)(3)(ii) of this section, P is treated as having incurred QRTME in the amount of $0 ($500,000 QRTME actually incurred by P less the $100,000 paid by R to P for the assignment of the 50 miles of eligible railroad track and the $400,000 paid by S to P for the assignment of the 150 miles of eligible railroad track). Further, P assigned all of its eligible railroad track miles to R and S for 2006. Accordingly, for 2006, P may not claim any RTMC.

(iii)For 2006, R is an eligible taxpayer because, during 2006, R ships property using the rail facilities of P and receives an assignment of 50 eligible railroad track miles from P. In accordance with paragraph (c)(3)(ii) of this section, R is treated as having incurred QRTME in the amount of $100,000 (the amount paid by R to P for the assignment of the eligible railroad track miles in 2006) even though no work was performed on the 50 miles of eligible railroad track that was assigned by P to R. For 2006, R determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $50,000 (50% multiplied by $100,000 QRTME treated as incurred by R during 2006). R further determines the credit limitation amount under paragraph (c)(2)(ii) of this section to be $175,000 ($3,500 multiplied by 50 miles of eligible railroad track assigned by P to R in 2006). Because R's tentative amount of RTMC does not exceed R's credit limitation amount for 2006, R may claim a RTMC for 2006 in the amount of $50,000.

(iv)For 2006, S is an eligible taxpayer because, during 2006, S provides railroad-related property to P and receives an assignment of 150 eligible railroad track miles from P. In accordance with paragraph (c)(3)(ii) of this section, S is treated as having incurred QRTME in the amount of $400,000 (amount paid by S to P for the assignment of the eligible railroad track miles in 2006). For 2006, S determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $200,000 (50% multiplied by $400,000 QRTME treated as incurred by S during 2006). S further determines the credit limitation amount under paragraph (c)(2)(ii) of this section to be $525,000 ($3,500 multiplied by 150 miles of eligible railroad track assigned by P to S in 2006). Because S's tentative amount of RTMC does not exceed S's credit limitation amount for 2006, S may claim a RTMC for 2006 in the amount of $200,000. Example 4. *Multiple assignments of track miles.*

(i)T, a calendar-year taxpayer, is a Class III railroad that owns or has leased to it 200 miles of railroad track within the United States on December 31, 2006. T owns 75 miles of this railroad track and leases 125 miles of this railroad track from U, a Class I railroad. V and W are not railroads, but are both taxpayers that provide railroad-related services to T during 2006. On January 15, 2006, T assigns for purposes of section 45G 200 miles of eligible railroad track to V. V agrees to incur, in 2006, $1.4 million of QRTME to upgrade a portion of/segment of these 200 miles of eligible railroad track. Due to unexpected financial difficulties, V only incurs $250,000 of QRTME during 2006 and on May 15, 2006, T learns that V is unable to incur the remainder of the QRTME. On June 15, 2006, T assigns for purposes of section 45G the 200 miles of railroad track to W. In 2006, W incurs $1,100,000 of QRTME to upgrade a portion of/segment of the railroad track. For 2006, T receives no other assignment of eligible railroad track miles and did not retain any eligible railroad track miles for itself. V and W do not receive any other assignments of miles of eligible railroad track miles from a Class II railroad or Class III railroad during 2006. T and W each file Form 8900 with their timely filed Federal income tax returns for 2006, and attach the statement required by paragraph (d)(4)(ii) and (iii), respectively, of this section, reporting the assignment of 200 miles of eligible railroad track to W.

(iii)For 2006, W is an eligible taxpayer because, during 2006, W provides railroad-related services to T and receives an assignment of 200 eligible railroad track miles from T. W determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $550,000 (50% multiplied by $1,100,000 QRTME incurred by W during 2006). W further determines the credit limitation amount under paragraph (c)(2)(ii) of this section to be $700,000 ($3,500 multiplied by the 200 miles of eligible railroad track assigned by T to W in 2006). Because W's tentative amount of RTMC does not exceed W's credit limitation amount for 2006, W may claim a RTMC for 2006 in the amount of $550,000. Example 5. *Multiple assignments of track miles.*

(i)Same facts as in *Example 4* , except T, to its Form 8900 for 2006, attaches the statement required by paragraph (d)(4)(ii) of this section assigning 200 miles of eligible railroad track to W and 200 miles of eligible railroad track to V.

(ii)Because T did not retain any miles of eligible railroad track for itself for 2006, the maximum miles of eligible railroad track that may be assigned by T for 2006 is 200 miles pursuant to paragraph (d)(2) of this section. However, on the statement required by paragraph (d)(4)(ii) of this section, T assigned a total of 400 miles of eligible railroad track (200 miles to W and 200 miles to V). Consequently, the 400 miles of eligible railroad track on this statement must be reduced to the 200 maximum miles of eligible railroad track available for assignment for 2006. Because the statement reports 200 miles of eligible railroad track assigned to each W and V, the reduction of 200 miles (400 total miles of eligible railroad track on the statement less 200 maximum miles of eligible railroad track available for assignment) is allocated pro-rata between W and V and, therefore, 100 miles each to W and V. Thus, pursuant to paragraph (d)(5)(ii) of this section, the number of miles of eligible railroad track assigned by T to W and V for 2006 is 100 miles each.

(iii)For 2006, V is an eligible taxpayer because, during 2006, V provides railroad-related services to T and receives an assignment of 100 eligible railroad track miles from T. V determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $125,000 (50% multiplied by $250,000 QRTME incurred by V during 2006). V further determines the credit limitation amount under paragraph (c)(2)(ii) of this section to be $350,000 ($3,500 multiplied by the 100 miles of eligible railroad track assigned by T to V in 2006). Because V's tentative amount of RTMC does not exceed W's credit limitation amount for 2006, V may claim a RTMC for 2006 in the amount of $125,000.

(iv)For 2006, W is an eligible taxpayer because, during 2006, W provides railroad-related services to T and receives an assignment of 100 eligible railroad track miles from T. W determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $550,000 (50% multiplied by $1,100,000 QRTME incurred by W during 2006). W further determines the credit limitation amount under paragraph (c)(2)(ii) of this section to be $350,000 ($3,500 multiplied by the 100 miles of eligible railroad track assigned by T to W in 2006). Because W's tentative amount of RTMC exceeds W's credit limitation amount for 2006, W may claim a RTMC for 2006 in the amount of $350,000 (the credit limitation). There is no carryover of the amount of $200,000 (the tentative amount of $550,000 less the credit limitation amount of $350,000).

(e)*Special rules* —(1) *Adjustments to basis* —(i) *In general.* All or some of the QRTME paid or incurred by an eligible taxpayer during the taxable year may be required to be capitalized under section 263(a) as a tangible asset or as an intangible asset. See, for example, § 1.263(a)-4(d)(8), which requires capitalization of amounts paid or incurred by a taxpayer to produce or improve real property owned by another (except to the extent the taxpayer is selling services at fair market value to produce or improve the real property) if the real property can reasonably be expected to produce significant economic benefits for the taxpayer. The basis of the tangible asset or intangible asset includes the capitalized amount of the QRTME.

(ii)*Basis adjustment made to railroad track.* An eligible taxpayer must reduce the adjusted basis of any railroad track with respect to which the eligible taxpayer claims the RTMC. For purposes of section 45G(e)(3) and this paragraph (e)(1), the adjusted basis of any railroad track with respect to which the eligible taxpayer claims the RTMC is limited to the amount of QRTME, if any, that is required to be capitalized into the qualifying railroad structure or an intangible asset. The adjusted basis of the railroad track is reduced by the amount of the RTMC allowable (as determined under paragraph

(c)of this section) by the eligible taxpayer for the taxable year, but not below zero. This reduction is taken into account at the time the QRTME is paid or incurred by an eligible taxpayer and before the depreciation deduction with respect to such railroad track is determined for the taxable year for which the RTMC is allowable. If all or some of the QRTME paid or incurred by an eligible taxpayer during the taxable year is capitalized under section 263(a) to more than one asset, whether tangible or intangible (for example, railroad track and bridges), the reduction to the basis of these assets under this paragraph (e)(1)(ii) is allocated among each of the assets subject to the reduction in proportion to the unadjusted basis of each asset at the time the QRTME is paid or incurred during that taxable year.

(iii)*Examples.* The application of this paragraph (e)(1) is illustrated by the following examples. In each example, all taxpayers use a calendar taxable year, and no taxpayers are members of a controlled group. Example 1.

(i)X is a Class II railroad that owns 500 miles of railroad track within the United States on December 31, 2006. During 2006, X incurs $1 million of QRTME for maintaining this railroad track. X uses the track maintenance allowance method for track structure expenditures (for further guidance, see Rev. Proc. 2002-65 (2002-2 CB 700) and § 601.601(d)(2)(ii)(b) of this chapter). Assume all of the $1 million QRTME is track structure expenditures and none of it was expended for new track structure.

(ii)For 2006, X determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $500,000 (50% multiplied by $1 million QRTME incurred by X during 2006). X further determines the credit limitation amount under paragraph (c)(2)(i) of this section for 2006 to be $1,750,000 ($3,500 multiplied by 500 miles of eligible railroad track). Because X's tentative amount of RTMC does not exceed X's credit limitation amount for 2006, X may claim a RTMC for 2006 in the amount of $500,000.

(iii)Of the $1 million QRTME incurred by X during 2006, X determines under the track maintenance allowance method that $750,000 is the track maintenance allowance under section 162 and $250,000 is the capitalized amount for the track structure. In accordance with paragraph (e)(1)(ii) of this section, X reduces the capitalized amount of $250,000 by the RTMC of $500,000 claimed by X for 2006, but not below zero. Thus, the capitalized amount of $250,000 is reduced to zero. X also deducts under section 162 a track maintenance allowance of $750,000 on its 2006 Federal income tax return. Example 2.

(i)Y is a Class II railroad that owns or has leased to it 500 miles of eligible railroad track within the United States on December 31, 2006. Z is not a railroad, but is a taxpayer that, in 2006, transports its products using the rail facilities of Y. In 2006, Y assigns for purposes of section 45G 300 miles of eligible railroad track to Z. Z does not receive any other assignments of eligible railroad track miles in 2006. During 2006, Z incurs QRTME in the amount of $1 million, and Y does not incur any QRTME. Y and Z each file Form 8900 with their timely filed Federal income tax returns for 2006 and attach the statement required by paragraph (d)(4)(ii) and (iii), respectively, of this section reporting the assignment of the 300 miles of eligible railroad track to Z.

(ii)For 2006, Z determines the tentative amount of RTMC under paragraph (c)(1) of this section to be $500,000 (50% multiplied by $1 million QRTME incurred by Z during 2006). Z further determines the credit limitation amount under paragraph (c)(2)(ii) of this section for 2006 to be $1,050,000 ($3,500 multiplied by 300 miles of eligible railroad track assigned by Y to Z in 2006). Because Z's tentative amount of RTMC does not exceed Z's credit limitation amount for 2006, Z may claim a RTMC for 2006 in the amount of $500,000.

