Notices. Extension of comment period for NUREG 1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment
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BILLING CODE 7590-01-M NUCLEAR REGULATORY COMMISSION Biweekly Notice; Applications and Amendments to Facility Operating Licenses Involving No Significant Hazards Considerations I. Background Pursuant to section 189a.
(2)of the Atomic Energy Act of 1954, as amended (the Act), the U.S. Nuclear Regulatory Commission (the Commission or NRC staff) is publishing this regular biweekly notice. The Act requires the Commission to publish notice of any amendments issued, or proposed to be issued, and grants the Commission the authority to issue and make immediately effective any amendment to an operating license upon a determination by the Commission that such amendment involves no significant hazards consideration, notwithstanding the pendency before the Commission of a request for a hearing from any person. This biweekly notice includes all notices of amendments issued, or proposed to be issued from September 29, 2006, to October 12, 2006. The last biweekly notice was published on October 10, 2006 ( 71 FR 59529). Notice of Consideration of Issuance of Amendments to Facility Operating Licenses, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing The Commission has made a proposed determination that the following amendment requests involve no significant hazards consideration. Under the Commission's regulations in 10 CFR 50.92, this means that operation of the facility in accordance with the proposed amendment would not
(1)involve a significant increase in the probability or consequences of an accident previously evaluated; or
(2)create the possibility of a new or different kind of accident from any accident previously evaluated; or
(3)involve a significant reduction in a margin of safety. The basis for this proposed determination for each amendment request is shown below. The Commission is seeking public comments on this proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendment before expiration of the 60-day period provided that its final determination is that the amendment involves no significant hazards consideration. In addition, the Commission may issue the amendment prior to the expiration of the 30-day comment period should circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example in derating or shutdown of the facility. Should the Commission take action prior to the expiration of either the comment period or the notice period, it will publish in the **Federal Register** a notice of issuance. Should the Commission make a final No Significant Hazards Consideration Determination, any hearing will take place after issuance. The Commission expects that the need to take this action will occur very infrequently. Written comments may be submitted by mail to the Chief, Rulemaking, Directives and Editing Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and should cite the publication date and page number of this **Federal Register** notice. Written comments may also be delivered to Room 6D22, Two White Flint North, 11545 Rockville Pike, Rockville, Maryland, from 7:30 a.m. to 4:15 p.m. Federal workdays. Copies of written comments received may be examined at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area O1F21, 11555 Rockville Pike (first floor), Rockville, Maryland. The filing of requests for a hearing and petitions for leave to intervene is discussed below. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/doc-collections/cfr/.* If a request for a hearing or petition for leave to intervene is filed within 60 days, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements:
(1)The name, address, and telephone number of the requestor or petitioner;
(2)the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding;
(3)the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and
(4)the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also set forth the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner/requestor intends to rely in proving the contention at the hearing. The petitioner/requestor must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner/requestor intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner/requestor to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing. If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration. The final determination will serve to decide when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing held would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, any hearing held would take place before the issuance of any amendment. A request for a hearing or a petition for leave to intervene must be filed by:
(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, *Attention:* Rulemaking and Adjudications Staff;
(2)courier, express mail, and expedited delivery services: Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, *Attention:* Rulemaking and Adjudications Staff;
(3)E-mail addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, *HearingDocket@nrc.gov;* or
(4)facsimile transmission addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, *Attention:* Rulemakings and Adjudications Staff at
(301)415-1101, verification number is
(301)415-1966. A copy of the request for hearing and petition for leave to intervene should also be sent to the Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and it is requested that copies be transmitted either by means of facsimile transmission to
(301)415-3725 or by e-mail to *OGCMailCenter@nrc.gov.* A copy of the request for hearing and petition for leave to intervene should also be sent to the attorney for the licensee. Nontimely requests and/or petitions and contentions will not be entertained absent a determination by the Commission or the presiding officer of the Atomic Safety and Licensing Board that the petition, request and/or the contentions should be granted based on a balancing of the factors specified in 10 CFR 2.309(a)(1)(i)-(viii). For further details with respect to this action, see the application for amendment which is available for public inspection at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the ADAMS Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html.* If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the PDR Reference staff at 1
(800)397-4209,
(301)415-4737 or by e-mail to *pdr@nrc.gov.* Arizona Public Service Company, et al., Docket Nos. STN 50-528, STN 50-529, and STN 50-530, Palo Verde Nuclear Generating Station, Units 1, 2, and 3, Maricopa County, Arizona *Date of amendments request:* August 16, 2006. *Description of amendments request:* The proposed amendments would revise several Surveillance Requirements
(SRs)in Technical Specification
(TS)3.8.1, “AC Sources—Operating,” to allow these SRs to be performed, or partially performed, in reactor modes that currently are not allowed by the TSs. The proposed changes would also require certain SRs to be performed at a power factor of ≤0.9 if performed with the emergency diesel generators synchronized to the grid, unless grid conditions do not permit. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. The emergency diesel generators
(DGs)and their associated emergency loads are accident mitigating features, rather than accident initiating equipment. Each DG is dedicated to a specific vital bus and these buses and DGs are independent of each other. There is no common mode failure provided by the testing changes proposed in this license amendment request
(LAR)that would cause multiple bus failures. Therefore, there will be no significant impact on any accident probabilities by the approval of the requested amendment. The design of plant equipment is not being modified by these proposed changes. The changes include an increase in the online time the DG will be paralleled to the grid in Mode[s] 1, 2, 3, and 4. The overall time that the DG is paralleled in all modes (outage/non-outage) should remain unchanged. As such, the ability of the DGs to respond to a design basis accident
(DBA)can be adversely impacted by the proposed changes. However, the impacts are not considered significant based on the DG under test maintaining its ability to respond to an auto-start signal were one to be received during testing, along with the ability of the remaining DG to mitigate a DBA or provide a safe shutdown, and data that shows that the DG itself will not perturb the electrical system significantly. Furthermore, the proposed amendments for surveillance requirements
(SR)3.8.1.10 and SR 3.8.1.14 share the same electrical configuration alignment to the current monthly 1-hour loaded surveillance. SR changes that are consistent with Industry/Technical Specification Task Force
(TSTF)Standard Technical Specification
(STS)change TSTF-283, Revision 3 and NUREG-1432, Revision 2 have been approved by the NRC, and the on-line tests allowed by the TSTF and the NUREG are only to be performed for the purpose of establishing operability of the DG being tested. Performance of these SRs during previously restricted modes will require an assessment to assure plant safety is maintained or enhanced. The proposed changes to SRs 3.8.1.10 and 3.8.1.14 to require that these SRs be performed at a power factor of ≤0.9 if performed with the emergency diesel generators synchronized to the grid unless grid conditions do not permit are consistent with NRC-approved NUREG-1432, Standard Technical Specifications, Combustion Engineering Plants, and NRC-approved TSTF-276, Revision 2. This requirement ensures that the DG is tested under load conditions that are as close to design basis conditions as possible. A power factor of ≤0.9 is representative of the actual inductive loading a DG would see under design basis accident conditions. Under certain conditions, however, the proposed change allows the surveillance to be conducted at a power factor other than ≤0.9. These conditions occur when grid voltage is high, and the additional field excitation needed to get the power factor to ≤0.9 results in voltages on the emergency busses that are too high. Under these conditions, the power factor should be maintained as close as practicable to 0.9 while still maintaining acceptable voltage limits on the emergency busses. In other circumstances, the grid voltage may be such that the DG excitation levels needed to obtain a power factor of 0.9 may not cause unacceptable voltages on the emergency busses, but the excitation levels are in excess of those recommended for the DG. In such cases, the power factor shall be maintained as close as practicable to 0.9 without exceeding DG excitation limits. As stated above, a power factor ≤0.9 should be able to be achieved when performing this SR at power and synchronized with offsite power by transferring house loads from the auxiliary transformer to the startup transformer in order to lower the Class 1E bus voltage. Transferring house loads from the auxiliary transformer to the startup transformer is routinely performed at power, in accordance with procedure 40OP-9NA03. The circuit breakers supplying the house loads (NAN-S01 and NAN-S02) from the auxiliary and startup transformers are interlocked such that one supply breaker does not open until the alternate supply breaker is closed. This ensures that the bus remains energized during the transfer. Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different accident from any accident previously evaluated? *Response:* No. The proposed changes would create no new accidents since no changes are being made to the plant that would introduce any new accident causal mechanisms. Equipment will be operated in the same configuration currently allowed by other DG SRs that allow testing in plant Modes 1, 2, 3, and 4. This license amendment request does not impact any plant systems that are accident initiators or adversely impact any accident mitigating systems. Therefore, the proposed change does not create the possibility of a new or different accident from any accident previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed changes do not involve a significant reduction in a margin of safety. The margin of safety is related to the ability of the fission product barriers to perform their design safety functions during and following an accident situation. These barriers include the fuel cladding, the reactor coolant system, and the containment system. The proposed changes to the testing requirements for the plant DGs do not affect the operability requirements for the DGs, as verification of such operability will continue to be performed as required (except during different allowed modes). Continued verification of operability supports the capability of the DGs to perform their required function of providing emergency power to plant equipment that supports or constitutes the fission product barriers. Only one DG is tested at a time and the remaining DG will be available to safely shut down the plant or respond to a DBA, if required. Consequently, the performance of these fission product barriers will not be impacted by implementation of the proposed amendment. In addition, the proposed changes involve no changes to safety setpoints or limits established or assumed by the accident analysis. On this and the above basis, no safety margins will be impacted. Therefore, the proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on that review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the request for amendments involves no significant hazards consideration. *Attorney for licensee:* Michael G. Green, Senior Regulatory Counsel, Pinnacle West Capital Corporation, P.O. Box 52034, Mail Station 8695, Phoenix, Arizona 85072-2034. *NRC Branch Chief:* David Terao. Dominion Energy Kewaunee, Inc., Docket No. 50-305, Kewaunee Power Station, Kewaunee County, Wisconsin *Date of amendment request:* September 25, 2006. *Description of amendment request:* The proposed amendment would revise Technical Specification
(TS)4.2.a, “ASME Code Class 1, 2, 3, and MC Components and Supports.” The revised TS 4.2.a, Item 2, would reference the American Society of Mechanical Engineers Code for Operation and Maintenance. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? No. The proposed change revises the Kewaunee Power Station (Kewaunee) Technical Specification
(TS)TS 4.2.a.2 regarding in-service testing of ASME Code Class 1, Class 2 and Class 3 pumps and valves. The proposed change revises the TS to be consistent with the requirements of 10 CFR [Title 10, Code of Federal Regulations] 50.55a(f)(4) for pumps and valves which are classified as American Society of Mechanical Engineers
(ASME)Code Class 1, Class 2 and Class 3. The proposed change incorporates revisions to the ASME Code that result in a net improvement in the measures for in-service testing of pumps and valves. As a net improvement in the in-service testing of pumps and valves, the proposed change does not negatively impact any accident initiators, analyzed events, or assumed mitigation of accident or transient events. It does not involve the addition or removal of any equipment, or any design changes to the facility. Therefore, this proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? No. The proposed change revises Kewaunee TS 4.2.a.2 regarding in-service testing of ASME Code Class 1, Class 2 and Class 3 pumps and valves, for consistency with the requirements of 10 CFR 50.55a(f)(4). The proposed change incorporates revisions to the ASME Code that result in a net improvement in the measures for testing pumps and valves. The proposed change does not involve a modification to the physical configuration of the plant (i.e., no new equipment will be installed) or adversely affect methods governing normal plant operation. The proposed change will not impose any new or different requirements or introduce a new accident initiator, accident precursor, or malfunction mechanism. The proposed change does not alter existing test criteria or frequencies. Additionally, there is no change in the types or increases in the amounts of any effluent that may be released off-site and there is no increase in individual or cumulative occupational exposure. Therefore, this proposed change does not create the possibility of an accident of a different kind than previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? No. The proposed change revises TS 4.2.a.2 regarding in-service testing of ASME Code Class 1, Class 2, and Class 3 pumps and valves, for consistency with the requirements of 10 CFR 50.55a(f)(4). The proposed change incorporates revisions to the ASME Code that result in a net improvement in the measures for testing pumps and valves. The safety function of the affected pumps and valves will continue to be confirmed through testing. Therefore, this proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Bradley D. Jackson, Esq., Foley and Lardner, P.O. Box 1497, Madison, WI 53701-1497. *NRC Branch Chief:* M. Murphy (Acting). Dominion Nuclear Connecticut, Inc., Docket Nos. 50-336 and 50-423, Millstone Power Station, Unit Nos. 2 and 3, New London County, Connecticut *Date of amendment request:* September 1, 2006. *Description of amendment request:* The proposed amendment would revise the Millstone Power Station, Unit Nos. 2 and 3 (MPS2 and MPS3) Technical Specifications
(TSs)to replace the terms “trash racks and screens” with the term “strainers”. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: Criterion 1: Does the proposed amendment involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. Although the configurations of the existing sump screen and the replacement strainer assemblies are different, they serve the same fundamental purpose of passively removing debris from the sump's suction supply of the supported system pumps. Replacing trash racks with strainers does not adversely impact the adequacy of pump net positive suction head assumed in the safety analyses. In fact, it will improve it. Likewise, the proposed change does not reduce the reliability of any supported systems or introduce any new system interactions. A missile evaluation of the new strainer design concluded that there is no credible missile that could damage the strainer when needed during a loss-of-coolant accident [LOCA]. A jet impingement evaluation of the new strainer design concluded that there are no credible high energy line break jets that could damage the strainer when needed during a LOCA. The greatly increased surface area of the new strainer will reduce the approach velocity of the strainer face significantly, further decreasing the risk of impact from large debris entrained in the sump flow stream. The proposed rewording of the SRs [surveillance requirements] will continue to ensure that the ECCS [emergency core cooling system] sump suction inlet strainers show no evidence of structural distress or abnormal corrosion for MPS2 and [MPS]3 with or without the strainer modification complete. As such, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. *Criterion 2:* Does the proposed amendment create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. During the next refueling outage for each unit, DNC [Dominion Nuclear Connecticut, Inc.] is replacing the ECCS trash racks and screens with strainers in support of the response to Generic Letter 2004-02 on Millstone Units 2 and 3. The ECCS strainers are passive components in standby safety systems used for accident mitigation. As such, they are not accident initiators. Therefore, there is no possibility that this change could create any accident of any kind. A change to TS SRs 4.5.2.j for MPS2 and 4.5.2.d.2 for MPS3 addresses differences in nomenclature between the existing and [Generic Safety Issue] GSI-191 designs. These changes do not alter the nature of events postulated in the Final Safety Analysis Report nor do they introduce any unique precursor mechanisms. Therefore, the proposed amendment will not create the possibility of a new or different kind of accident from any accident previously evaluated. *Criterion 3:* Does the proposed amendment involve a significant reduction in a margin of safety? *Response:* No. The proposed changes do not adversely affect any plant safety limits, set points, or design parameters. The changes also do not adversely affect the fuel, fuel cladding, reactor coolant system (RCS), or containment integrity. Therefore, the proposed TS change, which revises the terminology associated with TS SRs, does not involve a significant reduction in the margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Lillian M. Cuoco, Senior Nuclear Counsel, Dominion Nuclear Connecticut, Inc., Rope Ferry Road, Waterford, CT 06385. *NRC Acting Branch Chief:* Brooke D. Poole. Entergy Operations, Inc., Docket Nos. 50-313 and 50-368, Arkansas Nuclear One, Units 1 and 2 (ANO-1&2), Pope County, Arkansas *Date of amendment request:* October 25, 2005. *Description of amendment request:* The proposed change modifies inventory and inspection requirements associated with the Emergency Cooling Pond (ECP), which is a common cooling water source for ANO-1&2 during conditions that may render the normal cooling water source (Dardanelle Reservoir) unavailable. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. The indicated ECP level is an operator aid for routine verification that the required ECP inventory of 70 acre-feet is maintained. Relocation of this indication to the TS [technical specification] Bases does not change the design basis and, therefore, has no impact on any accident described in the SAR [safety analysis report]. The relocation of excessive SR [surveillance requirement] details to the TS Bases does not reduce the level of testing required with regard to ECP operability verifications. Actual ECP inspection is more detailed than that currently described in the TSs. The relocation of this excessive detail to the TS Bases, therefore, has no impact on any accident described in the SAR. Finally, the inclusion of a new Action associated with the discovery of degradation of the ECP structure is more restrictive in that the proposed engineering evaluation must be performed within 7 days. Previously, the TS Bases did not require a completion time for this action. Actions associated with TS Limiting Conditions for Operation
(LCO)or SRs are below the level of detail described in the SAR and, therefore, have no impact on any accident currently described in the SAR. Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The aforementioned proposed change to the TSs does not require any physical alteration to the plant or alter plant design. The ECP is not an accident initiator. The proposed change does not adversely impact the function of the ECP as credited in any safety analyses for the prevention or mitigation of any accident. Therefore, the proposed change does not create the possibility of a new or different kind of accident from any previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed change does not adversely impact a margin of safety analysis for any accident previously evaluated. Relocation of the indicated ECP level that corresponds to the required ECP volume of 70 acre-feet and the relocation of excessive SR details to the TS Bases will not result in a credible increase in nuclear safety risk. In addition, the TS Bases is part of the SAR and controlled under 10 CFR 50.59. The inclusion of a new action relocated from the TS Bases to the TS with completion time constraint is more conservative than currently described in the TS Bases. The proposed change acts to correct current TS deficiencies and, therefore, is considered risk neutral. Therefore, the proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Nicholas S. Reynolds, Esquire, Winston and Strawn, 1700 K Street, NW., Washington, DC 20006-3817. *NRC Branch Chief:* David Terao. Entergy Gulf States, Inc., and Entergy Operations, Inc., Docket No. 50-458, River Bend Station, Unit 1, West Feliciana Parish, Louisiana *Date of amendment request:* September 19, 2006. *Description of amendment request:* The proposed change will revise River Bend Station, Unit 1,
(RBS)Technical Specifications
(TS)Surveillance Requirement 3.6.1.3.5 to replace the currently specified frequency for leak testing containment purge supply and exhaust isolation valves with resilient seal materials with a requirement to test these valves in accordance with the Containment Leakage Rate Testing Program. The RBS Containment Leakage Rate Testing Program is implemented in accordance with the Code of Federal Regulations, Part 50, Appendix J, Option B, and Regulatory Guide
(RG)1.163, “Performance-Based Containment Leak Test Program,” dated September 1995. RG 1.163 allows a nominal test interval of 30 months for containment purge and vent valves. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. This change deletes the augmented testing requirement for these containment isolation valves and allows the surveillance intervals to be set in accordance with the Containment Leakage Rate Testing Programs. This change does not affect the system function or design. The purge valves are not an initiator of any previously analyzed accident. Leakage rates do not affect the probability of the occurrence of any accident. Operating history has demonstrated that the valves do not degrade and cause leakage as previously anticipated. Because these valves have been demonstrated to be reliable, these valves can be expected to perform the containment isolation function as assumed in the accident analyses. Therefore, there is no significant increase in the consequences of any previously evaluated accident. Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. Extending the test intervals has no influence on, nor does it contribute in any way to, the possibility of a new or different kind of accident or malfunction from those previously analyzed. No change has been made to the design, function or method of performing leakage testing. Leakage acceptance criteria have not changed. No new accident modes are created by extending the testing intervals. No safety-related equipment or safety functions are altered as a result of this change. Therefore, the proposed change does not create the possibility of a new or different kind of accident from any previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The only margin of safety that has the potential of being impacted by the proposed changes involves the offsite dose consequences of postulated accidents which are directly related to the containment leakage rate. The proposed change does not alter the method of performing the tests nor does it change the leakage acceptance criteria. Sufficient data has been collected to demonstrate these resilient seals do not degrade at an accelerated rate. Because of this demonstrated reliability, this change will provide sufficient surveillance to determine an increase in the unfiltered leakage prior to the leakage exceeding that assumed in the accident analysis. Therefore, the proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Mark Wetterhahn, Esq., Winston & Strawn LLP, 1700 K Street, NW., Washington, DC 20006. *NRC Branch Chief:* David Terao. Nuclear Management Company, LLC, Docket No. 50-255, Palisades Nuclear Plant (PNP), Van Buren County, Michigan *Date of amendment request:* May 30, 2006. *Description of amendment request:* The proposed amendment would revise Technical Specification (TS), Section 5.5.8, “Steam Generator Program,” to modify the steam generator
(SG)provisions for tube inspections, as contained in the PNP TS Surveillance Requirements, Section 5.5.8.d. The purpose of these changes is to define the depth of the required tube inspections. WCAP-16208-P, “NDE Inspection Length for CE [Combustion Engineering] Steam Generator Tubesheet Region Explosive Expansions,” Revision 1, provided recommended tubesheet region inspection lengths for plants with CE-supplied steam generators with explosive expansions. This inspection length is referred to as C* (“C-Star”). Nuclear Management Company
(NMC)intends to implement the C* inspection methodology for PNP. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed amendment involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. The proposed amendment does not involve a significant increase in the probability of an accident previously evaluated because the modification to TS Section 5.5.8.d maintains the existing design limits and would not increase the probability or consequences of an accident involving tube burst or primary to secondary accident-induced leakage, as previously analyzed in the UFSAR [Updated Final Safety Analysis Report]. Also, the tube burst and collapse criteria of NRC [Nuclear Regulatory Commission] Regulatory Guide 1.121, “Basis for Plugging Degraded PWR Steam Generator Tubes,” would continue to be satisfied. Tube burst is precluded for a tube with defects within the tubesheet region because of the constraint provided by the tubesheet. As such, tube pullout resulting from the axial forces induced by primary to secondary differential pressures would be a prerequisite for tube burst to occur. A joint industry test program, WCAP-16208-P, has defined the nondegraded tube to tubesheet joint length required to preclude tube pullout C °) and maintain acceptable primary to secondary accident-induced leakage, assuming a 360° circumferential through wall crack existed immediately below this length. For PNP, C ° is 12.5 inches. Any degradation below C ° is shown by empirical test results and analyses to be acceptable, thereby precluding an event with consequences similar to a postulated tube rupture event. WCAP-1 6208-P incorporates an assumed primary to secondary accident-induced leakage value of 0.1 gpm/SG. The NMC TSTF [Technical Specifications Task Force]-449 submittal to the NRC provided the PNP SG tube integrity related TS. LCO [Limiting Condition for Operation] 3.4.13, item d., “PCS Operational Leakage,” states that operational leakage through any one SG shall be limited to 150 gallons per day. The UFSAR Chapter 14.14-6 accident-induced leakage limit assumption based on MSLB [main steam-line break] is 0.3 gallons per minute (432 gallons per day). Therefore, the LCO leakage limit is conservatively less than the design basis accident induced leakage limit. In summary, the proposed modifications to the PNP Technical Specifications maintain existing design limits and do not involve a significant increase in the probability or consequences of an accident previously evaluated in the UFSAR. Therefore, operation of the facility in accordance with the proposed amendment would not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed amendment create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The proposed amendment does not create the possibility of a new or different kind of accident from any accident previously evaluated because SG tube leakage and structural integrity will continue to be maintained during all plant conditions upon implementation of the proposed inspection scope to the PNP TSs. The revised inspection scope does not introduce any new mechanisms that might result in a different kind of accident from those previously evaluated. Even with the limiting circumstances of a complete circumferential separation (360-degree through wall crack) of a tube below the C* length, tube pullout is precluded and leakage is predicted to be maintained within the TS limits during all plant conditions. Therefore, the proposed amendment does not create the possibility of a new or different kind of accident from any accident previously evaluated. 3. Does the proposed amendment involve a significant reduction in a margin of safety? *Response:* No. The proposed amendment does not involve a significant reduction in a margin of safety. The requirements for the inspection of SG tubes are intended to ensure that this portion of the primary coolant system maintains its integrity. Tube integrity means that the tubes are capable of performing these functions in accordance with the plant design and licensing basis. Tube integrity includes both structural and leakage integrity. The proposed tubesheet inspection depth of 12.5 inches will ensure tube integrity is maintained because any degradation below C* is shown by empirical test results and analyses to be acceptable. In addition, operation with potential tube degradation below the C* inspection length continues to meet the margin of safety as defined by RG [Regulatory Guide] 1.121, “Basis for Plugging Degraded PWR Steam Generator Tubes,” and RG 1.83, “Inservice Inspection of Pressurized Water Reactor Steam Generator Tubes.” Therefore, the proposed modifications do not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Jonathan Rogoff, Esquire, Vice President, Counsel & Secretary, Nuclear Management Company, LLC, 700 First Street, Hudson, WI 54016. *NRC Branch Chief:* Martin C. Murphy, Acting Branch Chief. Notice of Issuance of Amendments to Facility Operating Licenses During the period since publication of the last biweekly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR Chapter I, which are set forth in the license amendment. Notice of Consideration of Issuance of Amendment to Facility Operating License, Proposed No Significant Hazards Consideration Determination, and Opportunity for A Hearing in connection with these actions was published in the **Federal Register** as indicated. Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated. For further details with respect to the action see
(1)the applications for amendment,
(2)the amendment, and
(3)the Commission's related letter, Safety Evaluation and/or Environmental Assessment as indicated. All of these items are available for public inspection at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management Systems (ADAMS) Public Electronic Reading Room on the internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html.* If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the PDR Reference staff at 1
(800)397-4209,
(301)415-4737 or by e-mail to *pdr@nrc.gov.* Dominion Nuclear Connecticut, Inc., Docket No. 50-423, Millstone Power Station, Unit No. 3, New London County, Connecticut *Date of application for amendment:* March 28, 2006. *Brief description of amendment:* The amendment revised Facility Operating License No. NPF-49 by deleting Section 2.F, which specifies reporting of violations of the requirements of Section 2.C of the renewed operating license. *Date of issuance:* October 4, 2006. *Effective date:* As of the date of issuance and shall be implemented within 60 days from the date of issuance. *Amendment No.:* 234. *Facility Operating License No. NPF-49:* The amendment revised the License. *Date of initial notice in* Federal Register: May 9, 2006 (71 FR 26997). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 4, 2006. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-368, Arkansas Nuclear One, Unit No. 2, Pope County, Arkansas *Date of application for amendment* : September 19, 2005, as supplemented by letters dated February 28, May 31, and September 26, 2006. *Brief description of amendment:* The amendment revised Technical Specification
(TS)3.6.2.1, “Containment Spray System.” Specifically, the change revised the allowable outage time
(AOT)for TS 3.6.2.1 from 72 hours to 7 days during fuel cycles 19 and 20. Per the license amendment request, the AOT extension may only be invoked twice (i.e., once for each train or twice for one train). The requested changes are sought to provide needed flexibility in the performance of selected corrective and preventative maintenance activities during power operations. Currently, the licensee's maintenance activities on containment spray system components are performed during the refueling outages; taking several days of “around the clock” effort. *Date of issuance:* September 28, 2006. *Effective date:* As of the date of issuance and shall be implemented within 60 days from the date of issuance. *Amendment No.:* 268. *Renewed Facility Operating License No. NPF-6:* The amendment revised the Technical Specifications. *Date of initial notice in* Federal Register: January 3, 2006 (71 FR 148). The supplements dated February 28, May 31, and September 26, 2006, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28, 2006. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., System Energy Resources, Inc., South Mississippi Electric Power Association, and Entergy Mississippi, Inc., Docket No. 50-416, Grand Gulf Nuclear Station, Unit 1, Claiborne County, Mississippi *Date of application for amendment:* August 17, 2005, as supplemented by letter dated May 19, 2006. *Brief description of amendment:* The proposed changes revised the Operating License Condition
(OLC)2.C.(41) to add reference to a Nuclear Regulatory Commission
(NRC)Safety Evaluation that allows the application of certain risk-informed, performance-based fire protection methods and tools. *Date of issuance:* September 29, 2006. *Effective date:* As of the date of issuance and shall be implemented within 90 days of issuance. *Amendment No:* 170. *Facility Operating License No. NPF-29:* The amendment revised the OLC 2.C.(41). *Date of initial notice in* Federal Register: October 25, 2005 (70 FR 61658). The supplement dated May 19, 2006, provided additional information that clarified the change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 29, 2006 *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-382, Waterford Steam Electric Station, Unit 3, St. Charles Parish, Louisiana *Date of amendment request:* November 5, 2004. *Brief description of amendment:* The amendment modified Waterford 3 Technical Specification
(TS)3.7.4, “Ultimate Heat Sink,” to provide clarification that the ambient temperature monitoring requirement that is specified in TS 3.7.4.d only applies when the affected ultimate heat sink train is considered to be operable. The NRC is not approving the request to delete TS 3.7.4.c, which would allow the plant to take credit for the dry cooling tower fans that are not protected from tornado missiles when a tornado warning is in effect. *Date of issuance:* September 28, 2006. *Effective date:* As of the date of issuance and shall be implemented 60 days from the date of issuance. *Amendment No.:* 208. *Facility Operating License No. NPF-38:* The amendment revised the Operating License and the Technical Specifications. *Date of initial notice in* Federal Register: December 7, 2004 (69 FR 70717). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28, 2006. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-382, Waterford Steam Electric Station, Unit 3, St. Charles Parish, Louisiana *Date of amendment request:* October 27, 2005. *Brief description of amendment:* The amendment modified Surveillance Requirement
(SR)4.5.2e of Technical Specification
(TS)3.5.2, “ECCS [Emergency Core Cooling Systems] Subsystems—Modes 1, 2 and 3,” SR 4.6.2.1d of TS 3.6.2, “Containment Spray System,” and SR 4.7.3b of TS 3.7.3, “Component Cooling Water and Auxiliary Component Cooling Water Systems,” to remove the words “during shutdown.” This will provide flexibility allowing components required to be tested by these SRs to be tested online. Additionally, a revision to delete SR 4.7.12.1c of TS 3.7.12, “Essential Services Chilled Water system,” is approved. A modification permanently separating the safety and non-safety portions of the Essential Services Chilled Water system has eliminated the need for automatic isolation valves and thus this SR. *Date of issuance:* October 6, 2006. *Effective date:* As of the date of issuance and shall be implemented 60 days from the date of issuance. *Amendment No.:* 209. *Facility Operating License No. NPF-38:* The amendment revised the Technical Specifications and the Facility Operating License. *Date of initial notice in* Federal Register: December 20, 2005 (70 FR 75491). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 6, 2006. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-382, Waterford Steam Electric Station, Unit 3, St. Charles Parish, Louisiana *Date of amendment request:* October 25, 2005. *Brief description of amendment:* The amendment modifies Waterford 3 Technical Specification 6.9.1.11, “Core Operating Limits Report COLR,” to add a methodology that will allow the use of zirconium diboride burnable absorber coating on fuel pellets. *Date of issuance:* October 6, 2006. *Effective date:* As of the date of issuance and shall be implemented 30 days from the date of issuance. *Amendment No.:* 210. *Facility Operating License No. NPF-38:* The amendment revised the Operating License and the Technical Specifications. *Date of initial notice in* Federal Register: December 6, 2005 (70 FR 72673). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 6, 2006. *No significant hazards consideration comments received:* No. Exelon Generation Company, LLC, Docket Nos. 50-352 and 50-353, Limerick Generating Station, Units 1 and 2, Montgomery County, Pennsylvania *Date of application for amendments:* June 11, 2004, as supplemented by letters dated December 12, 2005, April 4, 2006, and July 28, 2006. *Brief description of amendments:* This amendment incorporated a revision to the Technical Specifications
(TSs)and licensing and design bases that relocates surveillance test intervals of various TS surveillance requirements to a new program, the Surveillance Frequency Control Program, which will be located in the Administrative Controls Section of the TSs. These amendments are pilot submittals in support of the Boiling Water Reactor Owners' Group Risk-Informed Initiative 5b, “Relocate Surveillance Test Intervals to Licensee Control.” *Date of issuance:* September 28, 2006. *Effective date:* As of the date of issuance, to be implemented within 60 days. *Amendment Nos. 186, 147.* *Facility Operating License Nos. NPF-39 and NPF-85.* This amendment revised the facility operating licenses and the TSs. *Date of initial notice in* Federal Register: May 24, 2005 (70 FR 29793). The supplements provided clarifying information that did not expand the scope of the application as originally noticed, and did not change the NRC staff's original proposed no significant hazards consideration determination as originally published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28, 2006. *No significant hazards consideration comments received:* No. FPL Energy Seabrook, LLC, Docket No. 50-443, Seabrook Station, Unit No. 1, Rockingham County, New Hampshire *Date of amendment request:* September 29, 2005, as supplemented on August 8, September 18, and September 28, 2006. *Description of amendment request:* The amendment revised the Seabrook Station, Unit No. 1 Technical Specifications
(TSs)to permit a one-time change in the steam generator tube inspection requirements to include a sampling of the bulges and over-expansions for portions of the steam generator tubes within the hot-leg tubesheet region. *Date of issuance:* September 29, 2006. *Effective date:* As of its date of issuance, and shall be implemented within 90 days. *Amendment No.:* 112. *Facility Operating License No. NPF-86:* The amendment revised the License and the Tss. *Date of initial notice in* Federal Register: November 8, 2005 (70 FR 67749). The licensee's August 8 and September 28, 2006, supplements provided clarifying information that did not change the scope of the proposed amendment as described in the original notice of proposed action published in the **Federal Register** , and did not change the initial proposed no significant hazards consideration determination. The supplement dated September 18, 2006, modified the requested amendment to request a one-time change in lieu of a permanent one. This narrowing of scope did not alter the validity of the NRC staff's proposed no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 29, 2006. *No significant hazards consideration comments received:* No. Indiana Michigan Power Company, Docket No. 50-315, Donald C. Cook Nuclear Plant, Unit 1, Berrien County, Michigan *Date of application for amendment:* May 31, 2006. *Brief description of amendment:* The amendment approved elimination of the resistance temperature detector
(RTD)bypass piping and installing fast response thermowell-mounted RTDs in the reactor coolant system loop piping. The amendment also revised Surveillance Requirement 3.3.1.15 of the Technical Specifications, deleting the requirement to perform surveillance on the reactor coolant system RTD bypass loop flow rate. *Date of issuance:* October 6, 2006. *Effective date:* As of the date of issuance and shall be implemented prior to entry into Mode 2 from the fall 2006 refueling outage. *Amendment No.:* 296. *Facility Operating License No. DPR-58:* Amendment revise the Technical Specifications. *Date of initial notice in* Federal Register: July 5, 2006 (71 FR 38182). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 6, 2006. *No significant hazards consideration comments received:* No. Nebraska Public Power District, Docket No. 50-298, Cooper Nuclear Station, Nemaha County, Nebraska *Date of amendment request:* January 30, 2006, as supplement by May 17 and August 29, 2006. *Brief description of amendment:* The amendment revised the Cooper Nuclear Station Technical Specification Section 5.5.12, “Primary Containment Leakage Rate Testing Program,” to allow a one-time extension of no more than 5 years for the Type A, Integrated Leakage Rate Test
(ILRT)interval. This revision is a one-time exception to the 10-year frequency of the performance-based leakage rate testing program for Type A tests as defined in Nuclear Energy Institute
(NEI)document, NEI 94-01, Revision 0, “Industry Guideline for Implementing Performance-Based Option of 10 CFR Part 50, Appendix J,” pursuant to 10 CFR Part 50, Appendix J, Option B. The requested exception is to allow the ILRT to be performed within 15 years from the last ILRT, last performed on December 7, 1998. *Date of issuance:* October 3, 2006. *Effective date:* As of the date of issuance and shall be implemented within 30 days of issuance. *Amendment No.:* 224. *Facility Operating License No. DPR-46:* Amendment revised the Technical Specifications. *Date of initial notice in* Federal Register: April 25, 2006 (71 FR 23957). The supplement dated May 17 and August 29, 2006, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 3, 2006. *No significant hazards consideration comments received:* No. Nine Mile Point Nuclear Station, LLC, Docket No. 50-220, Nine Mile Point Nuclear Station, Unit No. 1, Oswego County, New York *Date of application for amendment:* January 18, 2006. *Brief description of amendment:* The amendment deletes the reference to the hydrogen monitors in Technical Specification 3.6.11, “Accident Monitoring Instrumentation.” *Date of issuance:* October 2, 2006. *Effective date:* As of the date of issuance to be implemented within 60 days. *Amendment No.:* 191. *Facility Operating License No. DPR-63:* Amendment revises the Technical Specifications and License. *Date of initial notice in* Federal Register: July 18, 2006 (71 FR 40749) The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 2, 2006. *No significant hazards consideration comments received:* No. Nuclear Management Company, LLC, Docket Nos. 50-282 and 50-306, Prairie Island Nuclear Generating Plant, Units 1 and 2, Goodhue County, Minnesota *Date of application for amendments:* December 13, 2005, supplemented by letters dated June 7, and July 21, 2006. *Brief description of amendments:* The amendments revise technical specification 5.5.14 “Containment Leakage Rate Testing Program” for Prairie Island Nuclear Generating Plant Units 1 and 2, to allow a one-time interval extension of no more than 5 years for the Appendix J Type A, Integrated Leakage Rate Test. *Date of issuance:* October 2, 2006. *Effective date:* As of the date of issuance and shall be implemented within 30 days. *Amendment Nos.:* 174 and 164. *Facility Operating License Nos. DPR-42 and DPR-60:* Amendments revised the Technical Specifications. *Date of initial notice in* Federal Register: January 31, 2006 (71 FR 5081) The supplemental information provided by letters dated June 7, and July 21, 2006, did not change the no significant hazards determination. The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated October 2, 2006. *No significant hazards consideration comments received:* No. Pacific Gas and Electric Company, Docket Nos. 50-275 and 50-323, Diablo Canyon Nuclear Power Plant, Unit Nos. 1 and 2, San Luis Obispo County, California *Date of application for amendments:* January 19, 2006, as supplemented by letter dated June 20, 2006. *Brief description of amendments:* The amendments deleted the antitrust conditions from the facility operating licenses. *Date of issuance:* October 2, 2006. *Effective date:* As of the date of issuance and shall be implemented within 90 days of issuance. *Amendment Nos.:* Unit 1-189; Unit 2-191. *Facility Operating License Nos. DPR-80 and DPR-82:* The amendments revised the Facility Operating Licenses. *Date of initial notice in* Federal Register: April 14, 2006 (71 FR 19551) The supplemental letter dated June 20, 2006, provided additional information that clarified the application, and did not expand the scope of the application as originally noticed. The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated October 2, 2006. *No significant hazards consideration comments received:* No. PPL Susquehanna, LLC, Docket No. 50-387 and 50-388, Susquehanna Steam Electric Station, Units 1 and 2 (SSES 1 and 2), Luzerne County, Pennsylvania *Date of application for amendments:* November 9, 2004, as supplemented on December 15, 2005, June 30, 2006, August 18, 2006, and September 28, 2006. *Brief description of amendments:* The amendments revise the SSES 1 and 2 Technical Specifications
