Unknown. Final Rule

77,417 words·~352 min read·/register/2008/05/28/08-1301

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

--- schema: federal-register doc_type: fedreg source_file: FR-2008-05-28.xml --- 73 103 Wednesday, May 28, 2008 Contents Agriculture Agriculture Department See Animal and Plant Health Inspection Service See Federal Crop Insurance Corporation See Forest Service See Rural Utilities Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, E8-11871 30600-30601 E8-11872 Animal Animal and Plant Health Inspection Service PROPOSED RULES National Poultry Improvement Plan and Auxiliary Provisions, 30528-30543 E8-11739 Centers Centers for Disease Control and Prevention NOTICES Meetings:

National Center for Injury Prevention and Control/Initial Review Group, 30619 E8-11720 Centers Centers for Medicare & Medicaid Services RULES Medicare Program: Medicare Part D Claims Data, 30664-30685 08-1298 Coast Guard Coast Guard RULES Drawbridge Operation Regulations: Sacramento River, Rio Vista, CA, 30480-30481 E8-11862 Safety Zone: Ambrose Light, Offshore Sandy Hook, NJ, Atlantic Ocean, 30483-30485 E8-11868 Edenton 4th of July Celebration Firework Display, Edenton Bay, Edenton, NC, 30481-30483 E8-11867 PROPOSED RULES Safety Zone:

Port of Ponce, Puerto Rico, 30555-30559 E8-11864 Security Zones: Escorted Vessels, Charleston, SC, 30560-30563 E8-11863 Commerce Commerce Department See International Trade Administration See National Oceanic and Atmospheric Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30602-30604 E8-11858 E8-11859 E8-11860 Defense Defense Department See Navy Department RULES TRICARE: Certain Survivors of Deceased Active Duty Members; and Adoption Intermediaries, 30478-30479 E8-11738 NOTICES Federal Acquisition Regulation:

Information Collection; Cost or Pricing Data Requirements and Other Information, 30611-30612 E8-11813 Information Collection; Payment by Electronic Fund Transfer, 30611 E8-11445 Drug Drug Enforcement Administration NOTICES Denial Of Application: Paul H. Volkman, 30630-30644 E8-11851 Education Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30612 E8-11870 Compliance Agreement, 30688-30709 E8-11852 Energy Energy Department See Federal Energy Regulatory Commission EPA Environmental Protection Agency RULES Pesticide Tolerances:

Fluopicolide, 30492-30498 E8-11853 Hexythiazox, 30498-30503 E8-11892 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30614-30617 E8-11856 E8-11865 E8-11888 Meetings: Board of Scientific Counselors, Land Research Program Mid-Cycle Review; Spring 2008, 30617-30618 E8-11874 Executive Executive Office of the President See Presidential Documents Farm Farm Credit Administration RULES Eligibility and Scope of Financing; Processing and Marketing, 30460-30476 E8-11742 FCC Federal Communications Commission PROPOSED RULES Assessment and Collection of Regulatory Fees For 2008 Fiscal Year, 30563-30591 E8-11891 DTV Consumer Education Initiative, 30591-30596 E8-11889 Federal Crop Federal Crop Insurance Corporation NOTICES Funding Opportunity Title:

Crop Insurance Education in Targeted States (Targeted States Program), 30601 E8-11810 Federal Energy Federal Energy Regulatory Commission PROPOSED RULES Revised Public Utility Filing Requirements for Electric Quarterly Reports, 30543-30555 E8-11861 NOTICES Combined Notice of Filings, 30612-30613 E8-11833 Filings: Entergy Services, Inc., 30613 E8-11834 Federal Motor Federal Motor Carrier Safety Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30660-30661 E8-11890 Federal Railroad Federal Railroad Administration NOTICES Adjustment of Nationwide Significant Risk Threshold, 30661-30662 E8-11848 Federal Reserve Federal Reserve System NOTICES Formations of, Acquisitions by, and Mergers of Bank Holding Companies, 30618 E8-11845 Fish Fish and Wildlife Service PROPOSED RULES Endangered and Threatened Wildlife and Plants:

Initiation of Status Review for the Northern Mexican Gartersnake (Thamnophis eques megalops), 30596-30598 E8-11756 Migratory Bird Hunting; Proposed 2008-09 Migratory Game Bird Hunting Regulations, etc., 30712-30722 E8-11583 NOTICES Endangered and Threatened Species Permit Applications, 30623-30625 E8-11835 Meetings: Trinity Adaptive Management Working Group, 30625 E8-11837 Food Food and Drug Administration NOTICES Potential for a Registry of Breast Cancer Treatment Using Thermal Ablation Devices;

Request for Comments, 30619-30621 E8-11899 Forest Forest Service NOTICES Meetings: Federal Lands Recreation Enhancement Act (Title VIII, Pub. L. 108-447), 30601-30602 E8-11621 GSA General Services Administration NOTICES Federal Acquisition Regulation: Information Collection; Cost or Pricing Data Requirements and Other Information, 30611-30612 E8-11813 Information Collection; Payment by Electronic Fund Transfer, 30611 E8-11445 General Services Administration Acquisition Regulation:

Information Collection; Contract Administration, Quality Assurance (GSAR Parts 542 et al.), 30618-30619 E8-11849 Health Health and Human Services Department See Centers for Disease Control and Prevention See Centers for Medicare & Medicaid Services See Food and Drug Administration Homeland Homeland Security Department See Coast Guard See U.S. Citizenship and Immigration Services NOTICES Meetings: Data Privacy and Integrity Advisory Committee, 30621-30622 E8-11875 Interior Interior Department See Fish and Wildlife Service See Minerals Management Service International International Trade Administration NOTICES Postponement of Preliminary Determinations of Antidumping Duty Investigations:

Uncovered Innerspring Units from the People's Republic of China, South Africa, and the Socialist Republic of Vietnam, 30604-30605 E8-11854 Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Sodium Metal from France, 30605-30610 E8-11876 International International Trade Commission NOTICES Hearing: Andean Trade Preference Act; Impact on U.S. Economy and Andean Drug Crop Eradication, 30627-30628 E8-11842 Investigations: Semiconductor Chips With Minimized Chip Package Size And Products Containing Same (IV), 30628-30629 E8-11844 Short Wavelength Semiconductor Lasers And Products Containing Same, 30629-30630 E8-11843 Justice Justice Department See Drug Enforcement Administration NOTICES Lodging of Two Amendments to Consent Decree, 30630 E8-11846 Legal Legal Services Corporation PROPOSED RULES Termination, Limited Reductions in Funding, and Debarment Procedures;

Recompetition; Suspension procedures: Correction, 30563 E8-11873 Merit Merit Systems Protection Board NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30644-30645 E8-11877 Minerals Minerals Management Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30625-30627 E8-11809 NASA National Aeronautics and Space Administration NOTICES Federal Acquisition Regulation: Information Collection; Cost or Pricing Data Requirements and Other Information, 30611-30612 E8-11813 Information Collection;

Payment by Electronic Fund Transfer, 30611 E8-11445 Meetings: NASA Advisory Council; Science Committee; Planetary Science Subcommittee, 30645 E8-11805 National Archives National Archives and Records Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30645-30646 E8-11922 National Credit National Credit Union Administration RULES Technical Amendments, 30476-30478 E8-11736 NOAA National Oceanic and Atmospheric Administration RULES isheries of the Exclusive Economic Zone Off Alaska:

Yellowfin Sole by Vessels Participating in the Amendment 80 Limited Access Fishery in Bycatch Limitation Zone 1 of the Bering Sea and Aleutian Islands, 30524-30525 08-1299 Pacific Halibut Fisheries: Guideline Harvest Levels for the Guided Recreational Halibut Fishery; Correction, 30504 E8-11881 Pacific Halibut Fisheries; guided sport charter vessel fishery, 30504-30524 08-1301 PROPOSED RULES Fisheries of the Exclusive Economic Zone Off Alaska; Improved Retention/Improved Utilization, 30598-30599 E8-11880 NOTICES Endangered Species;

File No. 10037: Issuance of Permit, 30610 E8-11884 Endangered Species; File No. 1595-02: Issuance Of Permit Modification, 30610-30611 E8-11883 Navy Navy Department RULES Certifications and Exemptions under the International Regulations for Preventing Collisions at Sea, 1972, 30479-30480 E8-11836 Nuclear Nuclear Regulatory Commission RULES Administrative Changes: NRC Region IV Address Change and Phone Number and E-mail Address Changes, 30456-30460 E8-11751 NOTICES Environmental Impact Statements;

Availability, etc.: Reclamation of Sequoyah Fuels Corporation Site in Gore, Oklahoma, NUREG-1888, 30646-30647 E8-11869 Meetings; Sunshine Act, 30647-30648 08-1303 Notice of Issuance of Regulatory Guide, 30648 E8-11847 Personnel Personnel Management Office RULES Compensatory Time Off for Travel; Prevailing Rate

(Wage)Employees, 30455-30456 E8-11839 PROPOSED RULES Prevailing Rate Systems: Change in Nonappropriated Fund Federal Wage System Survey Schedule from Fiscal Year to Calendar Year, 30526-30528 E8-11838 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30648-30649 E8-11840 Presidential Presidential Documents PROCLAMATIONS *Special observances:* Prayer for Peace, Memorial Day (Proc. 8260), 30723-30726 08-1306 RUS Rural Utilities Service NOTICES Meetings: Hertford Renewable Energy, LLC; Environmental Assessment, 30602 E8-11812 SEC Securities and Exchange Commission NOTICES Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc., 30649-30655 E8-11832 SBA Small Business Administration NOTICES Disaster Declarations: Arkansas, 30655 E8-11886 Maine, E8-11885 30655-30656 E8-11887 Social Social Security Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30656-30659 E8-11898 State State Department NOTICES Determination on Provision of Assistance for Sudan, 30659 E8-11894 Meetings: FY 2009 Refugee Admissions Program, 30659 E8-11857 Shipping Coordinating Committee, 30659-30660 E8-11895 Surface Surface Transportation Board NOTICES Meetings: Rail Energy Transportation Advisory Committee, 30662 E8-11878 TVA Tennessee Valley Authority NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30660 E8-11830 Transportation Transportation Department See Federal Motor Carrier Safety Administration See Federal Railroad Administration See Surface Transportation Board Treasury Treasury Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30662 E8-11818 MISSING FOR: U.S. Citizenship and Immigration Services U.S. Citizenship and Immigration Services NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 30622-30623 E8-11819 Submission of Revised Form I-821, Application for Temporary Protected Status, 30623 E8-11816 Veterans Veterans Affairs Department RULES Disease Subject to Presumptive Service Connection; Correction, 30485 E8-11725 Survivors’ and Dependents’ Educational Assistance Program; Period of Eligibility for Eligible Children and Other Miscellaneous Issues, 30486-30492 E8-11726 Separate Parts In This Issue Part II Health and Human Services Department, Centers for Medicare & Medicaid Services, 30664-30685 08-1298 Part III Education Department, 30688-30709 E8-11852 Part IV Interior Department, Fish and Wildlife Service, 30712-30722 E8-11583 Part V Executive Office of the President, Presidential Documents, 30723-30726 08-1306 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws. To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 73 103 Wednesday, May 28, 2008 Rules and Regulations OFFICE OF PERSONNEL MANAGEMENT 5 CFR Part 550 RIN 3206-AL52 Compensatory Time Off for Travel; Prevailing Rate

(Wage)Employees AGENCY: U.S. Office of Personnel Management. ACTION: Final Rule. SUMMARY: The U.S. Office of Personnel Management is issuing final regulations to implement a provision of the National Defense Authorization Act for Fiscal Year 2008 permitting prevailing rate

(wage)employees to earn compensatory time off for time spent in a travel status away from the official duty station when such time is not otherwise compensable. DATES: The regulations are effective May 28, 2008. FOR FURTHER INFORMATION CONTACT: Gene Holson by telephone at

(202)606-2858; by fax at

(202)606-0824; or by email at *pay-performance-policy@opm.gov.* SUPPLEMENTARY INFORMATION: The U.S. Office of Personnel Management

(OPM)is issuing final regulations to implement section 1111 of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-181, January 28, 2008), hereafter referred to as “the Act.” Section 1111 of the Act amends subchapter V of chapter 55 of title 5, United States Code, to cover prevailing rate

(wage)employees under the compensatory time off for travel provision in 5 U.S.C. 5550b. Subject to the conditions specified in 5 U.S.C. 5550b and 5 CFR part 550, subpart N, a covered employee is entitled to earn, on an hour-for-hour basis, compensatory time off for time spent in a travel status away from the employee's official duty station when the travel time is not otherwise compensable. Because the section of law authorizing compensatory time off for travel is in 5 U.S.C. chapter 55, subchapter V, the provision applies to an “employee” as defined in 5 U.S.C. 5541(2), who is employed in an “Executive agency,” as defined in 5 U.S.C. 105. Prevailing rate

(wage)employees previously were excluded from the compensatory time off for travel provision by 5 U.S.C. 5541(2)(xi). However, the Act amends 5 U.S.C. 5541(2) and 5 U.S.C. 5550b to permit prevailing rate

(wage)employees to earn compensatory time off for travel under 5 U.S.C. 5550b and 5 CFR part 550, subpart N. Effective Date Section 1111(c) of the Act provides that the amendment takes effect on the earlier of

(1)the effective date of implementing regulations or

(2)the 90th day after the date of the law's enactment, which is April 27, 2008. These regulations are effective on April 27, 2008 and apply prospectively from that date. Accordingly, we have revised § 550.1402 to provide that prevailing rate

(wage)employees are covered by 5 CFR part 550, subpart N, effective April 27, 2008. Agencies must credit prevailing rate