(iii)For 2006, Z also must determine the portion of the $1 million QRTME that Z incurs that is required to be capitalized under section 263(a), and the portion that is a section 162 expense. Because Z is not a Class II railroad or Class III railroad, Z cannot use the track maintenance allowance method. Assume that all of the QRTME constitutes an intangible asset under § 1.263(a)-4(d)(8) and, therefore, is required to be capitalized by Z under section 263(a) as an intangible asset. In accordance with paragraph (e)(1)(ii) of this section, Z reduces the capitalized amount of $1 million by the RTMC of $500,000 claimed by Z for 2006. Thus, the capitalized amount of $1 million for the intangible asset is reduced to $500,000. Further, pursuant to § 1.167(a)-3(b)(1)(iv), Z may treat this intangible asset with an adjusted basis of $500,000 as having a useful life of 25 years for purposes of the depreciation allowance under section 167(a).

(2)*Coordination with section 61* . Except as specifically provided in the Code and regulations under the Code, the owner of qualifying railroad structure has gross income if another person paid or incurred QRTME for the owner's qualifying railroad structure and that person does not have a depreciable interest in the tangible improvements made by the QRTME. See, for example, section 109, which excludes from gross income of the lessor, the value of property attributable to buildings or other improvements made by a lessee.

(f)*Controlled groups* —(1) *In general* . Pursuant to section 45G(e)(2), if an eligible taxpayer is a member of a controlled group of corporations, rules similar to the rules in § 1.41-6T apply for determining the amount of the RTMC under section 45G(a) and this section. To determine the amount of RTMC (if any) allowable to a trade or business that at the end of its taxable year is a member of a controlled group, a taxpayer must—

(i)Compute the group credit in the manner described in paragraph (f)(3) of this section; and

(ii)Allocate the group credit among the members of the group in the manner described in paragraph (f)(4) of this section.

(2)*Definitions* . For purposes of section 45G(e)(2) and paragraph

(f)of this section—

(i)A *trade or business* is a sole proprietorship, a partnership, a trust, an estate, or a corporation that is carrying on a trade or business (within the meaning of section 162). Any corporation that is a member of a commonly controlled group shall be deemed to be carrying on a trade or business if any other member of that group is carrying on any trade or business;

(ii)*Group* and *controlled group* means a controlled group of corporations, as defined in section 41(f)(5), or a group of trades or businesses under common control. For rules for determining whether trades or businesses are under common control, see § 1.52-1

(b)through (g);

(iii)*Group credit* means the RTMC (if any) allowable to a controlled group;

(iv)*Consolidated group* has the meaning set forth in § 1.1502-1(h); and

(v)*Credit year* means the taxable year for which the member is computing the RTMC.

(3)*Computation of the group credit* . All members of a controlled group are treated as a single taxpayer for purposes of computing the RTMC. The group credit is computed by applying all of the section 45G computational rules (including the rules set forth in this section) on an aggregate basis.

(4)*Allocation of the group credit* —(i) *In general* .

(A)To the extent the group credit (if any) computed under paragraph (f)(3) of this section does not exceed the sum of the stand-alone entity credits of all of the members of a controlled group, computed under paragraph (f)(4)(ii) of this section, such group credit shall be allocated among the members of the controlled group in proportion to the stand-alone entity credits of the members of the controlled group, computed under paragraph (f)(4)(ii) of this section: ER08SE06.000

(B)To the extent that the group credit (if any) computed under paragraph (f)(3) of this section exceeds the sum of the stand-alone entity credits of all of the members of the controlled group, computed under paragraph (f)(4)(ii) of this section, such excess shall be allocated among the members of a controlled group in proportion to the QRTMEs of the members of the controlled group: ER08SE06.001

(ii)*Stand-alone entity credit* . The term *stand-alone entity credit* means the RTMC (if any) that would be allowable to a member of a controlled group if the credit were computed as if section 45G(e)(2) did not apply, except that the member must apply the rules provided in paragraphs (f)(5) (relating to consolidated groups) and (f)(8) (relating to intra-group transactions) of this section.

(5)*Special rules for consolidated groups* —(i) *In general* . For purposes of applying paragraph (f)(4) of this section, a consolidated group whose members are members of a controlled group is treated as a single member of the controlled group and a single stand-alone entity credit is computed for the consolidated group.

(ii)*Special rule for allocation of group credit among consolidated group members* . The portion of the group credit that is allocated to a consolidated group is allocated to the members of the consolidated group in accordance with the principles of paragraph (f)(4) of this section. However, for this purpose, the stand-alone entity credit of a member of a consolidated group is computed without regard to section 45G(e)(2).

(6)*Tax accounting periods used* —(i) *In general* . The credit allowable to a member of a controlled group is that member's share of the group credit computed as of the end of that member's taxable year. In computing the group credit for a group whose members have different taxable years, a member generally should treat the taxable year of another member that ends with or within the credit year of the computing member as the credit year of that other member. For example, Q, R, and S are members of a controlled group of corporations. Both Q and R are calendar year taxpayers. S files a return using a fiscal year ending June 30. For purposes of computing the group credit at the end of Q's and R's taxable year on December 31, S's fiscal year ending June 30, which ends within Q's and R's taxable year, is treated as S's credit year.

(ii)*Special rule when timing of QRTME is manipulated* . If the timing of QRTME by members using different tax accounting periods is manipulated to generate a credit in excess of the amount that would be allowable if all members of the group used the same tax accounting period, then the appropriate Internal Revenue Service official in the operating division that has examination jurisdiction of the return may require each member of the group to calculate the credit in the current taxable year and all future years as if all members of the group had the same taxable year and base period as the computing member.

(7)*Membership during taxable year in more than one group* . A trade or business may be a member of only one group for a taxable year. If, without application of this paragraph (f)(7), a business would be a member of more than one group at the end of its taxable year, the business shall be treated as a member of the group in which it was included for its preceding taxable year. If the business was not included for its preceding taxable year in any group in which it could be included as of the end of its taxable year, the business shall designate in its timely filed (including extensions) federal income tax return for the taxable year the group in which it is being included. If the business does not so designate, then the appropriate Internal Revenue Service official in the operating division that has examination jurisdiction of the return will determine the group in which the business is to be included. If the Federal income tax return for a taxable year beginning after December 31, 2004, and ending before September 7, 2006, is filed before October 10, 2006, and the business wants to apply paragraph (g)(2) of this section but did not designate its group membership in that return, the business must designate its group membership for that year either—

(i)In its next filed original Federal income tax return; or

(ii)In its amended Federal income tax return that is filed pursuant to paragraph (g)(2) of this section, provided that amended Federal income tax return is filed by the business before its next filed original Federal income tax return.

(8)*Intra-group transactions* —(i) *In general.* Because all members of a group under common control are treated as a single taxpayer for purposes of determining the RTMC, transfers between members of the group are generally disregarded.

(ii)*Payment for QRTME.* Amounts paid or incurred by the owner (or lessor) of eligible railroad track to another member of the group for QRTME shall be taken into account as QRTME by the owner (or lessor) of the eligible railroad track for purposes of section 45G only to the extent of the lesser of—

(A)The amount paid or incurred to the other member; or

(B)The amount that would have been considered paid or incurred by the other member for the QRTME, if the QRTME was not reimbursed by the owner (or lessor) of the eligible railroad track.

(g)*Effective date* —(1) *In general.*

(i)Except as provided in paragraphs (g)(2) and (g)(3) of this section, this section applies to taxable years ending on or after September 7, 2006, and beginning before January 1, 2008.

(ii)The applicability of this section expires on September 7, 2009.

(2)*Application of regulation project REG-142270-05 to pre-effective date.* A taxpayer may apply this section to taxable years beginning after December 31, 2004, and ending before September 7, 2006, provided that the taxpayer applies all provisions in this section to the taxable year.

(3)*Special rules for 2005 returns.* If a taxpayer's Federal income tax return for a taxable year beginning after December 31, 2004, and ending before September 7, 2006 is filed before October 10, 2006, and the taxpayer is not filing an amended Federal income tax return for that taxable year pursuant to paragraph (g)(2) of this section before the taxpayer's next filed original Federal income tax return, see paragraphs (d)(3)(iv) and (f)(7) of this section for the statements that must be attached to the taxpayer's next filed original Federal income tax return. PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT **Par. 4.** The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. **Par. 5.** In § 602.101, paragraph

(b)is amended by adding the following entry in numerical order to the table to read as follows: § 602.101 OMB control numbers.

(b)* * * CFR part or section where identified and described Current OMB control No. * * * * * 1.45G-1T 1545- * * * * * Mark E. Matthews, Deputy Commissioner for Services and Enforcement. Eric Solomon, Acting Deputy Assistant Secretary of the Treasury (Tax Policy). [FR Doc. E6-14858 Filed 9-7-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE INTERIOR National Park Service 36 CFR Part 7 RIN 1024-AD44 Cape Lookout National Seashore, Personal Watercraft Use AGENCY: National Park Service, Interior. ACTION: Final rule. SUMMARY: This final rule designates areas where personal watercraft

(PWC)may be used to access Cape Lookout National Seashore, North Carolina. This final rule implements the provisions of the National Park Service

(NPS)general regulations authorizing park areas to allow the use of PWC by promulgating a special regulation. Individual parks must determine whether PWC use is appropriate for a specific park area based on an evaluation of that area's enabling legislation, resources and values, other visitor uses, and overall management objectives. DATES: *Effective Date:* This rule is effective September 8, 2006. ADDRESSES: Mail inquiries to Superintendent, Cape Lookout National Seashore, 131 Charles Street, Harkers Island, NC 28531. FOR FURTHER INFORMATION CONTACT: Jerry Case, Regulations Program Manager, National Park Service, 1849 C Street, NW., Room 7241, Washington, DC 20240. Phone:

(202)208-4206. E-mail: *jerry_case@nps.gov* . SUPPLEMENTARY INFORMATION: Background Personal Watercraft Regulation On March 21, 2000, the NPS published a regulation (36 CFR 3.24) on the management of PWC use within all units of the national park system (65 FR 15077). The regulation prohibits PWC use in all national park units unless the NPS determines that this type of water-based recreational activity is appropriate for the specific park unit based on the legislation establishing that park, the park's resources and values, other visitor uses of the area, and overall management objectives. The regulation banned PWC use in all park units effective April 20, 2000, except for 21 parks, lakeshores, seashores, and recreation areas. The regulation established a 2-year grace period following the final rule publication to provide these 21 park units time to consider whether PWC use should be permitted to continue. Description of Cape Lookout National Seashore Cape Lookout National Seashore was established by Congress in 1966 to conserve and preserve for public use and enjoyment the outstanding natural, cultural, and recreational values of a dynamic coastal barrier island environment for future generations. Cape Lookout National Seashore is a low, narrow, ribbon of sand located three miles off the mainland coast in the central coastal area of North Carolina and occupies more than 29,000 acres of land and water from Ocracoke Inlet on the northeast to Beaufort Inlet to the southwest. The national seashore consists of four main barrier islands (North Core Banks, Middle Core Banks, South Core Banks, and Shackleford Banks), which consist mostly of wide, bare beaches with low dunes covered by scattered grasses, flat grasslands bordered by dense vegetation, and large expanses of salt marsh alongside the sound. Congressionally established boundaries include 150′ of water from the mean low waterline on the sound side of all islands. There are no road connections to the mainland or between the islands. Coastal barrier islands, such as those located in Cape Lookout National Seashore, are unique land forms that provide protection for diverse aquatic habitats and serve as the mainland's first line of defense against the impacts of severe coastal storms and erosion. Located at the interface of land and sea, the dominant physical factors responsible for shaping coastal landforms are tidal range, wave energy, and sediment supply from rivers and older, pre-existing coastal sand bodies. Relative changes in local sea level also profoundly affect coastal barrier island diversity. Coastal barrier islands exhibit the following six characteristics: • Subject to the impacts of coastal storms and sea level rise. • Buffer the mainland from the impact of storms. • Protect and maintain productive estuarine systems which support the nation's fishing and shellfishing industries. • Consist primarily of unconsolidated sediments. • Subject to wind, wave, and tidal energies. • Include associated landward aquatic habitats which the non-wetland portion of the coastal barrier island protects from direct wave attack. Coastal barrier islands protect the aquatic habitats between the barrier island and the mainland. Together with their adjacent wetland, marsh, estuarine, inlet, and nearshore water habitats, coastal barriers support a tremendous variety of organisms. Millions of fish, shellfish, birds, mammals, and other wildlife depend on barriers and their associated wetlands for vital feeding, spawning, nesting, nursery, and resting habitat. Shackleford Banks contains the park's most extensive maritime forest as well as wild horses that have adapted to this environment over the centuries. The islands are an excellent place to see birds, particularly during spring and fall migrations. A number of tern species, egrets, herons, and shorebirds nest here. Loggerhead turtles climb the beaches at nesting time. Purpose of Cape Lookout National Seashore Cape Lookout National Seashore was authorized on March 10, 1966, by Public Law 89-366. Additional legislation, Public Law 93-477 (October 26, 1974), called for another 232-acre tract of land to be acquired, a review and recommendation of any suitable lands for wilderness designation, and authorized funding for land acquisition and essential public facilities. The purpose of Cape Lookout National Seashore is to conserve and preserve for public use and enjoyment the outstanding natural, cultural, and recreational values of a dynamic coastal barrier island environment for future generations. The national seashore serves as both a refuge for wildlife and a pleasuring ground for the public, including developed visitor amenities. The mission of Cape Lookout National Seashore is to: • Conserve and preserve for the future the outstanding natural resources of a dynamic coastal barrier island system; • Protect and interpret the significant cultural resources of past and contemporary maritime history; • Provide for public education and enrichment through proactive interpretation and scientific study; and • Provide for sustainable use of recreation resources and opportunities. Significance of Cape Lookout National Seashore Cape Lookout National Seashore is nationally recognized as an outstanding example of a dynamic natural coastal barrier island system. Cape Lookout is designated as a unit of the Carolinian-South Atlantic Biosphere Reserve, United Nations Educational, Scientific and Cultural Organizations (UNESCO) Man and the Biosphere Reserve Program. The park contains: • Cultural resources rich in the maritime history of humankind's attempt to survive at the edge of the sea; and • Critical habitat for endangered and threatened species and other unique wildlife including the legislatively protected wild horses of Shackleford Banks. Authority and Jurisdiction Under the National Park Service Organic Act of 1916 (Organic Act) (16 U.S.C. 1 *et seq.* ) Congress granted the NPS broad authority to regulate the use of the Federal areas known as national parks. In addition, the Organic Act authorizes the NPS, through the Secretary of the Interior, to “make and publish such rules and regulations as he may deem necessary or proper for the use and management of the parks * * *.” 16 U.S.C. 1a-1 states, “The authorization of activities shall be conducted in light of the high public value and integrity of the National Park System and shall not be exercised in derogation of the values and purposes for which these various areas have been established * * *” (16 U.S.C. 3). As with the United States Coast Guard (USCG), NPS's regulatory authority over waters subject to the jurisdiction of the United States, including navigable waters and areas within their ordinary reach, derives from the U.S. Constitution. In regard to the NPS, based upon the Property and Commerce Clauses, Congress in 1976 directed the NPS to “promulgate and enforce regulations concerning boating and other activities on or relating to waters within areas of the National Park System, including waters subject to the jurisdiction of the United States * * *.” (16 U.S.C. 1a-2(h)). In 1996, the NPS published a final rule (61 FR 35136, July 5, 1996), amending 36 CFR 1.2(a)(3) to clarify its authority to regulate activities within the National Park System boundaries occurring on waters subject to the jurisdiction of the United States. Motorboats and other watercraft have been in use at Cape Lookout National Seashore since the park was established in 1966. It is unknown when PWC use first began at the national seashore. In compliance with the settlement with Bluewater Network, the national seashore closed to PWC use in April 2002. Personal watercraft are prohibited from launching or landing on any lands, boat ramps or docks within the boundaries of the national seashore. Personal watercraft may not be towed on trailers or carried on vehicles within national seashore boundaries except at the Harker's Island unit. This closure pertains to all of the barrier islands within the national seashore and the waters on the soundside of the islands within 150 feet of the mean low waterline. Outside of the park boundary, PWC use is governed by North Carolina PWC regulations. At present, the areas that were previously used by PWC owners for landing are closed with signs. Prior to the PWC closure, all areas of the park were open to PWC use. However, the majority of PWC use was concentrated in two areas of the national seashore that receive the heaviest visitor day-use in the park:

(1)On the sound-side of South Core Banks at the Lighthouse (from the Lighthouse dock through Barden Inlet and Lookout Bight), and

(2)the Shackleford Banks from Wade Shores west to Beaufort Inlet. Personal watercraft use of ocean beaches was rare due to rough surf conditions in the ocean and the hazard of beaching PWC in the ocean surf. Some PWC use occurred along North and South Core Banks from Portsmouth Village at the northern end of the national seashore to the lighthouse. This use was infrequent because of the prevalence of marshes and general lack of sound-side beaches along Core Banks, the large expanse of open water in Core Sound between the barrier islands and mainland North Carolina, and the low population of the adjacent communities in the “down east” as this portion of the national seashore is known locally. At public meetings held in October 2001, several participants indicated they had used their PWC to travel from locations such as Atlantic and Davis to the barrier islands. The popularity of Cape Lookout and Shackleford Banks where PWC use was concentrated can be attributed to the excellent soundside beaches in these areas, the attraction of the Cape Lookout lighthouse, traditional use of Shackleford Banks, their proximity to major inlets, and their close proximity to the three largest coastal population centers in Carteret County: Atlantic Beach, Morehead City, and Beaufort. NPRM and Environmental Assessment On December 29, 2005, the National Park Service published a Notice of Proposed Rulemaking

(NPRM)for the operation of PWC at Cape Lookout National Seashore (70 FR 77089). The proposed rule for PWC use was based on alternative B (one of three alternatives considered) in the Environmental Assessment

(EA)prepared by NPS for Cape Lookout National Seashore. The EA was open for public review and comment from January 24, 2005 to February 24, 2005. Copies of the EA may be downloaded at *http://www.nps.gov/calo/parkplan.htm* . The purpose of the EA was to evaluate a range of alternatives and strategies for the management of PWC use at Cape Lookout National Seashore to ensure the protection of park resources and values while offering recreational opportunities as provided for in the National Seashore's enabling legislation, purpose, mission, and goals. The analysis assumed alternatives would be implemented beginning in 2003 and considered a 10-year period, from 2003 to 2013. The EA evaluated three alternatives concerning the use of PWC at Cape Lookout National Seashore. The alternatives considered include: • *No-Action Alternative:* Do not reinstate PWC use within the national seashore. No special regulation would be promulgated. • *Alternative A:* Reinstate PWC use as previously managed under a special regulation. • *Alternative B:* Reinstate PWC use under a special NPS regulation with additional management prescriptions. Based on the analysis prepared for PWC use at Cape Lookout National Seashore, alternative B is considered the environmentally preferred alternative because it best fulfills park responsibilities as trustee of sensitive habitat; ensures safe, healthful, productive, and aesthetically and culturally pleasing surroundings; and attains a wider range of beneficial uses of the environment without degradation, risk of health or safety, or other undesirable and unintended consequences. This final rule contains regulations to implement alternative B at Cape Lookout National Seashore. Summary of Comments A proposed rule on PWC use in the Cape Lookout National Seashore (Cape Lookout) was published in the **Federal Register** for public comment on December 29, 2005, with the comment period lasting until February 27, 2006. NPS received 1,685 timely written pieces of correspondence regarding the EA and proposed regulation. Of the pieces of correspondence, 5 were from government agencies, 11 were from businesses, conservation groups, or recreation groups, and 1,669 were from unaffiliated individuals. A total of 148 comments supported alternative A, 25 comments supported alternative B, 4 comments opposed alternative B, 1519 comments supported the no action alternative, and 11 comments opposed the no action alternative. Within the analysis, the term “commenter” refers to an individual, organization, or public agency that responded. The term “comments” refers to statements made by a commenter. General Comments 1. Several commenters suggested that the access restrictions, closures, and boating rules should be applied equally to all motorized vessels, and not just to PWC. *NPS Response:* As described under the Scope of the Analysis in the Purpose and Need section of the EA, the focus of the EA is to define management alternatives specific to PWC use. The plan analyzed a variety of impact topics to determine if personal watercraft use was consistent with the park's enabling legislation and management goals and objectives. The goal of the EA was not to determine if these restrictions should also be applied to boats. Cape Lookout will consider subsequent rulemaking to address this issue for other watercraft and if subsequent rulemaking proceeds, that action would be subject to NEPA analysis and public comment. 2. One commenter stated that there is a lack of site-specific data in the EA. *NPS Response:* The scope of the EA did not include the conduct of site-specific studies regarding potential effects of PWC use on wildlife species, submerged aquatic vegetation beds, or visitor experience at Cape Lookout National Seashore. Analysis of potential impacts of PWC use on wildlife, submerged aquatic vegetation beds, and visitor experience at the national seashore was based on best available data, input from park staff, and the results of analysis using that data. 3. One commenter stated that the current EA does not discuss 40 CFR 1502.22 of the Council on Environmental Quality