(TSs)3.8.4, “DC Sources—Operating,” 3.8.5, “DC Sources-Shutdown,” 3.8.6, “Battery Cell Parameters,” and add a new TS Section, 5.5.13, “Battery Monitoring and Maintenance Program.” These changes are consistent with TS Task Force
(TSTF)360, Revision 1. *Date of issuance:* September 28, 2006. *Effective date:* As of the date of issuance and to be implemented within 60 days. *Amendment Nos.:* 238 and 215. *Facility Operating License Nos. NPF-14 and NPF-22:* The amendments revised the TSs and license. *Date of initial notice in* Federal Register: January 17, 2006 (71 FR 2596). The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated September 28, 2006. The supplements dated December 15, 2005, June 30, 2006, August 18, 2006, and September 28, 2006, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination. *No significant hazards consideration comments received:* No. PSEG Nuclear LLC, Docket No. 50-311, Salem Nuclear Generating Station, Unit No. 2, Salem County, New Jersey *Date of application for amendment:* September 21, 2005, as supplemented by letters dated June 28, 2006, and August 4, 2006. *Brief description of amendment:* The amendment revises the extent of steam generator tube inspections in the hot-leg side of the tubesheet. *Date of issuance:* September 28, 2006. *Effective date:* As of the date of issuance, to be implemented within 60 days from date of issuance. *Amendment No.:* 256. *Facility Operating License No. DPR-75:* This amendment revised the Technical Specifications and License. *Date of initial notice in* Federal Register: January 7, 2006 (71 FR 2594). The supplements did not expand the scope of the request, or change the original proposed no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28 2006. *No significant hazards consideration comments received:* No. Southern California Edison Company, et al., Docket Nos. 50-361 and 50-362, San Onofre Nuclear Generating Station, Units 2 and 3, San Diego County, California *Date of application for amendments:* April 17, 2006. *No significant hazards consideration comments received:* No. *Brief description of amendments:* The proposed amendments deleted Section 2.G of the Facility Operating Licenses, which required reporting of violations of the requirements in Sections 2.C(1), 2.C(3), and 2.F of the Facility Operating Licenses. *Date of issuance:* October 3, 2006. *Effective date:* As of the date of issuance and shall be implemented within 60 days of issuance. *Amendment Nos.:* Unit 2-205; Unit 3-197. *Facility Operating License Nos. NPF-10 and NPF-15:* The amendments deleted Section 2.G of the Facility Operating Licenses. *Date of initial notice in* Federal Register: May 9, 2006 (71 FR 27003) The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated October 3, 2006. *No significant hazards consideration comments received:* No. Tennessee Valley Authority, Docket No. 50-259, Browns Ferry Nuclear Plant, Unit 1, Limestone County, Alabama *Date of application for amendment:* August 16, 2004 (TS-433) as supplemented by letter dated September 30, 2005. *Brief description of amendment:* The proposed amendment extends the frequency of “once-per cycle” from 18 to 24 months in several Technical Specification
(TS)Surveillance Requirements. This change will allow the adoption of a 24-month refueling cycle. *Date of issuance:* September 28, 2006. *Effective date:* Date of issuance, to be implemented within 60 days. *Amendment No.:* 263. *Renewed Facility Operating License No. DPR-33:* Amendment revised the TSs. *Date of initial notice in* Federal Register: March 29, 2005 (70 FR 15947). The supplement dated September 30, 2005, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the NRC staff's original proposed no significant hazards determination as published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28, 2006. *No significant hazards consideration comments received:* No. Tennessee Valley Authority, Docket No. 50-259, Browns Ferry Nuclear Plant, Unit 1, Limestone County, Alabama *Date of amendment request:* October 12, 2004, as supplemented April 27 and June 27, 2005 (TS-438). *Description of amendment request:* The amendment revised the frequency requirement for Technical Specification
(TS)Surveillance Requirement
(SR)3.6.1.3.8 by allowing a representative sample (approximately 20 percent) of excess flow check valves (EFCVs) to be tested every 24 months, so that each EFCV is tested once every 120 months. The current SR requires testing of each EFCV every 24 months. *Date of issuance:* September 29, 2006. *Effective date:* Date of issuance, to be implemented within 30 days. *Amendment No.:* 264. *Facility Operating License Nos. DPR-33:* Amendment revised the TSs. *Date of initial notice in* Federal Register: March 29, 2005 (70 FR 15948). The supplemental letters provided clarifying information that did not expand the scope of the original application or change the initial proposed no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 29, 2006. *No significant hazards consideration comments received:* No. Tennessee Valley Authority, Docket No. 50-390, Watts Bar Nuclear Plant, Unit 1, Rhea County, Tennessee *Date of application for amendment:* February 24, 2006, as supplemented by letter dated May 8, 2006 (TS-06-02). *Brief description of amendment:* The amendment revises the Updated Final Safety Analysis Report (UFSAR) by modifying the design and licensing basis to incorporate revised dose analysis inputs and results for the steam generator tube rupture accident. The analysis was revised as a result of an error in the computer model used to calculate the dose consequences to the Main Control Room subsequent to an accident. *Date of issuance:* October 4, 2006. *Effective date:* As of the date of issuance and shall be implemented as part of the next UFSAR update made in accordance with 10 CFR 50.71(e). *Amendment No.:* 64. *Facility Operating License No. NPF-90:* Amendment authorizes revision of the UFSAR. *Date of initial notice in the* Federal Register: April 25, 2006 (71 FR 23962). The supplemental letter provided clarifying information that was within the scope of the initial notice and did not change the initial proposed no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 4, 2006. *No significant hazards consideration comments received:* No. TXU Generation Company LP, Docket Nos. 50-445 and 50-446, Comanche Peak Steam Electric Station, Unit Nos. 1 and 2, Somervell County, Texas *Date of amendment request:* December 16, 2005, as supplemented by letters dated June 23 and August 25, 2006. *Brief description of amendments:* The change revised Technical Specifications
(TSs)3.3.2, “ESFAS [Engineered Safety Features Actuation System] Instrumentation”; and 3.5.2, “ECCS [Emergency Core Cooling System]—Operating.” *Date of issuance:* October 5, 2006. *Effective date:* As of the date of issuance and shall be implemented within 120 days from the date of issuance for TS 3.5.2 revisions, and within 120 days from the completion of the 12th refueling outage of Unit 1, for TS 3.3.2 revisions. *Amendment Nos.:* 129 and 129. *Facility Operating License Nos. NPF-87 and NPF-89:* The amendments revised the Technical Specifications. *Date of initial notice in* Federal Register: March 14, 2006 (71 FR 13179). The supplements dated June 23 and August 25, 2006, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** . The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated October 5, 2006. *No significant hazards consideration comments received:* No. Wolf Creek Nuclear Operating Corporation, Docket No. 50-482, Wolf Creek Generating Station, Coffey County, Kansas *Date of amendment request:* July 23, 2004, as supplemented by letters dated August 11 and September 22, 2006. *Brief description of amendment:* The amendment revised Technical Specification
(TS)3.6.3, “Containment Isolation Valves,” by
(1)adding the abbreviation “(CIV)” for containment isolation valve in Condition A of the Actions for the Limiting Condition for Operation;
(2)deleting the note and revising Condition A to be for only one penetration flow path with one CIV inoperable;
(3)revising the completion time for Required Condition A.1 from 4 hours to as much as 7 days depending on the category of the inoperable CIV; and
(4)revising Condition C to be for two or more penetration flow paths with one CIV inoperable. The amendment also added two conditions to the license. *Date of issuance:* September 28, 2006. *Effective date:* Effective as of its date of issuance and shall be implemented prior to the start of Refueling Outage 18, which is scheduled to start in spring 2008. *Amendment No.:* 167. *Facility Operating License No. NPF-42.* The amendment revised Appendix A, “Technical Specifications,” and Appendix D, “Additional Conditions,” of the license. *Date of initial notice in* Federal Register: December 7, 2004 (69 FR 70724). The supplemental letters dated August 11 and September 22, 2006, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the NRC staff's original proposed no significant hazards consideration determination published in the **Federal Register** . The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated September 28, 2006. *No significant hazards consideration comments received:* No. Wolf Creek Nuclear Operating Corporation, Docket No. 50-482, Wolf Creek Generating Station, Coffey County, Kansas *Date of amendment request:* June 2, 2006. *Brief description of amendment:* The amendment revised Surveillance Requirement 3.5.2.8 by replacing the phrase “trash racks and screens” with the word “strainers.” The amendment reflects the replacement of the containment sump suction inlet trash racks and screens with a complex strainer design with significantly larger effective area in the upcoming Refueling Outage 15. *Date of issuance:* October 5, 2006. *Effective date:* As of its date of issuance and shall be implemented prior to the entry into Mode 4 in the restart from the fall 2006 refueling outage. *Amendment No.:* 168. *Facility Operating License No. NPF-42:* The amendment revised the Technical Specifications. *Date of initial notice in* Federal Register: July 18, 2006 (71 FR 40756) The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 5, 2006. *No significant hazards consideration comments received:* No. Wolf Creek Nuclear Operating Corporation, Docket No. 50-482, Wolf Creek Generating Station, Coffey County, Kansas *Date of amendment request:* June 30, 2006. *Brief description of amendment:* The amendment revised Technical Specification
(TS)5.5.9, “Steam Generator
(SG)Program,” by changing the “Refueling Outage 14” to “Refueling Outage 15” in two places. This change extended the provisions for SG tube repair criteria and inspections that were approved for Refueling Outage 14, and the subsequent operating cycle, in Amendment No. 162 issued April 28, 2005, to the upcoming Refueling Outage 15, and the subsequent operating cycle. *Date of issuance:* October 10, 2006. *Effective date:* As of its date of issuance and shall be implemented prior to entry into Mode 4 during the startup from Refueling Outage 15, scheduled to begin in October 2006. *Amendment No.:* 169. *Facility Operating License No. NPF-42:* The amendment revised the Technical Specifications. *Date of initial notice in* Federal Register: July 24, 2006 (71 FR 41845) The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated October 10, 2006. *No significant hazards consideration comments received:* No. Notice of Issuance of Amendments to Facility Operating Licenses and Final Determination of No Significant Hazards Consideration and Opportunity for a Hearing (Exigent Public Announcement or Emergency Circumstances) During the period since publication of the last biweekly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application for the amendment complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR Chapter I, which are set forth in the license amendment. Because of exigent or emergency circumstances associated with the date the amendment was needed, there was not time for the Commission to publish, for public comment before issuance, its usual Notice of Consideration of Issuance of Amendment, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing. For exigent circumstances, the Commission has either issued a **Federal Register** notice providing opportunity for public comment or has used local media to provide notice to the public in the area surrounding a licensee's facility of the licensee's application and of the Commission's proposed determination of no significant hazards consideration. The Commission has provided a reasonable opportunity for the public to comment, using its best efforts to make available to the public means of communication for the public to respond quickly, and in the case of telephone comments, the comments have been recorded or transcribed as appropriate and the licensee has been informed of the public comments. In circumstances where failure to act in a timely way would have resulted, for example, in derating or shutdown of a nuclear power plant or in prevention of either resumption of operation or of increase in power output up to the plant's licensed power level, the Commission may not have had an opportunity to provide for public comment on its no significant hazards consideration determination. In such case, the license amendment has been issued without opportunity for comment. If there has been some time for public comment but less than 30 days, the Commission may provide an opportunity for public comment. If comments have been requested, it is so stated. In either event, the State has been consulted by telephone whenever possible. Under its regulations, the Commission may issue and make an amendment immediately effective, notwithstanding the pendency before it of a request for a hearing from any person, in advance of the holding and completion of any required hearing, where it has determined that no significant hazards consideration is involved. The Commission has applied the standards of 10 CFR 50.92 and has made a final determination that the amendment involves no significant hazards consideration. The basis for this determination is contained in the documents related to this action. Accordingly, the amendments have been issued and made effective as indicated. Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated. For further details with respect to the action see
(1)the application for amendment,
(2)the amendment to Facility Operating License, and
(3)the Commission's related letter, Safety Evaluation and/or Environmental Assessment, as indicated. All of these items are available for public inspection at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html* . If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the PDR Reference staff at 1
(800)397-4209,
(301)415-4737 or by e-mail to *pdr@nrc.gov* . The Commission is also offering an opportunity for a hearing with respect to the issuance of the amendment. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR Part 2. Interested persons should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland, and electronically on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/doc-collections/cfr/* . If there are problems in accessing the document, contact the PDR Reference staff at 1
(800)397-4209,
(301)415-4737, or by e-mail to *pdr@nrc.gov* . If a request for a hearing or petition for leave to intervene is filed by the above date, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements:
(1)The name, address, and telephone number of the requestor or petitioner;
(2)the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding;
(3)the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and
(4)the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also identify the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner intends to rely in proving the contention at the hearing. The petitioner must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. 1 Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. 1 To the extent that the applications contain attachments and supporting documents that are not publicly available because they are asserted to contain safeguards or proprietary information, petitioners desiring access to this information should contact the applicant or applicant's counsel and discuss the need for a protective order. Each contention shall be given a separate numeric or alpha designation within one of the following groups: 1. *Technical* —primarily concerns/issues relating to technical and/or health and safety matters discussed or referenced in the applications. 2. *Environmental* —primarily concerns/issues relating to matters discussed or referenced in the environmental analysis for the applications. 3. *Miscellaneous* —does not fall into one of the categories outlined above. As specified in 10 CFR 2.309, if two or more petitioners/requestors seek to co-sponsor a contention, the petitioners/requestors shall jointly designate a representative who shall have the authority to act for the petitioners/requestors with respect to that contention. If a petitioner/requestor seeks to adopt the contention of another sponsoring petitioner/requestor, the petitioner/requestor who seeks to adopt the contention must either agree that the sponsoring petitioner/requestor shall act as the representative with respect to that contention, or jointly designate with the sponsoring petitioner/requestor a representative who shall have the authority to act for the petitioners/requestors with respect to that contention. Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing. Since the Commission has made a final determination that the amendment involves no significant hazards consideration, if a hearing is requested, it will not stay the effectiveness of the amendment. Any hearing held would take place while the amendment is in effect. A request for a hearing or a petition for leave to intervene must be filed by:
(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, *Attention:* Rulemaking and Adjudications Staff;
(2)courier, express mail, and expedited delivery services: Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, *Attention:* Rulemaking and Adjudications Staff;
(3)E-mail addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, *HearingDocket@nrc.gov* ; or
(4)facsimile transmission addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, Attention: Rulemakings and Adjudications Staff at
(301)415-1101, verification number is
(301)415-1966. A copy of the request for hearing and petition for leave to intervene should also be sent to the Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and it is requested that copies be transmitted either by means of facsimile transmission to
(301)415-3725 or by e-mail to *OGCMailCenter@nrc.gov* . A copy of the request for hearing and petition for leave to intervene should also be sent to the attorney for the licensee. Nontimely requests and/or petitions and contentions will not be entertained absent a determination by the Commission or the presiding officer or the Atomic Safety and Licensing Board that the petition, request and/or the contentions should be granted based on a balancing of the factors specified in 10 CFR 2.309(a)(1)(i)-(viii). Duke Power Company LLC, Docket Nos. 50-269, 50-270, and 50-287, Oconee Nuclear Station, Units 1, 2, and 3, Oconee County, South Carolina *Date of amendment request:* September 27, 2006, as supplemented October 2 and 3, 2006. The supplement dated October 2 and 3, 2006, provided additional information that claried the application, did not expand the scope of the original proposed no significant hazards consideration
(NSHC)determination, and did not change the NRC staff's original proposed NSHC determination. *Description of amendment request:* The amendments extend the Completion Time of Technical Specification 3.8.1, “AC Sources—Operating,” Required Action C.2.2.5 for one time only from 45 days to 75 days to allow time for repairs of Keowee Hydro Unit #2. *Date of issuance:* October 3, 2006. *Effective date:* As of the date of issuance and shall be implemented on or before October 3, 2006. *Amendment Nos.:* 354, 356, 355. *Renewed Facility Operating License Nos. DPR-38, DPR-47, and DPR-55:* Amendments revised the technical specifications. *Public comments requested as to proposed no significant hazards consideration (NSHC):* Yes. Public notice of the proposed amendments was published in the *Greenville News* on September 29 and 30, and October 1, 2006, and in the *Anderson Independent* on September 29 and October 1, 2006. The notice issued a proposed NSHC and provided an opportunity to submit comments to the NRC staff on the Commission's proposed NSHC determination by close of business on October 3, 2006. No comments have been received. The Commission's related evaluation of the amendment, finding of exigent circumstances, consultation with the State of South Carolina, and final NSHC determination are contained in a safety evaluation dated October 3, 2006. *Attorney for licensee:* Ms. Lisa F. Vaughn, Duke Power Company LLC, 526 South Church Street, Charlotte, North Carolina, 28201-1006. *NRC Branch Chief:* Evangelos C. Marinos. Florida Power and Light Company, Docket No. 50-250, Turkey Point Nuclear Plant, Unit 3, Miami-Dade County, Florida *Date of amendment request:* September 8, 2006. *Description of amendment request:* The amendment allows the use of an alternate method for determining the position of Control Rod M-6, which has an inoperable analog rod position indicator (ARPI), until the ARPI is repaired, but no later than the Cycle 23 refueling outage scheduled for the fall of 2007. *Date of issuance:* October 5, 2006. *Effective date:* As of the date of issuance. *Amendment No.:* 230. *Facility Operating License Nos. DPR-31:* Amendment revises the technical specifications. *Public comments requested as to proposed no significant hazards consideration (NSHC):* Yes (71 FR 54691, dated September 18, 2006). The notice provided an opportunity to submit comments on the Commission's proposed NSHC determination. No comments have been received. The notice also provided an opportunity to request a hearing by November 17, 2006, but indicated that if the Commission makes a final NSHC determination, any such hearing would take place after issuance of the amendment. The Commission's related evaluation of the amendment, finding of exigent circumstances, state consultation, and final NSHC determination are contained in a safety evaluation dated October 5, 2006. *Attorney for licensee:* M.S. Ross, Managing Attorney, Florida power and Light Company, P.O. Box 14000, Juno Beach, FL 33408-0420. *NRC Branch Chief:* L. Raghavan. Dated at Rockville, Maryland, this 13th day of October 2006. For the Nuclear Regulatory Commission. Catherine Haney, Director, Division of Operating Reactor Licensing, Office of Nuclear Reactor Regulation. [FR Doc. E6-17546 Filed 10-23-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [EA-06-223] In the Matter of USEC Inc. (Lead Cascade Facility) and All Other Persons Who Seek or Obtain Access to Safeguards Information Described Herein; Order Imposing Requirements for the Protection of and Access to Safeguards Information (Effective Immediately) I USEC Inc. (USEC or the Licensee) holds a license, issued in accordance with the Atomic Energy Act
(AEA)of 1954, by the U.S. Nuclear Regulatory Commission (NRC or Commission) authorizing it to construct and operate a uranium enrichment test and demonstration facility in Piketon, Ohio. On July 15, 2003, NRC provided USEC, for its information, copies of Orders issued to Category III facilities on interim measures to enhance physical security at those facilities. Those Orders contained Safeguards Information. 1 In addition, in the future, the Commission may issue the Licensee additional Orders that require compliance with specific additional security measures to enhance security at the facility. These Orders are also expected to contain Safeguards Information, which cannot be released to the public and must be protected from unauthorized disclosure. Therefore, the Commission is imposing the requirements, as set forth in Attachments A, B, and C of this Order, so that the Licensee can receive these documents. This Order also imposes requirements for the protection of Safeguards Information in the hands of any person, 2 whether or not a Licensee of the Commission, who produces, receives, or acquires Safeguards Information. 1 Safeguards Information is a form of sensitive, unclassified, security-related information that the Commission has the authority to designate and protect under section 147 of the AEA. 2 Person means:
(1)any individual, corporation, partnership, firm, association, trust, estate, public or private institution, group, government agency other than the Commission or the Department of Energy, except that the Department of Energy shall be considered a person with respect to those facilities of the Department specified in section 202 of the Energy Reorganization Act of 1974 (88 Stat. 1244), any State or any political subdivision of, or any political entity within a State, any foreign government or nation or any political subdivision of any such government or nation, or other entity; and
(2)any legal successor, representative, agent, or agency of the foregoing. On August 8, 2005, the Energy Policy Act of 2005 (EPAct) was enacted. Section 652 of the EPAct amended Section 149 of the AEA to require fingerprinting and a Federal Bureau of Investigation
(FBI)identification and criminal history records check of any person who is to be permitted to have access to Safeguards Information. The NRC's implementation of this requirement cannot await the completion of the Safeguards Information rulemaking, which is underway, because the EPAct fingerprinting and criminal history check requirements for access to Safeguards Information were immediately effective upon enactment of the EPAct. Although the EPAct permits the Commission by rule to except certain categories of individuals from the fingerprinting requirement, which the Commission has done (see 10 CFR 73.59, 71 FR 33,989 (June 13, 2006)), it is unlikely that many Licensee employees are excepted from the fingerprinting requirement by the “fingerprinting relief” rule. Individuals relieved from the fingerprinting and criminal history checks under the relief rule include Federal, State, and local officials and law enforcement personnel; Agreement State inspectors, who conduct security inspections on behalf of the NRC; members of Congress and certain employees of members of Congress or Congressional Committees; representatives of the International Atomic Energy Agency or certain foreign government organizations. In addition, individuals who have a favorably-decided U.S. Government criminal history check within the last five
(5)years, and individuals who have active Federal security clearances (provided in either case that they make available the appropriate documentation), have satisfied the EPAct fingerprinting requirement and need not be fingerprinted again. Therefore, in accordance with section 149 of the AEA, as amended by the EPAct, the Commission is imposing additional requirements, as set forth by this Order, for access to Safeguards Information so that affected licensees can obtain and grant access to Safeguards Information. This Order also imposes requirements for access to Safeguards Information by any person, from any person, whether or not a Licensee, Applicant, or Certificate Holder of the Commission or Agreement States. Subsequent to the terrorist events of September 11, 2001, the NRC issued Orders requiring certain entities to implement Additional Security Measures
(ASM)or Compensatory Measures
(CM)for certain radioactive materials. The requirements imposed by these Orders, and certain measures licensees have developed to comply with the Orders, were designated by the NRC as Safeguards Information. For some materials licensees, the storage and handling requirements for the Safeguards Information have been modified from the existing 10 CFR part 73 Safeguards Information requirements for reactors and fuel cycle facilities that require a higher level of protection; such Safeguards Information is designated as Safeguards Information—Modified Handling (SGI-M). However, the information subject to the SGI-M handling and protection requirements is Safeguards Information, and licensees and other persons who seek or obtain access to such Safeguards Information are subject to this Order. II The Commission has broad statutory authority to protect Safeguards Information and prohibit its unauthorized disclosure. Section 147 of the AEA, as amended, grants the Commission explicit authority to “* * * issue such orders, as necessary to prohibit the unauthorized disclosure of safeguards information * * *.” Furthermore, section 652 of the EPAct amended section 149 of the AEA to require fingerprinting and an FBI identification and a criminal history records check of each individual who seeks access to Safeguards Information. In addition, no person may have access to Safeguards Information unless the person has an established need-to-know and satisfies the trustworthy and reliability requirements of those Orders. Licensees and all persons who produce, receive, or acquire Safeguards Information must ensure proper handling and protection of Safeguards Information, to avoid unauthorized disclosure, in accordance with the specific requirements for the protection of Safeguards Information contained in Attachments A, B, and C. The Commission hereby provides notice that it intends to treat violations of the requirements contained in Attachments A, B, and C, applicable to the handling and unauthorized disclosure of Safeguards Information, as serious breaches of adequate protection of the public health and safety and the common defense and security of the United States. Access to Safeguards Information is limited to those persons who have established a need-to-know the information, and are considered to be trustworthy and reliable, and who satisfy the fingerprinting and criminal history records check required by the EPAct and this Order. A “need-to-know” means a determination by a person having responsibility for protecting Safeguards Information that a proposed recipient's access to Safeguards Information is necessary in the performance of official, contractual, or Licensee duties of employment. The Licensee and all other persons who obtain Safeguards Information must ensure that they develop, maintain, and implement strict policies and procedures for the proper handling of Safeguards Information, to prevent unauthorized disclosure, in accordance with the requirements in Attachments A, B, and C. The Licensee must ensure that all contractors whose employees may have access to Safeguards Information either adhere to the Licensee's policies and procedures on Safeguards Information or develop, maintain, and implement their own acceptable policies and procedures. The Licensee remains responsible for the conduct of its contractors. The policies and procedures necessary to ensure compliance with applicable requirements contained in Attachments A, B, and C must address, at a minimum, the following:
(1)The general performance requirement that each person who produces, receives, or acquires Safeguards Information shall ensure that Safeguards Information is protected against unauthorized disclosure;
(2)protection of Safeguards Information at fixed sites, in use and in storage, and while in transit;
(3)correspondence containing Safeguards Information;
(4)access to Safeguards Information;
(5)preparation, marking, reproduction, and destruction of documents;
(6)external transmission of documents;
(7)use of automatic data processing systems; and
(8)removal of the Safeguards Information category. To provide assurance that the Licensee is implementing appropriate measures to achieve a consistent level of protection to prohibit the unauthorized disclosure of Safeguards Information, the Licensee shall implement the requirements for access to Safeguards Information in this Order, including the requirements in Attachments A, B, and C of this Order. In addition, pursuant to 10 CFR § 2.202, I find that in light of the common defense and security matters identified above, which warrant the issuance of this Order, the public health, safety, and interest require that this Order be effective immediately. III Accordingly, pursuant to sections 53, 62, 63, 81, 147, 149, 161b, 161i, 161o, 182, and 186 of the Atomic Energy Act of 1954, as amended, and the Commission's regulations in 10 CFR 2.202, 10 CFR part 30, 10 CFR part 40, and 10 CFR part 70, IT IS HEREBY ORDERED, EFFECTIVE IMMEDIATELY, THAT LICENSEE AND ALL OTHER PERSONS WHO PRODUCE, RECEIVE, OR ACQUIRE THE ADDITIONAL SECURITY MEASURES IDENTIFIED ABOVE (WHETHER DRAFT OR FINAL), OR WHO SEEK OR OBTAIN ACCESS TO SAFEGUARDS INFORMATION, SHALL COMPLY WITH THE REQUIREMENTS SET FORTH IN THIS ORDER, INCLUDING THE REQUIREMENTS IN ATTACHMENTS A, B, AND C. A. 1. No person may have access to Safeguards Information unless that person has a need-to-know the Safeguards Information, has been fingerprinted or who has a favorably decided FBI identification and criminal history records check, and satisfies all other applicable requirements for access to Safeguards Information. Fingerprinting and the FBI identification and criminal history records check are not required, however, for any person who is relieved from that requirement by 10 CFR 73.59 (71 FR 33,989 (June 13, 2006)) or who has a favorably-decided U.S. Government criminal history check within the last five
(5)years, or who has an active Federal security clearance, provided in each case that the appropriate documentation is made available to the Licensee's NRC-approved reviewing official. 2. No person may have access to any Safeguards Information if the NRC has determined, based on fingerprinting and an FBI identification and criminal history records check, that the person may not have access to Safeguards Information. B. No person may provide Safeguards Information to any other person except in accordance with condition III.A above. Prior to providing Safeguards Information to any person, a copy of this Order shall be provided to that person. C. The Licensee shall comply with the following requirements: 1. The Licensee shall, within twenty
(20)days of the date of this Order, establish and maintain a fingerprinting program that meets the requirements of Attachment C to this Order. 2. The Licensee shall, within twenty
(20)days of the date of this Order, submit the fingerprints of one
(1)individual who needs access to Safeguards Information and who the Licensee nominates as the “reviewing official” for determining access to Safeguards Information by other individuals. The NRC will determine whether this individual (or any subsequent reviewing official) may have access to Safeguards Information and, therefore, will be permitted to serve as the Licensee's reviewing official. 3 The Licensee may, at the same time or later, submit the fingerprints of other individuals to whom the Licensee seeks to grant access to Safeguards Information. Fingerprints shall be submitted and reviewed in accordance with the procedures described in Attachment C of this Order. 3 The NRC's determination of this individual's access to Safeguards Information in accordance with the process described in Enclosure 3 to the transmittal letter of this Order is an administrative determination that is outside the scope of this Order. 3. The Licensee shall, in writing, within twenty
(20)days of the date of this Order, notify the Commission,
(1)if it is unable to comply with any of the requirements described in the Order, including Attachments A, B, and C, or
(2)if compliance with any of the requirements is unnecessary in its specific circumstances. The notification shall provide the Licensee's justification for seeking relief from or variation of any specific requirement. Licensee responses to C.1., C.2., and C.3. above shall be submitted to the Director, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555. In addition, Licensee responses shall be marked as “Security-Related Information—Withhold Under 10 CFR 2.390.” The Director, Office of Nuclear Material Safety and Safeguards, may, in writing, relax or rescind any of the above conditions, on demonstration of good cause by the Licensee. IV In accordance with 10 CFR 2.202, the Licensee must, and any other person adversely affected by this Order may, submit an answer to this Order, and may request a hearing on this Order, within twenty
(20)days of the date of this Order. Where good cause is shown, consideration will be given to extending the time to request a hearing. A request for extension of time in which to submit an answer or request a hearing must be made in writing to the Director, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555, and include a statement of good cause for the extension. The answer may consent to this Order. Unless the answer consents to this Order, the answer shall, in writing and under oath or affirmation, specifically set forth the matters of fact and law on which the Licensee or other person adversely affected relies, and the reasons as to why the Order should not have been issued. Any answer or request for a hearing shall be submitted to the Secretary, Office of the Secretary, U.S. Nuclear Regulatory Commission, ATTN: Rulemakings and Adjudications Staff, Washington, DC 20555. Copies also shall be sent to the Director, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555; to the Assistant General Counsel for Materials Litigation and Enforcement, at the same address; and to the Licensee, if the answer or hearing request is by a person other than the Licensee. Because of possible delays in delivery of mail to United States Government offices, it is requested that answers and requests for hearing be transmitted to the Secretary of the Commission, either by means of facsimile transmission, to 301-415-1101, or by e-mail, to *hearingdocket@nrc.gov;* and also to the Office of the General Counsel, either by means of facsimile transmission, to 301-415-3725, or by e-mail, to *OGCMailCenter@nrc.gov.* If a person other than the Licensee requests a hearing, that person shall set forth with particularity the manner in which their interest is adversely affected by this Order and shall address the criteria set forth in 10 CFR 2.309. If a hearing is requested by the Licensee or a person whose interest is adversely affected, the Commission will issue an Order designating the time and place of any hearing. If a hearing is held, the issue to be considered at such hearing shall be whether this Order should be sustained. Pursuant to 10 CFR 2.202(c)(2)(i), the Licensee may, in addition to demanding a hearing, at the time the answer is filed or sooner, move the presiding officer to set aside the immediate effectiveness of the Order on the grounds that the Order, including the need for immediate effectiveness, is not based on adequate evidence, but on mere suspicion, unfounded allegations, or error. In the absence of any request for hearing, or written approval of an extension of time in which to request a hearing, the provisions specified in Section III above shall be final twenty
(20)days from the date of this Order, without further order or proceedings. If an extension of time for requesting a hearing has been approved, the provisions specified in Section III shall be final when the extension expires, if a hearing request has not been received. AN ANSWER OR A REQUEST FOR HEARING SHALL NOT STAY THE IMMEDIATE EFFECTIVENESS OF THIS ORDER. Dated this 4th day of October 2006. For the Nuclear Regulatory Commission. Jack R. Strosnider, Director, Office of Nuclear Material Safety and Safeguards. Attachment A—Modified Handling Requirements for the Protection of Certain Safeguards Information (SGI-M) General Requirement Information and material that the U.S. Nuclear Regulatory Commission
(NRC)determines are safeguards information must be protected from unauthorized disclosure. In order to distinguish information needing modified protection requirements from the safeguards information for reactors and fuel cycle facilities that require a higher level of protection, the term “Safeguards Information—Modified Handling” (SGI-M) is being used as the distinguishing marking for certain materials licensees. Each person who produces, receives, or acquires SGI-M shall ensure that it is protected against unauthorized disclosure. To meet this requirement, licensees and persons shall establish and maintain an information protection system that includes the measures specified below. Information protection procedures employed by state and local police forces are deemed to meet these requirements. Persons Subject to These Requirements Any person, whether or not a licensee of the NRC, who produces, receives, or acquires SGI-M is subject to the requirements (and sanctions) of this document. Firms and their employees that supply services or equipment to materials licensees fall under this requirement if they possess SGI-M. A licensee must inform contractors and suppliers of the existence of these requirements and the need for proper protection. (See more under Conditions for Access). State or local police units who have access to SGI-M are also subject to these requirements. However, these organizations are deemed to have adequate information protection systems. The conditions for transfer of information to a third party, i.e., need-to-know, would still apply to the police organization as would sanctions for unlawful disclosure. Again, it would be prudent for licensees who have arrangements with local police to advise them of the existence of SGI-M requirements. Criminal and Civil Sanctions The Atomic Energy Act of 1954, as amended, explicitly provides that any person, “whether or not a licensee of the Commission, who violates any regulations adopted under this section shall be subject to the civil monetary penalties of section 234 of this Act.” Furthermore, willful violation of any regulation or order governing safeguards information is a felony subject to criminal penalties in the form of fines or imprisonment, or both. *See sections 147b. and 223 of the Act.* Conditions for Access Access to SGI-M beyond the initial recipients of the order will be governed by the background check requirements imposed by the order. Access to SGI-M by licensee employees, agents, or contractors must include both an appropriate need-to-know determination by the licensee, as well as a determination concerning the trustworthiness of individuals having access to the information. Employees of an organization affiliated with the licensee's company, e.g., a parent company, may be considered as employees of the licensee for access purposes. Need-To-Know Need-to-know is defined as a determination by a person having responsibility for protecting SGI-M that a proposed recipient's access to SGI-M is necessary in the performance of official, contractual, or licensee duties of employment. The recipient must be made aware that the information is SGI-M and those having access to it are subject to these requirements as well as criminal and civil sanctions for mishandling the information. Occupational Groups Dissemination of SGI-M is limited to individuals who have an established need-to-know and who are members of certain occupational groups. These occupational groups are: 1. An employee, agent, or contractor of an applicant, a licensee, the Commission, or the United States Government; 2. A member of a duly authorized committee of the Congress; 3. The Governor of a State or his designated representative; 4. A representative of the International Atomic Energy Agency
(IAEA)engaged in activities associated with the U.S./IAEA Safeguards Agreement who has been certified by the NRC; 5. A member of a state or local law enforcement authority that is responsible for responding to requests for assistance during safeguards emergencies; 6. A person to whom disclosure is ordered pursuant to section 2.744(e) of part 2 of part 10 of the Code of Federal Regulations; or 7. State Radiation Control Program Directors (and State Homeland Security Directors) or their designees. In a generic sense, the individuals described above in
(A)through
(G)are considered to be trustworthy by virtue of their employment status. For non-governmental individuals in group
(A)above, a determination of reliability and trustworthiness is required. Discretion must be exercised in granting access to the individuals in group (A). If there is any indication that the recipient would be unwilling or unable to provide proper protection for the SGI-M, they are not authorized to receive SGI-M. Information Considered for Safeguards Information Designation Information deemed SGI-M is information the disclosure of which could reasonably be expected to have a significant adverse effect on the health and safety of the public or the common defense and security by significantly increasing the likelihood of theft, diversion, or sabotage of materials or facilities subject to NRC jurisdiction. SGI-M identifies safeguards information which is subject to these requirements. These requirements are necessary in order to protect quantities of nuclear material significant to the health and safety of the public or common defense and security. The overall measure for consideration of SGI-M is the usefulness of the information (security or otherwise) to an adversary in planning or attempting a malevolent act. The specificity of the information increases the likelihood that it will be useful to an adversary. Protection While in Use While in use, SGI-M shall be under the control of an authorized individual. This requirement is satisfied if the SGI-M is attended by an authorized individual even though the information is in fact not constantly being used. SGI-M, therefore, within alarm stations, continuously manned guard posts or ready rooms need not be locked in file drawers or storage containers. Under certain conditions the general control exercised over security zones or areas would be considered to meet this requirement. The primary consideration is limiting access to those who have a need-to-know. Some examples would be: Alarm stations, guard posts and guard ready rooms; Engineering or drafting areas if visitors are escorted and information is not clearly visible; Plant maintenance areas if access is restricted and information is not clearly visible; Administrative offices (e.g., central records or purchasing) if visitors are escorted and information is not clearly visible; Protection While in Storage While unattended, SGI-M shall be stored in a locked file drawer or container. Knowledge of lock combinations or access to keys protecting SGI-M shall be limited to a minimum number of personnel for operating purposes who have a “need-to-know” and are otherwise authorized access to SGI-M in accordance with these requirements. Access to lock combinations or keys shall be strictly controlled so as to prevent disclosure to an unauthorized individual. Transportation of Documents and Other Matter Documents containing SGI-M when transmitted outside an authorized place of use or storage shall be enclosed in two sealed envelopes or wrappers. The inner envelope or wrapper shall contain the name and address of the intended recipient, and be marked both sides, top and bottom with the words “Safeguards Information—Modified Handling.” The outer envelope or wrapper must be addressed to the intended recipient, must contain the address of the sender, and must not bear any markings or indication that the document contains SGI-M. SGI-M may be transported by any commercial delivery company that provides nation-wide overnight service with computer tracking features, U.S. first class, registered, express, or certified mail, or by any individual authorized access pursuant to these requirements. Within a facility, SGI-M may be transmitted using a single opague envelope. It may also be transmitted within a facility without single or double wrapping, provided adequate measures are taken to protect the material against unauthorized disclosure. Individuals transporting SGI-M should retain the documents in their personal possession at all times or ensure that the information is appropriately wrapped and also secured to preclude compromise by an unauthorized individual. Preparation and Marking of Documents While the NRC is the sole authority for determining what specific information may be designated as “SGI-M,” originators of documents are responsible for determining whether those documents contain such information. Each document or other matter that contains SGI-M shall be marked “Safeguards Information—Modified Handling” in a conspicuous manner on the top and bottom of the first page to indicate the presence of protected information. The first page of the document must also contain
(i)the name, title, and organization of the individual authorized to make a SGI-M determination, and who has determined that the document contains SGI-M,
(ii)the date the document was originated or the determination made,
(iii)an indication that the document contains SGI-M, and
