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Code · REGISTER · 2006-12-27 · Federal Crop Insurance Corporation, USDA · Proposed Rules

Proposed Rules. Proposed rule with request for comments

78,468 words·~357 min read·/register/2006/12/27/06-9908

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 3510-22-S 71 248 Wednesday, December 27, 2006 Proposed Rules DEPARTMENT OF AGRICULTURE Federal Crop Insurance Corporation 7 CFR Part 457 RIN 0563-AC12 Common Crop Insurance Regulations, Millet Crop Insurance Provisions AGENCY: Federal Crop Insurance Corporation, USDA. ACTION: Proposed rule with request for comments. SUMMARY: The Federal Crop Insurance Corporation
(FCIC)proposes to amend the Common Crop Insurance Regulations, Millet Crop Insurance Provisions to remove the reduction in indemnity for any unharvested millet acreage to better meet the needs of insured producers. The changes will apply for the 2008 and succeeding crop years. DATES: Written comments and opinions on this proposed rule will be accepted until close of business February 26, 2007, and will be considered when the rule is to be made final. ADDRESSES: Interested persons are invited to submit comments, titled “Millet Crop Provisions”, by any of the following methods: • *By Mail to:* Director, Product Administration and Standards Division, Risk Management Agency, United States Department of Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 64133-4676. • *E-mail: DirectorPDD@rma.usda.gov* . • *Federal eRulemaking Portal: http://www.regulations.gov* . Follow the instructions for submitting comments. A copy of each response will be available for public inspection and copying from 7 a.m. to 4:30 p.m., c.s.t., Monday through Friday, except holidays, at the above address. FOR FURTHER INFORMATION CONTACT: Erin Reid, Risk Management Specialist, Product Management, Product Administration and Standards Division, Risk Management Agency, at the Kansas City, MO, address listed above, telephone
(816)926-7730. SUPPLEMENTARY INFORMATION: Executive Order 12866 The Office of Management and Budget
(OMB)has determined that this rule is not significant for the purpose of Executive Order 12866 and, therefore, it has not been reviewed by OMB. Paperwork Reduction Act of 1995 Pursuant to the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the collections of information in this rule have been approved by OMB under control number 0563-0053 through November 30, 2007. E-Government Act Compliance FCIC is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. Unfunded Mandates Reform Act of 1995 Title II of the Unfunded Mandates Reform Act of 1995
(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 rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA. Executive Order 13132 It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Regulatory Flexibility Act FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Program requirements for the Federal crop insurance program are the same for all producers regardless of the size of their farming operation. For instance, all producers are required to submit an application and acreage report to establish their insurance guarantees and compute premium amounts, and all producers are required to submit a notice of loss and production information to determine the amount of an indemnity payment in the event of an insured cause of crop loss. Whether a producer has 10 acres or 1000 acres, there is no difference in the kind of information collected. To ensure crop insurance is available to small entities, the Federal Crop Insurance Act authorizes FCIC to waive collection of administrative fees from limited resource farmers. FCIC believes this waiver helps to ensure that small entities are given the same opportunities as large entities to manage their risks through the use of crop insurance. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have an impact on small entities, and, therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605). Federal Assistance Program This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450. Executive Order 12372 This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983. Executive Order 12988 This proposed rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith. With respect to any direct action taken by FCIC or to require the insurance provider to take specific action under the terms of the crop insurance policy, the administrative appeal provisions published at 7 CFR part 11 must be exhausted before any action against FCIC for judicial review may be brought. Environmental Evaluation This action is not expected to have a significant economic impact on the quality of the human environment, health, or safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed. Background FCIC proposes to amend 7 CFR part 457 Common Crop Insurance Regulations by amending § 457.165 Millet crop insurance provisions, to be effective for the 2008 and succeeding crop years. Currently, the Millet Crop Provisions specify if the millet crop is not swathed and not harvested, the amount of the indemnity payable is reduced 30 percent to reflect those costs not incurred by the producer. In addition, if the millet crop is swathed but not harvested the amount of the indemnity payable is reduced by 15 percent to reflect those costs not incurred by the producer. Historically, millet prices have been very volatile throughout the growing season. The reduction in indemnity payment was designed to provide an incentive for producers to harvest the millet crop regardless of the millet price and avoid the potential for producers to shift losses to the crop insurance policy because the value of the crop insurance exceeded the value of the crop. The indemnity reduction for unharvested millet acreage has resulted in some insured millet producers choosing to harvest the millet crop when little or no potential production to count exists to avoid the reduced indemnity payment. FCIC has reviewed the situation and has determined that the disadvantage to producers who suffer legitimate losses from the reduction of the indemnity outweighs the potential for the shifting of losses to crop insurance. Accurate appraisals should ensure that producers are only paid for legitimate losses and receive the appropriate amount of indemnity. As a result of this change, premium rates will have to be increased because the amount of indemnity actually paid will increase and the premium is based on these anticipated losses. These premium rate increases were discussed with millet producers, who indicated a willingness to pay the projected 8-10 percent premium rate increase to remove the unharvested acreage indemnity reduction. The projected premium rate increase may be revised depending upon the experience of the proposed change. The proposed changes are as follows: Section 7—FCIC proposes to revise the end of the insurance period dates and to use only one date rather than dual dates. Only one date is necessary for the end of the insurance period for each group of states because of the removal of the unharvested acreage indemnity reduction. Section 8—In section 8(h), FCIC is proposing to clarify failure of the irrigation water supply that occurs during the insurance period is a covered cause of loss if such failure is due to a cause of loss specified in the Crop Provisions. This makes the Millet Crop Provisions consistent with other Crop Provisions and ensures that only named perils are covered under the policy. Section 10—FCIC proposes to remove section 10(f) to eliminate the reduction in indemnity for unharvested millet acreage and remove any references to that subsection. FCIC is also proposing to amend the example to correct plural terms to singular and singular terms to plural where necessary. Section 11—FCIC proposes to amend sections 11(a) and
(b)to change the references from “percent” to “percent per day”. Previously the provisions could have been interpreted that the guarantee would be reduced one percent total for the first ten days and three percent total for the following ten days. This makes the provisions consistent with other Crop Provisions. Section 12—FCIC proposes to amend the second sentence to refer to additional levels of coverage to be consistent with other Crop Provisions. List of Subjects in 7 CFR Part 457 Crop insurance, Millet, Reporting and recordkeeping requirements. Proposed Rule Accordingly, as set forth in the preamble, the Federal Crop Insurance Corporation proposes to amend 7 CFR part 457 to read as follows: PART 457—COMMON CROP INSURANCE REGULATIONS 1. The authority citation for 7 CFR part 457 continues to read as follows: Authority: 7 U.S.C. 1506(1), 1506(p). 2. Amend § 457.165 as follows: A. Revise the introductory text. B. Revise section 7. C. Revise section 8(h). D. Amend section 10(b)(4) by removing the phrase “and any adjustment from section 10(f)”. E. Amend paragraph
(2)of the example in section 10(b) by removing the phrase “1,500 bushels” and adding the phrase “1,500 bushel” in its place. F. Amend paragraph
(3)of the example in section 10(b) by removing the phrase “700 bushel” and adding the phrase “700 bushels” in its place. G. Amend section 10(d)(4)(iii) by removing the semicolon at the end of the current text and adding a period in its place. H. Remove section 10(f). I. Amend section 11(a) by adding the phrase “per day” after the phrase “One percent”. J. Amend section 11(b) by adding the phrase “per day” after the phrase “Three percent”. K. Amend section 12 by removing the phrase “an additional coverage level” and adding the phrase “additional levels of coverage” in its place. The revised text reads as follows: § 457.165 Millet crop insurance provisions. The millet crop insurance provisions for the 2008 and succeeding crop years are as follows: 7. Insurance Period In accordance with section 11 of the Basic Provisions, the calendar date for the end of insurance period is the date immediately following planting (unless otherwise specified in the Special Provisions) as follows:
(a)October 10 for North Dakota, South Dakota, and Wyoming; and
(b)October 31 for all other states. 8. Causes of Loss
(h)Failure of the irrigation water supply due to a cause of loss specified in sections 8(a) through
(g)that also occurs during the insurance period. Signed in Washington, DC, on December 14, 2006. Eldon Gould, Manager, Federal Crop Insurance Corporation. [FR Doc. E6-22002 Filed 12-26-06; 8:45 am] BILLING CODE 3410-08-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26685; Directorate Identifier 2006-NM-200-AD] RIN 2120-AA64 Airworthiness Directives; Empresa Brasileira de Aeronautica S.A. (EMBRAER) Model EMB-135BJ Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive
(AD)for all Empresa Brasileira de Aeronautica S.A. (EMBRAER) Model EMB-135BJ airplanes. This proposed AD would require modifying the forward and aft auxiliary fuel tanks. This proposed AD results from a report of sparks due to chafing between the harnesses of the forward and aft auxiliary fuel tanks, between certain harnesses attached to the aircraft structure, or between certain harnesses attached to certain mechanical components. We are proposing this AD to prevent a potential ignition source inside a fuel tank, which, in combination with flammable fuel vapors, could result in a fuel tank explosion. DATES: We must receive comments on this proposed AD by January 26, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • *DOT Docket Web site:* Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • *Government-wide rulemaking Web site:* Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • *Mail:* Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street SW., Nassif Building, Room PL-401, Washington, DC 20590. • *Fax:*
(202)493-2251. • *Hand Delivery:* Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Empresa Brasileira de Aeronautica S.A. (EMBRAER), P.O. Box 343—CEP 12.225, Sao Jose dos Campos—SP, Brazil, for service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Dan Rodina, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone
(425)227-2125; fax
(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2006-26685; Directorate Identifier 2006-NM-200-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov* , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov* . Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* , or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion The FAA has examined the underlying safety issues involved in fuel tank explosions on several large transport airplanes, including the adequacy of existing regulations, the service history of airplanes subject to those regulations, and existing maintenance practices for fuel tank systems. As a result of those findings, we issued a regulation titled “Transport Airplane Fuel Tank System Design Review, Flammability Reduction and Maintenance and Inspection Requirements” (66 FR 23086, May 7, 2001). In addition to new airworthiness standards for transport airplanes and new maintenance requirements, this rule included Special Federal Aviation Regulation No. 88 (“SFAR 88,” Amendment 21-78, and subsequent Amendments 21-82 and 21-83). Among other actions, SFAR 88 requires certain type design ( *i.e.* , type certificate
(TC)and supplemental type certificate (STC)) holders to substantiate that their fuel tank systems can prevent ignition sources in the fuel tanks. This requirement applies to type design holders for large turbine-powered transport airplanes and for subsequent modifications to those airplanes. It requires them to perform design reviews and to develop design changes and maintenance procedures if their designs do not meet the new fuel tank safety standards. As explained in the preamble to the rule, we intended to adopt airworthiness directives to mandate any changes found necessary to address unsafe conditions identified as a result of these reviews. In evaluating these design reviews, we have established four criteria intended to define the unsafe conditions associated with fuel tank systems that require corrective actions. The percentage of operating time during which fuel tanks are exposed to flammable conditions is one of these criteria. The other three criteria address the failure types under evaluation: Single failures, single failures in combination with a latent condition(s), and in-service failure experience. For all four criteria, the evaluations included consideration of previous actions taken that may mitigate the need for further action. The Joint Aviation Authorities
(JAA)has issued a regulation that is similar to SFAR 88. (The JAA is an associated body of the European Civil Aviation Conference
(ECAC)representing the civil aviation regulatory authorities of a number of European States who have agreed to co-operate in developing and implementing common safety regulatory standards and procedures.) Under this regulation, the JAA stated that all members of the ECAC that hold type certificates for transport category airplanes are required to conduct a design review against explosion risks. We have determined that the actions identified in this proposed AD are necessary to reduce the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in a fuel tank explosion. Relevant Service Information EMBRAER has issued Service Bulletin 145LEG-28-0022, dated February 17, 2005. The service bulletin describes procedures for modifying the forward and aft auxiliary fuel tanks. The modification includes, but is not limited to, re-routing the harnesses at the forward and aft fuel tanks; installing bonding jumpers, and electrical bonding of the refueling and vent lines at the forward fuel tanks and the solenoid valves of the aft fuel tanks; and installing new support assemblies of the harnesses of the aft fuel tanks. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The Agência Nacional de Aviçãco Civil
(ANAC)mandated the service information and issued Brazilian airworthiness directive 2006-07-03, effective August 23, 2006, to ensure the continued airworthiness of these airplanes in Brazil. FAA's Determination and Requirements of the Proposed AD This airplane model is manufactured in Brazil and is type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the ANAC has kept the FAA informed of the situation described above. We have examined the ANAC's findings, evaluated all pertinent information, and determined that we need to issue an AD for airplanes of this type design that are certificated for operation in the United States. Therefore, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously. Costs of Compliance This proposed AD would affect about 27 airplanes of U.S. registry. The proposed modifications would take about 20 work hours per airplane, at an average labor rate of $80 per work hour. Required parts would cost $2,200 per airplane. Based on these figures, the estimated cost of the proposed modifications for U.S. operators is $102,600, or $3,800 per airplane. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in subtitle VII, part A, subpart III, section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Empresa Brasileira de Aeronautica S.A. (EMBRAER):** Docket No. FAA-2006-26685; Directorate Identifier 2006-NM-200-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 26, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to all EMBRAER Model EMB-135BJ airplanes, certificated in any category. Unsafe Condition
(d)This AD results from a report of sparks due to chafing between the harnesses of the forward and aft auxiliary fuel tanks, between certain harnesses attached to the aircraft structure, or between certain harnesses attached to certain mechanical components. We are issuing this AD to prevent a potential ignition source inside a fuel tank, which, in combination with flammable fuel vapors, could result in a fuel tank explosion. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Modifications
(f)Within 5,000 flight hours after the effective date of this AD: Accomplish the modifications specified in paragraphs (f)(1) and (f)(2) of this AD by doing all the applicable actions in accordance with the Accomplishment Instructions of EMBRAER Service Bulletin 145LEG-28-0022, dated February 17, 2005.
(1)Modify the forward auxiliary fuel tank.
(2)Modify the aft auxiliary fuel tanks on the left and right sides. Alternative Methods of Compliance (AMOCs) (g)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information
(h)Brazilian airworthiness directive 2006-07-03, effective August 23, 2006, also addresses the subject of this AD. Issued in Renton, Washington, on December 19, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-22115 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26684; Directorate Identifier 2006-NM-193-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Model A330 and A340 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive
(AD)for all Airbus Model A330 and A340 airplanes. This proposed AD would require revising the Airworthiness Limitations section of the Instructions for Continued Airworthiness by incorporating new and revised certification maintenance requirements (CMRs). This proposed AD results from the manufacturer's determination that additional and revised CMRs are necessary in order to ensure continued operational safety of the affected airplanes. We are proposing this AD to prevent safety-significant latent failures that would, in combination with one or more other specific failures or events, result in a hazardous or catastrophic failure condition. DATES: We must receive comments on this proposed AD by January 26, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • *DOT Docket Web site:* Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • *Government-wide rulemaking web site:* Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • *Mail:* Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street SW., Nassif Building, room PL-401, Washington, DC 20590. • *Fax:*
(202)493-2251. • *Hand Delivery:* Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France, for service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Tim Backman, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone
(425)227-2797; fax
(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2006-26684; Directorate Identifier 2006-NM-193-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov* , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov* . Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* , or in person at the Docket Management Facility office between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion The European Aviation Safety Agency (EASA), which is the airworthiness authority for the European Union, notified us that Part 3, “Certification Maintenance Requirements (CMR)” of the Airworthiness Limitations Section
(ALS)for Model A330 and A340 airplanes has been updated. The new CMRs, among other things, introduce certain more restrictive limitations and inspection intervals for airplanes already in service. CMRs are intended to detect safety-significant latent failures that would, in combination with one or more other specific failures or events, result in a hazardous or catastrophic failure condition. Relevant Service Information Airbus has issued A330 Certification Maintenance Requirements 955.2074/93, Issue 19, dated March 22, 2006, to Part 3 of the A330 ALS. Issue 19 of the A330 CMRs: • Describes the effect of increasing the design service goal
(DSG)for the Weight Variant 50 series; • Adds new CMR tasks with more restrictive limitations associated with modifications and the new DSG; • Changes the status of one task from Two Star to One Star, with interval extension; and • Introduces more restrictive requirements for airplane configurations already in service. Airbus has also issued A340 Certification Maintenance Requirements, 955.3019/92, Issue 14, dated December 19, 2005, to Part 3 of the A340 ALS. Issue 14 of the A340 CMRs: • Introduces a new Model A340-643; • Describes the effect of increasing the DSG for the Weight Variant 50 series; • Revises the applicability of some tasks; • Adds new CMR tasks associated with modifications and the new DSG; • Revises some CMR tasks to have more restrictive intervals; • Deletes CMR status from some tasks; and • Introduces more restrictive requirements for airplane configurations already in service. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. EASA mandated the service information and issued airworthiness directive 2006-0224, dated July 27, 2006 (for Model A330 airplanes), and 2006-0225, dated July 21, 2006 (for Model A340 airplanes), to ensure the continued airworthiness of these airplanes in the European Union. FAA's Determination and Requirements of the Proposed AD These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. As described in FAA Order 8100.14A, “Interim Procedures for Working with the European Community on Airworthiness Certification and Continued Airworthiness,” dated August 12, 2005, the EASA has kept the FAA informed of the situation described above. We have examined the EASA's findings, evaluated all pertinent information, and determined that we need to issue an AD for airplanes of this type design that are certificated for operation in the United States. Therefore, we are proposing this AD, which would require revising the Airworthiness Limitations section of the Instructions for Continued Airworthiness by incorporating new and revised CMRs. Clarification of Compliance Time We have clarified the compliance time for revising the Airworthiness Limitations section of the Instructions for Continued Airworthiness to include a 3-month grace period. Costs of Compliance This proposed AD would affect about 27 Model A330 airplanes of U.S. registry. The proposed actions would take about 1 work hour per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $2,160, or $80 per airplane. Currently there are no affected A340 airplanes on the U.S. Register. However, if an affected airplane is imported and placed on the U.S. Register in the future, the required actions would take about 1 work hour per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed AD is $80 per airplane. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in subtitle VII, part A, subpart III, section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Airbus:** Docket No. FAA-2006-26684; Directorate Identifier 2006-NM-193-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 26, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to all Airbus Model A330 and A340 airplanes. Note 1: This AD requires revisions to certain operator maintenance documents to include new inspections. Compliance with these inspections is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by these inspections, the operator may not be able to accomplish the inspections described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an alternative method of compliance according to paragraph
(g)of this AD. The request should include a description of changes to the required inspections that will ensure the continued damage tolerance of the affected structure. The FAA has provided guidance for this determination in Advisory Circular
(AC)25-1529. Unsafe Condition
(d)This AD results from the manufacturer's determination that additional and revised certification maintenance requirements
(CMRs)are necessary in order to ensure continued operational safety of the affected airplanes. We are issuing this AD to prevent safety-significant latent failures that would, in combination with one or more other specific failures or events, result in a hazardous or catastrophic failure condition. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Revise the Airworthiness Limitations Section of the Instructions for Continued Airworthiness
(f)Within 3 months after the effective date of this AD: Revise the Airworthiness Limitations section of the Instructions for Continued Airworthiness by incorporating Airbus A330 Certification Maintenance Requirements, 955.2074/93, Issue 19, dated March 22, 2006 (for all Model A330 airplanes); or Airbus A340 Certification Maintenance Requirements, 955.3019/92, Issue 14, dated December 19, 2005 (for all Model A340 airplanes). Accomplish the actions specified in the applicable CMR at the times specified in the applicable CMR and in accordance with the applicable CMR, except as provided by paragraphs (f)(1), (f)(2), (f)(3), and (f)(4) of this AD.
(1)The associated interval for any new task is to be counted from the effective date of this AD.
(2)The associated interval for any revised task is to be counted from the previous performance of the task.
(3)For Model A340 airplanes that have exceeded the more restrictive limitations of Airbus A340 Certification Maintenance Requirements, 955.3019/92, Issue 14, Maintenance Significant Item
(MSI)21.28.00 and 21.43.00: Do the task within 2,500 flight hours after the previous accomplishment. Repeat the task thereafter at the applicable interval in the Airbus A340 Certification Maintenance Requirements, Issue 14.
(4)For Model A340 airplanes that have accumulated more than 2,700 flight hours since the last maintenance done in accordance with Airbus A340 Certification Maintenance Requirements, 955.3019/92, Issue 14, MSI 28.24.00: Do the next task within 800 flight hours after the effective date of this AD. Repeat the task thereafter at the applicable interval in the Airbus A340 Certification Maintenance Requirements, Issue 14. Alternative Methods of Compliance (AMOCs) (g)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information
(h)EASA airworthiness directives 2006-0224, dated July 27, 2006, and 2006-0225, dated July 21, 2006, also address the subject of this AD. Issued in Renton, Washington, on December 19, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-22111 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P FEDERAL TRADE COMMISSION 16 CFR Part 310 RIN 3084-0098 Telemarketing Sales Rule; Extension Beyond January 2, 2007, of the Previously Announced Forbearance Policy in Enforcement of the Prohibition of Prerecorded Calls in the Telemarketing Sales Rule (“TSR”) AGENCY: Federal Trade Commission. ACTION: Proposed rule. SUMMARY: In a **Federal Register** document published on October 4, 2006, 71 FR 58716, the FTC denied a request for creation of a new safe harbor in the TSR for prerecorded calls by sellers and their telemarketers to consumers with whom the seller has an “established business relationship,” and proposed an amendment to the TSR that would make explicit the prohibition on prerecorded calls that is now implicit in the TSR's call abandonment provisions. The Commission accordingly also announced the revocation of a previously announced policy of forbearing from enforcement of the TSR's call abandonment prohibition effective January 2, 2007. In response to a request for an extension of the forbearance policy, the Commission has determined that the forbearance policy should remain in effect until the conclusion of the prerecorded call amendment proceeding. DATES: Effective January 2, 2007, the Commission will continue its previously announced policy of forbearing from enforcing the prohibition of prerecorded calls in the TSR's call abandonment provisions, until the conclusion of the prerecorded call amendment proceeding. FOR FURTHER INFORMATION CONTACT: Craig Tregillus,
(202)326-2970, Division of Marketing Practices, Bureau of Consumer Protection, Room H-288, Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580. SUPPLEMENTARY INFORMATION: In a **Federal Register** document published on October 4, 2006, 71 FR 58716, the FTC denied a request for creation of a new safe harbor in the TSR for prerecorded calls by sellers and their telemarketers to consumers with whom the seller has an “established business relationship,” and proposed an amendment to the TSR that would make explicit the prohibition on prerecorded calls that is now implicit in the TSR's call abandonment provisions. The Commission accordingly also announced the revocation of a previously announced policy of forbearing from enforcement of the TSR's call abandonment prohibition effective January 2, 2007. On November 29, 2006, the Direct Marketing Association (“DMA”) filed a petition seeking an extension of the Commission's enforcement forbearance policy on prerecorded calls beyond the announced revocation date of January 2, 2007. A petition filed by medSage Technologies LLC on November 30, and petitions filed by Minutepoll, LLC (“Minutepoll petition”) and jointly by Silverlink Communications Inc. and the Eliza Corporation (“Silverlink petition”) on December 1, also requested extensions of the revocation date. Both the DMA and Silverlink petitions ask for an extension until the conclusion of the rulemaking proceeding, while the medSage and Minutepoll petitions seek an extension until six months after the conclusion of the rulemaking to allow companies sufficient time to comply. 1 1 The Commission believes that the medSage and Minutepoll requests for additional time after a final rule is promulgated for businesses to bring themselves into compliance is premature, since this issue can be addressed best when the final rule is issued. DMA argues that, if the policy were revoked as announced effective January 2, 2007, even prerecorded messages that consumers “affirmatively requested would need to be discontinued” because businesses would not have had sufficient time during their busy holiday season “to obtain the proposed prior written consents.” 2 Moreover, DMA believes that because the TSR's present call abandonment provisions, unlike the proposed amendment, lack any express provision allowing prerecorded calls to established customers who have given their written consent, that failure to extend the forbearance policy would have the effect of “a flat prohibition on prerecorded messages.” 3 2 DMA petition at 1-2. 3 *Id.* at 1. DMA advances two additional reasons for extending the forbearance policy until completion of the amendment proceeding. The first is that failure to continue the forbearance policy “effectively prejudges the outcome of the proceeding,” contrary to the intended statutory purpose “of the Notice and Comment process.” 4 The second is that an extension will maintain the status quo for consumers who have listed their numbers on the Do Not Call Registrybecause it simply continues the existing forbearance policy. 5 4 *Id.* at 2. 5 *Id.* at 3. The Minutepoll petition emphasizes the “irreparable harm smaller businesses” engaged in telemarketing would incur unless the forbearance policy is extended. 6 Minutepoll says that it and many other small telemarketers that place prerecorded calls otherwise would be forced to shut down their operations on January 2, 2007, since they cannot be “cost competitive” with large call centers in placing live telemarketing calls. 7 6 Minutepoll petition at 2. 7 *Id* . The medSage and Silverlink petitions come from companies under contract with HMO's and other health care providers, pursuant to regulations issued by the Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996, to place interactive “reminder” calls to the providers’ medical patients, urging them to get flu shots, childhood immunizations, routine mammograms and colonoscopies, prescription refills, and the like. 8 Both petitions argue that there is insufficient time before January 2 for the providers they serve to obtain written consent from the 10 to 20 million patients the Silverlink petition estimates receive such calls annually. 9 8 These calls are “telemarketing” calls covered by the TSR because they induce the purchase of medical goods or services. 9 Silverlink petition at 2; medSage petition at 3. Thus, the medSage petition contends that the company would be faced with “a Hobson's choice” of violating the TSR or failing to deliver “medically necessary prerecorded messages,” and that “[n]either choice makes any sense.” 10 Similarly, the Silverlink petition argues that if an extension is not granted, patients would be deprived of calls that improve healthcare services and patient outcomes. 11 10 medSage petition at 4. 11 Silverlink petition at 6-7 & nn.14-16. The Commission rejects DMA's argument that revoking its previously announced non-enforcement policy can reasonably be seen as in any way prejudging the outcome of the amendment proceeding. Nevertheless, in recognition of the reasons presented by the petitions and in order to preserve the *status quo* , the Commission has determined that, pending completion of this proceeding, the Commission will continue “to forbear from bringing any enforcement action for violation of the TSR's call abandonment prohibition, 16 CFR 310.4(b)(1)(iv), against a seller or telemarketer that places telephone calls to deliver prerecorded telemarketing messages to consumers with whom the seller on whose behalf the telemarketing call is placed has an established business relationship, as defined in the TSR, provided the seller or telemarketer conducts this activity in conformity with the [following] terms:” 12 12 69 FR 67287, 67290 (Nov. 17, 2004). •
(i)The seller or telemarketer, for each such telemarketing call placed, allows the telephone to ring for at least fifteen
(15)seconds or four
(4)rings before disconnecting an unanswered call; •
(ii)Within two
(2)seconds after the person's completed greeting, the seller or telemarketer promptly plays a prerecorded message that: •
(A)Presents an opportunity to assert an entity-specific Do Not Call request pursuant to § 310.4(b)(1)(iii)(A) at the outset of the message, with only the prompt disclosures required by § 310.4(d) or
(e)preceding such opportunity; and •
(B)Complies with all other requirements of this Part [16 CFR Part 310] and other applicable federal and state laws.” 13 13 69 FR at 67294 (noting that “This provision does not affect any seller's or telemarketer's obligation to comply with relevant state and federal laws, including but not limited to the TCPA, 47 U.S.C. 227, and 47 CFR part 64.1200.”) The Commission has stated its belief that, as the foregoing criteria indicate, “an interactive feature (pressing a button during the message to connect to a sales representative or an automated system to make a Do Not Call request) would be ideal . . . to protect consumers' Do Not Call rights under the TSR.” 14 The Commission emphasizes that its forbearance policy applies only to prerecorded telemarketing calls that comply completely with all of the foregoing criteria. 14 69 FR 67289. By direction of the Commission. Donald S. Clark, Secretary. [FR Doc. E6-22144 Filed 12-26-06; 8:45 am] BILLING CODE 6750-01-P SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 210, 240 and 241 [Release Nos. 33-8762; 34-54976; File No. S7-24-06] RIN 3235-AJ58 Management's Report on Internal Control Over Financial Reporting AGENCY: Securities and Exchange Commission. ACTION: Proposed interpretation; Proposed rule. SUMMARY: We are proposing interpretive guidance for management regarding its evaluation of internal control over financial reporting. The interpretive guidance sets forth an approach by which management can conduct a top-down, risk-based evaluation of internal control over financial reporting. The proposed guidance is intended to assist companies of all sizes to complete their annual evaluation in an effective and efficient manner and it provides guidance on a number of areas commonly cited as concerns over the past two years. In addition, we are proposing an amendment to our rules requiring management's annual evaluation of internal control over financial reporting to make it clear that an evaluation that complies with the interpretive guidance is one way to satisfy those rules. Further, we are proposing an amendment to our rules to revise the requirements regarding the auditor's attestation report on the assessment of internal control over financial reporting. DATES: *Comment Date:* Comments should be received on or before February 26, 2007. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/proposed.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number S7-24-06 on the subject line; or • Use the Federal eRulemaking Portal ( *http://www.regulations.gov* ). Follow the instructions for submitting comments. 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 S7-24-06. This file number should be included on the subject line if e-mail is used. To help us 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/proposed.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Michael G. Gaynor, Professional Accounting Fellow, Office of the Chief Accountant, at
(202)551-5300, or N. Sean Harrison, Special Counsel, Division of Corporation Finance, at
(202)551-3430 U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: We are proposing amendments to Rule 13a-15(c), 1 and Rule 15d-15(c) 2 under the Securities Exchange Act of 1934 (the “Exchange Act”); 3 and Rules 1-02(a)(2) 4 and 2-02(f) 5 of Regulation S-X. 6 1 17 CFR 240.13a-15(c). 2 17 CFR 240.15d-15(c). 3 15 U.S.C. 78a *et seq.* 4 17 CFR 210.1-02. 5 17 CFR 210.2-02(f). 6 17 CFR 210.1-01 *et seq.* I. Background Section 404(a) of the Sarbanes-Oxley Act of 2002 7 (“Sarbanes-Oxley”) directed the Commission to prescribe rules that require each annual report that a company, other than a registered investment company, files pursuant to Section 13(a) or 15(d) 8 of the Exchange Act to contain an internal control report:
(1)Stating management's responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2)containing an assessment, as of the end of the company's most recent fiscal year, of the effectiveness of the company's internal control structure and procedures for financial reporting. On June 5, 2003, the Commission adopted rules implementing Section 404 with regard to management's obligations to report on its internal control structure and procedures and, in so doing, created the term “internal control over financial reporting” (“ICFR”). 9 7 15 U.S.C. 7262. 8 15 U.S.C. 78m(a) or 78o(d). 9 *See* Release No. 33-8238 (June 5, 2003) [68 FR 36636] (hereinafter the “Adopting Release”). *See* Release No. 33-8392 (February 24, 2004) [69 FR 9722] for compliance dates applicable to accelerated filers. See Release No. 33-8760 (December 15, 2006) for compliance dates applicable to non-accelerated filers. The establishment and maintenance of internal accounting controls has been required of public companies since the enactment of the Foreign Corrupt Practices Act of 1977 (“FCPA”). 10 The significance of Section 404 of Sarbanes-Oxley is that it re-emphasizes the important relationship between the maintenance of effective ICFR and the preparation of reliable financial statements. Effective ICFR can also help companies deter fraudulent financial accounting practices or detect them earlier and perhaps reduce their adverse effects. While controls are susceptible to manipulation, especially in instances of fraud involving the collusion of two or more people, including senior management, these are known limitations of internal control systems. Therefore, it is possible to design ICFR to reduce, though not eliminate, instances of fraud. 10 Title I of Pub. L. 95-213 (1977). Under the FCPA, companies that have a class of securities registered under Section 12 of the Exchange Act, or that are required to file reports under Section 15(d) of the Exchange Act, are required to
(a)make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and
(b)to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:
(i)transactions are executed in accordance with management's general or specific authorization;
(ii)transactions are recorded as necessary
(1)to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and
(2)to maintain accountability for assets;
(iii)access to assets is permitted only in accordance with management's general or specific authorization; and
(iv)the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The definition of internal control over financial reporting is consistent with the description of internal accounting controls under the FCPA. When the Commission adopted rules in June 2003 to implement Section 404 of Sarbanes-Oxley, we emphasized two broad principles:
(1)That the evaluation must be based on procedures sufficient both to evaluate the design and to test the operating effectiveness 11 of ICFR; and
(2)that the assessment, including testing, must be supported by reasonable evidential matter. 12 Instead of providing specific guidance regarding the evaluation, we expressed our belief that the methods of conducting evaluations of ICFR will, and should, vary from company to company and will depend on the circumstances of the company and the significance of the controls. 13 We continue to believe that it is impractical to prescribe a single methodology that meets the needs of every company. 11 *See* Adopting Release at Section II.B.3.d. 12 *Id.* 13 *Id.* Since the Commission first adopted the ICFR requirements, companies and third parties have devoted considerable attention to the methods that management may use to evaluate ICFR. Efforts to comply with the Commission's rules have resulted in many public companies internally developing their own evaluation processes, while other companies have retained consultants or purchased commercial software and other products to establish or improve their ICFR evaluation process. 14 Management must bring its own experience and informed judgment to bear in order to design an evaluation process that meets the needs of its company and that provides reasonable assurance for its assessment. This proposed guidance is intended to allow management the flexibility to design such an evaluation process. 14 Exchange Act Rules 13a-15 and 15d-15 require management to evaluate the effectiveness of ICFR as of the end of the fiscal year. For purposes of this document, the term “evaluation” or “evaluation process” refers to the methods and procedures that management implements to comply with these rules. The term “assessment” is used in this document to describe the disclosure required by Item 308 of Regulations S-B and S-K [17 CFR 228.308 and 229.308]. This disclosure must include discussion of any material weaknesses which exist as of the end of the most recent fiscal year and management's assessment of the effectiveness of ICFR, including a statement as to whether or not ICFR is effective. Management is not permitted to conclude that ICFR is effective if there are one or more material weaknesses in ICFR. In order to facilitate the comparability of the assessment reports among companies, our rules implementing Section 404 require management to base its assessment of a company's internal control on a suitable evaluation framework. While the establishment and maintenance of internal accounting controls have been required since the enactment of the FCPA, as discussed above, the Commission's rules implementing Section 404 required management for the first time to use a framework for evaluating ICFR. It is important to note that our rules do not mandate the use of a particular framework, since multiple viable frameworks exist and others may be developed in the future. However, in the release adopting the Section 404 requirements, the Commission identified the *Internal Control—Integrated Framework* created by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as an example of a suitable framework. 15 16 15 *See* COSO, *Internal Control-Integrated Framework* (1992). In 1994, COSO published an addendum to the *Reporting to External Parties* volume of the COSO Report. The addendum discusses the issue of, and provides a vehicle for, expanding the scope of a public management report on internal control to address additional controls pertaining to safeguarding of assets. In 1996, COSO issued a supplement to its original framework to address the application of internal control over financial derivative activities. The COSO framework is the result of an extensive study of internal control to establish a common definition of internal control that would serve the needs of companies, independent public accountants, legislators, and regulatory agencies, and to provide a broad framework of criteria against which companies could evaluate and improve their control systems. The COSO framework divides internal control into three broad objectives: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. Our rules relate only to reliability of financial reporting. Each of the objectives in the COSO framework is further broken down into five interrelated components: control environment, risk assessment, control activities, information and communication, and monitoring. 16 In that release, we also cited the *Guidance on Assessing Control* published by the Canadian Institute of Chartered Accountants (“CoCo”) and the report published by the Institute of Chartered Accountants in England & Wales *Internal Control: Guidance for Directors on the Combined Code* (known as the Turnbull Report) as examples of other suitable frameworks that issuers could choose in evaluating the effectiveness of their internal control over financial reporting. We encourage companies to examine and select a framework that may be useful in their own circumstances; we also encourage the further development of alternative frameworks. While the COSO framework identifies the components and objectives of an effective system of internal control, it does not set forth an approach for management to follow in evaluating the effectiveness of a company's ICFR. 17 We, therefore, distinguish between the COSO framework as a definition of what constitutes an effective system of internal control and guidance on how to evaluate ICFR for purposes of our rules. The guidance that we are proposing in this release is not intended to replace or modify the COSO framework or any other suitable framework. 17 On July 11, 2006, COSO issued guidance entitled “Internal Control Over Financial Reporting—Guidance for Smaller Public Companies” that was designed primarily to help management of smaller public companies with establishing and maintaining effective ICFR. The guidance includes evaluation tools; however, these tools are intended only to be illustrative. In determining the need for additional guidance to management on how to conduct its evaluation, it is important to consider the steps that have been taken by the Commission and others to provide guidance to companies and audit firms. The Commission held its first roundtable discussion about implementation of the internal control reporting provisions on April 13, 2005. The 2005 roundtable sought input to consider the impact of the implementation of the Section 404 reporting requirements in view of the fact that Section 404 resulted in a major change for management and auditors. A broad range of interested parties, including representatives of managements and boards of domestic and foreign public companies, auditors, investors, legal counsel, and board members of the Public Company Accounting Oversight Board (“PCAOB”), participated in the discussion. We also invited and received written submissions from the public regarding Section 404 in advance of the roundtable. Feedback obtained from the 2005 roundtable indicated that the internal control reporting requirements had led to an increased focus by management on ICFR. However, the feedback also identified particular areas which were in need of further clarification to reduce unnecessary costs and burdens while at the same time not jeopardizing the benefits of Section 404. In addition, feedback indicated that a number of the implementation issues arose from an overly conservative application of the Commission rules and PCAOB Auditing Standard No. 2, *An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements* (“AS No. 2”), and the requirements of AS No. 2 itself, as well as questions regarding the appropriate role of the auditor in management's evaluation process. In response to this feedback, the Commission and its staff issued guidance on May 16, 2005, 18 emphasizing that management, not the auditor, is responsible for determining the appropriate nature and form of internal controls for the company as well as their evaluation methods and procedures. The May 2005 Staff Guidance emphasized and clarified existing provisions of the rules and other Commission guidance relating to the exercise of professional judgment, the concept of reasonable assurance, and the permitted communications between management and auditors. Feedback has indicated that the May 2005 Staff Guidance was appropriate, and while we have incorporated certain sections of that guidance into the proposed interpretive guidance set forth in this release, the May 2005 Staff Guidance remains relevant. 19 18 *Commission Statement on Implementation of Internal Control Reporting Requirements* , Press Release No. 2005-74 (May 16, 2005); Division of Corporation Finance and Office of the Chief Accountant: *Staff Statement on Management's Report on Internal Control Over Financial Reporting* (May 16, 2005) (hereinafter “May 2005 Staff Guidance”) available at *http://www.sec.gov/spotlight/soxcom/.htm.* Also on May 16, 2005, the PCAOB and its staff issued guidance to auditors on their audits under AS No. 2. The PCAOB's guidance focused on areas in which the efficiency of the audit could be substantially improved. Topics included the importance of the integrated audit, the role of risk assessment throughout the process, the importance of taking a top-down approach, and auditors' use of the work of others. 19 The incorporation of our May 16, 2005 guidance into this guidance was generally supported in comments received in response to the *Concept Release Concerning Management's Reports on Internal Control Over Financial Reporting,* Release No. 34-54122 (July 11, 2006) [71 FR 40866] available at *http://www.sec.gov/rules/concept/2006/34-54122.pdf* (hereinafter “Concept Release”) . See, for example, letters received from the American Electronics Association, Computer Sciences Corporation, American Institute of Certified Public Accountants, Institute of Management Accountants and Schering AG (available at *http://www.sec.gov/comments/s7-11-06/s71106.shtml* ). In its Final Report to the Commission, issued on April 23, 2006, the Commission's Advisory Committee on Smaller Public Companies (“Advisory Committee”) raised a number of concerns regarding the ability of smaller companies to comply cost-effectively with the requirements of Section 404. The Advisory Committee identified as an overarching concern the difference in how smaller and larger public companies operate. The Advisory Committee focused in particular on three characteristics:
(1)The limited number of personnel in smaller companies, which constrains the companies' ability to segregate conflicting duties;
(2)top management's wider span of control and more direct channels of communication, which increase the risk of management override; and
(3)the dynamic and evolving nature of smaller companies, which limits their ability to have static processes that are well-documented. 20 20 *Final Report of the Advisory Committee on Smaller Public Companies to the United States Securities and Exchange Commission* (April 23, 2006) at 35-36, available at *http://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf* (hereinafter “Advisory Committee Final Report”). The Advisory Committee suggested that these characteristics create unique differences in how smaller companies achieve effective ICFR that may not be adequately accommodated in AS No. 2 or other implementation guidance as currently applied in practice. 21 In addition, the Advisory Committee noted serious ramifications for smaller public companies stemming from the cost of frequent documentation changes and sustained review and testing of controls perceived to be necessary to comply with the Section 404 requirements. Indeed, the Advisory Committee noted that costs in relation to revenue have been disproportionately borne by smaller public companies. 22 21 *Id.* at 37. 22 *Id.* at 33. The Advisory Committee Final Report sets forth several recommendations for the Commission to consider regarding the application of the Section 404 requirements to smaller public companies. The Advisory Committee recommended partial or complete exemptions from the internal control reporting requirements for specified types of smaller public companies under certain conditions, unless and until a framework is developed for assessing ICFR that recognizes the characteristics and needs of those companies. The Advisory Committee also recommended, among other things, that the Commission, COSO and the PCAOB provide additional guidance to management to help facilitate the design and evaluation of ICFR and make processes related to internal control more cost-effective. 23 In addition, some commenters on the Advisory Committee's exposure draft of its report suggested that the Commission reexamine the appropriate role of outside auditors in connection with the management assessment required by the rules implementing Section 404. 24 23 *Id.* at 52. 24 *See,* *e.g.* , letter from BDO Seidman, LLP (April 3, 2006), available at *http://www.sec.gov/rules/other/265-23/bdoseidman9239.pdf.* Further, in April 2006, the U.S. Government Accountability Office issued a Report to the Committee on Small Business and Entrepreneurship, U.S. Senate, entitled *Sarbanes-Oxley Act, Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies* , which recommended that in considering the concerns of the Advisory Committee, the Commission should assess the available guidance for management to determine whether it is sufficient or whether additional action is needed. That report stated that management's implementation and evaluation efforts were largely driven by AS No. 2 because guidance was not available for management. 25 Further, the GAO Report recommended that the Commission coordinate with the PCAOB to help ensure that the Section 404-related audit standards and guidance are consistent with any additional management guidance issued. 26 25 United States Government Accountability Office Report to the Committee on Small Business and Entrepreneurship, U.S. Senate: *Sarbanes-Oxley Act: Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies* (April 2006) at 52-53, available at *http://www.gao.gov/new.items/d06361.pdf* (hereinafter “GAO Report”). 26 *Id.* at 58. On May 10, 2006, the Commission and PCAOB conducted a second Roundtable on Internal Control Reporting and Auditing Provisions to solicit feedback on accelerated filers' second year of compliance with the Section 404 requirements. Several participants indicated that their evaluation processes had improved from year one, but that additional improvements were needed. Although some expressed concern about being required to change the evaluation processes they have already implemented, a number of the participants expressed, at the roundtable and in their written comments, the view that additional management guidance was needed. 27 27 *See* transcript of Roundtable Discussion on Second Year Experiences with Internal Control Reporting and Auditing Provisions, May 10, 2006, Panels 1, 2, 3, and 5; letter from The Institute of Internal Auditors
(IIA)(May 1, 2006); letter from Institute of Management Accountants
(IMA)(May 4, 2006); letter from Canadian Bankers Association