(wage)employees who perform officially authorized travel on or after the effective date with any compensatory time off for travel to which they are entitled under the law and regulations. If an employee is on an extended period of officially authorized travel on the effective date, only the qualifying travel hours occurring on or after the effective date are creditable for the purpose of earning compensatory time off for travel. Authority Citation Subpart N of part 550 of title 5, Code of Federal Regulations, previously did not include an authority citation. Therefore, we have added 5 U.S.C. 5548(a) as the authority citation for 5 CFR part 550, subpart N. Waiver of Notice of Proposed Rulemaking Pursuant to section 553(b)(B) of title 5 of the United States Code, I find that good cause exists for waiving the general notice of proposed rulemaking. Also, pursuant to 5 U.S.C. 553(d)(3), I find that good cause exists for making this rule effective in less than 30 days. These regulations implement a provision of Public Law 110-181 that takes effect on the earlier of

(1)the effective date of implementing regulations or

(2)the 90th day after the date of the law's enactment. The statutory change is unambiguous and does not require interpretation, since it simply extends coverage under a particular provision of law to an additional category of employees. These regulations merely incorporate the statutory change. Thus, a notice of proposed rulemaking and a delayed effective date is unnecessary. This waiver will facilitate timely implementation of the law as intended by Congress. E.O. 12866, Regulatory Review The Office of Management and Budget has reviewed this rule in accordance with E.O. 12866. Regulatory Flexibility Act I certify that these regulations will not have a significant economic impact on a substantial number of small entities because they will apply only to Federal agencies and employees. List of Subjects in 5 CFR Part 550 Administrative practice and procedure, Claims, Government employees, Wages. U.S. Office of Personnel Management. Linda M. Springer, Director. Accordingly, OPM is amending 5 CFR part 550 as follows: PART 550—PAY ADMINISTRATION (GENERAL) Subpart N—Compensatory Time Off for Travel 1. An authority citation for subpart N of part 550 is added to read as follows: Authority: 5 U.S.C. 5548(a). 2. Section 550.1402 is revised to read as follows: § 550.1402 Coverage. This subpart applies to an employee as defined in 5 U.S.C. 5541(2) who is employed by an agency. In accordance with section 1111 of Public Law 110-181, an employee whose pay is fixed and adjusted from time to time in accordance with prevailing rates under subchapter IV of chapter 53 of title 5, United States Code, or by a wage board or similar administrative authority serving the same purpose, is covered by this subpart effective April 27, 2008. [FR Doc. E8-11839 Filed 5-27-08; 8:45 am] BILLING CODE 6325-39-P NUCLEAR REGULATORY COMMISSION 10 CFR Parts 1, 19, 20, 30, 40, 50, 52, 55, 60, 61, 63, 70, 71, 72, 73 and 76 [NRC-2008-0270] RIN 3150-AI39 Administrative Changes: NRC Region IV Address Change and Phone Number and E-mail Address Changes AGENCY: Nuclear Regulatory Commission. ACTION: Final rule. SUMMARY: The Nuclear Regulatory Commission

(NRC)is amending its regulations to update the street address for its Region IV office, and to update a telephone number and e-mail address for the Office of Information Services (OIS). This document is necessary to inform the public of these changes to the NRC's regulations. DATES: *Effective date:* This rule is effective May 28, 2008. FOR FURTHER INFORMATION CONTACT: Angella Love Blair, Rulemaking, Directives and Editing Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone 301-415-5661, e-mail *angella.love-blair@nrc.gov.* SUPPLEMENTARY INFORMATION: Background The NRC is amending its regulations at 10 CFR parts 1, 19, 20, 30, 40, 50, 52, 55, 60, 61, 63, 70, 71, 72, 73 and 76 to update the street address for the NRC Region IV office, and to update a telephone number and e-mail address for OIS. The physical location for the NRC Region IV office has not changed; the street address change is necessary because of local road construction. This rule also updates the internal addressee for the NRC Region IV office due to reorganization. Because these amendments constitute minor administrative corrections to the regulations, the notice and comment provisions of the Administrative Procedure Act do not apply pursuant to 5 U.S.C. 553(b)(B). The amendments are effective upon publication in the **Federal Register** . Good cause exists under 5 U.S.C. 553(d) to dispense with the usual 30-day delay in the effective date of the final rule, because the amendments are of a minor and administrative nature dealing with corrections to certain CFR sections. These amendments do not require action by any person or entity regulated by the NRC, and the final rule does not change the substantive responsibilities of any person or entity regulated by the NRC. Summary of Changes Change in Street Address for Region IV, USNRC The street address of the NRC Region IV office has been changed. The new address is incorporated into the following sections of the NRC's regulations: § 1.5(b)(4), Appendix D to 10 CFR part 20, § 30.6(b)(2)(iv), § 40.5(b)(2)(iv), § 55.5(b)(2)(iv), § 70.5(b)(2)(iv), and Appendix A to 10 CFR part 73. Change in Internal Addressee for Region IV, USNRC Due to reorganization in the NRC Region IV, the appropriate internal addressee is the Division of Nuclear Materials Safety. The new name is incorporated into the following sections of the NRC's regulations: § 30.6(b)(2)(iv), § 40.5(b)(2)(iv), and § 70.5(b)(2)(iv). Change in OIS Telephone Number The OIS telephone number for requesting NRC forms has been changed. The new telephone number is incorporated into the following sections of the NRC's regulations: Appendix G to 10 CFR part 20, § 30.7(e)(3), § 40.7(e)(3), § 50.7(e)(2), § 55.23, § 55.31(a)(1), § 60.9(e)(2), § 61.9(e)(2), § 63.9(e)(2), § 70.7(e)(3), § 71.9(e)(2), § 72.10(e)(2), § 73.57(d)(1), and § 76.7(e)(3). Change in OIS E-mail Address The OIS e-mail address for requesting NRC forms has been changed. The new e-mail address is incorporated into the following sections of the NRC's regulations: § 19.11(e)(2), § 30.7(e)(3), § 40.7(e)(3), § 50.7(e)(2), § 52.5(e)(2), § 60.9(e)(2), § 61.9(e)(2), § 63.9(e)(2), § 70.7(e)(3), § 71.9(e)(2), § 72.10(e)(2), § 73.57(d)(1), and § 76.7(e)(3). Environmental Impact: Categorical Exclusion The NRC has determined that this final rule is the type of action described in categorical exclusion 10 CFR 51.22(c)(2). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this rule. Paperwork Reduction Act Statement This final rule does not contain information collection requirements and, therefore, is not subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). Public Protection Notification The NRC may not conduct or sponsor, and a person is not required to respond to, a request for information or an information collection requirement unless the requesting document displays a currently valid OMB control number. Backfit Analysis The NRC has determined that the backfit rule does not apply to this final rule; therefore, a backfit analysis is not required for this final rule because these amendments are administrative in nature and do not involve any provisions that would impose backfits as defined in 10 CFR Chapter I. Congressional Review Act

(CRA)In accordance with the CRA of 1996, the NRC has determined that this action is not a major rule and has verified this determination with the Office of Information and Regulatory Affairs of OMB. List of Subjects 10 CFR Part 1 Organization and functions (government agencies). 10 CFR Part 19 Criminal penalties, Environmental protection, Nuclear materials, Nuclear power plants and reactors, Occupational safety and health, Radiation protection, Reporting and recordkeeping requirements, Sex discrimination. 10 CFR Part 20 Byproduct material, Criminal penalties, Licensed material, Nuclear materials, Nuclear power plants and reactors, Occupational safety and health, Packaging and containers, Radiation protection, Reporting and recordkeeping requirements, Source material, Special nuclear material, Waste treatment and disposal. 10 CFR Part 30 Byproduct material, Criminal penalties, Government contracts, Intergovernmental relations, Isotopes, Nuclear materials, Radiation protection, Reporting and recordkeeping requirements. 10 CFR Part 40 Criminal penalties, Government contracts, Hazardous materials transportation, Nuclear materials, Reporting and recordkeeping requirements, Source material, Uranium. 10 CFR Part 50 Antitrust, Classified information, Criminal penalties, Fire protection, Intergovernmental relations, Nuclear power plants and reactors, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements. 10 CFR Part 52 Administrative practice and procedure, Antitrust, Backfitting, Combined license, Early site permit, Emergency planning, Fees, Inspection, Limited work authorization, Nuclear power plants and reactors, Probabilistic risk assessment, Prototype, Reactor siting criteria, Redress of site, Reporting and recordkeeping requirements, Standard design, Standard design certification. 10 CFR Part 55 Criminal penalties, Manpower training programs, Nuclear power plants and reactors, Reporting and recordkeeping requirements. 10 CFR Part 60 Criminal penalties, High-level waste, Nuclear materials, Nuclear power plants and reactors, Reporting and recordkeeping requirements, Waste treatment and disposal. 10 CFR Part 61 Criminal penalties, Low-level waste, Nuclear materials, Reporting and recordkeeping requirements, Waste treatment and disposal. 10 CFR Part 63 Criminal penalties, High-level waste, Nuclear power plants and reactors, Reporting and recordkeeping requirements, Waste treatment and disposal. 10 CFR Part 70 Criminal penalties, Hazardous materials transportation, Material control and accounting, Nuclear materials, Packaging and containers, Radiation protection, Reporting and recordkeeping requirements, Scientific equipment, Security measures, Special nuclear material. 10 CFR Part 71 Criminal penalties, Hazardous materials transportation, Nuclear materials, Packaging and containers, Reporting and recordkeeping requirements. 10 CFR Part 72 Administrative practice and procedure, Criminal penalties, Manpower training programs, Nuclear materials, Occupational safety and health, Penalties, Radiation protection, Reporting and recordkeeping requirements, Security measures, Spent fuel, Whistleblowing. 10 CFR Part 73 Criminal penalties, Export, Hazardous materials transportation, Import, Nuclear materials, Nuclear power plants and reactors, Reporting and recordkeeping requirements, Security measures. 10 CFR Part 76 Certification, Criminal penalties, Radiation protection, Reporting and record keeping requirements, Security measures, Special nuclear material, Uranium enrichment by gaseous diffusion. For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR parts 1, 19, 20, 30, 40, 50, 52, 55, 60, 61, 63, 70, 71, 72, 73 and 76. PART 1—STATEMENT OF ORGANIZATION AND GENERAL INFORMATION 1. The authority citation for part 1 continues to read as follows: Authority: Sec. 23, 16181, 68 Stat. 925, 948, as amended (42 U.S.C. 2033, 2201); sec. 29, Pub. L. 85-256, 71 Stat. 759, Pub. L. 95-209, 91 Stat. 1483 (42 U.S.C. 2039); sec. 191 Pub. L. 87-615, 76 Stat. 409 (42 U.S.C. 2241); secs. 201, 203, 204, 205, 209, 88 Stat.1242, 1244, 1245, 1246, 1248, as amended (42 U.S.C. 5841, 5843, 5844, 5845, 5849); 5 U.S.C. 552, 553; Reorganization Plan No. 1 of 1980, 45 FR 40561, June 16, 1980. 2. In § 1.5, revise paragraph (b)(4) to read as follows: § 1.5 Location of principal offices and Regional Offices.

(b)* * *

(4)Region IV, USNRC, 612 E. Lamar Blvd., Suite 400, Arlington, TX 76011-4125. PART 19—NOTICES, INSTRUCTIONS AND REPORTS TO WORKERS: INSPECTION AND INVESTIGATIONS 3. The authority citation for part 19 continues to read as follows: Authority: 53, 63, 81, 103, 104, 161, 186, 68 Stat. 930, 933, 935, 936, 937, 948, 955, as amended, sec. 234, 83 Stat. 444, as amended, sec. 1701, 106 Stat. 2951, 2952, 2953 (42 U.S.C. 2073, 2093, 2111, 2133, 2134, 2201, 2236, 2282 2297f); sec. 201, 88 Stat. 1242, as amended (42 U.S.C. 5841); Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Section 19.32 is also issued under sec. 401, 88 Stat.1254 (42 U.S.C. 5891). § 19.11 [Amended] 4. In § 19.11, paragraph (e)(2), remove the e-mail address “ *forms@nrc.gov* ” and add in its place the e-mail address “ *FORMS.Resource@nrc.gov* ”. PART 20—STANDARDS FOR PROTECTION AGAINST RADIATION 5. The authority citation for part 20 continues to read as follows: Authority: Secs. 53, 63, 65, 81, 103, 104, 161, 182, 186, 68 Stat. 930, 933, 935, 936, 937, 948, 953, 955, as amended, sec. 1701, 106 Stat. 2951, 2952, 2953 (42 U.S.C. 2073, 2093, 2095, 2111, 2133, 2134, 2201, 2232, 2236, 2297f), secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note); sec. 651(e), Pub. L. 109-58, 119 Stat. 806-810 (42 U.S.C. 2014, 2021, 2021b, 2111). 6. In Appendix D to part 20, second column, revise the address for Region IV to read as follows: Appendix D to Part 20—United States Nuclear Regulatory Commission Regional Offices USNRC, Region IV, 612 E. Lamar Blvd., Suite 400, Arlington, TX 76011-4125. Appendix G to Part 20—[Amended] 7. In Appendix G to part 20, paragraph I.(c), third paragraph, remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”. PART 30—RULES OF GENERAL APPLICABILITY TO DOMESTIC LICENSING OF BYPRODUCT MATERIAL 8. The authority citation for part 30 continues to read as follows: Authority: Secs. 81, 82, 161, 182, 183, 186, 68 Stat. 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2111, 2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note); sec. 651(e), Pub. L. 109-58, 119 Stat. 806-810 (42 U.S.C. 2014, 2021, 2021b, 2111). Section 30.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). Section 30.34(b) also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 30.61 also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237). 9. In § 30.6, revise the second sentence of paragraph (b)(2)(iv) to read as follows: § 30.6 Communications.