(iv)an indication that unauthorized disclosure would be subject to civil and criminal sanctions. Each additional page shall be marked in a conspicuous fashion at the top and bottom with letters denoting “Safeguards Information—Modified Handling.” In additional to the “Safeguards Information—Modified Handling” markings at the top and bottom of page, transmittal letters or memoranda which do not in themselves contain SGI-M shall be marked to indicate that attachments or enclosures contain SGI-M but that the transmittal does not (e.g., “When separated from SGI-M enclosure(s), this document is decontrolled”). In addition to the information required on the face of the document, each item of correspondence that contains SGI-M shall, by marking or other means, clearly indicate which portions (e.g., paragraphs, pages, or appendices) contain SGI-M and which do not. Portion marking is not required for physical security and safeguards contingency plans. All documents or other matter containing SGI-M in use or storage shall be marked in accordance with these requirements. A specific exception is provided for documents in the possession of contractors and agents of licensees that were produced more than one year prior to the effective date of the order. Such documents need not be marked unless they are removed from file drawers or containers. The same exception applies to old documents stored away from the facility in central files or corporation headquarters. Since information protection procedures employed by state and local police forces are deemed to meet NRC requirements, documents in the possession of these agencies need not be marked as set forth in this document. Removal From SGI-M Category Documents containing SGI-M shall be removed from the SGI-M category (decontrolled) only after the NRC determines that the information no longer meets the criteria of SGI-M. Licensees have the authority to make determinations that specific documents *which they created* no longer contain SGI-M information and may be decontrolled. Consideration must be exercised to ensure that any document decontrolled shall not disclose SGI-M in some other form or be combined with other unprotected information to disclose SGI-M. The authority to determine that a document may be decontrolled may be exercised only by, or with the permission of, the individual (or office) who made the original determination. The document shall indicate the name and organization of the individual removing the document from the SGI-M category and the date of the removal. Other persons who have the document in their possession should be notified of the decontrolling of the document. Reproduction of Matter Containing SGI-M SGI-M may be reproduced to the minimum extent necessary consistent with need without permission of the originator. Newer digital copiers which scan and retain images of documents represent a potential security concern. If the copier is retaining any information in memory, the copier cannot be connected to a network. It should also be placed in a location that is cleared and controlled for the authorized processing of SGI-M information. Different copiers have different capabilities, including some which come with features that allow the memory to be erased. Each copier would have to be examined from a physical security perspective. Use of Automatic Data Processing
(ADP)Systems SGI-M may be processed or produced on an ADP system provided that the system is assigned to the licensee's or contractor's facility and requires the use of an entry code/password for access to stored information. Licensees must process this information in a computing environment that has adequate computer security controls in place to prevent unauthorized access to the information. An ADP system is defined here as a data processing system having the capability of long term storage of information. Word processors such as typewriters are not subject to the requirements as long as they do not transmit information off-site. ( Note: If SGI-M is produced on a typewriter, the ribbon must be removed and stored in the same manner as other SGI-M information or media.) The basic objective of these restrictions is to prevent access and retrieval of stored SGI-M by unauthorized individuals, particularly from remote terminals. Specific files containing SGI-M will be password protected to preclude access by an unauthorized individual. SGI-M files may be transmitted over a network if the file is encrypted. In such cases, the licensee will select a commercially available encryption system that National Institute of Standards and Technology
(NIST)has validated as conforming to Federal Information Processing Standards (FIPS). SGI-M files shall be properly labeled as “Safeguards Information—Modified Handling” and saved to removable media and stored in a locked file drawer or cabinet. The NIST maintains a listing of all validated encryption systems at *http://csrc.nist.gov/cryptval/140-1/1401val.htm* . Telecommunications SGI-M may not be transmitted by unprotected telecommunications circuits except under emergency or extraordinary conditions. For the purpose of this requirement, emergency or extraordinary conditions are defined as any circumstances that require immediate communications in order to report, summon assistance for, or respond to a security event (or an event that has potential security significance). This restriction applies to telephone, telegraph, teletype, facsimile circuits, and to radio. Routine telephone or radio transmission between site security personnel, or between the site and local police, should be limited to message formats or codes that do not disclose facility security features or response procedures. Similarly, call-ins during transport should not disclose information useful to a potential adversary. Infrequent or non-repetitive telephone conversations regarding a physical security plan or program are permitted provided that the discussion is general in nature. Individuals should use care when discussing SGI-M at meetings or in the presence of others to ensure that the conversation is not overheard by persons not authorized access. Transcripts, tapes or minutes of meetings or hearings that contain SGI-M shall be marked and protected in accordance with these requirements. Destruction Documents containing SGI-M must be destroyed when no longer needed. They may be destroyed by tearing into small pieces, burning, shredding or any other method that precludes reconstruction by means available to the public at large. Piece sizes one half inch or smaller composed of several pages or documents and thoroughly mixed are considered completely destroyed. Attachment B—Trustworthiness and Reliability Requirements for Individuals Handling Safeguards Information Licensees shall document the basis for concluding that there is reasonable assurance that individuals granted access to safeguards information are trustworthy and reliable, and do not constitute an unreasonable risk for malevolent use of the regulated material. The trustworthiness, reliability, and verification of an individual's true identity shall be determined based on a background investigation. The background investigation shall address at least the past three
(3)years, and, as a minimum, include a Federal Bureau of Investigation fingerprinting and criminal history check, verification of employment history, education, employment eligibility, credit check, and personal references. If an individual's employment has been less than the required three
(3)year period, educational references may be used in lieu of employment history. The licensee's background investigation requirements may be satisfied for an individual that has an active Federal security clearance. Attachment C—Requirements for Fingerprinting and Criminal History Checks of Individuals When Licensee's Reviewing Official Is Determining Access to Safeguards Information General Requirements Licensees shall comply with the requirements of this attachment. 1. a. Each Licensee subject to the provisions of this attachment shall fingerprint each individual who is seeking or permitted access to Safeguards Information (SGI). The Licensee shall review and use the information received from the Federal Bureau of Investigation
(FBI)and ensure that the provisions contained in the subject Order and this attachment are satisfied. b. The Licensee shall notify each affected individual that the fingerprints will be used to secure a review of his/her criminal history record and inform the individual of the procedures for revising the record or including an explanation in the record, as specified in the “Right to Correct and Complete Information” section of this attachment. c. Fingerprints need not be taken if an employed individual (e.g., a Licensee employee, contractor, manufacturer, or supplier) is relieved from the fingerprinting requirement by 10 CFR 73.59, has a favorably-decided U.S. Government criminal history check within the last five
(5)years, or has an active Federal security clearance. Written confirmation from the Agency/employer which granted the Federal security clearance or reviewed the criminal history check must be provided. The Licensee must retain this documentation for a period of three
(3)years from the date the individual no longer requires access to SGI associated with the Licensee's activities. d. All fingerprints obtained by the Licensee pursuant to this Order must be submitted to the Commission for transmission to the FBI. e. The Licensee shall review the information received from the FBI and consider it, in conjunction with the trustworthy and reliability requirements, in making a determination whether to grant access to Safeguards Information to individuals who have a need-to-know the SGI. f. The Licensee shall use any information obtained as part of a criminal history records check solely for the purpose of determining an individual's suitability for access to Safeguards Information. g. The Licensee shall document the basis for its determination whether to grant access to SGI. 2. The Licensee shall notify the NRC of any desired change in reviewing officials. The NRC will determine whether the individual nominated as the new reviewing official may have access to Safeguards Information based on a previously-obtained or new criminal history check and, therefore, will be permitted to serve as the Licensee's reviewing official. Prohibitions A Licensee shall not base a final determination to deny an individual access to Safeguards Information solely on the basis of information received from the FBI involving: an arrest more than one
(1)year old for which there is no information of the disposition of the case, or an arrest that resulted in dismissal of the charge or an acquittal. A Licensee shall not use information received from a criminal history check obtained pursuant to this Order in a manner that would infringe upon the rights of any individual under the First Amendment to the Constitution of the United States, nor shall the Licensee use the information in any way which would discriminate among individuals on the basis of race, religion, national origin, sex, or age. Procedures for Processing Fingerprint Checks For the purpose of complying with this Order, Licensees shall, using an appropriate method listed in 10 CFR 73.4, submit to the NRC's Division of Facilities and Security, Mail Stop T-6E46, one completed, legible standard fingerprint card (Form FD-258, ORIMDNRCOOOZ) or, where practicable, other fingerprint records for each individual seeking access to Safeguards Information, to the Director of the Division of Facilities and Security, marked for the attention of the Division's Criminal History Check Section. Copies of these forms may be obtained by writing the Office of Information Services, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, by calling
(301)415-5877, or by e-mail to *forms@nrc.gov* . Practicable alternative formats are set forth in 10 CFR 73.4. The Licensee shall establish procedures to ensure that the quality of the fingerprints taken results in minimizing the rejection rate of fingerprint cards due to illegible or incomplete cards. The NRC will review submitted fingerprint cards for completeness. Any Form FD-258 fingerprint record containing omissions or evident errors will be returned to the Licensee for corrections. The fee for processing fingerprint checks includes one re-submission if the initial submission is returned by the FBI because the fingerprint impressions cannot be classified. The one free re-submission must have the FBI Transaction Control Number reflected on the re-submission. If additional submissions are necessary, they will be treated as initial submittals and will require a second payment of the processing fee. Fees for processing fingerprint checks are due upon application. Licensees shall submit payment with the application for processing fingerprints by corporate check, certified check, cashier's check, money order, or electronic payment, made payable to “U.S. NRC.” [For guidance on making electronic payments, contact the Facilities Security Branch, Division of Facilities and Security, at
(301)415-7739]. Combined payment for multiple applications is acceptable. The application fee (currently $27) is the sum of the user fee charged by the FBI for each fingerprint card or other fingerprint record submitted by the NRC on behalf of a Licensee, and an NRC processing fee, which covers administrative costs associated with NRC handling of Licensee fingerprint submissions. The Commission will directly notify Licensees who are subject to this regulation of any fee changes. The Commission will forward to the submitting Licensee all data received from the FBI as a result of the Licensee's application(s) for criminal history checks, including the FBI fingerprint record. Right To Correct and Complete Information Prior to any final adverse determination, the Licensee shall make available to the individual the contents of any criminal records obtained from the FBI for the purpose of assuring correct and complete information. Written confirmation by the individual of receipt of this notification must be maintained by the Licensee for a period of one
(1)year from the date of the notification. If, after reviewing the record, an individual believes that it is incorrect or incomplete in any respect and wishes to change, correct, or update the alleged deficiency, or to explain any matter in the record, the individual may initiate challenge procedures. These procedures include either direct application by the individual challenging the record to the agency (i.e., law enforcement agency) that contributed the questioned information, or direct challenge as to the accuracy or completeness of any entry on the criminal history record to the Assistant Director, Federal Bureau of Investigation Identification Division, Washington, DC 20537-9700 (as set forth in 28 CFR 16.30 through 16.34). In the latter case, the FBI forwards the challenge to the agency that submitted the data and requests that agency to verify or correct the challenged entry. Upon receipt of an official communication directly from the agency that contributed the original information, the FBI Identification Division makes any changes necessary in accordance with the information supplied by that agency. The Licensee must provide at least ten
(10)days for an individual to initiate an action challenging the results of an FBI criminal history records check after the record is made available for his/her review. The Licensee may make a final SGI access determination based upon the criminal history record only upon receipt of the FBI's ultimate confirmation or correction of the record. Upon a final adverse determination on access to SGI, the Licensee shall provide the individual its documented basis for denial. Access to SGI shall not be granted to an individual during the review process. Protection of Information 1. Each Licensee who obtains a criminal history record on an individual pursuant to this Order shall establish and maintain a system of files and procedures for protecting the record and the personal information from unauthorized disclosure. 2. The Licensee may not disclose the record or personal information collected and maintained to persons other than the subject individual, his/her representative, or to those who have a need to access the information in performing assigned duties in the process of determining access to Safeguards Information. No individual authorized to have access to the information may re-disseminate the information to any other individual who does not have a need-to-know. 3. The personal information obtained on an individual from a criminal history record check may be transferred to another Licensee if the Licensee holding the criminal history check record receives the individuals' written request to re-disseminate the information contained in his/her file, and the gaining Licensee verifies information such as the individual's name, date of birth, social security number, sex, and other applicable physical characteristics for identification purposes. 4. The Licensee shall make criminal history records, obtained under this section, available for examination by an authorized representative of the NRC to determine compliance with the regulations and laws. 5. The Licensee shall retain all fingerprint and criminal history records received from the FBI, or a copy if the individual's file has been transferred, for three
(3)years after termination of employment or denial of access to SGI. After the required three
(3)year period, these documents shall be destroyed by a method that will prevent reconstruction of the information in whole or in part. [FR Doc. E6-17752 Filed 10-23-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [NUREG-1852] Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment AGENCY: Nuclear Regulatory Commission. ACTION: Extension of comment period for NUREG 1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment.” SUMMARY: On October 12, 2006 (71 FR 60200), the Nuclear Regulatory Commission
(NRC)issued for public comment NUREG 1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment.” A request has been made to extend the public comment period such that the public will have a full 60 days to review this report. Currently, the **Federal Register** specifies that the public comment period ends on November 6, 2006, less than 30 days after the issuance of the **Federal Register** Notice. DATES: The comment period has been extended and now expires on December 12, 2006. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received before this date. ADDRESSES: Members of the public are invited and encouraged to submit written comments to Michael Lesar, Chief, Rulemaking, Directives and Editing Branch, Office of Administration, Mail Stop T6-D59, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Hand-deliver comments attention to Michael Lesar, 11545 Rockville Pike, Rockville, MD, between 7:30 a.m. and 4:15 p.m. on Federal workdays. Comments may also be sent electronically to *NRCREP@nrc.gov.* This document, NUREG-1852, is available at the Agencywide Documents Access and Management System (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site at *http://www.nrc.gov/reading-rm/adams.html* under Accession No. ML0623502923; on the NRC Web site at *http://www.nrc.gov/reading-rm/doc-collections/nuregs/docs4comment.html* ; and at the NRC Public Document Room, 11555 Rockville Pike, Rockville, MD. The PDR's mailing address is USNRC PDR, Washington, DC 20555; telephone
(301)415-4737 or
(800)397-4205; fax
(301)415-3548; e-mail *PDR@NRC.GOV.* FOR FURTHER INFORMATION, CONTACT: Erasmia Lois, Human Factors and Reliability Branch, Office of Nuclear Regulatory Research, telephone
(301)415-6560, e-mail *exl1@nrc.gov.* Dated at Rockville, Maryland, this 16th day of October, 2006. For the Nuclear Regulatory Commission. Jose Ibarra, Chief, Human Factors and Reliability Branch, Probabilistic Risk and Applications, Division of Risk Assessment and Special Projects, Office of Nuclear Regulatory Research. [FR Doc. E6-17824 Filed 10-23-06; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54609; File No. SR-FICC-2006-11] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating To Establishing New Reporting Processes To Support the Bilateral Comparison of Pool Details Associated With Specified Pool Trade Activity October 16, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on June 15, 2006, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) and on June 30, 2006, amended the proposed rule change as described in Items I, II, and III below, which Items have been prepared primarily by FICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would add new rules to FICC's Mortgage Backed Securities Division (“MBSD”) Rulebook that would establish new reporting processes to support the bilateral comparison of pool details associated with specified pool trade (“SPT”) activity. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FICC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FICC has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. 2 2 The Commission has modified the text of the summaries prepared by FICC. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of this filing is to implement in MBSD's Rulebook new reporting processes to support the bilateral comparison of pool details associated with SPT's. This is the first of three new services MBSD plans to offer the mortgage-backed securities industry. The new services will be Real Time Trade Matching (“RTTM”) Specified Pool Trade Matching, Electronic Pool Notification Pool Substitution, and Central Counterparty Pool Netting with Guaranteed Settlement. 3 3 FICC has published two white papers that discuss its plans to develop central counterparty services for MBSD. *Fixed Income Clearing Corporation as Central Counterparty for Mortgage-Backed Securities* (June 2003) and *A Central Counterparty for Mortgage-Backed Securities: Paving the Way* (April 2006), which are available online at *http://www.ficc.com/mbs/docs/whitepapers/final.ccp.0617.pdf* and *http://www.dtcc.com/ThoughtLeadership/whitepapers/ccp.pdf* , respectively. Currently, MBSD does not support SPT matching. As a result, members must submit SPT's to MBSD as “to be announced” (“TBA”) trades for matching on a trade-for-trade basis. These trades are processed through MBSD's comparison and clearing system as TBA's and are risk managed at the TBA level using par amount. 4 MBSD reports these trades to members through the MBS Purchase and Sale Report and the Open Commitment Report, which reports provide binding confirmation of these trades to members but do not transmit actual pool level details to the member. Because these original trades must currently be submitted at the TBA level, MBSD members must perform exception processing to convert the SPT data to the associated TBA level. In addition, the selling member must utilize MBSD's EPN service to supplement the original trade submission with pool level details. 4 Par amount could be the original face or current face submitted by members. To make this process more efficient for its members, FICC is proposing to enable MBSD members to submit the pool number and original face for all SPT activity through RTTM. However, this proposal will not change how MBSD currently risk manages these trades at the TBA level. MBSD's rules will continue to stipulate that SPT's may be treated as TBA's in instances of member insolvency. In addition, FICC proposes to make two new reports available to members: the RTTM Purchase and Sale Report and the RTTM Open Commitment Report. 5 These reports would reflect the submission of pool number and original face value 6 as matching criteria submitted by members. Finally, FICC is proposing to include new fees for the submission of SPTs to the Schedule of Charges in the MBSD Rulebook. 5 These reports will not replace the MBSD's Purchase and Sale Report or the Open Commitment Report, which will continue to reflect specified pool trades as TBA trades. 6 In addition to pool number and original face value, existing matching fields (such as TBA CUSIP and price) will continue to be populated by members. FICC believes that the proposed rule change is consistent with the requirements of section 17A of the Act 7 and the rules and regulations thereunder because it should improve the reporting of SPT information to members and thereby should improve the accurate reporting, clearance, and settlement of securities. 7 15 U.S.C. 78q-1. B. Self-Regulatory Organization's Statement on Burden on Competition FICC does not believe that the proposed rule change will have any impact, or impose any burden, on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others FICC has not solicited or received written comments relating to the proposed rule change. FICC will notify the Commission of any written comments it receives. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-FICC-2006-11 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington DC 20549-1090. All submissions should refer to File No. SR-FICC-2006-11. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at FICC's principal office and on FICC's Web site at *http://ficc.com/gov/gov.docs.jsp?NS-query=#rf* . All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submission should refer to File No. SR-FICC-2006-11 and should be submitted on or before November 14, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17731 Filed 10-23-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54613; File No. SR-NASDAQ-2006-043] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Operations of Its Recently-Approved “Single Book” Execution System October 17, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 10, 2006, The NASDAQ Stock Market LLC (“Nasdaq”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq has filed the proposal pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to modify the operations of its recently-approved “Single Book” execution system. 5 Nasdaq states that, through quality control and testing, and feedback from the trading community, it has identified five modifications to the operation and rules governing the Single Book system that would improve the fair and orderly operation of the Nasdaq market. 5 Securities Exchange Act Release No. 54155 (July 14, 2006), 71 FR 41291 (July 20, 2006) (File No. SR-NASDAQ-2006-001) (approving the “Single Book Proposal”). *See also* Securities Exchange Act Release No. 53583 (March 31, 2006), 71 FR 19573 (April 14, 2006) (File No. SR-NASDAQ-2006-001) (“Single Book Proposal”). Specifically, Nasdaq is proposing five changes:
(1)Establishing a Pegged Order based upon changes to the Nasdaq Market Center inside, an order type that is currently available in the Nasdaq Market Center;
(2)clarifying how certain order routing strategies would operate with respect to the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”) markets;
(3)eliminating vestigial references to individual Nasdaq market participants—as opposed to the Nasdaq exchange—participating in the ITS system;
(4)adopting the adjustment of open orders process currently approved and in use in the Nasdaq Market Center, rather than the one currently used in the INET system; and
(5)reflecting the changes to the Nasdaq rules that have been approved since the Single Book Proposal was approved on July 14, 2006. Nasdaq has designated this proposal as non-controversial. Nasdaq has requested that the Commission waive the 30-day pre-operative waiting period contained in that rule. Nasdaq states that, if such waiver is granted by the Commission, this rule proposal, which is effective upon filing with the Commission, would become operative upon the launch of the Single Book execution system (which Nasdaq currently expects to occur on October 16, 2006), pursuant to Exchange Act Rule 19b-4(f)(6). Below is the text of the proposed rule change. Proposed new language is *italicized* and proposed deletions are in [brackets]. 4120. Trading Halts
(a)No Change.
(b)Procedure for Initiating a Trading Halt. (1)-(6) No Change. (7)(A) A trading halt initiated under Rule 4120(a)(1), (4),
(5)or
(6)shall be terminated when Nasdaq releases the security for trading. Prior to terminating the halt, there will be a 5-minute [Quotation] *Display* . Only Period during which market participants may enter quotations *and orders* in that security in Nasdaq systems. At the conclusion of the 5-minute [Quotation] *Display* Only Period, the security shall be released for trading unless Nasdaq extends the [Quotation] *Display* Only Period for an additional 1-minute period pursuant to subparagraph
(C)below. There shall be a period of between zero and 15 seconds (randomly selected) at which point the [Quotation] *Display* Only Period shall end and trading shall resume pursuant to Rule [4703] *4753* .
(B)A trading halt initiated under Rule 4120(a)(7) shall be terminated when Nasdaq releases the security for trading. Prior to terminating the halt, there will be a 15-minute [Quotation] *Display* Only Period during which market participants may enter quotes and orders in that security in Nasdaq systems. At the conclusion of the 15-minute [Quotation] *Display* Only Period, the security shall be released for trading unless Nasdaq extends the [Quotation] *Display* Only Period for one, two or three additional 5-minute [Quotation] *Display* Only Periods pursuant to subparagraph
(C)below. At the conclusion of the [Quotation] *Display* Only Period(s), there shall be an additional delay of between zero and 15 seconds (randomly selected) and then trading shall resume pursuant to Rule [4703] *4753.*
(C)If at the end of a [Quotation] *Display* Only Period, Nasdaq detects a Liquidity Imbalance in the security, Nasdaq will extend the [Quotation] *Display* Only Period as permitted under subparagraphs
(A)and
(B)above. Liquidity Imbalances shall be established when:
(1)*the Current Reference Prices, as defined in Rule 4752(a)(2)(A), disseminated 15 seconds and immediately prior to the end of the Display Only Period differ by greater than
(i)10 percent or
(ii)50 cents (whichever is greater), or
(2)all buy or sell market orders will not be executed in the cross.* [1. The Inside Match Prices, as defined in Rule 4703(a)(2), disseminated 15 seconds and immediately prior to the end of the Quotation Only Period differ by greater than
(i)10 percent or
(ii)50 cents (whichever is greater); or 2. The Halt Cross would execute at a price at which higher-priced marketable orders to buy or lower-priced marketable orders to sell would remain unexecuted.]
(8)No Change. 4751. Definitions (a)-(e) No Change.
(f)The term “Order Type” shall mean the unique processing prescribed for designated orders that are eligible for entry into the System, and shall include: (1)-(3) No Change.
(4)“Pegged Orders” are orders that, after entry, has their price automatically adjusted by the System in response to changes in *either the Nasdaq Market Center inside bid or offer or* bids or offers in the *national* market *system,* as appropriate. A Pegged Order can specify that its price will equal the inside quote on the same side of the market (“Primary Peg”) or the opposite side of the market (“Market Peg”). A Pegged Order may have a limit price beyond which the order shall not be executed. In addition, Pegged Orders may also establish their pricing relative to the appropriate bids or offers by the selection of one or more offset amounts that will adjust the price of the order by the offset amount selected. A new timestamp is created for the order each time it is automatically adjusted. (5)-(8) No Change. (g)-(i) No Change. 4758. Order Routing
(a)Order Routing Process
(1)The Order Routing Process shall be available to Participants from 7:00 a.m. until 8:00 p.m. Eastern Time, and shall route orders as described below:
(A)Exchange-Listed Routing Options. The System provides four routing options for orders in exchange-listed securities. Of these four, only DOT is available for orders ultimately sought to be directed to either the New York Stock Exchange (“NYSE”) or the American Stock Exchange (“AMEX”). The System also allows firms to send individual orders to the NYSE Direct + System, and to elect to have orders not be sent to the AMEX. Except as noted below in SPDY, routed pegged orders in securities listed on another exchange, the System will consider the quotations of accessible markets. The four System routing options for NYSE and/or Amex listed orders are:
(i)No Change.
(ii)Reactive Electronic Only (“STGY”)—under this option, after checking the System for available shares, orders are sent to other available market centers for potential execution, per entering firm's instructions. When checking the book, the System will seek to execute at the price it would send the order to a destination market center. If shares remain un-executed after routing, they are posted on the book [and are not sent to the NYSE or AMEX]. Once on the book, should the order subsequently be locked or crossed by another accessible market center, the System shall route the order to the locking or crossing market center for potential execution in order to resolve the locked or crossed market. With the exception of the Minimum Quantity order type, all time-in-force parameters and order types may be used in conjunction with this routing option. This process is one of the routing strategies allowed by the System for all securities.
(iii)Electronic Only Scan (“SCAN”)—under this option, after checking the System for available shares, orders are sent to other available market centers for potential execution, per entering firm's instructions. When checking the book, the System will seek to execute at the price it would send the order to a destination market center. If shares remain un-executed after routing, they are posted on the book [and are not sent to the NYSE or AMEX]. Once on the book, should the order subsequently be locked or crossed by another market center, the System will not route the order to the locking or crossing market center. With the exception of the Minimum Quantity order type, all time- in-force parameters and order types may be used in conjunction with this routing option. This process is one of the routing strategies allowed by the System for all securities *and shall be used for routing ITS Commitments.*
(iv)Aggressive Electronic Only (“SPDY”)—under this option, after checking the System for available shares, orders are sent to other available market centers for potential execution, per entering firm's instructions. When checking the book, the System will seek to execute at the price it would send the order to a destination market center. If shares remain un-executed after routing, they are posted on the book [and are not sent to the NYSE or AMEX]. Once on the book, should the order subsequently be locked or crossed by another accessible market center, the System shall route the order to the locking or crossing market center for potential execution in order to resolve the locked or crossed market. Market orders with the SPDY designation will, during a locked or crossed market, have their price adjusted by the System to match the best price displayed on the same side of the market as the market order (i.e., a buy order to the bid, a sell to the offer). If the order is for a security eligible for a de minimis exception to the trade-through rule set forth in Section 8 (d)(i) of the ITS Plan, the System will ignore AMEX prices when adjusting the SPDY order during a locked or crossed market. With the exception of the Minimum Quantity order type, all time-in-force parameters and order types may be used in conjunction with this routing option. This process is one of the routing strategies allowed by the System for all securities. (B)-(C) No Change. 4759. ITS Commitments Until such time as Nasdaq withdraws from the ITS Plan, Quotes and Orders that are eligible for ITS will be processed by the System and routed to the appropriate Non-Nasdaq Participant Market as an ITS Commitment in accordance with the requirements of the ITS Plan and all applicable Nasdaq rules. Nasdaq shall participate in the ITS Plan as set forth below.
(a)No Change.
(b)Inbound ITS Commitments
(1)If the ITS Commitment contains an obvious error, the Nasdaq Market Center will decline it. For purposes of this Rule, a transaction may have an obvious error in any term, such as price, number of shares or other unit of trading, *or* identification of the security[, or if a specific commitment to trade has been executed with the wrong Nasdaq Market Maker]. (2)-(3) No Change.
(c)Outbound Commitments: Any “commitment to trade,” which is transmitted by [an ]Nasdaq [Participant ]to another Non-Nasdaq ITS Participant Market through ITS, shall be firm and irrevocable for the period of thirty seconds following transmission by the sender. All such commitments to trade shall, at a minimum: (1)-(6) No Change.
(d)No Change. 4761. Adjustment of Open Quotes and/or Orders [The Nasdaq Market Center will automatically purge all open quotes and/or orders in all Nasdaq Market Center eligible securities resident in the system in response to issuer corporate actions related to a dividend, payment or distribution, on the ex-date of such actions, except where a cash dividend or distribution is less than one cent ($0.01).] *The Nasdaq Market Center will automatically adjust the price and/or size of open quotes and/or orders in all Nasdaq Market Center eligible securities (unless otherwise noted) resident in the system in response to issuer corporate actions related to a dividend, payment or distribution, on the ex-date of such actions, except where a cash dividend or distribution is less than one cent ($0.01), as follows:* *(a) Quotes—All bid and offer side quotes shall be purged from the system.* *(b) Sell Orders—Sell side orders in Nasdaq-listed and NYSE-listed securities shall not be adjusted by the system and must be modified, if desired, by the entering party, except for reverse splits where such sell side orders shall be purged from the system. Sell side orders in Amex-listed securities shall be adjusted in accordance with the procedures set forth below for Buy Orders in the event of a Stock Dividend or Stock Split.* *(c) Buy Orders—Buy side orders shall be adjusted by the system based on the particular corporate action impacting the security (i.e. cash dividend, stock dividend, both, stock split, reverse split) as set forth below:* *(1) Odd lot orders in ITS Securities that result from partial execution rather than order entry shall be canceled rather than adjusted.* *(2) Cash Dividends: Buy side order prices shall be first reduced by the dividend amount and the resulting price will then be rounded down to the nearest penny unless marked “Do Not Reduce”.* *(3) Stock Dividends and Stock Splits: Buy side order prices shall be determined by first rounding up the dollar value of the stock dividend or split to the nearest penny. The resulting amount shall then be subtracted from the price of the buy order. Unless marked “Do Not Increase”, the size of the order shall be increased by first,
(A)multiplying the size of the original order by the numerator of the ratio of the dividend or split, then
(B)dividing that result by the denominator of the ratio of the dividend or split, then
(C)rounding that result to the next lowest share.* *(4) Dividends Payable in Either Cash or Securities at the Option of the Stockholder: Buy side order prices shall be reduced by the dollar value of either the cash or securities, whichever is greater. The dollar value of the cash shall be determined using the formula in paragraph
(2)above, while the dollar value of the securities shall be determined using the formula in paragraph
(3)above. If the stockholder opts to receive securities, the size of the order shall be increased pursuant to the formula in subparagraph
(3)above.* *(5) Combined Cash and Stock Dividends/Split: In the case of a combined cash dividend and stock split/dividend, the cash dividend portion shall be calculated first as per section
(1)above, and stock portion thereafter pursuant to sections
(2)and/or
(3)above.* *(6) Reverse Splits: All orders (buy and sell) shall be cancelled and returned to the entering firm.* *(d) Open buy and sell orders that are adjusted by the system pursuant to the above rules, and that thereafter continuously remain in the system, shall retain the time priority of their original entry.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On July 14, 2006, the Commission approved SR-NASDAQ-2006-001, 6 a proposal to create an integrated execution facility—the “Single Book”—from Nasdaq's three current facilities: The Nasdaq Market Center; 7 the Brut ECN; and the INET ECN. Nasdaq states that, through quality control and testing, and feedback from the Nasdaq community, it has identified five minor modifications to the operation and rules governing the Single Book that would improve the fair and orderly operation of the Nasdaq market. 6 *See supra* note 5. 7 References to the Nasdaq Market Center refer to the current NASDAQ execution system as opposed to the future execution system.
(1)Nasdaq is proposing to modify Nasdaq Rule 4751(f)(4) to re-establish a Pegged Order based upon changes to the Nasdaq Market Center inside, an order type that is currently available in the Nasdaq Market Center. 8 As stated in Amendment 1 to the Single Book Proposal, Nasdaq originally focused on providing order types then available in the INET system, including Pegged Orders pegged to quotes and orders in the national market system other than in Nasdaq. 9 Nasdaq has determined that the having the ability to choose between Pegged Order based upon changes to the Nasdaq inside quotation or changes to the national best bid or offer would be a valuable tool for Nasdaq participants and that it would be relatively simple to revise this order type in the Single Book. Nasdaq states that the proposed Pegged Order would operate exactly as it is currently approved in the Nasdaq Market Center. 8 *See* Nasdaq Rule 4701(mm). 9 *See* Nasdaq Rule 4951(q) and Single Book Proposal at 19592.
(2)Nasdaq is proposing to eliminate language from Nasdaq Rule 4758(a)(1)(A)(ii), (iii), and
(iv)that Nasdaq states improperly indicates that orders in NYSE and Amex securities will not be routed to the NYSE and Amex. In fact, after NYSE and Amex have implemented their anticipated electronic trading platforms, Nasdaq states that those routing strategies—STGY, SCAN, and SPDY—may result in an order being routed to those markets. However, as stated in paragraph (a)(1)(A) of that rule, only the DOT routing strategy is used for orders that are directed by a participant to those markets. In addition, Nasdaq is proposing to add language to paragraph (a)(1)(A)(iii) stating that the SCAN routing strategy would be used to route Intermarket Trading System (“ITS”) commitments to the appropriate ITS exchanges.
(3)When Nasdaq begins operating as a national securities exchange for the purposes of trading NYSE and Amex securities, it will do so as a consolidated whole rather than as a collection of individual market participants. In the Single Book Proposal, Nasdaq systematically eliminated most references to individual market participant conduct in the System. It appears, however, that Nasdaq failed to eliminate several vestigial references in Nasdaq Rule 4759(c) to individual Nasdaq market participants—as opposed to the Nasdaq exchange—participating in the ITS system. Nasdaq is proposing to eliminate those references now, without otherwise changing that rule or Nasdaq's obligations under the ITS Plan.
(4)In the Single Book Proposal, Nasdaq proposed to adopt via Nasdaq Rule 4761 the INET process of purging open orders when a corporate event such as a stock split or dividend occurred, and to abandon the Nasdaq Market Center methodology for adjusting such open orders. After further dialogue with industry participants, Nasdaq has determined that many Nasdaq members prefer the current Nasdaq Market Center methodology for adjusting open orders rather than purging them because those members have not programmed their systems to adjust such orders themselves. By adopting the existing Nasdaq Market Center rule, Nasdaq Rule 4715, Nasdaq states that it would be relieving members of the burden of reprogramming their systems because the adjustment of orders will occur automatically within Nasdaq's system. Nasdaq believes it can modify this rule without burdening any of its other members because members that do not want Nasdaq to adjust their open orders in the event of a corporate action can choose simply to cancel their open orders at the end of the trading day.
(5)On July 28, 2006, Nasdaq submitted SR-NASDAQ-2006-019 which modified, among others, Nasdaq Rule 4120. 10 Nasdaq states that these modifications took effect on August 1, 2006, when Nasdaq began operating as a national securities exchange. In order to create a fully-transparent record of the development of the Nasdaq rule manual, Nasdaq believes it is necessary to demonstrate how the current rule, including the changes established in SR-NASDAQ-2006-019, differ from the rule approved in the Single Book Proposal and how the current rule would change when the Single Book system is implemented. Therefore, Nasdaq is proposing to modify the Nasdaq rule currently in effect to reflect changes that have already been approved in connection with the Single Book Proposal or that are required for use when the Single Book System is operational. Nasdaq states that the proposed changes to Nasdaq Rule 4120 are designed to re-establish the rule language already approved with respect to the Single Book Proposal and are therefore non-substantive. 10 Securities Exchange Act Release No. 54248 (July 31, 2006), 71 FR 44738 (August 7, 2006) (File No. SR-NASDAQ-2006-019). 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of section 6 of the Act, 11 in general, and with sections 6(b)(5) of the Act, 12 in particular, in that the proposal is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, or to regulate by virtue of any authority conferred by the Act matters not related to the purposes of the Act or the administration of the exchange. 11 15 U.S.C. 78f. 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change is subject to section 19(b)(3)(A)(iii) of the Act 13 and Rule 19b-4(f)(6) thereunder 14 because the proposal:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative prior to 30 days after the date of filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that Nasdaq has given the Commission notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. Nasdaq states that it would make this rule proposal operative upon the launch of the Single Book system. 13 15 U.S.C. 78s(b)(3)(A)(iii). 14 17 CFR 240.19b-4(f)(6). Nasdaq has satisfied the five-day pre-filing requirement and has requested that the Commission waive the 30-day pre-operative delay. Nasdaq states that it has carefully planned a detailed and thorough testing and roll-out schedule for the Single Book system, and has coordinated that schedule with numerous industry participants. Nasdaq states that to disrupt that schedule would cause substantial inconvenience for all involved and delay the launch of a process that Nasdaq believes would dramatically improve the Nasdaq Stock Market, whereas a delay would benefit none. The Commission believes that this proposal contains modifications to the Single Book rules that provide useful clarifications or represent modifications substantially similar to rules currently in effect at Nasdaq. The Commission believes that waiving the 30-day pre-operative delay is consistent with the protection of investors and the public interest because such waiver would permit Nasdaq to begin operation of its Single Book system under its current roll-out schedule. For this reason, the Commission designates the proposed rule change to be effective upon filing with the Commission. 15 The Commission notes that Nasdaq intends to make the proposed rule changes operative upon the launch of the Single Book execution system. 15 For the purposes only of waiving the 30-day pre-operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of such proposed rule change the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASDAQ-2006-043 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2006-043. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of Nasdaq. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2006-043 and should be submitted on or before November 14, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17734 Filed 10-23-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54614; File No. SR-NASD-2006-117] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enhance the Brut Directed Cross Order October 17, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 4, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq has filed the proposal pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to enhance the flexibility of the Brut Directed Cross Order by allowing it to check and, if appropriate, interact with available liquidity in any of Nasdaq's three execution systems (ITS/CAES System, Brut, and INET) before further processing. Nasdaq has designated this proposal as noncontroversial and has requested that the Commission waive the 30-day pre-operative waiting period contained in Rule 19b-4(f)(6)(iii) under the Act. 5 5 17 CFR 240.19b-4(f)(6)(iii). The text of the proposed rule change is below. Proposed new language is in *italics* ; proposed deletions are in [brackets]. 4903. Order Entry Parameter
(a)No Change.
(b)Brut Cross Orders—
(1)General. A Brut Cross Order is an order that is displayed in the System, and is executable against marketable contra-side orders in the System. The order also is eligible for routing to other market centers. If marketable upon receipt against both orders in the System as well as other market centers, the order shall execute first against System orders. With the exception of Directed Cross Orders, once a Brut Cross Order is routed (in whole or in part) to another market center, any remaining unexecuted or returned portion of the order shall be posted in System and shall no longer be eligible for routing to other market centers. Directed Cross Orders directed to the New York Stock Exchange shall remain at the exchange until executed or cancelled by the entering party. (A)-(C) No Change.