(CBA)(April 28, 2006); letter from Deloitte & Touche LLP (May 1, 2006); letter from Ernst & Young LLP (May 1, 2006); letter from KPMG LLP (May 1, 2006); letter from PricewaterhouseCoopers LLP (May 1, 2006) and letter from Pfizer Inc. (May 1, 2006), all available at *http://www.sec.gov/news/press/4-511.shtml* . On July 11, 2006, COSO published additional application guidance for its control framework, *Internal Control over Financial Reporting—Guidance for Smaller Public Companies.* This guidance is intended to assist the management of smaller companies in understanding and applying the COSO framework. It outlines principles fundamental to the five components of internal control described in the COSO framework. Further, this guidance defines each of these principles and describes the attributes of each. It also lists a variety of approaches that smaller companies can use to apply the principles and includes examples of how smaller companies have applied the principles. The Commission anticipates that the guidance will help organizations of all sizes that use the COSO framework to better understand and apply it to ICFR. On July 11, 2006, the Commission issued a Concept Release to seek public feedback on the Commission's planned issuance of guidance regarding management's evaluation and assessment of the effectiveness of ICFR. 28 The Concept Release sought specific feedback in three areas described below, as well as inquired about whether there were other areas where guidance should also be provided. 28 *See* footnote 19 above for reference. • Risk and control identification (such as how management considers entity-level controls, financial statement account and disclosure level considerations, as well as fraud risks); 29 • The methods or approaches available to management to gather evidence to support its assessment, and factors management should consider in determining the nature, timing and extent of its evaluation procedures; and • Documentation requirements, including overall objectives of the documentation and factors that might influence documentation requirements. 29 The term “entity-level controls” as used in this document describes aspects of a system of internal control that have a pervasive effect on the entity's system of internal control such as controls related to the control environment ( *e.g.* , management's philosophy and operating style, integrity and ethical values, board or audit committee oversight; and assignment of authority and responsibility); controls over management override; the company's risk assessment process; centralized processing and controls, including shared service environments; controls to monitor results of operations; controls to monitor other controls, including activities of the internal audit function, the audit committee, and self-assessment programs; controls over the period-end financial reporting process; and policies that address significant business control and risk management practices. The term “company-level” is also commonly used to describe these controls. The Commission received 167 comment letters in response to the Concept Release, a majority of which supported additional Commission guidance to management that is applicable to companies of all sizes and complexities. 30 The Commission considered the feedback received in those comment letters in drafting this proposed interpretive guidance. 30 The public comments we received are available for inspection in the Commission's Public Reference Room at 100 F Street, NE., Washington DC 20549 in File No. S7-11-06. They are also available on-line at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* Further, the Commission has also received feedback that its guidance and ICFR rules have been interpreted as applying to non-profit and non-public organizations. The Commission does not regulate such organizations, and none of the Commission's guidance or rules is intended to apply to such organizations. II. Introduction To implement Section 404(a) of the Sarbanes-Oxley Act, the Commission adopted rules requiring that management annually issue a report that contains an assessment of the effectiveness of ICFR. 31 An overall objective of ICFR is to foster the preparation of reliable financial statements. Reliable financial statements must be materially accurate. Therefore, the central purpose of the evaluation is to assess whether there is a reasonable possibility of a material misstatement in the financial statements not being prevented or detected on a timely basis by the company's ICFR. 32 31 Exchange Act Rules 13a-15(f) and 15d-15(f) [17 CFR 240.13a-15(f) and 15d-15(b)] define internal control over financial reporting as: A process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements. 32 There is a reasonable possibility of an event when the likelihood of the event is either “reasonably possible” or “probable” as those terms are used in Financial Accounting Standards Board Statement No. 5, *Accounting for Contingencies* . Management's assessment is based on whether any material weaknesses exist as of the end of the fiscal year. A material weakness is a deficiency, or combination of deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's ICFR. 33 33 Existing PCAOB auditing literature describes a material weakness as a control deficiency, or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the company's annual or interim financial statements will not be prevented or detected. Our use of the phrase “reasonable possibility” rather than “more than remote” to describe the likelihood of a material error is intended to more clearly communicate the likelihood element. We note that the PCAOB has indicated that it intends to revise its definitions to use the phrase “reasonable possibility.” AS No. 2 establishes that a control is deficient when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The definition formulated here is intended to be consistent with its use in existing auditing literature and practice. Management should implement and conduct an evaluation that is sufficient to provide it with a reasonable basis for its annual assessment. Management should use its own experience and informed judgment in designing an evaluation process that aligns with the operations, financial reporting risks and processes of the company. 34 If the evaluation process identifies material weaknesses that exist as of the end of the fiscal year, such weaknesses must be disclosed in management's annual report with a statement that ICFR is ineffective. 35 If the evaluation identifies no internal control deficiencies that constitute a material weakness, management assesses ICFR as effective. 36 34 This point also is made in one of the publicly available and commonly used assessment tools—the third volume of the report by COSO, *Internal Control—Integrated Framework: Evaluation Tools.* That volume cautioned that “because facts and circumstances vary between entities and industries, evaluation methodologies and documentation will also vary. Accordingly, entities may use different evaluation tools, or use other methodologies utilizing different evaluative techniques.” 35 This focus on material weaknesses will lead to a better understanding by investors of internal control over financial reporting, as well as its inherent limitations. Further, the Commission's rules implementing Section 404, by providing for public disclosure of material weaknesses, concentrate attention on the most important internal control issues. 36 If management's evaluation process identifies material weaknesses, but all material weaknesses are remediated by the end of the fiscal year, management may exclude disclosure of those from its assessment and state that ICFR is effective as of the end of the fiscal year. However, management should consider whether disclosure of the remediated material weaknesses is appropriate or required under Item 307 or Item 308 of Regulations S-K or S-B or other Commission disclosure rules. Management is required to assess as of the end of the fiscal year whether the company's ICFR is effective in providing reasonable assurance regarding the reliability of financial reporting. 37 Management is not required by Section 404 of Sarbanes-Oxley to assess other internal controls, such as controls solely implemented to meet a company's operational objectives. Further, “reasonable assurance” does not mean absolute assurance. ICFR cannot prevent or detect all misstatements, whether unintentional errors or fraud. Rather, the “reasonable assurance” referred to in the Commission's implementing rules relates to similar language in the FCPA. Exchange Act Section 13(b)(7) defines “reasonable assurance” and “reasonable detail” as “such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.” 38 The Commission has long held that “reasonableness” is not an “absolute standard of exactitude for corporate records.” 39 In addition, the Commission recognizes that while “reasonableness” is an objective standard, there is a range of judgments that an issuer might make as to what is “reasonable” in implementing Section 404 and the Commission's rules. Thus, the terms “reasonable,” “reasonably” and “reasonableness” in the context of Section 404 implementation do not imply a single conclusion or methodology, but encompass the full range of appropriate potential conduct, conclusions or methodologies upon which an issuer may reasonably base its decisions. 37 *See* Exchange Act Rules 13a-15 and 15d-15. 38 15 U.S.C. 78m(b)(7). The conference committee report on amendments to the FCPA also noted that the standard “does not connote an unrealistic degree of exactitude or precision. The concept of reasonableness of necessity contemplates the weighing of a number of relevant factors, including the costs of compliance.” Cong. Rec. H2116 (daily ed. April 20, 1988). 39 Release No. 34-17500 (January 29, 1981) [46 FR 11544]. This release proposes guidance regarding matters we believe will help management design and conduct its evaluation and assess the effectiveness of ICFR. The guidance assumes management has established and maintains a system of internal accounting controls as required by the FCPA. Further, it does not explain how management should design its ICFR to comply with the control framework it has chosen. To allow appropriate flexibility, the guidance does not provide a checklist of steps management should perform in completing its evaluation. Rather, it describes a top-down, risk-based approach that allows for the exercise of significant judgment so that management can design and conduct an evaluation that is tailored to its company's individual circumstances. 40 41 40 Because management is responsible for maintaining effective internal control over financial reporting, this proposed interpretive guidance does not specifically address the role of the board of directors or audit committee in a company's evaluation and assessment of ICFR. However, we would ordinarily expect a board of directors or audit committee, as part of its oversight responsibilities for the company's financial reporting, to be knowledgeable and informed about the evaluation process and management's assessment, as necessary in the circumstances. 41 *See* footnote 42 below. The proposed guidance is organized around two broad principles. The first principle is that management should evaluate the design of the controls that it has implemented to determine whether they adequately address the risk that a material misstatement in the financial statements would not be prevented or detected in a timely manner. The guidance describes a top-down, risk-based approach to this principle, including the role of entity-level controls in assessing financial reporting risks and the adequacy of controls. The proposed guidance promotes efficiency by allowing management to focus on those controls that are needed to adequately address the risk of a material misstatement in its financial statements. There is no requirement in our guidance to identify every control in a process or document the business processes impacting ICFR. Rather, under the approach described herein, management focuses its evaluation process and the documentation supporting the assessment on those controls that it believes adequately address the risk of a material misstatement in the financial statements. For example, if management determines that the risks for a particular financial reporting element are adequately addressed by an entity-level control, no further evaluation of other controls is required. The second principle is that management's evaluation of evidence about the operation of its controls should be based on its assessment of risk. The proposed guidance provides an approach for making risk-based judgments about the evidence needed for the evaluation. This allows management to align the nature and extent of its evaluation procedures with those areas of financial reporting that pose the greatest risks to reliable financial reporting ( *i.e.* , whether the financial statements are materially accurate). As a result, management may be able to use more efficient approaches to gathering evidence, such as self-assessments, in low-risk areas and perform more extensive testing in high-risk areas. By following these two principles, we believe companies of all sizes and complexities will be able to implement our rules effectively and efficiently. 42 As smaller public companies generally have less complex internal control systems than larger public companies, this top-down, risk-based approach should enable smaller public companies in particular to scale and tailor their evaluation methods and procedures to fit their own facts and circumstances. 43 We encourage smaller public companies to take advantage of the flexibility and scalability of this approach to conduct an efficient evaluation of internal control over financial reporting. 44 Further, we believe the proposed guidance will assist companies of all sizes in completing the annual evaluation of ICFR in an effective and efficient manner by addressing a number of the common areas of concern that have been identified over the past two years. For example, the proposed guidance: 42 Commenters on the Concept Release were supportive of principles-based guidance that applies to all companies. See for example, letters regarding file number S7-11-06 of: Financial Executives International, Metlife, and Siemens AG at *http://www.sec.gov/comments/s7-11-06/s71106.shtml* . 43 *See* Advisory Committee Final Report at 35-38. 44 While a company's individual facts and circumstances should be considered in determining whether a company is a smaller public company, a company's market capitalization and annual revenues are useful indicators of its size and complexity. In light of the Advisory Committee Final Report and the SEC's rules defining “accelerated filers” and “large accelerated filers,” companies with a market capitalization of approximately $700 million or less, with reported annual revenues of approximately $250 million or less, should be presumed to be “smaller companies,” with the smallest of these companies, with a market capitalization of approximately $75 million or less, described as “microcaps.” • Explains how to vary approaches for gathering evidence to support the evaluation based on risk assessments; • Explains the use of “daily interaction,” self-assessment, and other on-going monitoring activities as evidence in the evaluation; • Explains the purpose of documentation and how management has flexibility in approaches to documenting support for its assessment; • Provides management significant flexibility in making judgments regarding what constitutes adequate evidence in low-risk areas; and • Allows for management and the auditor to have different testing approaches. The information management gathers and analyzes from its evaluation process serves as the basis for its assessment on the effectiveness of its ICFR. The extent of effort required for a reasonable evaluation process will largely depend on the company's existing policies, procedures and practices. For example, in some situations management may determine that its existing activities, which may be undertaken for other reasons, provide information that is relevant to the assessment. In other situations, management may have to implement additional procedures to gather and analyze the information needed to provide a reasonable basis for its annual assessment. III. Proposed Interpretive Guidance The proposed interpretive guidance addresses the following topics: A. The Evaluation Process 1. Identifying Financial Reporting Risks and Controls a. Identifying Financial Reporting Risks b. Identifying Controls that Adequately Address Financial Reporting Risks c. Consideration of Entity-level Controls d. Role of General Information Technology Controls e. Evidential Matter to Support the Assessment 2. Evaluating Evidence of the Operating Effectiveness of ICFR a. Determining the Evidence Needed to Support the Assessment b. Implementing Procedures to Evaluate Evidence of the Operation of ICFR c. Evidential Matter to Support the Assessment 3. Multiple Location Considerations B. Reporting Considerations 1. Evaluation of Control Deficiencies 2. Expression of Assessment of Effectiveness of ICFR by Management and the Registered Public Accounting Firm 3. Disclosures About Material Weaknesses 4. Impact of a Restatement of Previously Issued Financial Statements on Management's Report on ICFR 5. Inability to Assess Certain Aspects of ICFR A. The Evaluation Process The objective of the evaluation of ICFR is to provide management with a reasonable basis for its annual assessment as to whether any material weaknesses in ICFR exist as of the end of the fiscal year. To meet this objective, management identifies the risks to reliable financial reporting, evaluates whether the design of the controls which address those risks is such that there is a reasonable possibility that a material misstatement in the financial statements would not be prevented or detected in a timely manner, and evaluates evidence about the operation of the controls included in the evaluation based on its assessment of risk. The evaluation process will vary from company to company; however, the approach we discuss is a top-down, risk-based approach which we believe is typically most efficient and effective. The evaluation process guidance is presented in two sections. The first section explains an approach to identifying financial reporting risks and evaluating whether the controls management has implemented are designed to address those risks. The second section describes an approach for making judgments about the methods and procedures for evaluating whether the operation of ICFR is effective. Both sections explain how entity-level controls 45 impact the evaluation process as well as how management focuses its evaluation efforts on the greatest risks. 45 *See* footnote 29 above. Under the Commission's rules, management's annual assessment must be made in accordance with a suitable control framework's definition of effective internal control. 46 These control frameworks define elements of internal control that are expected to be present and functioning in an effective internal control system. In assessing effectiveness, management evaluates whether its ICFR includes policies, procedures and activities that address all of the elements of internal control that the applicable control framework describes as necessary for an internal control system to be effective. The framework elements describe the characteristics of an internal control system that may be relevant to individual areas of the company's ICFR, pervasive to many areas, or entity-wide. Therefore, management's evaluation process includes not only controls involving particular areas of financial reporting, but also the entity-wide and other pervasive elements of internal control that are defined by the control frameworks. This guidance is not intended to replace the elements of an effective system of internal control as defined within a control framework. 46 For example, both the COSO framework and the Turnbull Report state that determining whether a system of internal control is effective is a subjective judgment resulting from an assessment of whether the five components ( *i.e.* , control environment, risk assessment, control activities, monitoring, and information and communication) are present and functioning effectively. Although CoCo states that an assessment of effectiveness be made against twenty specific criteria, it acknowledges that the criteria can be regrouped into different structures, and includes a table showing how the criteria can be regrouped into the five-component structure of COSO. Thus, these five components are also criteria for effective internal control. 1. Identifying Financial Reporting Risks and Controls The approach described herein allows management to identify controls and maintain supporting evidential matter for its controls in a manner that is tailored to a company's financial reporting risks (as defined below). Thus, management can avoid identifying and documenting controls that are not important to achieving the objectives of ICFR. Management should assess whether its controls are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). 47 The evaluation begins with the identification and assessment of the risks to reliable financial reporting ( *i.e.* , materially accurate financial statements), including changes in those risks. Management then evaluates whether it has controls placed in operation that are designed to adequately address those risks. Management ordinarily would consider the company's entity-level controls in both its assessment of risk and in identifying which controls adequately address the risk. The controls that management identifies as adequately addressing the financial reporting risks are then subject to procedures to evaluate evidence of the operating effectiveness, as determined pursuant to Section III.A.2. 47 Management of foreign private issuers that file financial statements prepared in accordance with home country generally accepted accounting principles or International Financial Reporting Standards with a reconciliation to U.S. GAAP should plan and conduct their evaluation process based on their primary financial statements ( *i.e.* , home country GAAP or IFRS) rather than the reconciliation to U.S. GAAP. The effort necessary to conduct an initial evaluation of financial reporting risks (as defined below) and the related controls will vary among companies, partly because this effort will depend on management's existing financial reporting risk assessment and monitoring activities. 48 Even so, in subsequent years for most companies, management's effort should ordinarily be significantly less because subsequent evaluations should be more focused on changes in risks and controls rather than identification of all financial reporting risks and the related controls. Further, in each subsequent year, the evidence necessary to reasonably support the assessment will only need to be updated from the prior year(s), not recreated anew. 48 Monitoring activities are those that assess the quality of internal control performance over time. These activities involve assessing the design and operation of controls on a timely basis and taking necessary corrective actions. This process is accomplished through on-going monitoring activities, separate evaluations by internal audit or personnel performing similar functions, or a combination of the two. On-going monitoring activities are often built into the normal recurring activities of an entity and include regular management and supervisory review activities. a. Identifying Financial Reporting Risks Ordinarily, the identification of financial reporting risks begins with evaluating how the requirements of GAAP apply to the company's business, operations and transactions. Management must provide investors with financial statements that fairly present the company's financial position, results of operations and cash flows in accordance with GAAP. A lack of fair presentation involves material misstatements (including omissions) in one or more of the financial statement amounts or disclosures (“financial reporting elements”). Management uses its knowledge and understanding of the business, its organization, operations, and processes to consider the sources and potential likelihood of misstatements in financial reporting elements and identifies those that could result in a material misstatement to the financial statements (“financial reporting risks”). Internal and external risk factors that impact the business, including the nature and extent of any changes in those risks, may give rise to financial reporting risks. Financial reporting risks may also arise from sources such as the initiation, authorization, processing and recording of transactions and other adjustments that are reflected in financial reporting elements. Management's evaluation of financial reporting risks should also consider the vulnerability of the entity to fraudulent activity ( *e.g.* , fraudulent financial reporting, misappropriation of assets and corruption) and whether any of those exposures could result in a material misstatement of the financial statements. 49 49 *See* “Management Antifraud Programs and Controls—Guidance to Help Prevent, Deter, and Detect Fraud,” which was issued jointly by seven professional organizations and is included as an exhibit to AU Sec. 316, *Consideration of Fraud in a Financial Statement Audit* (as adopted on an interim basis by the PCAOB in PCAOB Rule 3200T). The methods and procedures for identifying financial reporting risks will vary based on the characteristics of the company. 50 These characteristics include, among others, the size, complexity, and organizational structure of the company and its processes and financial reporting environment, as well as the control framework used by management. For example, to effectively identify financial reporting risks in larger businesses or in situations involving complex business processes, management's evaluation may need to involve employees with specialized knowledge who collectively have the necessary understanding of the requirements of GAAP, the underlying business transactions, the process activities, including the role of computer technology, that are required to initiate, authorize, record and process transactions, and the points within the process at which a material misstatement, including a misstatement due to fraud, may occur. In contrast, in a small company with less complex business processes that operate on a centralized basis and with little change in the risks or processes, management's daily involvement with the business may provide it with adequate knowledge to appropriately identify financial reporting risks. 50 To provide management the flexibility needed to implement an evaluation process that best suits its particular circumstances; the guidance in this proposed interpretative release does not prescribe a particular methodology for the identification of risks and controls. While the May 2005 Staff Guidance used the term “significant account,” which is used in AS No. 2, we are not requiring that companies use the guidance in the auditing literature to conduct their evaluation approach. The Commission encourages the development of methodologies and tools that meet the objectives of the ICFR evaluation. b. Identifying Controls That Adequately Address Financial Reporting Risks Management should evaluate whether it has controls placed in operation ( *i.e.* , in use) that are designed to address the company's financial reporting risks. 51 The determination of whether an individual control, or a combination of controls, adequately addresses a financial reporting risk involves judgments about both the likelihood and potential magnitude of misstatements arising from the financial reporting risk. For purposes of the evaluation of ICFR, the controls are not adequate when their design is such that there is a reasonable possibility that a misstatement in the related financial reporting element that could result in a material misstatement of the financial statements will not be prevented or detected on a timely basis. 52 If management determines that its controls are not adequately designed, a deficiency exists that must be evaluated to determine whether it is a material weakness. The guidance in Section III.B.1. is designed to assist management with that evaluation. 53 51 A control consists of a specific set of policies, procedures, and activities designed to meet an objective. A control may exist within a designated function or activity in a process. A control's impact on ICFR may be entity-wide or specific to a class of transactions or application. Controls have unique characteristics—they can be: automated or manual; reconciliations; segregation of duties; review and approval authorizations; safeguarding and accountability of assets, preventing error or fraud detection, or disclosure. Controls within a process may consist of financial reporting controls and operational controls ( *i.e.* , those designed to achieve operational objectives). 52 The use of the phrase “reasonable possibility that a misstatement in the related financial reporting element that could result in a material misstatement of the financial statements” is intended solely to assist management in identifying matters for disclosure under Item 308 of Regulation S-K. It is not intended to interpret or describe management's responsibility under FCPA or modify a control framework's definition of what constitutes an effective system of internal control. 53 A deficiency in the design of ICFR exists when
(a)necessary controls are missing or
(b)existing controls are not properly designed so that, even if the control operates as designed, the financial reporting risks would not be addressed. AS No. 2 states that a deficiency in the design of ICFR exists when
(a)a control necessary to meet the control objective is missing or
(b)an existing control is not properly designed so that, even if the control operates as designed, the control objective is not always met. See AS No. 2 ¶ 8. Management may identify controls for a financial reporting element that are preventive, detective or a combination of both. 54 It is not necessary to identify all controls that exist. Rather, the objective of this evaluation step is to identify controls that adequately address the risk of misstatement for the financial reporting element that could result in a material misstatement in the financial statements. To illustrate, management may determine for a financial reporting element that a control within the company's period-end financial reporting process ( *i.e.* , an entity-level control) is designed in a manner that adequately addresses the risk that a misstatement in interest expense, that could result in a material misstatement in the financial statements, may occur and not be detected. In such a case, management may not need to identify any additional controls related to interest expense. 54 Preventive controls have the objective of preventing the occurrence of errors or fraud that could result in a misstatement of the financial statements. Detective controls have the objective of detecting errors or fraud that has already occurred that could result in a misstatement of the financial statements. Preventive and detective controls may be completely manual, involve some degree of computer automation, or be completely automated. Management may consider the efficiency with which evidence of the operation of a control can be evaluated when identifying the controls that adequately address the financial reporting risks. For example, when more than one control exists that individually addresses a particular risk ( *i.e.* , redundant controls), management may decide to select the control for which evidence of operating effectiveness can be obtained more efficiently. Moreover, when adequate general information technology (“IT”) controls exist, and management has determined the operation of such controls is effective, management may determine that automated controls may be more efficient to evaluate than manual controls. Considering the efficiency with which the operation of a control can be evaluated will often enhance the overall efficiency of the evaluation process. When identifying the controls that address financial reporting risks, management may learn information about the characteristics of the controls, such as the judgment required to operate them or their complexity, that are considered in its judgments about the risk that the control will fail to operate as designed. Section III.A.2. discusses how these characteristics are considered in determining the nature and extent of evidence of the operation of the control that management evaluates. At the end of this identification process, management will have identified for testing only those controls that are needed to adequately address the risk of a material misstatement in its financial statements and for which evidence about their operation can be obtained most efficiently. c. Consideration of Entity-level Controls Management considers entity-level controls when identifying and assessing financial reporting risks and related controls for a financial reporting element. In doing so, it is important for management to consider the nature of the entity-level controls and how they relate to the financial reporting element. 55 Some entity-level controls are designed to operate at the process, transaction or application level and might adequately prevent or detect on a timely basis misstatements in one or more financial reporting elements that could result in a material misstatement to the financial statements. On the other hand, an entity-level control may be designed to identify possible breakdowns in lower-level controls, but not in a manner that would, by itself, sufficiently address the risk that misstatements to financial reporting elements that could result in a material misstatement to the financial statements will be prevented or detected on a timely basis. 55 Controls can be either directly or indirectly related to a financial reporting element. Controls that are designed to have a specific effect on a financial reporting element are considered directly related. For example, controls established to ensure that personnel are properly counting and recording the annual physical inventory relate directly to the existence of the inventory. The more indirect the relationship to a financial reporting element, the less effective a control may be in preventing or detecting a misstatement. Some entity-level controls, such as the control environment ( *e.g.* , tone at the top and entity-wide programs such as codes of conduct and fraud prevention), are indirectly related to a financial reporting element and may not, by themselves, be effective at preventing or detecting a misstatement in a financial reporting element. Therefore, while management ordinarily would consider entity-level controls of this nature when assessing financial reporting risks and evaluating the adequacy of controls, it is unlikely management will identify only this type of entity-level control as adequately addressing a financial reporting risk identified for a financial reporting element. 56 56 Many commenters on the Concept Release requested clarification of the role of entity-level controls in management's evaluation. See for example, letters regarding file number S7-11-06 of Aerospace Industries Association, Sprint Nextel Corporation, Unum Provident, Dupont, Deutsche Telekom, Ernst & Young LLP, Deloitte & Touche LLP, and Grant Thornton LLP at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* See Section III.A.2.a. for additional guidance on entity-level controls. d. Role of General Information Technology Controls Controls that management identifies as addressing financial reporting risks may be automated ( *e.g.* , application controls that update accounts in the general ledger for subledger activity) or dependent upon IT functionality ( *e.g.* , a control that manually investigates items contained in a computer generated exception report). In these situations, management's evaluation process generally considers the design and operation of the automated or IT dependent controls management identifies and the relevant general IT controls over the applications providing the IT functionality. While general IT controls ordinarily do not directly prevent or detect material misstatements in the financial statements, the proper and consistent operation of automated or IT dependent controls depends upon effective general IT controls. Aspects of general IT controls that may be relevant to the evaluation of ICFR will vary depending upon a company's facts and circumstances. Ordinarily, management should consider whether, and the extent to which, general IT control objectives related to program development, program changes, computer operations, and access to programs and data apply to its facts and circumstances. For purposes of the evaluation of ICFR, management only needs to evaluate those general IT controls that are necessary to adequately address financial reporting risks. e. Evidential Matter To Support the Assessment As part of its evaluation of ICFR, management must maintain reasonable support for its assessment. 57 Documentation of the design of the controls management has placed in operation to adequately address the financial reporting risks is an integral part of the reasonable support. The form and extent of the documentation will vary depending on the size, nature, and complexity of the company. It can take many forms ( *e.g.* , paper documents, electronic, or other media) and it can be presented in a number of ways ( *e.g.* , policy manuals, process models, flowcharts, job descriptions, documents, internal memorandums, forms, etc). The documentation does not need to include all controls that exist within a process that impacts financial reporting. Rather, and more importantly, the documentation can be focused on those controls that management concludes are adequate to address the financial reporting risks. 58 57 *See* instructions to Item 308 of Regulations S-K and S-B. 58 Commenters on the Concept Release were supportive of guidance regarding the form, nature, and extent of documentation. See for example letters regarding file number S7-11-06 of EDS, Controllers' Leadership Roundtable, Sasol Group, New York State Society of Certified Public Accountants, Grant Thornton LLP, and Financial Executives International at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* Section III.A.2.c also provides guidance with regard to the documentation required to support management's evaluation of operating effectiveness. In addition to providing support for the assessment of ICFR, documentation of the design of controls also supports other objectives of an effective system of internal control. For example, it serves as evidence that controls within ICFR, including changes to those controls, have been identified, are capable of being communicated to those responsible for their performance, and are capable of being monitored by the company. The documentation also provides the foundation for appropriate communication concerning responsibilities for performing controls and for the company's evaluation and monitoring of the operation of controls. Management should also consider the need to maintain evidential matter, including documentation, of the entity-wide and other pervasive elements of its ICFR that it believes address the elements of internal control that its chosen control framework prescribes as necessary for an effective system of internal control. 59 59 *Id.* 2. Evaluating Evidence of the Operating Effectiveness of ICFR Management should evaluate evidence of the effective operation of ICFR. A control operates effectively when it is performed in a manner consistent with its design by individuals with the necessary authority and competency. Management ordinarily focuses its evaluation of the operation of controls on those areas of ICFR that pose the highest risk to reliable financial reporting. The evaluation procedures that management uses to gather evidence about the effective operation of ICFR should be tailored to its assessment of the risk characteristics of both the individual financial reporting elements and the related controls (collectively, ICFR risk). Management's assessment of ICFR risk also considers the impact of entity-level controls, such as the relative strengths and weaknesses of the control environment, which may influence management's judgments about the risks of failure for particular controls. Management varies the nature, timing and extent of the evaluation methods it implements in response to its judgments about ICFR risk. Evidence about the effective operation of controls may be obtained from direct-testing of controls and on-going monitoring activities. The nature, timing and extent of evaluation procedures necessary for management to obtain sufficient evidence of the effective operation of a control depends on the assessed ICFR risk. In determining whether the evidence obtained is sufficient to provide a reasonable basis for its evaluation of the operation of ICFR, management should consider not only the quantity of evidence ( *e.g.* , sample size) but also qualitative characteristics of the evidence. The qualitative characteristics of the evidence include the nature of the evaluation procedures performed, the period of time to which the evidence relates, the objectivity of those evaluating the controls, and, in the case of monitoring controls, the extent of validation through direct testing of underlying controls. For any individual control, different combinations of the nature, timing, and extent of evaluation procedures may provide sufficient evidence. The sufficiency of evidence is not determined by any of these attributes individually. a. Determining the Evidence Needed To Support the Assessment Management should evaluate the ICFR risk of the controls identified in Section III.A.1. to determine the evidence needed to support the assessment. The risk assessment should consider the impact of the characteristics of the financial reporting elements to which the controls relate and the characteristics of the controls themselves. This concept is demonstrated in the following diagram. EP27DE06.115 Characteristics of the financial reporting element that management considers include both the materiality of the financial reporting element and the susceptibility of the underlying account balances, transactions or other supporting information to material misstatement. As the materiality of the financial reporting element increases in relation to the amount of misstatement that would be considered material to the financial statements, management's assessment of risk generally would correspondingly increase. In addition, financial reporting elements would generally have higher risk when they include transactions, account balances or other supporting information that is prone to misstatement. For example, elements which:
(1)Involve judgment in determining the recorded amounts;
(2)are susceptible to fraud;
(3)have complexity in the underlying accounting requirements; or
(4)are subject to environmental factors, such as technological and/or economic developments, would generally be assessed as higher risk. Management also considers the likelihood that a control might fail to operate effectively. That likelihood may depend on, among other things, the type of control ( *i.e.* , manual or automated), the complexity of the control, the risk of management override, the judgment required to operate the control, the nature and materiality of misstatements that the control is intended to prevent or detect, and the degree to which the control relies on the effectiveness of other controls ( *e.g.* , general IT controls). For example, management's risk assessment would be higher for a financial reporting element that involves controls whose operation requires significant judgment than for a financial reporting element that involves non-complex controls requiring little judgment on behalf of management. Certain financial reporting elements, such as those involving significant accounting estimates, 60 related party transactions, or critical accounting policies 61 generally would be assessed as having higher risk for both the risk of material misstatement to the financial reporting element and the risk of control failure. When the controls related to these financial reporting elements are subject to the risk of management override, involve significant judgment, or are complex, they should generally be assessed as having higher ICFR risk. 60 “Significant accounting estimates” referred to here relate to accounting estimates or assumptions where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and the impact of the estimates and assumptions on financial condition or operating performance is material. See *Interpretation: Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations.* Release No. 33-8350 (December 19, 2003). 61 “Critical accounting policies” are defined as those policies that are most important to the financial statement presentation, and require management's most difficult, subjective, or complex judgments, often as the result of a need to make estimates about the effect of matters that are inherently uncertain. See *Action: Cautionary Advice Regarding Disclosure About Critical Accounting Policies.* Release No. 33-8040 (December 12, 2001). When a combination of controls is required to adequately address the risks of a financial reporting element, management should analyze the risk characteristics of each control. This is because the controls associated with a given financial reporting element may not necessarily share the same risk characteristics. For example, a financial reporting element involving significant estimation may require a combination of automated controls that accumulate source data and manual controls that require highly judgmental determinations of assumptions. In this case, the automated controls may be subject to a system that is stable ( *i.e.* , has not undergone significant change) and is supported by effective general controls and are therefore assessed as lower risk, whereas the manual controls would be assessed as higher risk. The existence of entity-level controls ( *e.g.* , controls within the control environment) may influence management's determination of the evidence needed to sufficiently support its assessment. For example, management's judgment about the likelihood that a control fails to operate effectively may be influenced by a highly effective control environment and thereby impact the evidence evaluated for that control. However, a strong control environment would not eliminate the need for evaluation procedures that consider the effective operation of the control in some manner. 62 62 *See* references at footnote 56 to comments received related to the role of entity-level controls within management's evaluation. b. Implementing Procedures To Evaluate Evidence of the Operation of ICFR The methods and procedures management uses to gather evidence about the effective operation of controls are based on its assessment of the ICFR risk. Therefore, the methods and procedures, including the timing of when they are performed, are a function of the evidence that management considers necessary to provide reasonable support for its assessment of ICFR based on the assessment of ICFR risk. These procedures may be integrated with the daily responsibilities of its employees or implemented specifically for purposes of the ICFR evaluation. Evidence that is relevant to the assessment may come from activities that are performed for other reasons ( *e.g.* , day-to-day activities to manage the operations of the business). Further, activities performed to meet the monitoring objectives of the control framework will provide evidence to support the assessment. 63 63 Many commenters on the Concept Release requested guidance clarifying that evidence relevant to supporting the evaluation may come from activities that are integrated into management's daily activities or performed for other reasons. See, for example, letters regarding file number S7-11-06 of EDS, American Electric Power and the Hundred Group of Finance Directors at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* The evidence management evaluates may come from a combination of on-going monitoring and direct testing of controls. On-going monitoring includes activities that provide information about the operation of controls and may be obtained, for example, through self-assessment 64 procedures and the analysis of performance measures designed to track the operation of controls. 65 Direct tests of controls are tests performed periodically to provide evidence as of a point in time and may provide information about the reliability of on-going monitoring activities. 64 Self-assessment is a broad term that refers to different types of procedures performed by various parties. It includes an assessment made by the same personnel who are responsible for performing the control. However, self-assessment may also be used to refer to assessments and tests of controls performed by persons who are members of management but are not the same personnel who are responsible for performing the control. In this manner, an assessment may be carried out with varying degrees of objectivity. The sufficiency of the evidence derived from self-assessment depends on how it is implemented and the objectivity of those performing the assessment. COSO's 1992 framework defines self-assessments as “evaluations where persons responsible for a particular unit or function will determine the effectiveness of controls for their activities.” 65 Management's evaluation process may also consider the results of key performance indicators (“KPI's”) in which management reconciles operating and financial information with its knowledge of the business. While these KPI's may indicate a potential misstatement in a financial reporting element and therefore are relevant to meeting the objectives of ICFR, they generally do not monitor the effective operation of other controls. The procedures that management implements pursuant to this section should evaluate the effective operation of these KPI type controls when they are identified pursuant to Section III.A.1.b. as addressing financial reporting risk. The risk assessments discussed in Section III.A.2.a. can assist management in determining the evaluation procedures that provide reasonable support for the assessment. As the assessed risk increases, management will ordinarily adjust the nature of the evidence that is obtained. For example, management can vary the nature of evidence from on-going monitoring by adjusting the extent of validation through periodic direct testing of the underlying controls and/or adjusting the objectivity of those performing the self-assessments. Management can also vary the nature of evidence obtained by adjusting the period of time covered by direct testing. When ICFR risk is assessed as high, management's evaluation would ordinarily include evidence obtained from direct testing. Further, management's evaluation would ordinarily consider evidence from a reasonable period of time during the year, including the fiscal year-end. For lower risk areas, management may conclude that evidence from on-going monitoring is sufficient and that no direct testing is required. 66 66 Commenters on the Concept Release were supportive of guidance on factors that should be considered in using a risk-based evaluation. See, for example, letters regarding file number S7-11-06 of Aerospace Industries Association, American Institute of Certified Public Accountants, American Electric Power, Edison Electric Institute, and PricewaterhouseCoopers LLP at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* Section III.A.2.a. also provides guidance on a risked-based evaluation. In smaller companies, management's daily interaction with its controls may provide it with sufficient knowledge about their operation to evaluate the operation of ICFR. Knowledge from daily interaction includes information obtained by those responsible for evaluating the effectiveness of ICFR through their on-going direct knowledge and direct supervision of control operation. Management should consider its particular facts and circumstances when determining whether or not its daily interaction with controls provides sufficient evidence for the evaluation. For example, daily interaction may provide sufficient evidence when the operation of controls is centralized and the number of personnel involved in their operation is limited. Conversely, daily interaction in companies with multiple management reporting layers or operating segments would generally not provide sufficient evidence because those responsible for assessing the effectiveness of ICFR would not ordinarily be sufficiently knowledgeable about the operation of the controls. In these situations, management would ordinarily utilize direct testing or on-going monitoring type evaluation procedures to have reasonable support for the assessment. 67 67 Commenters on the Concept Release were supportive of guidance on how management's daily interaction can support the evaluation. See, for example, letters regarding file number S7-11-06 of U.S. Oncology, Inc., EDS, American Electric Power, MetLife, Texas Society of Certified Public Accountants, and the Controllers' Leadership Roundtable at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* Management evaluates the evidence it gathers to determine whether the operation of a control is effective. This evaluation considers whether the control operated as designed and includes matters such as how the control was applied, the consistency with which it was applied, and whether the person performing the control possesses the necessary authority and competence to perform the control effectively. If management determines that the operation of the control is not effective, a deficiency exists that must be evaluated to determine whether it is a material weakness. c. Evidential Matter To Support the Assessment Management's assessment must be supported by evidential matter that provides reasonable support for its assessment. The nature of the evidential matter may vary based on the assessed level of risk of the underlying controls and other circumstances, but we would expect reasonable support for an assessment to include the basis for management's assessment, including documentation of the methods and procedures it utilizes to gather and evaluate evidence. The evidential matter may take many forms and will vary depending on the assessed level of risk for controls over each of its financial reporting elements. For example, management may document its overall strategy in a comprehensive memorandum that establishes the evaluation approach, the evaluation procedures, and the basis for conclusions for each financial reporting element. Management may determine that it is not necessary to separately maintain copies of the evidence it evaluates; however, the evidential matter within the company's books and records should be sufficient to provide reasonable support for its assessment. For example, in smaller companies, where management's daily interaction with its controls provides the basis for its assessment, management may have limited documentation created specifically for the evaluation of ICFR. However, in these instances, management should consider whether reasonable support for its assessment would include documentation of how its interaction provided it with sufficient evidence. This documentation might include memoranda, e-mails, and instructions or directions from management to company employees. 68 68 *See* footnote 58 for references to Concept Release comment letters requesting guidance on documentation. Further, management should also consider the degree of complexity of the control, the level of judgment required to operate the control, and the risk of misstatement in the financial reporting element that could result in a material misstatement in the financial statements in determining the nature of supporting evidential matter. As these factors increase, management may determine that evidential matter supporting the assessment should be separately maintained. 69 For example, management may decide that separately maintained documentation will assist the audit committee in exercising its oversight of the company's financial reporting. 69 *Id.* If management believes that the operation of the entity-wide and other pervasive elements of its ICFR address the elements of internal control that its applicable framework describes as necessary for an effective system, then the evidential matter constituting reasonable support for management's assessment would ordinarily include documentation of how management formed that belief. 70 70 *Id.* 3. Multiple Location Considerations 71 71 Guidance in this area was requested in numerous comments received in response to the Concept Release. See, for example, letters regarding file number S7-11-06 of Eli Lilly, Deloitte & Touche LLP, Ernst & Young LLP, Sasol Group, and the Institute of Management Accountants at *http://www.sec.gov/comments/s7-11-06/s71106.shtml.* Management's consideration of financial reporting risks generally includes all of its locations or business units. 72 Management may determine that financial reporting risks are adequately addressed by controls which operate centrally, in which case the evaluation approach is similar to that of a business with a single location or business unit. When the controls necessary to address financial reporting risks operate at more than one location or business unit, management would generally evaluate evidence of the operation of the controls at the individual locations or business units. 72 Consistent with the guidance in Section III.A.1., management may determine when identifying financial reporting risks that some locations are so insignificant that no further evaluation procedures are needed. In situations where management determines that the ICFR risk of the controls (as determined through Section III.A.2.a) that operate at individual locations or business units is low, management may determine that evidence gathered through self-assessment routines or other on-going monitoring activities, when combined with the evidence derived from a centralized control that monitors the results of operations at individual locations, may constitute sufficient evidence for the evaluation. In other situations, management may determine that, because of the complexity or judgment in the operation of the controls at the individual location, the risks of the controls are high, and therefore more evidence is needed about the effective operation of the controls at the location. When performing its evaluation of the risk characteristics of the controls identified, management should consider whether there are location-specific risks that might impact the risk that a control might fail to operate effectively. Additionally, there may be pervasive factors at a given location that cause all controls, or a majority of controls, at that location to be considered higher risk. Management should generally consider the risk characteristics of the controls for each financial reporting element, rather than making a single judgment for all controls at that location when deciding whether the nature and extent of evidence is sufficient. B. Reporting Considerations 1. Evaluation of Control Deficiencies In order to determine whether a control deficiency, or combination of control deficiencies, is a material weakness, management evaluates each control deficiency that comes to its attention. 73 Control deficiencies that are determined to be a material weakness must be disclosed in management's annual report on its assessment of the effectiveness of ICFR. 74 Management may not disclose that it has assessed ICFR as effective if there is one or more control deficiencies determined to be a material weakness in ICFR. As part of the evaluation of ICFR, management considers whether the deficiencies, individually or in combination, are material weaknesses as of the end of the fiscal year. Multiple control deficiencies that affect the same financial statement account balance or disclosure increase the likelihood of misstatement and may, in combination, constitute a material weakness if there is a reasonable possibility 75 that a material misstatement to the financial statements would not be prevented or detected in a timely manner, even though such deficiencies may be individually insignificant. Therefore, management should evaluate individual control deficiencies that affect the same account balance, disclosure, relevant assertion, or component of internal control, to determine whether they collectively result in a material weakness. 76 73 Because of the importance to investors of the reconciliation to U.S. GAAP, when management of foreign private issuers that file in home country GAAP or IFRS determine the severity of an identified control deficiency, management should consider the impact of the control deficiency to the U.S. GAAP reconciliation disclosure. Hence, management should take into consideration both the amounts reported in the primary financial statements and the amounts reported in the reconciliation to U.S. GAAP in evaluating the severity of the control deficiency. For example, it would be inappropriate to determine, without further consideration, that a control deficiency associated with an item included in the reconciliation to U.S. GAAP, is not material to the primary financial statements, and therefore cannot be, by definition, a material weakness. 74 Pursuant to Rules 13a-14 and 15d-14 management discloses to the auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function) all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer's ability to record, process, summarize and report financial data and have identified for the issuer's auditors any material weaknesses in internal controls. The interaction of qualitative considerations that affect ICFR with quantitative considerations ordinarily results in deficiencies in the following areas being at least significant deficiencies in internal control over financial reporting: Controls over the selection and application of accounting policies that are in conformity with generally accepted accounting principles; antifraud programs and controls; controls over non-routine and non-systematic transactions; and controls over the period-end financial reporting process. If management determines that the deficiency would prevent prudent officials in the conduct of their own affairs from concluding that they have reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles, then management should deem the deficiency to be at least a significant deficiency. 75 *See* footnote 32. 76 A similar approach to aggregating individually insignificant control deficiencies was used by the AICPA in Statement on Auditing Standard No. 112. The evaluation of a control deficiency should include both quantitative and qualitative factors. Management can evaluate a deficiency in ICFR by considering the likelihood that the company's ICFR will fail to prevent or detect a misstatement of a financial statement element, or component thereof, on a timely basis; and the magnitude of the potential misstatement resulting from the deficiency or deficiencies. This evaluation is based on whether the company's controls will fail to prevent or detect a misstatement on a timely basis, not necessarily on whether a misstatement actually has occurred. Several factors affect the likelihood that a deficiency, or a combination of deficiencies, will result in a misstatement in a financial reporting element not being prevented or detected on a timely basis. The factors include, but are not limited to, the following: • The nature of the financial statement elements, or components thereof, involved ( *e.g.* , suspense accounts and related party transactions involve greater risk); • The susceptibility of the related asset or liability to loss or fraud ( *i.e.