(CEQ)National Environmental Policy Act

(NEPA)Regulations, which tells agencies that they have to make it clear when information is incomplete or unavailable. *NPS Response:* The EA discusses § 1502.22 of the CEQ NEPA Regulations in the Environmental Consequences section under the Summary of Laws and Policies on page 92. The EA mentions in several places that data is unavailable or had not been collected, including soundscapes and wildlife and wildlife habitat sections. Best available data, literature, and consultation with subject matter experts were used to determine impacts, as disclosed in the EA. 4. One commenter stated that any attempt to bar PWC or disparately regulate PWC would transgress NPS' regulatory duties and would be arbitrary and capricious in light of the EA's findings. *NPS Response:* Cape Lookout National Seashore was established in 1966. The purpose of Cape Lookout is to conserve and preserve for public use and enjoyment the outstanding natural, cultural, and recreational values of a dynamic coastal barrier island environment for future generations. The preferred alternative meets the objectives of the national seashore to a large degree, as well as meeting the purpose and need for action, and therefore is within the legislative and regulatory duties of Cape Lookout National Seashore. 5. One commenter stated that PWC use conflicts with NPS' mission and purpose. *NPS Response:* Cape Lookout National Seashore was established to conserve and preserve for public use and enjoyment the outstanding natural, cultural, and recreational values of a dynamic coastal barrier island environment for future generations. The national seashore serves as both a refuge for wildlife and a pleasuring ground for the public, including developed visitor amenities. Under this regulation PWC use is limited to providing a means of transportation to the island for the user to enjoy the natural, cultural, and recreational values of Cape Lookout National Seashore. 6. One commenter stated that the EA relies upon incorrect information regarding PWC numbers in the U.S. and uses outdated data from 2001 to guide its decision making process. *NPS Response:* A check of the National Marine Manufacturers Association

(NMMA)Web site revealed that indeed, PWC numbers for the years 2000 and 2001 are higher than quoted in the EA. Regardless, these are nationwide PWC numbers that were not used in the impacts analysis. The numbers used in the impacts analysis were park-specific, based on available visitor data and observations by Cape Lookout National Seashore staff. 7. One commenter stated that NPS has miscalculated the population growth rate of PWC. *NPS Response:* The numbers used in the impacts analysis were park-specific, based on available visitor data, park ranger counts in 2000 and 2001, and observations by seashore staff. They were not based on USCG data. 8. One commenter is concerned that the current EA is being politically manipulated in order to reauthorize PWC operation. *NPS Response:* Due to the increased level of public comment, Cape Lookout reanalyzed the issues and impact topics described in the 2001 Determination in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* The results of the in-depth analysis in the EA indicated that impacts range from negligible to moderate for all impact topics, and the NPS chose alternative B as the preferred alternative. 9. One commenter stated that the Proposed Rule should be redrafted to incorporate the ban on PWC that exists outside of NPS General Regulation. *NPS Response:* The ban or prohibition that exists at Cape Lookout is the result of NPS General Regulations that were promulgated in 2000 and took effect in 2002. This was a servicewide prohibition and affected all parks without special regulations. This rulemaking, or special regulation, will open Cape Lookout to PWC use, with restrictions. Only parks with special regulations can allow PWC use. 10. One commenter stated that PWC are designated as Class A boats by the USCG, and are subject to the same rules and registration fees as all other powered craft. *NPS Response:* Yes, and the NPS adopts applicable USCG regulations which are found in Title 33 CFR as well as applicable State laws and regulations within whose exterior boundaries a park is located. Therefore PWC are subject to the same rules and registration fees as all other powered craft. 11. One commenter asked why the PWC closure was rescinded in 2001, and why NPS wants to take the proposed action. *NPS Response:* Due to the increased level of public comment and congressional interest, Cape Lookout rescinded the 2001 closure to allow the issues and impact topics described in the 2001 Determination to be considered in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* As described in the EA, alternative B is the preferred alternative because, with limitations on PWC use and other mitigation, impacts can be minimized and managed. 12. One commenter stated that the spread of exotic species related to PWC operation is overlooked in the EA. *NPS Response:* This topic has been addressed in the errata to the EA as an issue that was considered but not further evaluated. After consultation with subject matter experts and available data, no exotic species are known to occur in areas accessible by PWC within Cape Lookout National Seashore. 13. One commenter disagrees with the cumulative impacts analysis. *NPS Response:* NPS acknowledges that the area around Cape Lookout National Seashore is being developed and this may result in increased PWC use. However, the EA shows that allowing limited PWC access at Cape Lookout National Seashore, will not result in more than negligible to minor cumulative impact, even when all motor boats are included in the analysis. 14. The EA and rule text should be rewritten to state that all obligations and restrictions would be imposed on the PWC operator, not the PWC equipment. Organization of the rule should also be improved. *NPS Response:* The text in the rule, errata to the EA, and the Finding Of No Significant Impact (FONSI) has been clarified to state that the restrictions will be imposed on the PWC operator, not the PWC equipment. Organization of the rule has also been improved and text was clarified. Comments Regarding Alternatives 15. One commenter stated that this environmental analysis could benefit greatly by constructing an alternatives matrix that shows on one axis the alternatives and on the other axis environmental conditions that might be affected. *NPS Response:* Table A: Summary of the Impact Analysis on page v of the EA provides an overview of which resource topics would be affected by each alternative. Alternatives A and B would impact water quality, air quality, soundscapes, shoreline and submerged aquatic vegetation, wildlife, aquatic fauna, threatened and endangered species, visitor use and experience, visitor conflicts and safety, cultural resources, and socioeconomics. Under the no-action alternative, none of the impact topics would be impacted by PWC since they would be banned, but all of the impact topics would be impacted to some capacity because of the cumulative impacts from boats. 16. One commenter stated that the alternative to limit PWC use by season or time of day was considered but not analyzed further. However, it could make a viable alternative because it would “minimize conflicts with other users in congested areas,” which could be an important purpose for this action. *NPS Response:* Time of day restrictions already exist because North Carolina PWC regulations prohibit the use of PWC from sunset to sunrise and have been adopted by the NPS. Limiting PWC use by season was not considered viable since few defensible reasons were identified to exclude PWCs at one time of year or another. The most obvious reason to limit access by season, for protection of birds and endangered species from access by PWCs, other boats, vehicles and pedestrians, is already managed by general closures. Monitoring of bird nesting areas and implementation of closures is routinely accomplished by the park resource management staff. 17. One commenter stated that the following three sections in the EA, “Unavoidable Adverse Impacts,” “Loss in Long-term Availability or Productivity to Achieve Short-term Gain,” and “Irreversible or Irretrievable Commitments of Resources,” pose some serious difficulties for the environmental impact analysis as a whole. *NPS Response:* Additional language has been added on the errata to the EA for the “Unavoidable Adverse Impacts” section to address the no-action alternative. The section “Loss in Long-term Availability or Productivity to Achieve Short-Term Gain” has been removed as per the errata because this section is required in Environmental Impact Statements, but is optional in EAs. The section “Irreversible or Irretrievable Commitments of Resources” discusses the minor use of fossil fuels to power PWC being an irretrievable commitment of this resource. Considering the very small number of PWC operators that use Cape Lookout National Seashore each year, which is estimated as less than one percent of visitors, the implementation of alternative B would not have more than a minor impact on irretrievable resources. Alternative B was identified as the environmentally preferred alternative because it meets the criteria established by the Council on Environmental Quality and the Department of the Interior (Department Manual) and also meets the purpose, needs, and objectives of this PWC EA. 18. Several commenters stated that alternative B does not merit status as the environmentally preferred alternative and should be rejected because it discriminates against PWC, unreasonably restricts PWC use, jeopardizes the safety of PWC users, motorized boaters and swimmers, and undermines the park's regulatory objectives. *NPS Response:* The EA was written to evaluate the appropriateness of PWC use within the National Seashore. The objective of the EA, as described in the “Purpose and Need” Chapter, was to evaluate a range of alternatives and strategies for the management of PWC use in order to ensure the protection of park resources and values, while offering recreational opportunities as provided in the enabling legislation, purpose, mission, and goals. An analysis of personal watercraft use and the impact topics was provided under each alternative. The EA was designed to determine if PWC use, not motorized boat use in general, was consistent with the park's enabling legislation and management goals and objectives. 19. Several commenters are concerned that the preferred alternative may violate the Organic Act by allowing the use of personal watercraft within Cape Lookout, which they believe will impair park resources or result in the derogation of park resources and values. *NPS Response:* The “Summary of Laws and Policies” section in the “Environmental Consequences” chapter of the EA summarizes the three overarching laws that guide the National Park Service in making decisions concerning protection of park resources. These laws, as well as others, are also reflected in NPS Management Policies. An explanation of how the Park Service applied these laws and policies to analyze the effects of personal watercraft on Cape Lookout National Seashore resources and values can be found under “Impairment Analysis” in the “Methodology” section of the EA. Impairment that is prohibited by the Organic Act and General Authorities Act is an impact that, in the professional judgment of the responsible NPS manager, would harm the integrity of park resources or values, including the opportunities that otherwise would be present for the enjoyment of those resources or values. An impairment to a particular park resource or park value may be indicated when the impact reaches the magnitude of “major,” as defined by its context, duration, and intensity. For each impact topic, the EA establishes thresholds or indicators of magnitude of impact. For each impact topic, when the intensity approached “major,” the park would consider mitigation measures to reduce the potential for “major” impacts, thus reducing the potential for impairment. For the PWC regulations at Cape Lookout National Seashore the National Park Service has determined in the EA that the preferred alternative would not result in impairment of park resources or values. 20. Several commenters support alternative B. *NPS Response:* Comment noted. NPS chose alternative B because it appears to meet the needs of most park visitors while continuing to protect the environment. 21. A commenter stated that the PWC use restrictions as stated in the proposed rule are vague, confusing, and defective from an enforcement standpoint. There is also redundancy in the description. *NPS Response:* The description of alternative B states “PWC would be allowed to access these areas * * * by remaining perpendicular to shore and operating at flat wake speed.” This means that any other type of use would continue to be prohibited. All PWC use is prohibited in the National Park System by general regulation except as authorized by park specific special regulation. Language in the rule, errata to the EA, and the FONSI has been rewritten to clarify the type of PWC use authorized and locations within the national seashore where it is permitted. 22. One commenter stated that management options such as flat wake zones, set backs, time and date restrictions were considered in the national rule and were determined to be too expensive to enforce and inadequate to protect park system resources. *NPS Response:* After analysis as part of the NEPA process, Cape Lookout National Seashore is proposing to implement flat wake restrictions for better protection of park resources and visitor safety. The flat wake restrictions should not be difficult to enforce at Cape Lookout because the restriction will apply to PWC in all locations within the park. 23. One commenter stated that Alternative B undermines NPS's safety objective and endangers PWC users and other park visitors, bans PWC use in some park locations without justification, and severely limits use within the designated use areas, and that the EA overstates the potential impact of PWC use on park resources. *NPS Response:* The EA analyzed a variety of impact topics to determine if personal watercraft use was consistent with the park's enabling legislation and management goals and objectives. As a result of this analysis, it was determined that the management prescriptions under alternative B, Reinstate PWC Use with Additional Management Prescriptions, would best protect natural and cultural resources, mitigate PWC safety concerns, provide for visitor health and safety, and enhance overall visitor experience. The plan was designed to determine if PWC use, not motorboat use in general, was consistent with the park's enabling legislation and management goals and objectives. 24. Many commenters support the no-action alternative. These commenters state that the EA provides no basis for overturning the Park Service's 2001 determination to ban PWC operation at Cape Lookout and that the preferred alternative breaks Federal law and fails to address many of the problems associated with PWC operation identified in the 2001 determination. Finally, these commenters believe the EA overlooks important research, reaches conclusions without supporting documentation or scientific evidence, and appears to violate the terms of the court-ordered settlement agreement with Bluewater Network. *NPS Response:* A summary of the NPS rulemaking and associated personal watercraft litigation is provided in Chapter 1, Purpose of and Need for Action, Background. NPS believes it has complied with the court order and has assessed the potential impacts of personal watercraft on those resources identified in the settlement agreement, as well as other resources that could be affected. This analysis was done for every applicable impact topic with the best available data, as required by regulations (40 CFR 1502.22). Where data was lacking, best professional judgment prevailed using assumptions and extrapolations from scientific literature, other park units where personal watercraft are used, and personal observations of park staff. NPS believes that the EA is in full compliance with the court-ordered settlement and that the rationale for limited use within the national seashore has been adequately analyzed and explained. Due to the increased level of public comment and congressional interest, Cape Lookout reconsidered the issues and impact topics described in the 2001 Determination in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* The results of the in-depth analysis in the EA indicated that potential impacts under Alternative B range from negligible to moderate for all impact topics, and chose Alternative B as the preferred alternative. 25. Some commenters believe the no-action alternative discriminates against PWC operators. *NPS Response:* The objective of the EA, as described in the “Purpose and Need” Chapter, was to evaluate a range of alternatives and strategies for the management of PWC use in order to ensure the protection of park resources and values, as provided in the enabling legislation, purpose, mission, and goals. 26. The North Carolina Department of Environment and Natural Resources, Division of Coastal Management