(D)A Brut Cross Order may also be designated as a Directed Cross Order. A Directed Cross Order is an order that is entered into the System during market hours and is executable against marketable contra-side orders in the System. The order also is eligible for routing to other market centers. After being processed and exhausting available liquidity, the order is automatically routed to the specific market center selected by the entering party for potential execution. Any portion of the Directed Cross Order that remains unfilled after being routed to the selected market center will be returned to the entering party. For Directed Cross Orders directed to the New York Stock Exchange [if, after being processed in the Brut System and exhausting available liquidity in the Brut System], such orders will *first interact with any available liquidity in the Brut, INET, and ITS/CAES systems* [be automatically routed to the ITS/CAES System and INET for potential execution] and thereafter, if instructed by the entering party, to other market centers that provide automated electronic executions before being sent to the New York Stock Exchange. Directed Cross Orders directed to the New York Stock Exchange shall remain at the New York Stock Exchange until executed or cancelled by the entering party. (E)-(F) No Change. (c)-(f) No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to increase the flexibility of the Brut Directed Cross Order for orders directed to the New York Stock Exchange (“NYSE”). Currently parties entering a Brut Directed Cross Order directed to the NYSE have those orders first processed in the Brut System and, after exhausting available liquidity in the Brut System, thereafter automatically routed to the ITS/CAES System and Nasdaq's INET Facility for potential execution and finally, if instructed by the entering party, to other market centers that provide automated electronic executions before being sent to the NYSE. Nasdaq proposes to modify the behavior of the Brut Directed Cross Order so that it will now check and, if appropriate, interact with available liquidity in any of the following Nasdaq-operated execution facilities: The ITS/CAES System, Nasdaq's Brut Facility, and Nasdaq's INET Facility, before being sent upon request to other market centers that provide automated electronic executions before finally being delivered to the NYSE. Nasdaq notes that each Nasdaq-operated execution facility would be checked for available liquidity before the order is routed away to another market. 6 6 Telephone conversation between Tomas Moran, Associate General Counsel, Nasdaq, and Theodore S. Venuti, Attorney, Division of Market Regulation, Commission, on October 10, 2006. Nasdaq believes that the above change will enhance the ability of market participants to take advantage of beneficial liquidity residing across all three of Nasdaq's current execution systems. Further, such processing will increase the likelihood of having users' NYSE-bound orders executed electronically thereby improving the speed and efficiency of the market as a whole. As before, no Brut Directed Cross Order will execute in a Nasdaq-operated execution venue at an inferior price to one that is available at an accessible alternative venue. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A of the Act, 7 in general, and with section 15A(b)(6) of the Act, 8 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to a free and open market and a national market system, and, in general, to protect investors and the public interest. 7 15 U.S.C. 78 *o* -3. 8 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change is subject to section 19(b)(3)(A)(iii) of the Act 9 and Rule 19b-4(f)(6) thereunder 10 because the proposal:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative prior to 30 days after the date of filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that Nasdaq has given the Commission notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 9 15 U.S.C. 78s(b)(3)(A)(iii). 10 17 CFR 240.19b-4(f)(6). Nasdaq has fulfilled the five-day pre-filing requirement. Nasdaq has requested that the Commission waive the 30-day pre-operative delay. The Commission believes that waiving the 30-day pre-operative delay is consistent with the protection of investors and the public interest because such waiver would immediately allow a Brut Directed Cross Order to check and, if appropriate, interact with available liquidity in any of Nasdaq's three execution systems (ITS/CAES System, Brut, and INET) before further processing. For these reasons, the Commission designates the proposed rule change to be effective and operative upon filing with the Commission. 11 11 For the purposes only of waiving the 30-day pre-operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-117 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-117. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2006-117 and should be submitted on or before November 14, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17733 Filed 10-23-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54616; File Nos. SR-NYSE-2006-77; SR-NASD-2006-112] Self-Regulatory Organizations; New York Stock Exchange LLC and the National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Changes Relating to NYSE Rule 472 and NASD Rule 2711 October 17, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 27, 2006, the New York Stock Exchange LLC (“NYSE” or the “Exchange”) and the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule changes as described in Items I, II, and III below, which Items have been prepared by the respective self-regulatory organizations. The NYSE and NASD (the “SROs”) have filed the proposed rule changes as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of existing rules pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders them effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule changes from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organizations' Statements of the Terms of Substance of the Proposed Rule Changes The Exchange proposes to amend NYSE Rule 472 to codify the Exchange's existing interpretive guidance relating to certain provisions of the rule and to make certain non-substantive, technical changes to the rule's text. The text of the proposed rule change is available on NYSE's Web site, *http://www.nyse.com,* at the NYSE's Office of the Secretary, and at the Commission's Public Reference Room. NASD is proposing to amend NASD Rule 2711 to codify NASD's existing interpretive guidance relating to certain provisions of the rule and to make several non-substantive, technical changes to clarify the rule's intended meaning. The text of the proposed rule change is attached as Exhibit 5 to the NASD's rule filing. II. Self-Regulatory Organizations' Statements of the Purpose of, and Statutory Basis for, the Proposed Rule Changes In their filings with the Commission, the NYSE and NASD included statements concerning the purpose of and basis for the proposed rule changes and discussed any comments they received on the proposed rule changes. The text of these statements may be examined at the places specified in Item IV below. The NYSE and NASD have prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organizations' Statements of the Purpose of, and Statutory Basis for, the Proposed Rule Changes
(1)NYSE's Purpose Background NYSE Rule 472 is, in significant part, intended to improve the objectivity of research by requiring that investors be provided with conflict disclosures as well as other useful and reliable information with which to make investment decisions. Specifically, NYSE Rule 472 restricts the interaction between research departments and investment banking personnel; requires disclosure of financial interests in covered companies by the analyst and the firm; requires disclosure of existing and potential investment banking relationships with subject companies; imposes quiet periods for issuance of research reports; restricts personal trading by analysts; requires disclosure of information that helps investors track the correlation between an analyst's rating and the stock's price movements; requires that a compensation committee, without investment banking representation, review and approve compensation of research analysts; prohibits research analysts from participating in the solicitation of investment banking business; and prohibits research analysts from participating in road shows related to investment banking transactions. Since the 2002 amendments to NYSE Rule 472, 5 the Exchange has jointly published with NASD two memoranda that provide interpretive guidance to member organizations on a number of issues relating to NYSE Rule 472 and NASD's corresponding Rule 2711. 6 Further, on December 21, 2005, the Exchange and the NASD submitted to the Commission a joint report on the operation and effectiveness of their respective rules relating to research analyst conflicts of interest (the “SRO Report”). Among the recommendations included in the SRO Report is that certain interpretations set forth in the two joint memoranda be codified as rule text. Accordingly, the Exchange is herein proposing amendments to NYSE Rule 472 consistent with these recommendations. 7 5 *See* Securities Exchange Act Release No. 45908 (May 10, 2002), 67 FR 34968 (May 16, 2002) (order approving SR-NYSE-2002-09). 6 *See* NYSE Information Memo 02-26 (June 26, 2002) and NYSE Information Memo 04-10 (March 9, 2004). 7 The SRO Report also recommended a number of substantive rule changes that extend beyond codifying existing interpretations of the provisions of NYSE Rule 472. As such, those changes are not included in this proposed rule change, which will take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act. Contemporaneously herewith, the Exchange filed a separate proposed rule change to implement those additional proposed amendments to NYSE Rule 472, SR-NYSE-2006-78. Specifically, the Exchange is proposing to amend NYSE Rule 472 to reflect the interpretive guidance relating to
(1)The definition of the term “public appearance,”
(2)the definition of the term “research report,”
(3)the definition of the term “investment banking services,”
(4)the definition of the term “household member,”
(5)the definition of the term “equity security,”
(6)certain disclosure requirements,
(7)compendium reports and
(8)third-party research. In addition, the Exchange is proposing non-substantive, technical changes to NYSE Rule 472 where necessary to clarify the rule's intended meaning. Definition of “Public Appearance” NYSE Rule 472.50 currently defines “public appearance” as any participation in a seminar, forum (including an interactive electronic forum), radio, television or print media interview, or other public speaking activity, or the writing of a print media article, in which a research analyst makes a recommendation or offers an opinion concerning an equity security. The proposed rule change codifies existing interpretive guidance to NYSE Rule 472 which will:
(1)Include “conference calls” in the definition of “public appearance.” 8 8 *See* NYSE Information Memo 02-26.
(2)Provide that a conference call, seminar, forum (including an interactive electronic forum) or other public speaking activity in which a research analyst makes a recommendation or offers an opinion concerning an equity security constitutes a public appearance only if presented before fifteen
(15)or more persons (the “15-person standard”). 9 If a member organization can reasonably ascertain at a public speaking activity before fifteen
(15)or more persons that those persons represent less than fifteen
(15)separate investors, then it will not constitute a public appearance. The NYSE believes the 15-person standard is consistent with the proposed rule change to amend the definition of “research report” in NYSE Rule 472 (discussed below) and SEC Regulation Analyst Certification (“Regulation AC”). 10 9 *See* NYSE Information Memo 04-10. 10 17 CFR 242.500 *et seq.*
(3)Clarify that any conference call, seminar, forum (including an interactive electronic forum) or other public speaking activity in which a research analyst makes a recommendation or offers an opinion concerning an equity security before one or more representatives of the media constitutes a public appearance. Thus, a public speaking activity attended by at least one
(1)representative of the media is a “public appearance” even if there are only three
(3)other persons in attendance. The NYSE believes this interpretation is consistent with the current definition of “public appearance” which expressly includes radio, television and print media interviews because the media are a conduit to the public.
(4)Exclude from the definition of “public appearance” password-protected Webcasts, conference calls and similar events with fifteen
(15)or more existing customers (either individuals or entities), provided that:
(a)The event participants have previously received the most current research report or other documentation pertaining to the equity security in question that includes the disclosures required by NYSE Rule 472; and
(b)The research analyst appearing at the event corrects or updates during the public appearance any disclosures that are inaccurate, misleading or no longer applicable. 11 11 *See* NYSE Information Memo 04-10. Definition of “Research Report” NYSE Rule 472.10(2) currently defines the term “research report” as a written or electronic communication which includes an analysis of equity securities of individual companies or industries, and provides information reasonably sufficient upon which to base an investment decision. The proposed rule change would exclude from the definition of “research report” the following communications:
(1)Reports discussing broad-based indices, such as the Russell 2000 or S&P 500 index;
(2)reports commenting on economic, political or market conditions;
(3)technical analysis concerning the demand and supply for a sector, index or industry based on trading volume and price;
(4)statistical summaries of multiple companies' financial data, including listings of current ratings;
(5)reports that recommend increasing or decreasing holdings in particular industries or sectors; and
(6)notices of ratings or price target changes, provided that the member organization simultaneously directs the readers of the notice to the most recent research report on the subject company that includes all current applicable disclosures required by NYSE Rule 472 and that such research report does not contain materially misleading disclosure, including disclosures that are outdated or no longer applicable. 12 12 The NYSE believes that these exclusions essentially parallel those contained in SEC Regulation AC and the terms of the Research Analyst Global Settlement, an agreement among NASD, NYSE, the SEC, the North American Securities Administrators Association and twelve of the largest investment banks to resolve allegations regarding biased research. ( *See also* NYSE Information Memos 02-26 and 04-10). The Exchange notes that the proposed rule language to codify these interpretations may not be identical to that in the joint memoranda. The changes reflect, in part, the fact that the definition of “research report” was subsequently amended and no longer requires a recommendation. Also, in some instances, the Exchange has chosen language more appropriate for rule text. To the extent there are discrepancies, unless otherwise noted, the substance of the existing interpretations is not intended to be different than those set forth in the joint memoranda. The proposed rule change would codify an additional exclusion from the definition of “research report” for the following communications, even if they include an analysis of an individual security and information reasonably sufficient upon which to base an investment decision:
(1)Any communication distributed to fewer than fifteen
(15)persons;
(2)periodic reports or other communications prepared for investment company shareholders or discretionary investment account clients that discuss individual securities in the context of a fund's or an account's past performance or the basis for previously made discretionary investment decisions; and
(3)internal communications that are not given to customers. Thus, NYSE believes that, for example, a manager's discussion of fund performance in a mutual fund shareholder report would not constitute a research report. 13 13 The NYSE believes that these exclusions parallel those contained in SEC Regulation AC. ( *See* NYSE Information Memo 04-10). Additionally, the proposed rule change would codify an interpretation that communications that constitute statutory prospectuses that are filed as part of the registration statement are not considered “research reports,” even if they otherwise satisfy the definitional elements. The NYSE believes this exemption recognizes that prospectuses serve different purposes than research reports and, thus, are subject to a separate comprehensive regulatory scheme. Definition of “Investment Banking Services” Under current NYSE Rule 472.20, the term “investment banking services” includes acting as an underwriter in an offering for the issuer; acting as a financial adviser in a merger or acquisition; providing venture capital, equity lines of credit, PIPEs, or similar investments; or serving as a placement agent for the issuer. The proposed rule change would codify existing interpretive guidance that the definition of “investment banking services” also includes acting as a member of a selling group in a securities underwriting. 14 14 *See* NYSE Information Memo 02-26. Definition of “Household Member” Exchange Rule 472.40 currently defines the term “household member” to include any individual whose principal residence is the same as the research analyst's principal residence. The proposed rule change would codify that the definition of “household member” does not include an unrelated person who shares the same residence as a research analyst provided that the research analyst and unrelated person are financially independent of one another. Thus, according to the NYSE, for example, an analyst's roommate or apartment mate, who is financially independent of the analyst, would not be considered a “household member” for purposes of the restrictions on personal trading and disclosure requirements in NYSE Rule 472. 15 15 *See* NYSE Information Memo 02-26. Definition of “Equity Security” Currently, “equity security” is not defined in NYSE Rule 472. The proposed rule change would add “equity security” as a defined term in paragraph 472.140 and would codify existing interpretive guidance that, for purposes of this rule, the term has the meaning ascribed to it in Section 3(a)(11) 16 of the Securities Exchange Act of 1934. 17 16 15 U.S.C. 78c(a)(11). 17 *See* NYSE Information Memo 02-26 and 04-10. Disclosure Requirements NYSE Rule 472(k) sets forth a number of disclosure requirements for research reports and for public appearances by research analysts. In addition to disclosures relating to conflicts, this provision requires that a member organization disclose the meanings of ratings used in the member organization's rating system, the distribution of buy, hold, and sell ratings assigned by the member organization, and a price chart that plots the assignment or changes of the analyst's ratings and price targets for the subject company against the movement of the subject company's stock price over time. NYSE Rule 472.70 supplements this provision stating that the ratings disclosures be current as of the end of the most recent calendar quarter (or the second most recent calendar quarter if the publication date is less than fifteen
(15)calendar days after the most recent calendar quarter). The NYSE believes the proposed rule change to amend NYSE Rule 472 would clarify the existing requirement that the ratings distribution in a research report should reflect the current distribution of the most recent ratings that the member organization has issued for all subject companies, within the previous twelve
(12)months. 18 18 *See* NYSE Information Memo 04-10. In addition, the proposed rule change would amend NYSE Rule 472(k)(1)(i)h to clarify that a price chart is required only if a research report contains either a rating or a price target, and the member organization has assigned a rating or price target to the subject company for at least one
(1)year. 19 19 *See* NYSE Information Memo 02-26. The proposed rule change would also make certain non-substantive, technical changes to the disclosure requirements of NYSE Rule 472 in order to clarify that such disclosures are required only in certain research reports. Specifically, the proposed rule change would amend NYSE Rule 472 to clarify that:
(1)A research report must disclose the meanings of ratings used in the member organization's ratings system only if the report contains a rating of the subject company's stock;
(2)a research report must disclose the member organization's ratings distribution information only if the report contains a rating; and
(3)a research report must disclose valuation methods used in determining price targets only if the report contains a price target. Compendium Reports NYSE Rule 472(k)(1)(iii)d provides that when a member organization distributes a research report covering six or more companies, for purposes of the rule's disclosure requirements, such report may direct the reader in a clear manner to the applicable current disclosures in written or electronic format. The proposed rule change would codify the existing interpretation that an electronic compendium report—a research report covering six
(6)or more subject companies—may include a hyperlink to the required disclosures. A paper-based compendium report must provide either a toll-free number to call or a postal address to write for the required disclosures and may also include a Web address of the member organization where the disclosures can be found. 20 20 *See* NYSE Information Memo 02-26. Third-Party Research First, the proposed rule change would add new paragraph (k)(4) (“Third-Party Research Reports”) to NYSE Rule 472 to codify existing interpretative guidance that when a member organization distributes research produced by another member organization, a non-member organization affiliate ( *e.g.* , a foreign broker-dealer or an investment adviser) or an independent third party, the member organization must disclose:
(1)The member organization's and its affiliate's ownership of the subject company's securities, pursuant to NYSE Rule 472(k)(1)(i)c;
(2)the member organization's and its affiliate's investment banking relationships with the subject company, pursuant to NYSE Rule 472(k)(1)(i)a;
(3)the member organization's market making activities in the subject company's securities, pursuant to NYSE Rule 472(k)(1)(i)b; and
(4)any other actual, material conflict of interest of the analyst or member organization, pursuant to NYSE Rule 472(k)(1)(iii)d (the “third-party disclosures”). 21 Where a member organization distributes another member organization's research report, the distributing member organization must include the third-party disclosures as they pertain to the distributing member organization's relationship to the subject company, whereas the member organization whose report is being distributed is subject to all disclosure requirements under NYSE Rule 472. 22 21 *See* NYSE Information Memos 02-26 and 04-10. 22 *See* NYSE Information Memos 02-26 and 04-10. Second, the proposed rule change clarifies that the third-party disclosures noted above shall not apply to research prepared by an independent third-party that the member organization makes available to its customers either upon request or through a member organization-maintained Web site. However, according to the NYSE, a member organization that makes a non-member organization affiliate's research report available to its customers upon request or through its Web site must include the third-party disclosures. Third, the amendments set forth the review and approval requirements for third-party research distributed by a member organization. The amended rule provides that a supervisory analyst qualified under NYSE Rule 344 must approve, pursuant to NYSE Rule 472(a)(2), by signature or initial, any third-party research distributed by a member organization. In addition, a supervisory analyst or qualified person designated pursuant to NYSE Rule 342(b)(1) ( *e.g.* , a person who has taken and passed the Series 9/10, or another examination acceptable to the Exchange which demonstrates competency relevant to assigned responsibilities, including the Series 24 if taken and passed after July 1, 2001) must review third-party research distributed by a member organization to determine that the third-party disclosures are complete and accurate, and that the content of the research report is consistent with all applicable standards regarding communications with the public. The joint interpretive memoranda indicate that distribution of independent third-party research through a soft-dollar arrangement is not encompassed by the disclosure requirements. The proposed rule change would supersede this interpretation. Thus, when a member organization distributes independent third-party research through a soft-dollar arrangement, the third-party disclosure requirements would apply, unless another exception is available ( *e.g.* , where such research is provided upon customer request or furnished directly by the research provider to the customer). 23 23 A “soft-dollar” arrangement involves an agreement whereby a money manager receives research or brokerage services from a broker-dealer in exchange for brokerage commissions from transactions for clients' accounts. In furnishing research, the broker-dealer may produce it in-house or obtain it from a third-party. Other Changes In addition, changes are proposed to delete the term “member” as used in NYSE Rule 472 to reflect the recent reorganization of the Exchange. 24 24 *See* Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (order approving SR-NYSE-2005-77). The Exchange has filed the proposed rule change for immediate effectiveness. The effective date and the implementation date will be the date of the filing.
(2)NYSE's Statutory Basis The statutory basis for the proposed rule change is Section 6(b)(5) 25 of the Act which requires, among other things, that the rules of the Exchange are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to perfect the mechanism of a free and open market and national market system, and in general to protect investors and the public interest. The Exchange believes that the proposed rule change will enhance the clarity and consistency of the research analyst rules, thereby facilitating the goals of reducing conflicts of interest and fraudulent and manipulative practices, and providing investors with more objective, reliable information upon which to base investment decisions. 25 15 U.S.C. 78f(b)(5).
(3)NASD's Purpose NASD Rule 2711 (Research Analysts and Research Reports) is intended to improve the objectivity of research and provide investors with important conflicts disclosures and other useful and reliable information with which to make investment decisions. Generally, NASD Rule 2711 restricts the relationship between research and investment banking; requires disclosure of financial interests in covered companies by the analyst and the firm; requires disclosure of existing and potential investment banking relationships with subject companies; imposes quiet periods for issuance of research reports; restricts personal trading by analysts; requires disclosure of information that helps investors track the correlation between an analyst's rating and the stock's price movements; requires that a compensation committee, without investment banking representation, review and approve compensation of research analysts; prohibits research analysts from participating in the solicitation of investment banking business; and prohibits research analysts from participating in road shows related to investment banking transactions. Since adoption of the rule in 2002, 26 NASD has jointly published with the New York Stock Exchange (“NYSE”) two memoranda that provide interpretive guidance to members on a number of issues relating to the rule. *See* NASD *Notice to Members* 02-39 (July 2002) and NASD *Notice to Members* 04-18 (March 2004). On December 21, 2005, NASD and the NYSE submitted to the Commission a joint report on the operation and effectiveness of the SRO rules relating to research analyst conflicts of interest (the “SRO Report”). In connection with that report, NASD staff performed a detailed review of NASD Rule 2711 and recommended various rule changes, among them, codifying certain existing interpretations. 27 26 *See* Securities Exchange Act Release No. 45908 (May 10, 2002), 67 FR 34968 (May 16, 2002) (order approving SR-NASD-2002-021). 27 The SRO Report also recommended a number of substantive rule changes that extend beyond codifying existing interpretations of the provisions of Rule 2711. Those changes are not included in this proposed rule change, but are the subject of a separate proposed rule change SR-NASD-2006-113, which has been filed contemporaneously herewith. The proposed rule change would make express in NASD Rule 2711 a number of existing interpretations, most of which have previously been set forth in the two joint interpretive memoranda. Specifically, NASD is proposing to amend NASD Rule 2711 to make express in the rule language the interpretive guidance contained in *Notice to Members* 02-39 and *Notice to Members* 04-18 relating to
(1)the definition of “equity security,”
(2)the definition of “investment banking services,”
(3)the definition of “member of a research analyst's household,”
(4)the definition of “public appearance,”
(5)the definition of “research report,”
(6)certain disclosure requirements,
(7)compendium reports and
(8)third-party research. In addition, NASD is proposing non-substantive, technical changes to NASD Rule 2711 where necessary to clarify the rule's intended meaning. Definition of “Equity Security” Currently, “equity security” is not defined in NASD Rule 2711. The proposed rule change would add “equity security” as a defined term in paragraph (a)(1) and would codify existing interpretive guidance that for purposes of this rule, the term has the meaning ascribed to it in Section 3(a)(11) of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(11). *See Notice to Members* 02-39. Definition of “Investment Banking Services” NASD Rule 2711(a)(2) defines “investment banking services” to include, without limitation, acting as an underwriter in an offering for the issuer; acting as a financial adviser in a merger or acquisition; providing venture capital, equity lines of credit, PIPEs or similar investments; or serving as placement agent for the issuer. The proposed rule change would renumber paragraph (a)(2) as paragraph (a)(3) in light of the rule change discussed above and would codify an existing interpretation that the definition of “investment banking services” also includes acting as a member of a selling group in a securities underwriting. *See Notice to Members* 02-39. Additionally, the proposed rule change would make a technical change to clarify that the acronym PIPE stands for “private investment, public equity transactions.” Definition of “Member of a Research Analyst's Household” NASD Rule 2711(a)(3) defines a “member of a research analyst's household” as any individual whose principal residence is the same as the research analyst's principal residence. The proposed rule change would renumber paragraph (a)(3) as paragraph (a)(4) in light of the rule change discussed above and would codify an existing interpretation that excludes from this definition any unrelated person who shares the same residence as a research analyst provided that the research analyst and unrelated person are financially independent of one another. Thus, according to NASD, for example, an analyst's roommate or apartment-mate, who is financially independent of the analyst, would not be considered a member of the analyst's household for purposes of the restrictions on personal trading and disclosure requirements in NASD Rule 2711. *See Notice to Members* 02-39. Definition of “Public Appearance” NASD Rule 2711(a)(4) defines “public appearance” as any participation in a seminar, forum (including an interactive electronic forum), radio, television or print media interview, or other public speaking activity, or the writing of a print media article, in which a research analyst makes a recommendation or offers an opinion concerning an equity security. The proposed rule change would renumber paragraph (a)(4) as paragraph (a)(5) in light of the rule change discussed above and would codify several existing interpretations relating to the definition of “public appearance.” First, NASD proposes to include conference calls in the definition. *See Notice to Members* 02-39. Second, NASD proposes to amend the definition to expressly provide that only a conference call, seminar, forum (including an interactive electronic forum) or other public speaking activity before 15 or more persons constitutes a “public appearance.” NASD believes this 15-person standard is consistent with SEC Regulation Analyst Certification (“Regulation AC”) and the proposed amendment to the definition of “research report” under NASD Rule 2711 (discussed below). *See Notice to Members* 04-18. As set forth in *Notice to Members* 04-18, the 15-person standard applies to separate investors. Thus, according to NASD, where a research analyst can ascertain at a public speaking activity before 15 or more individuals that those individuals represent fewer than 15 separate investors, then such activity would not constitute a “public appearance.” Third, the proposed rule change would amend the definition to provide that any conference call, seminar, forum or other public speaking activity before one or more representatives of the media constitutes a “public appearance” if the research analyst makes a recommendation or offers an opinion concerning an equity security. *See Notice to Members* 04-18. Thus, according to NASD, even if there are only five persons in attendance at a public speaking activity, if one of those persons is a representative of the media, the event will be a “public appearance.” NASD believes this interpretation is consistent with the current definition, which expressly includes radio, television and print media interviews because the media are a conduit to the public. Finally, NASD proposes to exclude from the definition password-protected Webcasts, conference calls and similar events with 15 or more existing customers (either individuals or entities), provided that the event participants have previously received the most current research report or other documentation that includes the disclosures required by NASD Rule 2711 and the research analyst appearing at the event corrects or updates during the public appearance any disclosures that are inaccurate, misleading or no longer applicable. *See Notice to Members* 04-18. Definition of “Research Report” NASD Rule 2711(a)(8) defines “research report” as a written or electronic communication that includes an analysis of equity securities of individual companies or industries, and that provides information reasonably sufficient upon which to base an investment decision. The proposed rule change would renumber paragraph (a)(8) as paragraph (a)(9) in light of the rule change discussed above and would codify an existing interpretation that communications that are limited to the following do not meet the definition of “research report”:
(1)Discussions of broad-based indices, such as the Russell 2000 or S&P 500 index;
(2)commentaries on economic, political or market conditions;
(3)technical analyses concerning the demand and supply for a sector, index or industry based on trading volume and price;
(4)statistical summaries of multiple companies' financial data, including listings of current ratings;
(5)recommendations regarding increasing or decreasing holdings in particular industries or sectors; and
(6)notices of ratings or price target changes, provided that the member simultaneously directs the readers of the notice to the most recent research report on the subject company that includes all current applicable disclosures required by NASD Rule 2711 and that such research report does not contain materially misleading disclosure, including disclosures that are outdated or no longer applicable. *See Notice to Members* 02-39. 28 28 NASD believes that these exclusions essentially parallel those contained in SEC Regulation AC and the terms of the so-called “Global Settlement,” an agreement among NASD, NYSE, the SEC, the North American Securities Administrators Association and ten of the largest investment banks to resolve allegations regarding biased research. NASD notes that the proposed rule language to codify these interpretations is not identical to that in the joint memoranda. The changes reflect, in part, the fact that the definition of “research report” was subsequently amended and no longer requires a recommendation. Also, in some instances, NASD has chosen language more appropriate for rule text. In any event, unless otherwise noted, the substance of the existing interpretations are not intended to be different than those set forth in the joint memoranda. In addition, the proposed rule change would codify three exclusions from the definition of “research report” for certain communications, even if they include an analysis of an individual equity security and information reasonably sufficient upon which to base an investment decision. First, NASD proposes to exclude any communication distributed to fewer than 15 persons. *See Notice to Members* 04-18. 29 This exclusion supersedes the interpretive guidance provided in *Notice to Members* 02-39 that an analysis prepared by a registered representative for a specific customer's account would not be considered a research report. Second, NASD proposes to exclude periodic reports or other communications prepared for investment company shareholders or discretionary investment account clients that discuss individual securities in the context of a fund's or an account's past performance or the basis for previously made discretionary investment decisions. Thus, NASD believes that, for example, a manager's discussion of fund performance in a mutual fund shareholder report would not constitute a research report. *See Notice to Members* 04-18. 30 Third, NASD proposes to exclude from the definition internal communications that are not given to current or prospective customers. *See Notice to Members* 02-39. 31 29 NASD believes that this exclusion parallels SEC Regulation AC. 30 NASD believes that this exclusion parallels SEC Regulation AC. 31 NASD believes that this exclusion parallels SEC Regulation AC. Additionally, the proposed rule change would codify an interpretation that communications that constitute statutory prospectuses that are filed as part of the registration statement are not considered “research reports,” even if they meet the definitional elements. NASD believes prospectuses serve different purposes than research reports and are subject to a separate comprehensive regulatory scheme. NASD is also proposing a non-substantive, technical change to the definition of “research report” to clarify that written communications include electronic communications. NASD believes that this change would be consistent with the definition of “research report” in SEC Regulation AC. Disclosure Requirements NASD Rule 2711(h) sets forth a number of disclosure requirements for research reports and public appearances by research analysts. In addition to disclosures relating to conflicts, this provision requires that a member disclose the meanings of ratings used in the member's rating system, the distribution of buy, hold, and sell ratings assigned by the member, and a price chart that plots the assignment or changes of the analyst's ratings and price targets for the subject company against the movement of the subject company's stock price over time. The proposed rule change would amend NASD Rule 2711(h)(5) to codify the existing interpretation that the ratings distribution should reflect the current distribution of the most recent ratings that the member has issued for all subject companies, unless the most recent rating was issued more than 12 months ago. *See Notice to Members* 04-18. In addition, the proposed rule change would amend NASD Rule 2711(h)(6) to clarify that a price chart is required if a research report contains either a rating or a price target; however, a member is not required to provide a price chart if the research report does not include a rating or price target. *See Notice to Members* 04-18. The proposed rule change would also make certain non-substantive, technical changes to the disclosure requirements of NASD Rule 2711(h) in order to clarify that such disclosures are required only in certain research reports. Specifically, NASD proposes to amend:
(1)NASD Rule 2711(h)(4) to clarify that a research report must disclose the meanings of ratings used in the member's ratings system only if the report contains a rating of the subject company's stock;
(2)NASD Rule 2711(h)(5) to clarify that a research report must disclose the member's ratings distribution information only if the report contains a rating; and
(3)NASD Rule 2711(h)(7) to clarify that a research report must disclose valuation methods used in determining price targets only if the report contains a price target. Compendium Reports NASD Rule 2711(h)(11) provides that when a member distributes a research report covering six or more companies, for purposes of the rule's disclosure requirements, such report may direct the reader in a clear manner as to where the reader may obtain the applicable current disclosures in written or electronic format. The proposed rule change would codify the existing interpretation that an electronic compendium report—a research report covering six or more subject companies—may include a hyperlink to the required disclosures. A paper-based compendium report must provide either a toll-free number to call or a postal address to write for the required disclosures and may also include a Web address of the member where the disclosures can be found. *See Notice to Members* 02-39. Third-Party Research The proposed rule change would add new paragraph (h)(13) to NASD Rule 2711 to codify the existing interpretive guidance relating to members' disclosure obligations in the context of distributing third-party research. Proposed new paragraph (h)(13)(A) would make express the existing interpretation that when a member distributes research produced by another member, a non-member affiliate ( *e.g.* , a foreign broker-dealer or an investment adviser) or an independent third party, the member must disclose
(1)The member's and its affiliate's ownership of the subject company's securities, pursuant to NASD Rule 2711(h)(1)(B);
(2)the member's and its affiliate's investment banking relationships with the subject company, pursuant to NASD Rule 2711(h)(2)(A)(ii);
(3)the member's market making activities in the subject company's securities, pursuant to NASD Rule 2711(h)(8); and
(4)any other actual, material conflict of interest of the analyst or member, pursuant to NASD Rule 2711(h)(1)(C) (the “third-party disclosures”). Thus, according to NASD, when a member distributes another member's research report, the distributing member must include the third-party disclosures as pertains to the distributing member's relationship to the subject company, while the member whose report is being distributed must comply with all of the disclosure requirements under NASD Rule 2711. *See Notice to Members* 02-39 and *Notice to Members* 4-18. 32 32 New paragraph (h)(13) and existing paragraphs (h)(1)(C), (h)(2)(A)(ii) and (h)(8) of NASD Rule 2711 will be renumbered pursuant to related rule filing SR-NASD-2006-113, discussed herein at note 27. The joint interpretive memoranda indicate that distribution of independent third-party research through a soft-dollar arrangement is not encompassed by the disclosure requirements. According to NASD, the proposed rule change would supersede this interpretation. Thus, NASD believes that when a member distributes independent third-party research through a soft-dollar arrangement, the third-party disclosure requirements would apply, unless another exception is available ( *e.g.* , where such research is provided upon customer request). The proposed rule change would codify the existing interpretation that a member is not required to make the third-party disclosures when the member makes independent third-party research reports available to its customers upon request or through a member-maintained Web site. *See Notice to Members* 02-39 and *Notice to Members* 04-18. However, a member that makes a non-member affiliate's research report available to its customers upon request or through its Web site must include the third-party disclosures. *See Notice to Members* 04-18. Finally, NASD believes that consistent with the requirements of NASD Rule 2210(b)(1), the proposed rule change would clarify that a registered principal must approve by signature or initial any third-party research distributed by a member. This requirement may be met by the signature or initial of a supervisory analyst approved pursuant to Rule 344 of the New York Stock Exchange ( *i.e.* , a Series 16 Supervisory Analyst). All third-party research distributed by a member must be reviewed by the designated principal (or Series 16 Supervisory Analyst, as the case may be) to determine that the applicable disclosures required by NASD Rule 2711 are complete and accurate, and the content of the research report is consistent with all applicable standards regarding communications with the public. With respect to research reports prepared by a member, NASD reminds members that the content of the research report must be approved by an individual who has passed either
(1)the Series 24 and the Series 87 or
(2)the Series 16. If the member elects to have a Series 16 approve the content of research, then a Series 24 principal who has also passed either the Series 87 or the Series 16 must supervise the conduct of both the Series 16 Supervisory Analyst and the research analyst. *See* NASD Rule 1022(a)(5) and NASD *Notice to Members* 04-81 (November 2004). Similar to the approach set forth above regarding the approval of third-party research, NASD will permit any registered principal or a Series 16 Supervisory Analyst to supervise for compliance with the disclosure provisions
(only)of NASD Rule 2711. According to NASD, all other content of the research report must continue to be approved by an individual who has passed either the Series 24 and the Series 87, or the Series 16. NASD reminds members that in accordance with NASD Rule 3010 (Supervision), all personnel reviewing both member and third-party research must be qualified by virtue of experience and training to carry out such review. NASD has filed the proposed rule change for immediate effectiveness. The effective date and the implementation date will be the date of filing, September 27, 2006.