* , greater susceptibility increases risk); • The subjectivity, complexity, or extent of judgment required to determine the amount involved ( *i.e.* , greater subjectivity, complexity, or judgment, like that related to an accounting estimate, increases risk); • The interaction or relationship of the control with other controls ( *i.e.* , the interdependence or redundancy of the control); • The interaction of the deficiencies ( *i.e.* , when evaluating a combination of two or more deficiencies, whether the deficiencies could affect the same financial statement accounts and assertions); and • The possible future consequences of the deficiency. Management should evaluate how the controls interact with other controls when evaluating the likelihood that the company's controls will fail to prevent or detect on a timely basis a misstatement that is material to the company's financial statements. There are controls, such as general IT controls, on which other controls depend. Some controls function together as a group of controls. Other controls overlap, in the sense that more than one control may individually achieve the same objective. Several factors affect the magnitude of the misstatement that might result from a deficiency or deficiencies in controls. The factors include, but are not limited to, the following: • The financial statement amounts or total of transactions exposed to the deficiency; and • The volume of activity in the account balance or class of transactions exposed to the deficiency that has occurred in the current period or that is expected in future periods. In evaluating the magnitude of the potential misstatement to the company's financial statements as a whole, management should recognize that the maximum amount that an account balance or total of transactions can be overstated is the recorded amount, while understatements could be larger. Moreover, in many cases, the probability of a small misstatement will be greater than the probability of a large misstatement. For example, if the deficiency is that errors identified during an account reconciliation are not being investigated in a timely manner, management should consider the possibility that larger errors are more likely to be investigated or identified through other controls than smaller ones. Management should evaluate the effect of compensating controls 77 when determining whether a control deficiency or combination of deficiencies is a material weakness. When evaluating a deficiency in ICFR, management also should determine the level of detail and degree of assurance that would satisfy prudent officials in the conduct of their own affairs that they have reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP. 77 Compensating controls are controls that serve to accomplish the objective of another control that did not function properly, helping to reduce risk to an acceptable level. To have a mitigating effect, the compensating control should operate at a level of precision that would prevent or detect a misstatement that was material. The following circumstances are strong indicators that a material weakness in ICFR exists: • An ineffective control environment. Circumstances that may indicate that the company's control environment is ineffective include, but are not limited to: —Identification of fraud of any magnitude on the part of senior management. —Significant deficiencies that have been identified and remain unaddressed after some reasonable period of time. —Ineffective oversight of the company's external financial reporting and ICFR by the company's audit committee. 78 78 If no audit committee exists, all references to the audit committee apply to the entire board of directors of the company. When a company is not required by law or applicable listing standards to have independent directors on its audit committee, the lack of independent directors at these companies is not indicative, by itself, of a control deficiency. In all cases, management should interpret the terms “board of directors” and “audit committee” as being consistent with provisions for the use of those terms as defined in relevant SEC rules. • Restatement of previously issued financial statements to reflect the correction of a material misstatement. Note: The correction of a material misstatement includes misstatements due to error or fraud; it does not include retrospective application of a change in accounting principle to comply with a new accounting principle or a voluntary change from one generally accepted accounting principle to another generally accepted accounting principle. • Identification by the auditor of a material misstatement in financial statements in the current period under circumstances that indicate the misstatement would not have been discovered by the company's ICFR. • For complex entities in highly regulated industries, an ineffective regulatory compliance function. This relates solely to those aspects of the ineffective regulatory compliance function in which associated violations of laws and regulations could have a material effect on the reliability of financial reporting. 2. Expression of Assessment of Effectiveness of ICFR by Management and the Registered Public Accounting Firm Management should disclose a clear expression of its assessment related to the effectiveness of ICFR and, therefore, should not qualify its assessment by saying that the company's ICFR is effective subject to certain qualifications or exceptions or express similar positions. For example, management should not state that the company's controls and procedures are effective except to the extent that certain material weakness(es) have been identified. In addition, if a material weakness exists, management may not state that the company's ICFR is effective. However, management may state that controls are ineffective due solely to, and only to the extent of, the identified material weakness(es). Prior to making this statement, however, management should consider the nature and pervasiveness of the material weakness. In addition, management may disclose any remediation efforts to the identified material weakness(es) in Item 9A of Form 10-K, Item 15 of Form 20-F, or General Instruction B of Form 40-F. 3. Disclosures About Material Weaknesses The Commission's rule implementing Section 404 was intended to bring information about material weaknesses in ICFR into public view. Because of the significance of the disclosure requirements surrounding material weaknesses beyond specifically stating that the material weaknesses exist, companies should also consider including the following in their disclosures: 79 79 Significant deficiencies in ICFR are not required to be disclosed in management's annual report on its evaluation of ICFR required by Item 308(a). • The nature of any material weakness, • Its impact on financial reporting and the control environment, and • Management's current plans, if any, for remediating the weakness. Disclosure of the existence of a material weakness is important, but there is other information that also may be material and necessary to form an overall picture that is not misleading. 80 There are many different types of material weaknesses and many different factors that may be important to the assessment of the potential effect of any particular material weakness. While management is required to conclude and state in its report that ICFR is ineffective when there is one or more material weaknesses, companies should also consider providing disclosure that allows investors to understand the root cause of the control deficiency and to assess the potential impact of each particular material weakness. This disclosure will be more useful to investors if management differentiates the potential impact and importance to the financial statements of the identified material weaknesses, including distinguishing those material weaknesses that may have a pervasive impact on ICFR from those material weaknesses that do not. The goal underlying all disclosure in this area is to provide an investor with disclosure and analysis beyond the mere existence of a material weakness. 80 *See* Exchange Act Rule 12b-20 [17 CFR 240.12b-20]. 4. Impact of a Restatement of Previously Issued Financial Statements on Management's Report on ICFR Item 308 of Regulation S-K requires disclosure of management's assessment of the effectiveness of the company's ICFR as of the end of the company's most recent fiscal year. When a material misstatement in previously issued financial statements is discovered, a company is required to restate those financial statements. However, the restatement of financial statements does not, by itself, necessitate that management consider the effect of the restatement on the company's prior conclusion related to the effectiveness of ICFR. While there is no requirement for management to reassess or revise its conclusion related to the effectiveness of ICFR, management should consider whether its original disclosures are still appropriate and should modify or supplement its original disclosure to include any other material information that is necessary for such disclosures not to be misleading in light of the restatement. The company should also disclose any material changes to ICFR, as required by Item 308(c) of Regulation S-K. Similarly, while there is no requirement that management reassess or revise its conclusion related to the effectiveness of its disclosure controls and procedures, management should consider whether its original disclosures regarding effectiveness of disclosure controls and procedures need to be modified or supplemented to include any other material information that is necessary for such disclosures not to be misleading. With respect to the disclosures concerning ICFR and disclosure controls and procedures, the company may need to disclose in this context what impact, if any, the restatement has on its original conclusions regarding effectiveness of ICFR and disclosure controls and procedures. 5. Inability To Assess Certain Aspects of ICFR In certain circumstances, management may encounter difficulty in assessing certain aspects of its ICFR. For example, management may outsource a significant process to a service organization and determine that evidence of the operating effectiveness of the controls over that process is necessary. However, the service organization may be unwilling to provide either a Type 2 SAS 70 report or to provide management access to the controls in place at the service organization so that management could assess effectiveness. 81 Finally, management may not have compensating controls in place that allow a determination of the effectiveness of the controls over the process in an alternative manner. The Commission's disclosure requirements state that management's annual report on ICFR must include a statement as to whether or not ICFR is effective and do not permit management to issue a report on ICFR with a scope limitation. 82 Therefore, management must determine whether the inability to assess controls over a particular process is significant enough to conclude in its report that ICFR is not effective. 81 AU Sec. 324, *Service Organizations* (as adopted on an interim basis by the PCAOB in PCAOB Rule 3200T), defines a report on controls placed in operation and test of operating effectiveness, commonly referred to as a “Type 2 SAS 70 report.” This report is a service auditor's report on a service organization's description of the controls that may be relevant to a user organization's internal control as it relates to an audit of financial statements, on whether such controls were suitably designed to achieve specified control objectives, on whether they had been placed in operation as of a specific date, and on whether the controls that were tested were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the related control objectives were achieved during the period specified. 82 *See* Item 308 of Regulations S-K and S-B [17 CFR 229.308(a)(3) and 228.308(a)(3)]. Request for Comment We request and encourage any interested parties to submit comments on the proposed interpretive guidance. In addition to seeking general feedback on the proposed interpretive guidance, the Commission seeks comments on the following: • Will the proposed interpretive guidance be helpful to management in completing its annual evaluation process? Does the proposed guidance allow for management to conduct an efficient and effective evaluation? If not, why not? • Are there particular areas within the proposed interpretive guidance where further clarification is needed? If yes, what clarification is necessary? • Are there aspects of management's annual evaluation process that have not been addressed by the proposed interpretive guidance that commenters believe should be addressed by the Commission? If so, what are those areas and what type of guidance would be beneficial? • Do the topics addressed in the existing staff guidance (May 2005 Staff Guidance and Frequently Asked Questions (revised October 6, 2004)) continue to be relevant or should such guidance be retracted? If yes, which topics should be kept or retracted? • Will the proposed guidance require unnecessary changes to evaluation processes that companies have already established? If yes, please describe. • Considering the PCAOB's proposed new auditing standards, *An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements* and *Considering and Using the Work of Others In an Audit* , are there any areas of incompatibility that limit the effectiveness or efficiency of an evaluation conducted in accordance with the proposed guidance? If so, what are those areas and how would you propose to resolve the incompatibility? • Are there any definitions included in the proposed interpretive guidance that are confusing or inappropriate and how would you change the definitions so identified? • Will the guidance for disclosures about material weaknesses result in sufficient information to investors and if not, how would you change the guidance? • Should the guidance be issued as an interpretation or should it, or any part, be codified as a Commission rule? • Are there any considerations unique to the evaluation of ICFR by a foreign private issuer that should be addressed in the guidance? If yes, what are they? IV. Proposed Rule Amendments Exchange Act Rules 13a-15(c) and 15d-15(c) require the management of each issuer subject to the Exchange Act reporting requirements, other than a registered investment company, to evaluate, with the participation of the issuer's principal executive and principal financial officers, or persons performing similar functions, the effectiveness, as of the end of each fiscal year, of the issuer's ICFR. 83 We are proposing to amend these rules to state that, although there are many different ways to conduct an evaluation of the effectiveness of ICFR to meet the requirement in the rule, an evaluation conducted in accordance with the interpretive guidance issued by the Commission, if the Commission adopts the interpretive guidance in final form, would satisfy the annual management evaluation required by those rules. 84 The proposed amendments would not limit the ability of management to use its judgment to determine a method of evaluation that is appropriate for its company. The proposed amendments would be similar to a non-exclusive safe-harbor in that they would not require management to conduct the evaluation in accordance with the interpretive guidance, but would provide certainty to management that chooses to follow the guidance that it has satisfied its obligation to conduct an evaluation for purposes of the requirements in Rules 13a-15(c) and 15d-15(c). 83 We recently adopted amendments that, among other things, provide a transition period for newly public companies before they become subject to the ICFR requirements. Under the new amendments, a newly public company will not become subject to the ICFR requirements until it either had been required to file an annual report for the prior fiscal year with the Commission or had filed an annual report with the Commission for the prior fiscal year. *See* Release No. 33-8760 (December 15, 2006) available at *http://www.sec.gov/rules/final.shtml* . 84 *See* proposed revisions to Rules 13a-15(c) and 15d-15(c). Our rules implementing Section 404(b) of Sarbanes-Oxley require every registered public accounting firm that issues or prepares an audit report on a company's financial statements for inclusion in an annual report that contains an assessment by management of the effectiveness of the registrant's ICFR to attest to, and report on, such assessment. Pursuant to Rule 2-02(f), the accountant's attestation report must clearly state the “opinion of the accountant as to whether management's assessment of the effectiveness of the registrant's ICFR is fairly stated in all material respects.” Over the past three years we have received feedback that the current form of the auditor's opinion may not effectively communicate the auditor's responsibility in relation to management's evaluation process. Therefore, we are proposing to revise Rule 2-02(f) to require the auditor to express an opinion directly on the effectiveness of ICFR. In addition, we are proposing revisions to Rule 2-02(f) to clarify the circumstances in which we would expect that the accountant cannot express an opinion. We are also proposing conforming revisions to the definition of attestation report in Rule 1-02(a)(2) of Regulation S-X. We believe this opinion necessarily conveys whether management's assessment is fairly stated. We understand the PCAOB will be proposing a conforming revision to its auditing standard to reflect this revision as well. Request for Comment We request and encourage any interested person to submit comments on the proposed revision to Exchange Act Rules 13a-15(c) and 15d-15(c) and Rules 1-02 and 2-02 of Regulation S-X. In addition to seeking general feedback on the proposed rule revision, the Commission seeks comments on the following: • Should compliance with the interpretive guidance, if issued in final form, be voluntary, as proposed, or mandatory? • Is it necessary or useful to amend the rules if the proposed interpretive guidance is issued in final form, or are rule revisions unnecessary? • Should the rules be amended in a different manner in view of the proposed interpretive guidance? • Is it appropriate to provide the proposed assurance in Rules 13a-15 and 15d-15 that an evaluation conducted in accordance with the interpretive guidance will satisfy the evaluation requirement in the rules? • Does the proposed revision offer too much or too little assurance to management that it is conducting a satisfactory evaluation if it complies with the interpretive guidance? • Are the proposed revisions to Exchange Act Rules 13a-15(c) and 15d-15(c) sufficiently clear that management can conduct its evaluation using methods that differ from our interpretive guidance? • Do the proposed revisions to Rules 1-02(a)(2) and 2-02(f) of Regulation S-X effectively communicate the auditor's responsibility? Would another formulation better convey the auditor's role with respect to management's assessment and/or the auditor's reporting obligation? • Should we consider changes to other definitions or rules in light of these proposed revisions? • The proposed revision to Rule 2-02(f) highlights that disclaimers by the auditor would only be appropriate in the rare circumstance of a scope limitation. Does this adequately convey the narrow circumstances under which an auditor may disclaim an opinion under our proposed rule? Would another formulation provide better guidance to auditors? V. Paperwork Reduction Act Certain provisions of our ICFR requirements contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”). We submitted these collections of information to the Office of Management and Budget (“OMB”) for review in accordance with the PRA and received approval for the collections of information. We do not believe the rule amendments that we are proposing in this release will impose any new recordkeeping or information collection requirements, or other collections of information requiring OMB's approval. VI. Cost-Benefit Analysis A. Background Section 404(a) of Sarbanes-Oxley directed the Commission to prescribe rules to require each annual report that a company, other than a registered investment company, files pursuant to Exchange Act Section 13(a) or 15(d) to contain an internal control report:
(1)Stating management's responsibilities for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2)containing an assessment, as of the end of the company's most recent fiscal year, of the effectiveness of the company's internal control structure and procedures for financial reporting. On June 5, 2003, the Commission adopted final rules implementing the requirements of Section 404(a). 85 85 *See* footnote 9 above for reference. The final rules did not prescribe any specific method or set of procedures for management to follow in performing its evaluation of ICFR. This gave managers some flexibility, while leaving it to management's judgment about what constitutes “reasonable support” for its assessment of internal controls. In the absence of specific guidance, managers of many companies have relied upon AS No. 2. This choice reflected the pressure on managers to meet the expectations of the auditors who were charged with attesting to the effectiveness of the company's ICFR and management's annual assessment of ICFR. The limited alternative guidance available to management has not given it the information that is necessary to assuage its concerns about the risk of being unable to satisfy the expectations of its auditor under AS No. 2. The proposed interpretive guidance is intended to enable management to conduct a more effective and efficient evaluation of ICFR. Further, under the proposed rule amendments, the auditor would express only a single opinion on the effectiveness of the company's internal controls in its attestation report rather than expressing separate opinions directly on the effectiveness of the company's ICFR and on management's assessment. Managers may choose to rely on the interpretive guidance, as an alternative to what is provided in existing auditing standards or elsewhere, for two key reasons. First, we are proposing a rule that would give managers who follow the interpretive guidance comfort that they have conducted a sufficient ICFR evaluation. Second, elimination of the auditor's opinion on management's assessment of ICFR in the auditor's attestation report should significantly lessen, if not eliminate, the pressures that managers have felt to look to auditing standards for guidance in performing those evaluations. While the focus of the Cost-Benefit Analysis in this release is on the costs and benefits related to the rule amendments that we are proposing in this release, rather than the costs and benefits of the proposed interpretive guidance that we describe in this release, 86 in view of the fact that the effect of the proposed rule amendments will be to endorse the interpretive guidance as one approach to compliance, we also have considered the effect that the proposed guidance may have on evaluation costs. 86 To reduce the costs of implementation, we developed proposed interpretive guidance to aid management in the planning and performance of an evaluation of ICFR. In connection with this interpretive guidance, we are proposing an amendment to Exchange Act Rules 13a-15(c) and 15d-15(c) that would make it clear that an evaluation that is conducted in accordance with the interpretive guidance is one way to satisfy the annual management evaluation requirement in those rules and forms. In addition, we are proposing revisions to Rule 2-02(f) of Regulation S-X to indicate that an auditor should only express a single opinion directly on the effectiveness of a company's ICFR, rather than an opinion on the effectiveness and a separate opinion on management's assessment. We are also proposing conforming revisions to Rule 1-02(a)(2) of Regulation S-X which defines the term “attestation report on management's assessment of internal control over financial reporting.” By encouraging managers to rely on guidance that is less prescriptive and better aligned with the objectives of Section 404, the proposed rule should reduce management's effort relative to current practice under existing auditing standards. The expenditure of effort by audit firms also may decline, in response, relative to what would occur otherwise. We are thus soliciting comments on how the proposed guidance and the proposed new auditing standard will affect the expenditure of effort, and division of labor, between the managers and employees of public companies and their audit firms. The benefits and costs of the proposed rule amendments will be affected by the number of companies that choose to follow the interpretive guidance. Managers will be free to weigh the benefits and costs to shareholders in choosing whether to follow the guidance or some other approach. This feature does not apply to the proposed revisions to Regulation S-X, however, because compliance with these amendments will be mandatory. B. Benefits As explained above, the proposed amendments would state that an evaluation by management of ICFR that is conducted in accordance with the interpretive guidance is one of many ways to satisfy the evaluation requirement in Exchange Act Rules 13a-15(c) and 15d-15(c), and would clarify that the auditor should only express an opinion directly on the effectiveness of a company's ICFR. We expect the primary benefits of the proposed rule amendments to Exchange Act Rules 13a-15(c) and 15d-15(c) to be two-fold. First, there will be a greater likelihood that management choosing to follow the guidance will more effectively detect material weaknesses. Second, there should be a reduction in the costs of excessive testing and documentation that have arisen from management aversion to risk in determining the level and type of effort that is sufficient to conduct an evaluation of ICFR. We believe the proposed revisions to Rule 2-02(f) of Regulation S-X should better communicate to investors the nature of the assurance provided to them through the work performed by the auditor. The proposed amendments to Rules 13a-15(c) and 15d-15(c) are similar to a non-exclusive safe-harbor in that they would not require management to comply with the evaluation requirement in a particular manner ( *i.e.* , by following the interpretive guidance), but would provide certainty to management choosing to follow the guidance that management has satisfied its obligation to conduct an evaluation in an appropriate manner. The proposed rule amendments are intended to make implementation of the internal control reporting requirements more efficient and cost-effective for all registrants. We believe that benefits to investors will arise from the following potential consequences of the proposed rule amendments: • Management can choose to follow guidance that is an efficient and effective means of satisfying the evaluation requirement; • All public companies, especially smaller public companies, that choose to follow the guidance would be afforded considerable flexibility to scale and tailor their evaluation methods and procedures to fit their own facts and circumstances; • Management would have the comfort that an evaluation that complies with our interpretive guidance is one way to satisfy the evaluation required by Exchange Act Rule 13a-15(c) and Exchange Act Rule 15d-15(c), and reduce any second-guessing as to whether management's process was adequate; • There may be reduced risk of costly and time-consuming disagreement between the auditor and management regarding the extent of documentation and testing needed to satisfy the ICFR evaluation requirement; • Companies are likely to save costs and reduce the amount of effort and resources associated with an evaluation by relying on a set of guidelines that clarify the nature, timing and extent of management's procedures and that recognizes the many different types of evidence-gathering methods available to management (such as direct interaction with control components); 87 and 87 *See, e.g.* , transcript of Roundtable Discussion on Second Year Experiences with Internal Control Reporting and Auditing Provisions, May 10, 2006, available at *http://www.sec.gov/spotlight/soxcomp.htm* . • Management would have greater clarity regarding the Commission's expectations concerning an evaluation of ICFR. Improved implementation of the ICFR requirements could facilitate a more timely flow of information within the company and, ultimately, to investors and the marketplace. We believe that an effective internal control evaluation would help management to better identify potential weaknesses and inefficiencies that could result in cost-savings in a company's operations. C. Costs Some larger public companies may face a transitory increase in compliance costs if they choose to follow the guidance. This is because many of the larger companies that have already evaluated their internal controls have reported cost reductions, or the anticipation of cost reductions, in the second and subsequent years of compliance with the internal control reporting provisions. For companies that choose to follow the interpretive guidance, the proposed rule amendments may cause some accelerated and large accelerated filers who have completed one or more evaluations of their ICFR to adjust their evaluation procedures in order to take advantage of the proposed rule amendments which could lead to an increase in the compliance costs. 88 88 Presumably such companies would only adjust their evaluation methods if they perceived the benefit of the proposed amendments would exceed the increased compliance cost. In addition, the benefits of the proposed amendments may be partially offset if the company's auditor obtains more audit evidence directly itself rather than using evidence generated by management's evaluation process, which could lead to an increase in audit costs. 89 89 Any near term increase in audit costs may be mitigated if the PCAOB's proposed new auditing standards, *An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements* and *Considering and Using the Work of Others In an Audit* , are approved. D. Request for Comment We request comment on the nature of the costs and benefits of the proposed amendments, including the likely responses of public companies and auditors concerning the introduction of new management guidance. We seek evidentiary support for the conclusions on the nature and magnitude of those costs and benefits, including data to quantify the costs and the value of the benefits described above. We seek estimates of these costs and benefits, as well as any costs and benefits not already identified, that may result from the adoption of these proposed amendments and issuance of interpretive guidance. With increased reliance on management judgment, will there be unintended consequences? We also request qualitative feedback and related evidentiary support relating to any benefits and costs we may have overlooked. VII. Consideration of Impact on the Economy, Burden on Competition and Promotion of Efficiency, Competition and Capital Formation For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or “SBREFA,” 90 we solicit data to determine whether the proposed rule amendments constitute a “major” rule. Under SBREFA, a rule is considered “major” where, if adopted, it results or is likely to result in: 90 5 U.S.C. 603. • An annual effect on the economy of $100 million or more (either in the form of an increase or a decrease); • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effects on competition, investment or innovation. Section 3(f) of the Exchange Act 91 requires the Commission, whenever it engages in rulemaking, and is required to consider or determine if an action is necessary or appropriate in the public interest, also to consider whether the action will promote efficiency, competition, and capital formation. Section 23(a)(2) of the Exchange Act 92 also requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition. In addition, Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. 91 15 U.S.C. 78c(f). 92 15 U.S.C. 78w(a)(2). We believe the proposed amendments, if adopted, would promote competition, efficiency, and capital formation. Under the Sarbanes-Oxley Act, all companies, except registered investment companies, are subject to the requirement to conduct an evaluation of their ICFR. Compliance with the proposed amendments to Exchange Act Rules 13a-15 and 15d-15, however, would be voluntary rather than mandatory and, as such, companies could choose whether or not to follow the interpretive guidance. The rule therefore should not impose any new cost. Accordingly, companies that have already completed one or more evaluations can continue to use their existing procedures to satisfy the evaluation required by our rules, or companies can choose to follow the guidance. The proposed rule amendments should increase the efficiency with respect to the effort and resources associated with an evaluation of ICFR and facilitate more efficient allocation of resources within a company. The guidance is also designed to be scalable depending on the size of the company. Reducing the potentially disproportionate costs to smaller companies required to comply with the evaluation requirements should also increase efficiency. Finally, the rules may promote competition among companies in developing the most efficient means to satisfy the evaluation requirement. Capital formation may be promoted in the following ways. To the extent the cost of compliance with the evaluation requirement is lowered to a more economically feasible threshold, smaller private companies may be able to access public capital markets earlier in their growth. They may therefore obtain enhanced sources of capital at lower cost. The proposed amendments may also introduce new competition from outside professionals and software vendors in the supply of services and products to assist the managers of public companies in their evaluations of ICFR. We seek comment on whether the proposed guidance and accompanying rule would stimulate new entry into any such market. We request comment on the potential impact of the proposed amendments on the U.S. economy on an annual basis, any potential increase in costs or prices for consumers or individual industries, and any potential effect on competition, investment or innovation. We also request comment on whether the proposed amendments would promote efficiency, competition, and capital formation. Commenters are requested to provide empirical data and other factual support for their view to the extent possible. VIII. Initial Regulatory Flexibility Analysis This Initial Regulatory Flexibility Analysis (“IRFA”) has been prepared in accordance with the Regulatory Flexibility Act. 93 This IRFA involves proposed amendments to Exchange Act Rules 13a-15(c) and 15d-15(c) and Rules 1-02(a)(2) and 2-02(f) of Regulation S-X. These rules require the management of an Exchange Act reporting company, other than registered investment companies, to prepare an annual evaluation of the company's ICFR, and that the registered public accounting firm that issues an audit report on the company's financial statements to attest to, and report on, management's assessment. The proposed rule amendments would clarify that an evaluation that is conducted in accordance with the interpretive guidance would satisfy the annual management evaluation of the company's ICFR. 94 93 5 U.S.C. 601. 94 In connection with the proposed rule amendments, we are also proposing interpretive guidance for management to use in conducting an annual evaluation of the company's internal control over financial reporting. The proposed interpretive guidance itself is not subject to the Regulatory Flexibility Act. Accordingly, for purposes of the IRFA, our analysis is focused on the proposed rule amendments. A. Reasons for the Proposed Action We are proposing rule amendments that would make it clear that an evaluation conducted in accordance with our interpretive guidance is one of many ways to satisfy the requirements of Exchange Act Rules 13a-15(c) and 15d-15(c), clarify the auditor report required Rule 2-02(f) of Regulation S-X, and revise the definition of the term attestation report in Rule 1-02(a)(2) of Regulation S-X. B. Objectives The proposed rule amendments are intended to make implementation of the internal control reporting requirements more efficient and cost-effective by reducing ambiguities that have arisen due to the lack of certainty available to companies on how to conduct an annual evaluation of ICFR. C. Legal Basis We are issuing the proposed rule amendments under the authority set forth in Sections 12, 13, 15 and 23 of the Exchange Act, and Sections 3(a) and 404 of the Sarbanes-Oxley Act of 2002. D. Small Entities Subject to the Proposed Revisions The proposed amendments would affect some issuers that are small entities. Exchange Act Rule 0-10(a) 95 defines an issuer, other than an investment company, to be a “small business” or “small organization” if it had total assets of $5 million or less on the last day of its most recent fiscal year. We estimate that there are approximately 2,500 issuers, other than registered investment companies, that may be considered small entities. The proposed amendments would apply to any small entity that is subject to Exchange Act reporting requirements. 95 17 CFR 240.0-10(a). E. Reporting, Recordkeeping, and Other Compliance Requirements The proposed rule amendments would not impose any new reporting, recordkeeping or compliance requirements. The amendments provide a voluntary, non-exclusive certainty, in the nature of a safe-harbor. F. Duplicative, Overlapping, or Conflicting Federal Rules The proposed amendments do not duplicate, overlap, or conflict with other federal rules. G. Significant Alternatives The Regulatory Flexibility Act directs us to consider alternatives that would accomplish our stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed extension, we considered the following alternatives: • Establishing different compliance or reporting requirements or timetables that take into account the resources available to small entities; • Clarifying, consolidating or simplifying compliance and reporting requirements under the rules for small entities; • Using performance rather than design standards; and • Exempting small entities from all or part of the requirements. The proposed rule amendments should allow a company to conduct an evaluation of internal control with greater certainty that it has satisfied our rule. We believe the proposed rule change would affect both large and small entities equally. The proposed rule amendments set forth primarily performance standards to aid companies in conducting an evaluation of ICFR. The purpose of the proposed amendments is to give comfort that following the clarified, consolidated and simplified guidance will satisfy the evaluation requirement. The proposed rule is designed to afford small entities that choose to rely on the interpretive guidance the flexibility to scale and tailor their evaluation methods to fit their particular circumstances. We are not proposing an exemption for small entities, because we are not persuaded at this time that an exemption would further the primary goal of the Sarbanes-Oxley Act to enhance the quality of reporting and increasing investor confidence in the fairness and integrity of the securities markets. H. Solicitation of Comments We encourage the submission of comments with respect to any aspect of this Initial Regulatory Flexibility Analysis. In particular, we request comments regarding: • The number of small entity issuers that may be affected by the proposed extension; • The existence or nature of the potential impact of the proposed amendments on small entity issuers discussed in the analysis; and • How to quantify the impact of the proposed amendments. Respondents are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. Such comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed rule amendments are adopted, and will be placed in the same public file as comments on the proposed amendments themselves. IX. Statutory Authority and Text of Proposed Rule Amendments The amendments described in this release are being proposed under the authority set forth in Sections 12, 13, 15, 23 of the Exchange Act, and Sections 3(a) and 404 of the Sarbanes-Oxley Act. List of Subjects 17 CFR Part 210 Accountants, Accounting, Reporting and recordkeeping requirements, Securities. 17 CFR Part 240 Reporting and recordkeeping requirements, Securities. 17 CFR Part 241 Securities. Text of Amendments For the reasons set out in the preamble, the Commission proposes to amend title 17, chapter II, of the Code of Federal Regulations as follows: PART 210—FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975 1. The authority citation for Part 210 is revised to read as follows: Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 78c, 78j-1, 78 *l* , 78m, 78n, 78o(d), 78q, 78u-5, 78w(a), 78 *ll* , 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, unless otherwise noted. 2. Amend § 210.1-02 by revising paragraph (a)(2) to read as follows: § 210.1-02 Definition of terms used in Regulation S-X (17 CFR part 210). (a)(1) * * *
(2)* Attestation report on management's assessment of internal control over financial reporting. * The term *attestation report on management's assessment of internal control over financial reporting* means a report in which a registered public accounting firm expresses an opinion, either unqualified or adverse, as to whether the registrant maintained, in all material respects, effective internal control over financial reporting (as defined in § 240.13a-15(f) or 240-15d-15(f)), except in the rare circumstance of a scope limitation that cannot be overcome by the registrant or the registered public accounting firm which would result in the accounting firm disclaiming an opinion. 3. Amend § 210.2-02 by revising paragraph
(f)to read as follows: § 210.2-02 Accountants' reports and attestation reports.
(f)*Attestation report on management's assessment of internal control over financial reporting.* Every registered public accounting firm that issues or prepares an accountant's report for a registrant, other than an investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), that is included in an annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78a *et seq.* ) containing an assessment by management of the effectiveness of the registrant's internal control over financial reporting must attest to, and report on, such assessment. The attestation report on management's assessment of internal control over financial reporting shall be dated, signed manually, identify the period covered by the report, indicate that the accountant has audited management's assessment, and clearly state the opinion of the accountant, either unqualified or adverse, as to whether the registrant maintained, in all material respects, effective internal control over financial reporting, except in the rare circumstance of a scope limitation that cannot be overcome by the registrant or the registered public accounting firm which would result in the accounting firm disclaiming an opinion. The attestation report on management's assessment of internal control over financial reporting may be separate from the accountant's report. PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 4. The authority citation for Part 240 continues to read as follows: Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78 *l* , 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78 *ll* , 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 *et seq.* , and 18 U.S.C. 1350, unless otherwise noted. 5. Amend § 240.13a-15 by revising paragraph
(c)to read as follows: § 240.13a-15 Controls and procedures.
(c)The management of each such issuer, that either had been required to file an annual report pursuant to section 13(a) or 15(d) of the Act (15 U.S.C. 78m(a) or 78o(d)) for the prior fiscal year or previously had filed an annual report with the Commission for the prior fiscal year, other than an investment company registered under section 8 of the Investment Company Act of 1940, must evaluate, with the participation of the issuer's principal executive and principal financial officers, or persons performing similar functions, the effectiveness, as of the end of each fiscal year, of the issuer's internal control over financial reporting. The framework on which management's evaluation of the issuer's internal control over financial reporting is based must be a suitable, recognized control framework that is established by a body or group that has followed due-process procedures, including the broad distribution of the framework for public comment. Although there are many different ways to conduct an evaluation of the effectiveness of internal control over financial reporting to meet the requirements of this paragraph, an evaluation that is conducted in accordance with the interpretive guidance issued by the Commission in Release No. 34-XXXXX will satisfy the evaluation required by this paragraph. 6. Amend § 240.15d-15 by revising paragraph
(c)to read as follows: § 240.15d-15 Controls and procedures.
(c)The management of each such issuer, that either had been required to file an annual report pursuant to section 13(a) or 15(d) of the Act (15 U.S.C. 78m(a) or 78o(d)) for the prior fiscal year or previously had filed an annual report with the Commission for the prior fiscal year, other than an investment company registered under section 8 of the Investment Company Act of 1940, must evaluate, with the participation of the issuer's principal executive and principal financial officers, or persons performing similar functions, the effectiveness, as of the end of each fiscal year, of the issuer's internal control over financial reporting. The framework on which management's evaluation of the issuer's internal control over financial reporting is based must be a suitable, recognized control framework that is established by a body or group that has followed due-process procedures, including the broad distribution of the framework for public comment. Although there are many different ways to conduct an evaluation of the effectiveness of internal control over financial reporting to meet the requirements of this paragraph, an evaluation that is conducted in accordance with the interpretive guidance issued by the Commission in Release No. 34-XXXXX will satisfy the evaluation required by this paragraph. PART 241—INTERPRETATIVE RELEASES RELATING TO THE SECURITIES EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER 7. Part 241 is amended by adding Release No. 34-XXXXX and the release date of December XX, 2006 to the list of interpretative releases. Dated: December 20, 2006. By the Commission. Nancy M. Morris, Secretary. [FR Doc. E6-22099 Filed 12-26-06; 8:45 am] BILLING CODE 8011-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-141901-05] RIN 1545-BE92 Exchanges of Property for an Annuity AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Change of location of public hearing. SUMMARY: On October 18, 2006, on page 61441 of the **Federal Register** (71 FR 61441), a notice of proposed rulemaking and notice of public hearing announced that a public hearing concerning guidance on the taxation of the exchange of property for an annuity contract will be held February 16, 2007 in the auditorium of the New Carrollton Federal Building, 5000 Ellin Road, Lanham, MD 20706. The location of the public hearing has changed. ADDRESSES: The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing Kelly Banks,
(202)622-0392 (not a toll-free number). LaNita Van Dyke, Branch Chief, Publications and Regulations, Associate Chief Counsel, Legal Processing Division (Procedure and Administration). [FR Doc. E6-22020 Filed 12-26-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-142270-05] RIN 1545-BE90 Railroad Track Maintenance Credit; Hearing Cancellation AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Cancellation of notice of public hearing on proposed rulemaking by cross-reference to temporary regulations. SUMMARY: This document cancels a public hearing on proposed regulations by cross-reference to temporary regulations relating to the railroad track maintenance credit determined for qualified railroad track maintenance expenditures paid or incurred by a Class II or Class III railroad and other eligible taxpayers during the taxable year. DATES: The public hearing, originally scheduled for January 9, 2007 at 10 a.m. is cancelled. FOR FURTHER INFORMATION CONTACT: Kelly Banks of the Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration) at
(202)622-0392 (not a toll-free number). SUPPLEMENTARY INFORMATION: A notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing that appeared in the **Federal Register** on Friday, September 8, 2006 (71 FR 53053), announced that a public hearing was scheduled for January 9, 2006, at 10 a.m. in the IRS Auditorium, New Carrollton Federal Building, 5000 Ellin Road, Lanham, MD 20706. The subject of the public hearing is under section 45G of the Internal Revenue Code. The public comment period expired on December 7, 2006. The notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing instructed those interested in testifying at the public hearing to submit an outline of the topics to be addressed. As of Monday, December 11, 2006, no one has requested to speak. Therefore, the public hearing scheduled for January 9, 2007, is cancelled. La Nita VanDyke, Branch Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E6-22018 Filed 12-26-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-208270-86] RIN 1545-AM12 Income and Currency Gain or Loss With Respect to a Section 987 QBU; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to notice of proposed rulemaking. SUMMARY: This document contains corrections to a notice of proposed rulemaking that was published in the **Federal Register** on Thursday, September 7, 2006 (71 FR 52876), regarding the determination of the items of income or loss of a taxpayer with respect to a section 987 qualified business unit as well as the timing, amount, character and source of any section 987 gain or loss. FOR FURTHER INFORMATION CONTACT: Sheila Ramaswamy,
(202)622-3870 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The notice of proposed rulemaking (REG-208270-86) that is the subject of these corrections is under section 987 of the Internal Revenue Code. Need for Correction As published, the notice of proposed rulemaking (REG-208270-86) contains errors that may prove to be misleading and is in need of clarification. Correction of Publication Accordingly, the notice of proposed rulemaking (REG-208270-86), that was the subject of FR Doc. 06-7250, is corrected as follows: 1. On page 52879, second column, in the preamble under the paragraph heading “ *E. Concerns Regarding the 1991 Proposed Regulations: Notice 2000-20,* ” the sixteenth line following the formula, the language “DE. The DE conducts mineral” is corrected to read “DE. The DE conducts mineral extraction in Country X”. 2. On page 52886, first column, in the preamble under the paragraph heading “ *C. Section 1.987-3 Determination of the Items of Section 987 Taxable Income or Loss of an Owner of a Section 987 QBU* ,” the eighth line, the language “under other provisions are not taken” is corrected to read “under other provisions of the Code or regulations are not taken”. 3. On page 52886, second column, under the paragraph heading “ *C. Section 1.987-3 Determination of the Items of Section 987 Taxable Income or Loss of an Owner of a Section 987 QBU,* ” first full paragraph, ninth line from the bottom of the paragraph, the language “rates for amount realized and adjusted” is corrected to read “rates for the amount realized and adjusted”. 4. On page 52886, second column, under the paragraph heading “ *C. Section 1.987-3 Determination of the Items of Section 987 Taxable Income or Loss of an Owner of a Section 987 QBU* ,” second full paragraph, fifth line, the language “Generally the amount realized and” is corrected to read “Generally, the amount realized and adjusted”. § 1.987-1 [Corrected] 5. On page 52895, second column, § 1.987-1(b)(7), paragraph (ii)(B) of Example 1, fifth line from the bottom of the paragraph, the language “neither the activities of DE1 or DE2 are” is corrected to read “the activities of DE1 are not”. § 1.987-2 [Corrected] 6. On page 52899, first column, § 1.987-2(c)(9), lines 2 and 3, the language “illustrate the principles of this paragraph (c). For purposes of these” is corrected to read “illustrate the principles of paragraph
(b)of this section and this paragraph (c). For purposes of these”. 7. On page 52899, second column, § 1.987-2(c)(9), paragraph (ii)(B) of *Example 1* , last line, the language “section 988 to X as a result of the loan.” is corrected to read “section 988 to X as a result of the disregarded loan.” 8. On page 52899, third column, § 1.987-2(c)(9), paragraph (ii)(A) of *Example 3,* line 3, the language “Federal tax purposes and therefore is a” is corrected to read “Federal income tax purposes and therefore is a”. 9. On page 52900, first column, § 1.987-2(c)(9), paragraph (ii)(C) of *Example 4* , line 3, the language “regarded for U.S. Federal tax purposes. As a” is corrected to read “regarded for U.S. Federal income tax purposes. As a”. 10. On page 52900, second column, § 1.987-2(c)(9), paragraph (ii)(A) of *Example 7* , line 1, the language “(ii) *Analysis.*
(A)For Federal tax purposes” is corrected to read “(ii) *Analysis.*
(A)For Federal income tax purposes”. 11. On page 52901, third column, § 1.987-2(d)(2), line 3, the language “described in section 988(c)(1)(i) and (ii)” is corrected to read “described in section 988(c)(1)(B)(i) and (ii)”. § 1.987-3 [Corrected] 12. On page 52902, third column, § 1.987-3(e)(2), line 5, the language “described in section 988(c)(1)(A)(i) and” is corrected to read “described in section 988(c)(1)(B)(i) and”. 13. On page 52904, first column, § 1.987-3(f) *Example 3.* , the fourth line from the bottom of the paragraph, the language “section and § 1.987-1(c)(3) €8,000 × $1=” is corrected to read “section and § 1.987-1(c)(3) (€8 <sup>[n1]</sup> ,000 × $1=”. § 1.987-6 [Corrected] 14. On page 52911, first column, § 1.987-6(c) *Example,* lines 5 through 10 from the bottom of the column, the language “of this section, Sf7,500 (Sf750,000/Sf1,000,000 × Sf10,000) of the section 987 gain will be treated as foreign source general limitation income which is not subpart F income and Sf2,500 (Sf250,000/Sf1,000,000 × Sf10,000) will” is corrected to read “of this section, Sf7,500 ((Sf750,000/Sf1,000,000) × Sf10,000) of the section 987 gain will be treated as foreign source general limitation income which is not subpart F income and Sf2,500 ((Sf250,000/Sf1,000,000) × Sf10,000) will”. Cynthia E. Grigsby, Senior Federal Register Liaison Officer, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E6-22169 Filed 12-26-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [CGD08-06-023] RIN 1625-AA11 Regulated Navigation Area; Atchafalaya River, Berwick Bay, Berwick Bay, LA AGENCY: Coast Guard, Department of Homeland Security (DHS). ACTION: Notice of proposed rulemaking. SUMMARY: The Coast Guard proposes to remove both paragraph (f)(4) and the note located at the end of the section from 33 CFR 165.811. Coast Guard Vessel Traffic Service
(VTS)Berwick Bay has determined that the Southern Pacific Railroad
(SPRR)Bridge visual displays are no longer necessary due to updated VTS technologies and procedures that actively inform towing vessels that the rules of 33 CFR 165.811 are in effect at the time of entry into the VTS. This action will relieve the owner of the SPRR Bridge and the Coast Guard from maintaining antiquated visual displays and related equipment. DATES: Comments and related material must reach the Coast Guard on or before January 26, 2007. ADDRESSES: You may mail comments and related material to Commander (dpw), Eighth Coast Guard District, 500 Poydras Street, New Orleans, LA 70130-3310. The Eighth Coast Guard District's Waterways Branch maintains the public docket for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, are part of docket [CGD08-06-023] and are available for inspection or copying at The Hale Boggs Federal Building, 500 Poydras Street (RM 1230), New Orleans, LA 70130-3310, between 8 a.m. and 3:30 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Lieutenant Commander Brian Hofferber or Chief Warrant Officer Edgardo Estrada, Eighth Coast Guard District's Waterways Branch, at telephone 504-671-2326. SUPPLEMENTARY INFORMATION: Request for Comments We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking [CGD08-06-023], indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 81/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them. Public Meeting We do not now plan to hold a public meeting. However, you may submit a request for a meeting by writing to the Eighth Coast Guard District's Waterways Branch address under ADDRESSES explaining why one would be beneficial. If we determine that a public meeting would aid this rulemaking, we will hold one at a time and place announced by a later notice in the **Federal Register** . Background and Purpose BNSF Railway Company, the owner of the Southern Pacific Railroad
(SPRR)Bridge, has requested to change visual displays requirements for the SPRR Bridge set forth in 33 CFR 165.811. In September 2005, the visual displays atop the SPRR Bridge were destroyed by Hurricane Rita and have not been restored. Prior to their destruction, the visual displays consisted of two vertically arranged red balls by day and two vertically arranged flashing white lights by night. The displays were maintained by the bridge owner and were activated upon direction by the Coast Guard Vessel Traffic Service
(VTS)Berwick Bay during high water periods as specified in 33 CFR 165.811. Prior to the current implementation of VTS Berwick Bay, the use of visual displays on the SPRR Bridge served as the primary means of advising towing vessels that the provisions of 33 CFR 165.811 were in effect, or were anticipated to be placed into effect, in order to reduce the risk of mishaps involving towing vessels and the local bridges crossing the waterway. The destruction of the displays by Hurricane Rita and the subsequent request by BNSF Railway Company for their discontinuance prompted discussion within the Coast Guard as to the necessity of the visual displays. Coast Guard VTS Berwick Bay concluded that the visual displays are antiquated and no longer serve as a primary means to advise towing vessels that the requirements of 33 CFR 165.811 are in effect. VTS Berwick Bay now directly advises mariners as to which navigation rules are in effect at the time of the vessel entry into the VTS regulated navigation area. Discussion of Proposed Rule Coast Guard Vessel Traffic Service
(VTS)Berwick Bay has determined that the SPRR Bridge visual displays required by 33 CFR 165.811(f)(4) are no longer necessary due to updated VTS technologies and procedures. Towing vessels subject to 33 CFR 165.811 during high water periods are now required to check into VTS Berwick Bay before the SPRR Bridge displays become visible during transit. Upon entry, subject vessels are advised directly by the VTS as to which regulations are in effect. Removal of subpart (f)(4) eliminates antiquated visual display requirements from 33 CFR 165.811 as the primary means of notice and relieves the owner of the SPRR Bridge from continued maintenance costs. Vessels which are not subject to 33 CFR 165.811(f)(4) need not be informed that the requirements of the regulated navigation area are in effect, but may request such information at any time from the Berwick Bay Vessel Traffic Center