(DCM)suggests that a monitoring program be implemented to evaluate whether the adverse environmental effects of implementing the proposed action are, as expected, insignificant. *NPS Response:* The restrictions for Cape Lookout are only associated with the area that is within the park boundary. The only water area within the boundary is on the sound side where the boundary is 150 feet from low water. It would be difficult to differentiate any impacts that were due to PWC use outside the park boundary (150-foot zone) compared to use that is inside the park boundary (150-foot zone), since most of the aquatic resources move freely in and out of these areas, except for direct impacts on submerged aquatic vegetation (SAV). In addition, SAV only occurs in one area that is proposed to be reopened to PWC use under alternative B. Marine mammals would also not be likely to use the area within 150-feet from shore because it is too shallow. It would be difficult to differentiate impacts between PWC use and motorboat use because PWC use is very low compared to motorboat use, and motorboats use both areas inside and outside the 150-foot zone. 27. One commenter suggested reducing the number of access points to those already developed. Specifically, eliminate the following four access points from the regulation: Milepost 11B, Old Drum Inlet, New Drum Inlet, and Power Squadron Spit. *NPS Response:* The access points at Milepost 11B, Old Drum Inlet, and New Drum Inlet were chosen because they provide access to the seashore for those people that live in the “down east” area from Davis to Cedar Island. Without including these access points, there would be few opportunities for PWC access from towns north of Davis. These sandy inlets are convenient areas to land a boat or PWC and allow easy access to the ocean. The use of these areas also provides protection to the remaining marshy areas of the sound, where submerged aquatic vegetation is more likely to occur. Power Squadron Spit was included because it provides access to the southern-most portion of the park, which is a popular day-use area. This area near Lookout Bight consists of a protected sandy beach, and is heavily used by larger boats that utilize PWC or smaller inflatable boats to access the shore. Comments Regarding Water Quality 28. One commenter stated that, because the EA has not properly accounted for the pace at which the PWC manufacturers are converting to cleaner-running engine technologies that meet the EPA standards, the EA overstates the potential water quality impacts of resuming PWC use. *NPS Response:* The assumption of all personal watercraft using 2-stroke engines in 2002 is recognized as conservative. It is protective of the environment yet follows the emission data available in California Air Resources Board

(1998)and Bluewater Network

(2001)at the time of preparation of the EA. The emission rate of 3 gallons per hour at full throttle is a mid-point between 3 gallons in two hours (1.5 gallons per hour; NPS 1999) and 3.8 to 4.5 gallons per hour for an average 2000 model year personal watercraft (Bluewater Network 2001). The assumption also is reasonable in view of the initiation of production line testing in 2000 (EPA 1997) and expected full implementation of testing by 2006 (EPA 1996). Reductions in emissions used in the water quality impact assessment are in accordance with the overall hydrocarbon emission reduction projections published by the EPA (1996). EPA

(1996)estimates a 52% reduction by personal watercraft by 2010 and a 68% reduction by 2015. The 50% reduction in emissions by 2013 (the future date used in the EA) is a conservative interpolation of the emission reduction percentages and associated years (2010 and 2015) reported by the EPA

(1996)but with a one-year delay in production line testing (EPA 1997). Despite these conservative estimates, impacts to water quality from personal watercraft are judged to be negligible for all alternatives evaluated. Cumulative impacts from personal watercraft and other outboard motorboats also are expected to be negligible. If the assumptions used were less than conservative, the conclusions could not be considered protective of the environment, while still being within the range of expected use. 29. One commenter stated that the EA's analysis is based on faulty premises that reflect worst case conditions. *NPS Response:* The estimates of personal watercraft use and emissions are based on the best information available at the time of preparation of the EA and are meant to be conservative (i.e., protective of the environment). By using conservative input assumptions in estimating impact to water quality, the probability of underestimating impacts is minimized. The evaporation rate for benzene (half-life of approximately 5 hours at 25 °C) is based on information presented in EPA

(2001)and in Verschuren (1983). Because impacts to water quality were determined to be negligible before any discussion or application of this evaporation rate, it was not discussed in the impact assessments of the alternatives. As stated in Appendix A of the EA, the concentration of benzo(a)pyrene can be up to 2.8 mg/kg (or 2.07 mg/L) (Gustafson *et al.* 1997). Because this concentration could be found in the gasoline used in Cape Lookout, it was used to be protective of the environment. It is not an unrealistic assumption. Annual sales of personal watercraft (200,000 units) are mentioned on page 7 of the EA. However, the text directs the reader to table 1 which shows that ownership declined after 1995. The discussion of national trends is not germane to the estimate of PWC use in the national seashore since the numbers of personal watercraft and hours of use are based on observations by park staff (see page 102 of the EA). In summary, if changes in evaporation rates, concentrations of gasoline constituents, sales of personal watercraft, and rates of replacement of older personal watercraft were made as suggested, the conclusions of negligible impacts from personal watercraft would not change, because “negligible” is the lowest impact level that can be used in the EA (see page 106). However, these conclusions would no longer be considered as conservative and could be challenged by other parties. 30. One commenter believes the EA ignores sales trends and relies on outdated statistics and assumptions, which inflate PWC sales and exaggerate PWC emissions. *NPS Response:* Annual sales of personal watercraft (200,000 units) are mentioned on page 6 of the EA. However, the text directs the reader to table 1, which shows that ownership declined after 1995. The discussion of national trends is not germane to the estimate of PWC use in the national seashore since the numbers of personal watercraft and hours of use are based on observations by park staff (see page 102 of the EA) and not national trends. If national sales of personal watercraft and rates of replacement of older personal watercraft were considered, the conclusions for impacts to water quality from personal watercraft would still be negligible. 31. One commenter stated that most PWC manufacturers have changed to 4-cycle engines, which do not mix oil with the gasoline. *NPS Response:* The assumption of all PWC using 2-stroke engines in 2003 is recognized as conservative. It is protective of the environment and follows the emission data available in CARB

(1998)and Bluewater Network

(2001)at the time of preparation of the EA. Emission rates were assumed to be reduced by 8 percent in 2003 in accordance with the EPA's estimate of hydrocarbon reduction (see page 104 of the EA). Despite these conservative estimates, impacts to water quality from PWC are judged to be negligible for all gasoline constituents, all areas, and all alternatives evaluated. 32. One commenter stated that there is some confusion on irreversible or irretrievable commitments of resources should the proposed action be implemented. *NPS Response:* Agreed, there is confusion regarding the definitions of irreversible and irretrievable, but the confusion does not extend to the Cape Lookout EA. The National Environmental Policy Act (NEPA), Section 102(2)(C)(v), does not distinguish between the two terms but instead lumps them together: “Any irreversible and irretrievable commitments * * *” and many EAs and EISs also simply lump the two terms together. While the two terms in question are not defined in NEPA or in the National Park Service Director's Order #12 (DO-12), they are defined in the National Park Service Handbook that accompanies DO-12 as follows: “Irreversible impacts are those effects that cannot be changed over the long term or are permanent. An effect to a resource is irreversible if it (the resource) cannot be reclaimed, restored, or otherwise returned to its condition before the disturbance * * * An irretrievable commitment of resources refers to the effects to resources that, once gone, cannot be replaced.” It is important to not worry about the semantics of these terms and instead be thorough in the disclosure to the public of any long-term, permanent effects to the park resources. The significance of personal watercraft using fossil fuel at Cape Lookout National Seashore (as it may affect air and water quality) has not been underestimated. In fact, the potential for impacts on these resources is quantitatively evaluated in the EA. The results indicate that PWC impacts to water quality and to air quality are negligible or nonexistent for all alternatives considered. These impacts could be termed inconsequential, especially in the context of other motorboats that outnumber personal watercraft 10 to 1 at the national seashore (see Table 15 of the EA). 33. One commenter stated that the water quality analysis does not fully account for the rapid rate that unburned gasoline emitted from PWC evaporates from the water. *NPS Response:* Impacts to human health and the environment would be negligible for all gasoline constituents, all alternatives, and all areas. The term “negligible” is the lowest (least significant impact threshold) term available to describe impacts in the EA (see page 106). Because all impacts to water quality were judged to be negligible, the effect of evaporation was not discussed in detail in the results. However, the effect of evaporation/volatilization of gasoline constituents is discussed in two locations under “Methodology and Assumptions.” These processes are mentioned in paragraphs 5 and 7 on page 103 of the EA. Volatilization of gasoline constituents (BTEX, methyl tertiary-butyl ether (MTBE), and petroleum aromatic hydrocarbons (PAHs)) also is discussed in Appendix A: Approach to Evaluating Surface Water Quality Impacts. Comments Regarding Air Quality 34. One commenter stated that NPS does not sufficiently account for the rapid engine conversion that is occurring and improperly overlooks the emissions reductions that the PWC companies have already achieved. *NPS Response:* A conservative approach was used in the analysis, since the numbers of PWCs already converted to four-stroke engines are not known. In addition, the EPA model takes into account the reduction in emissions over time. Even with the conservative approach, the analysis for alternative B presented in the EA indicates that current PWC use at Cape Lookout National Seashore results in negligible impacts to air quality. 35. One commenter stated that, while the EA correctly concludes that the short- and long-term human health impact from PWC emissions of hydrocarbons