(4)NASD's Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 33 which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed rule change will enhance the clarity and consistency of the research analyst rules, thereby facilitating the goals of reducing conflicts of interest and fraudulent and manipulative practices, and providing investors with more objective, reliable information upon which to base investment decisions. 33 15 U.S.C. 78o-3(b)(6). B. Self-Regulatory Organizations' Statements on Burden on Competition The NYSE and NASD do not believe that the proposed rule changes will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organizations' Statements on Comments on the Proposed Rule Changes Received From Members, Participants, or Others The NYSE and NASD have neither solicited nor received written comments. III. Date of Effectiveness of the Proposed Rule Changes and Timing for Commission Action The foregoing rule changes have become effective pursuant to Section 19(b)(3)(A) of the Act 34 and paragraph (f)(1) of Rule 19b-4 thereunder, 35 in that the proposed rule changes constitute a stated policy, practice or interpretation with respect to the meaning, administration, or enforcement of an existing rule. At any time within 60 days of the filing of the proposed rule changes, the Commission may summarily abrogate such rule changes if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 34 15 U.S.C. 78s(b)(3)(A). 35 17 CFR 240.19b4-4(f)(1). IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule changes are consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Numbers SR-NYSE-2006-77 and/or SR-NASD-2006-112 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Numbers SR-NYSE-2006-77 and/or SR-NASD-2006-112. These file numbers should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule changes that are filed with the Commission, and all written communications relating to the proposed rule changes between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal offices of the NYSE and NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to the File Numbers SR-NYSE-2006-77 and/or SR-NASD-2006-112 and should be submitted on or before November 14, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 36 36 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17744 Filed 10-23-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54615; File No. SR-NYSE-2006-37] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Exchange Rule 86 (Automated Bond System®) October 17, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 16, 2006, the New York Stock Exchange LLC) (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed Amendment Nos. 1 and 2 to the proposed rule change on August 4, 2006 3 and October 10, 2006, 4 respectively. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replaced and superseded the original filing in its entirety. 4 Amendment No. 2 replaced and superseded Amendment No. 1 in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE seeks to replace Exchange Rule 86 to implement changes to the Automated Bond System (“ABS®”), which would be re-named “NYSE Bonds SM .” The text of the proposed rule change is available on the NYSE's Web site ( *http://www.nyse.com* ), at the NYSE's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to replace current Exchange Rule 86 with a new rule that would accommodate and promote increased bond market activity and greater transparency in bond trading on the Exchange. The new rule would continue to enumerate the NYSE's primary rule relating to bond trading as Exchange Rule 86. The automated system in which bonds would trade would be re-named “NYSE Bonds.” Other Exchange rules that relate to trading of bonds in NYSE Bonds would be amended to conform to new Exchange Rule 86. Users 5 of NYSE Bonds would have the ability to buy and sell bonds through the NYSE Bonds automated execution facility. To obtain authorized access to NYSE Bonds, a member organization of the Exchange would have to enter into a service agreement with the Exchange thereby subscribing to NYSE Bonds. Non-members who wish to trade on NYSE Bonds would have to do so through a written sponsorship agreement with a subscribing member organization of the Exchange. 5 In the proposed rules, “User” means any Subscriber, Sponsoring Member Organization, Sponsored Participant, or Authorized Trader that is authorized to obtain access to NYSE Bonds. *See* proposed NYSE Rule 86(b)(2)(M). Bonds To Be Traded on NYSE Bonds Debt securities that currently trade on ABS would also trade on NYSE Bonds. Such debt securities include, but are not limited to the following: Corporate bonds (including convertible bonds), international bank bonds, foreign government bonds, U.S. government bonds, government agency bonds, municipal bonds, and debt-based structured products. In a separate filing, the Exchange has requested that the Commission provide relief pursuant to Section 36 of the Act 6 to provide an exemption from the provisions of Section 12(a) of the Act 7 to permit NYSE member organizations to trade bonds that are not registered under Section 12(b) of the Act, 8 but are issued by NYSE-listed companies and their wholly owned subsidiaries and that meet other conditions. 9 Should this exemption be granted, trading in bonds covered by the exemption would occur via the NYSE Bonds system. 6 15 U.S.C. 78mm. 7 15 U.S.C. 78 *l* (a). 8 15 U.S.C. 78 *l* (b). 9 *See* Securities Exchange Act Release No. 51998 (July 8, 2005), 70 FR 40748 (July 14, 2005) (File No. S7-06-05). Any security traded on NYSE Bonds would be referred to as a “bond” for purposes of Exchange Rule 86. Any security traded on NYSE Bonds would have to be listed, or otherwise admitted to dealing, on the Exchange. Today, the majority of NYSE bond volume is in corporate debt, with approximately 94% in non-convertible bonds, including certain debt-based structured products, and approximately 6% in convertible bonds. NYSE Bonds Trading Rules The proposed rules designate the types of orders that could be entered into NYSE Bonds and the minimum unit of trading for bonds traded through the system. Initially, Users of NYSE Bonds would be allowed to enter limit orders (“NYSE Bonds Limit Orders”) and reserve orders (“NYSE Bonds Reserve Orders”). A NYSE Bonds Reserve Order would be a limit order, a portion of which would be displayed and a portion of which would remain as undisplayed or reserve size. As the technology of the NYSE Bonds system continues to be implemented, all order types that are currently available in ABS also could be available in NYSE Bonds. Such order types may include “Next Day,” “Cash,” “Day,” 10 and “Good 'til Cancelled” (“GTC”). 11 The Exchange would notify its member organizations when additional order types became available for use. 10 “NYSE Bonds Day Orders” would have to be designated for specific trading sessions or, by default, such orders would participate only in the Core Bond Auction and the Core Bond Trading Session. 11 “NYSE Bonds Good 'Til Cancelled Orders” would be permitted to participate only in the Core Bond Auction and the Core Bond Trading Session. The minimum unit of trading in NYSE Bonds would be one bond. This minimum unit of trading would apply to both the displayed and undisplayed portion of a NYSE Bonds Reserve Order. A bond is usually traded in denominations of $1,000 ( *i.e.* , the original principal amount of a bond is usually $1,000). A unit of trading in bonds other than $1,000 could be designated by the Exchange for specific issues of bonds denominated in U.S. dollars or foreign currencies. Bonds with less than $1,000 original principal amount could trade on NYSE Bonds, provided the User first aggregated the bonds into denominations of $1,000. Bids or offers for less than $1,000 would have to specify the original principal amount of the bond. The maximum size for any bond order would be 1,000,000 bonds. NYSE Bonds would accept and display bids and offers in bonds priced to three decimal places. The Exchange would place parameters on priced orders that crossed the market by establishing price collar thresholds. The Exchange believes that these thresholds would help avoid executions at erroneous prices. Initially, these collars would be set at one percentage point of par value outside the Exchange best bid and offer. The Exchange could modify the price collar thresholds from time to time, upon prior notice to NYSE Bonds Users. The Exchange would reject an order sent to NYSE Bonds if the limit price of an incoming order to buy were one percentage point of par value higher than the price of the then-current best offer displayed on NYSE Bonds, or if the limit price of an incoming order to sell were one percentage point of par value lower than the then-current price of the NYSE Bonds' best bid. NYSE Bonds would be an electronic order-driven matching system. NYSE Bonds orders submitted by Users would be displayed, matched, and executed on a price/time priority basis. Orders that were marketable at the time of entry would be matched and executed. An order would be marketable when it entered the NYSE Bonds system if contra side interest were available at that price or a better price. Orders that were not marketable at the time of entry would post to the NYSE Bonds order “book.” Orders that were marketable beyond the price collar threshold would be rejected by the system. If an order were entered capable of trading at a better price than the then-best priced contra-side order on the NYSE Bonds book, the system would match the incoming order against the resting order at the resting order's price, thereby providing price improvement to the incoming order. For example, assume the NYSE Bonds market in the relevant bond is 101 bid, offered at 102 (1,000 × 1,000). A NYSE Bonds Limit Order to buy 1,000 bonds comes in priced at 103. The order would be executed at 102, providing 1 point of price improvement to the incoming order. With the same market, assume a NYSE Bonds Limit Order to buy 1,000 bonds at 104 comes into the NYSE Bonds system. The order would be rejected as it would violate the price collar threshold of one percentage point of par value. As previously discussed, NYSE Bonds would accept limit and reserve orders. Undisplayed reserve interest in NYSE Bonds would always yield to displayed orders at a particular price. Most orders matched on NYSE Bonds would be locked-in trades and would be submitted to a registered clearing agency with accrued interest calculated according to the defined eligibility characteristics of the particular bond. 12 Such accrued interest would be distributed to the seller. Settlement of corporate bond trades would be “regular way,” *i.e.* , three-day settlement. 12 The Exchange submits completed trades to one of the subsidiaries of the Depository Trust Clearing Corporation (“DTCC”) for clearance and settlement. The National Securities Clearing Corporation (“NSCC”), a subsidiary of DTCC, provides clearance and settlement services for government agency, corporate, and municipal bonds that trade on ABS. While the Government Securities Division of the Fixed Income Clearing Corporation (“FICC”), another subsidiary of DTCC, provides clearance and settlement services for transactions in U.S. government bonds, the Exchange does not currently have an agreement with FICC for such settlement and clearance. Presently, U.S. government bonds that trade on ABS are traded ex-clearing ( *i.e.* , the parties to the transaction arrange for manual clearing and settlement). The Exchange plans to submit trades on a locked-in basis to FICC for clearance and settlement in 2007. Until such time as the Exchange has such an agreement with the FICC, the U.S. government bonds that trade on NYSE Bonds would continue to trade ex-clearing as they do today on ABS. Trades that would not be locked-in would be those in bonds that are not set up for the Exchange's registered clearing agency, or bonds having a face value other than $1,000. Bond Trading Sessions NYSE Bonds would have three trading sessions during which ordinary trading would occur:
(1)The Opening Bond Trading Session (4 a.m. until 9:30 a.m. e.t.);
(2)the Core Bond Trading Session, which would likely have the greatest market activity (9:30 a.m. until 4 p.m. e.t.); and
(3)the Late Bond Trading Session (4 p.m. until 8 p.m. e.t.). Orders for one or more of these sessions could be entered in NYSE Bonds beginning at 3:30 a.m. e.t., and the orders would queue until the beginning of the designated Bond Trading Session(s). Users entering orders into NYSE Bonds would be required to designate for each such order the trading session(s) for which the order would be available for execution. If an order were not designated for any particular trading session the order would, by default, be available for execution only in the Core Bond Auction and the Core Bond Trading Session. 13 13 “NYSE GTC Orders” could execute only in the Core Bond Auction and the Core Bond Trading Session. Orders could be designated only for Bond Trading Sessions—not Bond Auctions. Therefore, while orders could be designated and “available” only for Trading Sessions, they would be “eligible” for execution in the Auctions that would launch the designated Trading Session provided the orders were entered before the related Auction commenced. If orders were designated for either the Opening Bond Trading Session or the Core Bond Trading Session and were entered after commencement of the related Auction, the order would be available only for ordinary trading in the designated Bond Trading Session. The Late Bond Trading Session would not commence with a Bond Auction. An order designated for execution in any Trading Session could be cancelled at any time as long as the order had not been executed, except that a User could cancel an order eligible for execution in a Bond Auction at any time until two minutes prior to the beginning of the particular Auction. Bond Auctions At the commencement of both the Opening Bond Trading Session and the Core Bond Trading Session, there would be a single-priced execution called a Bond Auction. The Opening Bond Trading Session would begin with the Opening Bond Auction. The Core Bond Trading Session would begin with the Core Bond Auction. During these Bond Auctions, all marketable orders received by NYSE Bonds as of that time and, if so designated for the related Bond Trading Session, would be matched and executed at the Indicative Match Price (“IMP”). The IMP would be defined as:
(1)The price at which the maximum volume of bonds are executable;
(2)if there are two or more prices at which the maximum volume of bonds are executable, the price that is closest to the closing price of that bond on the previous trading day, or if the bond did not trade on the previous day, the price that is closest to the closing price on the last day that the bond traded; or
(3)if bond orders to buy and bond orders to sell are not marketable, the highest priced bid. The lowest priced offer would not become the IMP as the system would accept only one price for the IMP, and by default, that would be the highest priced bid. The price collar threshold would act as a determining factor for those orders that would either enter the system or be rejected by the system. One initial order on a single side ( *i.e.,* only a buy order or only a sell order) could establish the IMP, but, unless marketable orders were entered into the NYSE Bonds system at appropriate times, no execution, and hence no Bond Auction, would take place. A Bond Auction would be an execution at the IMP. Therefore, to have a Bond Auction, at least one marketable bond order to buy or sell would have to be available to execute against contra-side interest. When the price of an order to buy is equal to or greater than the price of an order to sell, an Auction execution would occur. Beginning 30 minutes prior to the Opening Bond Trading Session and various times thereafter, the IMP for the Opening Bond Auction and any Imbalance 14 associated with it would be published by the Exchange. 14 *See* proposed NYSE Rule 86(b)(2)(F) (defining “Imbalance” as the number of buy or sell NYSE Bonds orders that cannot be matched with other orders at the Indicative Match Price at any given time). A User could cancel an order eligible for execution in either Bond Auction at any time until two minutes prior to the beginning of the particular Auction. The matching and execution of orders in an Auction would be instantaneous. The sequence of Bond Auctions and Bond Trading Sessions on NYSE Bonds would provide a seamless, continuous trading day that would begin at 3:30 a.m. e.t. and would continue until 8 p.m. e.t. NYSE Bonds Order Entry and Execution To post an order in a particular bond on NYSE Bonds, a User would be required to enter certain basic information including: cusip number, order quantity, order type ( *i.e.,* NYSE Bonds Limit Order or NYSE Bonds Reserve Order); price (up to three decimals); account type indicator (“P” for principle or “A” for agent); time in force ( *i.e.* , Opening Bond Trading Session, Core Bond Trading Session, and/or Late Bond Trading Session and GTC); and whether the order is buy, sell, or sell/short. The staff of the Division of Market Regulation of the Commission has stated that it would not recommend that the Commission take enforcement action if short sales in exchange-listed bonds and debentures are effected without complying with Rule 10a-1 under the Act. 15 By this filing, the Exchange seeks continued effect of this ruling. 15 *See* Securities Exchange Act Release No. 30772 (June 3, 1992), 57 FR 24415 (June 9, 1992) (File No. S7-13-92). The Exchange deems this determination by the Commission Staff to apply to Exchange Rule 440B (Short Sales). NYSE Bonds would accept orders beginning at 3:30 a.m. e.t., and orders could be entered throughout the trading day. Orders designated for the Opening Bond Trading Session that are entered into the system before 4 a.m. e.t. also would be eligible for the Opening Bond Auction. At 4 a.m. e.t., orders designated for the Opening Bond Trading Session would first be matched and executed in the Opening Bond Auction at the IMP. During this instantaneous Auction, the orders would be matched based on price/time priority. At various times during the period from 3:30 a.m. to 4 a.m., the IMP of the Opening Bond Auction, and any Imbalance associated therewith, would be published via a data feed. The data feed would provide Imbalance information in real time, and it would be available to Users, third-party data vendors, and other interested parties who agree to terms established by the Exchange. An Imbalance would be published any time one occurred, including when new orders are entered into NYSE Bonds that might affect the relevant Auction. Orders designated for a specific Trading Session automatically would be included in the Bond Auction that launches the designated Trading Session. The Opening Bond Auction would launch the Opening Bond Trading Session, and the Core Bond Auction would launch the Core Bond Trading Session. Therefore, an order designated for the Opening Bond Trading Session would be “available” to participate in the Opening Bond Trading Session, and if such order were entered into the system before 4 a.m. e.t., it also would be “eligible” for participation in the Opening Bond Auction. Similarly, an order designated for and thus “available” for the Core Bond Trading Session would be included in the Core Bond Auction if entered before the Core Bond Auction occurs at 9:30 a.m. e.t. An order designated for more than one Bond Trading Session would potentially straddle both Bond Auctions depending on the time the order is entered. As described above, an order designated for the Opening Bond Trading Session would first have an opportunity to match and execute in the Opening Bond Auction at the IMP. If such order does not execute in the Opening Bond Auction, either because the Auction did not occur or because the order did not match with interest on the contra side, the order would then have a second opportunity to participate in ordinary trading in the Opening Bond Trading Session, which would last from 4 a.m. until 9:30 a.m. e.t. Thereafter, if the same order does not trade in the Opening Bond Trading Session, it would have a third opportunity to trade in the Core Bond Auction at the IMP, which would occur at 9:30 a.m. e.t. If the same order does not trade in the Core Bond Auction, it would be cancelled unless it is designated for either of the next two trading sessions ( *i.e.,* the Core Bond Trading Session (9:30 a.m. until 4 p.m. e.t.) and the Late Bond Trading Session (4 p.m. until 8 p.m. e.t.). Therefore, if the same order is designated for the Core Bond Trading Session and the Late Bond Trading Session, it would get a fourth and perhaps a fifth opportunity to trade during the trading day, if not cancelled. Thus, the designation of a bond order in NYSE Bonds would determine the order's eligibility to participate in either or both of the Bond Auctions and its availability to participate in additional Bond Trading Sessions. NYSE Bonds would accept orders for the Core Bond Auction and Core Bond Trading Session from 3:30 a.m. e.t. until 9:30 a.m. e.t. Such orders would queue until 9:30 a.m. e.t. when the Core Bond Auction takes place. Like the Opening Bond Auction, marketable orders would be instantaneously matched and executed at the IMP in the Core Bond Auction. Those orders would be matched based on price/time priority. Like the Opening Bond Auction, at various times during the period from 3:30 a.m. to 9:30 a.m. e.t., the IMP of the Core Bond Auction, and any Imbalance associated therewith, would be published via a data feed. As discussed above, an order designated for execution in the Core Bond Trading Session could be cancelled at any time as long as it had not been executed, except that a User could not cancel an order eligible for execution in the Core Bond Auction inside of two minutes prior to the beginning of the Core Bond Auction. An order designated for the Late Bond Trading Session would be eligible for ordinary trading in the Late Bond Trading Session beginning at 4 p.m. and lasting until 8 p.m e.t. If the order does not trade in the Late Bond Trading Session, it would be cancelled. No Bond Auction would occur at the beginning of the Late Bond Trading Session. An order that is not designated for a particular trading session would be available only for the Core Bond Trading Session and the Core Bond Auction. Clearly Erroneous Executions The NYSE Bonds rules would define a “clearly erroneous execution” to be one where there is an obvious error in any term, such as price, unit of trading, or identification of the bond. 16 A User that receives an erroneous execution could request the Exchange review the transaction. A clearly erroneous execution would be determined by Exchange personnel. The request for review would have to be made via telephone, facsimile, or email and would have to be submitted within 30 minutes of the trade in question. The other party (or parties) to the trade would be notified of the request for review. Thereafter, an Officer of the Exchange or a designee would review the transaction and would make a determination as to whether there was a “clearly erroneous execution.” The reviewer could make this determination with or without supporting documentation from any party to the transaction. The Exchange would be able to review a request that is submitted more than 30 minutes after the transaction. This review would be determined on a case-by-case basis in a manner that promotes a fair and orderly market and does not unfairly discriminate against Users of NYSE Bonds. 16 *See* proposed NYSE Rule 86(b)(2)(H) and (j)(1). If the reviewer determined that the execution was not clearly erroneous, no corrective action would be taken in relation to the transaction. If the reviewer determined that the transaction were clearly erroneous, the transaction could be deemed null and void or equitably modified. If one party did not agree with the determination, that party could request further review or an appeal by a panel of reviewers that includes Exchange personnel and representatives of two NYSE Bonds subscribers who are not associated with the parties to the trade in question. Depending on the outcome of the appeal, the transaction would either remain unchanged or be deemed null and void. An appeal would not result in a new modification of the terms of the transaction, as this result would be available only at the initial review of the transaction. NYSE Bonds System Disruption or Malfunction or Equipment Changeover The proposed rule further provides that, in the event of any system disruption, malfunction, or equipment changeover in the NYSE Bonds trading facility, an Officer of the Exchange or a designee, without the need for a request for review, would review transactions affected by a system disruption, malfunction, or equipment changeover and decide if any transactions are erroneous. In such situations, the Officer of the Exchange or the designee could declare the transaction to be unchanged, null and void, or modified as appropriate. The rule also provides that, absent extraordinary circumstances, any such action of the Exchange Officer or a designee shall be taken within 30 minutes of detection of the system disruption, malfunction, or equipment changeover, or an erroneous transaction resulting from such system problem. If an erroneous transaction occured as a result of a system disruption, system malfunction, or equipment changeover, each party to the erroneous transaction would be notified of the situation and the specific action as soon as practicable. Thereafter, the User aggrieved by the action could appeal such action. 17 17 *See* proposed NYSE Rule 86(j). Halting, Suspending, and Closing of Bond Trading on the Exchange The proposed rule provides for the halting, suspension, and closing of bond trading on NYSE Bonds when:
(1)In the Exchange's regulatory capacity, it is necessary or appropriate to maintain a fair and orderly market, to protect investors, or is in the public interest, due to extraordinary circumstances or unusual market conditions;
(2)in the case of an individual bond, the related stock has been halted, suspended, or closed on the Exchange or the primary listing Exchange for regulatory purposes;
(3)in the case of an individual bond, that bond has been halted, suspended, or closed on the primary listing Exchange for regulatory purposes;
(4)news reports have a material impact on an individual bond, its issuer, or related stock of its issuer; and
(5)the authority under which a bond trades on the Exchange or on its primary market is revoked ( *i.e.,* the bond is delisted). When bond trading is halted under any of the circumstance described above, a halt message at the beginning and end of the halt would be disseminated to all NYSE Bonds Users. This trading halt would be referred to as a “Bond Halt.” During the Bond Halt, orders could enter the system and queue according to price/time priority. The IMP, and any Imbalance associated with such halt, would be published as soon as the Bond Halt commenced and would continue to be published until the conclusion of the halt. When the Bond Halt is concluded, trading would resume with a Bond Halt Auction, which would include matching and execution of orders at the IMP. The IMP would be determined during the Bond Halt. At the conclusion of the Bond Halt Auction, ordinary trading would resume in the Bond Trading Session (“Opening,” “Core,” or “Late”) that is in progress at the conclusion of the halt. Bond halts would be implemented to maintain a fair and orderly market and to dampen volatility. Dissemination of Trading Information The Exchange would publish a real-time bond data feed to NYSE Bonds Users that would reflect all orders in time sequence in the NYSE Bonds order “book.” Because NYSE Bonds would be a purely order-driven system, the Exchange would not disseminate any information on a particular bond if there are no orders posted in the “book” for such bond. In addition to the NYSE Bonds order “book,” the data feed also would include the last sale price (with corresponding number of bonds) as executions occur. The NYSE Bonds data feed would be available for purchase by non-subscribing market participants, third-party data vendors, and other interested parties who agree to the Exchange's terms. Member Organization and Non-Member Access to the NYSE Bonds System Only member organizations of the Exchange would be able to enter into written service agreements with the Exchange specifically providing for authorized access to NYSE Bonds ( *i.e.* , a “NYSE Bonds Service Agreement”). A non-member who wished to trade bonds on NYSE Bonds could do so as a “Sponsored Participant” of a subscribing member organization (“Sponsoring Member Organization”). The Sponsoring Member Organization's service agreement with the Exchange would have to include the name of the Sponsored Participant and to identify such entity as the Sponsored Participant. The proposed rule requires the Sponsoring Member Organization and the Sponsored Participant to maintain a written “sponsorship agreement.” The sponsorship agreement would have to be agreed to by both the Sponsoring Member Organization and the Sponsored Participant. The proposed sponsorship agreement would have to include the following provisions:
(A)Sponsoring Member Organization must acknowledge and agree that:
(i)All orders entered by a Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant and any executions occurring as a result of such orders are binding in all respects on the Sponsoring Member Organization;
(ii)Sponsoring Member Organization is responsible for any and all actions taken by such Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant; and
(iii)Sponsoring Member Organization must provide the Exchange with a Notice of Consent acknowledging its responsibility for the orders, executions, and actions of its Sponsored Participant at issue.
(B)Sponsored Participant must have written policies and procedures in place that comply with the Exchange's bylaws, rules, and procedures and with the rules of the Commission with regard to the Exchange, as if Sponsored Participant were a Member Organization of the Exchange.
(C)Sponsored Participant must maintain, keep current, and provide to the Sponsoring Member Organization a list of Authorized Traders who may obtain access to NYSE Bonds on behalf of the Sponsored Participant.
(D)Sponsored Participant must provide training to its Authorized Traders regarding the Sponsored Participant's obligations under this rule, other rules of the Exchange, and the rules of the Commission, and assure that these Authorized Traders receive appropriate training prior to any use or access to NYSE Bonds.
(E)Sponsored Participant must not permit anyone other than Authorized Traders to use or obtain access to NYSE Bonds.
(F)Sponsored Participant must have in place and must enforce written policies and procedures that provide reasonable security precautions to prevent unauthorized use or access to NYSE Bonds, including unauthorized entry of information into NYSE Bonds or the information and data made available therein. Sponsored Participant understands and agrees that Sponsored Participant is responsible for any and all orders, trades, and other messages and instructions entered, transmitted, or received under identifiers, passwords, and security codes of Authorized Traders, and for the trading and other consequences thereof.
(G)Sponsored Participant acknowledges its responsibility to establish adequate written procedures and controls that permit it to effectively monitor its employees', agents', and customers' use and access to the Exchange for compliance with the terms of this agreement and all relevant rules of the Exchange and the Commission.
(H)Sponsored Participant shall pay when due all amounts, if any, payable to Sponsoring Member Organization, the Exchange, NYSE Bonds, or any other third parties that arise from the Sponsored Participants access to and use of NYSE Bonds. Such amounts include, but are not limited to, applicable exchange and regulatory fees. Reports and Recordkeeping Users of NYSE Bonds would have to comply with all relevant rules of the Exchange and the Commission in relation to reports and recordkeeping of transactions on NYSE Bonds, including Exchange Rules 342 and 440 and Rules 17a-3 and 17a-4 under the Act. 18 18 17 CFR 240.17a-3 and 240.17a-4. Applicability of Section 11(a) and
(b)of the Act Section 11(a) of the Act 19 prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises investment discretion, unless an exception applies. This general prohibition would not impact trading on NYSE Bonds because Rule 11a1-4(T) under the Act 20 deems transactions in bonds on a national securities exchange for a member's own account to be consistent with Section 11(a). Similarly, Section 11(b) of the Act 21 and Rule 11b-1 thereunder, 22 which pertain to specialists and market-makers, would not be implicated because there would be no specialists or market makers on NYSE Bonds. 19 15 U.S.C. 78k(a). 20 17 CFR 240.11a1-4(T). 21 15 U.S.C. 78k(b). 22 17 CFR 240.11b-1. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 23 that an Exchange have rules that are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 23 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which NYSE consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2006-37 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2006-37. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-37 and should be submitted on or before November 14, 2006. 24 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 24 Jill M. Peterson, Assistant Secretary. [FR Doc. E6-17745 Filed 10-23-06; 8:45 am] BILLING CODE 8011-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10650] Alaska Disaster #AK-00008 AGENCY: Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Alaska (FEMA-1663-DR), dated 10/16/2006. *Incident:* Severe Storms, Flooding, Landslides, and Mudslides. *Incident Period:* 08/15/2006 through 08/25/2006. *Effective Date:* 10/16/2006. *Physical Loan Application Deadline Date:* 12/15/2006. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President's major disaster declaration on 10/16/2006, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Chugach Reaa (10), Denali Borough, Matanuska-Susitna Borough. *The Interest Rates are:* Percent Other (Including Non-Profit Organizations) With Credit Available Elsewhere 5.000 Businesses and Non-Profit Organizations Without Credit Available Elsewhere 4.000 The number assigned to this disaster for physical damage is 10650. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E6-17769 Filed 10-23-06; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 10519 and # 10520] New York Disaster Number NY-00022 AGENCY: U.S. Small Business Administration. ACTION: Amendment 4. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of New York (FEMA-1650-DR), dated 07/03/2006. *Incident:* Severe Storms and Flooding. *Incident Period:* 06/26/2006 through 07/10/2006. *Effective Date:* 10/16/2006. *Physical Loan Application Deadline Date:* 10/30/2006. *EIDL Loan Application Deadline Date:* 04/03/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for the State of New York, dated 07/03/2006, is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 10/30/2006. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Roger B. Garland, Acting Associate Administrator for Disaster Assistance. [FR Doc. E6-17768 Filed 10-23-06; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10625] Virginia Disaster Number VA-00008 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the Commonwealth of *Virginia* (FEMA-1661-DR ), dated 09/22/2006. *Incident:* Severe Storms and Flooding, Inc. Severe Storms and Flooding due to TS Ernesto. *Incident Period:* 08/29/2006 through 09/07/2006. *Effective Date:* 10/06/2006. *Physical Loan Application Deadline Date:* 11/21/2006. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of *Virginia,* dated 09/22/2006, is hereby amended to include the following areas as adversely affected by the disaster. Primary Counties: *Newport News (City).* All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008). Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E6-17766 Filed 10-23-06; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 10644 and # 10645] Virginia Disaster # VA-00006 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of an Administrative declaration of a disaster for the Commonwealth of *Virginia* dated 10/16/2006. *Incident:* Tropical Storm Ernesto. *Incident Period:* 08/30/2006 through 09/01/2006. *Effective Date:* 10/16/2006. *Physical Loan Application Deadline Date:* 12/15/2006. *Economic Injury
(EIDL)Loan Application Deadline Date:* 07/16/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Gloucester, Hampton (City), Newport News (City), Northumberland, Richmond
(City)Contiguous Counties: Virginia: Chesterfield, Henrico, James City, King and Queen, Lancaster, Mathews, Middlesex, Poquoson (City), Richmond, Westmoreland, York *The Interest Rates are:* Percent Homeowners With Credit Available Elsewhere 6.250 Homeowners Without Credit Available Elsewhere 3.125 Businesses With Credit Available Elsewhere 7.934 Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere 4.000 Other (Including Non-Profit Organizations) With Credit Available Elsewhere 5.000 Businesses And Non-Profit Organizations Without Credit Available Elsewhere 4.000 The number assigned to this disaster for physical damage is 10644 B and for economic injury is 10645 0. The State which received an EIDL Declaration # is *Virginia.* (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) October 16, 2006. Steven C. Preston, Administrator. [FR Doc. E6-17767 Filed 10-23-06; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 5586] Bureau of Political Military Affairs; Arms Export Control Act; Determinations Pursuant to section 654(c) of the Foreign Assistance Act of 1961, as amended, notice is hereby given that:
(1)On August 18, 2006, the President made a determination pursuant to section 36 of the Arms Export Control Act, as amended; and
(2)The President has concluded that publication of such determination would be harmful to the national security of the United States. Michael W. Coulter, Deputy Assistant Secretary, Department of State. [FR Doc. E6-17796 Filed 10-23-06; 8:45 am] BILLING CODE 4710-25-P DEPARTMENT OF STATE [Public Notice 5585] Culturally Significant Objects Imported for Exhibition Determinations: “El Greco to Picasso: Time, Truth, and History” SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, *et seq.* ; 22 U.S.C. 6501 note, *et seq.* ), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236 of October 19, 1999, as amended, and Delegation of Authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that the objects to be included in the exhibition “El Greco to Picasso: Time, Truth, and History,” imported from abroad for temporary exhibition within the United States, are of cultural significance. The objects are imported pursuant to loan agreements with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit objects at the Solomon R. Guggenheim Foundation Museum, New York, New York, from on or about November 17, 2006, until on or about March 28, 2007, and at possible additional venues yet to be determined, is in the national interest. Public Notice of these Determinations is ordered to be published in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: For further information, including a list of the exhibit objects, contact Paul Manning, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202/453-8050). The address is U.S. Department of State, SA-44, 301 4th Street, SW., Room 700, Washington, DC 20547-0001. Dated: October 17, 2006. C. Miller Crouch, Principal Deputy Assistant Secretary, for Educational and Cultural Affairs, Department of State. [FR Doc. E6-17782 Filed 10-23-06; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Public Notice 5884] Notice of Intent To Prepare an Environmental Impact Statement and To Conduct Scoping Meetings and Notice of Floodplain and Wetland Involvement; Transcanada Keystone Pipeline; Correction ACTION: Notice; correction. SUMMARY: On October 11, 2006, Notice was published in the **Federal Register** (volume 71, number 196, 59849-58951) pertaining to the reporting of “Notice of Intent To Prepare an Environmental Impact Statement and To Conduct Scoping Meetings and Notice of Floodplain and Wetland Involvement; Transcanada Keystone Pipeline, L.P.” The referenced notice is hereby corrected to change two dates on page 59849 from the 28th to the 26th, so that the current two lines that read “October 28, 2006, 7 to 10 p.m., Clark, South Dakota” and “October 28, 2006, 7 to 10 p.m., Seward, Nebraska” instead reads “October 26, 2006, 7 to 10 p.m., Clark, South Dakota” and “October 26, 2006, 7 to 10 p.m., Seward, Nebraska”, respectively. FOR FURTHER INFORMATION CONTACT: For further information contact Elizabeth A. Orlando, Foreign Affairs Officer, U.S. Department of State, (telephone: 202/647-4284). The address is: U.S. Department of State, OES/ENV, Room 2657, Washington, DC 20520. Dated: October 18, 2006. David Brown, Office Director, Bureau of Oceans and International Environmental and Scientific Affairs/Office of Environmental Policy, Department of State. [FR Doc. E6-17792 Filed 10-23-06; 8:45 am] BILLING CODE 4710-09-Pp DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Summary Notice No. PE-2006-37] Petitions for Exemption; Summary of Petitions Received AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of petition for exemption received. SUMMARY: Pursuant to FAA's rulemaking provisions governing the application, processing, and disposition of petitions for exemption, part 11 of Title 14, Code of Federal Regulations (14 CFR), this notice contains a summary of certain petitions seeking relief from specified requirements of 14 CFR. The purpose of this notice is to improve the public's awareness of, and participation in, this aspect of the FAA's regulatory activities. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of any petition or its final disposition. DATES: Comments on petitions received must identify the petition docket number involved and must be received on or before November 13, 2006. ADDRESSES: Send comments on the petition to the Docket Management System, U.S. Department of Transportation, Room Plaza 401, 400 Seventh Street, SW., Washington, DC 20590-0001. You must identify the docket number FAA-2006-25308, FAA-2006-25916, FAA-2006-24241, or FAA-2006-24521 at the beginning of your comments. If you wish to receive confirmation that the FAA received your comments, include a self-addressed, stamped postcard. You may also submit comments through the Internet to *http://dms.dot.gov.* You may review the public docket containing the petition, any comments received, and any final disposition in person in the Dockets Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Dockets Office (telephone 1-800-647-5527) is on the plaza level of the NASSIF Building at the Department of Transportation at the above address. Also, you may review public dockets on the Internet at *http://dms.dot.gov.* FOR FURTHER INFORMATION CONTACT: Annette Kovite, 425-227-1262, Transport Airplane Directorate (ANM-113), Federal Aviation Administration, 1601 Lind Ave., SW., Renton, WA 98057-3356; or Frances Shaver (202-267-9681), Office of Rulemaking (ARM-1), Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591. This notice is published pursuant to 14 CFR 11.85 and 11.91. Issued in Washington, DC, on October 16, 2006. Eve Taylor Adams, Acting Director, Office of Rulemaking. Petitions for Exemption *Docket No.:* FAA-2006-25308. *Petitioner:* Progressive Aerodyne, Inc. *Section of 14 CFR Affected:* §§ 21.190. *Description of Relief Sought:* Petitioner seeks an exemption to operate the SeaRey amphibian airplane under the Experimental Light Sport Aircraft
(ELSA)category. This exemption would be necessary to operate the airplane's retractable landing gear. The petitioner also wants to exercise the privilege of the exemption outside the United States because its airplane is sold in many different countries, and most of them have reciprocity with the FAA. Petitions for Exemption *Docket No.:* FAA-2006-25916. *Petitioner:* Alaska Airlines, Inc. *Section of 14 CFR Affected:* § 121.313(j)(1)(ii). *Description of Relief Sought:* Exemption from 14 CFR 121.313(j)(1)(ii) would allow Alaska Airlines to eliminate the requirement for a procedure on their B737-400 combination passenger/cargo operations for a flight attendant to enter the pilot compartment in the event a flight crew member becomes incapacitated. Petitions for Exemption *Docket No.:* FAA-2006-24241. *Petitioner:* Aero Sports Connection. *Sections of 14 CFR Affected:* § 21.190(c)(2) and 21.191(i)(1). *Description of Relief Sought:* The exemption would allow light-sport aircraft certification for certain aircraft equipped with retractable landing gear. The petitioner proposes to administer the exemption as a community-wide exemption, maintained by Aero Sports Connection and provided at no cost to complying applicants. Petitions for Exemption *Docket No.:* FAA-2006-24521. *Petitioner:* Aero Sports Connection. *Sections of 14 CFR Affected:* § 21.190(b), 21.191(i)(1), 21.191(i)(2)(iii), and 21.191(i)(3). *Description of Relief Sought:* The exemption would allow an increase in the maximum takeoff weights for certain lighter-than-air
(LTA)aircraft operating as light-sport aircraft (LSA). [FR Doc. E6-17827 Filed 10-23-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Executive Committee of the Aviation Rulemaking Advisory Committee; Meeting AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of meeting. SUMMARY: The FAA is issuing this notice to advise the public of a meeting of the Executive Committee of the Aviation Rulemaking Advisory Committee. DATES: The meeting will be on November 16, 2006, at 10 a.m. ADDRESSES: The meeting will take place at the Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591, 2nd floor, Bessie Coleman Room. FOR FURTHER INFORMATION CONTACT: Gerri Robinson, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591, telephone
(202)267-9678; fax
(202)267-5075; e-mail *Gerri.Robinson@faa.gov.* SUPPLEMENTARY INFORMATION: Under section 10(a)(2) of the Federal Advisory Committee Act (5 U.S.C. App. 2), we are giving notice of a meeting of the Executive Committee of the Aviation Rulemaking Advisory Committee taking place on November 8, 2006, at the Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591. The agenda includes: • ISO Feedback. • Future taskings of ARAC. • Issue Area Status Reports from Assistant Chairs. • Remarks from other EXCOM members. Attendance is open to the interested public but limited to the space available. The FAA will arrange teleconference service for individuals wishing to join in by teleconference if we receive notice by Nov. 8. Arrangements to participate by teleconference can be made by contacting the person listed in the FOR FURTHER INFORMATION CONTACT section. Callers outside the Washington metropolitan area are responsible for paying long-distance charges. The public must arrange by Nov. 8 to present oral statements at the meeting. The public may present written statements to the executive committee by providing 25 copies to the Executive Director, or by bringing the copies to the meeting. If you are in need of assistance or require a reasonable accommodation for this meeting, please contact the person listed under the heading FOR FURTHER INFORMATION CONTACT . Issued in Washington, DC, on October 18, 2005. Eve Taylor Adams, Acting Executive Director, Aviation Rulemaking Advisory Committee. [FR Doc. E6-17825 Filed 10-23-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Highway Administration [Docket No. FHWA 2006-26126] Agency Information Collection Activities: Request for Comments for New Information Collection AGENCY: Federal Highway Administration (FHWA), DOT. ACTION: Notice and request for comments. SUMMARY: The FHWA invites public comment about our intentions to request the Office of Management and Budget
(OMB)approval for a new information collection, which is summarized below under SUPPLEMENTARY INFORMATION . We are required to publish this notice in the **Federal Register** by the Paperwork Reduction Act of 1995. DATES: Please submit comments by December 26, 2006. ADDRESSES: You may submit comments identified by DOT DMS Docket Number FHWA-2006-26126 to the Docket Clerk, by any of the following methods: • *Web site: http://dms.dot.gov* . Follow the instructions for submitting comments on the DOT electronic docket site. • *Fax:* 1-202-493-2251. • *Mail:* Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001. • *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. *Docket:* For access to the docket to read background documents or comments received go to *http://dms.dot.gov* at any time or to Room 401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Ms. Elissa Konove, Office of the Chief Financial Officer, HCF-10,
(202)366-4617, Fax
(202)366-7493, or e-mail *elissa.konove@dot.gov* . For legal questions, please contact Mr. Livaughn Chapman, Office of the Chief Counsel,
(202)366-8839, *livaughn.chapman@fhwa.dot.gov;* Federal Highway Administration, Department of Transportation, 400 Seventh Street, SW., Washington, DC 20590. Office hours are from 7:45 a.m. to 4:15 p.m., e.t. Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: *Title:* Request Forms for Fund Transfers to Other Agencies and Among Title 23 Programs. *Background:* Sections 1108, 1119(b), 1935, and 1936 of Public Law 109-59, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) expanded the transferability of funds to other agencies and among programs. This notice establishes requirements for initiating the transferring of apportioned and allocated funds between entities and between projects and programs to carry out these provisions of law. The types of transfers affected by this notice are: A. Transfer of funds from a State to the FHWA pursuant to U.S.C. Title 23, § 104(k)(3); B. Transfer of funds from a State to a Federal Agency other than FHWA; C. Transfer of funds from a State to another State; D. Transfer of funds from Federal Transit Administration to FHWA; E. Transfer of funds between programs; and F. Transfer of funds between projects. The party initiating the fund transfer must fill out a FHWA transfer request form. Information required to fill out a transfer form will include the requester's contact information; a description of the program/project the transfer will come from and go to, the fiscal year, the program code, a demo ID or an urban area when applicable, and the amount to be transferred. The form must be approved by the applicable State Department of Transportation and concurred on by the correlating FHWA Division Office. *Respondents:* 50 State Transportation Departments, the District of Columbia, and Puerto Rico. *Frequency:* As Needed. *Estimated Average Burden per Response:* 30 minutes. *Estimated Total Annual Burden Hours:* It is estimated that a total of 600 responses will be received annually, which would equal a total annual burden of 300 hours. *Public Comments Invited:* You are asked to comment on any aspect of this information collection, including:
(1)Whether the proposed collection is necessary for the FHWA's performance;
(2)the accuracy of the estimated burdens;
(3)ways for the FHWA to enhance the quality, usefulness, and clarity of the collected information; and
(4)ways that the burden could be minimized, including the use of electronic technology, without reducing the quality of the collected information. The agency will summarize and/or include your comments in the request for OMB's clearance of this information collection. Authority: The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.48. Issued On: October 19, 2006. James R. Kabel, Chief, Management Programs and Analysis Division. [FR Doc. E6-17802 Filed 10-23-06; 8:45 am] BILLING CODE 4910-22-P DEPARTMENT OF THE TREASURY Submission for OMB Review; Comment Request October 18, 2006. The Department of the Treasury has submitted the following public information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. Copies of the submission(s) may be obtained by calling the Treasury Bureau Clearance Officer listed. Comments regarding this information collection should be addressed to the OMB reviewer listed and to the Treasury Department Clearance Officer, Department of the Treasury, Room 11000, 1750 Pennsylvania Avenue, NW., Washington, DC 20220. DATES: Written comments should be received on or before November 24, 2006 to be assured of consideration. Financial Crimes Enforcement Network (FinCEN) *OMB Number:* 1506-0003. *Type of Review:* Revision. *Title:* Currency Transaction Reports by Casinos—Nevada. *Form:* FinCEN 103N. *Description:* Casinos in Nevada file form 103-N for currency transactions in excess of $10,000 a day pursuant to 31 U.S.C. 5313(a) and 31 CFR 103.22(a)(2) and Nevada rule 6A. Criminal investigators, and taxation and regulatory enforcement authorities use the form during the course of investigations involving financial crimes. *Respondents:* Business and other for profit. *Estimated Total Reporting Burden:* 76,001 hours. *Clearance Officer:* Russell Stephenson,
(202)354-6012, Department of the Treasury, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. *OMB Reviewer:* Alexander T. Hunt,
(202)395-7316, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503. Michael A. Robinson, Treasury PRA Clearance Officer. [FR Doc. E6-17788 Filed 10-23-06; 8:45 am] BILLING CODE 4810-02-P DEPARTMENT OF THE TREASURY Correction to Submission for OMB Review October 18, 2006. The Department of the Treasury has submitted the following public information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. Copies of the submission(s) may be obtained by calling the Treasury Bureau Clearance Officer listed. Comments regarding this information collection should be addressed to the OMB reviewer listed and to the Treasury Department Clearance Officer, Department of the Treasury, Room 11000, 1750 Pennsylvania Avenue, NW., Washington, DC 20220. Financial Crimes Enforcement Network (FinCEN) *OMB Number:* 1506-0004. *Type of Review:* Revision. *Title:* Currency Transaction Reports. *Form:* FinCEN 104. *Correction:* In the **Federal Register** Notice published October 18, 2006, page 61537, make the following correction: The burden hours “7,499,995 hours” should read “6,249,995”. Michael A. Robinson. Treasury PRA Clearance Officer. [FR Doc. E6-17789 Filed 10-23-06; 8:45 am] BILLING CODE 4810-02-P DEPARTMENT OF VETERANS AFFAIRS Privacy Act of 1974 AGENCY: Department of Veterans Affairs (VA). ACTION: Notice of new system of records. SUMMARY: The Privacy Act of 1974, 5 U.S.C. 552(e)(4), requires that all agencies publish in the **Federal Register** a notice of the existence and character of their systems of records. Notice is hereby given that the Department of Veterans Affairs