(VTC)via telephone or VHF-FM 11, 13, or 16; from VHF-FM radio Broadcast Notices to Mariners; or from the current U.S. Army Corps of Engineers' river gauge readings (published on the Internet). Regulatory Evaluation This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. This proposed rule eliminates existing visual display requirements from a list of notice requirements under 33 CFR 165.811(f) which have been superseded by improved procedures for notification. This proposed rule change neither imposes any additional costs to the public nor eliminates significant benefits. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule is neutral to all business entities as it changes the means by which all vessel operators are provided notice from a visual display to direct advisories from VTS Berwick Bay. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the individuals listed under FOR FURTHER INFORMATION CONTACT . The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Collection of Information This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this proposed rule under Commandant Instruction M16475.lD, and Department of Homeland Security Management Directive 5100.1, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have made a preliminary determination that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, we believe that this rule should be categorically excluded, under figure 2-1, paragraph (32)(e), of the Instruction, from further environmental documentation. Under figure 2-1, paragraph (32)(e), of the Instruction, an “Environmental Analysis Check List” is not required for this rule. Comments on this section will be considered before we make the final decision on whether to categorically exclude this rule from further environmental review. List of Subjects in 33 CFR Part 165 Harbors, Marine Safety, Navigation (Water), Reporting and recordkeeping requirements, Security Measures, Waterways. For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows: PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority: 33 U.S.C. 1226, 1231; 46 U.S.C. Chapter 701; 50 U.S.C. 191, 195; 33 CFR 1.05-1(g), 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. § 165.811 [Amended] 2. In § 165.811, remove paragraph (f)(4) and the note located at the end of the section. Dated: December 4, 2006. J.R. Whitehead, Rear Admiral, U.S. Coast Guard, Commander, Eighth Coast Guard District. [FR Doc. E6-22153 Filed 12-26-06; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF THE INTERIOR National Park Service 36 CFR Part 13 RIN 1024-AD38 National Park System Units in Alaska AGENCY: National Park Service, Interior. ACTION: Proposed rule. SUMMARY: The National Park Service (NPS or Service) is proposing to revise the special regulations for the NPS-administered areas in Alaska to update provisions governing subsistence use of timber, seaweed collection, river management, ORV use, fishing and camping. The revision would also update definitions, prohibit using motorized vehicles to herd wildlife, and establish wildlife viewing distances in several park areas. DATES: Comments must be received by February 26, 2007. ADDRESSES: You may submit your comments, identified by Regulatory Information Number 1024-AD38 (RIN), by any of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov* . Follow the instructions for submitting comments. • E-mail NPS at: *akro_regulations@nps.gov* . Use RIN 1024-AD38 in the subject line. • Mail: National Park Service, Regional Director, Alaska Regional Office, 240 West 5th Ave., Anchorage, AK 99501. • Fax:
(907)644-3805. All submissions received must include the agency name and RIN. For additional information see “Public Participation” under SUPPLEMENTARY INFORMATION below. FOR FURTHER INFORMATION CONTACT: National Park Service, Victor Knox, Deputy Regional Director, Alaska Regional Office, 240 West 5th Ave., Anchorage, AK 99501. Telephone:
(907)644-3501. E-mail: *akro_regulations@nps.gov* . Fax:
(907)644-3816. SUPPLEMENTARY INFORMATION: Background Each park area in Alaska has a compendium consisting of the compiled designations, closures, openings, permit requirements, and other provisions established by the Superintendent under the discretionary authority granted in 36 CFR 1.5 and elsewhere in regulations. It is the policy of the NPS to review these provisions on a regular basis for possible addition to the general and special park regulations in part 13. The group of provisions proposed here are additions or changes to individual park regulations in part 13, subparts H-W. Where these provisions have applicability to several or all Alaska park areas, they generally are proposed for addition to part 13, subparts A-F. The following proposed regulations have resulted from the current review of compendium provisions. Additionally, several proposed changes to the part 13 regulations unrelated to the compendium review are included as indicated. We are consolidating all routine proposed changes in a single rulemaking document for administrative efficiency and to encourage broader participation in the rulemaking process. Each proposal is identified in the Section-by-Section Analysis that follows. As used within this document, the terms “we,” “our,” and “us” refer to the National Park Service. Section-by-Section Analysis Section 13.1 Definitions The definition for the term “adequate and feasible access” is proposed for deletion. This term, which does not currently appear in part 13, is a remnant of the NPS regulations for access to inholdings which were deleted in 1986 and moved to the Department of Interior's regulations in Title 43. The NPS definition has been superseded by the similar definition now found at 43 CFR 36.10(a)(1). This proposed change is a non-substantive administrative correction without regulatory effect. The definition of “National Preserve” is proposed for modification. The definition of National Preserve incorrectly identifies the “Alagnak Wild and Scenic River” instead of the Alagnak Wild River. See ANILCA § 605(b), 16 U.S.C. 1274(a)(25). Section 13.440 Subsistence Permits for Persons Whose Primary, Permanent Home Is Outside a Resident zone *§ 13.440(b).* We propose to remove this subsection because it no longer has any practical effect. It was originally adopted to provide a transitional authorization for subsistence uses without a permit during the initial application period for subsistence permits. This provision ceased to be applicable on August 1, 1981. Since that date, the authorization of subsistence uses by those living outside of resident zones has been by subsistence permit. Section 13.485 Subsistence Use of Timber and Plant Material *§ 13.485(a), (a)(1) and (a)(2).* We propose to revise these three paragraphs by deleting the word “live” in the term “live standing timber” with the intent of extending the applicability of these paragraphs to both live and dead standing timber. Due to the extensive amount of beetle killed standing timber in some park areas, the discretionary cutting of portions of this now dead standing timber is a useful resource management option and a benefit to subsistence users. Regulations at § 13.35(d) were revised in December of 2004 allowing park superintendents to authorize the harvest of dead standing timber. This proposed revision would allow subsistence users to harvest dead standing timber for firewood, house logs, and other subsistence uses. *§ 13.485(c)(1).* We propose revising this paragraph to expand the allowable reasons for temporary closures to subsistence use of particular plant populations. The intent of this proposal is to provide broader management discretion in designating plant harvest areas with the expanded allowance for timber harvest in § 13.35 and the proposed rule in paragraph
(a)above. The existing closure provisions for subsistence uses of plant materials, while closely patterned on the statutory provisions for temporary closures to subsistence use of fish and wildlife, are not similarly mandated by the law. Consequently, there is broader discretion for adjusting these provisions in accordance with traditional resource management guidelines and policies. This is especially appropriate in extreme circumstances such as those presented by the spruce bark beetle infestation now occurring in Alaska. Section 13.550 Wildlife Distance Conditions, Alagnak Wild River The park proposes to move a compendium rule to special regulations concerning wildlife distance conditions. This proposed regulation is similar to a regulation in Katmai National Park and Preserve, which was developed with input from the State of Alaska, commercial guides, conservation groups and others. This proposal also contains a provision restricting those fishing or engaging in photography from continuing that activity within 50 yards of a bear. While the regulation would allow a person to maintain a position while a bear transited the area or not to flee an approaching bear, continuing to fish within 50 yards of a bear presents an unacceptable opportunity for a bear to obtain fish from anglers. For photography, the proposal is needed to avoid unnatural behavior and displacement of less tolerant bears from a food source. Section 13.602 Wildlife Distance Conditions, Aniakchak National Preserve Like Katmai National Park and Preserve, Aniakchak proposes to move a current compendium rule to special regulation which would restrict fishing or engaging in photography from continuing that activity within 50 yards of a bear. While the regulation would allow a person to maintain a position while a bear transited the area or not to flee an approaching bear, continuing to fish within 50 yards of a bear presents an unacceptable opportunity for a bear to obtain fish from anglers. For photography, the proposal is needed to avoid unnatural behavior and displacement of less tolerant bears from a food source. Section 13. 918 Sable Pass Wildlife Viewing Area, Denali National Park and Preserve This section is a proposed re-adoption of the Sable Pass Wildlife Viewing Area, first established in 1956 as special park regulation 36 CFR 7.44(d) to protect wildlife viewing opportunities for all visitors who traveled the park road. This special regulation covered the area within one mile of the park road between miles 37 and 42. Realignment and extension of the park road has since caused road mileages to change slightly, and the mileages in the proposed regulation have been corrected accordingly. While entry into this area was prohibited, observation and photography of wildlife and other features from the road shoulders and designated turnouts were authorized. In 1983, this regulation was deleted without comment when the National Park Service revised parts 1-7 and 12 of the Code of Federal Regulations. Since then, the Sable Pass Closure has been seasonally implemented each year during the period of time when the park road is open, usually from May through September, using other regulatory authorities. The National Park Service believes it is important to provide one limited area along the park road where all visitors have an equal opportunity to view wildlife undisturbed in a natural setting. The majority of visitors along the park road ride on buses. These buses often turn around at Toklat or sooner, and do not traverse the other scenic high alpine passes, thus missing likely alpine bear viewing areas such as Highway Pass and Thorofare Pass. The National Park Service believes this closure should again be a special regulation. The NPS proposes to slightly modify the definition of the area from the original regulation to:
(1)exclude the Tattler Creek drainage in order to allow hiking opportunities there;
(2)extend from approximately mile 38.2 to 42.8 under the new road mileage system; and
(3)follow easily recognizable geographic boundaries where possible. Section 13.920 Wildlife Distance Conditions, Denali National Park and Preserve This section is proposed to codify and simplify wildlife viewing conditions that have been in effect in the park for many years. The conditions are intended to mitigate the risks associated with humans in close proximity to wildlife while accommodating the large numbers of visitors to Denali. Interior Alaska bears live at relatively low population densities in Denali and are likely to react to human presence at considerably greater distances than coastal bears. Furthermore, the open habitat, including much of the open tundra along the Denali park road, means that wildlife species may be more sensitive to human presence than the same species would be in forested habitat. Safe viewing and photography distances defined in Denali are greater than distances defined for other Alaska parks. Denali generally experiences visitor numbers, both on and off the main park road, that are significantly greater than other Alaska parks. High visitation provides more opportunities, over a broader area, for interaction between visitors and wildlife. Viewing in close proximity can alter wildlife behavior and cause hazardous circumstances for park visitors and wildlife. Chronic disruption of natural wildlife movements can also reduce or eliminate the viewing opportunities that attract visitors to Denali. The relatively high rate of wildlife encounters justifies more closely regulated management of visitors. In particular, the park is concerned about photographers who deliberately set up their equipment ahead of an advancing bear. To discourage this behavior, the rule would specifically prohibit photography within 300 yards of a bear. The minimum distance between people and wildlife protects both wildlife and visitors and maintains wildlife viewing opportunities. Although visitation tends to be concentrated along the road corridor, visitor use in more remote areas is also high due to the relative ease for visitors to access the backcountry. Denali's unique accessibility to high numbers of backcountry visitors without the level of experience or preparation that normally precedes backcountry visits exacerbates the potential risks. The rule is, therefore, proposed to apply parkwide to provide clarity, consistency and to help protect visitors and resources throughout the park. These wildlife viewing conditions do not apply to visitors engaged in lawful hunting or trapping activities, people who comply with a written protocol approved by the Superintendent, those who have a permit from the superintendent, or those who are otherwise directed by a park employee. Wildlife viewing distances are also not meant to apply to people inside or within 2 yards of a building entrance or cars, trucks or other highway vehicles. In addition to these regulations, any activity that disturbs the movements or behavior of wildlife is prohibited by 36 CFR 2.2(a)(2), which prohibits the feeding, touching, teasing, frightening or intentional disturbing of wildlife nesting, breeding or other activities. Section 13.1008 Solid Waste Disposal, Gates of the Arctic National Park and Preserve The NPS is proposing exceptions in certain circumstances to the solid waste disposal site requirements in four Alaska park areas, including Gates of the Arctic National Park and Preserve. The National Park Service believes that these provisions should be modified given the small communities residing inside park boundaries. Part 6 regulations require that solid waste disposal sites within park boundaries that were not in operation on September 1, 1984, handle waste “solely from National Park Service activities * * *.” This limitation has been problematic in the village of Anaktuvuk Pass. The NPS believes that the existing limitation may pose a threat to park resources. The village of Anaktuvuk Pass is not connected to the road system. Other than disposing of solid waste on private land within the boundaries of Gates of the Arctic National Park and Preserve, the only other option would entail flying out all solid waste, a cost prohibitive alternative. The statute, on which the current regulation is based, does not prohibit non-National Park Service waste. Accordingly, in order to enhance resource protection in the special circumstances affecting Gates of the Artic and three other Alaska park areas, the NPS is proposing to allow solid waste disposal sites to accept waste from activities other than National Park Service activities for waste generated within the boundaries of Gates of the Arctic National Park and Preserve. The NPS is also proposing to eliminate a site restriction. Section 6.4(a)(9) requires that disposal sites be located more than one mile from a “visitor center, campground, ranger station, entrance station, or similar public use facility, or residential area.” Moving existing disposal sites to comply with the one mile requirement would result in unnecessary environmental impact as well as be cost prohibitive. Additionally, in certain areas other lands are literally not available or not environmentally suitable. Therefore, the NPS proposes to eliminate the one mile limit so long as it does not degrade natural or cultural resources of the park area. For communities wholly within NPS boundaries, not being able to properly dispose of waste may result in unsafe disposal on park lands impairing park resources. The NPS believes that handling solid waste, under State of Alaska and the Environmental Protection Agency regulations, is preferable to each person disposing solid waste on private or leased lands within the park unit. Likewise, requiring that existing solid waste disposal sites be moved would result in unnecessary resource damage. It is also possible that the best location for sites may be within one mile of these facilities, as other lands may be unavailable or environmentally unsuitable. Other than the changes to allow handling non-National Park Service solid waste and to remove the one mile limit, so long as park resources would not be degraded, all other requirements of part 6 would remain in effect, providing protection to park resources while allowing a community on private land located inside the park to responsibly deal with solid waste sanitation. Section 13.1106 Pets, Glacier Bay National Park and Preserve The park proposes to move to special regulation the compendium rules regarding pets. The park believes that there are appropriate places for pets within the Bartlett Cove Developed Area, on vessels within the park and within the National Preserve. In these areas, pets must be leashed, crated, or otherwise physically restrained in accordance with 36 CFR 2.15(a)(2). In other areas, restrictions are placed on pets to protect wildlife, nesting areas, critical habitat and other values. Park wildlife is heavily dependent on the narrow strip of land between the bay and the mountains that quickly rise to present dramatic scenery. This narrow strip of land is also shared by campers and by visitors valuing the scenery and wildlife that it contains. In addition, the park has concerns about possible disease transmission from domestic to wild animals. Section 13.1108 Alsek Corridor, Glacier Bay National Park and Preserve The park proposes to promulgate as regulation several compendium entries related to the Alsek River, particularly as it relates to overnight use. This includes group size limits in the Alsek Corridor, consistent with the 1989 Alsek River Visitor Use Management Plan's management objectives. Campfires are currently prohibited by Servicewide regulations except in designated areas and under conditions set by the Superintendent. The park proposes to move the current designation allowing fires and a fire pan use condition to special regulation. This requirement helps protect the resource from intensive summer use at a limited number of campsites and provides for visitor enjoyment. Similarly, the repeated use of a small number of campsites created a human waste problem along the river. The park is proposing to move a compendium rule prohibiting disposal of human waste in the Alsek Corridor to special regulations. Standard camping practice on many heavily used rivers (including the Alsek since 1995 when the NPS constructed a rafter septic system at Dry Bay) involves the carry out of solid human waste. Similarly, the park proposes to move to regulation current compendium rules requiring a permit within the Alsek Corridor above Gateway Knob to manage public use. This is in accordance with the 1989 Plan, which also provides for an average of one party per day initiating travel in Canada. The permit serves as a tool to provide safety-related information, limit parties and groups in accordance with Plan objectives and ensure visitors receive appropriate orientation information. The permit system, in place since 1994, is coordinated with Canadian agencies. The Plan was developed with public input and in coordination with Canadian land management agencies. Section 13.1109 Off-Road Vehicle Use in Dry Bay, Glacier Bay National Park and Preserve Glacier Bay is also proposing to designate trails for Off-Road Vehicle
(ORV)use in Dry Bay. While ORV use is generally prohibited under current regulations, it is an authorized mode of transportation if it is directly incident to the exercise of commercial fishing rights or privileges obtained prior to December 2, 1980, in the Dry Bay area of the Preserve. Such use may be restricted if it poses a direct threat to park resources (36 CFR 13.21
(c)(1)). ORV's are the main mode of transportation in and around Dry Bay. Over the years, some ORV routes have relocated and new trails have been created, thus expanding the trail network beyond those in existence in 1979. Limiting ORV access to designated trails is necessary to prevent resource damage and protect the access of commercial fishermen. The NPS is proposing to authorize ORV use on certain designated trails and also limit all ORV use to those designated trails under 36 CFR 4.10(b). Section 13.1118 Solid Waste Disposal, Glacier Bay National Park and Preserve Finally, Glacier Bay, like Gates of the Arctic, is proposing exceptions in certain circumstances to the solid waste disposal site requirements. The National Park Service believes that these conditions should be modified given the small communities residing inside the park's boundary. Part 6 regulations require that solid waste disposal sites within park boundaries that were not in operation on September 1, 1984, handle waste “solely from National Park Service Activities * * *.” This limitation is problematic in Bartlett Cove and Dry Bay. The NPS believes that this limitation may pose a threat to park resources. For example, in Dry Bay within the boundaries of Glacier Bay National Park and Preserve, residents and business owners have very few options for storing or disposing of solid waste. The NPS is concerned that not allowing local residents and businesses the ability to have a solid waste disposal site closer to Dry Bay may result in garbage being dumped on park lands or other environmentally unsuitable disposal. Other than disposing of solid waste on private land within the boundaries of Glacier Bay National Park and Preserve, the only other option would entail flying or barging out all solid waste, a cost prohibitive alternative. The statute on which the current regulation is based does not prohibit non-National Park Service waste. Accordingly, in order to enhance resource protection in these special circumstances, the NPS is proposing to allow solid waste disposal sites to accept waste from activities other than National Park Service activities for waste generated within the boundaries of Glacier Bay National Park and Preserve. The NPS is also proposing to eliminate a site restriction. Section 6.4(a)(9) requires that disposal sites be located more than one mile from a “visitor center, campground, ranger station, entrance station, or similar public use facility, or residential area.” There is a solid waste disposal site in Bartlett Cove within one mile of park headquarters, the visitor center, the campground, and other park facilities. Moving the existing disposal site to comply with the one mile requirement would result in unnecessary environmental impact and be cost prohibitive. Additionally, in certain areas other lands are literally not available or not environmentally suitable. The NPS proposes to eliminate the one mile limit so long as it does not degrade natural or cultural resources of the park area. For communities wholly within NPS boundaries, not being able to properly dispose of waste may result in unsafe disposal on park lands impairing park resources. The NPS believes that handling solid waste, under State of Alaska and the Environmental Protection Agency regulations, is preferable to each person disposing solid waste on private or leased lands within the park unit. Likewise, requiring that existing solid waste disposal sites be moved would result in unnecessary resource damage. It is also possible that the best location for new sites may be within one mile of these facilities as other lands may be unavailable or environmentally unsuitable. Other than the changes to allow handling non-National Park Service solid waste and to remove the one mile limit so long as park resources would not be degraded, all other requirements of part 6 would remain in effect, providing protection to park resources while allowing communities on private land located inside the park to responsibly deal with solid waste sanitation. Section 13.1206 Wildlife Distance Conditions, Katmai National Park and Preserve The park proposes to move to special regulations a compendium restriction to the wildlife distance conditions. This proposal contains a provision restricting those fishing or engaging in photography from continuing that activity within 50 yards of a bear. While the regulation would allow a person to maintain a position while a bear transited the area or not to flee an approaching bear, continuing to fish within 50 yards of a bear presents an unacceptable opportunity for a bear to obtain fish from anglers. For photography, the proposal is needed to avoid unnatural behavior and displacement of less tolerant bears from a food source. Section 13.1210 Firearms, Katmai National Park and Preserve The park proposes to relax restrictions on the carrying of firearms in the former Katmai National Monument. The proposed modification would grant the Superintendent authority to designate areas and routes to allow hunters and residents of local communities to transit the area along the boundary of the former Katmai National Monument to access private inholdings or lands contiguous to the former Monument. For simplicity and ease of understanding, the proposed regulation applies to Katmai National Park rather than just the former Monument. Current regulations allow for the carrying, possession, and use of firearms in the ANILCA additions to Katmai. This regulation does not modify this allowance. Section 13.1304 Exit Glacier Developed Area, Kenai Fjords National Park Kenai Fjords National Park proposes to move to special regulations items currently in the compendium and in the Exit Glacier Area Plan. This includes a definition of the Exit Glacier area to clearly define the Exit Glacier Development Area
(EGDA)for the proposed regulations. The proposed rule includes— • Moving current compendium rules restricting food storage in the campground and camping consistent with bear management and the Exit Glacier Area Plan; • Prohibiting the use of a bicycle in the EGDA, except on the road or parking areas, for visitor safety and the prevention of resource impacts on the heavily used pedestrian paths; • Prohibiting snowmachines in part of the EGDA except on the Exit Glacier Road, parking areas, a marked route through the Exit Glacier campground to Exit Creek and within Exit Creek (which generally means the area between the banks and includes snow-covered gravel bars and the frozen surface of the creek) for safety reasons; and • Relaxing the requirement for a permit for the commercial transport of passengers by motor vehicles in the EGDA, but allowing the Superintendent the discretion to establish a permit requirement to protect public health and safety, park resources, or provide for the equitable use of park facilities. Section 13.1308 Harding Icefield, Kenai Fjords National Park The park proposed to close the Harding Icefield Trail to bicycles and similar wheeled devices for public safety concerns and also close the area within 1/8 mile from the trail to camping. Section 13.1310 Pets, Kenai Fjords National Park In addition, the park proposes to move to special regulation compendium rules prohibiting pets along the coast from mean high tide to one quarter mile inland after May 30 and before November 1 and in the EGDA except in the parking lot, on the Exit Glacier road, or in other areas designated by the superintendent. Section 13.1604 Solid Waste Disposal, Lake Clark National Park and Preserve The NPS is also proposing exceptions in certain circumstances to the solid waste disposal site requirements in Lake Clark National Park and Preserve. The National Park Service believes that these conditions should be modified given the small community of Port Alsworth residing inside the park's boundaries. Part 6 regulations require that solid waste disposal sites within park boundaries that were not in operation on September 1, 1984, handle waste “solely from National Park Service Activities * * *.” This limitation has been problematic in Port Alsworth. The NPS believes that this limitation may pose a threat to park resources. The community of Port Alsworth is not connected to the road system. Other than disposing of solid waste on private land within the boundaries of Lake Clark National Park and Preserve, the only current option would entail flying out all solid waste, a cost prohibitive alternative. The statute on which the current regulation is based does not prohibit non-National Park Service waste. The NPS is concerned that not allowing local residents and businesses the ability to have a solid waste disposal site closer to the community may result in garbage being dumped on park lands or other environmentally unsuitable disposal. Accordingly, in order to enhance resource protection in these special circumstances, the NPS is therefore proposing to allow solid waste disposal sites to accept waste from activities other than National Park Service activities for waste generated within the boundaries of Lake Clark National Park and Preserve. The NPS is also proposing to eliminate a site restriction. Section 6.4(a)(9) requires that disposal sites be located more than one mile from a “visitor center, campground, ranger station, entrance station, or similar public use facility, or residential area.” Lake Clark National Park and Preserve incinerates waste within one mile of park headquarters, residences, and other similar facilities. Moving this existing disposal site to comply with the one mile requirement would result in unnecessary environmental impact as well as be cost prohibitive. Additionally, in certain areas other lands are literally not available or not environmentally suitable. Therefore, the NPS proposes to eliminate the one mile limit so long as it does not degrade natural or cultural resources of the park area. For communities wholly within NPS boundaries, not being able to properly dispose of waste may result in unsafe disposal on park lands impairing park resources. The NPS believes that handling solid waste, under State of Alaska and the Environmental Protection Agency regulations, is preferable to each person disposing solid waste on private or leased lands within the park unit. Likewise, requiring that existing solid waste disposal sites be moved would result in unnecessary resource damage. It is also possible that the best location for new sites may be within one mile of these facilities as other lands may be unavailable or environmentally unsuitable. The NPS believes that these two changes—(1) to allow handling non-National Park Service solid waste and
(2)to remove the one mile limit so long as park resources would not be degraded—will provide protection to park resources while allowing communities on private land located inside the park to responsibly deal with solid waste sanitation. Finally, Lake Clark National Park and Preserve is proposing an exemption to the permit requirement of §§ 6.4(b) and 6.9(a) for a transfer station on nonfederal lands within the park boundary when the Regional Director is able to determine that the operation of a transfer station would not degrade park natural or cultural resources. The NPS believes the temporary nature of transfer stations poses significantly fewer environmental concerns than permanent solid waste disposal sites and that the Regional Director's determination and other applicable State and federal laws will adequately protect park resources from undue impacts. The State of Alaska regulates transfer stations in the State, consistent with EPA requirements. The State of Alaska seeks to ensure transfer stations are appropriately located and managed in an environmentally responsible manner. Operators of other types of solid waste disposal sites within the boundaries of Lake Clark National Park and Preserve would still be required to obtain a permit under § 6.4(b). For transfer stations on private lands within park boundaries, the NPS believes that the Regional Director's determination and State and EPA regulations sufficiently protect park resources. Section 13.1912 Solid Waste Disposal, Wrangell-St. Elias National Park and Preserve The NPS is also proposing exceptions in certain circumstances to the solid waste disposal site requirements in Wrangell-St. Elias. The National Park Service believes that these conditions should be modified given the small communities residing inside the park's boundaries. Part 6 regulations require that solid waste disposal sites within park boundaries that were not in operation on September 1, 1984, handle waste “solely from National Park Service activities * * * .” This limitation has been problematic in McCarthy. The NPS believes that this limitation may pose a threat to park resources. For example, for the town of McCarthy within the boundaries of Wrangell-St. Elias National Park and Preserve, the closest solid waste disposal site (including transfer stations) is more than 140 miles away. Not including summer visitors, McCarthy has a seasonal population of approximately 100 and year round population of about 50. The NPS is concerned that not allowing local residents and businesses the ability to have a solid waste disposal site closer to the community may result in garbage being dumped on park lands or other environmentally unsuitable disposal. The statute on which the current regulation is based does not prohibit non-National Park Service waste. The NPS is therefore proposing to allow solid waste disposal sites to accept waste from activities other than National Park Service activities for waste generated within the boundaries of Wrangell-St. Elias. The NPS is also proposing to eliminate a site restriction. Section 6.4(a)(9) requires that disposal sites be located more than one mile from a “visitor center, campground, ranger station, entrance station, or similar public use facility, or residential area.” In certain areas other lands are literally not available or not environmentally suitable. Therefore, the NPS proposes to eliminate the one mile limit so long as it does not degrade natural or cultural resources of the park area. For communities wholly within NPS boundaries, not being able to properly dispose of waste may result in unsafe disposal on park lands impairing park resources. The NPS believes that handling solid waste, under State of Alaska and the Environmental Protection Agency regulations, is preferable to each person disposing solid waste on private lands within the park unit. Likewise, limiting the locations of solid waste disposal sites may result in unnecessary resource damage. It is possible that the best location for new sites may be within one mile of designated facilities, as other lands may be unavailable or environmentally unsuitable. The NPS believes that these two changes—(1) to allow handling non-National Park Service solid waste and
(2)to remove the one mile limit so long as park resources would not be degraded—will provide protection to park resources while allowing communities on private land located inside the park to responsibly deal with solid waste sanitation. Finally, Wrangell-St. Elias National Park and Preserve is proposing an exemption to the permit requirement of §§ 6.4(b) and 6.9(a) for a transfer station on nonfederal lands within the park boundary when the Regional Director is able to determine that the operation of a transfer station would not degrade park natural or cultural resources. The NPS believes the temporary nature of transfer stations poses significantly fewer environmental concerns than permanent solid waste disposal sites and that the Regional Director's determination and other applicable State and federal laws will adequately protect park resources from undue impacts. The State of Alaska regulates transfer stations in the State, consistent with EPA requirements. The State of Alaska seeks to ensure transfer stations are appropriately located and managed in an environmentally responsible manner. Operators of other types of solid waste disposal sites within the boundaries of Wrangell-St. Elias National Park and Preserve would still be required to obtain a permit under § 6.4(b). For transfer stations on private lands within park boundaries, the NPS believes that the Regional Director's determination and State and EPA regulations sufficiently protect park resources. Compliance With Other Laws Regulatory Planning and Review (Executive Order 12866) This document is not a significant rule and is not subject to review by the Office of Management and Budget under Executive Order 12866.
(1)This rule will not have an effect of $100 million or more on the economy. It will not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities. A qualitative cost/benefit analysis was conducted to examine specific costs and benefits associated with this proposed regulation. That analysis concludes that positive net benefits would be generated by each component of the proposed regulatory action, and hence by the regulatory action overall. Further, governmental processes in NPS-administered areas in Alaska would be improved, and market failures would be more effectively addressed. Therefore, it is anticipated that economic efficiency would be improved by this proposed regulatory action.
(2)This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. This is an agency-specific rule that will not interfere with other agencies or local government plans, policies, or controls. The proposals included with this rulemaking apply to areas managed by the National Park Service and do not conflict with other federal regulations. Several proposals are specifically intended to improve consistency between state and Federal areas. The review process used to develop the rulemaking proposals included consultation with the State of Alaska Department of Natural Resources to seek views of appropriate officials and to provide maximum conformity with state rules on adjacent lands as well as active participation where NPS is proposing variation from similar state regulations.
(3)This rule does not alter the budgetary effects of entitlements, grants, user fees, or loan programs, or the rights and obligations of their recipients. This rule will have no effects on entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients. No grants or other forms of monetary supplements are involved.
(4)This rule does not raise novel legal or policy issues. This rule implements existing legislative enactments, judicial interpretations, and regulatory provisions. It is not a completely new proposal, but rather a continuation of the rulemaking process begun in 1980 to implement various provisions required by the Alaska National Interest Lands Conservation Act (ANILCA). In implementing ANILCA, NPS has sought to promulgate only those regulations necessary to interpret the law and to provide for the health and safety of the public and the environment. While the legal and policy issues associated with some parts of ANILCA may have been considered novel when adopted, they have long since lost their novelty. The continuing implementation of ANILCA has become routine and the process begun by this rulemaking is intended to increase participation and cooperation in the evolution of NPS regulations for Alaska. Regulatory Flexibility Act The Department of the Interior certifies that this document will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). The economic effects of this rule are local in nature and negligible in scope. The proposals in this rulemaking will either implement rules unrelated to business activity or make permanent various temporary and emergency rules under which area businesses have been operating. The rules included in this proposed rulemaking will have no effect or in some cases a salutary effect by eliminating year to year uncertainty for businesses and park visitors. A qualitative Regulatory Flexibility threshold analysis was conducted to examine potential impacts to small entities. Based on the cost/benefit analysis referred to above, that threshold analysis concludes that, since no significant costs are anticipated for any component of the proposed action, significant economic impacts would not be imposed on a substantial number of small entities. Small Business Regulatory Enforcement Fairness Act (SBREFA) This rule is not a major rule under 5 U.S.C. 804(2), SBREFA. This rule: a. Does not have an annual effect on the economy of $100 million or more. Expenses related to compliance with various provisions of this proposed rule are slight. No new user fees or charges are proposed. Any incidental costs of registering, checking-in, or participating in orientation programs would be small and often would not be additional to those already associated with visiting park areas. b. Will not cause a major increase in costs or prices for consumers, individual industries, federal, state, or local government agencies, or geographic regions. The proposed provisions of this rulemaking will generally continue existing rules and use patterns for the park areas in Alaska. c. Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. The various provisions of this proposed rule do not apply differently to U.S.-based enterprises and foreign-based enterprises. Unfunded Mandates Reform Act This rulemaking addresses only actions that will be taken by the NPS. It will not require any State, local or tribal government to take any action that is not funded. In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501 *et seq.* ): a. This rule will not “significantly or uniquely” affect small governments. A Small Government Agency Plan is not required. This rule is an agency specific rule and imposes no other requirements on small governments. Several of the proposed regulations are based on State of Alaska statutes. This consistency between the State of Alaska and the National Park Service is a benefit to visitors. b. This rule will not produce a federal mandate of $100 million or greater in any year, *i.e.* , it is not a “significant regulatory action” under the Unfunded Mandates Reform Act. Takings (Executive Order 12630) In accordance with Executive Order 12630, the rule does not have significant takings implications. A takings implication assessment is not required because no taking of personal property will occur as a result of this proposed rule. Federalism (Executive Order 13132) In accordance with Executive Order 13132, the rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The proposed rule is limited in effect to federal lands and waters managed by the NPS and will not have a substantial direct effect on state and local government in Alaska. This proposed rule was initiated in part at the request of the state and has been drafted in closed consultation with the State of Alaska and, as such, promotes the principles of federalism. Civil Justice Reform (Executive Order 12988) In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule does not unduly burden the judicial system and meets the requirements of §§ 3(a) and 3(b)(2) of the order. This rule does not impose a new burden on the judicial system. Paperwork Reduction Act This regulation requires an information collection from 10 or more parties, which must be submitted for OMB approval under the Paperwork Reduction Act. However, these are not new collection requirements and, therefore, no additional request to OMB has been prepared. The information collection activities are necessary for the public to obtain benefits in the form of concession contracts and special use permits. National Environmental Policy Act We have analyzed this rule in accordance with the criteria of the National Environmental Policy Act and 516 DM. This rule does not constitute a major Federal action significantly affecting the quality of the human environment. The rule has generally been determined to be categorically excluded from further NEPA analysis in accordance with Departmental Guidelines in 516 DM 6 (49 FR 21438), and NPS procedures in Reference Manual-12.3.4.A(8), and, other than as noted below, there are no applicable exceptions to categorical exclusions (516 DM 2, Appendix 2; RM-12.3.5). A categorical exclusion does not apply to the proposed special regulation [13.65(b)(13)] designating off-road vehicle routes at Glacier Bay National Preserve, for which an environmental assessment is being prepared. The categorical exclusion and environmental assessment, when completed, will be available at the Alaska Regional Office, 240 5th Avenue, Anchorage, Alaska, 99501, 907-644-3533. Government-to-Government Relationship With Tribes In accordance with Executive Order 13175 “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249); the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951); the Department of the Interior-Alaska Policy on Government-to-Government Relations with Alaska Native Tribes dated January 18, 2001; part 512 of the Departmental Manual, Chapter 2 “Departmental Responsibilities for Indian Trust Resources”; and various park consultation agreements with tribal governments, the potential effects on Federally-recognized Indian tribes have been evaluated, and it has been determined at this time that there are no potential effects. While the consultation agreements noted above have not resulted in findings of potential effects, various proposals are of interest to local residents using these NPS areas and have been facilitated by the relationships established through government-to-government consultation. Finally, the initial determination of effect noted here is dynamic and subject to change throughout this rulemaking process due to the ongoing nature of government-to-government consultation for the NPS areas in Alaska. Clarity of This Rule Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this rule easier to understand, including answers to questions such as the following:
(1)Are the requirements in the rule clearly stated?
(2)Does the rule contain technical language or jargon that interferes with its clarity?
(3)Does the format of the rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity?
(4)Would the rule be easier to read if it were divided into more (but shorter) sections? (A “section” appears in bold type and is preceded by the symbol “§ ” and a numbered heading.
(5)Is the description of the rule in the SUPPLEMENTARY INFORMATION section of the preamble helpful in understanding the proposed rule? What else could we do to make the rule easier to understand? Send a copy of any comments that concern how we could make this rule easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street NW., Washington, DC 20240. You may also e-mail the comments to this address: *Exsec@ios.doi.gov* . *Drafting Information:* The principal contributors to this proposed rule are: Jim Ireland, Kenai Fjords National Park ; Jay Liggett, Jane Hendrick, Andee Hansen and Paul Hunter, Alaska Regional Office, and Jerry Case, Regulations Program Manager, NPS, Washington, DC. Public Availability of Comments Before including your address, phone number, e-mail address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. List of Subjects in 36 CFR Part 13 Alaska, National Parks, Reporting and recordkeeping requirements. In consideration of the foregoing, the National Park Service proposes to amend 36 CFR part 13 as revised on November 30, 2006 (71 FR 69333) as set forth below: PART 13—NATIONAL PARK SYSTEM UNITS IN ALASKA 1. The authority for part 13 continues to read as follows: Authority: 16 U.S.C. 1, 3, 462(k), 3101 et. seq.; Subpart M also issued under 16 U.S.C. 1a-2(h), 20, 1361, 1531, 3197; Pub. L. 105-277, 112 Stat. 2681-259, October 21, 1998; Pub. L. 106-31, 113 Stat. 72, May 21, 1999; Sec. 13.1202 also issued under Sec. 1035, Pub. L. 104-333, 110 Stat. 4240. § 13.1 [Amended] 2. Amend § 13.1 as follows: A. Remove the definition of “adequate and feasible access”; and B. In the definition of “National Preserve,” remove the term “Alagnak National Wild and Scenic River” and add in its place the term “Alagnak Wild River.” § 13.440 [Amended] 3. In § 13.440, remove paragraph
(b)and redesignate paragraph
(c)as (b). 4. In § 13.485, revise paragraph
(a)and remove the first sentence of paragraph (c)(1) and add two new sentences in its place to read as follows: § 13.485 Subsistence use of timber and plant material.
(a)Unless otherwise provided for in this section, the non-commercial cutting of standing timber by local rural residents for appropriate subsistence uses, such as firewood or house logs, may be permitted in park areas where subsistence uses are allowed as follows:
(1)For standing timber of diameter greater than 3 inches at ground height, the Superintendent may permit cutting in accordance with the specifications of a permit if such cutting is determined to be compatible with the purposes for which the park area was established; and
(2)For standing timber of diameter less than three inches at ground height, cutting is authorized unless restricted by the Superintendent.
(c)* * *
(1)Unless otherwise provided for in this part, the Superintendent, after notice and public hearing in the affected vicinity and other locations as appropriate, may temporarily close all or any portion of a park area to subsistence uses of a particular plant population. The Superintendent may make a closure under this paragraph only if necessary for reasons of public safety, administration, resource protection, protection of historic or scientific values, conservation of endangered or threatened species, or the purposes for which the park area was established, or to ensure the continued viability of the plant population. 5. Add a new Subpart H (consisting of § 13.550) to read as follows: Subpart H—Special Regulations—Alagnak Wild River § 13.550 Wildlife distance conditions.
(a)Approaching a bear or any large mammal within 50 yards is prohibited.
(b)Continuing to occupy a position within 50 yards of a bear that is using a concentrated food source, including, but not limited to, animal carcasses, spawning salmon, and other feeding areas is prohibited.
(c)Continuing to engage in fishing or photography activities within 50 yards of a bear is prohibited.
(d)The prohibitions in this section do not apply to persons—
(1)Engaged in a legal hunt;
(2)On a designated bear viewing structure;
(3)In compliance with a written protocol approved by the Superintendent; or
(4)Who are otherwise directed by a park employee. 6. Amend § 13.604 by redesignating paragraph
(c)as paragraph
(d)and adding new paragraph
(c)to read as follows: § 13.604 Wildlife distance conditions.
(c)Continuing to engage in fishing or photography activities within 50 yards of a bear is prohibited. 7. Add new §§ 13.918 and 13.920 in subpart L to read as follows: § 13.918 Sable Pass Wildlife Viewing Area.
(a)Entry into the Sable Pass Wildlife Viewing Area is prohibited from May 1 to September 30 unless authorized by the Superintendent.
(b)The Sable Pass Wildlife Viewing Area means the area within one mile of the shoulder of the Park Road between Mile 38.2 and Mile 42.8, excluding the Tattler Creek drainage. A map showing the specific boundaries of the closure is available for inspection at the park visitor center. § 13.920 Wildlife distance conditions.
(a)*Bears.* The following are prohibited:
(1)Approaching within 300 yards of a bear; or
(2)Engaging in photography within 300 yards of a bear.
(b)*Other wildlife.* The following are prohibited:
(1)Approaching within 25 yards of a moose, caribou, Dall sheep, wolf, an active raptor nest, or occupied den site; or
(2)Engaging in photography within 25 yards of a moose, caribou, Dall sheep, wolf, an active raptor nest, or occupied den site.
(c)The prohibitions in this section do not apply to persons—
(1)Within a motor vehicle or a hard sided building;
(2)Within 2 yards of a motor vehicle or entrance to a hard sided building that are 25 yards or more from a bear;
(3)Engaged in legal hunting or trapping activities;
(4)In compliance with a written protocol approved by the Superintendent;
(5)Who are otherwise directed by a park employee; or
(6)In accordance with a permit from the Superintendent. 8. Add § 13.1008 in subpart M to read as follows: § 13.1008 Solid waste disposal.
(a)A solid waste disposal site may accept non-National Park Service solid waste generated within the boundaries of the park area.
(b)A solid waste disposal site may be located within 1 mile of facilities as defined by this part so long as it does not degrade natural or cultural resources of the park area. 9. Add § 13.1106 to read as follows: § 13.1106 Pets. Pets are prohibited except—
(a)On the Bartlett Cove Public Use Dock;
(b)On the beach between the Bartlett Cove Public Use Dock and the National Park Service Administrative Dock;
(c)Within 100 feet of Bartlett Cove Developed Area park roads or parking areas unless otherwise posted;
(d)On a vessel on the water; or
(e)Within Glacier Bay National Preserve. 10. Add § 13.1108 to read as follows: § 13.1108 Alsek Corridor.
(a)A permit is required to enter the Alsek Corridor. A map showing the boundaries of the Alsek Corridor is available from the park visitor center. Failure to obtain a permit is prohibited.
(b)Group size is limited to 15 persons except that specific concession permit holders are limited to 25 persons.
(c)Camping is prohibited for more than one night each at Walker Glacier, Alsek Spit and Gateway Knob plus one additional night at any one of these three locations. Camping is prohibited for more than four nights total among the three locations.
(d)Except at Dry Bay, campfires may be lighted and maintained inside a fire pan within 1/2 mile of the Alsek River.
(e)Disposal of solid human body waste within the Alsek Corridor is prohibited. This waste must be carried to the NPS designated facility. 11. Add § 13.1109 to read as follows: § 13.1109 Off-road vehicle use in Dry Bay. The use of off-road vehicles is authorized only on designated routes and areas in Dry Bay. The use of off-road vehicles in all other areas in Dry Bay is prohibited. A map of designated routes and areas is available at park headquarters. 12. Add § 13.1118 to read as follows: § 13.1118 Solid waste disposal.
(a)A solid waste disposal site may accept non-National Park Service solid waste generated within the boundaries of the park area.
(b)A solid waste disposal site may be located within one mile of facilities as defined by this part so long as it does not degrade natural or cultural resources of the park area. 13. Amend § 13.1206 by redesignating paragraph
(c)as paragraph
(d)and adding a new paragraph
(c)to read as follows: § 13.1206 Wildlife distance conditions.
(c)Continuing to engage in fishing or photography activities within 50 yards of a bear is prohibited. 14. Add § 13.1210 to read as follows: § 13.1210 Firearms. The superintendent may designate areas or routes within Katmai National Park where a firearm may be carried. 15. Revise § 13.1304 to read as follows: § 13.1304 Exit Glacier Developed Area.
(a)*Location of Exit Glacier Developed Area.* A map showing the boundaries of the EGDA is available at the park visitor center. For the purposes of this subpart, the Exit Glacier Developed Area
(EGDA)means:
(1)From the park boundary to Exit Glacier Campground Entrance Road, all park areas within 350 meters of the centerline of the Exit Glacier Road;
(2)From Exit Glacier Campground Entrance Road to the end of the main paved trail, all park areas within 500 meters of any paved surface; or
(3)All park areas within 300 meters of the terminus of Exit Glacier.
(b)*Camping.* Within the EGDA, camping is prohibited except in designated sites within the Exit Glacier Campground or as authorized by the Superintendent.
(c)*Food.* Cooking, consuming, storing or preparing food in the Exit Glacier Campground is prohibited except in designated areas.
(d)*Bicycles.* Within the EGDA, the use of a bicycle is prohibited except on the Exit Glacier road and parking areas.
(e)*Commercial transport of passengers by motor vehicles.* Commercial transport of passengers by motor vehicles on Exit Glacier Road is allowed without a written permit. However, if required to protect public health and safety or park resources, or to provide for the equitable use of park facilities, the Superintendent may establish a permit requirement with appropriate terms and conditions for the transport of passengers. Failure to comply with permit terms and conditions is prohibited.
(f)*Snowmachines.* The use of snowmachines is prohibited within the EGDA, except—
(1)On Exit Glacier Road;
(2)In parking areas;
(3)On a designated route through the Exit Glacier campground to Exit Creek;
(4)Within Exit Creek; and
(5)For NPS administrative activities.
(g)*Exit Glacier Developed Area closures and restrictions.* The Superintendent may prohibit or otherwise restrict activities in the EGDA to protect public health, safety, or park resources, or to provide for the equitable and orderly use of park facilities. Information on closures and restrictions will be available at the park visitor information center. Violating closures or restrictions is prohibited.
(h)*Climbing and walking on Exit Glacier.* Except for areas designated by the Superintendent, climbing or walking on, in, or under Exit Glacier is prohibited within 1/2 mile of the glacial terminus from May 1 through October 31, and during other periods as determined by the Superintendent. Restrictions and exceptions will be available for inspection at the park visitor center, on bulletin boards or signs, or by other appropriate means.
(i)*Ice fall hazard zones.* Entering an ice fall hazard zone is prohibited. These zones will be designated with signs, fences, rope barriers, or similar devices. 16. Add § 13.1308 to read as follows: § 13.1308 Harding Icefield Trail. The Harding Icefield Trail from the junction with the main paved trail near Exit Glacier to the emergency hut near the terminus is closed to—
(a)Camping within 1/8 mile of the trail; and
(b)Bicycles or other wheeled devices. 17. Add § 13.1310 to read as follows: § 13.1310 Pets.
(a)Pets are prohibited—
(1)In the Exit Glacier Developed Area except in the parking lot, on the Exit Glacier road, or other areas designated by the superintendent;
(2)Along the coast within the area extending from the mean high tide line to one quarter mile inland after May 30 and before November 1.
(b)The restrictions in this section do not apply to dogs when sufficient snow exists for skiing or dog sled use and the dogs are restrained as part of a sled dog team or for the purposes of skijoring. 18. Add § 13.1604 to read as follows: § 13.1604 Solid waste disposal.
(a)A solid waste disposal site may accept non-National Park Service solid waste generated within the boundaries of the park area.
(b)A solid waste disposal site may be located within one mile of facilities as defined by this part so long as it does not degrade natural or cultural resources of the park area.
(c)A transfer station located wholly on nonfederal lands within Lake Clark National Park and Preserve may be operated without a permit from the National Park Service as required by §§ 6.4(b) and 6.9(a) so long as the solid waste is generated within the boundaries of the park area and the Regional Director determines that the operation will not degrade any of the natural or cultural resources of the park area. Such a transfer station must comply with the remaining provisions of part 6 of this chapter. A transfer station means a public use facility for the deposit and temporary storage of solid waste, excluding a facility for the storage of a regulated hazardous waste. 19. Add § 13.1912 to read as follows: § 13.1912 Solid waste disposal.
(a)A solid waste disposal site may accept non-National Park Service solid waste generated within the boundaries of the park area.
(b)A solid waste disposal site may be located within one mile of facilities as defined by this part so long as it does not degrade natural or cultural resources of the park area.
(c)A transfer station located wholly on nonfederal lands within Wrangell-St. Elias National Park and Preserve may be operated without the permit required by §§ 6.4(b) and 6.9(a) only if:
(1)The solid waste is generated within the boundaries of the park area;
(2)The Regional Director determines that the operation will not degrade any of the natural or cultural resources of the park area; and
(3)The transfer station complies with the provisions of part 6 of this chapter.