(b)* * *

(2)* * *

(iv)* * * All mailed or hand-delivered inquiries, communications, and applications for a new license or an amendment, renewal, or termination request of an existing license specified in paragraph (b)(1) of this section must use the following address: U.S. Nuclear Regulatory Commission, Region IV, Division of Nuclear Materials Safety, 612 E. Lamar Blvd., Suite 400, Arlington, Texas 76011-4125; where e-mail is appropriate, it should be addressed to *RidsRgn4MailCenter@nrc.gov.* § 30.7 [Amended] 10. In § 30.7, paragraph (e)(3), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 40—DOMESTIC LICENSING OF SOURCE MATERIAL 11. The authority citation for part 40 continues to read as follows: Authority: Secs. 62, 63, 64, 65, 81, 161, 182, 183, 186, 68 Stat. 932, 933, 935, 948, 953, 954, 955, as amended, secs. 11e(2), 83, 84, Pub. L. 95 604, 92 Stat. 3033, as amended, 3039, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2014(e)(2), 2092, 2093, 2094, 2095, 2111, 2113, 2114, 2201, 2232, 2233, 2236, 2282); sec. 274, Pub. L. 86 373, 73 Stat. 688 (42 U.S.C. 2021); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); sec. 275, 92 Stat. 3021, as amended by Pub. L. 97 415, 96 Stat. 2067 (42 U.S.C. 2022); sec. 193, 104 Stat. 2835, as amended by Pub. L. 104 134, 110 Stat. 1321, 1321 349 (42 U.S.C. 2243); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Section 40.7 also issued under Pub. L. 95 601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). Section 40.31(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section 40.46 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 40.71 also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237). 12. In § 40.5, revise the second sentence of paragraph (b)(2)(iv) to read as follows: § 40.5 Communications.

(b)* * *

(2)* * *

(iv)* * * All mailed or hand-delivered inquiries, communications, and applications for a new license or an amendment or renewal of an existing license specified in paragraph (b)(1) of this section must use the following address: U.S. Nuclear Regulatory Commission, Region IV, Division of Nuclear Materials Safety, 612 E. Lamar Blvd., Suite 400, Arlington, Texas 76011-4125; where e-mail is appropriate, it should be addressed to *RidsRgn4MailCenter@nrc.gov.* § 40.7 [Amended] 13. In § 40.7, paragraph (e)(3), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 50—DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION FACILITIES 14. The authority citation for part 50 continues to read as follows: Authority: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note); sec. 651(e), Pub. L. 109-58, 119 Stat. 806-810 (42 U.S.C. 2014, 2021, 2021b, 2111). Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5841). Section 50.10 also issued under secs. 101, 185, 68 Stat. 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd), and 50.103 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a, 50.55a and appendix Q also issued under sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Sections 50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80—50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Appendix F also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237). § 50.7 [Amended] 15. In § 50.7, paragraph (e)(2), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 52—EARLY SITE PERMITS; STANDARD DESIGN CERTIFICATIONS; AND COMBINED LICENSES FOR NUCLEAR POWER PLANTS 16. The authority citation for part 52 continues to read as follows: Authority: Secs. 103, 104, 161, 182, 183, 186, 189, 68 Stat. 936, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2133, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, 202, 206, 88 Stat. 1242, 1244, 1246, as amended (42U.S.C. 5841, 5842, 5846); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). § 52.5 [Amended] 17. In § 52.5, paragraph (e)(2), remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 55—OPERATORS' LICENSES 18. The authority citation for part 55 continues to read as follows: Authority: Secs. 107, 161, 182, 68 Stat. 939, 948, 953 , as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2137, 2201, 2232, 2282); secs. 201, as amended, 202, 88 Stat. 1242, as amended, 1244 (42 U.S.C. 5841, 5842); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note).Sections 55.41, 55.43, 55.45, and 55.59 also issued under sec. 306, Pub. L. 97-425, 96 Stat. 2262 (42 U.S.C. 10226). Section 55.61 also issued under secs. 186, 187, 68 Stat. 955 (42 U.S.C. 2236, 2237). 19. In § 55.5, revise the second sentence of paragraph (b)(2)(iv) to read as follows: § 55.5 Communications.

(b)* * *

(2)* * *

(iv)* * * Submission by mail or hand delivery must be addressed to the Administrator at U.S. Nuclear Regulatory Commission, 612 E. Lamar Blvd., Suite 400, Arlington, Texas 76011-4125; where e-mail is appropriate, it should be addressed to *RidsRgn4MailCenter@nrc.gov.* § 55.23 [Amended] 20. In the introductory text of § 55.23, remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”. § 55.31 [Amended] 21. In § 55.31, paragraph (a)(1), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”. PART 60—DISPOSAL OF HIGH-LEVEL RADIOACTIVE WASTES IN GEOLOGIC REPOSITORIES 22. The authority citation for part 60 continues to read as follows: Authority: Secs. 51, 53, 62, 63, 65, 81, 161, 182, 183, 68 Stat. 929, 930, 932, 933, 935, 948, 953, 954, as amended (42 U.S.C. 2071, 2073, 2092, 2093, 2095, 2111, 2201, 2232, 2233); secs. 202, 206, 88 Stat. 1244, 1246 (42 U.S.C. 5842, 5846); secs. 10 and 14, Pub. L. 95-601, 92 Stat. 2951 (42 U.S.C. 2021a and 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); secs. 114, 121, Pub. L. 97-425, 96 Stat. 2213g, 2228, as amended (42 U.S.C. 10134, 10141), and Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Section 60.9 is also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). § 60.9 [Amended] 23. In § 60.9, paragraph (e)(2), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 61—LICENSING REQUIREMENTS FOR LAND DISPOSAL OF RADIOACTIVE WASTE 24. The authority citation for part 61 continues to read as follows: Authority: Secs. 53, 57, 62, 63, 65, 81, 161, 182, 183, 68 Stat. 930, 932, 933, 935, 948, 953, 954, as amended (42 U.S.C. 2073, 2077, 2092, 2093, 2095, 2111, 2201, 2232, 2233); secs. 202, 206, 88 Stat. 1244, 1246 (42 U.S.C. 5842, 5846); secs. 10 and 14, Pub. L. 95-601, 92 Stat. 2951 (42 U.S.C. 2021a and 5851) and Pub. L. 102-486, sec 2902, 106 Stat. 3123, (42 U.S.C. 5851); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Section 61.9 is also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). § 61.9 [Amended] 25. In § 61.9, paragraph (e)(2), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 63—DISPOSAL OF HIGH-LEVEL RADIOACTIVE WASTES IN A GEOLOGIC REPOSITORY AT YUCCA MOUNTAIN, NEVADA 26. The authority citation for part 63 continues to read as follows: Authority: Secs. 51, 53, 62, 63, 65, 81, 161, 182, 183, 68 Stat. 929, 930, 932, 933, 935, 948, 953, 954, as amended (42 U.S.C. 2071, 2073, 2092, 2093, 2095, 2111, 2201, 2232, 2233); secs. 202, 206, 88 Stat. 1244, 1246 (42 U.S.C. 5842, 5846); secs. 10 and 14, Pub. L. 95-601, 92 Stat. 2951 (42 U.S.C. 2021a and 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); secs. 114, 121, Pub. L. 97-425, 96 Stat. 2213g, 2238, as amended (42 U.S.C. 10134, 10141), and Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). § 63.9 [Amended] 27. In § 63.9, paragraph (e)(2), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 70—DOMESTIC LICENSING OF SPECIAL NUCLEAR MATERIAL 28. The authority citation for part 70 continues to read as follows: Authority: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 953, 954, as amended, sec. 234, 83 Stat. 444, as amended, (42 U.S.C. 2071, 2073, 2201, 2232, 2233, 2282, 2297f); secs. 201, as amended, 202, 204, 206, 88 Stat. 1242, as amended, 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846). Sec. 193, 104 Stat. 2835 as amended by Pub. L. 104-134, 110 Stat. 1321, 1321-349 (42 U.S.C. 2243); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Sections 70.1(c) and 70.20a(b) also issued under secs. 135, 141, Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 70.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). Section 70.21(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section 70.31 also issued under sec. 57d, Pub. L. 93-377, 88 Stat. 475 (42 U.S.C. 2077). Sections 70.36 and 70.44 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 70.81 also issued under secs. 186, 187, 68 Stat. 955 (42 U.S.C. 2236, 2237). Section 70.82 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). 29. In § 70.5, revise the second sentence of paragraph (b)(2)(iv) to read as follows: § 70.5 Communications.

(b)* * *

(2)* * *

(e)* * *

(2)Copies of NRC Form 3 may be obtained by writing to the Regional Administrator of the appropriate U.S. Nuclear Regulatory Commission Regional Office listed in Appendix D to Part 20 of this chapter, by calling

(301)415-7232, via e-mail to *FORMS.Resource@nrc.gov,* or by visiting the NRC's Web site at *http://www.nrc.gov* and selecting forms from the index found on the home page. PART 72—LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF SPENT NUCLEAR FUEL, HIGH-LEVEL RADIOACTIVE WASTE AND REACTOR-RELATED GREATER THAN CLASS C WASTE 33. The authority citation for part 72 continues to read as follows: Authority: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 688, as amended (42 U.S.C. 2021); sec. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102-486, sec. 7902, 106 Stat. 3123 (42 U.S.C. 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); secs. 131, 132, 133, 135, 137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153, 10155, 10157, 10161, 10168); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note); sec. 651(e), Pub. L. 109-58, 119 Stat. 806-810 (42 U.S.C. 2014, 2021, 2021b, 2111). Section 72.44(g) also issued under secs. 142(b) and 148(c), (d), Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 10168(c), (d)). Section 72.46 also issued under sec. 189, 68 Stat. 955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(g)). Subpart J also issued under secs. 2(2), 2(15), 2(19), 117(a), 141(h), Pub. L. 97-425, 96 Stat. 2202, 2203, 2204, 2222, 2224 (42 U.S.C. 10101, 10137(a), 10161(h)). Subparts K and L are also issued under sec. 133, 98 Stat. 2230 (42 U.S.C. 10153) and sec. 218(a), 96 Stat. 2252 (42 U.S.C. 10198). § 72.10 [Amended] 34. In § 72.10, paragraph (e)(2), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* PART 73—PHYSICAL PROTECTION OF PLANTS AND MATERIALS 35. The authority citation for part 73 continues to read as follows: Authority: Secs. 53, 161, 149, 68 Stat. 930, 948, as amended, sec. 147, 94 Stat. 780 (42 U.S.C. 2073, 2167, 2169, 2201); sec. 201, as amended, 204, 88 Stat. 1242, as amended, 1245, sec. 1701, 106 Stat. 2951, 2952, 2953 (42 U.S.C. 5841, 5844, 2297f); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note); Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 (2005). Section 73.1 also issued under secs. 135, 141, Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C, 10155, 10161). Section 73.37(f) also issued under sec. 301, Pub. L. 96-295, 94 Stat. 789 (42 U.S.C. 5841 note). Section 73.57 is issued under sec. 606, Pub. L. 99-399, 100 Stat. 876 (42 U.S.C. 2169). § 73.57 [Amended] 36. In § 73.57, paragraph (d)(1), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* 37. In Appendix A to Part 73, first table, second column, and second table, second column, revise the address for Region IV to read as follows: Appendix A to Part 73—U.S. Nuclear Regulatory Commission Offices and Classified Mailing Addresses USNRC, Region IV, 612 E. Lamar Blvd., Suite 400, Arlington, TX 76011-4125. USNRC, Region IV, 612 E. Lamar Blvd., Suite 400, Arlington, TX 76011-4125. PART 76—CERTIFICATION OF GASEOUS DIFFUSION PLANTS 38. The authority citation for part 76 continues to read as follows: Authority: Secs. 161, 68 Stat. 948, as amended, secs. 1312, 1701, as amended, 106 Stat. 2932, 2951, 2952, 2953, 110 Stat. 1321-349 (42 U.S.C. 2201, 2297b-11, 2297f); secs. 201, as amended, 204, 206, 88 Stat. 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846). Sec 234(a), 83 Stat. 444, as amended by Pub. L. 104-134, 110 Stat. 1321, 1321-349 (42 U.S.C. 2243(a)); sec. 1704, 112 Stat. 2750 (44 U.S.C. 3504 note). Sec. 76.7 also issued under Pub. L. 95-601. Sec. 10, 92 Stat 2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 U.S.C. 5851). Sec. 76.22 is also issued under sec. 193(f), as amended, 104 Stat. 2835, as amended by Pub. L. 104-134, 110 Stat. 1321, 1321-349 (42 U.S.C. 2243(f)). Sec. 76.35(j) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). § 76.7 [Amended] 39. In § 76.7, paragraph (e)(3), remove the telephone number “(301) 415-5877” and add in its place the telephone number “(301) 415-7232”, and remove the e-mail address *“forms@nrc.gov”* and add in its place the e-mail address *“FORMS.Resource@nrc.gov”.* Dated at Rockville, Maryland, this 20th day of May, 2008. For the Nuclear Regulatory Commission. Michael T. Lesar, Chief, Rulemaking, Directives and Editing Branch, Division of Administrative Services, Office of Administration. [FR Doc. E8-11751 Filed 5-27-08; 8:45 am] BILLING CODE 7590-01-P FARM CREDIT ADMINISTRATION 12 CFR Part 613 RIN 3052-AC33 Eligibility and Scope of Financing; Processing and Marketing AGENCY: Farm Credit Administration. ACTION: Final rule. SUMMARY: The Farm Credit Administration (FCA or Agency) issues this final rule to amend its regulation governing financing of processing and marketing operations by Farm Credit System (Farm Credit, FCS, or System) institutions under titles I and II of the Farm Credit Act of 1971, as amended (Act). The final rule revises the criteria used to determine the eligibility of legal entities for financing as processing and marketing operations. This revision will enable FCS institutions to better meet the changing needs of their eligible borrowers. The rule further requires System institutions to develop policies and procedures for ensuring that the revised eligibility criteria are met and to include information on all processing and marketing loans in their Reports of Condition and Performance filed with the FCA. The final rule also makes a non-substantive technical correction to the regulation defining the term “person”. DATES: *Effective Date:* This regulation will be effective 30 days after publication in the **Federal Register** during which either or both Houses of Congress are in session. We will publish a notice of the effective date in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: Barry Mardock, Associate Director, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090,