(VA)is establishing a new system of records entitled “Automated Safety Incident Surveillance and Tracking System-VA”, (99VA13). DATES: Comments on the establishment of this new system of records must be received no later than November 24, 2006. If no public comment is received, the new system will become effective November 24, 2006. ADDRESSES: Written comments concerning the proposed system of records may be submitted by mail or hand-delivery to Director, Office of Regulations Management (00REG1), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420; by fax to
(202)273-9026; or by e-mail to “ *VARegulations@mail.va.gov* ”. All relevant material received before November 24, 2006 will be considered. Comments will be available for public inspection at the above address in the Office of Regulation Policy and Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday (except holidays). FOR FURTHER INFORMATION CONTACT: Veterans Health Administration
(VHA)Privacy Officer, Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, telephone
(727)320-1839. SUPPLEMENTARY INFORMATION: I. Description of Proposed Systems of Records The Automated Safety Incident Surveillance and Tracking System (ASISTS) is an information management system that serves as the backbone of VA's management of work-related injuries and illnesses. The national database provides support for disease reporting, surveillance, and intervention, and as an integrated system, brings together different professional groups in a single community of practice to manage the various aspects of occupational injuries and illnesses in an efficient fashion. ASISTS allows VA to identify, characterize, and track adverse events involving and the progress of injured and ill current and former employees, trainees, contractors, subcontractors, volunteers, and other individuals working collaboratively with VA. It allows the affected individuals to file their initial report of injury or illness, supervisors to describe the setting of and events leading up to the injury or illness, and safety personnel to describe the results of their investigation. It supports electronic transmission of workers' compensation claims, causes of incidents, and other aspects of the cases to the Department of Labor through an electronic linkage with the Workers Compensation-Management Information System, which maintains the Department of Labor records, and provides these individuals with access to a copy of their filed information. These system functions are currently available through other approved systems of records, including the Employee Medical File System Records (Title 38)-VA (08VA05). The database allows VA to collect data related to blood-borne pathogen exposure and other causes of injury and illness, in accordance with the recordkeeping requirements of the Occupational Safety and Health Act of 1970, Public Law 91-596 84 STAT. 1590. It enables VA to identify system-wide problems and opportunities for focused education, examine emerging causes and clusters of incidents, evaluate the effectiveness of health and safety programs, and support research in the area of occupational medicine. The records and information in ASISTS may be used to examine or identify individual cases or file claims of work-related injuries and illnesses; to evaluate health and safety systems performance through statistical analysis; to track and evaluate services and medical care of injured or ill workers; to develop and manage the planning, distribution, and use of resources; and to identify clusters and outbreaks. The data may also be used by institutional members of an accident review board or an incident review board, a multidisciplinary group of health and safety professionals, as well as representatives from human resources, safety, occupational health, and infection control for the review of root causes of injuries. The data may also be used for audits, reviews, and investigations by staff of the facilities, the Regional Directors' Offices, VA Central Office, and the VA Office of Inspector General (OIG), and for quality assurance audits, reviews, and investigations. The national database located at the Austin Automation Center in Austin, Texas, will provide data to support new safety initiatives to reduce incidents, work-related injuries and illnesses, and workers' compensation claims. II. Proposed Routine Use Disclosures of Data in the System VA is proposing to establish the following routine use disclosures of information that will be maintained in the system: 1. VA may disclose on its own initiative any information in this system, except the names and addresses of veterans and their dependents, that is relevant to a suspected or reasonably imminent violation of law, whether civil, criminal, or regulatory in nature and whether arising by general or program statute or by regulation, rule, or order issued pursuant thereto, to a Federal, State, local, or foreign agency charged with the responsibility of investigating or prosecuting such violation, or charged with enforcing or implementing the statute, regulation, rule, or order. VA may also disclose on its own initiative the names and addresses of veterans and their dependents to a Federal agency charged with the responsibility of investigating or prosecuting civil, criminal, or regulatory violations of law, or charged with enforcing or implementing the statute, regulation, rule, or order. VA must be able to disclose information within its possession on its own initiative that pertains to a violation of law to the appropriate authorities in order for them to investigate and enforce those laws. VA may disclose the names and home addresses of veterans and their dependents only to Federal entities with law enforcement responsibilities under 38 U.S.C. 5701(a) and (f). Accordingly, VA has so limited this routine use. 2. VA may disclose information to a Congressional office from the record of an individual in response to an inquiry from the Congressional office made on behalf of and at the request of that individual. Individuals sometimes request the help of a Member of Congress in resolving some issue relating to a matter before VA. When the Member of Congress writes VA, VA must be able to provide sufficient information to be responsive to the inquiry. 3. VA may disclose information to the National Archives and Records Administration
(NARA)in records management inspections conducted under authority of Title 44 of United States Code. NARA is responsible for archiving old records no longer actively used but which may be appropriate for preservation and for the physical maintenance of the Federal government's records. VA must be able to turn records over to NARA in order to determine the proper disposition of such records. 4. VA may disclose information to the Department of Justice (DOJ), including United States Attorneys, or in a proceeding before a court, adjudicative body, or other administrative body when VA, its employees, or any of its components is a party to or has an interest in the litigation or the adjudicative or administrative process, or when the litigation or process is likely to affect VA, its employees, or any of its components, and the use of these records is deemed to be relevant and necessary to the litigation or process, provided that the disclosure is compatible with the purpose for which the records were collected. When VA is involved in litigation or an adjudicative or administrative process, or occasionally when another party is involved in litigation or an adjudicative or administrative process, and VA policies or operations could be affected by the outcome of the litigation or process, VA must be able to disclose information to the court, the adjudicative or administrative body, or the parties involved. A determination would be made in each instance that, under the circumstances involved, the purpose served by use of the information in the particular litigation or process is compatible with the purpose for which VA collected the information. 5. VA may disclose information for program review purposes and the seeking of accreditation and/or certification to survey teams of the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), College of American Pathologists, American Association of Blood Banks, and similar national accreditation agencies or boards with which VA has a contract or agreement to conduct such reviews, but only to the extent that the information is necessary and relevant to the review. VA health care facilities undergo certification and accreditation by several national accreditation agencies or boards to comply with regulations and good medical practices. VA must be able to disclose information for program review purposes and the seeking of accreditation and/or certification of health care facilities and programs. 6. VA may disclose information to officials of the Merit Systems Protection Board
(MSPB)and the Office of Special Counsel when requested in connection with appeals, special studies of the civil service and other merit systems, review of rules and regulations, investigation of alleged or possible prohibited personnel practices, and such other functions, promulgated in 5 U.S.C. 1205 and 1206, or as may be authorized by law. VA must be able to disclose information to the MSPB to assist it in fulfilling its responsibilities regarding Federal employees. 7. VA may disclose information to the Equal Employment Opportunity Commission
(EEOC)when requested in connection with investigations of alleged or possible discrimination practices, examination of Federal affirmative employment programs, compliance with the Uniform Guidelines of Employee Selection Procedures, or other functions vested in the Commission by the President's Reorganization Plan No. 1 of 1978. VA must be able to disclose information to the EEOC to assist it in fulfilling its responsibilities to protect employee rights. 8. VA may disclose information to the Federal Labor Relations Authority (FLRA), including its General Counsel, when requested in connection with the investigation and resolution of allegations of unfair labor practices or the resolution of exceptions to arbitrator awards when a question of material fact is raised, in matters before the Federal Service Impasses Panel, and to investigate representation petitions and conduct or supervise representation elections. VA must be able to disclose information to the FLRA to comply with the statutory mandate under which FLRA operates. 9. VA may disclose information to individuals, organizations, private or public agencies, or other entities with which VA has a contract or agreement, or where there is a subcontract to perform such services as VA may deem practicable for the purposes of laws administered by VA, in order for the contractor or subcontractor to perform the services of the contract or agreement. VA must be able to provide information to contractors or subcontractors with which VA has a contract or agreement in order to perform the services of the contract or agreement. In these situations, safeguards are provided in the contract prohibiting the contractor or subcontractor from using or disclosing the information for any purpose other than that described in the contract. 10. VA may disclose information to labor unions operating at the facility level as members of institutional review boards [accident review boards] to review root causes of injuries. VA must be able to use and disclose the information to allow the facility and labor unions to review and provide corrective measures for injury prevention. 11. VA may disclose information to the Department of Labor for the electronic filing of workers compensation claims, as provided by 5 U.S.C. 8121. VA must be able to provide information to the Department of Labor for workers compensation claims filed by injured VA employees through the Workers Compensation Management Information System and an Electronic Data Interface to the Department of Labor by entering information into the Automated Safety Incident Surveillance and Tracking System, into a designated form. III. Compatibility of the Proposed Routine Uses The Privacy Act permits VA to disclose information about individuals without their consent for a routine use when the information will be used for a purpose that is compatible with the purpose for which VA collected the information. In all of the routine use disclosures described above, either the recipient of the information will use the information in connection with a matter relating to one of VA's programs or to provide a benefit to VA, or disclosure is required by law. The notice of intent to publish and an advance copy of the system notice have been sent to the appropriate Congressional committees and to the Director of the Office of Management and Budget
(OMB)as required by the Privacy Act, 5 U.S.C. 552a(r), and guidelines issued by OMB, 65 FR 77677, December 12, 2000. Approved: October 3, 2006. Gordon H. Mansfield, Deputy Secretary of Veterans Affairs. 99VA13 SYSTEM NAME: Automated Safety Incident Surveillance and Tracking System-VA SYSTEM LOCATION: Records are maintained at each Department of Veterans Affairs
(VA)health care facility with back-up computer tape information being stored at off-site locations in most cases. Address locations for VA facilities are listed in VA Appendix 1 of the biennial publication of the VA system of records. In addition, records may be maintained at the Department of Veterans Affairs Central Office (VACO), 810 Vermont Avenue, NW., Washington, DC; VA Data Processing Centers; VA OI Field Offices; Veterans Integrated Service Network Offices; and Employee Education Systems. CATEGORIES OF INDIVIDUALS COVERED BY THE SYSTEM: The records include information concerning current and former employees, trainees, contractors, subcontractors, volunteers, and other individuals working collaboratively with VA. CATEGORIES OF RECORDS IN THE SYSTEM: The records may include: 1. Identifying information (e.g., name, date of birth, age, sex, social security number, taxpayer identification number); 2. Address information (e.g., home and/or mailing address, home telephone number, emergency contact information such as name, address, telephone number, and relationship); 3. Information on injuries and illnesses attributed to work (e.g., cause, severity, type of injury, body part affected, risk, and contributing factors); 4. Criteria necessary to meet the injury and illness reporting requirements for the Federal Accident Reporting System and its successors under the Occupational Safety and Health Act; and 5. Abstract information (e.g., environmental and epidemiological registries). AUTHORITY FOR MAINTENANCE OF THE SYSTEM: 5 U.S.C. Chapters 11, 31, 33, 43, 61, 63, and 83; 38 U.S.C. § 501; 38 U.S.C. Chapter 74. PURPOSE(S): The records and information may be used to examine or identify individual cases or file claims of work-related injuries and illnesses; to evaluate health and safety systems performance through statistical analysis; to track and evaluate services and medical care of injured or ill workers; to develop and manage the planning, distribution, and utilization of resources; and to identify clusters and outbreaks. The data may also be used by institutional members of an accident review board or an incident review board, a multidisciplinary group of health and safety professionals, as well as representatives from human resources, safety, occupational health, and infection control for the review of root causes of injuries. The data may also be used for audits, reviews, and investigations by staff of the facilities, the Regional Directors' Offices, VA Central Office, and the VA Office of Inspector General (OIG), and for quality assurance audits, reviews, and investigations. ROUTINE USES OF RECORDS MAINTAINED IN THE SYSTEM, INCLUDING CATEGORIES OF USERS AND THE PURPOSES OF SUCH USES: 1. VA may disclose on its own initiative any information in this system, except the names and addresses of veterans and their dependents, which is relevant to a suspected or reasonably imminent violation of law, whether civil, criminal, or regulatory in nature and whether arising by general or program statute or by regulation, rule, or order issued pursuant thereto, a Federal, State, local, or foreign agency charged with the responsibility of investigating or prosecuting such violation, or charged with enforcing or implementing the statute, regulation, rule, or order. VA may also disclose on its own initiative the names and addresses of veterans and their dependents to a Federal agency charged with the responsibility of investigating or prosecuting civil, criminal, or regulatory violations of law, or charged with enforcing or implementing the statute, regulation, rule, or order. 2. VA may disclose information to a Congressional office from the record of an individual in response to an inquiry from the Congressional office on behalf of and at the request of that individual. 3. VA may disclose information to the National Archives and Records Administration
(NARA)in records management inspections conducted under authority of Title 44 of United States Code. 4. VA may disclose information to the Department of Justice (DOJ), including United States Attorneys, or in a proceeding before a court, adjudicative body, or other administrative body when VA, its employees, or any of its components is a party to or has an interest in the litigation or the adjudicative or administrative process, or when the litigation or process is likely to affect VA, its employees, or any of its components, and the use of these records is deemed to be relevant and necessary to the litigation or process, provided that the disclosure is compatible with the purpose for which the records were collected. 5. VA may disclose information for program review purposes and the seeking of accreditation and/or certification to survey teams of the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), College of American Pathologists, American Association of Blood Banks, and similar national accreditation agencies or boards with which VA has a contract or agreement to conduct such reviews, but only to the extent that the information is necessary and relevant to the review. 6. VA may disclose information to officials of the Merit Systems Protection Board
(MSPB)and the Office of Special Counsel when requested in connection with appeals, special studies of the civil service and other merit systems, review of rules and regulations, investigation of alleged or possible prohibited personnel practices, and such other functions promulgated in 5 U.S.C. §§ 1205 and 1206, or as may be authorized by law. 7. VA may disclose information to the Equal Employment Opportunity Commission
(EEOC)when requested in connection with investigations of alleged or possible discrimination practices, examination of Federal affirmative employment programs, compliance with the Uniform Guidelines of Employee Selection Procedures, or other functions vested in the Commission by the President's Reorganization Plan No. 1 of 1978. 8. VA may disclose information to the Federal Labor Relations Authority (FLRA), including its General Counsel, when requested in connection with the investigation and resolution of allegations of unfair labor practices or the resolution of exceptions to arbitrator awards when a question of material fact is raised, in matters before the Federal Service Impasses Panel, and to investigate representation petitions and conduct or supervise representation elections. 9. VA may disclose information to individuals, organizations, private or public agencies, or other entities with which VA has a contract or agreement, or where there is a subcontract to perform such services as VA may deem practicable for the purposes of laws administered by VA, in order for the contractor or subcontractor to perform the services of the contract or agreement. 10. VA may disclose information to labor unions operating at the facility level as members of institutional review boards [accident review boards] to review root causes of injuries. 11. VA may disclose information to the Department of Labor for the electronic filing of workers compensation claims, as provided by 5 U.S.C. 8121. POLICIES AND PRACTICES FOR STORING, RETRIEVING, ACCESSING, RETAINING, AND DISPOSING OF RECORDS IN THE SYSTEM: STORAGE: Records are maintained electronically on magnetic tape, disk, or laser optical media with copies of back-up computer files maintained at off-site locations in most cases. RETRIEVABILITY: Records are retrieved by name, social security number, or other assigned identifiers of the individuals on whom they are maintained. SAFEGUARDS: 1. Access to VA working and storage areas is restricted to VA personnel on a “need-to-know” basis; strict control measures are enforced to ensure that disclosure to these individuals is also based on this same principle. Generally, VA file areas are locked after normal duty hours, and the facilities are protected from outside access by the Federal Protective Service or other security personnel. 2. Access to computer rooms at health care facilities is generally limited by appropriate locking devices and restricted to authorized VA employees and vendor personnel. Automated Data Processing
(ADP)peripheral devices are placed in secure areas, which are locked, with limited access, or are otherwise protected. Records may be accessed by authorized VA employees, and access is controlled at two levels; the systems recognize authorized users by series of individually unique passwords/codes as a part of each data message, and access is limited to only those who need the information in the performance of their official duties. Information downloaded from ASISTS and maintained on personal computers is afforded similar storage and access protections as data maintained in the original files. Access to information stored on automated storage media at other VA locations is controlled by individually unique passwords/codes. RETENTION AND DISPOSAL: The Master (National Database) and local files are cut-off at the end of the calendar year and destroyed or deleted 6 years after cut-off. The Office of Public Health and Environmental Hazards in VACO files are destroyed or deleted when no longer needed for administrative and operational purposes. Back-up files are deleted when the master file has been deleted or replaced by a subsequent back-up file. SYSTEM MANAGER(S) AND ADDRESS: Official responsible for policies and procedures: Office of Public Health and Environmental Hazards (13), Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420. Officials maintaining the system: Director at the facility where the employee was associated. NOTIFICATION PROCEDURE: Individuals seeking information on the existence and content of a record pertaining to them should contact the VA facility location at which they are or were employed, or performed work. Inquiries should include the person's full name, social security number, dates of employment or work, and return address. RECORD ACCESS PROCEDURE: (See Notification Procedure above.) CONTESTING RECORD PROCEDURES: (See Notification Procedure above.) RECORD SOURCE CATEGORIES: Information in this system of records is provided by employees, trainees, contractors, subcontractors, volunteers, and other affected individuals; supervisors; health and safety professionals at facilities; clinical personnel; workers' compensation personnel; and human resources staff. [FR Doc. E6-17756 Filed 10-23-06; 8:45 am] BILLING CODE 8320-01-P 71 205 Tuesday, October, 24, 2006 CORRECTIONS Shari DEPARTMENT OF ENERGY Notice of Intent To Prepare a Supplement to the Stockpile Stewardship and Management Programmatic Environmental Impact Statement—Complex 2030 Correction In notice document E6-17508 beginning on page 61731 in the issue of Thursday, October 19, 2006, make the following correction: On page 61731, in the second column, under the heading “ DATES ”, in the sixth line, “January 17, 2006” should read “January 17, 2007”. [FR Doc. Z6-17508 Filed 10-23-06; 8:45 am] BILLING CODE 1505-01-D 71 205 Tuesday, October 24, 2006 Rules and Regulations Part II Department of Housing and Urban Development 24 CFR Part 970 Demolition or Disposition of Public Housing Projects; Final Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 970 [Docket No. FR-4598-F-02] RIN 2577-AC20 Demolition or Disposition of Public Housing Projects AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Final rule. SUMMARY: This final rule revises HUD's regulations governing demolition or disposition of public housing projects. This rule establishes the general and specific requirements for HUD approval of demolition or disposition applications, relocation of residents, resident participation in the form of consultation and opportunity to purchase a public housing project, the replacement of units, and a new authority for a public housing agency
(PHA)to demolish a small number of its units without a formal application under certain circumstances, referred to as “ *de minimis* ” demolition. This final rule follows a December 15, 2004, proposed rule and makes several changes in response to public comment. DATES: *Effective Date:* November 24, 2006. FOR FURTHER INFORMATION CONTACT: Ainars Rodins, Director, Public and Indian Housing Special Application Center, Department of Housing and Urban Development, Ralph H. Metcalfe Federal Building, 77 West Jackson Boulevard, Room 2401, Chicago, IL 60604-3507; telephone:
(312)353-6236 (this is not a toll-free number). Persons with hearing or speech impairments may access that number toll-free through TTY by calling the Federal Relay Service at
(800)877-8339. SUPPLEMENTARY INFORMATION: I. Background On December 15, 2004, HUD published a proposed rule (69 FR 75188) entitled “Demolition or Disposition of Public Housing Projects.” This rule proposed to implement revisions to section 18 of the U.S. Housing Act of 1937 (1937 Act) (42 U.S.C. 1437p) (section 18) made by the Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, approved October 21, 1998) (QHWRA). Section 18 generally pertains to the demolition and disposition of public housing projects, including application and other requirements. The main features of the QHWRA revisions to section 18 are: • A change in the burden of proof required for HUD approval of an application for demolition or disposition. Rather than HUD having to independently make certain findings, as long as the PHA certifies truthfully to the relevant factors, HUD will approve the application. • The resident opportunity to purchase a project, which, by regulation, applied in the case of both demolition and disposition, is now by statute available only for proposed dispositions of public housing projects. • The former requirement for one-for-one replacement of demolished units was eliminated. • Former section 18(d) of the 1937 Act was removed. That section provided that a PHA could not “take any action” to demolish a public housing project, or portion of a project, without HUD approval. Similar language in 24 CFR 970.7(a) and 970.25(a) is designed to make certain that HUD can track units being phased out for funding purposes. That language is not intended to create any private right of action. • A small, “ *de minimis* ” exception to the requirements of section 18 is made that allows the lesser of 5 percent of a PHA's public housing units or five units to be demolished, if the space will be used for meeting service or other needs of residents or if the units are beyond repair. • Consolidation of occupancy in buildings for the purpose of improving living conditions or providing more efficient services to residents is allowed. • If replacement units are put back on the site of a demolished project, they must be significantly fewer in number than the number of units demolished. • The Uniform Relocation Act (42 U.S.C. 4601 *et seq.* ) is statutorily not applicable to residents of projects to be demolished or disposed, but there are specific notice and relocation requirements for those residents. There is a more detailed description of the statutory changes in the preamble to the proposed rule at 69 FR 75188. II. This Final Rule This final rule follows publication of the December 15, 2004, proposed rule and takes into consideration all comments received. Section III of this preamble summarizes the issues raised by the public commenters and provides HUD's responses. In consideration of the public comments, and in order to clarify certain legal points, HUD has made several changes at the final rule stage. • The exception in § 970.3(b)(5) for common areas and unoccupied units for use in Family Self-Sufficiency
(FSS)programs has been expanded to include HUD-approved economic self-sufficiency services and activities to promote employment of public housing residents. • In § 970.3(b)(11), the explanation of the acronym “DOFA” (date of full availability) has been eliminated because the correct explanation is now given at § 970.3(b)(2). • In § 970.3(b)(12), a clarification is made that the regulation does not apply to disposition of property for mixed-finance development under 24 CFR part 941, subpart F. • In § 970.7(a)(6), the rule clarifies that a relocation plan must include reasonable accommodations for persons who require such accommodations under law. This addition simply clarifies existing law. • The requirement in proposed § 970.7(a)(9), that a PHA provide the estimated balance of project debt with a disposition application, has been eliminated because HUD has independent access to that information. • The proposed 2-year time limitation on completion of demolition or disposition in § 970.7(b)(1) has been removed. • The rule clarifies references to the HOPE VI program and mandatory conversion in § 970.9(b) relating to exceptions from the resident opportunity to purchase, and, in § 970.9(c), includes a clarifying reference to the definition of “established eligible organizations.” • In § 970.11, which contains the procedures for sales offers to resident organizations, the final rule gives the PHAs 3 business days to provide information in response to the residents' initial expression of interest, rather than the proposed same-day response (see § 970.11(d)(6)). • In § 970.13, HUD has incorporated more explanation about environmental review procedures and policies into the environmental review provisions. • In § 970.15, which relates to criteria for HUD approval of demolition requests, the use of housing construction cost
(HCC)in the test for obsolescence is replaced with a percentage of total development cost (TDC). • In § 970.21(c)(2), this rule clarifies that the use of Urban Development Action Grant
(UDAG)funds under 42 U.S.C. 5318 and HOME Investment Partnership Act
(HOME)funds under 42 U.S.C. 12701 *et seq.* , as well as Community Development Block Grant
(CDBG)funds under 42 U.S.C. 5301 * et seq. * , can trigger relocation obligations under section 104(d) of the Housing and Community Development Act of 1974. • In § 970.27, relating to the requirements for *de minimis* demolition, the definition of “beyond repair” is removed, and a clarification is added to the effect that PHAs must still comply with applicable laws outside of the 1937 Act, including environmental authorities and civil rights requirements. • The phrase “notwithstanding any other provision of law” is added to § 970.31, which contains the requirement that any on-site replacement units be significantly fewer in number than the number of units demolished. III. Discussion of the Public Comment on the December 15, 2004, Proposed Rule The public comment period for the proposed rule closed on February 14, 2005. Fourteen commenters submitted comments. Commenters included industry trade associations, PHAs, and individuals. A summary of the issues raised by the commenters follows. A number of commenters stated that they generally support the rule. A commenter stated that it supports the “streamlined changes” to the regulations. Another commenter favorably cited the provision allowing PHAs to rescind requests for demolition or disposition if conditions have changed (§ 970.7(b)(2)), and that an offer only has to be made to resident organizations in the case of disposition (§ 970.11). Another commenter stated that the rule is now better organized and easier to read. One commenter stated support for the following specific provisions: §§ 970.7, 970.15, and 970.17, which provide for HUD deference to a PHA's “unique knowledge of local conditions,” and §§ 970.15 and 970.17, permitting a PHA to certify that portions of its housing stock are no longer viable for public housing “according to more realistic standards.” The commenter stated that these provisions will give PHAs greater flexibility to develop alternative housing programs and preserve its other existing housing stock. This commenter also stated support for § 970.19 providing for a waiver of the duty to retire outstanding obligations. Sections 970.9 and 970.11 would provide for “reasonable prior notice to residents.” While PHAs would “no longer be obligated to wait for a period of time for the resident to organize” in the case of a disposition, they would only be obligated to make an offer to existing resident organizations. Proposed § 970.25, allowing the PHA to consolidate occupancies, will provide “greater flexibility in allocating scarce resources.” Section 970.27, providing for a *de minimis* exception to demolition requirements, will “grant the PHA relief from the substantial administrative burdens” involved in making small changes to its public housing stock. A. General Comments *Comment:* One commenter requested an extension of time to file public comments, stating that the rule could have a large impact and that time for further research was necessary. *Response:* HUD provided 60 days for public comment. This time span is in accordance with HUD's policy as stated in 24 CFR 10.1, and experience has shown that this period is generally sufficient time for the public to comment on HUD's proposed rules, and HUD determined that this was the case for this rule. *Comment:* HUD should continue to refine and streamline this rule for greater flexibility. Another commenter stated that HUD should remove “all unnecessary and redundant regulations to streamline the demolition and disposition process.” *Response:* HUD continually seeks to improve its regulations. B. Comments on Specific Provisions 1. Demolition or Disposition for Mixed-Finance Projects *Comment:* Demolition or disposition related to mixed-finance development should be exempt from the requirements of this rule, or such disposition should be exempt. Some commenters raising this issue stated that because mixed-finance projects are already heavily regulated and time-consuming, they should not have to undergo a separate complete approval process under this rule. These and other commenters stated that there is already substantial overlap between the mixed-finance approval process and the approval process under this rule, and to the extent that there are some different requirements (such as environmental review and offer of sale to residents), the entire approval process could be done as part of mixed-finance approval, or at least PHAs should be given that option. *Response:* The rule does exempt public housing developments that are conveyed by a PHA prior to the date of full availability
(DOFA)to enable an owner entity to develop the property using the mixed-finance development method (see 24 CFR 970.3(b)(11)). In addition, HUD agrees with the commenters that section 18 of the 1937 Act and this regulation do not apply to public housing property to be used for mixed-finance developments. This final rule revises 24 CFR 970.3(b)(12) to clarify this point. *Comment:* Section 970.2(a)(11) of the currently codified regulations should be read to exempt mixed-finance projects from a separate disposition review process, although HUD (according to the commenter, incorrectly) does not read the section this way. Some other commenters also cited proposed § 970.3(b)(11) as well as § 970.3(b)(12) for the same proposition. Other commenters cited proposed § 970.3(b)(12) for the proposition that mixed-finance public housing does not require a demolition/disposition application, and asked that HUD's Mixed-Finance Guidebook be amended accordingly. *Response:* See the response to the preceding comment. Additionally, all guidance and application materials will be revised accordingly. *Comment:* The rule should contain a clear statement that mixed-finance projects are exempt. HUD should “clarify” its regulations on this issue, because working on complex issues with multiple departments at HUD may cause delays that increase development costs and that are detrimental to residents. Sections 970.3(b)(11) and
(12)should be revised to exempt “any public housing development or land on which a public housing development formerly stood that is conveyed by a PHA to an owner entity pursuant to an approved proposal under 24 CFR part 941, subpart F.” If HUD chooses not to exempt mixed-finance projects in their entirety, HUD should add a new § 970.3(c) as follows: Land or public housing disposed of prior to the start of construction in or due to mixed-finance development is not exempt under this part. Although development under 24 CFR part 941, subpart F is not exempt from this part 970, for such development under part 941, subpart F, HUD will collect all information required by part 970 during the approval process described at 24 CFR part 941, subpart F. *Response:* The rule does exempt public housing developments that are conveyed by a PHA prior to the date of full availability
(DOFA)to enable an owner entity to develop the property using the mixed-finance development method (see 24 CFR 970.3(b)(11)). HUD believes that §§ 970.3(b)(11) and
(12)resolve the issues raised by these comments. *Comment:* Independent appraisals should not be required where a property is undergoing disposition for a nominal price or for use in a mixed-finance project, because most such dispositions are for a nominal or *de minimis* price. PHAs should not have to obtain an independent appraisal for dispositions at less than fair market value (FMV). Section 970.7(a)(10) should be revised to read: In the case of disposition, an estimate of the fair market value of the property, established on the basis of one independent appraisal, unless HUD determines that another method of valuation is sufficient, as described in § 970.10(c). Three commenters stated that § 970.19(c)(2) should be revised to read: Another method of valuation is clearly sufficient and the expense of an independent appraisal is unjustified because of the limited nature of the property interest involved or other available data, including, but not limited to, transfers for less than fair market value. *Response:* HUD reserves the right to request a determination of fair market value
(FMV)of the property. Assessing the market value of a property is a common business practice and assists in evaluating any gain or loss. HUD only requires an appraisal if the property is advertised for bid and, even then, not in all cases. HUD recognizes that in some cases, a full appraisal is not necessary and has accepted tax assessors' opinions for dollar deals, negotiated sales, and leases in order to meet the appraisal requirement. Appraisal would not be required for disposition based on commensurate public benefit. Even in the case of public sale, appraisal is not required under some circumstances as indicated in § 970.19 of the proposed rule. Language in the proposed rule stated that an independent appraisal is required unless “HUD determines that another method of valuation is clearly sufficient and the expense of an independent appraisal is unjustified.” (See proposed § 970.7(a)(10), final § 970.7(a)(9).) Therefore, HUD has not adopted suggestions from commenters regarding proposed § 970.7(a)(10), since the result is the same under both the proposed rule and the commenter's suggested language. 2. De Minimis Demolition, Proposed § 970.27 *Comment:* Section 970.27(c)(2) defines “beyond repair” for the de minimis demolition exception. This definition should be removed to provide PHAs with more discretion. One commenter stated that it may not be appropriate to rehabilitate a property even if costs fall just under the HCC. Some commenters stated that “this rigid definition conflicts with the spirit of the de minimis exception” to limit regulatory burdens. *Response:* Since this proposed definition may be overly restrictive, HUD is adopting the requested change. This final rule removes language in § 970.27(c)(2) defining “beyond repair.” 3. The Use of Proceeds of Demolition, Proposed § 970.19(e)(2)(i) *Comment:* The proposed rule should permit as much flexibility as possible for the use of the proceeds of disposition. Several commenters stated that the listing of specific examples of permissible uses of proceeds should be removed from § 970.19(e)(2)(i). An additional section should be added stating that proceeds will be allowed for use on all projects benefiting public housing residents and low-income families. One commenter stated that the phrase “or for other low-income housing purposes” should be added to the section. *Response:* HUD did not adopt suggestions by commenters to remove the examples from the rule, since HUD believes that examples provide clarity to the rule (however, the examples are not intended to limit flexibility). HUD is not adopting a suggestion by commenters to add additional explanatory language since the proposed regulatory language does permit net proceeds to be used for the provision of low-income housing or to benefit the residents of the PHA. *Comment:* Proposed § 970.19(e)(2)(ii) provides that the net proceeds of disposition may be used for “leveraging amounts for securing commercial enterprises, on-site in public housing developments of the PHA, appropriate to serve the needs of the residents.” Some commenters stated that this provision should be explicitly expanded to define “on-site” as including either current public housing sites or “former public housing property which is disposed of for purposes including commercial enterprises.” The commenters stated that there is an urgent need for commercial enterprises, such as grocery stores, pharmacies, and other services on and around public housing developments, and HUD is unlikely to consider such enterprises as an appropriate use of current public housing property. *Response:* HUD incorporates statutory language from 42 U.S.C. 1437p(a)(5)(B)(ii) in § 970.19(e)(2)(ii) and believes this language is clear. However, HUD may provide additional guidance in this area after issuance of the final rule. 4. Definition of “End of Initial Operating Period (EIOP), “ Proposed § 970.5 *Comment:* The definition of end of initial operating period
(EIOP)should be conformed to the definition in 24 CFR part 941. *Response:* HUD has decided to use DOFA instead of EIOP throughout the rule, and so this final rule removes the definition of EIOP. 5. Exemption for Disposition for Homeownership Programs, Proposed § 970.3(b)(3) *Comment:* Several commenters stated that they support the exemption in § 970.3(b)(3) of homeownership programs under public housing homeownership programs under sections 5(h), 21, and 32 of the 1937 Act from the disposition approval process. A commenter stated that some provisions of the current regulations conflict with the homeownership programs, and that there should be “expedited adoption” of the homeownership exemption and that notices required “to keep the PIC system up to date occur as part of the final rule making process.” Commenters also stated that the exemption is not sufficiently broad and should be extended to all homeownership programs, including “Section 24/9” and “Nehemiah-like” programs. Some commenters stated that a new § 970.3(b)(16) be added as follows: The conveyance of a public housing project or vacant land formerly containing a public housing project for the purpose of providing homeownership opportunities under Section 24, Section 9, Middle-Income, Nehemiah, or other HUD-approved homeownership program. *Response:* The purpose of this exemption is to allow for the removal of units outside of this regulation for use in a statutory homeownership program. While “Nehemiah-like” activities may be eligible under HOPE VI, homeownership may or may not be the result of a HOPE VI plan. In addition, any disposition as part of a HOPE VI plan is subject to section 18 of the 1937 Act and hence this implementing regulation. On the other hand, the Section 5(h) and 32 programs both provide a statutory basis for removal of units from the program under the requirement that the units be used for homeownership. It is these types of programs to which the exemption is addressed. In order to clarify this focus, this final rule refers to “statutory predecessor” homeownership programs. 6. Time Limit for Completion, Timetable, and Plan in PHA Plan, Proposed § 970.7 *Comment:* Commenters objected to the 2-year time limit in § 970.7(b)(1) for completion of demolition or disposition. Because project approval, relocation of tenants, and obtaining funding take varying amounts of time depending on the project, there should be no time limit. There is a potential conflict between § 970.7(a)(4), which requires the PHA to submit with its application a general timetable, and the 2-year time limit. There are too many variables involved to limit the process to 2 years. Instead, the timetable submitted under § 970.7(a)(4) should determine the time limit. In addition, there is no statutory basis for the 2-year limitation, and HUD should consider PHA applications for extensions under appropriate circumstances. The 2-year limitation might be impossible for larger projects to meet, and instead there should be a firm date after which no HUD money could be spent on the property except for demolition and disposition costs. A solution might be to revise § 970.7(b)(1) to require that a PHA “must either
(a)commence any demolition or disposition within 2 years of the date of HUD's approval or
(b)complete any demolition or disposition within 3 years of the date of HUD's approval.” *Response:* While the majority of demolitions and dispositions can be accomplished in 2 years, there may be some cases where a longer period is required. Therefore, this final rule adopts the commenters' suggestion and removes the 2-year requirement. *Comment:* Section 970.7(a)(1) should not require an identical timetable and description in the application and the PHA's plan. This requirement is antithetical to a streamlined process, and requires PHAs to submit, in effect, multiple applications for every demolition or disposition. The administrative burden will be extensive and will create delays, and having two identical submissions will not improve the process. For example, if, during the process, it were discovered that another property should have been included, the proposed rule would require the PHA to wait until the next annual plan submission before including the property. It should be sufficient under the statute for the PHA to specifically authorize demolition of a certain number of units in a certain neighborhood, and have the specific units listed in the demolition application. Accordingly, § 970.7(a)(1) should be revised to read: A certification that the PHA has described the demolition or disposition in the approved PHA Annual Plan under 24 CFR part 903 (except in the case of small, high-performing, or MTW PHAs eligible for streamlined annual plan treatment), and that the application submitted pursuant to this part otherwise complies with section 18 of the Act, 42 U.S.C. 1437p, and this part * * * The timetable requirement is unrealistic because the description in the annual plan could anticipate a slightly different formulation of units, land, or other components that the agency is actually able to submit, and it is not clear from the regulation what to do in such a case. To require the PHA plan and the application to be identical serves no rational purpose and provides (because of minor differences that may arise) a basis for challenging or delaying a legitimate and necessary undertaking. Instead, the PHA plan should be “substantially descriptive” of the proposed action in order to facilitate general public comments. Another commenter stated that, while the intention to carry out a demolition or disposition would be stated in the annual plan, “it is often difficult to predict accurately the timeline within which a project will be played out.” *Response:* Section 970.7 only requires that the description of the housing proposed to be demolished or disposed of in the approved PHA Annual Plan be identical to the application submitted pursuant to 24 CFR part 970. The Annual Plan requirements ask for limited demolition/disposition information as it relates to the planning process where the application requires more detailed information along with justifications and certifications. Since a PHA may amend the plan and submit significant changes to HUD, HUD disagrees with commenters that would suggest that only a certification be required for the contents of the PHA's plan. The Annual Plan's purpose is to provide a framework for local accountability and an easily identifiable source by which public housing residents, participants, and other members of the public may locate basic PHA policies, rules, and requirements; the PHA's mission for serving the needs of low-income families; and the PHA's goals and objectives to enable the PHA to reach that mission. The application for demolition/disposition is a specific request for demolition and/or disposition. HUD does not believe that this requirement is duplicative or burdensome. *Comment:* One commenter stated that “at a time when there is a trend towards demolishing and disposing of public housing units, we must ensure that we do not make it easier” for PHAs to remove units. For this reason, the provision exempting small and high-performing PHAs from certifying their demolition plans in their annual plans should be removed. *Response:* PHAs that are small or high performers are not entirely exempt from certifying their demolition plans. Those PHAs that are eligible to submit a streamlined plan are required to submit a certification listing the policies the PHA has revised since submission of its last Annual Plan, including those involving demolition and disposition. HUD believes that this certification is appropriate for PHAs using the streamlined plan process. 7. Resident Relocation, Proposed §§ 970.21, 970.23 a. Notice to Residents, Proposed § 970.21(e)(1) *Comment:* The required 90-day notice of demolition or disposition is too short. Only 20 percent of all new rental construction in the past decade has been targeted for low-income and extremely low-income people. Given the shortage of affordable rental units for low-income and extremely low-income people, it may be extremely difficult for families to find affordable rental housing within 90 days. The rule should require 6 months' advance notice. *Response:* The statute refers to 90 days' notice; however, it also should be noted that a PHA may not commence demolition or complete disposition until all residents are relocated. Since the rule, as proposed, addressed the commenter's concerns, HUD does not adopt this comment. b. Uniform Relocation Act
(URA)Procedures *Comment:* The rule provides an exemption from the URA, but the substitute procedures are “the functional equivalent” of URA procedures. The use of HUD funds for relocation costs (in proposed § 970.23) would reduce the availability of those funds for other necessary uses. The use of disposition proceeds for relocation should be considered for those PHAs seeking waivers from using disposition proceeds to pay down debt. *Response:* HUD recognizes that much of what is required under URA is similar to the requirements in part 970. However, these requirements are statutory (see 42 U.S.C. 1437p(a)(4)(A)(iii)). HUD disagrees with the statement that funds for relocation costs would reduce the availability of those funds for other uses since other funds are available for relocation costs. The comment pertaining to the use of disposition proceeds is not adopted because doing so would conflict with the requirements of § 970.19 of this rule and 42 U.S.C. 1437p(a)(5). c. Use of Vouchers *Comment:* Given the funding shortfalls in the voucher program (citing that only 95 percent of 2004 vouchers are being funded, and the proposed FY 2006 budget would cut project-based assistance by $272 million), HUD should require PHAs to “confirm landlord stability” in the tenant-based and project-based voucher programs before certifying that a resident has been relocated. The commenter also states that the rule should require PHAs to track relocated families for at least 3 years, and that this data is to be shared with HUD. *Response:* The comments related to vouchers are beyond the scope of this rule. As to relocation, the relocation provisions are required by statute (see 42 U.S.C. 1437p(a)(4)(A)(iii)). The statutory requirement is that demolition not commence until each resident is relocated, and the rule appropriately implements that requirement. Therefore, no change is made to the final rule. 8. Reference to HOPE VI, Proposed § 970.9(b)(3)(iii) *Comment:* Section 970.9(b)(3)(iii) incorrectly references part 970 as including regulations for HOPE VI relocation. This reference should be revised. *Response:* The rule addresses circumstances in which a PHA is not required to make an offering to residents. The rule takes into account
(1)HOPE VI revitalization (see 42 U.S.C. 1437v),
(2)mandatory removal from inventory of distressed units for which there is no potential to revitalize under 24 CFR part 971 (authorized by the 1996 Omnibus Consolidated Rescissions and Appropriation Act, Pub. L. 104-134, approved April 26, 1996), and