(d)For purposes of this section, a transfer station means a public use facility for the deposit and temporary storage of solid waste, excluding a facility for the storage of a regulated hazardous waste. Dated: November 21, 2006. David M. Verhey, Acting Assistant Secretary, Fish and Wildlife and Parks. [FR Doc. E6-22100 Filed 12-26-06; 8:45 am] BILLING CODE 4310-EF-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 52 and 81 [EPA-R05-OAR-2006-0046; FRL-8261-6] Determination of Attainment, Approval and Promulgation of Implementation Plans and Designations of Areas for Air Quality Planning Purposes; Ohio; Redesignation of Belmont County to Attainment of the 8-Hour Ozone Standard AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: On June 20, 2006, the Ohio Environmental Protection Agency (Ohio EPA), submitted a request for EPA approval of redesignation of Belmont County (the Ohio portion of the Wheeling, West Virginia-Ohio (WV-OH) bi-state ozone nonattainment area) to attainment of the 8-hour ozone National Ambient Air Quality Standard (NAAQS) and a request for EPA approval of an ozone maintenance plan for Belmont County as a revision to the Ohio State Implementation Plan (SIP). On August 24, 2006, the State submitted public hearing records for the ozone redesignation request and ozone maintenance plan. On December 4, 2006, the State submitted a clarification of its intent to implement contingency measures in the event of an ozone standard violation in the Wheeling, WV-OH area subsequent to the redesignation of this area to attainment of the ozone standard. EPA is proposing to approve Ohio's request and corresponding SIP revision. EPA is also proposing to approve the Volatile Organic Compounds
(VOC)and Nitrogen Oxides (NO <sup>X</sup> ) Motor Vehicle Emission Budgets (MVEBs) for Belmont County, as supported by the ozone maintenance plan for this County, for purposes of conformity determinations. DATES: Comments must be received on or before January 26, 2007. Submit your comments, identified by Docket ID No. EPA-R05-OAR-2006-0046, by one of the following methods: • *www.regulations.gov* : Follow the on-line instructions for submitting comments. • E-mail: *mooney.john@epa.gov* . • Fax:
(312)886-5824. • Mail: John M. Mooney, Chief, Criteria Pollutant Section, Air Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. • Hand Delivery: John M. Mooney, Chief, Criteria Pollutant Section, Air Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois. Such deliveries are only accepted during the Regional Office's normal hours of operation, and special arrangements should be made for deliveries of boxed information. The Regional Office's official hours of operation are Monday through Friday, 8:30 a.m. to 4:30 p.m., excluding Federal holidays. *Instructions:* Direct your comments to Docket ID No. EPA-R05-OAR-2006-0046. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at *www.regulations.gov* , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI, or otherwise protected, through *www.regulations.gov* or e-mail. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *www.regulations.gov* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters and any form of encryption, and should be free of any defects or viruses. *Docket:* All documents in the docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, *e.g.* , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hardcopy. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hardcopy at the Environmental Protection Agency, Region 5, Air and Radiation Division, 77 West Jackson Boulevard, Chicago, Illinois 60604. This facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding Federal holidays. It is recommended that you telephone Edward Doty, Environmental Scientist, at
(312)886-6057, before visiting the Region 5 office. FOR FURTHER INFORMATION CONTACT: Edward Doty, Environmental Scientist, Criteria Pollutant Section, Air Programs Branch (AR-18), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604,
(312)886-6057, *doty.edward@epa.gov* . SUPPLEMENTARY INFORMATION: Throughout this document whenever “we,” “us,” or “our” is used, we mean the EPA. This supplementary information section is arranged as follows: I. What Action is EPA Proposing to Take? II. What Is the Background for These Actions? III. What Are the Criteria for Redesignation to Attainment? IV. What Are EPA's Analyses of the State's Requests and What Are the Bases for EPA's Proposed Actions? V. Has Ohio Adopted Acceptable Motor Vehicle Emissions Budgets for the End Year of the Ozone Maintenance Plans Which Can Be Used To Support Conformity Determinations? VI. What Are the Effects of EPA's Proposed Actions? VII. Statutory and Executive Order Reviews I. What Action is EPA Proposing to Take? We are proposing to take several related actions for Belmont County, Ohio. First, we are proposing to determine that Belmont County has attained the 8-hour ozone NAAQS and that Belmont County and the State of Ohio have met the requirements for redesignation to attainment of the 8-hour ozone NAAQS under section 107(d)(3)(E) of the CAA. We are, therefore, proposing to approve the June 20, 2006 and August 24, 2006 requests from the State of Ohio to change the designation of Belmont County from nonattainment to attainment of the 8-hour ozone NAAQS. 1 1 A separate proposed rule from EPA addresses a request from the State of West Virginia to redesignate Marshall and Ohio Counties, West Virginia to attainment of the 8-hour ozone NAAQS. See 71 FR 57894, October 2, 2006. Second, we are proposing to approve Ohio's ozone maintenance plan for Belmont County as a revision to the Ohio SIP. The maintenance plan is designed to keep Belmont County and, in conjunction with a West Virginia ozone maintenance plan for Marshall and Ohio Counties, the entire Wheeling, WV-OH area in attainment of the 8-hour ozone NAAQS for the next 12 years, through 2018. As supported by and consistent with the ozone maintenance plan, we are also proposing to approve the 2018 VOC and NO <sup>X</sup> MVEBs for Belmont County for conformity determination purposes. II. What is the Background for These Actions? EPA has determined that ground-level ozone is detrimental to human health. On July 18, 1997, EPA promulgated an 8-hour ozone NAAQS (62 FR 38856) of 0.08 parts per million parts of air (0.08 ppm) (80 parts per billion (ppb)). 2 This 8-hour ozone standard replaced a prior 1-hour ozone NAAQS, which was promulgated on February 8, 1979 (44 FR 8202) and revoked on June 15, 2005. 2 This standard is violated in an area when any ozone monitor in the area (or in its impacted downwind environs) records 8-hour ozone concentrations with a three-year average of the annual fourth-highest daily maximum 8-hour ozone concentrations equaling or exceeding 85 ppb. Ground-level ozone is not emitted directly by sources. Rather, emitted NO <sup>X</sup> and VOC react in the presence of sunlight to form ground-level ozone along with other secondary compounds. NO <sup>X</sup> and VOC are referred to as “ozone precursors.” The CAA required EPA to designate as nonattainment any area that violated the 8-hour ozone NAAQS. Ozone data for the three most recent years at the time when the 8-hour ozone designations were initially established (2001-2003) were considered to establish the ozone designations. The **Federal Register** notice making these designations was signed on April 15, 2004, and was published on April 30, 2004 (69 FR 23857). The CAA contains two sets of provisions—subpart 1 and subpart 2—that address planning and emission control requirements for nonattainment areas. (Both are found in title I, part D of the CAA.) Subpart 1 contains general, less prescriptive requirements for nonattainment areas for any pollutant governed by a NAAQS, and applies to all nonattainment areas. Subpart 2 contains more specific requirements for certain ozone nonattainment areas, and applies to ozone nonattainment areas classified under section 181 of the CAA. In the April 30, 2004 designation rulemaking, EPA divided 8-hour ozone nonattainment areas into the categories of subpart 1 nonattainment (“basic” nonattainment) and subpart 2 nonattainment (“classified” nonattainment) based on their 8-hour ozone design values ( *i.e.* , on the three-year average of the annual fourth-highest daily maximum 8-hour ozone concentrations at the worst-case monitoring sites in the designated areas) and on their 1-hour ozone design values ( *i.e.* , on the fourth-highest daily maximum 1-hour ozone concentrations over the three-year period at the worst-case monitoring sites in the designated areas). 3 8-hour ozone nonattainment areas with 1-hour ozone design values equaling or exceeding 121 ppb were designated as subpart 2, classified nonattainment areas. Classification of the subpart 2 nonattainment areas were based on the levels of the monitored 8-hour ozone design values for each nonattainment area. All other 8-hour nonattainment areas were designated as subpart 1, basic nonattainment areas, which have no area-specific classifications. 3 The 8-hour ozone design value and the 1-hour ozone design value for each area were not necessarily recorded at the same monitoring site. The worst-case monitoring site for each ozone concentration averaging time was considered for each area. Emission control requirements for classified nonattainment areas are linked to area classifications. Areas with more serious ozone pollution problems are subject to more prescribed requirements. The requirements are designed to bring areas into attainment by their specified attainment dates, which also depend on the area classifications. For example, marginal nonattainment areas are subject to the fewest mandated control requirements and have the earliest attainment deadline. Whereas, severe nonattainment areas are required to meet more mandated emission controls, including tighter restrictions on the sizes of existing VOC and NO <sup>X</sup> sources required to install emission controls and tighter restrictions on mandated emission controls and offsetting of new sources, and have a later attainment deadline. In contrast, the attainment deadline for basic nonattainment areas does not depend on the magnitude of the area 8-hour ozone design values. Under EPA regulations at 40 CFR part 50, the 8-hour ozone standard is attained when the three-year average of the annual fourth-highest daily maximum 8-hour average ozone concentrations is less than or equal to 0.08 ppm ( *i.e.* , less than or equal to 0.084 ppm or 84 ppb based on data rounding conventions specified in appendix I of 40 CFR part 50) over the most recent three-year period at all monitors in an area and in its impacted downwind environs. (See 69 FR 23857 (April 30, 2004) for further information.) Such supporting data must meet a minimum data completeness requirement. The completeness requirement (specified in appendix I of 40 CFR part 50) for ozone data supporting a determination of attainment and a redesignation to attainment is met when the annual average percent of days with valid ambient monitoring data is greater than 90 percent for the ozone seasons during the three-year period, with no single year with less than 75 percent data completeness during the ozone season. In the April 30, 2004 designation/classification rulemaking, the Wheeling, WV-OH area, including Belmont County, was designated as subpart 1 nonattainment for the 8-hour ozone standard. The designation was based on ozone data collected during the 2001-2003 period. On June 20, 2006, the State of Ohio requested redesignation of Belmont County to attainment of the 8-hour ozone NAAQS based on ozone data collected in these Counties during the 2003-2005 period. On August 24, 2006, the State of Ohio completed the ozone redesignation request by submitting documentation of the public hearing conducted by the State for the redesignation request and ozone maintenance plan. All information contained in the State's June 20, 2006 ozone redesignation request submittal was unchanged through the State's public review process (summarized in the August 24, 2006 submittal). On December 4, 2006, the State submitted a clarification to the State's ozone maintenance plan, indicating that the State is committed to implement contingency emission control measures in the event of a violation of the 8-hour ozone standard subsequent to the redesignation of Belmont County and the Wheeling, WV-OH area to attainment of the 8-hour ozone NAAQS. Note that the State of West Virginia has also submitted an ozone redesignation request for the West Virginia portion of the Wheeling, WV-OH area (for Marshall and Ohio Counties). The West Virginia ozone redesignation request is being addressed through a separate rulemaking process. EPA published a notice of proposed rulemaking on the West Virginia request on October 2, 2006 (71 FR 57894). III. What Are the Criteria for Redesignation to Attainment? The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA allows for redesignation to attainment provided that:
(1)The Administrator determines that the area has attained the applicable NAAQS based on current air quality data;
(2)the Administrator has fully approved an applicable state implementation plan for the area under section 110(k) of the CAA;
(3)the Administrator determines that the improvement in air quality is due to permanent and enforceable emission reductions resulting from implementation of the applicable SIP, Federal air pollution control regulations, and other permanent and enforceable emission reductions;
(4)the Administrator has fully approved a maintenance plan for the area meeting the requirements of section 175A of the CAA; and
(5)the state containing the area has met all requirements applicable to the area under section 110 and part D of the CAA. EPA provided guidance on redesignations in the General Preamble for the Implementation of Title I of the CAA Amendments of 1990 on April 16, 1992 (57 FR 13498), and supplemented this guidance on April 28, 1992 (57 FR 18070). EPA provided further guidance on processing redesignation requests in the following documents: “Ozone and Carbon Monoxide Design Value Calculations,” Memorandum from Bill Laxton, June 18, 1990; “Maintenance Plans for Redesignation of Ozone and Carbon Monoxide Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, April 30, 1992; “Contingency Measures for Ozone and Carbon Monoxide
(CO)Redesignations,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, June 1, 1992; “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992; “State Implementation Plan
(SIP)Actions Submitted in Response to Clean Air Act
(Act)Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; “Technical Support Documents (TSD's) for Redesignation of Ozone and Carbon Monoxide Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, August 17, 1993; “State Implementation Plan
(SIP)Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide
(CO)National Ambient Air Quality Standards (NAAQS). On or After November 15, 1992,” Memorandum from Michael H. Shapiro, Acting Assistant Administrator for Air and Radiation, September 17, 1993; “Use of Actual Emissions in Maintenance Demonstrations for Ozone and CO Nonattainment Areas,” Memorandum from D. Kent Berry, Acting Director, Air Quality Management Division, November 30, 1993; “Part D New Source Review (part D NSR) Requirements for Areas Requesting Redesignation to Attainment,” Memorandum from Mary D. Nichols, Assistant Administrator for Air and Radiation, October 14, 1994; and, “Reasonable Further Progress, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard,” Memorandum from John S. Seitz, Director, Office of Air Quality Planning and Standards, May 10, 1995. IV. What Are EPA's Analyses of the State's Requests and What Are the Bases for EPA's Proposed Actions? EPA is proposing to:
(1)Determine that Belmont County has attained the 8-hour ozone standard and approve the redesignation of this County to attainment of the 8-hour ozone NAAQS; and
(2)approve the ozone maintenance plan for this County and the VOC and NO <sup>X</sup> MVEBs supported by the ozone maintenance plan. The bases for our proposed determination and approvals are as follows: 1. Belmont County and the Wheeling, WV-OH Area Have Attained the 8-Hour Ozone NAAQS For ozone, as noted above, an area may be considered to be attaining the 8-hour ozone NAAQS if there are no violations of the NAAQS, as determined in accordance with 40 CFR 50.10 and 40 CFR part 50 appendix I based on the most recent three complete, consecutive calendar years of quality-assured air quality monitoring data at all monitoring sites in the area and in its impacted downwind environs. To attain this standard, the average of the annual fourth-high daily maximum 8-hour average ozone concentrations measured and recorded at each monitor (the monitoring site's ozone design value) within the area and in its impacted downwind environs over the most recent three-year period must not exceed the ozone standard. Based on the ozone data rounding convention described in 40 CFR part 50 appendix I, the 8-hour ozone standard is attained if the area's ozone design value 4 is 0.084 ppm (84 ppb) or less. The data must be collected and quality-assured in accordance with 40 CFR part 50, and must be recorded in EPA's Air Quality System (AQS). 4 The worst-case monitoring site-specific ozone design value in the area or in its impacted downwind environs. As part of the June 20, 2006 ozone redesignation request, the Ohio EPA submitted ozone monitoring data indicating the top four daily maximum 8-hour ozone concentrations for each monitoring site in the Wheeling, WV-OH area during the 2002-2005 period. These ozone concentrations are part of the quality-assured ozone data collected in this area and recorded in the AQS. The annual fourth-high 8-hour daily maximum concentrations for each year during the 2002-2005 period, along with the three-year averages, 5 are summarized in Table 1. 5 Three-year averages are specified for the last year of each three-year period. Table 1.—Annual Fourth-High Daily Maximum 8-Hour Ozone Concentrations in Parts Per Million
(ppm)Site ID County Address Year Percent observations Fourth-high concentration Three-year average 54-069-0007 Ohio
(WV)Northern Panhandle 2002 100 0.097 NA 54-069-0007 Ohio
(WV)Northern Panhandle 2003 99 0.076 NA 54-069-0009 Ohio
(WV)Wheeling EPA 2004 100 0.063 0.079 54-069-0010 Ohio
(WV)Warwood Water Plant 2005 100 0.089 0.076 It is noted that the ozone monitor for this area was moved several times during the three-year attainment period. While the monitor was relocated twice after 2003, the monitoring site remained within five miles of its original location in 2003. Statistical analysis of data submitted by the State of West Virginia, which was conducted by EPA during the review of the West Virginia ozone redesignation request, led to the conclusion that the various ozone monitoring sites can be treated as one and that, collectively, the three monitoring sites have maintained the integrity of the conclusions drawn concerning the three-year averages of the fourth-high daily maximum 8-hour ozone concentrations. (See the Technical Support Document prepared for the review of the West Virginia ozone redesignation request available at EPA's Region III Air Division office. Also see 71 FR 57894, October 2, 2006.) The monitored ozone concentrations for 2002-2004 show that the entire Wheeling, WV-OH area has attained the 8-hour ozone standard with a current (2003-2005) ozone design value of 0.076 ppm. The data collected at the Ohio County, West Virginia monitoring sites satisfy the CAA requirement that the ozone standard must be attained at all sites in the ozone nonattainment area. The three-year ozone design value for the nonattainment area is less than 0.085 ppm. West Virginia has committed to continue ozone monitoring in this area as part of the State's ozone maintenance plan (see 71 FR 57897, October 2, 2006). Since the State of Ohio does not conduct ozone monitoring in this area, but relies on the State of West Virginia for this purpose, the commitment of West Virginia to continue monitoring in this area meets the redesignation requirement, in accordance with 40 CFR part 58, that ozone monitoring will be continued to assure continued attainment of the 8-hour ozone standard. We believe that the ozone monitoring data submitted by the State of West Virginia provide an adequate demonstration that the Wheeling, WV-OH area has attained the 8-hour ozone NAAQS. Therefore, we propose to determine that Belmont County, Ohio, as part of the Wheeling, WV-OH area, has attained the 8-hour ozone NAAQS. Please note that available, non-quality assured data for 2006 show that this area continues to attain the 8-hour ozone standard through 2006. 2. Belmont County and the State of Ohio Have Met All Applicable Requirements Under Section 110 and Part D of the CAA and This Area Has a Fully Approved SIP Under Section 110(k) of the CAA We have determined that Belmont County and the State of Ohio have met all currently applicable SIP requirements for Belmont County under section 110 of the CAA (general SIP requirements). We have determined that the Ohio SIP meets the currently applicable SIP requirements under subpart 1 part D of title I of the CAA (requirements specific to basic ozone nonattainment areas). See section 107(d)(3)(E)(v) of the CAA. In addition, we have determined that all applicable requirements are approved in the Ohio SIP. See section 107(d)(3)(E)(ii) of the CAA. In making these determinations, we determined the CAA requirements which are applicable to Belmont County, and determined that the applicable portions of the SIP meeting these requirements are fully approved under section 110(k) of the CAA. We note that SIPs must be fully approved only with respect to currently applicable requirements of the CAA, which in this case are those CAA requirements applicable to Belmont County at the time the State submitted a complete ozone redesignation request for this area, on August 24, 2006. a. Belmont County Has Met All Applicable Requirements Under Section 110 and Part D of the CAA The September 4, 1992 Calcagni memorandum (see “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992) describes EPA's interpretation of section 107(d)(3)(E) of the CAA. To qualify for redesignation of an area to attainment under this interpretation, the state and the area must meet the relevant CAA requirements that apply at the time of the State's submittal of a complete redesignation request for the area. See also the September 17, 1993 Michael Shapiro memorandum, and 66 FR 12459, 12465-12466 (March 7, 1995) (redesignation of Detroit-Ann Arbor, Michigan to attainment of the 1-hour ozone NAAQS). Applicable requirements of the CAA that come due subsequent to the state's submittal of a complete redesignation request remain applicable until a redesignation of the area to attainment of the standard is approved, but are not required as prerequisites to redesignation. See section 175A(c) of the CAA. *Sierra Club* v. *EPA* , 375 F.3d 537 (7th Cir. 2004). See also 68 FR 25424, 25427 (May 12, 2003) (redesignation of the St. Louis/East St. Louis area to attainment of the 1-hour ozone NAAQS). *General SIP requirements:* Section 110(a) of title I of the CAA contains the general requirements for a SIP, which include: enforceable emission limitations and other control measures, means, or techniques; provisions for the establishment and operation of appropriate devices necessary to collect data on ambient air quality; and programs to enforce the emission limitations. General SIP elements and requirements are delineated in section 110(a)(2) of title I, part A of the CAA. These requirements and SIP elements include, but are not limited to, the following:
(a)Submittal of a SIP that has been adopted by the State after reasonable public notice and a hearing;
(b)provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality;
(c)implementation of a source permit program;
(d)provisions for the implementation of part C requirements (Prevention of Significant Deterioration (PSD)) and part D requirements (New Source Review (NSR)) for new sources or major source modifications;
(e)criteria for stationary source emission control measures, monitoring, and reporting;
(f)provisions for air quality modeling; and
(g)provisions for public and local agency participation. SIP requirements and elements are discussed in the following EPA documents: “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992; “State Implementation Plan
(SIP)Actions Submitted in Response to Clean Air Act
(CAA)Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; and “State Implementation Plan
(SIP)Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide
(CO)National Ambient Air Quality Standards (NAAQS) on or after November 15, 1992,” Memorandum from Michael H. Shapiro, Acting Assistant Administrator, September 17, 1993. See also other guidance documents listed above. Section 110(a)(2)(D) of the CAA requires SIPs to contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state. To implement this provision, EPA required states to establish programs to address transport of air pollutants (NO <sup>X</sup> SIP call and Clean Air Interstate Rule (CAIR)). EPA has also found, generally, that states have not submitted SIPs under section 110(a)(1) of the CAA to meet the interstate transport requirements of section 110(a)(2)(D)(i) of the CAA (70 FR 21147, April 25, 2005). However, the section 110(a)(2)(D) requirements for a state are not linked with a particular nonattainment area's classification. EPA believes that the requirements linked with a particular nonattainment area's classification are the relevant measures to evaluate when reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. We believe that these requirements should not be construed to be applicable requirements for purposes of redesignation. Further, we believe that the other section 110 elements described above that are not connected with nonattainment plan submissions and that are not linked with an area's attainment status are also not applicable requirements for purposes of redesignation. A state remains subject to these requirements after an area is redesignated to attainment. We conclude that only the section 110 and part D requirements which are linked with an area's designation and classification are the relevant measures for evaluating this aspect of a redesignation request. This approach is consistent with EPA's policy on applicability of conformity and oxygenated fuels requirements for redesignation purposes, as well as with section 184 ozone transport requirements. See: Reading, Pennsylvania proposed and final rulemakings (61 FR 53174-53176, October 10, 1996 and 62 FR 24826, May 7, 1997); Cleveland-Akron-Loraine, Ohio final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida final rulemaking (60 FR 62748, December 7, 1995). See also the discussion on this issue in the Cincinnati, Ohio ozone redesignation (65 FR 37890, June 19, 2000), and the Pittsburgh, Pennsylvania ozone redesignation (66 FR 50399, October 19, 2001). We believe that section 110 elements not linked to the area's nonattainment status are not applicable for purposes of redesignation. Nonetheless, we also note that EPA has previously approved provisions in the Ohio SIP addressing section 110 elements under the 1-hour ozone standard. We have analyzed the Ohio SIP as codified in 40 CFR part 52, subpart KK and have determined that it is consistent with the requirements of section 110(a)(2) of the CAA. The SIP, which has been adopted after reasonable public notice and hearing, contains enforceable emission limitations; requires monitoring, compiling, and analyzing ambient air quality data; requires preconstruction review of new major stationary sources and major modifications of existing sources; provisions for adequate funding, staff, and associated resources necessary to implement its requirements; requires stationary source emissions monitoring and reporting; and otherwise satisfies the applicable requirements of section 110(a)(2). *Part D SIP requirements:* EPA has determined that the Ohio SIP meets applicable SIP requirements under part D of the CAA. Under part D, an area's classification (subpart 1, marginal, moderate, serious, severe, and extreme) indicates the requirements to which it will be subject. Subpart 1 of part D, found in sections 172-176 of the CAA, sets forth the basic nonattainment area plan requirements applicable to all nonattainment areas. Subpart 2 of part D, found in section 182 of the CAA, establishes additional specific requirements depending on the area's nonattainment classification. *Part D, subpart 1 requirements:* For purposes of evaluating this redesignation request, the applicable subpart 1 part D requirements for all nonattainment areas are contained in sections 172(c)(1)-(9) and 176. A thorough discussion of the requirements of section 172 can be found in the General Preamble for Implementation of Title I (57 FR 13498). See also 68 FR 4852-4853, a notice of proposed rulemaking for an ozone redesignation for the St. Louis area, for a discussion of section 172 requirements. No requirements under part D of the CAA came due for Belmont County prior to the State's submittal (August 24, 2006) of a complete ozone redesignation request for this area. For example, the requirement for an ozone attainment demonstration, as contained in section 172(c)(1), is not yet applicable, nor are the requirements for Reasonably Available Control Measures
(RACM)and Reasonably Available Control Technology
(RACT)(section 172(c)(1)), Reasonable Further Progress
(RFP)(section 172(c)(2)), and attainment plan and RFP contingency measures (section 172(c)(9)). Therefore, none of the part D requirements are applicable to Belmont County for purposes of redesignation. *Section 176 conformity requirements:* Section 176(c) of the CAA requires states to establish criteria and procedures to ensure that Federally-supported or funded activities, including highway projects, conform to the air planning goals in the applicable SIP. The requirement to determine conformity applies to transportation plans, programs, and projects developed, funded, or approved under Title 23 U.S.C. and the Federal Transit Act (transportation conformity) as well as to all other Federally-supported or funded projects (general conformity). State conformity SIP revisions must be consistent with Federal conformity regulations that the CAA required the EPA to promulgate. As with other 8-hour ozone nonattainment area requirements, EPA believes that the conformity requirements do not apply for purposes of evaluating the ozone redesignation request under section 107(d) of the CAA. Further support for this view lies in the fact that state conformity rules are still required after redesignation of areas to attainment of a NAAQS and Federal conformity rules apply where state rules have not been approved. See *Wall* v. *EPA* , 265 F.3d 426 (6th Cir. 2001). See also 60 FR 62748 (December 7, 1995) (Tampa, Florida). *Part D new source review requirements:* EPA has determined that areas being redesignated need not comply with the requirement that a New Source Review
(NSR)program be approved prior to redesignation, provided that the area demonstrates maintenance of the standard without part D NSR, since Prevention of Significant Deterioration
(PSD)requirements will apply after redesignation. A more detailed rationale for this view is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D New Source Review Requirements for Areas Requesting Redesignation to Attainment.” Ohio has demonstrated that Belmont County will be able to maintain the 8-hour ozone standard without part D NSR in effect, and therefore, we conclude that the State need not have a fully approved part D NSR program prior to approval of the redesignation request. The State's PSD program will become effective in Belmont County upon redesignation to attainment. See rulemakings for Detroit, Michigan (60 FR 12467-12468, March 7, 1995); Cleveland-Akron-Lorain, Ohio (61 FR 20458, 20469-20470, May 7, 1996); Louisville, Kentucky (66 FR 53665, October 23, 2001); Grand Rapids, Michigan (61 FR 31834-31837, June 21, 1996). We conclude that Belmont County and the State of Ohio have satisfied all applicable requirements under section 110 and part D of the CAA to the extent that these requirements apply for purposes of reviewing the State's ozone redesignation request for this area. b. Belmont County Has a Fully Approved Applicable SIP Under Section 110(k) of the CAA EPA has fully approved the Ohio SIP for Belmont County under section 110(k) of the CAA for all applicable requirements. EPA may rely on prior SIP approvals in approving a redesignation request (See the September 4, 1992 John Calcagni memorandum, page 3, *Southwestern Pennsylvania Growth Alliance* v. *Browner* , 144 F.3d 984, 989-990 (6th Cir. 1998), *Wall* v. *EPA* , 265 F.3d 426 (6th Cir. 2001)) plus any additional measures it may approve in conjunction with a redesignation action. See 68 FR 25426 (May 12, 2003). Since the passage of the CAA of 1970, Ohio has adopted and submitted, and EPA has fully approved, provisions addressing the various required SIP elements applicable to Belmont County for purposes of redesignation. No Belmont County SIP provisions are currently disapproved, conditionally approved, or partially approved. As indicated above, EPA believes that the section 110 elements not connected with nonattainment plan submissions and not linked to the area's nonattainment status are not applicable requirements for purposes of reviewing of the State's redesignation request. EPA has also noted that it may conclude that the section 110 SIP submission approved under the 1-hour standard will be adequate for purposes of attaining and maintaining the 8-hour standard. EPA also believes that since the part D requirements did not become due prior to Ohio's submission of a final, complete redesignation request for Belmont County, they also are not applicable requirements for purposes of redesignation. 3. The Air Quality Improvement in the Wheeling, WV-OH Area Is Due to Permanent and Enforceable Reductions in Emissions Resulting From Implementation of the SIP, Federal Air Pollution Control Regulations, and Other Permanent and Enforceable Emission Reductions In making this demonstration, the States of West Virginia 6 and Ohio have documented changes in VOC and NO <sup>X</sup> emissions from all anthropogenic (man-made or man-based) sources in the Wheeling, WV-OH area occurring between 2002, an ozone standard violation year, and 2004, one of the years in which the Wheeling, WV-OH area has recorded attainment of the 8-hour ozone standard. The States have also discussed permanent and enforceable emission reductions that have occurred elsewhere in the States and in other upwind areas that have contributed to the air quality improvement in the Wheeling, WV-OH area. Table 2 summarizes the VOC and NO <sup>X</sup> emissions totals from the anthropogenic sources in 2002 and 2004 for the Wheeling, WV-OH area. From the table, it can be seen that VOC emissions have essentially remained constant between 2002 and 2004, whereas NO <sup>X</sup> emissions have significantly declined between 2002 and 2004. 6 West Virginia submitted a separate ozone redesignation request for its portion of the Wheeling, WV-OH area. The West Virginia redesignation request is addressed in a separate EPA proposed rule. West Virginia did supply emissions data for the Wheeling area to the State of Ohio for inclusion in Ohio's ozone request. The States of Ohio and West Virginia conclude that the differences in the 2002 and 2004 emissions are due primarily to the implementation of permanent and enforceable emission control requirements. The States have asserted that these emission reductions along with those occurring elsewhere in the two States and in other upwind areas have led to the observed improvement in air quality in the Wheeling, WV-OH area. Table 2.—Total Anthropogenic VOC and NO <sup>X</sup> Emissions for 2002 and 2004 in the Wheeling, WV-OH Area [tons per day] County Point Area Non-road Mobile Total 2002 Volatile Organic Compounds Belmont County, Ohio 0.2 4.1 1.0 4.2 9.5 Marshall and Ohio Counties, West Virginia 3.0 14.8 2.3 3.4 23.5 2002 Total 3.2 18.9 3.3 7.6 33.0 2004 Volatile Organic Compounds Belmont County, Ohio 0.2 4.0 0.9 3.5 8.6 Marshall and Ohio Counties, West Virginia 3.0 15.4 2.3 2.8 23.5 2004 Total 3.2 19.4 3.2 6.3 32.1 Difference (2002-2004) 7 0.0 −0.5 0.1 1.3 0.9 2002 Nitrogen Oxides Belmont County, Ohio 31.8 0.3 3.0 7.4 42.5 Marshall and Ohio Counties, West Virginia 152.2 3.4 5.6 5.4 166.6 2002 Total 174.0 3.7 8.6 15.8 209.1 2004 Nitrogen Oxides Belmont County, Ohio 28.7 0.3 2.9 6.3 38.2 Marshall and Ohio Counties, West Virginia 85.8 3.4 7.3 4.7 101.2 2004 Total 114.5 3.7 10.2 11.0 139.4 Difference (2002-2004) 59.5 0.0 −1.6 4.8 69.7 The significant decline in NO <sup>X</sup> emissions in this area between 2002 and 2004 occurred primarily at Electric Generating Units
(EGU)and at large industrial boilers as the result of the implementation of the States' NO <sup>X</sup> emission control rules (resulting from the implementation of EPA's NO <sup>X</sup> SIP call and acid rain emission controls under title IV of the CAA). Besides the NO <sup>X</sup> emission reductions occurring within the nonattainment area itself, the implementation of the States' NO <sup>X</sup> control rules have reduced NO <sup>X</sup> emission throughout both Ohio and West Virginia. The additional statewide emission reductions have contributed to attainment of the 8-hour ozone standard in the Wheeling, WV-OH area. 7 Positive differences indicate a decrease in emissions over time from 2002 to 2004. Negative differences indicate emissions were increasing over time, primarily as the result of emission changes from source growth exceeding the impacts of implemented emission controls. We concur with the State of Ohio that NO <sup>X</sup> emissions have been significantly lowered in the Wheeling, WV-OH area and throughout the States of Ohio and West Virginia. We also concur with the State that these emission reductions have contributed to attainment of the 8-hour ozone standard in the Wheeling, WV-OH area. Therefore, the State of Ohio has met this criteria for redesignation of Belmont County to attainment of the 8-hour ozone standard. Besides implementation of the NO <sup>X</sup> emission control rules and despite the general lack of decreasing emissions for VOC (the data imply that existing VOC control measures are reducing VOC emission at current rates that are generally keeping pace with new source growth), additional emission controls are being implemented in the Wheeling, WV-OH area which will also contribute to attainment and maintenance of the 8-hour ozone standard. The State of Ohio notes that, in the mid-1990's, the State promulgated statewide rules requiring Reasonably Available Control Techniques
(RACT)for significant new sources of VOC emissions. The RACT rules have been implemented for significant new sources locating in Ohio subsequent to the State adoption of the rules. Additional implemented, or soon to be implemented, emission control rules include several Federal rules:
(1)Tier II emission standards for vehicles and gasoline sulfur standards (promulgated by EPA in February 2000 and currently being implemented);
(2)heavy-duty diesel engine emission control rules (promulgated by the EPA in July 2000 and currently being implemented; and
(3)clean air non-road diesel rule (promulgated by the EPA in May 2004 and currently being phased in through 2009). All of these rules have contributed to reducing VOC and NO <sup>X</sup> emissions throughout the States of Ohio and West Virginia and will contribute to future emission reductions in these States. The State of Ohio commits to continuing the existing VOC and NO <sup>X</sup> emission controls after the Wheeling, WV-OH area is redesignated to attainment of the 8-hour ozone standard. 4. Belmont County Has a Fully Approvable Ozone Maintenance Plan Pursuant to Section 175A of the CAA In conjunction with its request to redesignate Belmont County to attainment of the ozone NAAQS, Ohio submitted a SIP revision request to provide for maintenance of the 8-hour ozone NAAQS in Belmont County and in the entire Wheeling, WV-OH area through 2018, exceeding the minimum 10 year maintenance period required by the CAA. a. What Is Required in an Ozone Maintenance Plan? Section 175A of the CAA sets forth the required elements of air quality maintenance plans for areas seeking redesignation from nonattainment to attainment of a NAAQS. Under section 175A, a maintenance plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after the Administrator approves the redesignation to attainment. Eight years after the redesignation, the State must submit a revised maintenance plan which demonstrates that maintenance of the standard will continue for 10 years following the initial 10 year maintenance period. To address the possibility of future NAAQS violations, the maintenance plan must contain such contingency measures, with a schedule for implementation, as EPA deems necessary, to assure prompt correction of any future NAAQS violations. The September 4, 1992 John Calcagni memorandum provides additional guidance on the content of maintenance plans. An ozone maintenance plan should, at minimum, address the following items:
(1)The attainment VOC and NO <sup>X</sup> emissions inventories;
(2)a maintenance demonstration showing maintenance for the first 10 years of the maintenance period;
(3)a commitment to maintain the existing monitoring network;
(4)factors and procedures to be used for verification of continued attainment; and
(5)a contingency plan to prevent and/or correct a future violation of the NAAQS. b. What Are the Attainment Emission Inventories for Belmont County? Ohio EPA prepared comprehensive VOC and NO <sup>X</sup> emission inventories for Belmont County, including EGU and non-EGU point (significant stationary sources), other
(area)(smaller and widely-distributed stationary sources), Marine, Aircraft, and Rail mobile (MAR), mobile on-road, and mobile non-road sources for 2002 (the base year). To develop the attainment year
(2004)and projected maintenance years (2009 and 2018) emissions, the Ohio EPA projected the 2002 emissions applying various source category-specific growth factors and emission control factors. The State has thoroughly documented how the 2002 base year emissions were derived. The following summarizes the procedures and sources of data used by the Ohio EPA to derive the base year emissions. i. *Point Sources.* The primary source of point source information was facility-specific information collected annually by the State for sources covered by Title V source permits. This information includes emissions, process rates, operating schedules, emissions control data, and other relevant information. The State also used emissions data provided by EPA's EGU emission inventory, maintained to support the NO <sup>X</sup> SIP call emissions trading program and the acid rain control program. The sources included in the 2002 point source inventory were identified using Ohio's Title V STARS database. The emissions included in this database are facility-reported actual emissions. Ohio EPA defines point source process emissions as those which occur at an identifiable stationary stack or vent. Point source emissions not emitted from discrete stacks or vents are defined to be fugitive emissions. Facility-specific fugitive emissions are also reported by each Title V facility and stored in the Title V STARS database. Point source emissions included in the 2002 base year emissions inventory were provided to the Lake Michigan Air Directors Consortium (LADCO) in National Emissions Inventory Input Format
(NIF)3.0 format. LADCO imported and processed the NIF files in the Emissions Modeling System
(EMS)and applied temporal and spatial profiles to calculate July weekday emissions rates. The Belmont County emissions derived from this set of emissions data were split into EGU emissions and non-EGU emissions for inclusion in the base year emissions inventory used to support the Belmont County ozone redesignation request. ii. *Area (Other) Sources.* Area sources are those sources which are generally small, numerous, and have not been inventoried as specific point, mobile, or biogenic sources. The emissions for these sources are calculated and grouped by source type and are estimated using various surrogates, such as population, estimates of employees in various occupational groups and facility-types, etc. The area source emissions are typically defined at the county level. To estimate the area source emissions, Ohio EPA has either used published Emission Inventory Improvement Program
(EIIP)emissions estimation methodologies or other methodologies typically used by other states. Area source categories include: Various stationary combustion sources (not including the EGU sources included in the point source portion of the emissions inventory); human cremation; agricultural pesticides; architectural surface coatings; auto body refinishing; consumer and commercial solvents; degreasing and solvent cleaning (not included in point source emissions); fuel marketing; graphic arts (the emissions from the smaller facilities not included in the Title V STARS database); hospital sterilizers; small industry surface coating; small industry rubber and plastics coating; landfills; portable fuel containers; traffic markings; and Privately Owned Treatment Works (POTWs). The State has documented the data sources and emission factors or calculation procedures used for each of these area source categories. iii. *Non-Road Mobile Sources.* The non-road mobile source emissions inventory was generated regionally by running EPA's National Mobile Inventory Model (NMIM). The output of the NMIM was converted to the NIF format and submitted to LADCO for processing in the EMS to obtain spatially and temporally allocated emissions for a July weekday. The basic non-road algorithm for calculating emissions in NMIM uses base year equipment populations, average load factors, available engine powers, activity hours and emission factors to calculate the emissions. To address concerns about the accuracy of NMIM for some source categories, LADCO contracted with two consulting companies to review the base data and make recommended changes. iv. *Marine, Aircraft, and Rail
(MAR)Sources.* Due to the significance of the emissions from these source types, the Ohio EPA has decided to treat these source categories separately from other non-road mobile sources. The MAR emissions include emissions from commercial marine, aircraft, and locomotive sources. Commercial marine vessels consist of several different categories of vessel types. For each vessel type, there are unique engine types, emission rates, and activity data sets. The emissions inventory documentation lists the vessel types and activity data sources by vessel type, along with the special distribution of each vessel type. Locomotive activity was divided into various rail categories: Class I operations; Class II/III operations; passenger trains; consumer lines; and yard operations. Since Class I operations are expected to be the most significant rail operations in most areas, including Belmont County, operators of Class I operations were queried for activity and emissions-related information for each railroad line. Class I activity levels were provided by county in terms of ton-miles of freight movement and estimated fuel consumption. This approach provided for more specific estimates of emissions by railroad line. Class II/III emissions were based on national fuel consumption and per employee fuel consumption estimates. The number of employees in each county was used to allocate the fuel consumption to each county and, therefore, the emissions to each county. The passenger train estimates were based on information provided by AMTRAK on the weekly schedule of train operation, and the emissions were based on an assumption of 2.35 gallons of fuel use per train-mile of travel. No commuter lines or yard operations exist in Belmont County. EPA provided the aircraft emission estimates based on Federal Aviation Administration
(FAA)published Landing and Take-Off
(LTO)rates by engine type for each airline and major airport in the State of Ohio. The LTO-engine information was combined with engine type-specific emission factors developed by the International Civil Aviation Organization (ICAO), and, through use of an FAA Emissions and Dispersion Modeling System (EDMS), emissions were assigned to each county in the State, including Belmont County. LADCO processed all of the MAR emissions data through the EMS to calculate July 2002 weekday emissions for VOC and NO <sup>X</sup> . v. *On-Road Mobile Sources.* A regional transportation model operated by the Belmont, Ohio, Marshall Regional Council Metropolitan Planning Organization (Bel-O-Mar), West Virginia Department of Transportation (WVDOT), and Ohio Department of Transportation (Ohio DOT) was used to estimate traffic levels, vehicle age and type distributions, vehicle speeds, and other emissions-related vehicle parameters for the roadways in Belmont County and elsewhere in the Wheeling, WV-OH area. This vehicle travel information, along with the MOBILE 6.2 vehicle emission factor model, was used to estimate mobile source VOC and NO <sup>X</sup> emissions for Belmont County and the entire Wheeling, WV-OH area. vi. *Projected Emissions for the Attainment Year.* Ambient air quality data showed that the Wheeling, WV-OH area met the 8-hour ozone NAAQS in 2004. Ohio EPA used point source growth data provided by individual point source facilities along with other source category growth estimates and emission control estimates to estimate 2004 VOC and NO <sup>X</sup> emissions for Belmont County. The State of West Virginia estimated 2004 VOC and NO <sup>X</sup> emissions for the remainder of the Wheeling, WV-OH area. The estimated 2004 emissions have been compared to the 2002 emissions to demonstrate the basis for the improved air quality in the Wheeling, WV-OH area. See Table 2 above for the 2004 attainment level emissions. c. Demonstration of Maintenance To demonstrate maintenance of the attainment of the 8-hour ozone standard for at least 10 years following the redesignation of the Wheeling, WV-OH area to attainment of the 8-hour ozone NAAQS, the State of Ohio and the State of West Virginia projected the VOC and NO <sup>X</sup> emissions in the Wheeling, WV-OH area for the years of 2009 and 2018. For Belmont County, Ohio EPA used source growth estimates provided by LADCO along with mobile source growth estimates generated using the regional transportation model and MOBILE 6.2 to project the Belmont County VOC and NO <sup>X</sup> emissions. The methods used by the State of West Virginia are described in West Virginia's ozone redesignation request (reviewed in a separate EPA proposed rule. See 71 FR 57894, October 2, 2006). Note that a maintenance demonstration need not be based on modeling. See *Wall* v. *EPA* , 265 F. 3d 426 (6th Cir. 2001), *Sierra Club* v. *EPA* , 375 F. 3d 537 (7th Cir. 2004). See also 66 FR 53094, 53099-53100 (October 19, 2001) and 68 FR 25430-25432 (May 12, 2003). Table 3 summarizes the VOC emissions projected to occur in Belmont County, Ohio and in Marshall and Ohio Counties, West Virginia during the demonstrated ozone maintenance period. Similarly, Table 4 summarizes the NO <sup>X</sup> emissions projected to occur in the same area during the demonstrated ozone maintenance period. The State of Ohio and the State of West Virginia chose 2018 as a projection year to meet the 10-year maintenance demonstration requirement, allowing several years for EPA to complete the redesignation rulemaking process. The States also chose 2009 as an interim year to demonstrate that VOC and NO <sup>X</sup> emissions will remain below the attainment year levels throughout the 10-year maintenance period. Table 3.—Projected VOC Emissions in the Wheeling, WV-OH Area [tons/day] Source sector 2004 attainment 2009 interim 2018 maintenance Safety margin Belmont County VOC Emissions EGU Point 0.17 0.12 0.17 Non-EGU Point 0.03 0.03 0.04 Area (Other) 4.03 3.85 3.86 Non-Road Mobile 0.88 0.76 0.56 On-Road Mobile 3.52 *2.60 *1.52 Marine-Air-Railroad 0.05 0.05 0.5 Total Belmont County 8.68 7.41 6.20 **2.48 Marshall and Ohio Counties, West Virginia VOC Emissions EGU Point 0.5 0.7 0.7 Non-EGU Point 2.5 2.1 2.6 Area (Other) 15.4 7.3 8.4 Non-Road Mobile (MAR included) 2.3 2.1 1.8 On-Road Mobile 2.81 2.22 1.24 Total Marshall and Ohio Counties 23.51 14.42 14.74 **8.77 Total Wheeling, WV-OH 32.19 21.83 20.94 * Includes 15 percent mobile source budget increase as a safety margin. Actual projected 2018 on-road mobile source VOC emissions in Belmont County are 1.32 tons per day. ** Difference between 2004 attainment year emissions and 2018 maintenance year emissions. Table 4.—Projected NO <sup>X</sup> Emissions in the Wheeling, WV-OH Area [tons/day] Source sector 2004 attainment 2009 interim 2018 maintenance Safety margin Belmont County NO <sup>X</sup> Emissions EGU Point 28.61 20.96 18.85 Non-EGU Point 0.08 0.08 0.08 Area (Other) 0.29 0.36 0.38 Non-Road Mobile 1.35 1.16 0.63 On-Road Mobile 6.29 * 4.69 * 1.91 Marine-Air-Railroad 1.54 1.38 1.28 Total Belmont County 38.16 28.63 23.13 **15.03 Marshall and Ohio Counties, West Virginia NO <sup>X</sup> Emissions EGU Point 73.20 51.1 14.9 Non-EGU Point 12.6 10.6 11.3 Area (Other) 3.4 1.8 2.0 Non-Road Mobile (MAR included) 7.3 5.2 4.6 On-Road Mobile 4.67 3.75 1.47 Total Marshall and Ohio Counties 101.47 72.45 34.27 * * 67.20 Total Wheeling, WV-OH 139.63 101.08 57.40 * Includes 15 percent mobile source budget increase as a safety margin. Actual projected 2018 on-road mobile source NO <sup>X</sup> emissions in Belmont County are 1.66 tons per day. **Difference between 2004 attainment year emissions and 2018 maintenance year emissions. The Ohio EPA also notes that the State's EGU NO <sup>X</sup> emissions control rules stemming from EPA's NO <sup>X</sup> SIP call and Clean Air Interstate Rule (CAIR), to be implemented beyond 2006, will further lower NO <sup>X</sup> emissions in upwind areas, resulting in decreased ozone and ozone precursor transport into Belmont County and the Wheeling, WV-OH area. This will also support maintenance of the ozone standard in this area. The emission projections for Belmont County and the Wheeling, WV-OH area as a whole coupled with the expected impacts of the States' EGU NO <sup>X</sup> rules and CAIR led to the conclusion that Belmont County and the Wheeling, WV-OH area should maintain the 8-hour ozone NAAQS throughout the required 10-year maintenance period and through 2018. The projected decreases in local VOC and local and regional NO <sup>X</sup> emissions indicate that peak ozone levels in the Wheeling, WV-OH area may actually further decline during the maintenance period. Based on the comparison of the projected emissions and the attainment year emissions, we conclude that Ohio EPA has successfully demonstrated that the 8-hour ozone standard should be maintained in Belmont County and in the Wheeling, WV-OH area. We believe that this is especially likely given the expected impacts of the NO <sup>X</sup> SIP call and CAIR. As noted by Ohio EPA, this conclusion is further supported by the fact that other states in the eastern portion of the United States are also expected to further reduce regional NO <sup>X</sup> emissions through implementation of their ozone NO <sup>X</sup> emission control rules for EGUs and other NO <sup>X</sup> sources through the implementation of the NO <sup>X</sup> SIP call and CAIR. d. Contingency Plan The contingency plan provisions of the CAA are designed to result in prompt correction or prevention of violations of the NAAQS that might occur after redesignation of an area to attainment of the NAAQS. Section 175A of the CAA requires that a maintenance plan include such contingency measures as EPA deems necessary to assure that the State will promptly correct a violation of the NAAQS that might occur after redesignation. The maintenance plan must identify the contingency measures to be considered for possible adoption, a schedule and procedure for adoption and implementation of the selected contingency measures, and a time limit for action by the State. The State should also identify specific indicators to be used to determine when the contingency measures need to be adopted and implemented. The maintenance plan must include a requirement that the State will implement all measures with respect to control of the pollutant(s) that were included in the SIP before the redesignation of the area to attainment. See section 175A(d) of the CAA. As required by section 175A of the CAA, Ohio has adopted a contingency plan to address a possible future ozone air quality problem in the Wheeling, WV-OH area. The contingency plan has two levels of actions/responses depending on whether a violation of the 8-hour ozone standard is only threatened (Warning Level Response) or has actually occurred or appears to be very imminent (Action Level Response). A Warning Level Response will be triggered whenever an annual (1-year) fourth-high monitored 8-hour ozone concentration of 88 ppb occurs within the ozone maintenance area (within the Wheeling, WV-OH) area. A Warning Level Response will consist of a study to determine whether the ozone value indicates a trend toward higher ozone concentrations or whether emissions appear to be increasing. The study will evaluate whether the trend, if any, is likely to continue and, if so, the control measures necessary to reverse the trend taking into consideration ease and timing for implementation, as well as economic and social consideration, will be selected for possible adoption. Implementation of necessary controls in response to a Warning Level Response triggering will take place as expeditiously as possible, but in no event later than 12 months from the conclusion of the most recent ozone season (September 30). An Action Level Response will be triggered whenever a two-year averaged annual fourth-high monitored 8-hour ozone concentration of 85 ppb occurs within the maintenance area or whenever a violation of the 8-hour ozone standard is actually monitored in the maintenance area. An Action Level Response will also be triggered if a violation of the 8-hour ozone standard is monitored in the Wheeling, WV-OH area. In the event that an Action Level Response is triggered and is not due to an exceptional event, malfunction, or noncompliance with a source permit condition or rule requirement, Ohio EPA will determine the additional emission control measures needed to assure future attainment of the ozone NAAQS. Emission control measures that can be implemented in a short time will be selected in order to be in place within 18 months from the close of the ozone season that prompted the Action Level Response. Any new emission control measure that is selected for implementation will be given a public review. If a new emission control measure is already promulgated and scheduled to be implemented at the Federal or State level and that emission control measure is determined to be sufficient to address the upward trend in peak ozone concentrations, additional local measures may be unnecessary. Ohio EPA will submit to the EPA an analysis to demonstrate that the proposed emission control measures are adequate to reverse the upward trend in peak ozone concentrations and to maintain the 8-hour ozone standard in the Wheeling, WV-OH area. The selection of emission control measures will be based on cost-effectiveness, emission reduction potential, economic and social considerations, or other factors that the Ohio EPA and West Virginia Department of Environmental Protection (WVDEP) deem to be appropriate. Selected emission control measures will be subjected to public review and the States will seek public input prior to selecting new emission control measures. The State of Ohio ozone redesignation request lists the following possible emission control measures as contingency measures in the ozone maintenance portion of the State's submittal: • Extension of Reasonably Available Control Techniques