(703)883-4456, TTY

(703)883-4434; or Michael J. Duffy, Senior Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090,

(952)854-7151, TTY

(952)854-2239; or Howard I. Rubin, Senior Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090,

(703)883-4029, TTY

(703)883-4020. SUPPLEMENTARY INFORMATION: I. Background Sections 1.11(a)(1) and 2.4(a)(1) of the Act authorize Farm Credit banks and associations to finance the processing and marketing operations of bona fide farmers, ranchers, and aquatic producers or harvesters that are “directly related” to the operations of the borrower, provided that the operations of the borrower supply some portion of the raw materials used in the processing or marketing operation (throughput). 1 Current § 613.3010(a)(1) provides that a borrower is eligible for financing for a processing or marketing operation only if the borrower is eligible to borrow from the System or is a legal entity in which eligible borrowers own more than 50 percent of the voting stock or equity. 1 12 U.S.C. 2019(a)(1), 2075(a)(1). Each Farm Credit bank has transferred its title I authority to make long-term real estate mortgage loans to Federal land bank associations pursuant to section 7.6 of the Act (12 U.S.C. 2279b). We believe that the existing rule, focusing solely on the percentage of eligible borrower ownership in a legal entity, is unnecessarily narrow. Therefore, FCA adds additional specific criteria for determining what legal entities are eligible for financing for processing and marketing operations in accordance with the provisions in sections 1.11(a) and 2.4(a) of the Act. While potentially expanding the pool of eligible legal entities, we believe that the additional criteria properly ensure that there is a sufficiently strong economic link—or identity of interests—between eligible borrowers and the processing or marketing entity so that the financing can be considered made to eligible borrowers and “directly related” to their operations. On October 16, 2006, we published a proposed rule (71 FR 60678) to amend the regulation governing financing of processing and marketing operations by FCS institutions with the comment period closing on December 15, 2006. On January 11, 2007, we reopened the comment period for the proposed rule (72 FR 1300) after receiving requests from several commercial bank trade organizations. The comment period was reopened for 45 days and ended on February 26, 2007. II. Purpose of the Rule FCA believes its amendment to § 613.3010 will permit System associations to more effectively meet the credit needs of eligible borrowers in the face of changing agricultural and economic conditions while remaining consistent with the Act. We recognize the increasing importance of value-added agriculture and aquaculture and the changing ownership structures in processing and marketing operations. As part of these changing agricultural and economic conditions, FCA seeks to ensure that affordable and dependable credit for businesses that add value to farm and aquatic products and commodities remains available for the benefit of agricultural and aquacultural producers (and the rural communities in which they operate). As farmers, ranchers, and producers or harvesters of aquatic products look for opportunities to increase their income and diversify income sources, the importance of value-added agriculture and aquaculture has emerged. Producers are pursuing value-added activities to gain more direct access to markets and a greater share of the consumers' food dollar. As such, farmers are increasingly reliant upon vertical integration and coordination of production, processing, and marketing to deliver products that meet consumer needs. These opportunities have stemmed from increased consumer demands regarding health, nutrition, and convenience; efforts by food processors to improve their productivity; and technological advances that enable producers to provide what consumers and processors desire. With continued movement to a global economy, the international market for value-added products is also growing. Ownership structures within processing and marketing operations are changing as substantial capital investments cannot be fully raised through traditional methods. The farmer-owned sole proprietorships or closely held entities prevalent in the past are often no longer economically viable. Therefore, new forms of cooperatives, limited liability companies, limited liability partnerships, and other ownership structures—requiring outside investment—are being used to address capital needs. For example, many new ethanol plants are only partially owned by farmers; however, these plants are usually directly related to the farmer-owners' operations and provide significant benefits to both producers and the rural communities in which they are located. Moreover, even where sole proprietorships or closely held entities are economically viable, they are often not advisable from a legal liability, tax, or estate planning perspective. Structuring a processing or marketing operation with prudent legal liability considerations protects borrowers' financial interests and is an appropriate safety and soundness practice. We do not believe that our rules should create a circumstance that forces eligible borrowers to reject prudent legal, business and tax advice if they wish to continue borrowing from their FCS lender. Processing and marketing agricultural businesses are projected to continue to evolve and grow within rural America. The entrepreneurial spirit of farmers, ranchers, and producers of aquatic products will require a reliable and flexible source of credit and financial services. As value-added agriculture continues to grow, agricultural producers are challenged by the need to attract substantial capital in order to provide products to an increasing number of consumers and improve the output and efficiency of their operations. The success of value-added agriculture not only directly benefits rural America, but American and international consumers as well. 2 2 For background on the issues discussed in this section, *see* , e.g., Klinefelter, D. A., and Penson, J. B., “Growing Complexity of Agricultural Lending Decisions.” *Choices,* 20(1) (1st Quarter 2005); Bowers, D. and Gale, F., “Value-Added Manufacturing—An Important Link to the Larger U.S. Economy,” *Rural Conditions and Trends,* Vol. 8, No. 3 (March 1998); Govindasamy, R., and Thornsbury, S., “Theme Overview: Fresh Produce Marketing: Critical Trends and Issues,” *Choices,* 21(4) (4th Quarter 2006); Gehlhar, M. and Coyle, W., “Global Food Consumption and Impacts on Trade Patterns,” *Agriculture and Trade Report,* Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, WRS-01-1 (May 2001); Holz-Clause, M., “Using Value-added Agriculture to Create a New Rural America,” Economic Development Administration, U.S. Department of Commerce (Summer 2004); Kohl, D. M., and Morris, A. M., “Agri-lending Vision 2020: When Vision and Reality Meet.” *Choices,* (20)1 (1st Quarter 2005); and Innovation & Information Consultants, Inc., “Empirical Approach to Characterize Rural Small Business Growth and Profitability,” Office of Advocacy, Small Business Administration, *Small Business Research Summary* (February 2006). FCA recognizes the importance of these value-added enterprises to producers, rural areas and American agriculture and consumers. We believe this regulation will help ensure dependable credit for businesses that add value to farm, ranch and aquatic products and commodities, as well as the communities in which they operate. We also believe that the regulation will provide the FCS with the additional flexibility to meet the existing and future credit needs of processing and marketing entities upon which farmers, ranchers, and producers or harvesters of aquatic products are increasingly dependent for economic survival. III. Structure of Final Rule The two criteria contained in existing § 613.3010(a)(1) and (a)(2) for determining the eligibility of processing or marketing operations are retained in paragraphs (a)(1) and (a)(2) of revised § 613.3010. In addition, paragraph (a)(2) clarifies that it only applies to a legal entity that does not qualify for financing under paragraph (a)(1) as a bona fide farmer, rancher, or producer or harvester of aquatic products. However, as discussed above, we believe that a limitation based solely on the percentage of voting stock held by eligible borrowers—representing pure numerical voting “control” of the entity—is an unnecessarily narrow way of looking through a legal entity to determine whether a loan can be viewed as made to an eligible borrower or “directly related to” an eligible borrower's operation. The final rule adds new paragraph § 613.3010(a)(3) to provide alternative methods for determining actual eligible borrower “control” over a legal entity where the eligible borrower owns 50 percent or less of the voting stock or equity. New § 613.3010(a)(4) provides eligibility criteria for legal entities where eligible borrowers have a significant equity stake and provide a substantial amount of the throughput for the processing and marketing operation. New § 613.3010(a)(5) provides criteria for financing legal entities that are a direct extension or outgrowth of an eligible borrower's production operation, regardless of the amount of eligible borrower ownership of the legal entity. A legal entity must meet one of the criteria under § 613.3010 to borrow from an FCS association for its processing and marketing activities. The final rule also adds new paragraph (c), adding new reporting requirements for each System institution making processing or marketing loans and new paragraph (d), requiring the board of directors of each System institution making processing or marketing loans to adopt a policy that, at a minimum, directs institution management to establish procedures for ensuring compliance with the eligibility provisions of § 613.3010. IV. Comments Received We received a total of 5,016 comment letters on our proposed rule. We received letters from commenters residing in Puerto Rico, the District of Columbia, and from 48 states. Of the comment letters received, 1,976 letters expressed support for the proposed amendments. The majority of these letters were submitted by System institutions and their member/borrowers, officers, and employees, as well as four comment letters from the Farm Credit Council

(FCC)on the behalf of all System institutions and two letters from the 10th District of the FCC. We also received a letter of support from the Empire State Council of Agricultural Organizations, an umbrella organization comprised of 25 farm, commodity and agribusiness organizations in New York. We received 3,040 comment letters expressing opposition to the proposed rule. Of the opposition comment letters received, 2,945 were submitted by commercial banks, 67 by trade organizations representing commercial banks, and 28 by individuals. The national trade associations that provided opposition comments included the American Bankers Association of America (ABA), the Independent Bankers Association of America (ICBA), the Financial Services Roundtable, the Conference of State Bank Supervisors, the American Bankers Insurance Association, and America's Community Bankers. The states from which banking chapters and affiliates of their national associations submitted comments included Arizona, Arkansas, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin, and Wyoming. Although we received opposition letters from commenters throughout the country, almost 75 percent of all opposition comment letters came from the following states located in the central portion of the country: Kansas (429 letters), Oklahoma (325 letters), Minnesota (288 letters), Nebraska (180 letters), Missouri (157 letters), South Dakota (146 letters), Michigan (128 letters), Iowa (125 letters), North Dakota (108 letters), Wisconsin (89 letters), Illinois (80 letters), Colorado (57 letters), Arkansas (55 letters), Wyoming (54 letters), and Tennessee (46 letters). Moreover, commenters in Kansas and Oklahoma submitted approximately 25 percent of all the opposition letters we received. We received a significant number of letters criticizing the proposal from the three noncontiguous states of Oregon (129 letters), Pennsylvania (109 letters), and Virginia (98 letters). By adding the opposition letters from these three states to those from the 15 states identified above, we note that almost 86 percent of all opposition letters we received in response to the proposed rule came from 18 states. We also received support letters from commenters located throughout the country. The largest geographic concentration (approximately 27 percent) of letters supporting the proposal came from commenters residing in states located in the South Atlantic section of the country. For example, we received numerous support letters from South Carolina (215 letters), North Carolina (147 letters), Georgia (96 letters), and Virginia (81 letters). In contrast to the opposition letters we received, which were primarily from commenters residing in the middle of the country, we received letters supporting the proposed rule from commenters throughout the United States. Approximately 40 percent of the letters supporting the proposed rule were submitted by the member/borrowers, officers, and employees of the System from Colorado (120 letters), Minnesota (89 letters), California (88 letters), Pennsylvania (87 letters), Kansas (70 letters), Washington (64 letters), North Dakota (61 letters), Texas (60 letters), Ohio (58 letters), Illinois (49 letters), and Wisconsin (49 letters). Consequently, approximately 67 percent of all supporting comments came from the 15 noncontiguous states identified above. The vast majority of the 5,016 letters we received in response to our proposed rule—4,683 letters or 93.4 percent of all letters received—were form letters or letters with the same language as numerous other letters with only the names and addresses changed. For example, of the 3,040 responses we received opposing the proposed rule, 3,007 were form letters. Consequently, 98.9 percent of all opposition comments were submitted through form letters by the officers and employees of commercial banks and their trade associations (Bankers). In addition, of the 1,976 responses we received in support of the proposed rule, 1,676 were form letters. Therefore, 84.8 percent of the supporting comments were submitted through form letters by the member/borrowers, officers, and employees of the System. The form letters submitted by System and non-System commenters expressed strong opinions—albeit from very different positions—on the rule. V. Summary of Supporting Comments We received 1,976 comments in favor of the proposed rule. Most letters highlighted the changes occurring in the industry and the importance of value-added agriculture, stating: • The existing regulations no longer fully meet the needs of today's producers and the proposed revisions are necessary to address the changing agricultural conditions farmers currently face; • Congress recognized the importance of economic diversity for farmers and rural communities and established the FCS to improve the income and well being of agricultural producers who often have limited options for marketing their products; • The proposed regulatory changes will allow producers to coordinate the production, processing and marketing of their commodities through a financial structure that is conducive to a natural business model; • Processing and marketing operations are becoming increasingly important to the success and viability of farmers and rural areas as traditional operations diversify into facilities that support producers with value-added activities; • FCA should develop a rule that allows System institutions to finance the complex business entities that agricultural producers employ to efficiently and effectively manage their operations; and • The proposed rule will help rural areas by increasing the level of outside investment in processing and marketing businesses. The commenters also suggested a number of additional changes to provide further flexibility for financing processing and marketing entities, including: • Revising proposed § 613.3010(a)(2) to require “at least 50-percent ownership” rather than “more than 50-percent ownership” to allow the financing of hybrid operations that include half eligible producers and half investor owners; and • Emphasizing “throughput” rather than “ownership” for determining eligibility to better accommodate future changes in the operating structures of agricultural entities. VI. Summary of Opposing Comments We received a total of 3,040 comment letters opposing the proposed changes to the rule. The vast majority of the opposition letters—received from commercial bankers and commercial bank lobbyists—requested that the FCA withdraw the proposed rule. We refer to these throughout this preamble as “Bankers' comments.” Bankers' comments included: • FCA lacks the authority to establish new or revised criteria for processing and marketing borrowers; • The proposal is an attempt to change the mission of the FCS so it can expand into “every sphere of commercial lending”; • The proposed rule will allow the System to move away from financing farmer-owned businesses and will lead to the direct financing of commercial businesses that may have only marginal farmer involvement, in conflict with Congress' original intent for the System; • The proposed expansion of authority could be harmful to rural America due to the unregulated growth of the System and lead to another Federal bailout; • There is no need for the proposed regulatory changes because there is abundant capital in the marketplace and numerous banks and other lending institutions seeking to make processing and marketing loans; • FCA should retain its existing rule because it is quantifiable and easy to use when determining eligibility; • Revisions to the eligibility requirements are not necessary because System institutions can make processing and marketing loans under their similar entity authorities; • The proposed criteria for determining eligibility is “very subjective and arbitrary”; • FCA does not provide a transparent process or criteria for determining a borrower's eligibility; • The proposed rule will expand the lending authority of the System and is part of the System's “Horizons” project; • The proposed rule does not include an explanation of how the FCA would monitor compliance with the new criteria; • The proposal does not allow for public input, oversight or the ability to challenge a System funding decision; and • The proposed rule will negatively impact several thousand small banks that compete with the FCS. VII. Consideration of Comments and Summary of Changes In response to the concerns raised by the commenters, we made several changes to the proposed rule to:

(1)Ensure the language of the regulation conforms to our stated purposes and objectives,

(2)increase the objectivity of the eligibility criteria,

(3)ensure adequate controls over System processing and marketing lending activities, and

(4)add new reporting requirements for processing and marketing loans. We believe the final rule is consistent with the intent of the proposed rule while minimizing or eliminating the potential for unintended consequences or overly broad interpretation of the eligibility criteria. Changes from the proposed to final rule include: • Revising proposed § 613.3010 (eligibility based on actual management control) by eliminating (a)(3)(iii) and requiring eligible borrowers to constitute a majority of the directors of a corporation, general partners of a limited partnership, or managing members of a limited liability company and exercise actual control; • Revising proposed § 613.3010(a)(5) (eligibility based on a direct extension or outgrowth of a borrower's operation) to— ○ Require that the processing or marketing entity was created for the primary purpose of processing or marketing the eligible borrower's throughput and would not exist but for the eligible borrower's involvement, and ○ Add specific throughput requirements; • Adding new § 613.3010(c) (reporting requirements) to require periodic reporting on processing and marketing loans as part of the quarterly Reports of Condition and Performance required under § 621.12 of this chapter; and • Adding new § 613.3010(d) (institution policies) to require the board of directors of each System institution making processing or marketing loans to legal entities under authority of this section to adopt a policy, that, at a minimum, directs institution management to establish procedures for ensuring that the eligibility provisions of § 613.3010 are properly adhered to. VIII. Response to General Comments A. Legal Authority for Rule Many Bankers commented that FCA's proposal violates sections 1.11(a)(1) and 2.4(a)(1) of the Act (authorizing System banks and associations to finance the processing and marketing credit needs of bona fide farmers, ranchers, and aquatic producers and harvesters that are “directly related” to the operations of the borrower) because it allows financing for entities not majority owned by farmers. We disagree. While the Bankers' comment letters supported FCA's existing rule (requiring eligible borrowers to own more than 50 percent of a processing or marketing entity) as a necessary and objective bright line test under the Act, in 1997 the ICBA and ABA filed suit against FCA seeking to invalidate that rule (and other regulatory changes adopted at the same time). The ICBA and ABA argued to the court that the plain language of the statute requires that the applicant be an agricultural producer and therefore only 100-percent farmer-owned operations should be eligible for financing. At the time, FCA argued that the new 50-percent rule was valid because it ensured that the processing or marketing operation was “directly related” to the eligible borrower's production operation by requiring farmers to “control” the processing or marketing entity. Even under FCA's pre-1997 rule, System lenders could make processing or marketing loans to “persons” other than eligible farmers or ranchers. At that time, FCA rules required that eligible borrowers own 100 percent of the processing or marketing entity. Whether a corporation (or most other “legal entities”) is owned 1 percent or 100 percent by farmers, it is considered to be a separate “person” under the law, able to sue and be sued in its own name. It is a hallmark of the corporate form that shareholders are not liable for the debts of their corporation, and the corporation is not liable for the debts of the shareholders. A loan to a corporation is not the same thing as a loan to its shareholders. In January 1999, the United States Court of Appeals for the District of Columbia rejected the Bankers' challenge (affirming the district court's decision), holding that under either the old (100-percent ownership) or new (more than 50-percent ownership) rule: legal entities could obtain financing for their processing and marketing operations, provided they were controlled by actual farmers. Appellants' [ICBA and ABA] objection is thus one of degree: how much ownership of the legal entity is enough before the business is no longer farmer-controlled. The statute does not directly address this issue, and appellants fail to demonstrate that the agency's requirement that farmers have a majority ownership of the operation is not a reasonable interpretation. 3 3 *Independent Bankers Ass'n* v. *Farm Credit Admin.,* 164 F.3d 661, 670 (DC Cir. 1999). Notably, the Court did not say that the 50-percent rule was the only reasonable interpretation or formulation allowed under the Act. Today, the Banker commenters are making conceptually the same legal argument—and in some cases almost word-for-word the same legal argument—that the Court of Appeals rejected in 1999. There is nothing in the Act that requires 50-percent ownership or any other numerical threshold for farmer ownership for an entity to be eligible for processing or marketing credit. The 50-percent rule is simply a test FCA devised for determining whether a processing or marketing entity has a sufficient identity of interests with an eligible borrower so that it is considered “directly related” to the eligible borrower's operations and therefore eligible for financing under the Act. There are, however, other meaningful ways to make that determination. While the 50-percent rule does provide a “bright line” test, it excludes many borrowers we believe should be eligible under the Act and is therefore an imperfect test. An example: a processing facility is operated on a day-to-day basis by an eligible farmer and his son, who works full-time in the processing facility. The farmer's equipment and employees are used to operate the facility and the farmer supplies 100 percent of the throughput. However, the processing operation is not eligible for System financing because the farmer only owns 49.9 percent of the stock in the corporation that owns the facility, with the other 50.1 percent owned by the farmer's son, who is not an eligible farmer because he does not own agricultural land or produce agricultural products. 4 4 *See* 12 CFR 613.3000(a)(1). The Bankers argue that the 50-percent rule is necessary to ensure that legal entities financed by the System are “controlled” by eligible borrowers. Many Banker commenters noted that the proposed rule is “arbitrary” and would “eliminate the quantifiable, easily determined requirement that eligible processing and marketing operations have at least 50-percent farmer or rancher ownership and would replace it with a graduated series of mostly subjective determinations regarding the control, authority, and dependent financial condition of the producers and borrowers.” However, there are many ways to measure “control” over a legal entity. For example, statutes and regulations applicable to a wide spectrum of activities define “control” several different ways, including use of various numerical thresholds. In some contexts, as little as 5-percent ownership of an entity can be deemed a “controlling” interest. 5 We believe that each of the new § 613.3010 provisions require substantial control over an entity by an eligible borrower. More importantly, since the concept of “control” is not contained in the Act, control through majority stock ownership is clearly not the only way to determine whether financing a processing or marketing entity is necessary to meet the credit needs of an eligible borrower or whether the operation is “directly related” to the farmer's production operation. 5 *See,* e.g., 12 CFR 612.2130(c) (definition of “controlled entity” under FCA Standards of Conduct rule); 12 U.S.C. 1841(a) (statutory presumptions related to determining bank holding company “control”); 7 CFR 59.200 (definition of an affiliate of a packer under United States Department of Agriculture rule); 5 CFR 890.1003 (definition of “control interest” by a health care provider under Office of Personnel Management rule). The 50-percent rule was adopted by FCA more than 10 years ago even though nothing in the Act required a 50-percent test for eligibility. As we noted in the preamble to the proposed rule, we believe that our current rule is unnecessarily narrow in focusing solely on percentage of ownership to determine eligibility. However, the Financial Services Roundtable commented that “[h]owever arbitrary these percentage minimums and maximums [in the current rule] may seem, these percentages of eligible borrower ownership permit an objective application of FCA regulations.” We disagree that a Federal agency should settle for a potentially arbitrary rule just because it permits an “objective” application. Ease of application is not the only criterion to consider when promulgating a rule. There may not be a perfect method available to determine which processing or marketing entities should be eligible and which should not; however, we do believe our current rules are deficient because they exclude entities we believe Congress intended to be eligible under the Act. As discussed herein, we have made changes to address commenters' concerns over “subjectivity” and the potential for overly broad lending under the rule. Far from being “arbitrary” or unduly “subjective,” we have attempted to carefully target the new provisions of § 613.3010 to ensure that farmers, ranchers, and aquatic producers and harvesters are able to obtain System credit for their value-added activities as they vertically integrate their operations. B. Prior FCA Interpretations The Bankers further assert that the new rule contradicts FCA's previous interpretation of legislative history, contradicts the System's mission to serve farmers and ranchers, and contains proposals FCA rejected in prior rulemakings. As discussed below, these assertions are based, in large part, on a misunderstanding of the intended scope of the rule. As Banker commenters noted, “FCA has long held the position that the Act only authorizes titles I and II lenders to lend to processing and marketing operations that are directly related to the borrowers' agricultural or aquatic activities.” We continue to believe this; we also believe that, in today's agricultural economy, processing and marketing operations not 50 percent owned by farmers may also be “directly related” to an eligible borrower's production activities. While the Bankers criticize FCA for “expanding the class” of eligible borrowers under the rule, the new rule, like the prior rule, is intended to ensure that farmers and ranchers can get System financing for their processing and marketing needs, even when legal structures are arranged so that they do not own more than 50 percent of the entity. In adopting the processing and marketing provisions of the Act, we believe Congress intended System lenders to continue to finance their borrowers as they grow their agricultural businesses into value-added activities; our intent with the new rule is to remove artificial constraints impeding System lenders' efforts to fully serve the credit needs of their customers. With regard to our interpretation of legislative history, FCA is required to implement the Act as adopted by Congress. Legislative history is a tool of statutory interpretation that can help provide insight into Congress's intent. However, it is not the law, and it cannot override the plain words of a statute enacted by Congress. Moreover, as the Court of Appeals stated in the 1999 *Independent Bankers* v. *FCA* case, “the remarks of a single legislator, even the sponsor, are not controlling in analyzing legislative history.” 6 The ICBA's comment includes lengthy quotes from 1980 Committee Reports that accompanied the legislation establishing a 20-percent minimum throughput requirement. However, Congress changed the law in 1990 to allow financing where there was only “some” farmer-owner throughput, clearly evidencing a Congressional intent to broaden eligibility requirements and clearly limiting the usefulness of the 1980 quotes in determining Congressional intent. 6 *Id.* at 668. More fundamentally, as the Court of Appeals said in its 1999 decision, an “initial agency interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis.” 7 The Supreme Court has stated that agencies “must be given ample latitude to ‘adapt their rules and policies to the demands of changing circumstances.' ” 8 As discussed above, we believe our new rule is necessary to ensure that the regulatory authorities of System lenders keep up with the evolving nature of their customers' businesses. 7 *Id.* (quoting *Chevron, U.S.A., Inc.* v. *Natural Resources Defense Council, Inc.* , 467 U.S. 837, 863-64 (1984)). 8 *Motor Vehicle Mfrs. Assn. of United States, Inc.* v. *State Farm Mut. Automobile Ins. Co.* , 463 U.S. 29, 42