(3)the required conversion of distressed housing to tenant-based assistance under 42 U.S.C 1437z-5. 9. Environmental Review Provisions, Proposed § 970.13 *Comment:* Several commenters objected to environmental review provisions in proposed § 970.13. Commenters stated that an environmental review should not be required for a known re-use unless such re-use involves PIH funds. Commenters also stated that: The Preamble describes known use so broadly that a housing authority disposing of property would have to get Part 58 approval for a future use such as a purely privately funded project * * *. That result places a disproportionate burden on housing authorities to obtain environmental approvals not otherwise required by the placement of HUD funds into a project. It also requires a housing authority to essentially subsidize activities by a third party outside of the public housing program. For situations in which housing authorities dispose of land that will no longer be used for public housing purposes, any required environmental review should be passed on to the purchaser. Accordingly, § 970.13(b) should be revised to read: The environmental review is limited to the demolition or disposition action and any known re-use involving public housing funding. For the purposes of this section, known re-use means:
(1)architectural, engineering, or design plans for the re-use exist and go beyond preliminary stages and
(2)either of the following is true:
(a)HUD public housing funding has been committed; or
(b)a grant application for HUD public housing funding has been submitted to HUD. One commenter stated that the provision that environmental review is not required for an unknown future re-use is too general, and the term “unknown” should be defined. Another commenter stated that it is unlikely that a PHA does not know the future re-use of its property. The process of obtaining an environmental review is “onerous” because the responsibility for the review is on the local governmental entity. “In reality, this usually shifts the cost burden to the housing agency because the city is unlikely to cover the expense of environmental review.” *Response:* HUD believes that the proposed preamble language provided clarity regarding what is a “known future reuse” and what is an “unknown reuse” and has placed the language describing the factors used to determine whether a future re-use is “known” in the text of the final rule. The suggested revision to § 970.13(b) is not adopted since an environmental review is applicable when there is a “federal action,” such as HUD approving an application for demolition or disposition or a related request for release of funds. The requirement is not necessarily limited to public housing funding. HUD does not agree that the environmental review is “onerous” and points out that § 970.13 does permit HUD to make a finding in accordance with 24 CFR 58.11(d) and may itself perform the environmental review under the provision of 24 CFR part 50 if a PHA objects in writing to the responsible entity performing the review under 24 CFR part 58. *Comment:* Dispositions by sealed-bid solicitations should be conducted without an environmental assessment. This would allow PHAs to “test the disposition market” without the expense of an environmental review and also give relief to the transferee from the costs of having to conduct an environmental review prior to acquisition. Environmental review should not be required for mixed-finance projects or for de minimis demolitions under § 970.27. “There is little difference” between mixed-finance development and redevelopment using the Capital Fund, where environmental review is not required. Since the de minimis exception is for cases where the demolition action is “not substantive,” the environmental review requirement should be eliminated for these demolitions as well. *Response:* See the response to the preceding comment. The commenter's statement that environmental review is not required for development and redevelopment using the Capital Fund is not correct (see 24 CFR 58.1(b)(6)(i)). Environmental review is required because federal financial assistance is involved. 10. Substitution of Units, Proposed § 970.7(b)(3) *Comment:* Section 970.7(b)(3) should be revised to allow “de minimis” substitution of units. While HUD needs to be able to track units, the proposed rule is unduly restrictive. Redevelopment in an urban setting sometimes requires the substitution of small parcels in order to produce efficiency or meet local zoning or code requirements. The proposed provisions will cause unnecessary delays in these cases. To avoid this problem, § 970.7(b)(3) should be revised to read: A PHA may request to either substitute units or add units to those originally included in the approved demolition or disposition application, without submitting a new application for those units, so long as such a request involves
(a)units within the same project number or
(b)the substitution or addition of no more than 3 units in project numbers adjacent to the project that is the subject of the disposition. In the alternative, HUD should permit amendments to approved demolition or disposition applications. In that case, the section should be revised to read: A PHA may either substitute units or add units to those originally included in the approved demolition or disposition application through an amendment to the application, so long as such a request involves
(a)units within the same project number or
(b)the substitution or addition of no more than 10 units in project numbers adjacent to the project that is the subject of the disposition. One commenter stated that “PHAs should be permitted a greater degree of flexibility to substitute units within developments in order to effectuate the stated goal of consolidation of occupancies.” *Response:* The comments regarding “de minimis” substitution of units are not adopted since applications are approved for specific reasons and reviewed on a case-by-case basis. Not all units in a given public housing project are equivalent to all others, and considerations include not only the units themselves but such factors as location, amenities, and appearance. However, PHAs can apply for and obtain approval to demolish a larger set of units than they actually plan to demolish, including the units they may wish to substitute. The PHA could then substitute units within the approved larger group. Thus, PHAs can effectively have the ability to substitute units for demolition and still comply with this rule. 11. Offer to Existing Resident Organizations, Proposed § 970.11 *Comment:* One commenter supported the general idea of excluding demolitions (so that the offer to purchase to residents applies only to disposition), HOPE VI, and mandatory conversion projects from the resident offer requirement. However, the rule stops short by not also excluding projects where the PHA has consolidated vacancies as permitted by section 18. Excluding such developments does not seem to further any legitimate purpose, and will penalize PHAs that consolidate occupancies to improve the living conditions of their residents or to provide greater efficiency in serving residents. Why would HUD want to discourage such efforts? Commenters stated that the procedures for the offering to residents are unduly cumbersome and time-consuming. The entire process could take from 135 to 225 days, and such a delay is unreasonable. The rule should ensure that the entire process is completed within 30 days and that the decision of the PHA is not subject to an appeal process. One commenter stated that “[p]roposal 970.11(h) would provide for an extension of the time, from 30 days to 120 days, for appealing resident organizations desiring to buy a complex, but receiving a rejected purchase proposal. Should the rejection be justified, and HUD agrees, it would seem that this proposal would further delay the redevelopment of a project. HUD should waive this requirement or certainly limit it to a nominal time frame if there is no organized resident group.” Extending the time frame for HUD to review the PHA decision from 30 days to 120 days will place an additional burden on the PHA. Timing is a key factor, and it is essential that disposition applications be processed by the HUD Special Application Center as expeditiously as possible. However, the proposed appeals process could add an additional 120 days or more to the application approval process. In addition, the uncertainty of how long the review period could last will likely hinder a PHA's ability to consummate market transactions with private partners and could unnecessarily deter private partners from working with PHAs on real estate transactions. The time frame for HUD to render a decision on an appeal should remain 30 days. *Response:* The rule does permit a PHA to consolidate without submitting a disposition application and, therefore, the offer to existing resident organizations under this rule is not applicable. The comments regarding the time for resident consultation are not adopted since the procedures for offer of sale to established eligible organizations is statutory. The comment regarding the 120-day HUD appeal process is not adopted since the 120-day period relates to the maximum amount of time HUD has to consider an appeal from a resident organization. HUD believes that there is no uncertainty as to how long the review period could last, since the period is a maximum of 120 days. HUD's experience in this area reflects the possibility that some appeals may require the full 120 days to review and render a decision. *Comment:* Proposed § 970.11(d)(6), which requires the PHA to provide sales materials to the resident organization on the same day as it receives the resident's expression of interest, has too short a time frame. The provision should be revised to read, “The PHA must supply the totality of all the terms of sale and all the necessary materials to the residents no later than 3 business days from the day it receives the residents' initial expression of interest.” *Response:* HUD adopts this comment. This final rule revises the third sentence of § 970.11(d)(6) to read: “The PHA must supply the totality of all the terms of sale and all necessary material to the residents no later than 3 business days from the day it receives the residents' initial expression of interest.” *Comment:* The resident offer provision should be expanded. Contrary to HUD's assertions in the proposed rule, there are many PHAs that do not have resident organizations. HUD should include a requirement that PHAs have to inform tenants of their right to organize and allow them the opportunity to organize before moving forward with any disposition plans. The $25 per unit/per year for resident participation activities should be used for resident organizations. In addition, the 60 days provided for residents to secure financing is not enough. Residents should get 90 days. This commenter stated that, contrary to proposed § 970.11(h), residents should have a right to appeal any HUD ruling in court. *Response:* HUD does not adopt this comment since the resident-offer provision, as required by the existing regulation, proved to be overly time-consuming and unworkable in some situations where there was not yet a resident organization formed. The suggestion to give residents 90 days to secure financing is beyond statutory requirements and to allow an extended period of time would again delay the process unnecessarily. As for the right to judicial appeal, residents are not prevented by this section from pursuing any available judicial review; § 970.11(h) simply provides for finality of the administrative review process. 12. Exemption of Areas Used for Family Self-Sufficiency (FSS), Proposed § 970.3(b)(5) *Comment:* The exemption for common and unoccupied areas being used for an FSS program is correct, but should be expanded to all areas being used for supportive services regardless of whether they are being used in the statutory FSS program. *Response:* After consideration of this issue, HUD agrees that HUD's policy in this area, should “encourage and reward employment and economic self-sufficiency” (see 42 U.S.C. 1437a(2)(D).) “Employment and economic self-sufficiency” includes FSS and other HUD-approved self-sufficiency activities. This final rule revises 24 CFR 970.3(b)(5) accordingly. 13. Review Under the Public Housing Assessment System
(PHAS)*Comment:* Two commenters stated that when a PHA submits a property for demolition or disposition, it acknowledges that the units are in need of substantial repair and is working to resolve the problem. Such units should not be required to be reviewed under PHAS or scored as part of the PHA's overall rating. The PHA should not be penalized by HUD for the condition of the units being demolished or subject to disposition. *Response:* Changes to PHAS scoring are outside the scope of this rule. 14. Exemption for Eminent Domain Taking, Proposed § 970.3(b)(8) *Comment:* One commenter stated that the preamble and regulatory provisions on eminent domain taking do not match. In particular, the preamble states that HUD must be a party to the eminent domain proceeding, that HUD must approve any out-of-court settlement for the transfer of PHA-owned property, and that additional adjustments may be made to account for changes in law. These requirements do not appear in the rule text. This commenter stated that the rule should clearly state that commencement of litigation is not required in those states such as Ohio where the first step toward an eminent domain taking occurs before litigation. This commenter also stated that material should be added to the rule that explains how to obtain HUD approval for an eminent domain taking and which HUD office to contact. *Response:* HUD does not adopt this comment since the proposed regulatory provisions address the fact of the exemption only. To fully explain the process of eminent domain is beyond the scope of this rule. This final rule does not limit the start of condemnation proceedings to the filing in a court but accepts the determination as to when the condemnation proceedings commence under state law. 15. Resident Consultation Requirement, Proposed § 970.9 *Comment:* The rule should have “safe harbor” criteria for resident consultation that, once met, ensure that the requirement has been fulfilled. This comment cites an example of a situation where the commenter states that more than 30 meetings were held with residents over 2 years, and HUD did not find the consultation adequate but required the PHA to sign a memorandum of understanding
(MOU)with the resident council in which the parties agreed to the action. This requirement exceeds any reasonable interpretation of “consultation.” This comment suggests an additional sentence be added to read: The requirement for resident consultation will be satisfied where the PHA has invited all affected residents and resident organizations to attend at least three meetings at which the proposed demolition or disposition plan is presented in writing to those attending and the PHA affords the residents in attendance the right to present their comments orally and later in writing. *Response:* The comment is not adopted. The statute requires consultation with residents who will be affected by the action and HUD believes that PHAs should have flexibility in this area. HUD shall review consultation on a case-by-case basis. HUD does not consider it appropriate to specify how many meetings are necessary for resident consultation, but as proposed § 970.9 requires, a PHA must submit copies of any written comments submitted to the PHA and any evaluation that the PHA has made of the comments. *Comment:* Proposed § 970.9(c), which provides that established, eligible resident organizations may act for residents, “does not identify any standards that must be met by nonprofit organizations that may act on behalf of residents. At a minimum, nonprofit organizations should have a history of working with the residents of the affected community and should be able to demonstrate the capacity and ability to assist the resident organization with real estate transactions.” *Response:* Proposed § 970.9 makes reference to 24 CFR part 964 to define what is a resident management corporation. Additionally, part 964 contains language stating that a nonprofit organization is one that is “validly incorporated under the laws of the state in which it is located.” This standard has been clarified in the final rule. HUD believes that the rule is sufficient and that adopting the comment would make the rule too prescriptive and inflexible in this regard. 16. Method of Disposition, Proposed § 970.19 *Comment:* There should be an additional disposition option besides public solicitation for not less than FMV, or negotiated sale. The rule should also permit a sale by public solicitation for less than FMV. Why prohibit a sale on this basis? It does not serve anyone's interest to require the PHA to retain title solely because the purchaser willing to pay the most for it will not pay the appraised value. Whether or not to accept such a bid should be within the PHA's discretion. *Response:* The proposed rule permitted HUD to authorize sale for less than fair market value. No change is made to this final rule as a result of this comment. *Comment:* Two commenters stated that the rule requires an assessment of commensurate public benefits when selling for less than FMV. HUD required a showing of commensurate public benefits for a negotiated sale of greater than FMV. This requirement was a waste of time because there was no chance of anyone other than the offeror offering more than the negotiated price, and placed the PHA at risk of receiving less money because the offeror might decide to lower the offer and risk losing the property. The rule should be changed to allow for a negotiated price at greater than the appraised value without showing a commensurate public benefit. *Response:* The rule merely requires a showing of a commensurate public benefit for a sale of less than FMV. HUD will not require a showing of commensurate public benefit for a negotiated sale of greater than FMV on and after implementation date of the final rule. 17. Program of Modifications Is Not Cost-Effective, Proposed § 970.15(a)(2) *Comment:* The test for obsolescence—whether a reasonable program of modifications is cost-effective to return a development or portion to useful life—should be based on 90 percent of total development cost (TDC), rather than 100 percent of housing construction cost (HCC), as proposed. *Response:* HUD has eliminated proposed references to HCC for clarity purposes and revised language in the final rule to reflect 62.5 percent of TDC for elevator structures and 57.14 percent of TDC for all other types of structures, which is the functional equivalent of 100 percent of HCC. Such a change does not eliminate the flexibility the proposed rule offered. 18. PIH Information Center
(PIC)System *Comment:* A trade association commenter stated that its members have found that the limitations of the PIC system for tracking public housing units make it difficult to demolish or dispose of units that should otherwise be eligible for demolition or disposition. As an example, if a PHA has two buildings under one public housing project number, and it decides to demolish one and apply for funding for replacement housing, it cannot later apply to replace the second building because, as far as the system is concerned, the PHA has already received replacement housing funding for that project. *Response:* Technical issues related to PIC were not addressed in the proposed rule and are outside the scope of this rulemaking. 19. Replacement Units, Proposed § 970.31 *Comment:* This section, which provides that replacement housing units may be placed back on-site if the number of units is significantly fewer than the number of units demolished, should be prefaced with the phrase, “notwithstanding any other provision of law.” This phrase would mirror current law. *Response:* The final rule makes the suggested change. Section 18(d) of the 1937Act (42 U.S.C. 1437p(d)) provides for placing replacement units back on site “notwithstanding any other provision of law.” 20. Application Requirements Generally, Proposed §§ 970.7, 970.29 *Comment:* This proposed section requires submission of too much information and should be streamlined. HUD would approve an application based on a PHA's certification as to specific conditions of the property and evidence that the PHA complied with resident consultation requirements. This should result in a simpler process. One purpose of the statute, to eliminate the burden on PHAs, is overshadowed by HUD's demand for more information than is required. *Response:* The rule does reflect statutory language. PHAs determine whether a project is eligible for demolition or disposition and are permitted to certify to this unless HUD has information that the PHA's certification is incorrect. Certification forms reflect language from section 18(b) of the 1937 Act. However, the application process will be updated to conform to any changes made by this rule. *Comment:* Commenters stated that proposed § 970.29, which provides the rules for HUD's rejection of an application, is too broad or too vague. Proposed § 970.29(a)(3), which states that HUD may disapprove an application if it has information inconsistent with the application, is too vague concerning what that contrary information may be. “The rule should be more explicit on what information or data may be requested so that PHAs are not subject to the vagaries of those conducting the application process.” This section implies that HUD can ask for additional information after it reviews the application, and that, since HUD reviews the PHA's annual and 5-year plans, HUD personnel should know what to ask before their review. As written, the section could cause lengthy delays. The phrase “HUD will disapprove an application if HUD determines * * *” should be changed to “HUD will disapprove an application only if HUD determines * * *” because, as written, the phrase implies that HUD may disapprove an application for some other reason. A commenter objected to proposed § 907.29(a) because it does not define what “clearly inconsistent” means, and because the phrase “if HUD determines” vests absolute discretion in the agency regardless of how clear and convincing a case the PHA has made. This commenter stated that the section should be revised to read: HUD will disapprove an application only if any certification by the PHA required under this part is:
(a)Inconsistent with the approved PHA Plan; or
(b)Arbitrary, capricious, made in bad faith, or constitutes an abuse of discretion. *Response:* Language in this section reflects statutory requirements. Each proposal is unique and must be reviewed on a case-by-case basis. HUD may reject an application for demolition or disposition if the reason for the proposed action is not in conformance with the statute. 21. Other Miscellaneous Application Requirements, Proposed § 970.7 a. Estimate of Project Debt, § 970.7(a)(9) *Comment:* Proposed § 970.7(a)(9), requiring PHAs to submit estimate of project debt, should be removed. This information is readily available to HUD and not to PHAs. *Response:* This comment is adopted since HUD currently maintains such information. However, if HUD determines the project still has debt, it will assume the PHA is asking for a waiver of the requirement to use the proceeds to repay the debt, if the PHA has shown another use for the proceeds. b. Consultation With Appropriate Government Officials, § 970.7(a)(15) *Comment:* This requirement could “require a great deal of extra effort if the PHA's project is trying to move forward during a change in local government.” The rule should allow more latitude in case of change in local political volatility. *Response:* HUD disagrees with this commenter and believes that the rule does allow for latitude. Section 970.7(a)(15)(iii) provides that, where the local government consistently fails to respond to the PHA's attempt at consultation, including letters, request for meetings, public notice and other reasonable efforts, documentation of those attempts are acceptable. HUD will review such documentation on a case-by-case basis to determine if the consultation requirement was met. Because of the large amount of variations in local situations, HUD does not consider it appropriate to make a general rule as to what action on the part of the public body will be required to meet the consultation requirement in situations where the local government does not respond. *Comment:* The rule should have a “safe harbor” standard so that it is known when the PHA has satisfied the consultation requirement. Otherwise, jurisdictions could delay the process. For example, if a racially concentrated project were to be demolished to provide for integration of its residents into non-concentrated neighborhoods, a jurisdiction opposed to integration could refuse to issue the letter required in proposed § 970.7(a)(15)(ii) and allege that the PHA did not consult. By establishing threshold criteria, the PHA could establish that it had consulted adequately even absent the letter. A new paragraph should be added to § 970.7(a)(15) to read: The requirement for consultation with local government officials will be satisfied where the PHA has either met or offered to meet with the appropriate government officials on three occasions at which the proposed demolition or disposition plan was presented in writing to those attending and the PHA has responded in writing to any written objections, comments, or concerns received within ten days following the third such meeting or offer to meet. *Response:* As discussed in the response to the preceding comment, because of the variances in local situations, HUD does not believe it is possible to provide a safe harbor standard that will be applicable in all cases. IV. Findings and Certifications Paperwork Reduction Act The information collection requirements in this rule have been approved by OMB under section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) and assigned OMB Control number 2577-0157. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a valid control number. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
(UMRA)establishes requirements for Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This final rule does not impose any Federal mandates on any state, local, or tribal government, or the private sector within the meaning of UMRA. Environmental Impact A Finding of No Significant Impact (FONSI) with respect to the environment was made with respect to the proposed rule in accordance with HUD regulations in 24 CFR part 50 that implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI remains applicable and is available for public inspection between 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, U.S. Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the FONSI by calling the Regulations Division at
(202)708-3055 (this is not a toll-free number). Impact on Small Entities The Regulatory Flexibility Act
(RFA)(5 U.S.C. 601 *et seq.* ), generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule is concerned solely with the requirements for PHAs to apply for demolition or disposition of the public housing developments that they administer. However, many of the requirements of this rule were already present under the existing regulations regarding public housing demolition or disposition. To the extent that this rule would alter the previous requirements, it would do so in ways that are likely to either leave the economic impact unchanged or lower such impact. For example, because of a statutory change, the rule would no longer require PHAs to have a replacement housing plan. The rule would provide greater flexibility than before in how PHAs can use the proceeds from disposition of a property. The rule would provide for demolition of a minimal number of units without submitting an application. Thus, the rule certainly would not impose a greater administrative burden on entities than previously, and in some ways would lower the administrative requirements for demolishing or disposing of public housing units. Therefore, the undersigned certifies that this final rule will not have a significant economic impact on a substantial number of small entities, and an initial regulatory flexibility analysis is not required. Federalism Impact Executive Order 13132 (entitled “Federalism”) prohibits, to the extent practicable and permitted by law, an agency from promulgating a regulation that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or preempts state law, unless the relevant requirements of section 6 of the executive order are met. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the executive order. Executive Order 12866, Regulatory Planning and Review OMB reviewed this final rule under Executive Order 12866 (entitled Regulatory Planning and Review). OMB determined that this rule is a significant regulatory action, as defined in section 3(f) of the order (although not economically significant, as provided in section 3(f)(1) of the order). The docket file is available for public inspection from 8 a.m. to 5 p.m. in the Regulations Division, Office of General Counsel, U.S. Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the docket file by calling the Regulations Division at
(202)708-3055 (this is not a toll-free number). List of Subjects in 24 CFR Part 970 Grant programs—housing and community development, Public housing, Reporting and recordkeeping requirements. The Catalog of Federal Domestic Assistance program number for the program affected by this final rule is 14.850. For the reasons stated in the preamble, HUD revises 24 CFR part 970 as follows: 1. 24 CFR part 970 is revised to read as follows: PART 970—PUBLIC HOUSING PROGRAM—DEMOLITION OR DISPOSITION OF PUBLIC HOUSING PROJECTS Sec. 970.1 Purpose. 970.3 Applicability. 970.5 Definitions. 970.7 General requirements for HUD approval of a PHA demolition/disposition application. 970.9 Resident participation—consultation and opportunity to purchase. 970.11 Procedures for the offer of sale to established eligible organizations. 970.13 Environmental review requirements. 970.15 Specific criteria for HUD approval of demolition requests. 970.17 Specific criteria for HUD approval of disposition requests. 970.19 Disposition of property; use of proceeds. 970.21 Relocation of residents. 970.23 Costs of demolition and relocation of displaced tenants. 970.25 Required and permitted actions prior to approval. 970.27 De minimis exception to demolition requirements. 970.29 Criteria for disapproval of demolition or disposition applications. 970.31 Replacement units. 970.33 Effect on Operating Fund Program and Capital Fund Program. 970.35 Reports and records. Authority: 42 U.S.C. 1437p and 3535(d). § 970.1 Purpose. This part states requirements for HUD approval of a public housing agency's application for demolition or disposition (in whole or in part) of public housing developments assisted under Title I of the U.S. Housing Act of 1937 (Act). The regulations in 24 CFR part 85 are not applicable to this part. § 970.3 Applicability.
(a)This part applies to public housing developments that are owned by public housing agencies
(PHAs)and that are subject to annual contributions contracts
(ACCs)under the Act.
(b)This part does not apply to the following:
(1)PHA-owned section 8 housing, or housing leased under former sections 10(c) or 23 of the Act;
(2)Demolition or disposition before the date of full availability
(DOFA)of property acquired incident to the development of a public housing project (however, this exception shall not apply to dwelling units under ACC);
(3)The conveyance of public housing for the purpose of providing homeownership opportunities for lower-income families under sections 21 and 32 of the Act (42 U.S.C. 1437s and 42 U.S.C. 1437z-4, respectively), the homeownership program under former section 5(h) of the Act (42 U.S.C. 1437c(h)), or other predecessor homeownership programs;
(4)The leasing of dwelling or non-dwelling space incident to the normal operation of the project for public housing purposes, as permitted by the ACC;
(5)Making available common areas and unoccupied dwelling units in public housing projects to provide HUD-approved economic self-sufficiency services and activities to promote employment of public housing residents;
(6)The reconfiguration of the interior space of buildings (e.g., moving or removing interior walls to change the design, sizes, or number of units) without “demolition,” as defined in § 970.5. (This includes the conversion of bedroom size, occupancy type, changing the status of unit from dwelling to non-dwelling.);
(7)Easements, rights-of-way, and transfers of utility systems incident to the normal operation of the development for public housing purposes, as permitted by the ACC;
(8)A whole or partial taking by a public or quasi-public entity (taking agency) authorized to take real property by its use of police power or exercise of its power of eminent domain under state law. A taking does not qualify for the exception under this paragraph unless:
(i)The taking agency has been authorized to acquire real property by use of its police power or power of eminent domain under its state law;
(ii)The taking agency has taken at least the first step in formal proceedings under its state law; and
(iii)If the taking is for a federally assisted project, the Uniform Relocation Act
(URA)(42 U.S.C. 4601 *et seq.* ) applies to any resulting displacement of residents and it is the responsibility of the taking agency to comply with applicable URA requirements.
(9)Demolition after conveyance of a public housing project to a non-PHA entity in accordance with an approved homeownership program under Title III of the Cranston-Gonzalez National Affordable Housing Act (HOPE I) (42 U.S.C. 1437aaa note);
(10)Units or land leased for non-dwelling purposes for one year or less;
(11)A public housing property that is conveyed by a PHA prior to DOFA to enable an owner entity to develop the property using the mixed-finance development method;
(12)Disposition of public housing property for development pursuant to the mixed-finance development method at 24 CFR part 941, subpart F;
(13)Demolition under the de minimis exception in § 970.27, except that the environmental review provisions apply, including the provisions at §§ 970.7(a)(16) and 970.13(b) of this part;
(14)Demolition (but not disposition) of severely distressed units as part of a revitalization plan under section 24 of the Act (42 U.S.C. 1437v) (HOPE VI) approved after October 21, 1998;
(15)Demolition (but not disposition) of public housing developments removed from a PHA's inventory under section 33 of the Act, 42 U.S.C. 1437z-5. § 970.5 Definitions. *ACC* , or *annual contributions contract* , is defined in 24 CFR 5.403. *Act* means the United States Housing Act of 1937, 42 U.S.C. 1437 *et seq.* *Appropriate government officials* mean the Chief Executive Officer or officers of a unit of general local government. *Assistant Secretary* means the Assistant Secretary for Public and Indian Housing at HUD. *Chief Executive Officer of a unit of general local government* means the elected official or the legally designated official, who has the primary responsibility for the conduct of that entity's governmental affairs. Examples of the chief executive officer of a unit of general local government are: the elected mayor of a municipality; the elected county executive of a county; the chairperson of a county commission or board in a county that has no elected county executive; and the official designated pursuant to law by the governing body of a unit of general local government. *Demolition* means the removal by razing or other means, in whole or in part, of one or more permanent buildings of a public housing development. A demolition involves any four or more of the following:
(1)Envelope removal (roof, windows, exterior walls);
(2)Kitchen removal;
(3)Bathroom removal;
(4)Electrical system removal (unit service panels and distribution circuits); or
(5)Plumbing system removal (e.g., either the hot water heater or distribution piping in the unit, or both). *Disposition* means the conveyance or other transfer by the PHA, by sale or other transaction, of any interest in the real estate of a public housing development, subject to the exceptions stated in § 970.3. *DOFA* , or date of full availability, means the last day of the month in which substantially all (95 percent or more) of the units in a housing development are available for occupancy. *Firm financial commitment* means a commitment that obligates a creditable source, lender, or equity provider, to the lending or equity investment of a specific sum of funds to be made on or before a specific date(s) and may contain contingencies or conditions that must be satisfied by the borrower (or entity receiving equity investments) before the closing of the transaction. The condition of a firm commitment must be that it is enforceable by the borrower (or entity receiving the equity investment) upon the satisfaction of all contingencies or conditions. *PHA Plan* —Means the PHA's initial, annual, and 5-year submissions under section 5A of the U.S. Housing Act of 1937, 42 U.S.C. 1437c-1. *Resident Advisory Board*
(RAB)has the same meaning as in § 903.13(a) of this title. *Resident Council* means a resident organization, the role and requirements of which are as described in 24 CFR part 964. *Total development cost* has the same meaning as in 24 CFR 941.103. § 970.7 General requirements for HUD approval of a PHA demolition/disposition application.
(a)*Application for HUD Approval.* A PHA must obtain written approval from HUD before undertaking any transaction involving demolition or disposition of PHA-owned property under the ACC. Where a PHA demolishes or disposes of public housing property without HUD approval, no HUD funds may be used to fund the costs of demolition or disposition or reimburse the PHA for those costs. HUD will approve an application for demolition or disposition upon the PHA's submission of an application with the required certifications and the supporting information required by this section and §§ 970.15 or 970.17. Section 970.29 specifies criteria for disapproval of an application. Approval of the application under this part does not imply approval of a request for additional funding, which the PHA must make separately under a program that makes available funding for this purpose. The PHA shall submit the application for demolition or disposition and the timetable in a time and manner and in a form prescribed by HUD. The supporting information shall include:
(1)A certification that the PHA has described the demolition or disposition in the PHA Annual Plan and timetable under 24 CFR part 903 (except in the case of small or high-performing PHAs eligible for streamlined annual plan treatment), and that the description in the PHA Annual Plan is identical to the application submitted pursuant to this part and otherwise complies with section 18 of the Act (42 U.S.C. 1437p) and this part;
(2)A description of all identifiable property, by development, including land, dwelling units, and other improvements, involved in the proposed demolition or disposition;
(3)A description of the specific action proposed, such as:
(i)Demolition, disposition, or demolition with disposition;
(ii)If disposition is involved, the method of sale;
(4)A general timetable for the proposed action(s), including the initial contract for demolition, the actual demolition, and, if applicable, the closing of sale or other form of disposition;
(5)A statement justifying the proposed demolition or disposition under the applicable criteria of §§ 970.15 or 970.17;
(6)If applicable, a plan for the relocation of tenants who would be displaced by the proposed demolition or disposition (including persons with disabilities requiring reasonable accommodations and a relocation timetable as prescribed in § 970.21);
(7)A description with supporting evidence of the PHA's consultations with residents, any resident organizations, and the Resident Advisory Board, as required under § 903.9 of this title;
(8)In the case of disposition only, evidence of compliance with the offering to resident organizations, as required under § 970.9;
(9)In the case of disposition, an estimate of the fair market value of the property, established on the basis of one independent appraisal, unless otherwise determined by HUD, as described in § 970.19(c);
(10)In the case of disposition, estimates of the gross and net proceeds to be realized, with an itemization of estimated costs to be paid out of gross proceeds and the proposed use of any net proceeds in accordance with § 970.19;
(11)An estimate of costs for any required relocation housing, moving costs, and counseling.
(12)Where the PHA is requesting a waiver of the requirement for the application of proceeds for repayment of outstanding debt, the PHA must request such a waiver in its application, along with a description of the proposed use of the proceeds;
(13)A copy of a resolution by the PHA's Board of Commissioners approving the specific demolition or disposition application (or, in the case of the report required under § 970.27(e) for “de minimis” demolitions, the Board of Commissioner's resolution approving the “de minimis” action) for that development or developments or portions thereof. The resolution must be signed and dated after all resident and local government consultation has been completed;
(14)Evidence that the application was developed in consultation with appropriate government officials as defined in § 970.5, including:
(i)A description of the process of consultation with local government officials, which summarizes dates, meetings, and issues raised by the local government officials and the PHA's responses to those issues;
(ii)A signed and dated letter in support of the application from the chief executive officer of the unit of local government that demonstrates that the PHA has consulted with the appropriate local government officials on the proposed demolition or disposition;
(iii)Where the local government consistently fails to respond to the PHA's attempts at consultation, including letters, requests for meetings, public notices, and other reasonable efforts, documentation of those attempts;
(iv)Where the PHA covers multiple jurisdictions (such as a regional housing authority), the PHA must meet these requirements for each of the jurisdictions where the PHA is proposing demolition or disposition of PHA property;
(15)An approved environmental review of the proposed demolition or disposition in accordance with 24 CFR parts 50 or 58 for any demolition or disposition of public housing property covered under this part, as required under 24 CFR 970.13;
(16)A certification that the demolition or disposition application does not violate any remedial civil rights order or agreement, voluntary compliance agreement, final judgment, consent decree, settlement agreement, or other court order or agreement;
(17)Any additional information necessary to support the application and assist HUD in making determinations under this part.
(b)*Completion of demolition/disposition or rescissions of approval.*
(1)HUD will consider a PHA's request to rescind an earlier approval to demolish or dispose of public housing property, where a PHA submits a resolution from the Board of Commissioners and submits documentation that the conditions that originally led to the request for demolition or disposition have significantly changed or been removed.
(2)The Assistant Secretary will not approve any request by the PHA to either substitute units or add units to those originally included in the approved demolition or disposition application, unless the PHA submits a new application for those units that meet the requirements of this part. § 970.9 Resident participation—consultation and opportunity to purchase.
(a)*Resident consultation.* PHAs must consult with residents who will be affected by the proposed action with respect to all demolition or disposition applications. The PHA must provide with its application evidence that the application was developed in consultation with residents who will be affected by the proposed action, any resident organizations for the development, PHA-wide resident organizations that will be affected by the demolition or disposition, and the Resident Advisory Board (RAB). The PHA must also submit copies of any written comments submitted to the PHA and any evaluation that the PHA has made of the comments.
(b)*Resident organization offer to sell—applicability.* In the situation where the PHA applies to dispose of a development or portion of a development:
(1)The PHA shall, in appropriate circumstances as determined by the Assistant Secretary, initially offer the property proposed for disposition to any eligible resident organization, eligible resident management corporation as defined in 24 CFR part 964, or to a nonprofit organization acting on behalf of the residents at any development proposed for disposition, if the resident entity has expressed an interest in purchasing the property for continued use as low-income housing. The entity must make the request in writing to the PHA, no later than 30 days after the resident entity has received the notification of sale from the PHA;
(2)If the resident entity has expressed an interest in purchasing the property for continued use as low-income housing, the entity, in order for its purchase offer to be considered, must:
(i)In the case of a nonprofit organization, be acting on behalf of the residents of the development; and
(ii)Demonstrate that it has obtained a firm commitment for the necessary financing within 60 days of serving its written notice of interest under paragraph (b)(1) of this section.
(3)The requirements of this section do not apply to the following cases, which have been determined not to present an appropriate opportunity for purchase by a resident organization:
(i)A unit of state or local government requests to acquire vacant land that is less than two acres in order to build or expand its public services (a local government wishes to use the land to build or establish a police substation); or
(ii)A PHA seeks disposition outside the public housing program to privately finance or otherwise develop a facility to benefit low-income families (e.g., day care center, administrative building, mixed-finance housing under 24 CFR part 941 subpart F, or other types of low-income housing);
(iii)Units that have been legally vacated in accordance with the HOPE VI program, the regulations at 24 CFR part 971, or the mandatory conversion regulations at 24 CFR part 972, excluding developments where the PHA has consolidated vacancies;
(iv)Distressed units required to be converted to tenant-based assistance under section 33 of the 1937 Act (42 U.S.C. 1437z-5); or
(vi)Disposition of non-dwelling properties, including administration and community buildings, and maintenance facilities.
(4)If the requirements of this section are not applicable, as provided in paragraph (b)(3) of this section, the PHA may proceed to submit to HUD its application under this part to dispose of the property, or a portion of the property, without affording an opportunity for purchase by a resident organization. However, PHAs must consult with their residents in accordance with paragraph
(a)of this section. The PHA must submit documentation with date and signatures to support the applicability of one of the exceptions in paragraph (b)(3) of this section. Examples of appropriate documentation include, but are not limited to: a letter from the public body that wants to acquire the land, copies of memoranda or letters approving the PHA's previous application under part 970 or mandatory conversion plan, and the HUD transmittal document approving the proposed revitalization plan.
(c)*Established eligible organizations.* Where there are eligible resident organizations, eligible resident management corporations as defined in 24 CFR part 964, or nonprofit organizations acting on behalf of the residents as defined in 24 CFR part 964 (collectively, “established eligible organizations”), that have expressed an interest, in writing, to the PHA within 30 days of the date of notification of the proposed sale, in purchasing the property for continued use as low-income housing at the affected development, the PHA shall follow the procedures for making the offer described in § 970.11. § 970.11 Procedures for the offer of sale to established eligible organizations. In making an offer of sale to established eligible organizations as defined in § 970.9(c) in the case of proposed disposition, the PHA shall proceed as follows:
(a)*Initial written notification of sale of property.* The PHA shall send an initial written notification to each established eligible organization (for purposes of this section, an established eligible organization that has been so notified is a “notified eligible organization”) of the proposed sale of the property. The notice of sale must include, at a minimum, the information listed in paragraph
(d)of this section;
(b)*Initial expression of interest.* All notified eligible organizations shall have 30 days to initially express an interest, in writing, in the offer (“initial expression of interest”). The initial expression of interest need not contain details regarding financing, acceptance of an offer of sale, or any other terms of sale.
(c)*Opportunity to obtain firm financial commitment by interested entity.* If a notified eligible organization expresses interest in writing during the 30-day period referred to in paragraph
(b)of this section, no disposition of the property shall occur during the 60-day period beginning on the date of the receipt of the written notice of interest. During this period, the PHA must give the entity expressing interest an opportunity to obtain a firm financial commitment as defined in § 970.5 for the financing necessary to purchase the property;
(d)*Contents of initial written notification.* The initial written notification to established eligible organizations under paragraph
(a)of this section must include at a minimum the following:
(1)An identification of the development, or portion of the development, involved in the proposed disposition, including the development number and location, the number of units and bedroom configuration, the amount and use of non-dwelling space, the current physical condition (fire damaged, friable asbestos, lead-based paint test results), and percent of occupancy;
(2)A copy of the appraisal of the property and any terms of sale;
(3)Disclosure and description of the PHA's plans for reuse of land, if any, after the proposed disposition;
(4)An identification of available resources (including its own and HUD's) to provide technical assistance to the organization to help it to better understand its opportunity to purchase the development, the development's value, and potential use;
(5)A statement that public housing developments sold to resident organizations will not continue to receive capital and operating subsidy after the completion of the sale;
(6)Any and all terms of sale that the PHA will require, including a statement that the purchaser must use the property for low-income housing. If the PHA does not know all the terms of the offer of sale at the time of the notice of sale, the PHA shall include all the terms of sale of which it is aware. The PHA must supply the totality of all the terms of sale and all necessary material to the residents no later than 3 business days from the day it receives the residents' initial expression of interest;
(7)A date by which an established eligible organization must express its interest, in writing, in response to the PHA's offer to sell the property proposed for demolition or disposition, which shall be up to 30 days from the date of the official written offer of sale from the PHA;
(8)A statement that the established eligible organization will be given 60 days from the date of the PHA's receipt of its letter expressing interest to develop and submit a proposal to the PHA to purchase the property and to obtain a firm financial commitment, as defined in § 970.5. The statement shall explain that the PHA shall approve the proposal from an organization if the proposal meets the terms of sale and is supported by a firm commitment for financing. The statement shall also provide that the PHA can consider accepting an offer from the organization that differs from the terms of sale. The statement shall explain that if the PHA receives proposals from more than one organization, the PHA shall select the proposal that meets the terms of sale, if any. In the event that two proposals from the development to be sold meet the terms of sale, the PHA shall choose the best proposal. If no proposal meets the terms of sale, the PHA in its discretion may or may not select the best proposal.
(e)*Response to the notice of sale.* The established eligible organization or organizations have up to 30 days to respond to the notice of sale from the PHA. The established eligible organization shall respond to the PHA's notice of sale by means of an initial expression of interest under paragraph
(b)of this section.
(f)*Resident proposal.* The established eligible organization has up to 60 days from the date the PHA receives its initial expression of interest and provides all necessary terms and information to prepare and submit a proposal to the PHA for the purchase of the property of which the PHA plans to dispose, and to obtain a firm commitment for financing. The resident's proposal shall provide all the information requested in paragraph
(i)of this section.
(g)*PHA Review of Proposals.* The PHA has up to 60 days from the date of receipt of the proposal or proposals to review the proposals and determine whether they meet the terms of sale described in the PHA's offer or offers. If the PHA determines that the proposal meets the terms of sale, within 14 days of the date of this determination, the PHA shall notify the organization of that fact and that the proposal has been accepted. If the PHA determines that the proposal differs from the terms of sale, the PHA may accept or reject the proposal at its discretion;
(h)*Appeals.* The established eligible organization has the right to appeal the PHA's decision to the Assistant Secretary for Public and Indian Housing, or his designee, by sending a letter of appeal within 30 days of the date of the PHA's decision to the field office director. The letter of appeal must include copies of the proposal and any related correspondence, along with a statement of reasons why the organization believes the PHA should have decided differently. HUD shall render a decision within 30 days, and notify the organization and the PHA by letter within 14 days of such decision. If HUD cannot render a decision within 30 days, HUD will so notify the PHA and the established eligible organization in writing, in which case HUD will have an additional 30 days in which to render a decision. HUD may continue to extend its time for decision in 30-day increments for a total of 120 days. Once HUD renders its decision, there is no further administrative appeal or remedy available.