(RACT)requirements to include source categories previously excluded. New VOC RACT rules could be adopted for the following source categories: ▪ Consumer products ▪ Architectural and industrial maintenance coatings ▪ Stage I gasoline dispensing facilities (including pressure valves) ▪ Automobile refinishing ▪ Cold cleaner degreasers ▪ Portable fuel containers ▪ Synthetic organic compound manufacturing ▪ Organic compound batch processes ▪ Wood products manufacturing ▪ Industrial wastewater ▪ Aerospace industry ▪ Ship building ▪ Bakeries ▪ Plastic parts coating ▪ Volatile organic liquid storage ▪ Industrial solvent cleaning ▪ Offset lithography ▪ Industrial surface coating; and ▪ Other sources with VOC emissions greater than 50 tons per year; • Revision of new source permitting requirements to require more stringent emissions control technology and/or greater emissions offsets; • NO <sup>X</sup> RACT, with the following being potential source categories covered by such RACT requirements: ▪ EGUs ▪ Asphalt batching plants ▪ Industrial/commercial and institutional boilers ▪ Process heaters ▪ Internal combustion engines ▪ Combustion turbines ▪ Other sources with NO <sup>X</sup> emissions exceeding 100 tons per year; • Regulations to establish plant-wide emission caps (potentially with emission trading provisions); • Stage II vapor recovery regulations for gasoline service stations; and, • Establishment of a Public Awareness/Ozone Action Days Program, focusing on increasing the public's understanding of air quality issues in the region and on increasing support for actions to improve the air quality, resulting in reduced emissions on days with the potential for high ozone concentrations. One or more of these regulatory revisions would be selected within three
(3)months after verification of a monitored ozone standard violation. For each regulatory revision selected, a draft rule will be developed within six
(6)months of selection. The State will file the rule as an emergency rule, which will be become effective within 42 days after filing and fully implemented within six
(6)months after adoption. Rules will be filed as legislative rules for permanent authorization by the Legislature during the following legislative session. This approach means that less than 18 months should elapse from the time a violation of the standard occurs until the appropriate control measure(s) is fully in place. No contingency measure, however, will be implemented without the State providing the opportunity for full public participation and review. e. Provisions for a Future Update of the Ozone Maintenance Plan As required by section 175A(b) of the CAA, the State commits to submit to the EPA an update of the ozone maintenance plan eight years after redesignation of Belmont County to attainment of the 8-hour ozone NAAQS. The updated maintenance plan will provide for maintenance of the 8-hour ozone standard in Belmont County and the Wheeling, WV-OH area for an additional 10 years beyond the period covered by the initial ozone maintenance plan. We consider Ohio's ozone maintenance demonstration and contingency plan to be acceptable. V. Has Ohio Adopted Acceptable Motor Vehicle Emissions Budgets for the End Year of the Ozone Maintenance Plans Which Can Be Used To Support Conformity Determinations? A. How Are the Motor Vehicle Emission Budgets Developed and What Are the Motor Vehicle Emission Budgets for Belmont County? Under the CAA, states are required to submit, at various times, SIP revisions and ozone maintenance plans for applicable areas (for ozone nonattainment areas and for areas seeking redesignations to attainment of the ozone standard or revising existing ozone maintenance plans). These emission control SIP revisions (e.g. reasonable further progress and attainment demonstration SIP revisions), including ozone maintenance plans, must create MVEBs based on on-road mobile source emissions that are allocated to highway and transit vehicle use that, together with emissions from other sources in the area, will provide for attainment or maintenance of the ozone NAAQS. Under 40 CFR part 93, MVEBs for an area seeking a redesignation to attainment of the NAAQS are established for the last year of the maintenance plan (for the maintenance demonstration year). The MVEBs serve as ceilings on mobile source emissions from an area's planned transportation system and are used to test planned transportation system changes or projects to assure compliance with the emission limits assumed in the SIP. The MVEB concept is further explained in the preamble to the November 24, 1993 transportation conformity rule (58 FR 62188). The preamble also describes how to establish the MVEBs in the SIP and how to revise the MVEBs if needed. Under section 176(c) of the CAA, new transportation projects, such as the construction of new highways, must “conform” to (i.e., be consistent with) the part of the SIP that addresses emissions from cars, trucks, and other on-roadway vehicles. Conformity to the SIP means that transportation activities will not cause new air quality standard violations, or delay timely attainment of the NAAQS. If a transportation plan does not conform, most new transportation projects that would expand the capacity of the roadways cannot go forward. Regulations at 40 CFR part 93 set forth EPA's policy, criteria, and procedures for demonstrating and assuring conformity of transportation activities to a SIP. When reviewing SIP revisions containing MVEBs, including attainment strategies, rate-of-progress plans, and maintenance plans, EPA must affirmatively find that the MVEBs are “adequate” for use in determining transportation conformity. Once EPA affirmatively finds the submitted MVEBs to be adequate for transportation conformity purposes, the MVEBs are used by state and Federal agencies in determining whether proposed transportation projects conform to the SIPs as required by section 176(c) of the CAA. EPA's substantive criteria for determining the adequacy of MVEBs are specified in 40 CFR 93.118(e)(4). EPA's process of determining adequacy of MVEBs consists of three basic steps:
(1)Providing public notification of a SIP submission;
(2)providing the public the opportunity to comment on the MVEBs during a public comment period; and
(3)finally making a finding of adequacy. The process of determining the adequacy of submitted SIP MVEBs was initially outlined in EPA's May 14, 1999 guidance, “Conformity Guidance on Implementation of March 2, 1999, Conformity Court Decision.” This guidance was finalized in the Transportation Conformity Rule Amendments for the “New 8-Hour Ozone and PM2.5 National Ambient Air Quality Standards and Miscellaneous Rule Amendments—Response to Court Decision and Additional Rule Change” published on July 1, 2004 (69 FR 40004). EPA follows this guidance and rulemaking in making its adequacy determinations. The Transportation Conformity Rule, in 40 CFR 93.118(f), provides for adequacy findings through two mechanisms. First, 40 CFR 93.118(f)(1) provides for posting a notice to the EPA conformity Web site at: *http://www.epa.gov/otaq/stateresources/transconf/adequacy.htm* and providing a 30-day public comment period. Second, a mechanism is described in 40 CFR 93.118(f)(2) which provides that EPA can review the adequacy of an implementation plan submission simultaneously with its review of the implementation plan itself. In this notice, EPA is reviewing the adequacy of the Belmont County motor vehicle emission budgets as part of the review and proposal on the overall ozone maintenance plan. The State of Ohio had previously requested parallel processing and the expediency of this review process is best suited to following the 40 CFR 93.118(f)(2) mechanism. The Belmont County ozone maintenance plan contains VOC and NO <sup>X</sup> MVEBs for 2018. EPA has reviewed the submittal and the proposed VOC and NO <sup>X</sup> MVEBs for Belmont County, and finds that the MVEBs meet the adequacy criteria in the Transportation Conformity Rule. The 30-day comment period for the adequacy period will be the same as the 30-day comment period for the proposed approval of the MVEBs and ozone maintenance plan. Any and all comments on the adequacy or approvability of the MVEBs should be submitted during the comment period stated in the DATES section of this notice. EPA, through this rulemaking, is proposing to approve the MVEBs for use to determine transportation conformity in Belmont County because EPA has determined that the budgets are consistent with the control measures and future emissions projected in the SIP and that Belmont County and the Wheeling, WV-OH area can maintain attainment of the 8-hour ozone NAAQS for the relevant required 10-year period with mobile source emissions at the levels of the MVEBs. Ohio EPA has determined the 2018 MVEBs for Belmont County to be 1.52 tons per day for VOC and 1.91 tons per day for NO <sup>X</sup> . It should be noted that these MVEBs exceed the on-road mobile source VOC and NO <sup>X</sup> emissions projected by the Ohio EPA for 2018, but do match the on-road mobile source emissions for 2018 summarized in Tables 3 and 4 above. Through discussions with all organizations involved in transportation planning for Belmont County, Ohio EPA decided to include 15 percent safety margins in the MVEBs to provide for mobile source growth not anticipated in the projected 2018 emissions. Ohio EPA has demonstrated that Belmont County and the Wheeling, WV-OH area can maintain the 8-hour ozone NAAQS with mobile source emissions at the levels of the MVEBs since total source emissions with the increased mobile source emissions will remain under the attainment year levels. B. What Is a Safety Margin? A “safety margin” is the difference between the attainment level of emissions (from all sources) and the projected level of emissions (from all sources) in the maintenance plan for a future maintenance year. As noted in Tables 3 and 4 above, Belmont County VOC and NO <sup>X</sup> emissions are projected to have safety margins of 2.48 tons per day for VOC and 15.03 tons per day for NO <sup>X</sup> in 2018 (the differences between the 2004, attainment year, and 2018 VOC and NO <sup>X</sup> emissions for all sources in Belmont County). The MVEBs requested by Ohio EPA contain safety margins (selected by the State) significantly smaller than the safety margins reflected in the total emissions for Belmont County. The State is not requesting allocation of the entire available safety margins actually reflected in the demonstration of maintenance. Therefore, even though the State is requesting MVEBs that exceed the projected on-road mobile source emissions for 2018 contained in the demonstration of maintenance, the increase in on-road mobile source emissions that can be considered for transportation conformity purposes is well within the safety margins of the ozone maintenance demonstration. C. Are the MVEBs Approvable? The VOC and NO <sup>X</sup> MVEBs for Belmont County are approvable because they maintain the total emissions for Belmont County at or below the attainment year emission inventory levels, as required by the transportation conformity regulations. VI. What Are the Effects of EPA's Proposed Actions? Approval of the redesignation request would change the official designation of the Belmont County for the 8-hour ozone NAAQS, found at 40 CFR part 81, from nonattainment to attainment. It would also incorporate into the Ohio SIP a plan for maintaining the ozone NAAQS through 2018. The maintenance plan includes contingency measures to remedy possible future violations of the 8-hour ozone NAAQS, and establishes MVEBs of 1.52 tons per day for VOC and 1.91 tons per day for NO <sup>X</sup> . VII. Statutory and Executive Order Reviews Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 (58 FR 51735, September 30, 1993), this action is not a “significant regulatory action” and, therefore, is not subject to review by the Office of Management and Budget. Paperwork Reduction Act This proposed rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). Regulatory Flexibility Act This proposed action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Unfunded Mandates Reform Act Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Order 13132: Federalism This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely proposes to approve a state rule implementing a federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments This proposed rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). Executive Order 13045: Protection of Children From Environmental Health and Safety Risks This proposed rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant regulatory action,” this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). National Technology Transfer Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), 15 U.S.C. 272, requires Federal agencies to use technical standards that are developed or adopted by voluntary consensus to carry out policy objectives, so long as such standards are not inconsistent with applicable law or otherwise impractical. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Absent a prior existing requirement for the state to use voluntary consensus standards, EPA has no authority to disapprove a SIP submission for failure to use such standards, and it would thus be inconsistent with applicable law for EPA to use voluntary consensus standards in place of a program submission that otherwise satisfies the provisions of the Clean Air Act. Therefore, the requirements of section 12(d) of the NTTA do not apply. List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Intergovernmental relations, Nitrogen dioxide, Ozone, Volatile organic compounds. Dated: December 19, 2006. Bharat Mathur, Acting Regional Administrator, Region 5. [FR Doc. E6-22140 Filed 12-26-06; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 52 and 81 [EPA-R05-OAR-2006-0046; FRL-8261-5] Determination of Attainment, Approval and Promulgation of Implementation Plans and Designations of Areas for Air Quality Planning Purposes; Ohio; Redesignation of Allen and Stark Counties to Attainment of the 8-Hour Ozone Standard AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: On June 20, 2005, the Ohio Environmental Protection Agency (Ohio EPA), submitted a request for EPA approval of redesignations of Allen County
(Lima)and Stark County (Canton) to attainment of the 8-hour ozone National Ambient Air Quality Standard (NAAQS), and a request for EPA approval of ozone maintenance plans for Allen and Stark Counties as revisions to the Ohio State Implementation Plan (SIP). Additional supporting information was submitted on August 24, 2006, and December 4, 2006. EPA is proposing to approve Ohio's requests and corresponding SIP revisions. EPA is also proposing to approve the Volatile Organic Compounds
(VOC)and Nitrogen Oxides (NO <sup>X</sup> ) Motor Vehicle Emission Budgets (MVEBs) for Allen and Stark Counties, as supported by the ozone maintenance plans for these Counties, for purposes of conformity determinations. DATES: Comments must be received on or before January 26, 2007. Submit your comments, identified by Docket ID No. EPA-R05-OAR-2006-0046, by one of the following methods: • *www.regulations.gov:* Follow the on-line instructions for submitting comments. • *E-mail: mooney.john@epa.gov.* • *Fax:*
(312)886-5824. • *Mail:* John M. Mooney, Chief, Criteria Pollutant Section, Air Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. • *Hand Delivery:* John M. Mooney, Chief, Criteria Pollutant Section, Air Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois. Such deliveries are only accepted during the Regional Office's normal hours of operation, and special arrangements should be made for deliveries of boxed information. The Regional Office's official hours of operation are Monday through Friday, 8:30 a.m. to 4:30 p.m., excluding Federal holidays. *Instructions:* Direct your comments to Docket ID No. EPA-R05-OAR-2006-0046. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at *www.regulations.gov* , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI, or otherwise protected, through *www.regulations.gov* or e-mail. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *www.regulations.gov* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters and any form of encryption, and should be free of any defects or viruses. For additional instructions on submitting comments, go to section I of the SUPPLEMENTARY INFORMATION section of this document. *Docket:* All documents in the docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, *e.g.* , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hardcopy. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hardcopy at the Environmental Protection Agency, Region 5, Air and Radiation Division, 77 West Jackson Boulevard, Chicago, Illinois 60604. This facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding Federal holidays. It is recommended that you telephone Edward Doty, Environmental Scientist, at
(312)886-6057, before visiting the Region 5 office. FOR FURTHER INFORMATION CONTACT: Edward Doty, Environmental Scientist, Criteria Pollutant Section, Air Programs Branch (AR-18), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604,
(312)886-6057, *doty.edward@epa.gov.* SUPPLEMENTARY INFORMATION: Throughout this document whenever “we,” “us,” or “our” is used, we mean the EPA. This supplementary information section is arranged as follow: I. What Action is EPA Proposing to Take? II. What is the Background for These Actions? III. What are the Criteria for Redesignation to Attainment? IV. What are EPA's Analyses of the State's Requests and What are the Bases for EPA's Proposed Actions? V. Has Ohio Adopted Acceptable Motor Vehicle Emissions Budgets for the End Year of the Ozone Maintenance Plans Which Can Be Used to Support Conformity Determinations? VI. What Are the Effects of EPA's Proposed Actions? VII. Statutory and Executive Order Reviews I. What Action Is EPA Proposing to Take? We are proposing to take several related actions for both Allen County and Stark County, Ohio. First, we are proposing to determine that Allen and Stark Counties have attained the 8-hour ozone NAAQS and that both of these Counties have met the requirements for redesignation to attainment of the 8-hour ozone NAAQS under section 107(d)(3)(E) of the CAA. We are, therefore, proposing to approve the request from the State of Ohio to change the designations of Allen and Stark Counties from nonattainment to attainment of the 8-hour ozone NAAQS. Second, we are proposing to approve Ohio's ozone maintenance plans for Allen and Stark Counties as revisions to the Ohio SIP. The maintenance plans are designed to keep these Counties in attainment of the 8-hour ozone NAAQS for the next 12 years, through 2018. As supported by and consistent with the ozone maintenance plans, we are also proposing to approve the 2018 VOC and NO <sup>X</sup> MVEBs for Allen and Stark Counties for conformity determination purposes. II. What Is the Background for These Actions? EPA has determined that ground-level ozone is detrimental to human health. On July 18, 1997, EPA promulgated an 8-hour ozone NAAQS (62 FR 38856) of 0.08 parts per million parts of air (0.08 ppm) (80 parts per billion (ppb)). This standard is violated in an area when any ozone monitor in the area (or in its impacted downwind environs) records 8-hour ozone concentrations with a three-year average of the annual fourth-highest daily maximum 8-hour ozone concentrations equaling or exceeding 85 ppb. This 8-hour ozone standard replaced a prior 1-hour ozone NAAQS, which was promulgated on February 8, 1979 (44 FR 8202), and revoked on June 15, 2005. Ground-level ozone is not generally emitted directly by sources. Rather, emitted NO <sup>X</sup> and VOC react in the presence of sunlight to form ground-level ozone along with other secondary compounds. NO <sup>X</sup> and VOC are referred to as “ozone precursors.” The CAA required EPA to designate as nonattainment any area that violated the 8-hour ozone NAAQS. The **Federal Register** notice promulgating these designations was published on April 30, 2004 (69 FR 23857). The CAA contains two sets of provisions—subpart 1 and subpart 2—that address planning and emission control requirements for nonattainment areas (both are found in title I, part D of the CAA). Subpart 1 contains general, less prescriptive, requirements for nonattainment areas for any pollutant governed by a NAAQS, and applies to all nonattainment areas. Subpart 2 contains more specific requirements for certain ozone nonattainment areas, and applies to ozone nonattainment areas classified under section 181 of the CAA. In the April 30, 2004 designation rulemaking, EPA divided 8-hour ozone nonattainment areas into the categories of subpart 1 nonattainment (“basic” nonattainment) and subpart 2 nonattainment (“classified” nonattainment) based on their 8-hour ozone design values ( *i.e.* , on the three-year averages of the annual fourth-highest daily maximum 8-hour ozone concentrations at the worst-case monitoring sites in the designated areas) and on their 1-hour ozone design values ( *i.e.* , on the fourth-highest daily maximum 1-hour ozone concentrations over the three-year period at the worst-case monitoring sites in the designated areas). 1 8-hour ozone nonattainment areas with 1-hour ozone design values equaling or exceeding 121 ppb were designated as subpart 2, classified nonattainment areas. Classification of the subpart 2 nonattainment areas was based on the levels of the monitored 8- hour ozone design values for each nonattainment area. All other 8-hour nonattainment areas were designated as subpart 1, basic nonattainment areas, which have no area-specific classifications. 1 The 8-hour ozone design value and the 1-hour ozone design value for each area were not necessarily recorded at the same monitoring site. The worst-case monitoring site for each ozone concentration averaging time was considered for each area. Emission control requirements for classified nonattainment areas are linked to area classifications. Areas with more serious ozone pollution problems are subject to more prescribed requirements. The requirements are designed to bring areas into attainment by their specified attainment dates, which also depend on the area classifications. For example, marginal nonattainment areas are subject to the fewest mandated control requirements and have the earliest attainment deadline. Severe nonattainment areas are required to meet more mandated emission controls, including tighter restrictions on the sizes of existing VOC and NO <sup>X</sup> sources required to install emission controls and tighter restrictions on mandated emission controls and offsetting of new sources, and have a later attainment deadline. In contrast, the attainment deadline for basic nonattainment areas does not depend on the magnitude of the areas' 8-hour ozone design values, and the required emission controls are less prescriptive. Under EPA regulations at 40 CFR part 50, the 8-hour ozone standard is attained when the three-year average of the annual fourth-highest daily maximum 8-hour average ozone concentrations is less than or equal to 0.08 ppm ( *i.e.* , less than or equal to 0.084 ppm or 84 ppb based on data rounding conventions specified in appendix I of 40 CFR part 50) at all monitors in an area and in nearby downwind environs (for further information, see 69 FR 23857, April 30, 2004). The supporting data must meet a minimum data completeness requirement. The completeness requirement (specified in appendix I of 40 CFR part 50) for ozone data supporting a determination of attainment and a redesignation to attainment is met when the annual average percent of days with valid ambient monitoring data is greater than 90 percent for the ozone seasons during the three-year period, with no single year with less than 75 percent data completeness during the ozone season. In the April 30, 2004 designation/classification rulemaking, Allen and Stark Counties were both designated as subpart 1 nonattainment for the 8-hour ozone standard. The designations were based on ozone data collected during the 2001-2003 period. On June 20, 2006, the State of Ohio requested redesignation of Allen and Stark Counties to attainment of the 8-hour ozone NAAQS based on ozone data collected in these Counties during the 2003-2005 period. On August 24, 2006, the State of Ohio completed the ozone redesignation request by submitting documentation of the public hearings conducted by the State for the ozone redesignation request and ozone maintenance plans. The information contained in the State's June 20, 2006 ozone redesignation request submittal was unchanged through the State's public review process. On December 4, 2006, the State submitted a clarification of the State's ozone maintenance plans, confirming that the State is committed to implement contingency emission control measures in the event of a violation of the 8-hour ozone standard in either Allen County or Stark County after these Counties are redesignated to attainment of the 8-hour ozone standard. III. What Are the Criteria for Redesignation to Attainment? The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA allows for redesignation provided that:
(1)The Administrator determines that the area has attained the applicable NAAQS based on current air quality data;
(2)the Administrator has fully approved an applicable state implementation plan for the area under section 110(k) of the CAA;
(3)the Administrator determines that the improvement in air quality is due to permanent and enforceable emission reductions resulting from implementation of the applicable SIP, Federal air pollution control regulations, and other permanent and enforceable emission reductions;
(4)the Administrator has fully approved a maintenance plan for the area meeting the requirements of section 175A of the CAA; and
(5)the state containing the area has met all requirements applicable to the area under section 110 and part D of the CAA. EPA provided guidance on redesignations in the General Preamble for the Implementation of Title I of the CAA Amendments of 1990 on April 16, 1992 (57 FR 13498), and supplemented this guidance on April 28, 1992 (57 FR 18070). EPA provided further guidance on processing redesignation requests in the following documents: “Ozone and Carbon Monoxide Design Value Calculations,” Memorandum from Bill Laxton, June 18, 1990; “Maintenance Plans for Redesignation of Ozone and Carbon Monoxide Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, April 30, 1992; “Contingency Measures for Ozone and Carbon Monoxide
(CO)Redesignations,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, June 1, 1992; “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992; “State Implementation Plan
(SIP)Actions Submitted in Response to Clean Air Act
(Act)Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; “Technical Support Documents (TSD's) for Redesignation of Ozone and Carbon Monoxide Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, August 17, 1993; “State Implementation Plan
(SIP)Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide
(CO)National Ambient Air Quality Standards (NAAQS) On or After November 15, 1992,” Memorandum from Michael H. Shapiro, Acting Assistant Administrator for Air and Radiation, September 17, 1993; “Use of Actual Emissions in Maintenance Demonstrations for Ozone and CO Nonattainment Areas,” Memorandum from D. Kent Berry, Acting Director, Air Quality Management Division, November 30, 1993; “Part D New Source Review (part D NSR) Requirements for Areas Requesting Redesignation to Attainment,” Memorandum from Mary D. Nichols, Assistant Administrator for Air and Radiation, October 14, 1994; and, “Reasonable Further Progress, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard,” Memorandum from John S. Seitz, Director, Office of Air Quality Planning and Standards, May 10, 1995. IV. What Are EPA's Analyses of the State's Requests and What Are the Bases for EPA's Proposed Actions? EPA is proposing to determine that Allen and Stark Counties have attained the 8-hour ozone standard, approve the ozone maintenance plans for these Counties, and approve the VOC and NO <sup>X</sup> MVEBs supported by these ozone maintenance plans. EPA is also proposing to approve the redesignation of these Counties to attainment of the 8-hour ozone NAAQS. The bases for our proposed determinations and approvals follow. 1. Allen and Stark Counties Have Attained the 8-Hour Ozone NAAQS For ozone, as noted above, an area may be considered to be attaining the 8-hour ozone NAAQS if there are no violations of the NAAQS, as determined in accordance with 40 CFR 50.10 and 40 CFR part 50 appendix I based on the most recent three complete, consecutive calendar years of quality-assured air quality monitoring data at all monitoring sites in the area. To attain this standard, the average of the annual fourth-high daily maximum 8-hour average ozone concentrations measured and recorded at each monitor (the monitoring site's ozone design value) within the area and in its impacted downwind environs over a three-year period must not exceed the ozone standard. Based on the ozone data rounding convention described in 40 CFR part 50 appendix I, the 8-hour standard is attained if the area's ozone design value 2 is 0.084 ppm (84 ppb) or lower. The data must be collected and quality-assured in accordance with 40 CFR part 50, and must be recorded in EPA's Air Quality System (AQS). 2 The worst-case monitoring site-specific ozone design value in the area. As part of the June 20, 2006 ozone redesignation request, Ohio EPA submitted ozone monitoring data indicating the top four daily maximum 8-hour ozone concentrations for each monitoring site in Allen and Stark Counties during the 2003-2005 period. These ozone concentrations are part of the quality-assured ozone data collected and recorded in these Counties. These data have been entered into EPA's AQS. The annual fourth-high 8-hour daily maximum ozone concentrations, along with their three-year averages, are summarized in Table 1. Table 1.—Fourth-High 8-Hour Ozone Concentrations in Parts Per Billion
(ppb)County Monitoring site 2003 2004 2005 Average Allen 2650 Bible 88 76 81 82 Stark Malone College 87 74 76 79 Stark 245 West Fifth 85 71 76 77 Stark 1175 West Vine 86 76 86 83 These data show that the site-specific ozone design values (average fourth-high daily maximum 8-hour ozone concentrations over the period of 2003-2005) for all monitoring sites in Allen and Stark Counties are below the 85 ppb ozone standard violation cut-off. These data support the conclusion that the Allen County and Stark County ozone monitors did not record a violation of the 8-hour ozone standard during the 2003-2005 period, and monitored attainment of the standard during this period. We note that the ozone data recorded in the AQS show that these monitoring sites met completeness requirements for the period covered here. Based on these data, we propose to find that Allen and Stark Counties have attained the 8-hour ozone NAAQS. Based on available data (not fully quality assured), these monitoring sites continue to show attainment of the 8-hour ozone NAAQS through 2006. The State of Ohio has committed to continue the operation of these ozone monitors through the ozone maintenance period, and will consult with the EPA if changes in the monitoring system are required. 2. Allen and Stark Counties Have Met All Applicable Requirements Under Section 110 and Part D of the CAA and These Areas Have a Fully Approved SIP Under Section 110(k) of the CAA We have determined that Allen and Stark Counties and the State of Ohio have met all currently applicable SIP requirements for Allen and Stark Counties, including the requirements under section 110 of the CAA (general SIP requirements) and the requirements under subpart 1 part D of title I of the CAA (requirements specific to basic ozone nonattainment areas). See section 107(d)(3)(E)(v) of the CAA. In addition, EPA has fully approved the pertinent elements of the Ohio SIP. See section 107(d)(3)(E)(ii) of the CAA. We note that SIPs must be fully approved only with respect to currently applicable requirements of the CAA, those CAA requirements applicable to Allen and Stark Counties at the time the State submitted the final, complete ozone redesignation request for these areas (August 24, 2006). a. Allen and Stark Counties Have Met All Applicable Requirements Under Section 110 and Part D of the CAA The September 4, 1992 Calcagni memorandum (see “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992) describes EPA's interpretation of section 107(d)(3)(E) of the CAA. To qualify for redesignation of an area to attainment under this interpretation, the state and the area must meet the relevant CAA requirements that come due prior to the State's submittal of a complete redesignation request for the area. See also the September 17, 1993 Michael Shapiro memorandum and 66 FR 12459, 12465-12466 (March 7, 1995, redesignating Detroit-Ann Arbor, Michigan to attainment of the 1-hour ozone NAAQS). Applicable requirements of the CAA that come due subsequent to the state's submittal of a complete redesignation request remain applicable until a redesignation of the area to attainment of the standard is approved, but are not required as prerequisites to redesignation. See section 175A(c) of the CAA. *Sierra Club* v. *EPA,* 375 F.3d 537 (7th Cir. 2004). See also 68 FR 25424, 25427 (May 12, 2003, redesignating the St. Louis/East St. Louis area to attainment of the 1-hour ozone NAAQS). *General SIP requirements:* Section 110(a) of title I of the CAA contains the general requirements for a SIP, which include: enforceable emission limitations and other control measures, means, or techniques; provisions for the establishment and operation of appropriate devices necessary to collect data on ambient air quality; programs to enforce the emission limitations; submittal of a SIP that has been adopted by the State after reasonable public notice and a hearing; implementation of a source permit program; provisions for the implementation of part C requirements (Prevention of Significant Deterioration (PSD)) and part D requirements (New Source Review (NSR)) for new sources or major source modifications; criteria for stationary source emission control measures, monitoring, and reporting; provisions for air quality modeling; and provisions for public and local agency participation. SIP requirements and elements are discussed in the following EPA documents: “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992; “State Implementation Plan
(SIP)Actions Submitted in Response to Clean Air Act
(CAA)Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; and “State Implementation Plan
(SIP)Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide
(CO)National Ambient Air Quality Standards (NAAQS) on or After November 15, 1992,” Memorandum from Michael H. Shapiro, Acting Assistant Administrator, September 17, 1993. See also other guidance documents listed above. Section 110(a)(2)(D) of the CAA requires SIPs to contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state. To implement this provision, EPA required states to establish programs to address transport of air pollutants (NO <sup>X</sup> SIP call and Clean Air Interstate Rule (CAIR)). EPA has also found, generally, that states have not submitted SIPs under section 110(a)(1) of the CAA to meet the interstate transport requirements of section 110(a)(2)(D)(i) of the CAA (70 FR 21147, April 25, 2005). However, the section 110(a)(2)(D) requirements for a state are not linked with a particular area's designation. EPA believes that the requirements linked with a particular area's nonattainment designation and classification are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. We believe that these requirements should not be construed to be applicable requirements for purposes of redesignation. Further, we believe that the other section 110 elements described above that are not connected with nonattainment plan submissions and that are not linked with an area's attainment status are also not applicable requirements for purposes of redesignation. A state remains subject to these requirements after an area is redesignated to attainment. We conclude that only the section 110 and part D requirements which are linked with an area's designation and classification are the relevant measures for evaluating this aspect of a redesignation request. This approach is consistent with EPA's existing policy on applicability of conformity and oxygenated fuels requirements for redesignation purposes, as well as with section 184 ozone transport requirements. See: Reading, Pennsylvania proposed and final rulemakings (61 FR 53174-53176, October 10, 1996 and 62 FR 24826, May 7, 1997); Cleveland-Akron-Loraine, Ohio final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida final rulemaking (60 FR 62748, December 7, 1995). See also the discussion on this issue in the Cincinnati, Ohio ozone redesignation (65 FR 37890, June 19, 2000), and the Pittsburgh, Pennsylvania ozone redesignation (66 FR 50399, October 19, 2001). We believe that section 110 elements not linked to the area's nonattainment status are not applicable for purposes of redesignation. Nonetheless, we also note that EPA has previously approved provisions in the Ohio SIP addressing section 110 elements under the 1-hour ozone standard. We have analyzed the Ohio SIP as codified in 40 CFR part 52, subpart KK and have determined that it is consistent with the requirements of section 110(a)(2) of the CAA. The SIP, which has been adopted after reasonable public notice and hearing, contains enforceable emission limitations; requires monitoring, compiling, and analyzing ambient air quality data; requires preconstruction review of new major stationary sources and major modifications of existing sources; provisions for adequate funding, staff, and associated resources necessary to implement its requirements; requires stationary source emissions monitoring and reporting; and otherwise satisfies the applicable requirements of section 110(a)(2). *Part D SIP requirements:* EPA has determined that the Ohio SIP meets applicable SIP requirements under part D of the CAA. Under part D, an area's classification (subpart 1, marginal, moderate, serious, severe, and extreme) indicates the requirements to which it will be subject. Subpart 1 of part D, found in sections 172-176 of the CAA, sets forth the basic nonattainment area plan requirements applicable to all nonattainment areas. Subpart 2 of part D, found in section 182 of the CAA, establishes additional specific requirements depending on the area's nonattainment classification. Since Allen and Stark Counties are designated as subpart 1 nonattainment areas for the 8-hour ozone standard, the subpart 2 part D requirements do not apply to these Counties. *Part D, subpart 1 requirements:* For purposes of evaluating this redesignation request, the applicable subpart 1 part D requirements are contained in sections 172(c)(1)-(9) and 176. A thorough discussion of the requirements of section 172 can be found in the General Preamble for Implementation of Title I (57 FR 13498). See also 68 FR 4852-4853, in an ozone redesignation notice of proposed rulemaking for the St. Louis area, for a discussion of section 172 requirements. No requirements for the 8-hour ozone standard under part D of the CAA came due for Allen and Stark Counties prior to when the State submitted the complete ozone redesignation request. For example, the requirement for an ozone attainment demonstration, as contained in section 172(c)(1), was not yet due when the State submitted the ozone redesignation request for these Counties, nor were the requirements for Reasonably Available Control Measures
(RACM)and Reasonably Available Control Technology
(RACT)(section 172(c)(1)), Reasonable Further Progress
(RFP)(section 172(c)(2)), and attainment plan and RFP contingency measures (section 172(c)(9)). All of these required SIP elements are required for submittal after Ohio submitted the complete, adopted ozone redesignation request and maintenance plans for Allen and Stark Counties. Therefore, none of the part D requirements for the 8-hour ozone standard are considered to be applicable to Allen and Stark Counties for purposes of redesignation. *Section 176 conformity requirements:* Section 176(c) of the CAA requires states to establish criteria and procedures to ensure that Federally-supported or funded activities, including highway projects, conform to the air planning goals in the applicable SIP. The requirement to determine conformity applies to transportation plans, programs, and projects developed, funded, or approved under Title 23 U.S.C. and the Federal Transit Act (transportation conformity) as well as to all other Federally-supported or funded projects (general conformity). State conformity SIP revisions must be consistent with Federal conformity regulations that the CAA required the EPA to promulgate. As with other part D requirements, EPA interprets the conformity requirements as not applying for purposes of evaluating the ozone redesignation request under section 107(d) of the CAA. In addition, please note that conformity rules are required for areas that are redesignated to attainment of a NAAQS, and that Federal conformity rules apply where state rules have not been approved. See *Wall* v. *EPA,* 265 F.3d 426 (6th Cir. 2001). See also 60 FR 62748 (December 7, 1995) (Tampa, Florida). *Part D new source review requirements:* EPA has determined that areas being redesignated need not comply with the requirement that a New Source Review
(NSR)program be approved prior to redesignation, provided that that the area demonstrates maintenance of the standard without emission reductions from part D NSR, since Prevention of Significant Deterioration
(PSD)requirements will apply after redesignation. A more detailed rationale for this view is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D New Source Review Requirements for Areas Requesting Redesignation to Attainment.” Ohio has demonstrated that Allen and Stark Counties will be able to maintain the 8-hour ozone standard without part D NSR in effect, and therefore, we conclude that the State need not have a fully approved part D NSR program prior to approval of the redesignation request. The State's PSD program will become effective in Allen and Stark Counties upon redesignation to attainment. See rulemakings for Detroit, Michigan (60 FR 12467-12468, March 7, 1995); Cleveland-Akron-Lorain, Ohio (61 FR 20458, 20469-20470, May 7, 1996); Louisville, Kentucky (66 FR 53665, October 23, 2001); Grand Rapids, Michigan (61 FR 31834-31837, June 21, 1996). We conclude that Allen and Stark Counties have satisfied all applicable requirements under section 110 and part D of the CAA to the extent that these requirements apply for purposes of reviewing the State's ozone redesignation request. b. Allen and Stark Counties Have a Fully Approved Applicable SIP Under Section 110(k) of the CAA EPA has fully approved the Ohio SIP for Allen and Stark Counties under section 110(k) of the CAA for all applicable requirements. EPA may rely on prior SIP approvals in approving a redesignation request (See the September 4, 1992 John Calcagni memorandum, page 3, *Southwestern Pennsylvania Growth Alliance* v. *Browner,* 144 F.3d 984, 989-990 (6th Cir. 1998), Wall v. EPA, 265 F.3d 426 (6th Cir. 2001)) plus any additional measures it may approve in conjunction with a redesignation action. See 68 FR 25426 (May 12, 2003). Since the passage of the CAA of 1970, Ohio has adopted and submitted, and EPA has fully approved, provisions addressing the various required SIP elements applicable to Allen and Stark Counties for purposes of ozone redesignation. No SIP provisions relevant to Allen or Stark Counties are currently disapproved, conditionally approved, or partially approved. As indicated above, EPA believes that the section 110 elements not connected with nonattainment plan submissions and not linked to the area's nonattainment status are not applicable requirements for purposes of review of the State's redesignation request. EPA believes that approval of section 110 SIP elements under the 1-hour ozone standard satisfies the prerequisite for approval of the ozone redesignation request for purposes of attaining and maintaining the 8-hour ozone standard. EPA also believes that since the part D requirements for the 8-hour ozone standard did not become due prior to Ohio's submittal of the final, complete redesignation request, they also are not applicable requirements for purposes of redesignation. 3. The Air Quality Improvements in Allen and Stark Counties Are Due To Permanent and Enforceable Reductions in Emissions From Implementation of the SIP and Federal Air Pollution Control Regulations and Other Permanent and Enforceable Emission Reductions We believe that the State of Ohio has adequately demonstrated that the observed air quality improvements in Allen and Stark Counties are due to permanent and enforceable emission reductions resulting from the implementation of the SIP, Federal measures, and other State-adopted measures. In making this demonstration, the State has documented the changes in VOC and NO <sup>X</sup> emissions from all anthropogenic (man-made or man-based) sources in Allen and Stark Counties between 2002, an ozone standard violation year, and 2004, one of the years in which Allen and Stark Counties recorded attainment of the 8-hour ozone standard. The Ohio EPA has also identified permanent and enforceable emission reductions which occurred elsewhere in the State and in other upwind areas that have contributed to the air quality improvement in Allen and Stark Counties. Table 2 summarizes the VOC and NO <sup>X</sup> emissions totals from the anthropogenic sources in 2002 and 2004 for both Counties as summarized in the State's ozone redesignation submittal. Table 2.—Total Anthropogenic VOC and NO <sup>X</sup> Emissions for 2002 and 2004 in Allen and Stark Counties (tons per summer day) Source category 2002 2004 Allen County Volatile Organic Compounds Emissions Point 4.77 4.92 Area 5.17 5.08 Non-Road Mobile 2.19 2.11 On-Road Mobile 7.72 6.51 Total 19.85 18.62 Allen County Nitrogen Oxides Emissions Point 12.14 12.57 Area 0.45 0.47 Non-Road Mobile 5.30 4.85 On-Road Mobile 11.71 10.13 Total 29.60 28.02 Stark County Volatile Organic Compounds Emissions Point 2.90 2.97 Area 21.23 21.03 Non-Road Mobile 5.98 5.44 On-Road Mobile 16.56 14.03 Total 46.67 43.47 Stark County Nitrogen Oxides Emissions Point 5.12 4.85 Area 1.17 1.23 Non-Road Mobile 10.06 9.25 On-Road Mobile 25.35 22.00 Total 41.70 37.33 Information in the above table indicates that both Counties experienced decreases in VOC and NO <sup>X</sup> anthropogenic emissions between 2002 and 2004. The State of Ohio concludes that the differences in the 2002 and 2004 emissions are due primarily to the implementation of permanent and enforceable emission control requirements. The State asserts that these emission reductions, along with those occurring elsewhere in the State and in upwind areas, have led to observed improvements in air quality in Allen and Stark Counties. The State notes a significant decline in regional NO <sup>X</sup> emissions between 2002 and 2004 as the result of the implementation of State NO <sup>X</sup> emission control rules for combustion sources, primarily Electric Generating Units (EGUs), in compliance with EPA's NO <sup>X</sup> SIP call and acid rain control requirements under title IV of the CAA. Besides the NO <sup>X</sup> emission reductions occurring within the State itself, the implementation of statewide NO <sup>X</sup> emission control rules occurred in many States east of the Mississippi River. EPA believes these emission reductions contributed significantly to the air quality improvements in Allen and Stark Counties through the reduction of transported ozone and ozone precursors. Although both Allen and Stark Counties have no significant EGUs, these Counties have benefited from the NO <sup>X</sup> emission reductions occurring in the surrounding areas. These regional NO <sup>X</sup> emission reductions are considered to be permanent and enforceable. Besides implementation of the regional NO <sup>X</sup> emission controls, the State of Ohio notes that, in the mid-1990's, the State of Ohio promulgated statewide rules requiring Reasonably Available Control Techniques
(RACT)for significant sources of VOC emissions (those with potential VOC emissions of 100 tons or more per year) whose construction or modification commenced on or after October 19, 1979. RACT rules for smaller sources have been implemented in the ozone nonattainment areas. Additional implemented, or soon to be implemented, emission control rules include several Federal rules:
(1)Tier II emission standards for vehicles and gasoline sulfur content standards (promulgated by EPA in February 2000 and currently being implemented);
(2)heavy-duty diesel engine emission control rules (promulgated by the EPA in July 2000 and currently being implemented); and
(3)clean air non-road diesel rule (promulgated by the EPA in May 2004 and currently being phased in through 2009). All of these rules have contributed to reducing VOC and NO <sup>X</sup> emissions throughout the State of Ohio (and in other States surrounding Ohio) and will contribute to further, future emission reductions in Ohio. The emission limits in the SIP will assure that these emission reductions will remain in place even after redesignation of Allen and Stark Counties to attainment of the 8-hour ozone NAAQS, and the State commits to maintaining these emission controls after the redesignation. 4. Allen and Stark Counties Have Fully Approvable Ozone Maintenance Plans Pursuant to Section 175A of the CAA In conjunction with its request to redesignate Allen and Stark Counties to attainment of the 8-hour ozone NAAQS, Ohio submitted SIP revision requests to provide for maintenance of the 8-hour ozone NAAQS in Allen and Stark Counties through 2018, exceeding the 10 year minimum maintenance period required by the CAA. a. What Is Required In an Ozone Maintenance Plan? Section 175A of the CAA sets forth the required elements of air quality maintenance plans for areas seeking redesignation from nonattainment to attainment of a NAAQS. Under section 175A, a maintenance plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after the Administrator approves the redesignation to attainment. Eight years after the redesignation, the State must submit a revised maintenance plan which demonstrates that maintenance of the standard will continue for 10 years following the initial 10 year maintenance period. To address the possibility of future NAAQS violations, the maintenance plan must contain such contingency measures, with a schedule for implementation, as EPA deems necessary, to assure prompt correction of any future NAAQS violations. The September 4, 1992 John Calcagni memorandum provides additional guidance on the content of maintenance plans. An ozone maintenance plan should, at minimum, address the following items:
(1)The attainment VOC and NO <sup>X</sup> emissions inventories;
(2)a maintenance demonstration showing maintenance for the first 10 years of the maintenance period;
(3)a commitment to maintain the existing monitoring network;
(4)factors and procedures to be used for verification of continued attainment; and
(5)a contingency plan to prevent and/or correct a future violation of the NAAQS. b. What Are the Attainment Emission Inventories for Allen and Stark Counties? Ohio EPA prepared VOC and NO <sup>X</sup> emission inventories for Allen and Stark Counties, including point (significant stationary sources), other (area sources, smaller and widely-distributed stationary sources), Marine, Aircraft, and Railroad