(1983)(quoting *Permian Basin Area Rate Cases* , 390 U.S. 747, 784 (1968)). C. Unmet Credit Needs Virtually all of the Banker commenters assert that our rule is not necessary because there is not an “unmet need” for processing and marketing credit. The Bankers assert that commercial banks are filling this credit need and therefore this type of financing is generally available in the relevant marketplace. The Bankers support this argument by pointing to the large number of commercial banks operating in rural communities. The Bankers assert that the System would provide unfair competition for these loans, ultimately driving commercial banks out of the market to the detriment of rural communities. 9 The Bankers further assert that FCA must be able to demonstrate an unmet credit need for processing and marketing businesses prior to adopting a final rule. 9 We note that many of the Banker commenters appear to contradict this assertion by stating that it is “comical” or “nonsense” to believe that the 100 or so direct lenders of the System can have any significant impact on competition in credit markets. We believe that the Bankers' comments misconstrue both the System's statutory mission and authorities and FCA's role as a Federal regulatory agency. Moreover, many of the Bankers' comments appear to be based on factual misconceptions as well. Congress established the System to be a nationwide lender to make loans to all creditworthy agricultural borrowers covered by the Act. The preamble to the Act states that the System is intended, among other things, to “provide for an adequate and flexible flow of money into rural areas.” Congress further provided in section 1.1(a) of the Act (12 U.S.C. 2001) that: It is declared to be the policy of the Congress, recognizing that a prosperous, productive agriculture is essential to a free nation and recognizing the growing need for credit in rural areas, that the farmer-owned cooperative Farm Credit System be designed to accomplish the objective of improving the income and well-being of American farmers and ranchers by furnishing sound, adequate, and constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient farm operations. Congress did not intend for the System to only serve those agricultural producers “who could not otherwise obtain credit.” Congress could have, but did not, limit the System to only those areas and to only those times when credit was otherwise “unavailable.” Congress also did not authorize FCA to limit the System's lending authority to only those times and places where there was a lack of available credit. Congress specifically rejected this approach, providing in section 1.1(c) of the Act that the System offer “competitive” credit to borrowers. Further, in response to banker opposition to new System rural housing authority in the 1971 Act, the House Agriculture Committee stated that: The committee does not agree that those lenders have a vested right to be free from competition and free to make the choice of the areas in which adequate credit is actually available for fully repayable housing loans. There will be no `credit elsewhere' requirement. 10 10 H. Rep. No. 92-593, 92nd Cong., 1st Sess., (Oct. 27, 1971) at 12. See also *Independent Bankers Ass'n* v. *National Credit Union Admin.,* 936 F. Supp. 605, 612 (W.D. Wis. 1996) (stating “Congress enacted the Farm Credit Act solely for the benefit of farmers and other agricultural entities, not for the benefit of the banks. In fact, Congress seems to have intended that the Act would promote competition for banks by providing farmers with an alternative access to credit”). The Act requires the System to provide financing for the processing and marketing credit needs of farmers, ranchers and aquatic producers and harvesters and directs FCA to implement the Act through regulations. Therefore, Congress has already addressed the question of System competition and FCA has an obligation to ensure that its rules enable System lenders to fully meet their statutory obligations. The Bankers generally assert that FCA has exceeded its statutory authority in proposing this rule; however, in the same comment letters they are asking FCA to regulate the System in a manner that would essentially suppress competition for agricultural credit, a result inconsistent with clear statutory intent. Such action by FCA would exceed its Constitutional and statutory authority as an administrative agency. D. Adequacy of Processing and Marketing Credit The Act specifically authorizes System lenders to serve the processing and marketing credit needs of farmers, ranchers and aquatic producers and harvesters. Therefore Congress, as expressed through the Act, has decided the `unmet credit need' policy question for FCA. While we carefully considered and evaluated the Bankers' assertions, we remain convinced that the rule is appropriate to ensure a continuing and “adequate and flexible flow of money into rural areas.” The ICBA supports its contentions, in part, with the results of a poll of its own commercial bank members, in which the poll respondents nearly universally concluded that they are meeting the credit needs of processing and marketing borrowers. We are unaware of any national poll of processing and marketing borrowers gauging their satisfaction with credit providers. However, we note that of the 3,040 people who signed comments in opposition to the rule, only one identified him or herself as a farmer, rancher, or agricultural credit customer. In contrast, we received hundreds of letters from persons who identified themselves as farmers, ranchers and/or System borrowers offering strong support regarding the need for the rule. Moreover, we received a number of letters

(19)from farmers in the Northeastern United States stating that commercial banks are not interested in lending to agricultural borrowers in their area. This regional variation in agricultural credit availability also seems to be borne out by the geographic distribution of opposition letters; as discussed above, a large percentage of the opposition letters came from a small number of states. In contrast, we received relatively very few opposition letters from major agricultural states such as California, Texas and Florida (in addition to the Northeast). Various independent studies on the availability of credit in rural areas have indicated there is the need for additional competition. For example, a recent article in *Choices* magazine, a publication of the American Agricultural Economics Association, explored the need for additional competition in rural credit markets. The authors focused their attention on the competitive forces in rural credit markets in 12 Midwestern states. The authors found that price discrimination and barriers to entry may result in the extension of less credit in rural areas than is optimal. They also concluded that when barriers to entering a market exist, banks that provide agricultural credit engage in credit rationing towards farmers and away from nonfarm borrowers. 11 Similarly, an article entitled “Financing the New Rural Economy,” presented at a conference on rural policy issues sponsored by the Federal Reserve Bank of Kansas City, noted that borrowers with large debt capital needs, borrowers needing debt capital for start-up businesses, and borrowers needing debt capital for businesses unfamiliar to their lenders can expect difficulties obtaining credit. 12 11 Kilkenny, M., & Jolly, R., “Are Rural Credit Markets Competitive? Is There Room for Competition in Rural Credit Markets?” *Choices* , 20(1) (1st Quarter 2005). 12 Markley, D. M., “Financing the New Rural Economy.” Federal Reserve Bank of Kansas City Rural Conference: *Exploring Policy Options for a New Rural America* , 69-80 (2001). A study recently commissioned by the ABA and the Pennsylvania Bankers Association on rural credit markets in Pennsylvania confirmed that the capital needs of rural America require many participants to be involved. 13 The study's authors (professors at Pennsylvania State University) stated that “multiple sources of credit will be required” to meet rural Pennsylvania's future needs in order to avoid the possibility of “credit rationing.” Most importantly, the professors surveyed farm-related businesses and found those businesses want to work with a lender that has expertise in agriculture, but commercial banks are not replacing their agricultural loan officers who move or retire and some banks are exiting the agricultural market entirely. The study also concluded that the System is “clearly involved in agricultural lending to an extremely high degree while the average commercial bank does comparatively little agricultural lending in Pennsylvania.” We also note that we received comments from System customers stating their preference for working with System lenders because of their specialized knowledge and expertise in agricultural lending. 13 Stokes, J. R. and Moore, H. L., *Rural Credit Conditions in Pennsylvania* . American Bankers Association and Pennsylvania Bankers Association (April 2007). Available on the World Wide Web at: *http://www.aba.com/Press+Room/041007FarmDisputes.htm* . Other independent academic and government sources also indicate that while there may be access to some credit at some price in all parts of rural America today, there is a lack of adequate competition for credit throughout the rural areas of the United States. For example, the 1997 Conference on Rural Development sponsored by the Kansas City Federal Reserve Bank documented shortfalls in financing for rural and agricultural businesses. 14 More recently, a 2005 study of farm level data from the United States Department of Agriculture's

(USDA)Agricultural Resource Management Survey

(ARMS)looked at competition in farm credit markets and studied farm loans made during the periods of 1991-93 and 2001-02. The study noted the number of counties called “highly competitive” (three or more banks with at least one branch in the county and at least 10-percent agricultural loans or $50 million of agricultural loans) declined between the two periods and the number that were “uncompetitive” (with no banks meeting the conditions outlined above) increased. The study found FCS lenders were more likely to serve full-time commercial farmers and farmers located in regions with less competitive credit markets. 15 Factors such as distance from metropolitan areas, economies of scale, and the small number of potential customers in remote areas are market-entry barriers that limit competition. Thus, banks in these markets are in a position to charge higher interest rates, pay lower rates on deposits, offer a narrower range of products, and take on fewer risks than they otherwise would in a more competitive situation. Clearly, the presence of a System institution in these rural credit markets has a moderating influence on what commercial banks offer, and rural customers benefit from the additional competition provided by the System's presence. 16 This benefit may become more significant as commercial banks continue to consolidate, particularly if the acquiring bank chooses to focus more heavily on nonagricultural pursuits. Notably the number of commercial banks classified as agricultural banks by the Federal Deposit Insurance Corporation ( *i.e.* , at least 25 percent of a bank's loan portfolio consists of agricultural loans) has declined by about a third (34 percent) over the last 10 years to 1,634 banks at year-end 2006. 17 14 Federal Reserve Bank of Kansas City, *Financing Rural America* (1997). Available on the World Wide Web: *http://www.kansascityfed.org/publicat/fra/framain.htm* . 15 Dodson, C. B. and Koenig, S. R., “Competition in Farm Credit Markets: Identifying Market Segments Served by the Farm Credit System and Commercial Banks,” *Agricultural Finance Review* , 64, no. 2, 167-186 (2004). 16 Markley, D. M., “Financing the New Rural Economy.” *Exploring Policy Options for a New Rural America* . Federal Reserve Bank of Kansas City (April 30—May 1, 2001). Available on the World Wide Web at: *http://www.kansascityfed.org/PUBLICAT/Exploring/RC01Mark.pdf* . 17 Economic Research Service, *Ag Income and Finance Outlook* (AIS 80). U.S. Department of Agriculture (March 11, 2003). Available on the World Wide Web at: *http://usda.mannlib.cornell.edu/usda/ers/AIS//2000s/2003/AIS-03-11-2003.pdf* ; and Federal Deposit Insurance Corporation (FDIC), Bank Data & Statistics. Available on the World Wide Web at: *http://www.fdic.gov/bank/statistical/index.html* . Additionally, there is significant anecdotal evidence that commercial banks are not interested in providing financing for start-up and other small or potentially risky processing and marketing ventures, which are the primary intended beneficiaries of our rule. Some of the Banker commenters tacitly acknowledge this, asserting that System institutions employ “relaxed underwriting standards that do not meet our safety and soundness requirements.” This means that the System is making processing and marketing loans that commercial banks typically do not make. System institutions have a public mission to serve agriculture in good times and bad and therefore we expect them to accept a reasonable degree of risk that commercial banks may not be willing to accept; because System institutions are dedicated agricultural lenders, their expertise and experience in lending to agricultural ventures should enable them to more accurately measure, understand, and adequately address the risks involved. A good example of this is the ethanol industry. The System appears to have provided financing for the majority of independently owned ethanol plants (excluding ethanol plants owned by large corporate entities) in the start-up phase of the industry. Contrary to Banker assertions about System loan pricing, interest spreads on System ethanol loans would ordinarily be very attractive and, in other industries, draw a great deal of competition for the loans. E. “Unfair” System Competition Many bankers commented that the System—because of its Government-sponsored enterprise

(GSE)status—provides “unfair” competition for commercial banks, asserting that it is unfair for “private sector” banks to compete against “government,” “Federal instrumentality,” “taxpayer subsidized” System institutions. This comparison needs careful consideration. First, each System association—the entity that makes direct loans to farmers, ranchers, and aquatic producers and harvesters—is a cooperative owned and controlled by its member borrowers. The Farm Credit banks—which provide funding to the associations—are in turn owned by their affiliated associations. CoBank, ACB has the authorities of both a Farm Credit bank and a bank for cooperatives and is therefore jointly owned by its affiliated associations and by its cooperative borrowers. FCS institutions are privately owned and in 1985 legislation, Congress expressly referred to “commercial bankers and Farm Credit System” as “private lenders” in contrast to “public lenders.” 18 Therefore, similar to their commercial bank competitors, no government capital is invested in System institutions. 18 12 U.S.C. 2001 *note* . Second, Congress established the System to fulfill a public purpose and specifically designated System institutions to be “Federal instrumentalities.” Congress also created the national banks to fulfill a public purpose and courts have long recognized that national banks are also “Federal instrumentalities.” 19 Congress continues to expect the System and banks to meet public needs; for example, Congress made banks (and not the System) subject to the Community Reinvestment Act, while obligating the System (and not banks) to focus on lending to “young, beginning, and small farmers and ranchers.” 19 *See Davis* v. *Elmira Sav. Bank* , 161 U.S. 275, 283 (1896). Third, System institutions do not receive any government “subsidy,” which directs payments by the government to a private party, such as in various USDA programs providing payments to farmers. Instead, Congress provided that Farm Credit banks and Federal land bank associations, and their long-term mortgage lending business are exempt from Federal and state income taxation. The production credit activities of System associations are taxable. Congress provided similar tax exemptions for a wide variety of privately owned entities that also fulfill public purposes; 26 U.S.C. 501 alone lists some 31 categories of tax-exempt organizations. Moreover, Congress has provided a variety of ways for privately owned businesses to minimize their Federal income taxes. For example, System institutions are organized as cooperatives; to the extent that they return profits to their members in the form of patronage, they are able to minimize their taxes under Subchapter T of the Internal Revenue Code. Similarly, as of December 31, 2006, some 2,356 commercial banks have organized as Subchapter S corporations and are therefore also able to pass their Federal tax burden on to shareholders. 20 This number has risen steadily since 1997 when financial institutions were first allowed to elect Subchapter S status. 21 This trend is particularly pronounced for commercial banks that are classified as agricultural banks by the Federal Deposit Insurance Corporation, with 49 percent electing to be organized as Subchapter S corporations at December 31, 2006, compared to 11 percent in 1997. 22 20 *See* U.S. Government Accountability Office letter to Senator Bernard Sanders, April 30, 2007 (GAO-07-593R). 21 *Id.* 22 Federal Deposit Insurance Corporation (FDIC), Required Financial Reports, Call and Thrift Financial Reports (December 2006). Available on the World Wide Web at: *http://www.fdic.gov/regulations/required/index.html* . Fourth, commercial banks also receive government benefits not available to System institutions and are free from statutory restrictions that System lenders must live by. For example, unlike System lenders, commercial banks may accept Federally insured (government-guaranteed) deposits (and earn service fees associated with those deposits). By statute, commercial banks also may lend to a much broader range of customers and provide a much broader range of services to those customers than can System institutions. Moreover, unlike commercial banks, System lenders must comply with rigid statutory borrower rights provisions, offering their borrowers extensive disclosures and distressed loan restructuring. Additionally, each System borrower must purchase stock in the lending association (with a statutory minimum of the lesser of 2 percent of the loan or $1,000) before obtaining a loan. Fifth, Banker commenters assert that “unlike FCS lenders,” commercial banks are subject to many safety and soundness regulatory limitations. We invite commenters to review our rules at 12 CFR part 600 *et seq.* , in particular parts 613 (eligibility and scope of financing), 614 (loan policies and operations), 615 (funding and fiscal affairs), 616 (leasing), 618, subpart A (related services), and 621 (accounting and reporting requirements) which demonstrate that FCA's safety and soundness rules are comparable to those of other financial institution regulators. Lastly, the Bankers assert the System has an “unfair funding advantage” because the financial markets treat the System as having an implicit government guarantee, thereby allowing the System to obtain funds at favorable “agency” interest rates (and thereby allowing System lenders to undercut them on interest rate pricing). However, commercial banks also have access to “agency” or GSE funding through the Federal Home Loan Bank System and have increased those borrowings significantly in recent years. 23 Additionally, we have found that arguments about an unfair funding advantage are not clear cut and are extremely difficult to evaluate and ensure meaningful comparison given the multiple variables impacting various lenders' cost structures and funding strategies. We note that none of the comment letters the Agency received presented any empirical data on this issue. 23 Federal Deposit Insurance Corporation (FDIC), “FLHB Borrowings Rose Sharply,” *Quarterly Banking Profile,* (November 27, 2007). Available on the World Wide Web at: *http://www2.fdic.gov/gbp/2007sep/chart8.html.* F. Similar Entity Authorities Many Bankers suggested that the financing proposed under the revised rule could be accomplished using existing similar entity authorities and that FCA should be encouraging the System to work with commercial banks through the Act's similar entity authority rather than discouraging that cooperation by expanding eligibility for processing and marketing operations. Under section 4.18A of the Act (12 U.S.C. 2206a), System title I and II lenders may participate with non-System lenders in loans made to entities that are not otherwise eligible to receive a loan from a System bank or association, provided the entities are “functionally similar” to System-eligible borrowers. Among other statutory restrictions, System lenders must hold less than 50 percent of any similar entity loan. System institutions may also participate with non-System lenders in loans to eligible borrowers. Similar entity authorities are designed to meet the credit needs of (functionally similar) ineligible borrowers while the processing and marketing statutory and regulatory provisions are intended to meet the needs of eligible borrowers. As Congress directed the System in the Act to serve eligible borrower needs directly, a reliance on the more limited similar entity authorities would not be appropriate. Moreover, the System has been very active in working with commercial banks through participation and similar entity authorities. According to Call Report data (available at *http://www.FCA.gov* ), System institutions held $10 billion (net, *i.e.* , purchases less sales) in participations obtained from non-System lenders, including nearly $5.8 billion (net of similar entity loans) at December 31, 2006. FCA continues to encourage System lenders to work with their commercial bank counterparts in providing credit to borrowers. However, the Act caps similar entity volume (lending capacity) at 15 percent of total loan volume. Because the capital intensive nature of processing and marketing facilities often results in large loans, some associations that serve these operations are already approaching this cap. Using this capacity for loans to borrowers that should be eligible unnecessarily restricts the System's ability to work with commercial bankers in the similar entity marketplace for functionally similar ineligible borrowers. More fundamentally, we believe that this rule will not have a significant effect on similar entity or eligible borrower participations by System lenders with commercial banks. This is because multi-lender transactions are driven by economic considerations, not regulatory fiat. Most System-commercial bank participations involve large credits. Multiple lenders make sense for those transactions because:

(1)The lead lender may not have the capacity to make the entire loan,

(2)the risk exposure can be spread among multiple lenders, and

(3)the costs associated with using multiple lenders makes sense in the context of the loan size. These types of large loans will continue to be made with multiple lenders. However, this means that the needs of young, beginning and small farmers for start-up processing and marketing credit—intended beneficiaries of this rule—may not be met through participations and are unlikely to be met in the future because of the economics and risks inherent in such loans. Moreover, where commercial banks have made a business decision to avoid lending (or participating in loans) in a particular industry or to a particular class of borrowers, similar entity authority does not provide any means for the System to provide financing. G. Scope of Rule—Processing or Marketing Operations Many of the opposition commenters, without specific reference to any proposed rule language, asserted that the rule will allow System institutions “unlimited opportunities” to finance “investor-owned” businesses that have little or no connection to farmers. Several commenters also expressed concern that the revised regulation would allow System lenders to finance large, publicly traded firms and investor-owned firms. Numerous commenters used Wal-Mart as an example of a large, publicly traded entity that would qualify for System financing as a result of its relationship with farmer-owned suppliers. It was not an objective of the regulation to expand the System's authority so that it could lend to businesses that only have a tangential relationship to agricultural or producers' operations. As we stated in the **Federal Register** notice reopening the comment period, “[s]uch a wide scale expansion of lending authority is not the intent of the proposed rule.” 24 As discussed in detail below, we have made significant changes to § 613.3010(a)(5) to allay these concerns and avoid unintended consequences. However, many of the comments appear to be based on a misunderstanding of the scope of the System's processing and marketing lending authority under the Act and FCA's prior rule. This is evidenced by this passage appearing in many of the letters: 24 *See* 72 FR 1300 (Jan. 5, 2007). Another example possible under the proposed rule: A rural town has two farm supply stores. One of the stores is a farmer-owned store (greater than 50 percent of the enterprise is owned by eligible borrowers), and the second one is owned by some investors that do not live in the community. Under the existing regulations, only the farmer-owned supply store would be eligible for total FCS financing because it is majority owned by eligible farmers. Under the proposed rule the FCS lender would be able to finance both enterprises or either enterprise. If the FCS lender determines that the investor-owned business was a better business deal for them, they could finance it, and deny credit to the farmer-owned store, thus providing taxpayer subsidized credit to an enterprise that was in competition with a farmer owned business. The problem with this example is that ordinarily neither of these businesses would be eligible for financing under either the old or new version of § 613.3010 because neither of them appears to be a “processing or marketing” operation. 25 Sections 1.11(a)(1) and 2.4(a)(1) (12 U.S.C. 2019(a)(1) and 2075(a)(1)) of the Act authorize System institutions to make loans to meet the “processing and marketing” credit needs of eligible borrowers. The Act does not define “processing” or “marketing.” FCA has also not adopted a definition of those terms, primarily because we have not seen significant confusion in the System as to what is a “processing” or “marketing” operation. 25 Additionally, this and similar examples used by the Bankers set up a false choice. Absent safety and soundness or other regulatory limitations, we would expect a System lender to finance all creditworthy eligible borrowers, not pick and choose among them. Processing and marketing operations are often called “value-added” operations. USDA regulations at 7 CFR 4284.3 define “value-added” this way: *Value-Added* . The incremental value that is realized by the producer from an agricultural commodity or product as the result of a change in its physical state, differentiated production or marketing, as demonstrated in a business plan, or product segregation. Also, the economic benefit realized from the production of farm or ranch-based renewable energy. Incremental value may be realized by the producer as a result of either an increase in value to buyers or the expansion of the overall market for the product. Examples include milling wheat into flour, slaughtering livestock or poultry, making strawberries into jam, the marketing of organic products, an identity-preserved marketing system, wind or hydro power produced on land that is farmed and collecting and converting methane from animal waste to generate energy. Identity-preserved marketing systems include labeling that identifies how the product was produced and by whom. While we are not adopting this as our definition of “processing or marketing,” it provides commenters with a good overview of what kinds of businesses are—and are not—covered. For example, it is unlikely that general retail and other “main street” businesses could qualify for System financing as an agricultural “processing or marketing” operation. Contrary to commenters” suggestions otherwise, a farmer selling produce to a grocery store does not turn the grocery store into a “processing or marketing” entity. The Act and our existing rules do not allow “unlimited” lending in this area. Sections 1.11 and 2.4 of the Act (12 U.S.C. 2019 and 2075) and § 613.3010(b) of our rules—which we did not propose to change—provide specific limits on processing and marketing lending. Under § 613.3010(b), processing or marketing loans to eligible borrowers who regularly supply less than 20 percent of the throughput are subject to the following restrictions: • *Bank limitation* . The aggregate of such processing and marketing loans made by a Farm Credit bank shall not exceed 15 percent of all its outstanding retail loans at the end of the preceding fiscal year. • *Association limitation* . The aggregate of such processing and marketing loans made by all direct lender associations affiliated with the same Farm Credit bank shall not exceed 15 percent of the aggregate of their outstanding retail loans at the end of the preceding fiscal year. Each Farm Credit bank, in conjunction with all its affiliated direct lender associations, shall ensure that such processing or marketing loans are equitably allocated among its affiliated direct lender associations. Our analysis indicates that System institutions appear to have low market penetrations in the agricultural processing and food manufacturing industries. In addition, total FCS association and Farm Credit bank lending to agricultural processing and marketing entities is well below the regulatory limitations previously noted. Although the proposed regulation does not specifically exclude large, publicly traded entities, the ownership, throughput, control, and functional integration requirements serve to ensure that the System only funds operations that are “directly related” to eligible borrowers and their operations, effectively excluding large publicly traded entities from becoming borrowers. If Wal-Mart could be considered a “processing” or “marketing” operation it would still not meet any of the criteria for eligibility provided for in § 613.3010 and it therefore would not qualify for System processing and marketing funding. We note that numerous commenters provided examples involving large, publicly traded entities such as Wal-Mart to support their opposition to the proposed rule. We believe these examples present unrealistic scenarios to circumvent regulatory requirements. We also note that these scenarios would be evaluated and addressed through the FCA's examination process. The ICBA further asserted that a large, publicly traded, multinational entity could qualify for System financing if it owns a few acres of land that are producing an agricultural commodity or could one day produce an agricultural commodity. This hypothetical comment raises a different issue than those implicated by our revisions to § 613.3010; the question of who is a “bona fide farmer” generally eligible for System financing is governed by § 613.3000(a)(1), a rule we are not changing. Therefore the comment is beyond the scope of this rulemaking. H. The Horizons Project A number of commenters criticized the rule as being part of the System's “Horizons” project. The Horizons project was undertaken by the System on its own initiative. As part of Horizons, System representatives came up with key findings concerning the evolving financial needs and business trends of farmers, rural businesses and rural communities. It is our understanding that System representatives offered specific legislative changes to Congress. FCA has taken no position on the System's legislative initiatives. While System representatives provided FCA with the Horizons report, 26 we did not receive a formal petition for rulemaking requiring FCA to act. However, FCA is open to constructive suggestions from any source on how the System may better serve its intended customers. The evolution of processing and marketing business eligibility was an area reviewed by the Horizons project. FCA looked at processing and marketing issues independently and determined that our existing rules were excluding certain types of borrowers who we believe were intended to be financed under the Act. We then proposed a rule that would narrowly expand eligibility for certain specific types of entities whose operations were directly related to an agricultural producer's operations. 26 The Farm Credit Council, *21st Century Rural America: New Horizons for U.S. Agriculture.* Available on the World Wide Web at: *http://www.fccouncil.com/uploads/Farm%20Credit%20Horizons%20Final%20Report.pdf.* Moreover, many Banker commenters appear not to have read and/or understood our proposed rule. For example, we received comments such as: If the rule were adopted, the FCS would be allowed to make commercial loans to any business that provides any good or service to anyone who may be eligible to borrow from the FCS. Furthermore, it would allow FCS to make residential mortgage loans for high dollar properties and properties in urban and suburban housing markets with populations of up to 50,000. While these may be items in the System's Horizons agenda, FCA did not propose to authorize loans to goods or services providers and did not make any proposal affecting residential mortgage lending authorities. Many of the more general comments about the sweeping breadth and effect of our proposed rule also seemed unrelated to the actual text of our proposal. I. Transparency, Public Input, and FCA Oversight of the System Opposition commenters also asserted that lending under the proposed rule would lack:

(1)Transparency,

(2)opportunities for the public to provide input and challenge a financing decision, and

(3)adequate oversight by FCA. Many commenters criticized the proposed rule for not including procedures on how to make determinations about the control, authority, and dependent financial condition of the producers and borrowers. Taken as a whole, these comments evidence a concern over the potential for abuse by System lenders under the rule. To address these concerns, we have added paragraphs

(c)and

(d)to the final rule, establishing new reporting requirements and internal controls. These provisions are more fully discussed in the section-by-section analysis. New paragraph

(c)requires each System institution making processing and marketing loans under § 613.3010 to report on its processing and marketing lending in the Reports of Condition and Performance required to be filed with FCA at least quarterly. These reports are publicly available on FCA's Web site. New paragraph