(HC)and nitrogen oxides (NO X ) under alternatives A and B would be negligible, NPS nevertheless overstates actual emissions levels for these constituents. *NPS Response:* It is agreed that the relative quantity of HC + NO X are a very small proportion of the county-based emissions and that this proportion will continue to be reduced over time. The EA takes this into consideration in the analysis. For consistency and conformity in approach, NPS has elected to rely on the assumptions in the 1996 Spark Ignition Engine Rule which is consistent with the widely used NONROAD emissions estimation model. The outcome is that estimated emissions from combusted fuel may be more conservative, compared to actual emissions. 36. One commenter stated that the EA's use of a study by Kado *et al.* is outdated, and the EA inaccurately uses the results of this study. *NPS Response:* The criteria for analysis of impacts from PWC to human health are based on the National Ambient Air Quality Standards (NAAQSs) for criteria pollutants, as established by the EPA under the Clean Air Act, and on criteria pollutant annual emission levels. This methodology was selected to assess air quality impacts for all NPS EAs to promote regional and national consistency, and identify areas of potential ambient standard exceedances. PAHs are not assessed specifically as they are not a criteria pollutant. However, they are indirectly included as a subset of total hydrocarbons, which are assessed because they are the focus of the EPA's emissions standards directed at manufacturers of spark ignition marine gasoline engines. Neither peak exposure levels nor National Institute for Occupational Safety and Health (NIOSH) nor Occupational Safety and Health Administration

(OSHA)standards are included as criteria for analyzing air quality related impacts except where short-term exposure is included in a NAAQS. The Kado Study presented the outboard engine air quality portion of a larger study described in Outboard Engine and Personal Watercraft Emissions to Air and Water: A Laboratory Study (CARB 2001). In the CARB report, results from both outboards and personal watercraft (2-stroke and 4-stroke) were reported. The general pattern of emissions to air and water shown in CARB