(MAR)mobile sources, non-road (off-road) mobile sources, and on-road mobile sources for 2002 (the base nonattainment year), 2004 (the attainment year), 2009, and 2018 (the projected maintenance year). To develop the 2004, 2009, and 2018 emission inventories, the Ohio EPA projected the 2002 emissions applying various source category-specific growth factors and emission control factors. The State has documented how the 2002 base year emissions were derived and how these emissions were projected to derive the 2004, 2009, and 2018 emissions. The following summarizes the procedures and sources of data used by the Ohio EPA to derive the 2002 emissions. i. *Point Sources.* The primary source of point source information was facility-specific emissions and source activity data collected annually by the State for sources covered by Title V 3 source permits. This information includes emissions, process rates, source operating schedules, emissions control data, and other relevant source information. The State also used emissions data provided by EPA's EGU emission inventory, maintained to support the NO <sup>X</sup> SIP call emissions trading program and the acid rain control/trading program. The sources included in the 2002 point source emissions inventory were identified using Ohio's Title V STARS database system. The emissions included in this database are facility-reported actual emissions. 3 Title V of the CAA requires source-specific emission permits detailing all applicable emission control requirements and emission limits, as specified in the SIP, for each source facility covered by the State's Title V source permit program and requirements. Ohio EPA defines point source emissions as those which occur at an identifiable stationary stack or vent. Point source emissions not emitted from discrete stacks or vents are defined to be fugitive emissions. Facility-specific fugitive emissions are also reported by each Title V facility and stored in the Title V STARS database. Point source emissions included in the 2002 base year emissions inventory were provided to the Lake Michigan Air Directors Consortium (LADCO) in National Emissions Inventory Input Format
(NIF)3.0 format. LADCO imported and processed the NIF files in the Emissions Modeling System
(EMS)and applied temporal and spatial profiles to calculate July weekday emissions rates. The Allen and Stark Counties' emissions derived from this set of emissions data were split into EGU emissions and non-EGU emissions for inclusion in the base year emissions inventory used to support the Allen and Stark Counties ozone redesignation requests. Since no EGUs exist in Allen and Stark Counties, there are no EGU emissions in these Counties. ii. *Area (Other) Sources.* Area sources are those sources which are generally small, numerous, and have not been inventoried as specific point, mobile, or biogenic sources. The emissions for these sources are generally calculated using various surrogates, such as population, estimates of employees in various occupational groups, etc., and grouped by general source types. The area source emissions are typically defined at the county level. Ohio EPA has either used published Emission Inventory Improvement Program
(EIIP)emissions estimation methodologies or other methodologies typically used by other states to estimate the area source emissions. Area source categories include: Various stationary combustion sources (not including the EGU sources included in the point source portion of the emissions inventory); agricultural pesticides; architectural surface coatings; auto body refinishing; consumer and commercial solvent usage; solvent cleaning; fuel marketing; graphic arts; hospital sterilizers; industrial surface coating (minus point source emissions for this source category); municipal solid waste disposal; portable fuel containers; privately owned treatment works; traffic markings; human cremation; industrial fuel combustion; residential fuel combustion; structural fires; and miscellaneous source categories. The State has documented the data sources used for each of these source categories. iii. *Non-Road Mobile Sources.* The non-road mobile source emissions inventory was generated regionally by running EPA's National Mobile Inventory Model (NMIM). The output of the NMIM was converted to the NIF format and submitted to LADCO for processing in the EMS to obtain spatially and temporally allocated emissions for a July weekday. The basic non-road algorithm for calculating emissions in NMIM uses base year equipment populations, average load factors, available engine powers, activity hours and emission factors to calculate the emissions. To address concerns about the accuracy of NMIM results for some source categories, LADCO contracted with a consultant to review the base data and to make recommended changes. The non-road mobile source emissions inventory has been appropriately adjusted based on the contractor recommendations. iv. *Marine, Aircraft, and Rail
(MAR)Sources.* Due to the significance of the emissions from these mobile source types, the Ohio EPA has decided to treat these source categories separately from other non-road mobile sources. The MAR emissions include emissions from commercial marine, aircraft, and locomotive sources. Commercial marine vessels consist of several different categories of vessel types. For each vessel type, there are unique engine types, emission rates, and activity data sets. The emissions inventory documentation lists the vessel types and activity data sources by vessel type, along with special distribution of each vessel type. Locomotive activity was divided into various rail categories: Class I operations; Class II/III operations; passenger trains; commuter lines; and yard operations. Since Class I operations are expected to be the most significant rail operations in the two Counties, operators of Class I operations were queried for activity and emissions-related information for each railroad line. This approach provided for more specific estimates of emissions by railroad line. Class II/III emissions were based on national fuel consumption and per employee fuel consumption estimates. The number of railroad employees in each county was used to allocate the fuel consumption to each county and, therefore, the emissions to each county. For passenger trains and commuter lines, the Ohio EPA obtained information from AMTRAK concerning train schedules, miles of transport, and schedules of operation. This information was coupled with a fuel usage rate estimate of 2.35 gallons per train-mile of travel to obtain the total fuel usage per unit time in each of the Counties. Total fuel use by county was used to assign emissions from this source category to each county. EPA provided the aircraft emission estimates based on Federal Aviation Administration
(FAA)published Landing and Take-Off
(LTO)rates by engine type for each airline and major airport in the State of Ohio. The LTO-engine information was combined with engine type-specific emission factors developed by the International Civil Aviation Organization (ICAO), and, through use of a FAA Emissions and Dispersion Modeling System (EDMS), emissions were calculated and assigned to each county in the State, including Allen and Stark Counties. The MAR data were processed by LADCO using the EMS to calculate July 2002 daily emissions of VOC and NO <sup>X</sup> . v. *On-Road Mobile Sources.* The inventories of on-road mobile source emissions for both Allen County and Stark County were developed by the Ohio EPA in conjunction with the Ohio Department of Transportation (Ohio DOT), LADCO, and EPA. The Ohio DOT provided the daily vehicle miles traveled data and vehicle age and type distribution data. The Ohio DOT and the Ohio EPA jointly developed estimated vehicle speeds for functional roadway class categories (the Ohio DOT also provided the roadway miles by functional class). Traffic monitoring conducted by the Ohio DOT was used to modify the vehicle speeds and traffic levels for specific roadway segments where deemed necessary. This vehicle travel information, along with the MOBILE 6.2 vehicle emission factor model, was used to estimate mobile source VOC and NO <sup>X</sup> emissions for Allen and Stark Counties. vi. *Projected Emissions for the Attainment Year.* Ambient ozone air quality data showed that Allen and Stark Counties met the 8-hour ozone NAAQS in the 2003-2005 period. Ohio EPA selected 2004, the central year of this period, to estimate the “attainment year” emissions for both Counties, needed as the base period emissions for the demonstrations of maintenance. The 2004 emissions were estimated by growing the emissions from the 2002 base year emission levels. Ohio EPA used point source growth data provided by individual point source facilities along with other source category-specific growth estimates and emission control estimates to estimate stationary source VOC and NO <sup>X</sup> emissions for Allen and Stark Counties. LADCO provided growth and source control projection data to project VOC and NO <sup>X</sup> area source emissions. The Ohio DOT provided projections of vehicle travel estimates (Vehicle Miles Traveled (VMT)) to allow the projection of mobile source emissions, with MOBILE 6.2 providing the projected changes in vehicle emission factors. The estimated 2004 emissions have been compared to the 2002 base year emissions to demonstrate the basis for the improved air quality in Allen and Stark Counties. See Table 2 above for a summary of the 2004 VOC and NO <sup>X</sup> emissions and for a comparison of these emissions with the 2002 emissions. There are no EGU facilities in Allen and Stark Counties, but the emissions from these source types have been derived by the Ohio EPA for other Counties in Ohio and have been factored into the State's demonstration of maintenance. Reductions in NO <sup>X</sup> emissions in surrounding counties are assumed to reduce ozone levels in Allen and Stark Counties through reductions in transported ozone and NO <sup>X</sup> . c. Demonstration of Maintenance As part of the June 20, 2006 redesignation request submittal, Ohio EPA requested revisions to the Ohio SIP to incorporate ozone maintenance plans for Allen and Stark Counties as required under section 175A of the CAA. The maintenance plans demonstrate maintenance of the 8-hour ozone NAAQS through 2018 by documenting attainment year and future projected VOC and NO <sup>X</sup> emissions and showing that future emissions of VOC and NO <sup>X</sup> will remain at or below the attainment year emission levels. An ozone maintenance demonstration need not to be based on ozone modeling. See *Wall* v. *EPA* , 265 F.3d 426 (6th Cir. 2001), *Sierra Club* v. *EPA* , 375 F.3d 537 (7th Cir. 2004). See also 66 FR 53094, 53099-53100 (October 19, 2001), and 68 FR 25430-25432 (May 12, 2003). The Ohio EPA projected the VOC and NO <sup>X</sup> emissions in Allen and Stark Counties to the years of 2009 and 2018 to demonstrate maintenance of the 8-hour ozone NAAQS for at least 10 years after the expected redesignation dates for these areas. For both Counties, Ohio EPA used source growth estimates provided by LADCO along with mobile source growth estimates generated using VMT projections provided by the Ohio DOT and MOBILE 6.2 to project the Allen and Stark Counties VOC and NO <sup>X</sup> emissions. Table 3 summarizes the VOC and NO <sup>X</sup> emissions projected to occur in Allen County during the demonstrated maintenance period. Similarly, Table 4 summarizes the VOC and NO <sup>X</sup> emissions projected to occur in Stark County during the demonstrated maintenance period. The State of Ohio chose 2018 as a maintenance year to meet the 10-year maintenance requirement of the CAA, allowing several years for EPA to complete the redesignation rulemaking process. The State also chose 2009 as an interim year to demonstrate that VOC and NO <sup>X</sup> emissions will remain below the attainment year levels throughout the 10-year maintenance period. Table 3.—Projected VOC and NO <sup>X</sup> Emissions In Allen County (tons/day) Source sector 2004 Attainment 2009 Interim 2018 Maintenance Safety margin VOC Emissions: Point 4.92 5.28 6.44 Area (Other) 5.08 4.85 4.89 Non-Road Mobile 1.98 1.77 1.24 On-Road Mobile 6.51 *5.08 *2.89 Marine-Air-Railroad 0.13 0.12 0.12 Total VOC Emissions 18.62 17.10 15.58 **3.04 NO <sup>X</sup> Emissions: Point 12.57 13.66 15.98 Area (Other) 0.47 0.52 0.55 Non-Road Mobile 2.29 1.92 1.13 On-Road Mobile 10.13 *8.28 *3.47 Marine-Air-Railroad 2.56 1.80 1.69 Total NO <sup>X</sup> Emissions 28.02 26.18 22.82 **5.20 * Includes 15 percent growth cushion increase to mobile source budget. ** Difference between 2004 attainment year emissions and 2018 maintenance year emissions. Table 4.—Projected VOC and NO <sup>X</sup> Emissions In Stark County (tons/day) Source sector 2004 Attainment 2009 Interim 2018 Maintenance Safety margin VOC Emissions: Point 2.97 3.14 3.77 Area (Other) 21.03 20.49 21.93 Non-Road Mobile 5.29 3.92 3.22 On-Road Mobile 14.03 *10.02 *5.37 Marine-Air-Railroad 0.15 0.14 0.14 Total VOC Emissions 43.47 37.71 34.43 **9.04 NO <sup>X</sup> Emissions: Point 4.85 4.16 4.72 Area (Other) 1.23 1.40 1.46 Non-Road Mobile 6.22 4.81 2.50 On-Road Mobile 22.00 *18.03 *7.08 Marine-Air-Railroad 3.03 2.39 2.22 Total NO <sup>X</sup> Emissions 37.33 30.79 17.98 **19.35 * Includes 15 percent growth cushion increase to mobile source budget. ** Difference between 2004 attainment year emissions and 2018 maintenance year emissions. The Ohio EPA also notes that the State's EGU NO <sup>X</sup> emissions control rules stemming from EPA's NO <sup>X</sup> SIP call and Clean Air Interstate Rule (CAIR), to be implemented after 2006, will further lower NO <sup>X</sup> emissions throughout the State and upwind of Allen and Stark Counties. This will result in decreased ozone and ozone precursor transport into Allen and Stark Counties, and will support maintenance of the 8-hour ozone standard in these areas. The emissions projections for Allen and Stark Counties lead to the conclusion that Allen and Stark Counties should maintain the 8-hour ozone NAAQS throughout the required 10-year maintenance period and through 2018. The projected decreases in local VOC and local and regional NO <sup>X</sup> emissions indicate that peak ozone levels in Allen and Stark Counties may actually further decline during the maintenance period. Based on the comparison of the projected emissions and the attainment year emissions, we conclude that Ohio EPA has successfully demonstrated that the 8-hour ozone standard will be maintained in Allen and Stark Counties. As also noted by Ohio EPA, this conclusion is further supported by the fact that other states in the eastern portion of the United States are also expected to reduce regional NO <sup>X</sup> emissions through implementation of their NO <sup>X</sup> emission control rules for EGUs and other NO <sup>X</sup> sources through the implementation of the NO <sup>X</sup> SIP call and CAIR. d. Contingency Plan The contingency plan provisions of the CAA are designed to result in prompt correction or prevention of violations of the NAAQS that might occur after redesignation of an area to attainment of the NAAQS. Section 175A of the CAA requires that a maintenance plan include such contingency measures as EPA deems necessary to assure that the State will promptly correct a violation of the NAAQS that might occur after redesignation. The maintenance plan must identify the contingency measures to be considered for possible adoption, a schedule and procedure for adoption and implementation of the selected contingency measures, and a time limit for action by the State. The State should also identify specific indicators to be used to determine when the contingency measures need to be adopted and implemented. The maintenance plan must include a requirement that the State will continue to implement all measures with respect to control of the pollutant(s) that were included in the SIP before the redesignation of the area to attainment. See section 175A(d) of the CAA. As required by section 175A of the CAA, Ohio has adopted contingency plans to address possible future ozone air quality problems in Allen and Stark Counties. The contingency plans have two levels of actions/responses depending on whether a violation of the 8-hour ozone standard is only threatened (Warning Level Response) or has actually occurred or appears to be imminent (Action Level Response). A Warning Level Response will be triggered whenever an annual (1-year) fourth-high monitored 8-hour ozone concentration of 88 ppb occurs in Stark County or an annual fourth-high monitored 8-hour ozone concentration of 85 ppb occurs in Allen County. A Warning Level Response will consist of a study to determine whether the high ozone value indicates a trend toward higher ozone concentrations and/or whether emissions appear to be increasing. The study will evaluate whether the trend, if any, is likely to continue. If so, the control measures necessary to reverse the trend will be selected by the State for evaluation and possible adoption. Implementation of necessary controls in response to a Warning Level Response triggering will occur as expeditiously as possible, but in no event later than 12 months from the conclusion of the most recent ozone season (September 30). An Action Level Response will be triggered whenever a two-year averaged annual fourth-high monitored 8-hour ozone concentration of 85 ppb occurs within either of the maintenance areas or whenever a violation of the 8-hour ozone standard is actually monitored in either of the maintenance areas. An Action Level Response will also be triggered if a violation of the 8-hour ozone NAAQS is recorded in either Allen County or in Stark County after these two Counties are redesignated to attainment of the 8-hour ozone NAAQS. In the event that an Action Level Response is triggered and is not due to an exceptional event, malfunction, or noncompliance with a source permit condition or rule requirement, Ohio EPA will determine the additional emission control measures needed to assure future attainment of the ozone NAAQS. Emission control measures that can be implemented in a short time will be selected in order to be in place within 18 months from the close of the ozone season that prompted the Action Level Response. If a new emission control measure is already promulgated and scheduled to be implemented at the Federal or State level and if that emission control measure is determined to be sufficient to address the ozone air quality problem, additional local measures may be unnecessary. Ohio EPA will submit to the EPA an analysis to demonstrate that the proposed emission control measures are adequate to reverse the upward trend in peak ozone concentrations and to maintain the 8-hour ozone standard in the subject maintenance area (the area in which the Action Level Response is triggered). The selection of emission control measures will be based on cost-effectiveness, emission reduction potential, economic and social considerations, or other factors that the Ohio EPA deems to be appropriate. Selected emission control measures will be subjected to public review and the State will seek public input prior to selecting new emission control measures. Finally, emission control measures that can be implemented in a short period of time will be selected so that they can be in place within 18 months from the close of the ozone season in which the Action Level Response is triggered. The State's ozone maintenance plans list the following emission control measures as possible contingency measures: • Low Reid vapor pressure gasoline; • Tightening of RACT on existing sources covered by EPA Control Technique Guidelines issued in response to the 1990 Clean Air Act amendments; • Application of RACT to smaller existing sources; • One or more transportation control measures sufficient to achieve at least half of a percent reduction in actual area-wide VOC emissions. The transportation control measures to be considered include: ■ Trip reduction programs, including: employer-based transportation management plans; area-wide rideshare programs; work schedule changes; and telecommuting; ■ Traffic flow and transit improvements; and, ■ Other new or innovative transportation measures not yet in widespread use that affect state and local governments deemed appropriate; • Alternative fuel and diesel retrofit programs for fleet vehicle operations; • Controls on consumer products consistent with those adopted elsewhere in the United States; • Requirements for VOC or NO <sup>X</sup> emission offsets for new and modified major sources; • Requirements for VOC or NO <sup>X</sup> emission offsets for new and modified minor sources; • Increase of the ratio of emission offsets required for new sources; and, • Requirements for VOC or NO <sup>X</sup> emission controls on new minor sources (with emissions of less than 100 tons per year). No contingency measures will be adopted and implemented without providing the opportunity for full public participation and comment in the contingency measure selection process. A list of VOC and NO <sup>X</sup> source types potentially subject to future emission controls include: NO <sup>X</sup> RACT: • EGUs • Asphalt batching plants • Industrial/commercial and institutional boilers • Process heaters • Internal combustion engines • Combustion turbines • Other sources with NO <sup>X</sup> emissions exceeding 100 tons per year VOC RACT: • Consumer products • Architectural and industrial maintenance coatings • Stage I gasoline dispensing facilities • Automobile refinishing shops • Cold cleaner degreasers • Portable fuel containers • Synthetic organic compound manufacturing • Wood manufacturing • Industrial wastewater • Aerospace industry • Ship building • Bakeries • Plastic parts coating • Volatile organic liquid storage • Industrial solvent cleaning • Offset lithography • Industrial surface coating • Other VOC sources with emissions exceeding 50 tons per year e. Provisions for a Future Update of the Ozone Maintenance Plan As required by section 175A(b) of the CAA, the State commits to review the maintenance plans 8 years after redesignation of Allen and Stark Counties to attainment of the 8-hour ozone NAAQS and to submit revised maintenance plans extending the maintenance period for an additional 10 years. We find Ohio's ozone maintenance demonstration and contingency plan acceptable. V. Has Ohio Adopted Acceptable Motor Vehicle Emissions Budgets for the End Year of the Ozone Maintenance Plans Which Can Be Used To Support Conformity Determinations? A. What Are Motor Vehicle Emission Budgets and Are They Adequate? Under the CAA, states are required to submit, at various times, SIP revisions and ozone maintenance plans for applicable areas (for ozone nonattainment areas and for areas seeking redesignations to attainment of the ozone standard or revising existing ozone maintenance plans). These emission control SIP revisions (e.g. reasonable further progress and attainment demonstration SIP revisions), including ozone maintenance plans, must create MVEBs based on on-road mobile source emissions that are allocated to highway and transit vehicle use that, together with emissions from other sources in the area, will provide for attainment or maintenance of the ozone NAAQS. Under 40 CFR part 93, MVEBs for an area seeking a redesignation to attainment of the NAAQS are established for the last year of the maintenance plan (for the maintenance demonstration year). The MVEBs serve as ceilings on mobile source emissions from an area's planned transportation system and are used to test planned transportation system changes or projects to assure compliance with the emission limits assumed in the SIP. The MVEB concept is further explained in the preamble to the November 24, 1993 transportation conformity rule (58 FR 62188). The preamble also describes how to establish the MVEBs in the SIP and how to revise the MVEBs if needed. Under section 176(c) of the CAA, new transportation projects, such as the construction of new highways, must “conform” to (i.e., be consistent with) the part of the SIP that addresses emissions from cars, trucks, and other on-roadway vehicles. Conformity to the SIP means that transportation activities will not cause new air quality standard violations, or delay timely attainment of the NAAQS. If a transportation plan does not conform, most new transportation projects that would expand the capacity of the roadways cannot go forward. Regulations at 40 CFR part 93 set forth EPA's policy, criteria, and procedures for demonstrating and assuring conformity of transportation activities to a SIP. When reviewing SIP revisions containing MVEBs, including attainment strategies, rate-of-progress plans, and maintenance plans, EPA must find that the MVEBs are “adequate” for use in determining transportation conformity. Once EPA finds the submitted MVEBs to be adequate for transportation conformity purposes, the MVEBs are used by state and Federal agencies in determining whether proposed transportation projects conform to the SIPs as required by section 176(c) of the CAA. EPA's substantive criteria for determining the adequacy of MVEBs are specified in 40 CFR 93.118(e)(4). EPA's process of determining adequacy of MVEBs consists of three basic steps:
(1)Providing public notification of a SIP submission;
(2)providing the public the opportunity to comment on the MVEBs during a public comment period; and
(3)making a finding of adequacy. The process of determining the adequacy of submitted SIP MVEBs was initially outlined in EPA's May 14, 1999 guidance, “Conformity Guidance on Implementation of March 2, 1999, Conformity Court Decision.” This guidance was finalized in the Transportation Conformity Rule Amendments for the “New 8-Hour Ozone and PM2.5 National Ambient Air Quality Standards and Miscellaneous Rule Amendments—Response to Court Decision and Additional Rule Change” published on July 1, 2004 (69 FR 40004). EPA follows this guidance and rulemaking in making its adequacy determinations. The Transportation Conformity Rule, in 40 CFR 93.118(f), provides for adequacy findings through two mechanisms. First, 40 CFR 93.118(f)(1) provides for posting a notice to the EPA conformity Web site at: *http://www.epa.gov/otaq/stateresources/transconf/adequacy.htm* and providing a 30-day public comment period. Second, a mechanism is described in 40 CFR 93.118(f)(2) which provides that EPA can review the adequacy of an implementation plan submission simultaneously with its review of the implementation plan itself. We have opened the public comment period on the adequacy of the submitted MVEBs for Allen and Stark Counties at the adequacy review Web site. The Allen County and Stark County ozone maintenance plans contain VOC and NO <sup>X</sup> MVEBs for 2018. EPA has reviewed the submittal and the proposed VOC and NO <sup>X</sup> MVEBs for Allen and Stark Counties, and finds that the MVEBs meet the adequacy criteria in the Transportation Conformity Rule. Any comments on the adequacy of the MVEBs should be noted through the adequacy review Web site. B. What Is a Safety Margin? A “safety margin” is the difference between the attainment level of emissions (from all sources) and the projected level of emissions (from all sources) in the maintenance plan for a future maintenance year. As noted in Tables 3 and 4 above, Allen County is projected to have a VOC safety margin of 3.04 tons per day and a NO <sup>X</sup> safety margin of 5.20 tons per day in 2018, and Stark County is projected to have a VOC safety margin of 9.04 tons per day and a NO <sup>X</sup> safety margin of 19.35 tons per day in 2018 (the differences between the 2004, attainment year, and 2018 VOC and NO <sup>X</sup> emissions for all sources in these Counties). C. Are the MVEBs Approvable? EPA, through this rulemaking, is proposing to approve the MVEBs for use to determine transportation conformity in Allen and Stark Counties because EPA has determined that the budgets are consistent with the control measures and future emissions projected in the SIP and that Allen and Stark Counties can maintain attainment of the 8-hour ozone NAAQS for the relevant required 10-year period with mobile source emissions at the levels of the MVEBs. Ohio EPA has determined the 2018 MVEBs for Allen County as 2.89 tons per day for VOC and 3.47 tons per day for NO <sup>X</sup> and the 2018 MVEBs for Stark County as 5.37 tons per day for VOC and 7.08 tons per day for NO <sup>X</sup> . These MVEBs exceed the on-road mobile source VOC and NO <sup>X</sup> emissions projected by the Ohio EPA for 2018, but do match the on-road mobile source emissions for 2018 summarized in Tables 3 and 4 above. Through discussions with all organizations involved in transportation planning for Allen and Stark Counties, Ohio EPA decided to include 15 percent safety margins in the MVEBs to provide for mobile source growth not anticipated in the projected 2018 emissions. Ohio EPA has demonstrated that Allen and Stark Counties can maintain the 8-hour ozone NAAQS with mobile source emissions at the levels of the MVEBs since total source emissions with the increased mobile source emissions will remain under the attainment year levels. The VOC and NO <sup>X</sup> MVEBs for Allen and Stark Counties are approvable because they maintain the total emissions for Allen and Stark Counties at or below the attainment year emission inventory levels, as required by the transportation conformity regulations. VI. What Are the Effects of EPA's Proposed Actions? Approval of the redesignation request would change the official designations of Allen and Stark Counties for the 8-hour ozone NAAQS, found at 40 CFR part 81, from nonattainment to attainment. Final rulemaking approving the redesignation request would also incorporate into the Ohio SIP plans for maintaining the ozone NAAQS through 2018 in these areas. The maintenance plans include contingency measures to remedy possible future violations of the 8-hour ozone NAAQS, and establishes 2018 MVEBs for these Counties. VII. Statutory and Executive Order Reviews Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 (58 FR 51735, September 30, 1993), this action is not a “significant regulatory action” and, therefore, is not subject to review by the Office of Management and Budget. Paperwork Reduction Act This proposed rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). Regulatory Flexibility Act This proposed action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Unfunded Mandates Reform Act Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Order 13132: Federalism This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely proposes to approve a state rule implementing a federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments This proposed rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). Executive Order 13045: Protection of Children From Environmental Health and Safety Risks This proposed rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant regulatory action,” this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). National Technology Transfer Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), 15 U.S.C. 272, requires Federal agencies to use technical standards that are developed or adopted by voluntary consensus to carry out policy objectives, so long as such standards are not inconsistent with applicable law or otherwise impractical. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Absent a prior existing requirement for the state to use voluntary consensus standards, EPA has no authority to disapprove a SIP submission for failure to use such standards, and it would thus be inconsistent with applicable law for EPA to use voluntary consensus standards in place of a program submission that otherwise satisfies the provisions of the Clean Air Act. Therefore, the requirements of section 12(d) of the NTTA do not apply. List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Intergovernmental relations, Nitrogen dioxide, Ozone, Volatile organic compounds. Dated: December 19, 2006. Bharat Mathur, Acting Regional Administrator, Region 5. [FR Doc. E6-22156 Filed 12-26-06; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80 [EPA-HQ-OAR-2006-0841; FRL-8261-8] Regulation of Fuels and Fuel Additives: Extension of the Reformulated Gasoline Program to the East St. Louis, IL Ozone Nonattainment Area AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: Under section 211(k)(6) of the Clean Air Act, the Administrator of EPA shall require the sale of reformulated gasoline
(RFG)in an ozone nonattainment area upon the application of the Governor of the State in which the nonattainment area is located. This notice proposes to extend the Act's prohibition against the sale of conventional (i.e., non-reformulated) gasoline in RFG areas to the Illinois portion of the St. Louis, Missouri-Illinois 8-hour ozone nonattainment area hereafter referred to as the East St. Louis, Illinois nonattainment area. The Agency proposes to implement this prohibition on May 1, 2007, for all persons other than retailers and wholesale purchaser-consumers (i.e., refiners, importers, and distributors). For retailers and wholesale purchaser-consumers, EPA proposes to implement the prohibition on June 1, 2007. On June 1, 2007, the East St. Louis ozone nonattainment area would be a covered area for all purposes in the federal RFG program. EPA seeks comment on alternative implementation dates it could establish if unexpected delays in issuing the final rule render the proposed implementation dates impractical. DATES: Comments on this proposed rule must be received in writing by January 26, 2007. To request a public hearing, contact Kurt Gustafson at
(202)343-9219 or *gustafson.kurt@epa.gov* . If a hearing is requested no later than January 16, 2007, a hearing will be held at a time and place to be published in the **Federal Register** . Persons wishing to testify at a public hearing must contact Kurt Gustafson at
(202)343-9219, and submit copies of their testimony to the docket and to Kurt Gustafson at the addresses below, no later than 10 days prior to the hearing. After the hearing, the docket for this rulemaking will remain open for an additional 30 days to receive comments. If a hearing is held, EPA will publish a document in the **Federal Register** extending the comment period for 30 days after the hearing. ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2006-0841, by one of the following methods: • *http://www.regulations.gov:* Follow the on-line instructions for submitting comments. • *Mail:* Air Docket, Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-2006-0841. Comments may also be e-mailed to *a-and-r-docket@epamail.epa.gov* . In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 20503. *Instructions:* Direct your comments to Docket ID No. EPA-HQ-OAR-2006-0841. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at *http://www.regulations.gov* , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through *http://www.regulations.gov* or e-mail. The *http://www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *http://www.regulations.gov* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. *Docket:* All documents in the docket are listed in the *http://www.regulations.gov index* . Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in *http://www.regulations.gov* or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is
(202)566-1744, and the telephone number for the Air Docket is
(202)566-1742. Note: The EPA Docket Center suffered damage due to flooding during the last week of June 2006. The Docket Center is continuing to operate. However, during the cleanup, there will be temporary changes to Docket Center telephone numbers, addresses, and hours of operation for people who wish to make hand deliveries or visit the Public Reading Room to view documents. Consult EPA's **Federal Register** notice at 71 FR 38147 (July 5, 2006) or the EPA Web site at *http://www.epa.gov/epahome/dockets.htm* for current information on docket operations, locations and telephone numbers. The Docket Center's mailing address for U.S. mail and the procedure for submitting comments to www.regulations.gov are not affected by the flooding and will remain the same. FOR FURTHER INFORMATION CONTACT: Kurt Gustafson, Transportation and Regional Programs Division (Mail Code 6406J), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: 202-343-9219; fax number: 202-343-2800; e-mail address: *gustafson.kurt@epa.gov* . SUPPLEMENTARY INFORMATION: In the “Rules and Regulations” section of today's **Federal Register** , we are setting forth this amendment to the federal RFG regulations as a direct final rule without prior proposal because we view this as a noncontroversial amendment and anticipate no adverse comment. We have explained our reasons for this approach in the preamble to the direct final rule. If we receive no adverse comment, we will not take further action on this proposed rule. If we receive adverse comment, we will withdraw the direct final rule and it will not take effect. We will address all public comments in a subsequent final rule based on this proposed rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. This document concerns the amendment to EPA's regulations governing RFG and the prohibition of the sale of conventional gasoline supplied to the East St. Louis area of Illinois. For further information, including the regulatory language, please see the information provided in the direct final rule of the same title which is located in the “Rules and Regulations” section of this **Federal Register** . I. Public Participation and Effective Date A. Public Comments Section 211(k)(6) states that, “[u]pon the application of the Governor of a State, the Administrator shall apply the prohibition” against the sale of conventional gasoline in any area of the State classified as marginal, moderate, serious, or severe for ozone. Although section 211(k)(6) provides EPA some discretion to establish the effective date for this prohibition, and allows EPA to consider whether there is sufficient domestic capacity to produce RFG in establishing the effective date, EPA does not have discretion to deny a Governor's request. Therefore, the scope of this action is limited to setting an effective date for East St. Louis' opt-in to the RFG program, and not to decide whether East St. Louis should in fact opt in. For this reason, EPA is only soliciting comments addressing the implementation date and whether there is sufficient capacity to produce RFG, and is not soliciting comments that support or oppose East St. Louis' participating in the program. EPA is proposing implementation dates for this rule of May 1, 2007, for all persons other than retailers and wholesale purchaser-consumers, and June 1, 2007 for retailers and purchaser-consumers. These dates coincide with the dates that regulated parties are to switch from producing or dispensing RFG with a wintertime formulation, to producing or dispensing VOC-controlled RFG for the summer ozone season. Section 211(k)(6)(A) of the Act stipulates that the effective date of an RFG opt-in must be no later than one year after the application of the Governor is received. In this case, therefore, the effective date could be no later than July 10, 2007. EPA solicits comment on the proposed implementation dates, and also solicits comment on alternative implementation dates that could be used in the event that EPA is unable to issue a final rule quickly enough to use the proposed implementation dates. Persons with comments containing proprietary information must distinguish such information from other comments to the greatest extent and label it as “Confidential Business Information.” If a person making comments wants EPA to base the final rule in part on a submission labeled as confidential business information, then a non-confidential version of the document which summarizes the key data or information should be placed in the public docket. Information covered by a claim of confidentiality will be disclosed by EPA only to the extent allowed by the procedures set forth in 40 CFR part 2. If no claim of confidentiality accompanies the submission when it is received by EPA, it may be made available to the public without further notice to the person making comments. B. Public Hearing Procedures Any person desiring to present testimony regarding this proposed rule at the public hearing (see DATES) should notify the contact person listed above of such intent as soon as possible. A sign-up sheet will be available at the registration table the morning of the hearing for scheduling testimony for those who have not notified the contact person. This testimony will be scheduled on a first come, first served basis to follow the previously scheduled testimony. EPA suggests that approximately 50 copies of the statement or material to be presented be brought to the hearing for distribution to the audience. In addition, EPA would find it helpful to receive an advance copy of any statement or material to be presented at the hearing in order to give EPA staff adequate time to review such material before the hearing. Such advance copies should be submitted to the contact person listed above. The official record of the hearing will be kept open for 30 days following the hearing to allow submission of rebuttal and supplementary testimony. All such submittals should be directed to the Air Docket, Docket No. EPA-HQ-OAR-2006-0841 (see ADDRESSES ). The Director of EPA's Transportation and Regional Programs Division, Office of Transportation and Air Quality, or her designee, is hereby designated Presiding Officer of the hearing. The hearing will be conducted informally and technical rules of evidence will not apply. Because a public hearing is designed to give interested parties an opportunity to participate in the proceeding, there are no adversary parties as such. Statements by participants will not be subject to cross examination by other participants. A written transcript of the hearing will be placed in the above docket for review. Anyone desiring to purchase a copy of the transcript should make individual arrangements with the court reporter recording the proceeding. The Presiding Officer is authorized to strike from the record statements which he/she deems irrelevant or repetitious and to impose reasonable limits on the duration of the statement of any witness. This information will be available for public inspection at the EPA Air Docket, Docket No. EPA-HQ-OAR-2006-0841 (see ADDRESSES ). II. Background The background for this proposal, including the text of the letter from the Governor of Illinois requesting that RFG requirements be applied in the East St. Louis ozone nonattainment area, is set forth in the companion direct final rule also published in today's **Federal Register** . III. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review This action is not a “significant regulatory action” under the terms of Executive Order
(EO)12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the EO. EPA notes that the economic impacts of the RFG program were assessed in EPA's Regulatory Impact Analysis for the 1994 RFG rules. See 59 FR 7810-7811 (February 16, 1994). In that analysis the production cost of RFG was estimated to be 4 to 8 cents per gallon more than conventional gasoline. Since conventional gas regulations have evolved since that time to be more like RFG and since the State has a low RVP requirement that also more closely resembles RFG, EPA expects the costs of RFG in the East St. Louis area to be at the low end or lower than this range. Nonetheless, using the 4 to 8 cent per gallon estimate, the cost of the program in East St. Louis would be significantly lower than the trigger for a significant regulatory action. B. Paperwork Reduction Act This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 *et seq.* The Office of Management and Budget
(OMB)has approved the information collection requirements that apply to the RFG/anti-dumping program (see 59 FR 7716, February 16, 1994), and has assigned OMB control number 2060-0277 (EPA ICR No. 1951.08). Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR Part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act
(RFA)generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's proposed rule on small entities, small entity is defined as:
(1)A small business that has not more than 1,500 employees (13 CFR 121.201);
(2)a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and
(3)a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. In promulgating the RFG and the related anti-dumping regulations for conventional gasoline, the Agency analyzed the impact of the regulations on small businesses. The Agency concluded that the regulations may possibly have some economic effect on a substantial number of small refiners, but that the regulations may not significantly affect other small entities, such as gasoline blenders, terminal operators, service stations and ethanol blenders. See 59 FR 7810-7811 (February 16, 1994). As stated in the preamble to the final RFG/anti-dumping rule, exempting small refiners from the RFG regulations would result in the failure of meeting CAA standards. 59 FR 7810. However, since most small refiners are located in the mountain states or in California, which has its own RFG program, the vast majority of small refiners are unaffected by the federal RFG requirements (although all refiners of conventional gasoline are subject to the anti-dumping requirements). Moreover, all businesses, large and small, maintain the option to produce conventional gasoline to be sold in areas not obligated by the Act to receive RFG or those areas which have not chosen to opt into the RFG program. A complete analysis of the effect of the RFG/anti-dumping regulations on small businesses is contained in the Regulatory Flexibility Analysis which was prepared for the RFG and anti-dumping rulemaking, and can be found in the docket for that rulemaking. The docket number is: EPA Air Docket A-92-12. Today's proposed rule will affect only those refiners, importers or blenders of gasoline that choose to produce or import RFG for sale in the East St. Louis ozone nonattainment area, and gasoline distributors and retail stations in those areas. As discussed above, EPA determined that, because of their location, the vast majority of small refiners would be unaffected by the RFG requirements. For the same reason, most small refiners will be unaffected by today's action. Other small entities, such as gasoline distributors and retail stations located in East St. Louis, which will become a covered area as a result of today's proposed rule, will be subject to the same requirements as those small entities which are located in current RFG covered areas. The Agency did not find the RFG regulations to significantly affect these entities. Based on this, EPA certifies that this proposed rule would not have a significant adverse impact on a substantial number of small entities. D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements. EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Thus, today's proposed rule is not subject to the requirements of sections 202 and 205 of the UMRA. Although EPA does not believe that UMRA imposes requirements for this rulemaking, EPA notes that the environmental and economic impacts of the RFG program were assessed in EPA's Regulatory Impact Analysis for the 1994 RFG rules. E. Executive Order 13132: Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” This proposed rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The proposed rule would only impose requirements on certain refiners and other entities in the gasoline distribution system, and not on States. The requirements of the proposed rule will be enforced by the federal government at the national level. Thus, Executive Order 13132 does not apply to this proposed rule. F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This proposed rule does not have tribal implications, as specified in Executive Order 13175. Today's proposed rule will affect only those refiners, importers or blenders of gasoline that choose to produce or import RFG for sale in the East St. Louis ozone nonattainment area, and gasoline distributors and retail stations in those areas. Thus, Executive Order 13175 does not apply to this rule. G. Executive Order 13045: Protection of Children from Environmental Health & Safety Risks Executive Order 13045, entitled “Protection of Children from Environmental Health and Safety Risks,” (62 FR 19885, April 23, 1997) applies to any rule that:
(1)is determined to be “economically significant” as defined under Executive Order 12866, and
(2)concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This proposed rule is not subject to Executive Order 13045 because it is not economically significant. H. Executive Order 13211: Actions that Significantly Effect Energy Supply This proposed rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866. I. National Technology Transfer Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Section 12(d) of Public Law 104-113, directs us to use voluntary consensus standards in our regulatory activities unless it would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , materials specifications, test methods, sampling procedures, and business practices) developed or adopted by voluntary consensus standards bodies. The NTTAA directs us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards. This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards. J. Statutory Authority The Statutory authority for the action proposed today is granted to EPA by sections 211(c) and
(k)and 301 of the Clean Air Act, as amended; 42 U.S.C. 7545(c) and
(k)and 7601. List of Subjects in 40 CFR Part 80 Environmental protection, Air pollution control, Fuel additives, Gasoline, Motor vehicle pollution. Dated: December 20, 2006. Stephen L. Johnson, Administrator. [FR Doc. E6-22161 Filed 12-26-06; 8:45 am] BILLING CODE 6560-50-P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 224 [Docket No. 061212327-6327-01; I.D. 120706A] RIN 0648-XB57 Endangered And Threatened Species; Proposed Endangered Status for North Pacific Right Whale AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Proposed rule; request for comments. SUMMARY: We, NMFS, have completed a status review of the northern right whale under the Endangered Species Act (ESA). We initiated this review in response to a petition submitted by the Center for Biological Diversity, dated August 16, 2005, to list the North Pacific right whale as a separate endangered species. Based on the findings from the status review and consideration of the factors affecting this species, we have concluded that right whales in the northern hemisphere exist as two species: the North Pacific right whale ( *Eubalaena japonica* ) and the North Atlantic right whale ( *E. glacialis* ). We have also determined that each of these species is in danger of extinction throughout its range. To reflect this taxonomic revision, we are designating each separately as an endangered species. This rule proposes to list the North Pacific right whale as an endangered species; a proposed rule to list the North Atlantic right whale isissued separately. We also intend to designate critical habitat for the North Pacific right whale. A proposed rule for designation of critical habitat will follow this action. We are soliciting public comment on this proposed listing determination. DATES: Comments on this proposed rule must be received by close of business on February 26, 2007. Requests for public hearings must be made in writing by February 12, 2007. ADDRESSES: Send comments to Kaja Brix, Assistant Regional Administrator, Protected Resources Division, Alaska Region, NMFS, Attn: Ellen Walsh. Comments may be submitted by: • E-mail: *ESA-NRW-status@noaa.gov* . Include in the subject line the following document identifier: North Pacific Right Whale PR. E-mail comments, with or without attachments, are limited to 5 megabytes. • Webform at the Federal eRulemaking Portal: *www.regulations.gov* . Follow the instructions at that site for submitting comments. • Mail: P. O Box 21668, Juneau, AK 99802 • Hand delivery to the Federal Building : 709 W. 9th Street, Juneau, Alaska. • Fax:
(907)586-7012. The proposed rule and other materials relating to this proposal can be found on the NMFS Alaska Region website *http://www.fakr.noaa.gov/* . FOR FURTHER INFORMATION CONTACT: Brad Smith, NMFS, 222 West 7 th Avenue, Anchorage, Alaska 99517, telephone
(907)271-5006, fax
(907)271-3030; Kaja Brix, NMFS,(907)586-7235, fax
(907)586-7012; or Marta Nammack,
(301)713-1401. SUPPLEMENTARY INFORMATION: Background Petition On August 16, 2005, we received a petition from the Center for Biological Diversity
(CBD)to list the North Pacific right whale as a separate endangered species under the ESA. A copy of the petition may be viewed at our Alaska Region website (see ADDRESSES ). CBD requested that we list the North Pacific right whale as a new endangered species based, in part, on recent scientific information that establishes a new taxonomic classification for right whale species. On January 26, 2006, we issued our finding that the petition presented substantial information indicating that the petitioned action may be warranted (71 FR 4344), and we requested information regarding the taxonomy and status of the North Pacific right whale, its habitat, biology, movements and distribution, threats to the species, or other pertinent information. This proposed rule summarizes the information gathered and the analyses conducted in a status review of right whales in the North Pacific Ocean and in the North Atlantic Ocean and constitutes our 12-month determination on CBD's petition. Status Review The review of the status of right whales in the North Atlantic and North Pacific Oceans describes the population structure and examines the extent to which phylogenetic uniqueness exists between right whales found in the North Atlantic and North Pacific. The review also examines the biological status and threats to the right whales and their habitat. Biology of Right Whales in the North Pacific Ocean Right whales are large baleen whales that grow to lengths and weights exceeding 18 meters and 100 tons (90.7 metric tons), respectively. They are filter feeders whose prey consists exclusively of zooplankton. Right whales attain sexual maturity at an average age of 8-10 years, and females produce a single calf at intervals of 3-5 years (Kraus *et al.* , 2001). Their life expectancy is unclear, but is known to reach 70 years in some cases (Hamilton *et al.* , 1998; Kenney, 2002). Right whales are generally migratory, with at least a portion of the population movingbetween summer feeding grounds in temperate or high latitudes and winter calving areas in warmer waters (Kraus *et al* ., 1986; Clapham *et al* ., 2004). In the North Pacific, individuals have been observed feeding in the Gulf of Alaska, the Bering Sea, and the Sea of Okhotsk. Although a general northward movement is evident in spring and summer, it is unclear whether the entire population undertakes a predictable seasonal migration, and the location of calving grounds remains completely unknown (Scarff, 1986; Scarff, 1991; Brownell *et al* ., 2001; Clapham *et al* .,2004; Shelden *et al* ., 2005). Historically, right whales occurred across the entire North Pacific Ocean from the western coast of North America to the Russian Far East (Scarff, 1986; Brownell *et al* ., 2001, Clapham *et al* ., 2004, Shelden *et al* ., 2005). Sightings in the 20th century were from as far south as central Baja California, Mexico, and the Yellow Sea, and as far north as the Bering Sea and the Okhotsk Sea (Goddard and Rugh, 1998; Brownell *et al* ., 2001). Right whales are frequently found in coastal or shelf waters. Such sightings, however, may be partially a function of survey effort, and thus may not reflect current or historical distribution. Sighting records also indicate that right whales occur far offshore, and movements over abyssal depths are known (Scarff, 1986; Mate *et al* . 1997). Clapham *et al.*