(i)*Contents of the organization's proposal.* The established eligible organization's proposal shall at a minimum include the following:
(1)The length of time the organization has been in existence;
(2)A description of current or past activities that demonstrate the organization's organizational and management capability, or the planned acquisition of such capability through a partner or other outside entities (in which case the proposal should state how the partner or outside entity meets this requirement);
(3)To the extent not included in paragraph (i)(2) of this section, the organization's experience in the development of low-income housing, or planned arrangements with partners or outside entities with such experience (in which case the proposal should state how the partner or outside entity meets this requirement);
(4)A statement of financial capability;
(5)A description of involvement of any non-resident organization (such as non-profit, for-profit, governmental, or other entities), if any, the proposed division of responsibilities between the non-resident organization and the established eligible organization, and the non-resident organization's financial capabilities;
(6)A plan for financing the purchase of the property and a firm financial commitment as stated in paragraph
(c)of this section for funding resources necessary to purchase the property and pay for any necessary repairs;
(7)A plan for using the property for low-income housing;
(8)The proposed purchase price in relation to the appraised value;
(9)Justification for purchase at less than the fair market value in accordance with § 970.19(a) of this part, if appropriate;
(10)Estimated time schedule for completing the transaction;
(11)Any additional items necessary to respond fully to the PHA's terms of sale;
(12)A resolution from the resident organization approving the proposal; and
(13)A proposed date of settlement, generally not to exceed 6 months from the date of PHA approval of the proposal, or such period as the PHA may determine to be reasonable.
(j)*PHA obligations* . The PHA must:
(1)Prepare and distribute the initial notice of sale pursuant to 24 CFR 970.11(a), and, if any established eligible organization expresses an interest, any further documents necessary to enable the organization or organizations to make an offer to purchase;
(2)Evaluate proposals received, make the selection based on the considerations set forth in paragraph
(b)of this section, and issue letters of acceptance or rejection;
(3)Prepare certifications, where appropriate, as provided in paragraph
(k)of this section;
(4)Comply with its obligations under § 970.7(a) regarding tenant consultation and provide evidence to HUD that the PHA has met those obligations. The PHA shall not act in an arbitrary manner and shall give full and fair consideration to any offer from a qualified resident management corporation, resident council of the affected development, or a nonprofit organization acting on behalf of the residents, and shall accept the proposal if the proposal meets the terms of sale.
(k)*PHA post-offer requirements* . After the resident offer, if any, is made, the PHA shall:
(1)Submit its disposition application to HUD in accordance with section 18 of the Act and this part. The disposition application must include complete documentation that the resident offer provisions of this part have been met. This documentation shall include:
(i)A copy of the signed and dated PHA notification letter(s) to each established eligible organization informing them of the PHA's intention to submit an application for disposition, the organization's right to purchase the property to be disposed of; and
(ii)The responses from each organization. (2)(i) If the PHA accepts the proposal of an established eligible organization, the PHA shall submit revisions to its disposition application to HUD in accordance with section 18 of the Act and this part reflecting the arrangement with the resident organization, with appropriate justification for a negotiated sale and for sale at less than fair market value, if applicable.
(ii)If the PHA rejects the proposal of the resident organization, the resident organization may appeal as provided in paragraph
(h)of this section. Once the appeal is resolved, or, if there is no appeal, and the 30 days allowed for appeal has passed, HUD shall proceed to approve or disapprove the application.
(3)HUD will not process an application for disposition unless the PHA provides HUD with one of the following:
(i)An official board resolution or its equivalent from each established eligible organization stating that such organization has received the PHA offer, and that it understands the offer and waives its opportunity to purchase the project, or portion of the project, covered by the disposition application;
(ii)A certification from the executive director or board of commissioners of the PHA that the 30-day time frame to express interest has expired and no response was received to its offer; or
(iii)A certification from the executive director or board of commissioners of the PHA with supporting documentation that the offer was otherwise rejected. § 970.13 Environmental review requirements.
(a)Activities under this part (including de minimis demolition pursuant to § 970.27) are subject to HUD environmental regulations in 24 CFR part 58. However, HUD may make a finding in accordance with 24 CFR 58.11(d) of this title and may itself perform the environmental review under the provisions of 24 CFR part 50 if a PHA objects in writing to the responsible entity performing the review under 24 CFR part 58.
(b)The environmental review is limited to the demolition or disposition action and any known re-use, and is not required for any unknown future re-use. Factors that indicate that the future site reuse can reasonably be considered to be known include the following:
(1)Private, Federal, state, or local funding for the site reuse has been committed;
(2)A grant application involving the site has been filed with the Federal government or a state or local unit of government;
(3)The Federal government or a state or unit of local government has made a commitment to take an action, including a physical action, that will facilitate a particular reuse of the site; and
(4)Architectural, engineering, or design plans for the reuse exist that go beyond preliminary stages.
(c)In the case of a demolition or disposition made necessary by a disaster that the President has declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 *et seq.,* or a disaster that has been declared under state law by the officer or entity with legal authority to make such declaration, pursuant to 24 CFR 50.43 and 24 CFR 58.33, the provisions of 40 CFR 1506.11 will apply. § 970.15 Specific criteria for HUD approval of demolition requests.
(a)In addition to other applicable requirements of this part, HUD will approve an application for demolition upon the PHA's certification that it meets the following statutory criteria, unless the application meets the criteria for disapproval under 24 CFR 270.29. An application for the demolition of all or a portion of a public housing project must certify that the project:
(1)Is obsolete as to physical condition, location, or other factors, making it unsuitable for housing purposes, and no reasonable program of modifications is cost-effective to return the public housing project or portion of the project to useful life; and
(2)In the case of an application for demolition of a portion of a project, the demolition will help to ensure the viability of the remaining portion of the project.
(b)As to paragraph (a)(1) of this section:
(1)Major problems indicative of obsolescence are:
(i)As to physical condition: Structural deficiencies that cannot be corrected in a cost-effective manner (settlement of earth below the building caused by inadequate structural fills, faulty structural design, or settlement of floors), or other design or site problems (severe erosion or flooding);
(ii)As to location: physical deterioration of the neighborhood; change from residential to industrial or commercial development; or environmental conditions as determined by HUD environmental review in accord with 24 CFR part 50, which jeopardize the suitability of the site or a portion of the site and its housing structures for residential use; or
(iii)There are other factors that have seriously affected the marketability, usefulness, or management of the property.
(2)HUD generally shall not consider a program of modifications to be cost-effective if the costs of such program exceed 62.5 percent of total development cost
(TDC)for elevator structures and 57.14 percent of TDC for all other types of structures in effect at the time the application is submitted to HUD.
(c)As to paragraph (a)(2) of this section, a partial demolition will be considered to ensure the viability of the remaining portion if the application certifies that the demolition will reduce development density to permit better access by emergency, fire, or rescue services, or improve marketability by reducing the density to that of the neighborhood or other developments in the PHA's inventory. § 970.17 Specific criteria for HUD approval of disposition requests. In addition to other applicable requirements of this part, HUD will approve a request for disposition by sale or other transfer of a public housing project or other real property if the PHA certifies that the retention of the property is not in the best interests of the residents or the PHA for at least one of the following reasons, unless information available to HUD is inconsistent with the certification:
(a)Conditions in the area surrounding the project (density, or industrial or commercial development) adversely affect the health or safety of the tenants or the feasible operation of the project by the PHA;
(b)Disposition allows the acquisition, development, or rehabilitation of other properties that will be more efficiently or effectively operated as low-income housing developments;
(c)The PHA has otherwise determined the disposition to be appropriate for reasons that are consistent with the goals of the PHA and the PHA Plan and that are otherwise consistent with the Act;
(d)In the case of disposition of property other than dwelling units (community facilities or vacant land), the PHA certifies that:
(1)The non-dwelling facilities or land exceeds the needs of the development (after DOFA); or
(2)The disposition of the property is incidental to, or does not interfere with, continued operation of the remaining portion of the development. § 970.19 Disposition of property; use of proceeds.
(a)Where HUD approves the disposition of real property of a development, in whole or in part, the PHA shall dispose of the property promptly for not less than fair market value (in which case there is no showing of commensurate public benefit required), unless HUD authorizes negotiated sale for reasons found to be in the best interests of the PHA or the federal government; or dispose of the property for sale for less than fair market value (where permitted by state law), based on commensurate public benefits to the community, the PHA, or the federal government justifying such an exception. General public improvements, such as streets and bridges, do not qualify as commensurate public benefits.
(b)A PHA may pay the reasonable costs of disposition, and of relocation of displaced tenants allowable under § 970.21, out of the gross proceeds, as approved by HUD.
(c)To obtain an estimate of the fair market value before the property is advertised for bid, the PHA shall have one independent appraisal performed on the property proposed for disposition, unless HUD determines that:
(1)More than one appraisal is warranted; or
(2)Another method of valuation is clearly sufficient and the expense of an independent appraisal is unjustified because of the limited nature of the property interest involved or other available data.
(d)To obtain an estimate of the fair market value when a property is not publicly advertised for bid, HUD may accept a reasonable valuation of the property.
(e)A PHA shall use net proceeds, including any interest earned on the proceeds (after payment of HUD-approved costs of disposition and relocation under paragraph
(a)of this section), subject to HUD approval, as follows:
(1)Unless waived by HUD, for the retirement of outstanding obligations, if any, issued to finance original development or modernization of the project; and
(2)To the extent that any net proceeds remain, after the application of proceeds in accordance with paragraph (e)(1) of this section, for:
(i)The provision of low-income housing or to benefit the residents of the PHA, through such measures as modernization of lower-income housing or the acquisition, development, or rehabilitation of other properties to operate as lower-income housing; or
(ii)Leveraging amounts for securing commercial enterprises, on-site in public housing developments of the PHA, appropriate to serve the needs of the residents.
(f)For dispositions for the purpose stated in § 970.17(b), a PHA must demonstrate to the satisfaction of HUD that the replacement units are being provided in connection with the disposition of the property. A PHA may use sale proceeds in accordance with paragraph
(e)to fund the replacement units. § 970.21 Relocation of residents.
(a)*Relocation of residents on a nondiscriminatory basis and relocation resources.* A PHA must offer each family displaced by demolition or disposition comparable housing that meets housing quality standards
(HQS)and is located in an area that is generally not less desirable than the location of the displaced persons. The housing must be offered on a nondiscriminatory basis, without regard to race, color, religion, creed, national origin, handicap, age, familial status, or gender, in compliance with applicable Federal and state laws. For persons with disabilities displaced from a unit with reasonable accommodations, comparable housing should include similar accommodations. Such housing may include:
(1)Tenant-based assistance, such as assistance under the Housing Choice Voucher Program, 24 CFR part 982, except that such assistance will not be considered “comparable housing” until the family is actually relocated into such housing;
(2)Project-based assistance; or
(3)Occupancy in a unit operated or assisted by the PHA at a rental rate paid by the family that is comparable to the rental rate applicable to the unit from which the family is vacated.
(b)*In-place tenants.* A PHA may not complete disposition of a building until all tenants residing in the building are relocated.
(c)*Financial resources* .
(1)Sources of funding for relocation costs related to demolition or disposition may include, but are not limited to, capital funds or other federal funds currently available for this purpose;
(2)If Federal financial assistance under the Community Development Block Grant
(CDBG)program, 42 U.S.C. 5301 *et seq.* (including loan guarantees under section 108 of the Housing and Community Development Act of 1974, 42 U.S.C. 5308 *et seq.* ); the Urban Development Action Grant
(UDAG)program, 42 U.S.C. 5318 *et seq.* ; or HOME program, 42 U.S.C. 12701 *et seq.* is used in connection with the demolition or disposition of public housing, the project is subject to section 104(d) of the Housing and Community Development Act of 1974, 42 U.S.C. 5304(d) (as amended)), including the relocation payment provisions and the anti-displacement provisions, which require that comparable replacement dwellings be provided within the community for the same number of occupants as could have been housed in the occupied and vacant, occupiable low- and moderate-income units demolished or converted to another use.
(d)*Relocation timetable* . For the purpose of determining operating subsidy eligibility under 24 CFR part 990, a PHA must provide the following information in the application or immediately following application submission:
(1)The number of occupied units at the time of demolition/disposition application approval;
(2)A schedule for the relocation of those residents on a month-by-month basis.
(e)The PHA is responsible for the following:
(1)Notifying each family residing in the development of the proposed demolition or disposition 90 days prior to the displacement date, except in cases of imminent threat to health and safety. The notification must include a statement that:
(i)The development or portion of the development will be demolished or disposed of;
(ii)The demolition of the building in which the family resides will not commence until each resident of the building has been relocated;
(iii)Each family displaced by such action will be provided comparable housing, which may include housing with reasonable accommodations for disability, if required under section 504 of the Rehabilitation Act of 1973 and HUD's regulations in 24 CFR part 8, as described in paragraph
(a)of this section;
(2)Providing for the payment of the actual and reasonable relocation expenses of each resident to be displaced, including residents requiring reasonable accommodations because of disabilities;
(3)Ensuring that each displaced resident is offered comparable replacement housing as described in paragraph
(b)of this section; and
(4)Providing any necessary counseling for residents that are displaced.
(f)In addition, the PHA's plan for the relocation of residents who would be displaced by the proposed demolition or disposition must indicate:
(1)The number of individual residents to be displaced;
(2)The type of counseling and advisory services the PHA plans to provide;
(3)What housing resources are expected to be available to provide housing for displaced residents; and
(4)An estimate of the costs for counseling and advisory services and resident moving expenses, and the expected source for payment of these costs.
(g)The Uniform Relocation Act does not apply to demolitions and dispositions under this part. § 970.23 Costs of demolition and relocation of displaced tenants. Where HUD has approved demolition of a project, or a portion of a project, and the proposed action is part of a program under the Capital Fund Program (24 CFR part 905), the costs of demolition and of relocation of displaced residents may be included in the budget funded with capital funds pursuant to section 9(d) of the Act (42 U.S.C. 1437g(d)) or awarded HOPE VI or other eligible HUD funds. § 970.25 Required and permitted actions prior to approval.
(a)A PHA may not take any action to demolish or dispose of a public housing development or a portion of a public housing development without obtaining HUD approval under this part. HUD funds may not be used to pay for the cost to demolish or dispose of a public housing development or a portion of a public housing development, unless HUD approval has been obtained under this part. Until the PHA receives HUD approval, the PHA shall continue to meet its ACC obligations to maintain and operate the property as housing for low-income families. However, the PHA may engage in planning activities, analysis, or consultations without seeking HUD approval. Planning activities may include project viability studies, capital planning, or comprehensive occupancy planning. The PHA must continue to provide full housing services to all residents that remain in the development. A PHA should not re-rent these units at turnover while HUD is considering its application for demolition or disposition. However, the PHA's operating subsidy eligibility will continue to be calculated as stated in 24 CFR part 990.
(b)A PHA may consolidate occupancy within or among buildings of a development, or among developments, or with other housing for the purposes of improving living conditions of, or providing more efficient services to residents, without submitting a demolition or disposition application. § 970.27 De minimis exception to demolition requirements.
(a)A PHA may demolish units without submitting an application if the PHA is proposing to demolish not more than the lesser of:
(1)five dwelling units; or
(2)5 percent of the total dwelling units owned by the PHA over any 5-year period.
(b)The 5-year period referred to in paragraph (a)(2) of this section is the 5 years counting backward from the date of the proposed de minimis demolition, except that any demolition performed prior to October 21, 1998, will not be counted against the five units or 5 percent of the total, as applicable. For example, if a PHA that owns 1,000 housing units wishes to demolish units under this de minimis provision on July 1, 2004, and previously demolished two units under this provision on September 1, 2000, and two more units on July 1, 2001, the PHA would be able to demolish one additional unit for a total of five in the preceding 5 years. As another example, if a PHA that owns 60 housing units as of July 1, 2004, had demolished two units on September 1, 2000, and one unit on July 1, 2001, that PHA would not be able to demolish any further units under this “de minimis” provision until after September 1, 2005, because it would have already demolished 5 percent of its total.
(1)In order to qualify for this exemption, the space occupied by the demolished unit must be used for meeting the service or other needs of public housing residents (use of space to construct a laundry facility, community center, child care facility, office space for a general provider; or for use as open space or garden); or
(2)The unit being demolished must be beyond repair.
(d)PHAs utilizing this section will comply with environmental review requirements at 24 CFR 970.13 and, if applicable, the requirements of 24 CFR 8.23.
(e)For recordkeeping purposes, PHAs that wish to demolish units under this section shall submit the information required in § 970.7(a)(1), (2), (12), (13), and (14). HUD will accept a certification from the PHA that one of the two conditions in paragraph
(c)of this section apply unless HUD has independent information that requirements for “de minimis” demolition have not been met. § 970.29 Criteria for disapproval of demolition or disposition applications. HUD will disapprove an application if HUD determines that:
(a)Any certification made by the PHA under this part is clearly inconsistent with:
(1)The PHA Plan;
(2)Any information and data available to HUD related to the requirements of this part, such as failure to meet the requirements for the justification for demolition or disposition as found in §§ 970.15 or 970.17; or
(3)Information or data requested by HUD; or
(b)The application was not developed in consultation with:
(1)Residents who will be affected by the proposed demolition or disposition as required in § 970.9; and
(2)Each resident advisory board and resident council, if any, of the project (or portion thereof) that will be affected by the proposed demolition or disposition as required in § 970.9, and appropriate government officials as required in § 970.7. § 970.31 Replacement units. Notwithstanding any other provision of law, replacement public housing units may be built on the original public housing location or in the same neighborhood as the original public housing location if the number of the replacement public housing units is significantly fewer than the number of units demolished. Such development must comply with 24 CFR part 905, Public Housing Capital Fund Program, as well as 24 CFR part 941. § 970.33 Effect on the Operating Fund Program and Capital Fund Program. The provisions of 24 CFR part 990, the Public Housing Operating Fund Program, and 24 CFR part 905, the Public Housing Capital Fund Program, apply. § 970.35 Reports and records.
(a)After HUD approval of demolition or disposition of all or part of a project, the PHA shall provide information on the following:
(1)Actual completion of each demolition contract by entering the appropriate information into HUD's applicable data system, or providing the information by another method HUD may require, within a week of making the final payment to the demolition contractor, or expending the last remaining funds if funded by force account;
(2)Execution of sales or lease contracts by entering the appropriate information into HUD's applicable data system, or providing the information by another method HUD may require, within a week of execution;
(3)The PHA's use of the proceeds of sale by providing a financial statement showing how the funds were expended by item and dollar amount;
(4)Amounts expended for closing costs and relocation expenses, by providing a financial statement showing this information for each property sold; and
(5)Such other information as HUD may from time to time require.
(b)[Reserved] Dated: October 12, 2006. Orlando J. Cabrera, Assistant Secretary for Public and Indian Housing. [FR Doc. E6-17724 Filed 10-23-06; 8:45 am] BILLING CODE 4210-67-P 71 205 Tuesday, October 24, 2006 Notices Part III Department of Housing and Urban Development Additional Waivers Granted to and Alternative Requirements for the State of Mississippi Under Public Law 109-148; Notice DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT [Docket No. FR-5051-N-07] Additional Waivers Granted to and Alternative Requirements for the State of Mississippi Under Public Law 109-148 AGENCY: Office of the Assistant Secretary for Community Planning and Development, HUD. ACTION: Notice of waivers and alternative requirements. SUMMARY: As described in the SUPPLEMENTARY INFORMATION section of this Notice, HUD is authorized by statute to waive statutory and regulatory requirements and specify alternative requirements for this grant, upon the request of the state grantee. This Notice describes the additional waivers for the disaster recovery grants made to the State of Mississippi under the subject appropriations act. DATES: *Effective Date:* October 30, 2006. FOR FURTHER INFORMATION CONTACT: Jan C. Opper, Director, Disaster Recovery and Special Issues Division, Office of Block Grant Assistance, Department of Housing and Urban Development, Room 7286, 451 Seventh Street, SW., Washington, DC 20410, telephone number
(202)708-3587. Persons with hearing or speech impairments may access this number via TTY by calling the Federal Information Relay Service at
(800)877-8339. FAX inquiries may be sent to Mr. Opper at
(202)401-2044. (Except for the “800” number, these telephone numbers are not toll-free.) SUPPLEMENTARY INFORMATION: Authority To Grant Waivers A Federal fiscal year 2006 supplemental appropriation for the Community Development Block Grant
(CDBG)program was in the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 (Pub. L. 109-148, approved December 30, 2005), that appropriated $11.5 billion for necessary expenses related to disaster relief, long-term recovery, and restoration of infrastructure in the most impacted and distressed areas related to the consequences of the covered disasters. The 2006 Act authorizes the Secretary to waive, or specify alternative requirements for, any provision of any statute or regulation that the Secretary administers in connection with the obligation by the Secretary or use by the recipient of these funds and guarantees, except for requirements related to fair housing, nondiscrimination, labor standards, and the environment, upon a request by the state and a finding by the Secretary that such a waiver would not be inconsistent with the overall purpose of the statute. The following additional waivers and alternative requirements for funds provided under the 2006 Act are in response to requests from the State of Mississippi. The Secretary finds that the following waivers and alternative requirements, as described below, are not inconsistent with the overall purpose of Title I of the Housing and Community Development Act of 1974, as amended (the 1974 Act), or the Cranston-Gonzalez National Affordable Housing Act, as amended. Under the requirements of the Department of Housing and Urban Development Act, as amended (42 U.S.C. 3535(q)), regulatory waivers must be published in the **Federal Register** . Except as described in this and other notices applicable to these grants, statutory and regulatory provisions governing the Community Development Block Grant program for states, including those at 24 CFR part 570, shall apply to the use of these funds. In accordance with the appropriations act cited above, HUD will reconsider every waiver in this Notice on the two-year anniversary of the day this Notice is published. Waiver Justification In general, waivers already granted to the State of Mississippi and alternative requirements already specified for CDBG disaster recovery grant funds provided under Public Law 109-148 apply. The notices in which these prior waivers and alternative requirements applicable to Mississippi appear are 71 FR 7666, published February 13, 2006, and 71 FR 34457, published June 14, 2006. The provisions of this Notice do not apply to funds provided under the annual CDBG program. The provisions provide additional flexibility in program design and implementation and implement statutory requirements unique to this appropriation. *Eligibility—wind pool reinsurance premium.* The state requested that HUD grant an eligibility waiver to permit it to pay reinsurance costs for two years for the wind pool for insurance maintained by the Mississippi Windstorm Underwriting Association (MWUA). HUD was initially concerned that allowing this activity would artificially depress the costs of insurance in the wind pool area and result in people making redevelopment decisions that did not take into account the real balance of risks and benefits of living in the impacted areas. The state responded by pointing out that even with the reinsurance in place insurance rates would still rise substantially, that the state would disclose to ratepayers the risk that rates would increase more if reinsurance rates remained high after grant assistance ended, and that the state was simultaneously working to raise building standards to help ameliorate actual risks and possibly lower eventual insurance costs. HUD considered the request and the state's response and agreed that it is consistent with the overall purposes of the 1974 Act for the state to fund, in accordance with the terms described in the state's Action Plan, the reinsurance coverage for the wind pool maintained by MWUA. *Low- and moderate-income household benefit for multi-unit housing projects.* Rehabilitation and reconstruction of housing is an eligible CDBG activity. HUD has already granted the state an eligibility waiver to allow new construction of housing. Now the state has requested a related waiver to allow it to fund multi-unit projects and to measure benefit to low- and moderate-income households in such projects in a manner more supportive of mixed-income housing than the *structure* basis required by 24 CFR 570.483(b)(3). (Under the cited regulation, the general rule is that at least 51 percent of the residents of an assisted *structure* must be income eligible.) HUD has reviewed other housing assistance programs that measure benefit differently: by the housing *unit.* Under the unit approach, one or more of the units in a structure must house income-eligible families, but the remainder of the units may be market-rate, so long as the proportion of assistance provided compared to the overall project budget is no more than the proportion of units that will be occupied by income-eligible households compared to the number of units in the overall project. In other words, the rule under the structure approach is that a nickel of CDBG assistance to a structure means that 51 percent of the units must meet income requirements. Under the proportional units approach, the number of income-eligible units is proportional to the amount of assistance provided. Based on HUD experience, the second approach is generally more compatible with large-scale development of mixed-income housing. There is HUD precedent for using the proportional unit basis in two programs familiar to the state:
(1)the CDBG program rule has a built-in exception that allows limited use of the unit basis for multi-unit non-elderly new construction structures with between 20 and 50 percent low- and moderate-income occupancy, and
(2)the HOME Investment Partnerships program, HUD's primary housing production program, successfully uses its own variation on the proportional unit approach. After review of the state's Action Plan for Disaster Recovery and learning more about the state's intention to encourage mixed-income housing development, HUD has determined that it is consistent with the overall purposes of the 1974 Act to provide the state the requested additional flexibility in measuring program benefit. Therefore, the waiver and alternative requirements allow the state a choice. The state may measure benefit within a housing development project
(1)according to the existing CDBG requirements,
(2)according to the HOME program requirements at 24 CFR 92.205(d) or
(3)according to the modified CDBG alternative requirements specified in this notice, which extend the CDBG exception noted above. The state must select and use just one method for each project. For these purposes, the term “project” will have the same meaning as in the HOME program at 24 CFR 92.2. Unlike the HOME program, the CDBG program does not regulate the maximum amount of assistance per unit, require unit and income reviews in the years following initial occupancy, require a specific form of subsidy layering review, or define affordability. The state is reminded, however, that CDBG does require that costs be necessary and reasonable and that the state must develop procedures and documentation to ensure that its housing investments meet this requirement. The state must also meet all civil rights and fair housing requirements. Overall Benefit to Low- and Moderate-Income Persons The State of Mississippi has repeated its request that the Secretary waive the requirement that 50 percent of the CDBG funds received by the state under the grant made under Public Law 109-148 be for activities that benefit persons of low and moderate income (see 71 FR 7666, published February 13, 2006, for the waiver granted under Public Law 109-148 to the original 70 percent requirement). In a June 14, 2006, notice (71 FR 34457) the Secretary granted a waiver of the overall benefit requirement for the Public Law 109-148 grant to the extent that the state could carry out the activity of compensation for housing loss, (the costs of which the state believed at the time would consume the majority of its grant), in an “income-blind” manner because the disaster affected households without regard to income. Because the current $1.3 billion estimate of demand for this program under the eligibility criteria specified by the state is substantially less than the approximately $3.255 billion estimated and approved in the Action Plan, the state now plans to modify the activity and reallocate funds to additional beneficiary groups or to other activities through a substantial amendment to its Action Plan. Note that the June 14 waiver does not cover activities added or modified under such a substantial amendment. To recognize the actual size of the program and because the state subsequently repeated its request for an overall benefit waiver that covers all activities, HUD is replacing the June 14 waiver and alternative requirements with the updated waiver and alternative requirements in this notice. (Substantial amendments to the state's program after the date of this notice may trigger further updates.) To grant this waiver, the Secretary must find that it is “not inconsistent” with the CDBG program's primary purpose. This purpose is stated at 42 U.S.C. 5301(c): “The primary objective of this chapter and of the community development program of each grantee under this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income.” Further, Public Law 109-148 stipulates that, to decrease or eliminate the overall benefit requirement below 50 percent, the Secretary of HUD must also make a finding of “compelling need” for the waiver. The Secretaries of HUD have granted very few overall benefit waivers for past disaster recoveries. The Secretary reset the percentage requirement for Grand Forks, North Dakota, to the actual pre-storm percentage of income-eligible residents in the affected area, and included the proviso that the City serve low- and moderate-income persons first, whenever feasible. HUD also allowed the State of Maine, following severe ice storms, an overall benefit waiver that permitted the state to use its entire grant to assist private utilities with uninsured service restoration costs. Logically, a utility grid or service area cannot be restored for one income group alone, and this type of disaster affects everyone in an area, regardless of income. There was no practical methodology in this example for allocating costs among income groups. In these two cases, the waiver supported some area-wide activity such as buyouts or infrastructure that arguably resulted in a larger total number of assisted low- and moderate-income households than if more targeted and measurable assistance had been provided. The case in Mississippi is more complicated than those in Maine and Grand Forks, because of the large number of political sub-jurisdictions, choice of possible activities, the effects of the mix of activities, population movement, and the catastrophic scale of the disaster. As in Maine, whole areas of Mississippi were impacted regardless of income (and far more severely in Mississippi than in Maine), so many of the state's proposed activities are area-or sector-wide. As in Grand Forks, the majority of Mississippians in the most impacted areas were not income-eligible prior to the storm so the state's recovery strategy must necessarily address the needs of a range of income groups. Mississippi has a much larger CDBG grant than either Maine or Grand Forks. Although the state plans to use the homeowner assistance funds very rapidly, it will take somewhat longer to budget and to use the remainder of the grant, and to determine the final benefit figures for the programs it plans to undertake. In considering the waiver request, HUD again examined the available post-disaster data on unmet recovery needs and the percentages of low- and moderate-income populations residing in the most impacted areas at the time of the disaster (Hancock County: 43 percent, Harrison County: 41 percent, Jackson County: 37 percent, Pearl River County: 41 percent.). HUD accepts the position of the state that one of the state's compelling needs for assistance in the disaster-affected area is to help re-establish homeowners outside the floodplain who suffered major uninsured flood damage. (The state designated this as its “primary need.”) HUD also considered the other CDBG disaster recovery activities the state is undertaking. After the June 14 waiver, the state made Action Plan amendments including some additional CDBG disaster recovery activities that do not qualify under the low- and moderate-income national objective, such as assistance to private utilities, wind pool re-insurance (mentioned elsewhere in this notice) and regional infrastructure development. In its Action Plan, the state described how these activities would address its disaster recovery needs. However, the state has not yet published Action Plan amendments describing the uses of all grant funds. HUD considered the data and the state's justification for its request. Considering that the state has not yet budgeted all of its grant funds in the Action Plan, it has a large amount of unbudgeted funds, it will be reallocating previously budgeted funds, and a substantial number of low- and moderate-income persons were impacted by the disaster, HUD decided that the Department does not have enough information to conclude that the state has compelling need for a waiver of overall benefit for the entire grant at this time. Based on the compelling need presented for the activities already included in the Action Plan for Disaster Recovery for the grant made under Public Law 109-148, HUD is granting the state a waiver of the requirement that at least 50 percent of the supplemental CDBG grant funds provided under Public Law 109-148 primarily benefit persons of low and moderate income, to the extent necessary to permit Mississippi to carry out the activities contained in its March 31, June 28, and July 12, 2006, Action Plan submissions, provided that the state must give reasonable priority for the balance of its funds to activities that will primarily benefit persons of low and moderate income. HUD expects the grantee to maintain low- and moderate-income benefit documentation for each activity providing such benefit. This waiver of overall benefit does not cover activities that may be added or modified under a substantial amendment to the activities mentioned in the Action Plan submissions listed above. Previously, the state agreed to examine other housing needs and to pursue other sources of funding to provide assistance for other compelling housing needs, such as for homeless and special needs populations, for low-income renters, and for uninsured low-income homeowners. HUD expects the state to continue these efforts. HUD is not granting the state's request that all of its activities be carried out under the national objective of “urgent need” because such a waiver would effectively grant an overall benefit waiver for the entire grant. HUD expects the state to principally benefit low- and moderate-income persons in activities where such design is feasible and reasonable, and to design its activities to meet the “slum-blight” or urgent need national objective otherwise. Consistent with the principles discussed above, HUD will be open to considering a further extension of the waiver when the uses of the balance of the available funds are proposed by the state. HUD also reminds the state that, pursuant to the instruction in Public Law 109-148, all waivers in this notice must be reconsidered on the two-year anniversary date of this notice. Applicable Rules, Statutes, Waivers, and Alternative Requirements 1. *General note.* Except as described in this Notice, the statutory, regulatory, and notice provisions that shall apply to the use of these funds are: a. Those governing the funds appropriated under Public Law 109-148 and already published in the **Federal Register** , including those in Notices 71 FR 7666, published February 13, 2006; and 71 FR 34457, published June 14, 2006; and b. Those governing the Community Development Block Grant program for states, including those at 42 U.S.C. 5301 et seq. and 24 CFR part 570. 2. *Low- and moderate-income benefit for multi-unit housing projects.* HUD will consider assistance for a multi-unit housing project to benefit low- and moderate-income households in the following circumstances: (a)(i) The CDBG assistance defrays the development costs of a housing project providing eligible permanent residential units that, upon completion, will be occupied by low- and moderate-income households; and
(ii)If the project is rental, the units occupied by low- and moderate-income households will be leased at affordable rents. The grantee or unit of general local government shall adopt and make public its standards for determining “affordable rents” for this purpose; and
(iii)The proportion of the total cost of developing the project to be borne by CDBG funds is no greater than the proportion of units in the project that will be occupied by low- and moderate-income households; or
(b)When CDBG funds defray the development costs of eligible permanent residential units, such funds shall be considered to benefit low and moderate income persons if the grantee follows the provisions of 24 CFR 92.205(d); or
(c)The requirements of 24 CFR 570.483(b)(3) are met.
(d)The state must select and use just one method for each project.
(e)The term “project” will have the same meaning as in the HOME program at 24 CFR 92.2.
(f)If the state applies option
(a)or
(b)above to a housing project, 24 CFR 570.483(b)(3) is waived for that project. 3. *Eligibility—wind pool reinsurance premium.* 42 U.S.C. 5305(a) is waived to the extent necessary to make eligible payment of wind pool reinsurance premiums in accordance with the state's approved Action Plan and published program design. 4. *Overall benefit.* 42 U.S.C. 5301(c) and 5304(b)(3), and 24 CFR 570.484 and 24 CFR 91.325(b)(4)(ii) with respect to the overall benefit requirement are waived to the extent necessary to permit Mississippi to carry out the activities contained in its March 31, June 28, and July 12, 2006, Action Plan submissions, provided that: a. The state must give reasonable priority for the balance of its funds to activities which will primarily benefit persons of low and moderate income; and b. The State will maintain documentation of the low- and moderate-income benefit attributable to each assisted activity, if feasible, and report on such benefit to HUD as part of the regular quarterly reports. 5. *Information collection approval note.* HUD has approval for information collection requirements in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) under OMB control number 2506-0165, which expires August 31, 2007. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, nor is a person required to respond to, a collection of information unless the collection displays a valid control number. Catalog of Federal Domestic Assistance The Catalog of Federal Domestic Assistance numbers for the disaster recovery grants under this Notice are as follows: 14.219; 14.228. Finding of No Significant Impact A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4321(2)(C)). The FONSI is available for public inspection between 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the finding by calling the Regulations Division at
(202)708-3055 (this is not a toll-free number). Dated: October 19, 2006. Roy A. Bernardi, Deputy Secretary. [FR Doc. 06-8856 Filed 10-19-06; 3:19 pm]
Connectionstraces to 76
Traces to 76 documents
CFR
- Issuance of amendment.§ 50.92
- Hearing requests, petitions to intervene, requirements for standing, and contentions.§ 2.309
- Notice for public comment; State consultation.§ 50.91
- Conditions of construction permits, early site permits, combined licenses, and manufacturing licenses.§ 50.55
- Changes, tests, and experiments.§ 50.59
- Criterion for categorical exclusion; identification of licensing and regulatory actions eligible for categorical exclusion or otherwise not requiring environmental review.§ 51.22
- Application of subpart to ongoing environmental work.§ 51.12
- Maintenance of records, making of reports.§ 50.71
- Relief from fingerprinting, identification and criminal history records checks and other elements of background checks for designated categories of individuals.§ 73.59
- Orders.§ 2.202
- Public inspections, exemptions, requests for withholding.§ 2.390
- Communications.§ 73.4
- Purpose and scope.§ 16.30
- Delegation of authority to Director of Division of Trading and Markets.§ 200.30-3
- Definitions.§ 242.500
- Does FAA invite public comment on petitions for exemption?§ 11.85
- Miscellaneous equipment.§ 121.313
- General requirements for HUD approval of a PHA demolition/disposition application.§ 970.7
- Policy.§ 10.1
- Applicability.§ 970.3
- Legal capacity and performance.§ 58.11
- Purpose and applicability.§ 58.1
- Definitions.§ 5.403
- Environmental review requirements.§ 970.13
- Procedures for the offer of sale to established eligible organizations.§ 970.11
- Emergencies.§ 50.43
- Emergencies.§ 58.33
- Alterations of existing housing facilities.§ 8.23
- Criteria for national objectives.§ 570.483
- Eligible activities: General.§ 92.205
- Definitions.§ 92.2
- Overall benefit to low and moderate income persons.§ 570.484
- Certifications.§ 91.325
U.S. Code
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- National system for clearance and settlement of securities transactions§ 78q–1
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- National securities exchanges§ 78f
- Definitions and application§ 78c
- Registered securities associations§ 78o–3
- General exemptive authority§ 78mm
- Trading by members of exchanges, brokers, and dealers§ 78k
- Immunity from seizure under judicial process of cultural objects imported for temporary exhibition or display§ 2459
- Purposes§ 6501
- Reports on domestic coins and currency transactions§ 5313
- Confidential nature of claims§ 5701
- Transmittal of information to Congress§ 1205
- Claim§ 8121
- Records maintained on individuals§ 552a
- Rules and regulations§ 501
- Demolition and disposition of public housing§ 1437p
- Definitions§ 4601
- Urban development action grants§ 5318
- National housing goal§ 12701
- Congressional findings and declaration of purpose§ 5301
- Demolition, site revitalization, replacement housing, and tenant-based assistance grants for projects§ 1437v
- Required conversion of distressed public housing to tenant-based assistance§ 1437z–5
- Rental payments§ 1437a
- Cooperation of agencies; reports; availability of information; recommendations; international and national coordination of efforts§ 4332
- Definitions§ 601
- Public housing homeownership and management opportunities§ 1437s
- Resident homeownership programs§ 1437z–4
- Contributions for low-income housing projects§ 1437c
- Program authority§ 1437aaa
- Declaration of policy and public housing agency organization§ 1437
- Public housing agency plans§ 1437c–1
- Congressional findings and declarations§ 5121
- Guarantee and commitment to guarantee loans for acquisition of property§ 5308
- Statement of activities and review§ 5304
- Public housing Capital and Operating Funds§ 1437g
- Administrative provisions§ 3535
- Activities eligible for assistance§ 5305
- Congressional declaration of purpose§ 4321
public-private-law
39 references not yet in our index
- 10 CFR 2
- 10 CFR 50
- 88 Stat. 1244
- 10 CFR 73
- 10 CFR 30
- 10 CFR 40
- 10 CFR 70
- 17 CFR 240.19
- 15 USC 78
- 17 CFR 240.17
- 17 CFR 240.11
- 79 Stat. 985
- Pub. L. 109-59
- 49 CFR 1.48
- Pub. L. 104-13
- 31 CFR 103.22(a)(2)
- Pub. L. 91-596
- 24 CFR 970
- Pub. L. 105-276
- 24 CFR 941
- 24 CFR 903
- 24 CFR 971
- Pub. L. 104-134
- 24 CFR 50
- 24 CFR 58
- 24 CFR 964
- 2 USC 1531-1538
- 24 CFR 85
- 24 CFR 941.103
- 24 CFR 972
- 40 CFR 1506.11
- 24 CFR 270.29
- 24 CFR 982
- 24 CFR 990
- 24 CFR 8
- 24 CFR 905
- Pub. L. 109-148
- 24 CFR 570
- 44 USC 3501-3520
Citation graph
cites case law
Notices
Extension of comment period for NUREG 1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment
Cite10 CFR 2
Cite10 CFR 50
Stat.88 Stat. 1244
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