(2001)was 2-stroke carbureted outboards and personal watercraft having the highest emissions, and 4-stroke outboard and personal watercraft having the lowest emissions. The only substantive exception to this pattern was in NO X emissions to air- 2-stroke carbureted outboards and personal watercraft had the lowest NO X emissions, while the 4-stroke outboard had the highest emissions. Therefore, the pattern of emissions for outboards is generally applicable to personal watercraft and applicable to outboards directly under the cumulative impacts evaluations. 37. One commenter stated that a proper PAH analysis, using the analytical approach set forth in the Lake Mead Report, refutes unsubstantiated claims by PWC opponents that PAH emissions from PWC operating in the Cape Lookout National Seashore will endanger human health. *NPS Response:* The EPA data incorporated into the 1996 Spark Ignition Marine Engine rule were used as the basis for the assessment of air quality, and not the Sierra Research data. It is agreed that these data show a greater rate of emissions reductions than the assumptions in the 1996 Rule and in the EPA NONROAD Model, which was used to estimate emissions. However, the level of detail included in the Sierra Research report has not been carried into the EA for reasons of consistency and conformance with the model predictions. Most states use the EPA NONROAD Model for estimating emissions from a broad array of mobile sources. To provide consistency with state programs and with the methods of analysis used for other similar NPS assessments, NPS has elected not to base its analysis on focused research such as the Sierra Report for assessing PWC impacts. It is agreed that the relative quantity of HC + NO X are a very small proportion of the county-based emissions and that this proportion will continue to be reduced over time. The EA takes this into consideration in the analysis. For consistency and conformity in approach, the NPS has elected to rely on the assumptions in the 1996 Spark Ignition Marine Engine Rule, which are consistent with the widely used NONROAD emissions estimation model. The outcome is that estimated emissions from combusted fuel may be more conservative, compared to actual emissions. 38. One commenter believes that the Sierra Research emissions analysis should be used in the air quality analysis. *NPS Response:* The EPA data incorporated into the 1996 Spark Ignition Marine Engine rule were used as the basis for the assessment of air quality, and not the Sierra Research data. It is agreed that the Sierra Research data show a greater rate of emissions reductions than the assumptions in the 1996 Rule and in the EPA NONROAD Model, which NPS used to estimate emissions. However, the level of detail included in the Sierra Research report was not carried into the EA for reasons of consistency and conformance with the model predictions. Most states use the EPA NONROAD Model for estimating emissions from a broad array of mobile sources. To provide consistency with state programs and with the methods of analysis used for other similar NPS assessments, NPS has elected not to base its analysis on focused research such as the Sierra Report for assessing PWC impacts. It is agreed that the relative quantity of HC plus NO X are a very small proportion of the county-based emissions and that this proportion will continue to be reduced over time. The EA takes this into consideration in the analysis. For consistency and conformity in approach, NPS has elected to rely on the assumptions in the 1996 Spark Ignition Marine Engine Rule, which are consistent with the widely used NONROAD emissions estimation model. The outcome is that estimated emissions from combusted fuel may be more conservative compared to actual emissions. Comments Regarding Soundscapes 39. One commenter stated that in the 2005 EA, NPS concludes that PWC operation would produce negligible to minor short-term impacts upon the park's soundscape. NPS provides no new evidence for the EA's latest noise conclusions, which directly contradicts the 2001 determination. *NPS Response:* In the 2005 EA impacts to the soundscape in the preferred alternative were evaluated using operational restrictions such as requiring PWC to travel at a flat wake speed and limiting access to specific locations. With these restrictions impacts were determined to be adverse, short term, negligible to minor, depending upon location. The 2001 determination was made using unrestricted conditions that were in effect prior to the 2002 prohibition. 40. One commenter stated that there is no evidence that PWC noise adversely affects aquatic fauna or animals. PWC typically exhaust above the water at the air/water transition area. Consequently, most PWC sound is transmitted through the air and not the water. *NPS Response:* PWC exhaust is below or at the air/water transition areas, not above the water. Sound transmitted through the water is not expected to have greater than negligible adverse impacts on fish, and the EA does not state that PWC noise adversely affects aquatic fauna. 41. One commenter questioned the PWC noise levels that were used in the analysis. *NPS Response:* A correction has been included in the errata to the EA to indicate that one PWC would emit 68 to 76 A-weighted dB at 82 feet. Based on the PWC noise levels from the Glen Canyon study, two PWC would emit 66 to 77 dB at 82 feet, 65 to 75 dB at 100 feet, and 59 to 69 dB at 200 feet. The noise levels of two PWC traveling together would be less than the NPS noise limit of 82 dB at 82 feet for all alternatives. Ambient sound levels at Cape Lookout National Seashore vary due to the wide range of land cover types and visitor and other activities within and near the national seashore. In addition to intensity, other aspects of PWC noise were assessed, including changes in pitch. The operation of PWC 50 feet from shore traveling at a flat wake speed would have minor adverse affects on the soundscape. In most locations, except in high use areas, natural sounds would prevail and motorized noise would be very infrequent or absent. 42. One commenter stated that the steps North Carolina has taken to limit boating noise will mitigate the potential impacts of PWC use on the park's soundscapes. *NPS Response:* Comment noted. Impacts to soundscapes under alternative B are negligible to minor, depending on location. 43. Several comments stated that the EA's findings overstate the potential sound impacts of PWC use and do not include any documented complaint data about PWC noise. *NPS Response:* Comment noted. Impacts to soundscapes under alternative B are negligible to minor, depending on location. The EA states that the level of sound impact associated with PWC use varies based on location, time of day, and season. The EA also states that sound impacts associated with PWC use would be most prevalent in quieter areas. Analysis of potential impacts of PWC use relating to sound was based on best available data, input from park staff, and the results of analyses using that data. 44. One commenter stated that the EA exaggerates PWC's propensity to become airborne. *NPS Response:* NPS agrees that many PWC do not leave the water when being operated. When required to operate at flat wake speed in Cape Lookout National Seashore it is highly unlikely that any PWC will leave the water. Impacts to soundscapes from PWC under alternative B range from negligible to minor, depending on the location within the park. 45. One commenter stated that the PWC manufacturers have made significant progress in reducing PWC noise through technological innovations. *NPS Response:* NPS concurs that on-going and future improvements in engine technology and design would likely further reduce noise emitted from PWC. Even without the improvements the EA found impacts to soundscapes under alternative B are negligible to minor, depending on the location within the park. 46. One commenter stated that state legislation entitled the “National Marine Manufacturers Association Model Noise Act” establishes muffler requirements and maximum noise levels for PWC and other motorized boats, so noise disturbances would be minimized. *NPS Response:* NPS concurs that on-going and future improvements in engine technology and design would likely further reduce noise emitted from PWC. However, based on location and time, ambient noise levels at the national seashore can range from negligible to moderate and improved technology resulting in a reduction of noise emitted from PWC would not significantly change impact thresholds. Comments Regarding Shoreline and Submerged Aquatic Vegetation 47. A commenter stated that because PWC lack an exposed propeller, they can't damage seagrasses in shallow waters. Furthermore, the natural forces at Cape Lookout have a greater impact on vegetation than PWC use. *NPS Response:* PWC do not have an exposed propeller but they do use an engine that directs a substantial amount of water towards the bottom at a high velocity. PWC can operate in waters less than a foot deep and have the potential of disturbing the sediment and submerged aquatic vegetation in shallow water areas. Disturbance of submerged aquatic vegetation beds diminishes their ecological value and productivity, affecting the entire ecosystem. As PWC are frequently operated in shallow areas in a repetitive manner, impacts on submerged aquatic vegetation beds can be severe. Natural forces may at times have a greater impact but the NPS allows such to occur without interference. 48. A commenter stated that allowing PWC operators to access shallow areas near the Cape Lookout Environmental Education Center dock would greatly disturb the underwater substrate and shoreline. *NPS Response:* The 10 designated access areas, which include the area near the Cape Lookout Environmental Education Center dock, were chosen to avoid marshes and high-congestion beach areas. Indirect impacts from PWC use to shoreline vegetation would occur but would be limited to the designated access areas and would therefore be negligible to minor. Most of the access areas do not contain submerged aquatic vegetation beds, so PWC operation in these areas would have little potential to adversely impact this habitat. Additionally, the flat-wake speed restriction would minimize the potential for PWC to damage submerged aquatic vegetation beds through collision or uprooting and would reduce sediment resuspension and its detrimental effects. Comments Regarding Wildlife and Wildlife Habitat 49. One commenter stated that there are no documented cases of deliberate harassment or collisions with wildlife by PWC users and there is no evidence that PWC use disturbs wildlife along the shoreline. *NPS Response:* There is a potential for collision with or disturbance of aquatic wildlife species. The determination of potential for impacts to wildlife associated with PWC use is based on the assessment of several potential stressors including potential collision; noise; disruption of feeding, nesting, and resting activities; sediment suspension; emissions, etc. The flat wake requirement will reduce the level of PWC disturbance in the restricted areas and in nearby marshes. This reduced speed level and the requirement to travel perpendicular to the shoreline in designated access areas is expected to have short-term, negligible to minor, direct and indirect adverse impacts on aquatic wildlife species and habitat. 50. One commenter stated that the EA cites only anecdotal accounts, in which park staff supposedly observed PWC flushing terns and other bird species, as support for its position that PWC use is more disruptive to wildlife than other vessels. *NPS Response:* The scope of the EA did not include the conduct of site-specific studies regarding potential effects of PWC use on wildlife species at Cape Lookout National Seashore. Analysis of potential impacts of PWC use on wildlife at the national seashore was based on best available data, input from park staff, and the results of analysis using that data. The EA does not state that shorebirds were observed being flushed from nests in the park. 51. A commenter believes that PWC are no more disruptive than other forms of boating activity. Studies by Dr. James Rodgers of the Florida Fish and Wildlife Conservation Commission have shown that PWC are no more likely to disturb wildlife than any other form of human interaction. *NPS Response:* Some research indicates that PWC are no more apt to disturb wildlife than are small outboard motorboats; however, disturbance from both PWC and outboard motor boats does occur. Dr. Rodgers recommends that buffer zones be established for all watercraft, creating minimum distances between boats (personal watercraft and outboard motorboats) and nesting and foraging waterbirds. The shoreline restrictions limit access for PWC to 10 locations under alternative B and require them to operate at a flat wake speed as an added precaution. Impacts to wildlife and wildlife habitat under all the alternatives were judged to be negligible to minor from all visitor activities. 52. One commenter believes the Everglades Report has been wrongly used in the wildlife analysis. *NPS Response:* The reference to the Everglades Report at page iii of the EA provides background regarding past actions taken by NPS with respect to PWC use. The EA states that “After studies in Everglades National Park showed that PWC use resulted in damage to vegetation, adversely impacted shorebirds, and disturbed the life cycles of other wildlife, NPS prohibited PWC use by a special regulation at the park in 1994.” This EA did not rely on the Everglades Report as a basis for assessing potential impacts to park resources associated with PWC use. 53. One commenter stated that the EA puts forth a conflicting position on the adequacy of new regulations to protect the park environment and wildlife, as well as the resources available to adequately enforce the NPS' new rules. *NPS Response:* The NPS agrees that a total prohibition would be easier to enforce. However, enforcement would also be required under the no-action alternative. The seashore is fully aware that this new regulation will require short-term changes and reallocations of assets and resources, with an increase in education and enforcement. However, this effort will generally need to be focused at popular boating use areas that are already the focus of enforcement activity. Enforcement of the April 22, 2002, prohibition of PWC required an increased focus on education and PWC enforcement during routine patrols at a limited number of popular use areas. This education and enforcement effort became successful in about two boating seasons. The majority of seashore users are law abiding and sensitive to the special values of seashore waters and lands. An active education program backed by a reasonable enforcement effort should, in a few seasons, educate the PWC user to the requirements of the new regulation. After an initial period of adjustment to the new regulations, the small number of PWC users who encounter seashore waters should be knowledgeable enough to abide by the law, and the initial need for focused attention on PWC operators will diminish. Additional water presence by park rangers and education are proven methods of protecting resources for the future enjoyment of all visitors, with the end result of enhancing the visitor experience. 54. One commenter stated that the EA reaches a different conclusion regarding the appropriateness of PWC, compared to the 2001 determination. *NPS Response:* Due to an increased level of public comment, Cape Lookout reanalyzed the issues and impact topics described in the 2001 Determination in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* The results of the in-depth analysis in the EA indicated that alternative B, which provided for limited access at flat wake speeds, would create acceptable impacts that ranged from negligible to moderate for all impact topics. Alternative B was chosen as the preferred alternative. 55. One commenter stated that the preferred alternative violates the Marine Mammal Protection Act (MMPA), which requires Federal agencies to prevent the “take” of marine mammals. Slow moving boats, even ones operating at flat wake speed, can violate the MMPA prohibition on harassment. *NPS Response:* The EA states that implementing the preferred alternative would be expected to have short-term, negligible to minor, direct and indirect impacts to aquatic wildlife and habitats. The EA states that flat wake zoning prescriptions and the implementation of ten designated access areas would minimize potential for adverse impacts. 56. One commenter stated that the EA fails to adequately investigate the impact of the current PWC ban on biological migration patterns. *NPS Response:* The scope of the EA did not include the conduct of surveys to determine potential effects of the current PWC ban on biological use patterns in Cape Lookout National Seashore. Analysis of potential impacts of PWC use on wildlife at the national seashore was based on best available data, input from park staff, and the results of analysis using that data. Comments Regarding Visitor Use and Experience 57. One commenter stated that the EA overlooks the impact of reauthorizing PWC operation and its impact upon visitor use patterns. NPS should have conducted a visitor use survey over the past two years to measure public support for the current PWC closures. *NPS Response:* The comment is correct in stating that no new visitor use surveys have been conducted since 1993. However, NPS received over 6,000 letters and emails on the issue since the initial PWC closure in March 2001. To suggest the seashore is not current on the opinions of the public on PWC is not an accurate statement concerning the NEPA and rulemaking process. 58. One commenter stated that the national accident figures cited in the document are dated and potentially misleading. *NPS Response:* The factors described in the comment are recognized. However, these factors are unlikely to fully explain the large difference in percentages (personal watercraft are only 7.5% of registered vessels, yet they are involved in 36% of reported accidents). In other words, PWC are 5 times more likely to have a reportable accident than are other boats. Despite these national boating accident statistics, impacts of PWC use and visitor conflicts are judged to be negligible relative to swimmers and minor relative to other motorboats at the national seashore. 59. One commenter stated that the EA cites North Carolina state and county accident data instead of park-specific data. Furthermore, PWC users comprise only 1% of the total number of visitors to Cape Lookout National Seashore; therefore the number of PWC in the park will be relatively small and will not create unique or disproportionate safety risks. *NPS Response:* Although only one PWC-related injury has been reported at Cape Lookout, much of the waters in the area are outside of park boundaries and many incidents are likely not reported to any agency. PWC speeds, wakes, and operations near other users can pose hazards and conflicts, especially to canoeists and sea kayakers. As stated in the EA, PWC have historically operated for longer periods of time in the heavily used areas of the park, including the soundside of Shackleford Banks and the cove at the Cape Lookout lighthouse, increasing the opportunities for conflicts or accidents. Limiting PWC use in these areas, coupled with flat wake speed requirements, would reduce conflicts between PWC and other users. 60. One commenter stated that by restricting PWC use to ten designated areas, alternative B concentrates PWC use in several popular areas of the park, which increases the likelihood of potential conflict with other visitors. Alternative B's restrictions do not apply to other motorized vessels. The PWC-only flat wake zone will create serious safety hazards for PWC users, and should be extended to all motorized craft within park waters. *NPS Response:* The 10 designated access areas were chosen to avoid marshes and high-congestion beach areas. Implementation of a flat wake zone will reduce potential impacts associated with high speed use in near shore areas, as compared to use without the speed restriction. When vessels, other than PWC, enter park waters, which extend into the sound 150 feet, they normally operate at reduced speeds as they prepare to anchor or dock, so they are traveling at speeds similar to those required for PWCs. Vessels maneuvering in congested waters are generally safer at slower speeds. 61. Commenters are concerned with the assumption that PWC will not adversely impact public safety and that a majority of PWC users operate their craft in a lawful manner. However, in 2001 the NPS reported that PWC use “pose[d] unacceptable risks” to the safety of other visitors. *NPS Response:* Due to an increased level of public comment, Cape Lookout reanalyzed the issues and impact topics described in the 2001 Determination in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* The results of the in-depth analysis in the EA indicated that alternative B, which provided for limited access at flat wake speeds would create acceptable impacts that ranged from negligible to moderate for all impact topics. Alternative B was chosen as the preferred alternative. Alternative B also provides more enforcement and education for PWC users. 62. A commenter stated that documented visitor satisfaction when PWC use was permitted was rated very good to excellent. Furthermore, today's PWC owner typically uses the craft for family-oriented outings. *NPS Response:* NPS agrees that some PWC operators are better educated and are not reckless with their machines, and that many trips are family-oriented. However, PWC use does vary, and many operators still use the machines for “thrill,” including stunts, wake jumping, and other more risky exercises. Some users can still create disturbances or safety concerns, especially if children are operating the vessel. Under alternative B, NPS is providing access to the park so that PWC users can enjoy Cape Lookout National Seashore beaches and other natural or cultural resources, but is restricting the use of PWCs in park waters to prohibit the wave jumping and other similar behavior. 63. Several commenters stated that alternative B is inconsistent with NPS' goal of avoiding the creation of additional enforcement requirements, and that there are not enough enforcement officials to keep PWC violations in check. *NPS Response:* Both the no-action alternative and alternative B requires enforcement action. Cape Lookout National Seashore is fully aware that this new regulation will require short-term changes and reallocations of assets and resources, with an increase in education and enforcement. However, this effort will need to focus on popular boating use areas that are already the focus of enforcement activity. Enforcement of the April 22, 2002, ban of PWC at Cape Lookout National Seashore required increased focus on education and PWC enforcement during routine patrols at a limited number of popular use areas. This education and enforcement effort was successful in two boating seasons. The majority of national seashore users are law abiding and sensitive to the special values of seashore waters and lands. An active education program backed by a reasonable enforcement effort should, in a few seasons, educate the PWC user to the requirements of the new regulation. After an initial period of adjustment to the new regulations, the small number of PWC users who encounter national seashore waters should be knowledgeable enough to abide by the law, and the initial need for focused attention on PWC operators will diminish. Additional water presence and education are proven methods of protecting resources for the future enjoyment of all visitors, with the end result of enhancing the visitor experience. Comments Regarding Visitor Conflict and Safety 64. One commenter stated that the EA reaches many conclusions regarding the impact of PWC upon Cape Lookout resources and wildlife that are directly contradicted by the 2001 determination and previous NPS testimony. *NPS Response:* Due to the increased level of public comment and congressional interest, Cape Lookout National Seashore reanalyzed the issues and impact topics described in the 2001 Determination in more detail in the EA. The 2001 Determination can be viewed at: *http://www.nps.gov/calo/parkplan.htm.* In the 2001 determination PWC use was evaluated without any operational or access restrictions and therefore the reports differ in results. The results of the in-depth analysis in the EA indicated that impacts under alternative B range from negligible to moderate for all impact topics, and the NPS chose alternative B as the preferred alternative. Under alternative B, PWC would only be allowed in ten areas of the park in order to facilitate PWC access to certain sections of Shackleford Banks, South Core Banks, and North Core Banks. PWC must remain perpendicular to the shore and operate at flat wake speed, which would limit safety and noise issues from PWC. 65. Commenters have concerns about PWC operators following too closely and riding too close to the shoreline, both of which put people at risk for serious injury. *NPS Response:* In the preferred alternative, PWC will only be allowed in the ten areas within the park specifically for landing purposes. PWC must remain perpendicular to shore and operate at flat wake speed. These restrictions would reduce the potential for conflicts with other vessels. 66. One commenter believes that the proposed rule caters to a minority of PWC users at the expense of the majority of the park visitors who favor a PWC ban. *NPS Response:* The proposed rule would support visitor enjoyment by allowing limited access by PWC users while accommodating other visitors and meeting resource management objectives. Comments Regarding Cultural Resources 67. One commenter stated that the EA overstates PWC's potential impact on cultural resources. *NPS Response:* The EA was focused on the analysis of impacts from PWC use. PWC can make it easier to reach some remote areas, compared to hiking to these areas, but the NPS agrees that the type of impacts to cultural resources from any users of remote areas of the park would be similar if they can reach these areas. Comments Regarding Socioeconomics 68. One commenter stated that the EA does not investigate the economic impact that lifting the PWC ban would have upon businesses that are dependent upon the conservation of wildlife and their habitat. *NPS Response:* Page 170 of the EA states that the primary group that would incur costs under the preferred alternative is park visitors who do not use PWC and whose experiences would be negatively affected by PWC within the park. However, because PWC users account for a very small fraction of economic activity in the region, it is very unlikely that there will be any measurable incremental impacts on the region's economy. Continued PWC use within the park under the preferred alternative would have short-term, minor adverse impacts on wildlife species and their habitats, and is unlikely to impact the conservation of wildlife in and near the park. 69. One commenter stated that the proposed rule fails to mention the economic impacts on the PWC-related businesses in the area. The comment also mentions a recently published economic study that discusses the economic impact of banning PWC in Cape Lookout National Seashore. *NPS Response:* NPS reviewed the Trade Partnership study, which concludes that PWC sales grew steadily through 1995, and have declined dramatically since then. The study blames this decline in sales on the PWC bans at National Parks. While the PWC ban at some National Park units may have contributed slightly to decline in PWC sales, NPS disagrees with the study's conclusion that the ban is the primary reason for the decline in sales. PWC use occurred in only 32 of the 87 park units that allow motorized boating. These 32 park units comprise a very small percentage of the total amount of waterways in the United States that can accommodate PWC. A decline in PWC sales can be attributed to many other reasons, including economic reasons, perceptions about the machines, and limitations by other public entities. In fact, at least 34 states have either implemented use restrictions or considered regulating PWC use and operation. The economic analysis report quoted in the comment ( *Economic Analysis of Management Alternatives for Personal Watercraft in Cape Lookout National Seashore,* MACTEC Engineering 2005) concludes that the proposed rule is not expected to reduce any of the local area's PWC-related businesses' profit margins or reduce the competitiveness of PWC rental and retail businesses. The report also concludes that small increases in revenue are projected under the proposed rule, relative to the no-action alternative, for firms selling and renting PWCs to Cape Lookout visitors. Changes to the Final Rule Several non-substantive changes have been made to the rule language in response to comments on the NPRM. First, the rule was rewritten to clarify the type of PWC use prohibited and locations within the national seashore where it is permitted. In addition, the phrase “recreational use” has been deleted. Also, the text in the rule has been clarified to state that the restrictions will be imposed on the PWC operator, not the PWC equipment. Organization of the rule has also been improved. See the discussion above under Comment Numbers 14 and 21. Compliance With Other Laws Regulatory Planning and Review (Executive Order 12866) This document is not a significant rule and has not been reviewed by the Office of Management and Budget under Executive Order 12866.