(2004)plotted 20th century records together with data summarized from 19th century whaling catches. These plots show that right whales had an extensive offshore distribution in the 19th century, and were common in areas where few or no right whales occur today. Sightings diminished and occurred further south in autumn, and very few animals were recorded anywhere in winter. Whalers never reported winter calving areas in the North Pacific, and calving locations remain unknown (Scarff, 1986; Clapham *et al.* , 2004). Overall, these analyses confirmed that the size and range of the right whale population is now considerably diminished in the North Pacific relative to the situation during the peak period of whaling for this species in the 19th century. Little is known regarding the migratory behavior of right whales in the North Pacific. Historical sighting and catch records provide the only information on possible migration patterns for North Pacific right whales (Omura, 1958; Omura *et al.* , 1969; Scarff, 1986). During summer, whales were found in the Gulf of Alaska, along both coasts of the Kamchatka Peninsula, the Kuril Islands, the Aleutian Islands, the southeastern Bering Sea, and in the Okhotsk Sea. Fall and spring distribution was the most widely dispersed, with whales occurring in mid-ocean waters and extending from the Sea of Japan to the eastern Bering Sea. In winter, right whales were found in the Ryukyu Islands (south of Kyushu, Japan), the Bonin Islands, the Yellow Sea, and the Sea of Japan. The current distribution patterns and migration routes of these whales are not known. In the North Pacific, whaling for right whales began in the Gulf of Alaska (known to whalers as the “Northwest Ground”) in 1835 (Webb, 1988). Right whales were extensively hunted in the western North Pacific in the latter half of the 19th century, and by 1900 were scarce throughout their range. Right whales were protected worldwide in 1935 through a League of Nations agreement. However, because neither Japan nor the USSR signed this agreement, both nations asserted authority to continue hunting right whales until 1949 when the newly-created International Whaling Commission endorsed the ban. Despite this ban, a total of 23 right whales were legally killed in the North Pacific by Japan and the USSR under Article VIII of the International Convention for the Regulation of Whaling (1946), which permits the taking of whales for scientific research purposes. However, it is now known that the USSR illegally caught many right whales in the North Pacific (Doroshenko, 2000; Brownell *et al.* , 2001). In the eastern North Pacific, 372 right whales were killed by the Soviets between 1963 and 1967; of these, 251 were taken in the Gulf of Alaska south of Kodiak, and 121 in the southeastern Bering Sea. These takes devastated a population that, while undoubtedly small, may have been undergoing a slow recovery (Brownell *et al.* , 2001). As a result of this historic and recent hunting, right whales today are among the most endangered of all whales worldwide. In the western North Pacific (the Sea of Okhotsk and adjacent areas), current abundance is unknown but is probably in the low to mid-hundreds (Brownell *et al.* , 2001). There is no estimate of abundance for the eastern North Pacific (Bering Sea, Aleutian Islands, and Gulf of Alaska), but sightings are rare. Most biologists believe the current population is unlikely to exceed a hundred individuals, and is probably much smaller. Prior to the illegal Soviet catches of the 1960s, on average, 25 whales were observed each year in the eastern North Pacific (Brownell *et al.* , 2001); in contrast, the total number of records in the 35 years from 1965 to 1999 was only 82, or an average of 2.3 whales per annum. The current population size of right whales in the North Pacific is likely fewer than 1,000 animals. Exploitation by commercial whaling reduced the North Pacific right whales nearly to the point of extinction by the beginning of the 20th century. There are insufficient data to estimate the pre-exploitation size of this or any other species of right whale. Based upon catch levels, it is reasonable to assume there were in excess of 10,000 animals in the North Pacific. Based upon the number of animals taken illegally by Soviets during the 1960s, there were at least 372 right whales alive at that time. That estimate would not include right whales found in the western North Pacific. There are no reliable estimates of current abundance or trends for this species. Rice
(1974)indicated only a few individuals remained in the eastern North Pacific management unit (i.e., within U.S. waters), and that the population was essentially extinct. Despite high levels of survey effort in the region, most notably from Japanese sighting surveys (Miyashita and Kato, 1998), right whale sightings in the eastern North Pacific have been rare and geographically scattered (Perry *et al.* , 1999). Recent sightings of right whales in the eastern Bering Sea during the summer (Goddard and Rugh, 1998; Tynan, 1998, 1999; Moore *et al.* , 2000; LeDuc *et al.* , 2001; Tynan *et al.* , 2001; Wade *et al.* , 2006) represent the first reliable observations of aggregations of right whales in the eastern North Pacific since the 1960s. Although a few calves have recently been documented in the eastern North Pacific (Goddard and Rugh, 1998; LeDuc, 2004; Wade *et al.* , 2006), these were the first such sightings in over a century (Brownell *et al.* , 2001). These recent sightings, the first of which occurred in 1996, and other surveys (directed specifically at right whales or otherwise) have detected small numbers of right whales in the southeastern Bering Sea, including an aggregation estimated at 24 animals in the summer of 2004. Photo-identification and genetic data have identified 17 individuals from the Bering Sea, and the high inter-annual resighting rate further reinforces the idea that this population is small. Right whales have also been sighted in the northern Gulf of Alaska, including sightings in 2005 and 2006. However, the overall number of right whales using habitats in the North Pacific other than the Bering Sea is not known. Prior to the onset of commercial whaling in 1835, right whales were widely distributed across the North Pacific (Scarff, 1986; Clapham *et al.* , 2004; Shelden *et al.* , 2005). However, no reason exists to suspect that the right whales that remain alive today inhabit a substantially different range than right whales alive during the time of the Soviet catches; indeed, given the longevity of this species, it is likely that some of the individuals who survived that whaling episode remain extant. Both the southeastern Bering Sea and the western Gulf of Alaska (shelf and slope waters south of Kodiak) have been the focus of many sightings (as well as the illegal Soviet catches) in recent decades. In general, the majority of northern right whale sightings (historically and in recent times) in the Northeast Pacific have occurred from about 40°N to 60°N latitude (lat.). There are historical records from north of 60°N. lat., but these are rare and are likely to have been misidentified bowhead whales. Right whales have on rare occasions been recorded off California and Mexico, as well as off Hawaii. However, as noted by Brownell et al. (2001), there is no evidence that either Hawaii or the west coast of North America from Washington State to Baja California were ever important habitats for right whales. Given the amount of whaling effort as well as the human population density in these regions, it is highly unlikely that substantial concentrations of right whales would have passed unnoticed. Furthermore, no archaeological evidence exists from the U.S. west coast suggesting that right whales were the target of local native hunts. Consequently, the few records from this region are considered to represent vagrants. We have determined the range of the North Pacific right whale extends over a broad area of the North Pacific Ocean as depicted in Figure 1. BILLING CODE 3510-22-S EP27DE06.114 BILLING CODE 3510-22-C Listing Determinations Under the ESA The ESA defines an endangered species as one that is in danger of extinction throughout all or a significant portion of its range, and a threatened species as one that is likely to become endangered in the foreseeable future throughout all or a significant portion of its range (sections 3(6) and 3(20), respectively). The statute requires us to determine whether any species is endangered or threatened because of any one of the following five factors:
(1)the present or threatened destruction, modification or curtailment of its habitat or range;
(2)overutilization for commercial, recreational, scientific, or educational purposes;
(3)disease or predation;
(4)the inadequacy of existing regulatory mechanisms; or
(5)other natural or manmade factors affecting its continued existence (section 4(a)(1)(A)-(E)). We are to make this determination based solely on the best available scientific information after conducting a review of the status of the species and taking into account any efforts being made by states or foreign governments to protect the species. The focus of our evaluation of the ESA section 4(a)(1) factors is to evaluate whether and to what extent a given factor represents a threat to the future survival of the species. The focus of our consideration of protective efforts is to evaluate whether and to what extent they address the identified threats and so ameliorate a species' risk of extinction. The steps we follow in implementing this statutory scheme are to:
(1)delineate the species under consideration; (2)review the status of the species;
(3)consider the ESA section 4 (a)(1) factors to identify threats facing the species;
(4)assess whether certain protective efforts mitigate these threats; and
(5)predict the species' future persistence. Review of “Species” Delineation Since 1974, NMFS has maintained the right whale listing as originally listed by the United States Fish and Wildlife Service (USFWS) under the Endangered Species Conservation Act of 1969, the precursor to the Endangered Species Act of 1973 (16 U.S.C. 1531 *et seq.* ; the ESA)(35 FR 18319, December 2, 1970)— *Eubalaena* spp., i.e., all the species within the genus *Eubalaena* . The USFWS maintains the official lists of threatened and endangered species and is required to add species to the official lists when NMFS or USFWS determines species under itsjurisdiction should be listed. The USFWS has changed the nomenclature for right whales several times over the years in various iterations of the list of threatened and endangered wildlife. NMFS also changed the nomenclature for a period of time after one of the USFWS changes, butlater reverted back to the original Eubalaena spp. listing. The changes may have been made as a reflection of the discussion in the scientific literature over the appropriate taxonomic status of right whales. At no point did the USFWS ever propose delisting any of the species that were included in the original listing of *Eubalaena* spp. Regardless of the changes to the list, NMFS maintains that right whale species were listed as *Eubalaena* spp., which reflects the predominant view that existed in 1974: that right whale species are distinct from bowhead whales ( *Balaena mysticetus* ), they belong in the genus *Eubalaena* , and the genus *Eubalaena* contains at least two species: *E. glacialis* in the northern hemisphere and *E. australis* in the southern hemisphere. Recent investigations of right whale genetics confirm the distinction between *E. glacialis* and *E. australis* at the species level and suggest that the North Pacific form of *E. glacialis* should be recognized as a separate species and named *E. japonica* , distinct from the other two species. NMFS is proposing to adopt this view and, in a separate rulemaking, to modify its listing to add *E. japonica* to the current listing *Eubalaena* spp. (which includes *E. glacialis* and *E. australis* ). Taxonomy of Right Whales All whales belong to the mammalian order Cetacea, which is divided into two suborders: Odontoceti (toothed whales) and Mysticeti (baleen whales). The Mysticeti are further divided into four families: the Eschrichtidae, a monotypic family (i.e., containing only one species), the gray whale; Neobalaenidae, another monotypic family containing only the pygmy right whale;Balaenidae, which contains two genera: *Balaena* (bowhead whales) and *Eubalaena* (right whales); and Balaenopteridae, which contains all of the other baleen whales. *Balaena* is the genus name for the bowhead whale ( *Balaena mysticetus* ), recognized byLinnaeus in 1758. *Eubalaena* is the genus name for right whales, first proposed by Gray in 1864. The first right whale to be named was what we today call the North Atlantic right whale or Nord-Kaper (Balaena glacialis, Muller, 1776), from North Cape, Norway. The second right whale to be named was what we today call the North Pacific right whale ( *Balaena japonica* , Lacepede,1818), from Japan. And the third right whale to be named was what we today call the Southern right whale ( *Balaena australis* , Desmoulins, 1822), from Algoa Bay, Cape of Good Hope, South Africa. In the 1970s when all baleen whales were being considered for listing as endangered under the Endangered Species Conservation Act of 1969, authors disagreed on the taxonomic status of right whales. One view was that they belonged in the genus Balaena along with bowhead whales and that the genus contains two species: Baleana mysticetus and Baleana glacialis (Rice, 1977). The subspecific composition of B. glacialis was unclear. The other view was that right whales were distinct from bowhead whales at the genus level and that right whales should be identified as Eubalaena (Schevill, 1986). This later view is currently the prevailing view, and it is the view embraced by USFWS and NMFS. There were also two views about the species composition of *Eubalaena* . One view was that there was only one species *Eubalaena glacialis* containing several subspecies ( *E. glacialis glacialis* (North Atlantic), *E. glacialis sieboldii* (North Pacific), and E. glacialis australis (Southern oceans)) (Tomilin, 1957). Hershkovitz
(1966)also describes these three subspecies,except that he refers to North Pacific right whales as E. glacialis japonica. The other view was that Eubalaena comprised two species *E. glacialis* and *E. australis* (Omura, 1958; Omura *et al.* ,1969). This is the view represented by the designation of *Eubalaena* spp. in the original listing by USFWS in 1970 and by NMFS in its first listing in 1974. Generally accepted taxonomic nomenclature recognized the term “spp.” as an abbreviation for multiple species within a genus. The two-species view is summarized by Perry *et al.* 's
(1999)summary of morphological (Muller, 1954) and genetic data (Schaeff et al., 1991), both of which recognized distinct species in the northern and southern hemispheres. Cummings
(1985)used E. australis for all right whales below the equator (southern right whales). The International Whaling Commission also recognizes the presence of two distinct species, E. glacialis and E. australis, in the schedule appended to the Convention in which species under purview of the Commission are listed. Conclusion Although the listing of right whales has changed from the original nomenclature of *Eubalaena* spp., there is no indication in the record that USFWS ever intended to delist any of the species contained in the original listing of the entire genus. Since the original 1970 listing was described as “Eubalaena spp.”, the logical interpretation is that at least two species of right whale were listed, the northern right whale ( *E. glacialis* ) and the southern right whale ( *E. australis* ), since “spp.” refers to more than one species, not “subspecies.” Even if three separate species had been recognized in 1970, southern right whale ( *E. australis* ) would have been one of them. Each plausible scenario results in the right whale in the Southern Hemisphere being recognized as a separate species. Since NMFS has maintained its listing as “Right whales, Eubalaena spp.”, and USFWS has never proposed delisting any of the species included in the original listing, we conclude that both *E. glacialis* and *E. australis* were listed in 1970, carried forward to the list created pursuant to the ESA, and determined to be endangered in our listing in 1974. Right Whale Species Currently Being Considered for Listing Genetic data now provide unequivocal support to distinguish three right whale lineages as separate phylogenetic species:
(1)the North Atlantic right whale ( *Eubalaena glacialis* ), ranging in the North Atlantic Ocean;
(2)the North Pacific right whale ( *Eubalaena japonica* ), ranging in the North Pacific Ocean, and
(3)the southern right whale ( *Eubalaena australis* ), historically ranging throughout the southern hemisphere's Oceans (Rosenbaum *et al.* , 2000). Based on evidence from recent genetic studies (Gaines *et al.* , 2005), we conclude that the current taxonomic classification of right whales in the northern hemisphere should be revised consistent with the generally accepted analyses by Rosenbaum *et al.* (2000). We have determined that listing right whales in the North Atlantic and the North Pacific as two separate species is warranted in light of the compelling evidence provided by recent scientific studies on right whale taxonomy and classification. In accordance with the applicable statutory definitions and requirements, the North Atlantic right whale ( *E. glacialis* ) and the North Pacific right whale ( *E. japonica* ) are being considered for listing as separate species under the ESA. Refining the taxonomy of these endangered cetaceans is critical to the recovery planning and conservation of these species. The separate listings of these two species in the northern hemisphere will allow for consistent scientific practice and management policies in recovering these species. Status of the Three Right Whale Species The determination that right whales in the North Atlantic and North Pacific Oceans are two separate species requires us to consider these species separately for the purposes of listing under the ESA. We will consider the status of the North Pacific right whale ( *E. japonica* ) in this proposed rule and that of the North Atlantic right whale ( *E. glacialis* ) in a separate proposed rule in today's issue of the **Federal Register** . At the final rule stage, we will address both species in the same rule so that any changes become effective together. The southern right whale, *E. australis* , will remain listed as endangered, though we intend to conduct a 5-year review of its status in the near future. In the following discussion of the status of the North Pacific right whale, E. japonica, we provide the rationale for today's proposal to list this species as a separate endangered species. The other proposed rule in today's issue of the **Federal Register** provides the rationale for this proposal to list the North Atlantic right whale, *E. glacialis* , as a separate endangered species. We also identify the southern right whale, *E. australis* (one of two species that was listed in 1970 and is still listed) in the regulatory language as a separate endangered species and remove *Eubalaena* spp. from the list. Status of the North Pacific Right Whale ( *Eubalaena japonica* ) Abundance and Trends The basic life history parameters and census data, including population abundance, growth rate, age structure, breeding ages, and distribution, remain undetermined for North Pacific right whale. To date, the largest number of North Pacific right whale individuals identified in the eastern Bering Sea is 23 (based on genetic sampling), while abundance in the western North Pacific appears to number fewer than 1,000 individuals (with a minimum estimate near 400). Abundance estimates and other vital rate indices in both the eastern and western North Pacific are not well established. Where such estimates exist, they have very wide confidence limits. Life History Characteristics Although there are no data for the North Pacific, studies of other right whale populations suggest calving intervals of 3-6 years, lifespans of up to 70 years, and growth rates that are likely dependent on feeding success (Reynolds *et al.* , 2002; Kenney, 2002). Long-lived organisms have limited abilities to respond to chronic increases in juvenile mortality and even lesser abilities to respond to increased mortality through commercial harvest of juveniles and adults (Congdon *et al.* , 1993). Life history characteristics such as low reproductive rates, delayed sexual maturity, and reliance on high juvenile survivorship make long-lived species such as whales particularly vulnerable to overexploitation. This likely explains the paucity of sightings in the North Pacific following the illegal kills by Soviet whalers in the 1960s. The effects of past commercial and illegal harvests persist. These removals remain an obstacle to the recovery of the North Pacific right whale, despite the cessation of such whaling. Distorted Age, Size or Structure of the Population, and Reduced Reproductive Success To date, photogrammetric data in the Bering Sea have been collected primarily for adult animals (LeDuc *et al.* , 2001). Of the 12 whales for which lengths were determined (range: 14.7-17.6m), none were smaller than the smallest length estimate for sexually mature right whales (13-16m: Kenney, 2002). Length measurements for two whales observed off California suggestat least one of these whales was not yet sexually mature (12.6m: Carretta et al., 1994). The presence of two calves during the 2004 season in the Bering Sea (Wade *et al.* , 2006) is encouraging. However, to date, there is no evidence of reproductive success (i.e., young reared to independence) in the eastern North Pacific. No data are available for the western North Pacific. Genetic Diversity The Allee effect has been defined as the impact of reduced social interactions and loss of mating opportunities in a small population. Marine mammal populations with an effective population size of a few dozen individuals are usually sufficiently large to avoid most of the deleterious consequences of inbreeding (Lande, 1991). Theoretically, during a rapid decline in population size, nearly all (i.e., >95 percent) of the diversity in a population is maintained in an effective population of 10 individuals, and more than 99 percent of the diversity in a population is maintained in an effective population of 50 individuals (Ralls et al., 1983). However, it has been suggested that if the number of reproductive animals is fewer than 50, the potential for impacts associated with inbreeding depression increases substantially (IUCN, 2003). In 2002, the ratio of right whale females to males biopsied in the Bering Sea was 1:9. In 2004, biopsy results indicated a ratio of 7:16. Excluding the two male calves from the sample and assuming all other whales were adults, a 1:2 ratio of females to males can be estimated, with a possible effective abundance of 21. Although there is some evidence of mating success among North Pacific right whales, the extent of reproductive success has not been quantified. Habitat Specificity or Site Fidelity Other large whale populations such as humpback whales ( *Megaptera novaeangliae* ) appear to use common breeding grounds with a “maternally directed site-fidelity to specific feeding grounds” (Baker et al., 1990, 1994; Palsb ll et al., 1995, 1997; Larsen et al., 1996). Genetic sampling revealed similar patterns in western North Atlantic right whales ( *E. glacialis* ), indicating this population probably occupies a single breeding area but segregates into distinct,maternally-linked subpopulations during migration to isolated nursery areas (Schaeff et al., 1993). There is some suggestion of site fidelity among right whales found in the Bering Sea. Of the whales observed between 1997 and 2004, at least five were photographed and five were biopsied over multiple years. It is possible that similar site fidelity is occurring in the western North Pacific. It is not known where these animals overwinter, nor if they share a common wintering area. This is a critical gap in understanding dynamics of right whales in the North Pacific Ocean. Summary of Factors Affecting the North Pacific Right Whale Section 4(a)(1) of the ESA and the listing regulations (50 CFR part 424) set forth procedures for listing species. We must determine, through the regulatory process, if a species is endangered or threatened because of any one or a combination of the following factors:
(1)the present or threatened destruction, modification, or curtailment of its habitat or range;
(2)overutilization for commercial, recreational, scientific, or educational purposes;
(3)disease or predation;
(4)the inadequacy of existing regulatory mechanisms; and
(5)other natural or manmade factors affecting its continued existence. A discussion of these considerations follows: The Present or Threatened Destruction, Modification, or Curtailment of Habitat or Range One potential source of habitat degradation for baleen whales is spilled oil. Data on the effects of oil pollution on cetaceans are inconclusive (Geraci, 1990; Loughlin, 1994). However, general concerns with regard to oil pollution, some of which are direct impacts on the whales rather than habitat impacts, are ingestion of contaminated prey, potential irritation of skin and eyes, inhalation of toxic fumes, and abandonment of polluted feeding habitat (Geraci and St. Aubin, 1980; Geraci, 1990). Although there is currently no oil exploration or production underway in known right whale habitat in offshore areas of the Bering Sea or Gulf of Alaska, and limited activity elsewhere in the species' range, the possibility remains that there will be lease sales in these areas in the future. Furthermore, large amounts of oil are transported by ship along the western North American coast through areas that have been used by right whales in the past, and where they have been occasionally seen recently (Brownell et al., 2001). The Minerals Management Service
(MMS)has proposed an Outer Continental Shelf
(OCS)leasing for conducting lease sales for the North Aleutian Basin (in the southeast Bering Sea) in 2010 and 2012. This planning area is presently under a moratorium from OCS leasing by Presidential Executive Order. It is unknown whether the moratorium may be lifted or to what extent these activities may disturb or otherwise affect right whales. In addition to oil and gas exploration and development, undersea exploration and development of mineral deposits may affect the habitat of the North Pacific right whale. Development of oil fields off the Sakhalin Islands is also occurring within habitat of the western North Pacific population of the North Pacific right whale. The effect on habitat of shipping or oil and gas development is unclear. Right whale life history characteristics make them very slow to adapt to rapid changes in their habitat (Reynolds *et al.* ., 2002). They are also feeding specialists that require exceptionally high densities of their prey (Baumgartner and Mate, 2003; Baumgartner *et al.* , 2003). Zooplankton abundance and density in the Bering Sea has been shown to be highly variable, affected by climate, weather, and ocean processes and in particular ice extent (Napp and Hunt, 2001; Baier and Napp, 2003). The largest concentrations of copepods occurred in years with the greatest southern extent of sea ice (Baier and Napp, 2003). It is possible that changes in ice extent, density, and persistence may alter the dynamics of the Bering Sea shelf zooplankton community and in turn affect the foraging behavior and success of right whales. No data are available for the western North Pacific. Chemical contaminants are an additional potential source of habitat degradation for right whales. The direct impact of chemical contaminants on right whales is uncertain. O'Shea and Brownell
(1994)conclude that there is currently no evidence for significant contaminant-related problems in baleen whales. Although additional research is needed, existing data on mysticetes indicate that the lower trophic levels at which these animals feed should result in smaller contaminant burdens than would be expected in many odontocetes, which typically show burdens that differ from those of baleen whales by an order of magnitude (O'Shea and Brownell, 1994). However, the manner in which pollutants negatively impact animals is complex and difficult to study, particularly in taxa (such as large whales) for which many of the key variables and pathways are unknown (Aguilar, 1987; O'Shea and Brownell, 1994). The trans-generational accumulation of contaminants (Colborn and Smolen, 1996) is perhaps a more likely source for concern, but this remains unstudied in right whales or any other cetacean. Overutilization for Commercial, Recreational, Scientific, or Educational Purposes North Pacific right whales were heavily exploited by commercial whalers during the 19th and 20th centuries. The IWC estimates 15,451 right whales were taken in the North Pacific between 1840 and 1909 (Brownell et al., 1986). There were 741 recorded catches of right whales in the North Pacific in the 20th century (411 in the eastern unit and 330 in the western unit)(Brownell et al., 2001). According to Estes
(1979)and Congdon et al. (1993), long-lived organisms have limited abilities to respond to chronic increases in juvenile mortality and even less ability to respond to increased mortality through commercial hunting of juveniles and adults. Life history characteristics such as low reproductive rates, delayed sexual maturity, and reliance on high juvenile survivorship make long-lived species such as whales particularly vulnerable to overexploitation. Commercial whaling very likely reduced the genetic variability of the North Pacific right whale. The small, remnant populations that survived commercial whaling likely lost genetic variability because of genetic drift and inbreeding, further confounding conservation and recovery efforts. Currently, the IWC has assigned “Protected Stock” status to all stocks of right whales (IWC, 1995). The catch quota for these whales is therefore set at zero for all signatory nations at the IWC. The Soviet Union killed right whales illegally for commercial purposes in the Okhotsk Sea/Kuril Islands (reported as “hundreds” by Yablokov (1994), although this is known to include bowhead whales). Furthermore, the Soviets killed 372 right whales in the eastern North Pacific(notably in the Bering Sea and Gulf of Alaska) in the 1960s (Doroshenko, 2000). These catches presumably occurred primarily during summer. Right whales were historically hunted by native peoples along the Northwest Pacific coast and in the Aleutian Islands, although the level of such take was probably insignificant. We have no information on aboriginal harvests for the western North Pacific. However, given the current status of this species, the North Pacific right whale could not tolerate even a very low level of commercial or aboriginal hunt. While no hunting currently occurs on North Pacific right whales, the impact from historical commercial harvest persists and likely presents a threat to the recovery of the species throughout all of its range. These removals are the primary causative factor for the decline of the North Pacific right whale, and the North Pacific right whale is in danger of extinction throughout its range because of historical and more recent whaling. There are no known recreational or educational uses of North Pacific right whales. However, if a right whale were to be seen in a highly accessible area, such as near the coast of California, there could be a large response from whale watching operations trying to observe the whale. Scientific studies of right whales may involve close approaches to the animals for the purpose of photographs, genetic sampling, or tagging. These activities are controlled by permits in both U.S. and Canadian waters, and potential negative impact on the animals is considered in the permitting process. While the potential for disturbance or harassment exists for scientific research, the overall impact from this activity on North Pacific right whales is likely minimal, and the information gained in this research may play a critical role in helping manage and recover the species. Disease or Predation Disease and predation are not believed to be factors causing the North Pacific right whale to be in danger of extinction. Very little is known about disease in, or predation on, North Pacific right whales. There have been no recorded epizootics in baleen whales. Reeves et al.
(2001)presented the results of a workshop on right whale reproduction, which considered five possible factors including disease as explanations for the decline in North Atlantic right whales. The information reviewed and summarized, along with associated caveats at this NMFS workshop, are likely applicable to other balaenids (Reeves et al., 2001). The only four known cases of mass mortalities of baleen whales involved humpback whales ( *Megaptera novaeangliae* ) in the Northeast United States in 1987-1988, 2003, 2005, and 2006. Geraci et al.
(1989)provide strong evidence that, in the former case, these deaths resulted from consumption of mackerel whose livers contained high levels of saxitoxin, a naturally occurring red-tide toxin originating with dinoflagellate ( *Alexandrium* spp). It has been suggested that red tide phenomena are related to increased freshwater runoff from coastal development, leading some observers to suggest that such events may become more common among marine mammals as coastal development increases. There is currently no evidence linking red tide toxins to deaths or chronic health problems in North Pacific right whales. It is not known whether right whales suffer from stress-induced bacterial infections similar to those observed in captive cetaceans (Buck et al., 1987). Studies of bowhead whales killed in the Alaskan native hunt have provided information on bacterial, mycotic, and viral infections, but not on the level to which they contribute to mortality and morbidity (Philo et al.,1993). Skin lesions, found on all the hunted bowhead whales, were not malignant or contagious. However, potentially pathogenic microorganisms inhabit these lesions and may contribute to epidermal necrosis and the spread of disease (Shotts et al., 1990). Exposure of these roughened areas of skin to environmental contaminants, such as petroleum products, could have significant effects (Albert, 1981; Shotts et al., 1990); however, Bratton et al.(1993) concluded that such encounters were not likely to be hazardous. The occurrence of skin lesions on North Atlantic right whales has been documented in recent years (Marx et al., 1999; Pettis et al., 2004). The origins and significance of these lesions are unknown, and further research is required to determine whether they represent a topical or systemic health problem for the affected animals.The system developed by Pettis et al.
(2004)to assess health and body condition of North Atlantic right whales is currently being applied to photographs of North Pacific right whales. Predation of right whales by killer whales and large shark species is likely to occur, but the level is not documented, and no attacks have been observed. North Atlantic right whales bearing scars from killer whale, *Orcinus orca* , attacks have been photographed (Kraus, 1990), but the number of whales killed by this predator is unknown (Perry et al., 1999). More recently, Mehta
(2004)concluded that scars recorded on the flukes and bodies of North Atlantic right whales are more consistent with harassment by some smaller cetacean, possibly pilot whales, *Globicephala* spp., and do not originate from killer whales. Of 195 bowhead whales examined during the Alaskan subsistence hunt (1976-92), 8 had been wounded by killer whales (George et al., 1994). Seven of the eight bowhead whales were greater than 13 m in length, suggesting either that scars are accumulated over time, or young animals do not survive a killer whale attack. Hunters on St. Lawrence Island reported two small (<9 m) bowhead whales found dead as a result of killer whale attacks (George et al., 1994). Bowhead whales are pagophilic (“ice-loving”), unlike right whales, and ice-covered waters may provide some protection from killer whale attacks. The frequency of attacks is unknown, and killer whale distribution in the North Pacific has not been well documented (George et al., 1994). The Inadequacy of Existing Regulatory Mechanisms Right whales are protected under both U.S. and Canadian law, and internationally by the IWC. At present, there is no information to indicate that existing regulatory mechanisms are inadequate, resulting in activities having adverse effects on North Pacific right whales. If additional studies reveal that significant impacts are occurring, it may be necessary to enhance existing laws or promulgate new regulations to reduce or eliminate these threats. Other Natural or Manmade Factors Affecting its Continued Existence *Vessel Collisions* -The role vessel interactions play in the mortality of North Pacific right whales is not known. In the North Atlantic, ship collisions and fishing gear entanglements are the most common direct known causes of mortality in North Atlantic right whales (Kraus, 1990;Knowlton and Kraus, 1998; Gillespie and Leaper, 2001), but little is known of the nature or extent of this problem in the North Pacific, and no collisions have been recorded. The area where right whales have been seen in recent surveys is not in a major vessel traffic lane. However, the proximity of the other known right whale habitats to shipping lanes (e.g., Unimak Pass) suggests that collisions with vessels may represent a threat to North Pacific right whales. Because of the rarity of right whales, the impact to the species from even low levels of interaction could be significant. *Fisheries Interactions* -The eastern Bering Sea supports extensive fisheries, and, therefore, fishery interactions with right whales are possible. Types of gear that most frequently entangle North Atlantic right whales include pots and gillnets. Gillnet fisheries in the eastern Bering Sea occur in nearshore waters (state waters) not associated and generally not overlapping with known North Pacific right whale distribution. Pot fisheries occur in offshore waters, though they are often prosecuted during seasons when right whales are not known to be present (i.e., winter). Entanglements of North Pacific right whales in fishing gear appear to be uncommon; though this may be due to the very low numbers of whales influencing the probability of encounter. Perry et al.
(1999)reported two fishery-related mortalities due to entanglement in fishing gear from Russian waters (Kornev, 1994; NMFS, 1991). On review of the original records in the Platforms of Opportunity Program database, one of the encounters was actually a sighting and not an entanglement. Therefore, only one case of entanglement is known from the western North Pacific (Brownell et al., 2001), though the occurrence of right whales near pot fisheries in the Bering Sea creates a potential for interactions and, as with vessel collisions, the direct impact from even low levels of interaction could be significant. Several cases of entanglements of bowhead whales have been recorded during the Alaska Native subsistence hunt (Philo et al., 1992). These reports included three bowheads killed in the hunt with scars attributed to rope entanglements, one bowhead found dead entangled in ropes similar to those used with fishing gear in the Bering Sea, and one bowhead with ropes on it that were attributed to rigging from a commercial offshore fishing pot, most likely a crab pot. There have been two other recent reports of bowheads with gear attached or marks that likely were from crab gear (J. C. George, North Slope Borough, Barrow, AK, pers. comm.). Aerial photographs in at least two cases have shown ropes trailing from the mouths of bowheads (NMFS, NMML, unpublished data). A similar review of photographs of North Pacific right whales is planned. Injuries and entanglements that are not initially lethal may result in a gradual weakening of entangled individuals, making them more vulnerable to some other direct cause of mortality(Kenney and Kraus, 1993). Entanglement-related stress may decrease an individual's reproductive success or reduce its life span, which may in turn depress population growth. Studies of scarring rates have been conducted in the North Atlantic to determine the frequency of right whale entanglements with fishing gear (Kraus, 1990; Hamilton et al., 1998b). Studies of scarring rates among North Pacific right whales would be difficult due to the extreme rarity of this species, but may provide significant insight into the extent of this problem in the North Pacific Ocean. *Noise* -Noise pollution may also have an impact on critical behaviors of marine mammals (e.g., foraging, mating, nursing), although the effect is unclear. Richardson et al.
(1995)provides a review of the impacts of noise on marine mammals. It is unclear whether activities, such as oil exploration and development and shipping, adversely affect critical behaviors such as reproductive success, population productivity, and feeding activity. Some observations suggest that marine mammals can habituate to high levels of sound (Geraci and St. Aubin, 1980). However, playback experiments on gray and bowhead whales indicate these whales actively avoid very loud sources of noise (Malme et al., 1983). While certain species of large whales have shown behavioral changes in response to anthropogenic noise in the marine environment, there have been few studies of the effects of anthropogenic noise on right whales specifically. In right whales, the level of sensitivity to noise disturbance and vessel activity appears related to the behavior and activity in which they are engaged at the time (Watkins, 1986; Mayo, Watkins, and Kraus pers. comm., as cited in NMFS, 1991; Kraus and Mayo, unpubl. data as cited in NMFS, 1991). In particular, feeding or courting right whales may be relatively unresponsive to loud sounds and, therefore, slow to react to approaching vessels or even oblivious to them. In general, the impact of noise from shipping or industrial activities on the communication, behavior, and distribution of right whales remains unknown. Conservation Efforts When considering the listing of a species, section 4 (b)(1)(A) of the ESA requires consideration of efforts by any State, foreign nation, or political subdivision of a State or foreign nation to protect such species. Such efforts would include measures by Native tribes and organizations, local governments, and private organizations. Also, Federal, tribal, state, and foreign recovery actions (16 U.S.C. 1533(f)), Federal consultation requirements (16 U.S.C. 1536), and prohibitions on taking (16 U.S.C. 1538) constitute conservation measures. On March 28, 2003, we and USFWS (the Services) published the final policy for evaluating conservation efforts (PECE)(68 FR 15100). The PECE provides guidance on evaluating current protective efforts identified in conservation agreements, conservation plans, management plans, or similar documents (developed by Federal agencies, state and local governments, tribal governments, businesses, organizations, and individuals) that have not yet been implemented, or have been implemented but have not yet demonstrated effectiveness. The PECE establishes two basic criteria for evaluating current conservation efforts:
(1)the certainty that the conservation efforts will be implemented, and
(2)the certainty that the efforts will be effective. The PECE provides specific factors under these two basic criteria that direct the analysis of adequacy and efficacy of existing conservation efforts. North Pacific right whales benefit from protections afforded by the MMPA and the ESA (by virtue of their current inclusion as part of the endangered northern right whale). Also, the Marine Conservation Alliance, with support from NMFS, has developed an outreach program and informational brochures to be distributed throughout the commercial fishing industry to alert fishermen to the presence of right whales, and to take proactive measures to avoid interaction. This Alliance is also coordinating with commercial shipping interests to extend this network so that it might reach the commercial cargo vessels that transit the North Pacific. The effectiveness of such voluntary measures has not been determined. The Canadian Department of Fisheries and Oceans has prepared a draft National Recovery Strategy for the North Pacific right whale ( *E. japonica* ) in Canadian waters in the Pacific Ocean. At this time the document has not been finalized. Except for the IWC hunting ban noted above, we are not aware of any other conservation efforts undertaken by foreign nations specifically to protect North Pacific right whales. We support the conservation efforts currently in effect; however, these efforts lack certainty of implementation and effectiveness. In developing our final listing determination, we will consider the best available information concerning these conservation efforts and any other protective efforts for which we have information. Proposed Listing Determination We have reviewed the status of the North Pacific right whale, considered the factors set forth in section 4 (a)(1) of the ESA, and taken into account any conservation efforts to protect the species. We conclude that the North Pacific right whale should be listed as an endangered species under the ESA because it is in danger of extinction throughout all of its range because of:(1) overutilization for commercial, recreational, scientific or educational purposes; and
(2)other natural and manmade factors affecting its continued existence (see above for a description of these section 4 (a)(1) factors). This endangered determination is also supported by the fact that the factors confounding recovery have not been thoroughly identified and may continue to persist until more is known, and corrective actions can be taken. We also conclude that, at present, no protective or conservation measures are in place that substantially mitigate the factors affecting the future viability of this species. Based on the best available information, we propose to list the North Pacific right whale under the ESA as an endangered species. Prohibitions and Protective Measures Section 9 of the ESA prohibits certain activities that directly or indirectly affect endangered species. These prohibitions apply to all individuals, organizations, and agencies subject to U.S. jurisdiction. Sections 7(a)(2) and
(4)of the ESA require Federal agencies to consult with us to ensure that activities they authorize, fund, or conduct are not likely to jeopardize the continued existence of a listed species or a species proposed for listing, or to destroy or adversely modify critical habitat or proposed critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into consultation with us. Examples of Federal actions that may affect the North Pacific right whale include oil and gas development, seismic exploration, emerging chemical contaminant practices, vessel operations, and fishery management practices. Sections 10(a)(1)(A) and
(B)of the ESA authorize us to grant exceptions to the ESA's Section 9 ''take'' prohibitions. Section 10(a)(1)(A) scientific research and enhancement permits may be issued to entities (Federal and non-federal) for scientific purposes or to enhance the propagation or survival of a listed species. The type of activities potentially requiring a section 10(a)(1)(A) research/enhancement permit include scientific research that targets North Pacific right whales. Under section 10(a)(1)(B), the Secretary may permit takings otherwise prohibited by section 9(a)(1)(B) if such taking is incidental to, and not the purpose of, the carrying out of an otherwise lawful activity. NMFS Policies on Endangered and Threatened Fish and Wildlife On July 1, 1994, we and FWS published a series of policies regarding listings under the ESA, including a policy for peer review of scientific data (59 FR 34270) and a policy to identify, to the maximum extent possible, those activities that would or would not constitute a violation of section 9 of the ESA (59 FR 34272). Role of Peer Review The intent of the peer review policy is to ensure that listings are based on the best scientific and commercial data available. Prior to a final listing, we will solicit the expert opinions of three qualified specialists, concurrent with the public comment period. Independent specialists will be selected from the academic and scientific community, Federal and state agencies, and the private sector. Identification of Those Activities That Would Constitute a Violation of Section 9 of the ESA The intent of this policy is to increase public awareness of the effect of our ESA listing on proposed and ongoing activities within the species' range. We will identify, to the extent known at the time of the final rule, specific activities that will be considered likely to result in violation of section 9, as well as activities that will not be considered likely to result in violation. Activities that we believe could result in violation of section 9 prohibitions against “take” of the North Atlantic right whale include, but are not limited to, the following:
(1)Operating vessels in a manner that results in ship strikes or disrupts foraging, resting, or care for young;
(2)fishing practices that can result in entanglement when lines, nets, or other gear are placed in the water column;
(4)discharging or dumping toxic chemicals or other pollutants into areas used by North Pacific right whales;
(5)scientific research activities;
(6)Land/water use or fishing practices that result in reduced availability of prey species during periods when North Pacific right whales are present. We believe, based on the best available information, the following actions will not result in a violation of Section 9:
(1)federally funded or approved projects for which ESA section 7 consultation has been completed, and that are conducted in accordance with any terms and conditions we provide in an incidental take statement accompanying a biological opinion; and
(2)takes of North Pacific right whales that have been authorized by NMFS pursuant to section 10 of the ESA. These lists are not exhaustive. They are intended to provide some examples of the types of activities that we might or might not consider as constituting a take of North Pacific right whales. Critical Habitat Section 4(a)(3)(A) of the ESA requires that, to the maximum extent prudent and determinable, critical habitat be designated concurrently with the final listing of a species under the ESA. Critical habitat has previously been designated for the Northern right whale in the North Pacific Ocean (71 FR 38277; July 6, 2006). The designation of the North Pacific right whale as a new species under the ESA necessitates the designation of critical habitat, replacing that previously designated. We intend to propose designation of critical habitat for the North Pacific right whale in a separate rulemaking. Public Comments To ensure that final action resulting from this proposed rule will be as accurate and effective as possible and be based upon the best available scientific and commercial information, we solicit comment from the public, other governmental agencies, the scientific community, industry, and any other interested parties. 50 CFR 424.16(c)(3) requires the Secretary of Commerce to promptly hold at least one public hearing if any person requests one within 45 days of publication of a proposed regulation to list a species under the ESA. Requests for public hearing must be made in writing (see DATES and ADDRESSES ). Such hearings provide the opportunity for interested individuals and parties to give comments, exchange information and opinions, and engage in a constructive dialogue concerning this proposed rule. We encourage the public's involvement in such ESA matters. Classification National Environmental Policy Act The 1982 amendments to the ESA, in section 4(b)(1)(A), restrict the information that may be considered when assessing species for listing to the best scientific and commercial data available. Based on this limitation of criteria for a listing decision and the opinion in *Pacific Legal Foundation* v. *Andrus* , 675 F 2d 825 (6th Cir.1981), we have concluded that ESA listing actions are not subject to the environmental assessment requirements of the National Environmental Policy Act. (see also NOAA Administrative Order 216-6.) Executive Order (E.O.) 12866, Regulatory Flexibility Act and Paperwork Reduction Act As noted in the Conference Report on the 1982 amendments to the ESA, economic impacts cannot be considered when assessing the status of a species. Therefore, the economic analysis requirements of the Regulatory Flexibility Act are not applicable to the listing process. In addition, this rule is exempt from review under E. O. 12866. This proposed rule does not contain a collection-of-information requirement for the purposes of the Paperwork Reduction Act. Federalism E.O. 13132 requires agencies to take into account any federalism impacts of regulations under development. It includes specific consultation directives for situations where a regulation will preempt state law, or impose substantial direct compliance costs on state and local governments (unless required by statute). Neither of these circumstances is applicable to this proposed listing determination. In keeping with the intent of the Administration and Congress to provide continuing and meaningful dialogue on issues of mutual State and Federal interest, this proposed rule will be given to the relevant state agencies in each state in which the North Pacific right whale is believed to occur, who will be invited to comment. Government-to-Government Relationship With Tribes E.O. 13175 The longstanding and distinctive relationship between the Federal and tribal governments is defined by treaties, statutes, executive orders, judicial decisions, and agreements, which differentiate tribal governments from the other entities that deal with, or are affected by, the Federal Government. This relationship has given rise to a special Federal trust responsibility involving the legal responsibilities and obligations of the United States toward Indian Tribes and the application of fiduciary standards of due care with respect to Indian lands, tribal trust resources, and the exercise of tribal rights. E. O. 13175 - Consultation and Coordination with Indian Tribal Governments- outlines the responsibilities of the Federal Government in matters affecting tribal interests. We have determined the proposed listing of the North Pacific right whale would not have tribal implications, nor affect any tribal governments or issues. The North Pacific right whale is not hunted by Alaskan Natives for traditional use or subsistence purposes. References Cited A complete list of all references cited in this rulemaking is available upon request from the NMFS (see ADDRESSES ). List of Subjects in 50 CFR Part 224 Administrative practice and procedure, Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation. Dated: December 20, 2006. Samuel D. Rauch III., Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service. For the reasons set out in the preamble, we propose to amend 50 CFR part 224 as follows: PART 224 ENDANGERED MARINE AND ANADROMOUS SPECIES 1. The authority citation for part 224 continues to read as follows: Authority: 16 U.S.C. 1531-1543 and 16 U.S.C. 1361 *et seq.* 2. Revise § 224.101(b) to read as follows: § 224.101 Enumeration of endangered marine and anadromous species.
(b)*Marine mammals* . Blue whale ( *Balaenoptera musculus* ); Bowhead whale ( *Balaena mysticetus* ); Caribbean monk seal ( *Monachus tropicalis* ); Chinese river dolphin ( *Lipotes vexillifer* ); Cochito ( *Phocoena sinus* ); Fin or finback whale ( *Balaenoptera physalus* ); Hawaiian monk seal ( *Monachus schauinslandi* ); Humpback whale ( *Megaptera novaeangliae* ); Indus River dolphin ( *Platanista minor* ); Mediterranean monk seal ( *Monachus monachus* ); North Pacific right whale ( *Eubalaena japonica* ); Saimaa seal ( *Phoca hispida saimensis* ); Sei whale ( *Balaenoptera borealis* ); Sperm whale ( *Physeter catodon* ); Western North Pacific (Korean) gray whale ( *Eschrichtius robustus* ); Steller sea lion, western population, (Eumetopias jubatus), which consists of Stellar sea lions from breeding colonies located west of 144° W. longitude. [FR Doc. 06-9908 Filed 12-26-06; 8:45 am]
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  • 42 USC 4321-4370f
  • Pub. L. 107-295
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  • 43 CFR 36.10(a)(1)
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  • Pub. L. 105-277
  • Pub. L. 106-31
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  • Pub. L. 104-333
  • 110 Stat. 4240
  • 40 CFR 50
  • 40 CFR 58
  • 375 F.3d 537
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  • 144 F.3d 984
  • 40 CFR 93
  • 40 CFR 93.118(e)(4)
  • 40 CFR 93.118(f)
  • 40 CFR 93.118(f)(1)
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