(1)This rule will not have an effect of $100 million or more on the economy. It will not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. The NPS has completed the report “Economic Analysis of Management Alternatives for Personal Watercraft in Cape Lookout National Seashore” (MACTEC Engineering, December 2005). This document may be viewed on the park's Web site at: *http://www.nps.gov/calo/parkplan.htm.*

(2)This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. Actions taken under this rule will not interfere with other agencies or local government plans, policies or controls. This rule is an agency specific rule.

(3)This rule does not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients. This rule will have no effects on entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients. No grants or other forms of monetary supplements are involved.

(4)This rule does not raise novel legal or policy issues. This rule is one of the special regulations being issued for managing PWC use in National Park Units. The NPS published general regulations (36 CFR 3.24) in March 2000, requiring individual park areas to adopt special regulations to authorize PWC use. The implementation of the requirement of the general regulation continues to generate interest and discussion from the public concerning the overall effect of authorizing PWC use and NPS policy and park management. Regulatory Flexibility Act The Department of the Interior certifies that this rulemaking will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). This certification is based on a report entitled “Economic Analysis of Management Alternatives for Personal Watercraft in Cape Lookout National Seashore” (MACTEC Engineering, December 2005). This document may be viewed on the park's Web site at: *http://www.nps.gov/calo/parkplan.htm.* Small Business Regulatory Enforcement Fairness Act (SBREFA) This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This final rule: a. Does not have an annual effect on the economy of $100 million or more. b. Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. c. Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. Unfunded Mandates Reform Act This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local or tribal governments or the private sector. This rule is an agency specific rule and does not impose any other requirements on other agencies, governments, or the private sector. Takings (Executive Order 12630) In accordance with Executive Order 12630, the rule does not have significant takings implications. A taking implication assessment is not required. No taking of personal property will occur as a result of this rule. Federalism (Executive Order 13132) In accordance with Executive Order 13132, the rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. This final rule only affects use of NPS administered lands and waters. It has no outside effects on other areas by allowing PWC use in specific areas of the park. Civil Justice Reform (Executive Order 12988) In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order. Paperwork Reduction Act This regulation does not require an information collection from 10 or more parties and a submission under the Paperwork Reduction Act is not required. An OMB Form 83-I is not required. National Environmental Policy Act The NPS analyzed this rule in accordance with the criteria of the National Environmental Policy Act and prepared an EA. The EA was available for public review and comment from January 24, 2005, to February 24, 2005. A Finding of No Significant Impact (FONSI) was signed on July 7, 2006. These documents are available at *http://www.nps.gov/calo/parkplan.htm* or may be requested by telephoning

(252)728-2250. Mail inquiries should be directed to park headquarters: Cape Lookout National Seashore, 131 Charles Street, Harkers Island, NC 28531. Government-to-Government Relationship With Tribes In accordance with the President's memorandum of April 29, 1994, “Government to Government Relations with Native American Tribal Governments” (59 FR 22951) and 512 DM 2, we have evaluated potential effects on federally recognized Indian tribes and have determined that there are no potential effects. Administrative Procedure Act This rule allows use of PWC in Cape Lookout National Seashore under specified conditions. Because current regulations do not allow use of PWC at all, this rule relieves a restriction on the public. For this reason, and because NPS wishes to allow the public to take advantage of the new rules as soon as possible, this final rule is effective upon publication in the **Federal Register** , as allowed by the Administrative Procedure Act at 5 U.S.C. 553(d)(1). The proposed rule was published in the **Federal Register** (70 FR 77089) on December 29, 2005, with a 60-day period for notice and comment consistent with the requirements of 5 U.S.C. 553(b). List of Subjects in 36 CFR Part 7 National Parks, Reporting and recordkeeping requirements. In consideration of the foregoing, the NPS amends 36 CFR part 7 as follows: PART 7—SPECIAL REGULATIONS, AREAS OF THE NATIONAL PARK SYSTEM 1. The authority for part 7 continues to read as follows: Authority: 16 U.S.C. 1, 3, 9a, 460(q), 462(k); sec. 7.96 also issued under D.C. Code 8-137

(1981)and D.C. Code 40-721 (1981). 2. Add new § 7.49 to read as follows: § 7.49 Cape Lookout National Seashore.

(a)Personal watercraft

(PWC)may be operated within Cape Lookout National Seashore only under the following conditions:

(1)PWC must be operated at flat-wake speed;

(2)PWC must travel perpendicular to shore;

(3)PWC may only be operated within the seashore to access the following sound side special use areas:

(i)North Core Banks: Access Location

(A)Ocracoke Inlet Wallace Channel dock to the demarcation line in Ocracoke Inlet near Milepost 1.

(B)Milepost 11B Existing sound-side dock at mile post 11B approximately 4 miles north of Long Point.

(C)Long Point Ferry landing at the Long Point Cabin area.

(D)Old Drum Inlet Sound-side beach near Milepost 19 (as designated by signs), approximately 1/2 mile north of Old Drum inlet (adjacent to the cross-over route) encompassing approximately 50 feet.

(ii)South Core Banks: Access Location

(A)New Drum Inlet Sound-side beach near Milepost 23 (as designated by signs), approximately 1/4 mile long, beginning approximately 1/2 mile south of New Drum Inlet.

(B)Great Island Access Carly Dock at Great Island Camp, near Milepost 30 (noted as Island South Core Banks-Great Island on map).

(iii)Cape Lookout: Access Location

(A)Lighthouse Area North A zone 300 feet north of the NPS dock at the lighthouse ferry dock near Milepost 41.

(B)Lighthouse Area South Sound-side beach 100 feet south of the “summer kitchen” to 200 feet north of the Cape Lookout Environmental Education Center Dock.

(C)Power Squadron Spit Sound-side beach at Power Squadron Spit across from rock jetty to end of the spit.

(iv)*Shackleford Banks:* Access Location

(A)West End Access Sound-side beach from Whale Creek west to Beaufort Inlet, except the area between the Wade Shores toilet facility and the passenger ferry dock.

(b)The Superintendent may temporarily limit, restrict or terminate access to the areas designated for PWC use after taking into consideration public health and safety, natural and cultural resource protection, and other management activities and objectives. Dated: August 25, 2006. David M. Verhey, Acting Assistant Secretary, Fish and Wildlife and Parks. [FR Doc. 06-7502 Filed 9-7-06; 8:45 am]

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