(d)requires the board of directors of each System institution making processing and marketing loans under § 613.3010 to adopt a policy and prescribe implementation of procedures on how to properly document and determine eligibility under § 613.3010. However, it is unreasonable for commenters to argue that the public should have the ability to challenge an individual lending decision made by a System institution. Individual credit decisions made by System institutions on particular borrowers are not public information and are not made by popular public vote. At a minimum, such public involvement would violate any notion of borrower privacy. System institutions make credit decisions after carefully considering the borrower's eligibility and creditworthiness as well as compliance with the statute, FCA regulations, board policies, management procedures, and sound business practices. While members of the public are free to (and sometimes do) contact FCA with inquiries about the eligibility or creditworthiness of System loans, it is FCA's role to oversee and ensure regulatory and statutory compliance. Where there is a question, FCA will evaluate the System lending decisions and will take appropriate actions to address safety and soundness concerns or regulatory violations. Several Banker commenters criticized FCA's effectiveness as a regulatory agency, but provided no evidence to support or substantiate these claims. Many Bankers also raised the specter of “taxpayer risk” if the rule is implemented. However, as noted, the System and FCA operate with no taxpayer funds. The only “risk” to taxpayers the Bankers identify is the potential for Federal assistance if the System is in a financial crisis. Approximately 22 years ago, at a time when the System was in a financial crisis, Congress transformed FCA into an arms-length regulator and gave it the same enforcement and supervisory authorities held by other financial institution regulators. Congress also created the Farm Credit System Insurance Corporation—which holds an insurance fund collected through premiums charged to System institutions—to ensure the payment of System obligations. Today, the System is arguably financially healthier and better capitalized than at any time in its history. Since 1985, FCA has adopted many rules and taken many formal and informal supervisory actions to ensure that the System operates in a safe and sound manner. FCA's examination process ensures that each System institution receives the level of regulatory oversight needed on a timely basis so that problems may be identified and proactively addressed. The examination process centers on an ongoing oversight approach, involving both off-site and on-site activities. This ongoing oversight is accomplished through formal and informal contacts with institutions by examiners who monitor and analyze conditions in their assigned institutions. We believe that FCA has demonstrated its ability to effectively regulate the System and ensure it operates in a safe and sound manner. 27 27 *See* U.S. General Accounting Office letter to Senator Richard G. Lugar, February 28, 2002, (GAO-02-324R) and Farm Credit System: *Farm Credit Administration Effectively Addresses Identified Problems,* (GAO/GGD-94-14, Jan. 7, 1994). In addition, the Bankers do not explain why the rule—modestly expanding processing and marketing lending eligibility—would lead to more “risky” lending by the System. The rule allows the same type of loans—for agricultural enterprises—that the System already specializes in making. Moreover, the same commenters express concern that the System will take loans that the Bankers want to make; the Bankers do not explain how these loans can, at the same time, be desirable for commercial banks yet “risky” for a System lender. J. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 605(b)), the FCA certified in the October 6, 2006, **Federal Register** notice that the proposed rule will not have a significant economic impact on a substantial number of small entities because each of the banks in the System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, System institutions are not “small entities” as defined in the Regulatory Flexibility Act. The Financial Services Roundtable asserted that this certification was “erroneous” because the rule would affect a substantial number of small entities, including small commercial banks that compete against System lenders and small businesses that compete against entities financed by System lenders. However, 12 U.S.C. 603(b)(2) requires an initial regulatory flexibility analysis

(RFA)that contains an estimate of the “number of small entities to which the proposed rule will apply.” Courts have clearly stated that under the plain language of the statute, the RFA applies only to regulated entities (in this case, System institutions) and not to small entities that may be indirectly affected. In considering a challenge to an Environmental Protection Agency

(EPA)rule, the United States Court of Appeals for the District of Columbia stated that the “statute requires that the agency conduct the relevant analysis or certify ‘no impact’ for those small businesses that are ‘subject to’ the regulation, that is, those to which the regulation ‘will apply.’ EPA's rule applies, by its terms, only to [regulated entities]. The rule will undoubtedly have economic impacts in many sectors of the economy. But to require an agency to assess the impact on all of the nation's small businesses possibly affected by a rule would be to convert every rulemaking process into a massive exercise in economic modeling, an approach that has already been rejected.” 28 Therefore, FCA's certification was accurate. 28 *Cement Kiln Recycling Coalition* v. *Environmental Protection Agency,* 255 F.3d 855, 869 (DC Cir. 2001) (citing *Mid-Tex Elec. Coop.,* 773 F.2d 327, 342-43 (DC Cir. 1985)). IX. Section-by-Section Analysis A. Section 613.3010(a)(1) and (a)(2) These criteria are taken directly from FCA's existing rule. The Bankers did, however, argue that keeping the 50-percent provision is meaningless because no entity would ever have to meet this requirement in light of the new, less restrictive eligibility options. However, keeping the existing criteria is necessary because there are many entities that receive financing today under the 50-percent rule that will not qualify under any of the new additional provisions. There are eligible processing and marketing entities in which eligible borrowers own more than 50 percent of the stock but do not hold a majority of seats on the board of directors and therefore can not qualify under new paragraph (a)(3), do not produce at least 20 percent of the throughput and therefore can not qualify under new paragraph (a)(4), or the operation is not a direct extension or outgrowth (no integration of operations) of the eligible borrowers' production operations and therefore cannot qualify under new paragraph (a)(5). System commenters suggested changing the ownership requirement in paragraph (a)(2) from “more than 50-percent ownership” to “at least 50-percent ownership” to accommodate situations where farmers and nonfarmers are equal owners. However, we believe the existing language provides an objective, bright line ownership test to determine control and do not believe the proposed change is necessary, particularly in light of the new eligibility criteria added by our final rule. Therefore, we adopt § 613.3010(a)(1) and (a)(2) as proposed. B. Section 613.3010(a)(3)—Majority Voting, Management, or Actual Control Under proposed § 613.3010(a)(3), if eligible borrowers own 50 percent or less of the voting stock or equity and one or more of those eligible borrowers/ owners regularly produce some portion of the throughput used in the processing or marketing operation, then an entity would be eligible if it could establish majority voting control, management control, or actual control. Bankers criticized the rule for not setting a minimum percentage floor for ownership. Rather than setting an arbitrary percentage number, the final rule requires either majority voting control or majority control of the board of directors (or similar body), ensuring eligible borrower control. This provision is essentially self-enforcing as to ownership interests; it is highly unlikely that control of an entity will be exercised by a 1-percent owner of a business. 1. Majority Voting Control Proposed § 613.3010(a)(3)(i) provides that a legal entity is eligible for financing under this paragraph if eligible borrowers under § 613.3000(b) own 50 percent or less of the voting stock or equity, regularly produce some portion of the throughput used in the processing or marketing operation and “exercise majority voting control over the entity.” This is essentially a slight refinement of our existing 50-percent rule. An example of this is a corporation with separate classes of voting stock, where the eligible farmer-owned class of stock exercises actual majority voting control regardless of their overall percentage ownership of stock. Another example would be where holders of a majority of voting stock agree, by contract or otherwise, to allow eligible farmer-owners to exercise voting control. This provision sets an “objective” standard, very much like the existing 50-percent test praised as essential by Banker commenters. However, the Financial Services Roundtable asserts that it is “excessively vague” and could be abused by an entity by giving majority voting control to a small minority of farmer owners until such time as the entity obtained a System loan, with majority control then reverting back to the majority. Under FCA's new or existing rule, we would consider an entity that temporarily manipulates its structure in this manner to be an ineligible borrower. To address this potential, new § 613.3010(d) requires each System institution, before making a loan to a legal entity under § 613.3010, to document the legal entity's plan and intent for maintaining eligible borrower ownership, control, throughput, and integration of operations, as applicable, during the duration of the loan. If the institution has reason to believe that majority voting control by eligible borrowers—or any other eligibility criteria—is only temporary, the institution is not authorized to make the loan. 2. Management Control and Actual Control Proposed § 613.3010(a)(3)(ii) would have authorized financing for a legal entity in which eligible borrowers under § 613.3000(b) own 50 percent or less of the voting stock or equity, regularly produce some portion of the throughput used in the processing or marketing operation and “exercise control over management of the legal entity, such as constituting a majority of the directors of a corporation, general partners of a limited partnership, or managing members of a limited liability company.” Proposed § 613.3010(a)(3)(iii) would have authorized financing for a legal entity in which eligible borrowers under § 613.3000(b) own 50 percent or less of the voting stock or equity, regularly produce some portion of the throughput used in the processing or marketing operation and “exercise the documented power and authority to directly determine and implement the policies, business practices, management, and decision-making process of the legal entity.” Bankers criticized paragraphs (a)(3)(ii) and (a)(3)(iii) for being too subjective and asserted that one farmer on the board of a corporate entity could make an entity eligible for System financing. In response to these concerns, we have eliminated paragraph (a)(3)(iii) from the final rule and made paragraph (a)(3)(ii) a “bright line” test in the nature of the existing 50-percent rule. Final paragraph (a)(3)(ii) provides that the eligible borrowers: Constitute a majority of the directors of a corporation, general partners of a limited partnership, or managing members of a limited liability company who exercise control over the legal entity by determining and overseeing the policies, business practices, management, and decision-making process of the legal entity. The provision also requires that the majority of eligible borrowers actually exercise “control,” using a definition derived directly from court decisions and banking statutes and regulations defining “control,” to avoid the concerns raised by the Financial Services Roundtable that the rule could be subverted through supermajority board voting or other manipulative practices. C. Section 613.3010(a)(4)—Substantial Ownership Interest and Supply of Throughput Section 613.3010(a)(4) will authorize financing for a legal entity in which eligible borrowers under § 613.3000(b) own at least 25 percent of the voting stock or equity, regularly produce 20 percent or more of the throughput used in the processing or marketing operation and maintain representation on the board of directors or in the applicable management structure. Under this provision, eligible borrower-owners do not need to exercise voting control over the entity because the substantial ownership requirement coupled with the 20-percent throughput requirement ensures that eligible borrowers have both a significant investment in the entity and the operation is “directly related to” eligible borrowers' operations. To further evidence the importance of farmer involvement and a direct relationship to the eligible borrower's production operation, the final rule includes a requirement that eligible borrowers be involved in directing the processing or marketing entity. As a result of this addition, the criteria in proposed paragraph (a)(4) was reordered so that final paragraph (a)(4)(i) addresses ownership requirements; final paragraph (a)(4)(ii) addresses throughput requirements; and final paragraph (a)(4)(iii) addresses eligible borrower representation on the entity's board or management structure. The reordering of proposed paragraph (a)(4) improves the readability of the rule, but does not change the proposed requirement that eligible borrower-owners regularly produce at least 20 percent of the throughput used in the processing or marketing operation. As discussed at length above in response to Bankers' criticisms, allowing an entity to be eligible with less than 50-percent farmer ownership does not violate the Act and we believe that the combining substantial ownership of the entity, substantial throughput, and involvement in overseeing the entity sufficiently evidences a direct relationship to an eligible borrower's production operation. The 25-percent ownership requirement in final paragraph (a)(4)(i) is consistent with our rules governing attribution of loans; when one entity owns 25 percent of another, System institutions must treat both entities as representing a single credit risk. Section 614.4359 of this chapter provides that “for the purpose of applying the lending and leasing limit to the indebtedness of a borrower, loans to a related borrower shall be combined with loans outstanding to the borrower and attributed to the borrower” when the conditions set forth in the rule are met. A 25-percent ownership threshold is also used in a number of banking agency statutes and regulations for determining when someone has “control” over a legal entity. 29 29 *See* , *e.g.* , 12 U.S.C. 1841(a)(2)(A), 371c(b)(3)(A), 1467a(a)(2)(A); 12 CFR 32.2(g), 40.3(g), 41.3(i), 215.2(c), 223.3(g), 225.2(e), 362.2(e), 574.4(a), 583.7(a). Moreover, Congress established 20-percent throughput as a meaningful threshold in sections 1.11(a)(2) and 2.4(a)(1) of the Act (12 U.S.C. 2019(a)(2) and 2075(a)(1)), placing a cap on the amount of loans System lenders may make where the applicants supply less than 20 percent of the throughput. Therefore, we believe it appropriate to conclude that Congress viewed loans in which the applicants (farmer-owners of an entity) supplied at least 20 percent of the throughput as clearly related to the applicants' production operations. For example, the farmer-owners of a typical ethanol plant would need to supply in excess of five million bushels of corn a year to meet the 20-percent throughput requirement. The Financial Services Roundtable stated that the 20-percent throughput requirement “is a mere fig leaf since the bulk of the entity's throughput will come from parties who are not eligible borrowers, such as large, stockholder-owned industrial corporations not eligible to borrow from the System.” However, the term “throughput” refers to the raw materials produced in agricultural operations. Anyone (including a small or large corporate entity) engaged in producing agricultural products (the throughput used in processing or marketing operations) is, under FCA rules (and common meaning), a “bona fide farmer” eligible to borrow from the System. 30 30 *See* 12 CFR 613.3000(a)(1). System commenters suggested that the throughput requirement could be satisfied if the throughput was supplied by any eligible borrower, not just the owners of the entity. However, we reject that suggestion because it would make the throughput requirement meaningless since virtually all “throughput” is produced by eligible borrowers. It is clear under the Act that the operations of the “borrower” (including the owners of a borrowing legal entity) must supply some of the throughput. As proposed, paragraph (a)(4) required an eligible borrower-owner to “supply” 20 percent or more of the throughput used by the processing or marketing entity. In paragraph (a)(4)(ii) of the final rule, we changed “supply” to “regularly produce” in order to conform the language to paragraphs (a)(1), (a)(2), and (a)(3). As noted above, to further strengthen the connection between the legal entity and the farmers' production operations, we added paragraph (a)(4)(iii) which requires owners that are eligible borrowers to maintain representation on the board of directors or in the applicable management structure of the legal entity. This requirement also addresses concerns from Bankers that System financing will focus on entities that involve large outside investors at the expense of those owned by local farmers and investors. D. Section 613.3010(a)(5)—Extension or Outgrowth of Production Operations Section 613.3010(a)(5) will authorize financing for a legal entity that regularly processes or markets some portion of an eligible borrower's throughput and whose operations are a direct extension or outgrowth of that eligible borrower's operation. This is intended to cover entities—regardless of ownership—in which an eligible borrower has significant involvement, that fulfill the eligible borrower's business needs, and that are functionally integrated with the eligible borrower's production operation. Under paragraph (a)(5), the legal entity's financial condition is necessarily dependent upon the continued involvement of the eligible borrower. This mutual interdependency in financial performance is further indicia that the processing and marketing operation is part, or an “extension or outgrowth,” of the eligible borrower's production operation. We intended proposed paragraph (a)(5) to be a fairly narrow provision to meet the needs of borrowers in limited circumstances (primarily in family farming operations). However, the overwhelming bulk of negative comments focused on this provision. Most of the Banker commenters asserted that this provision would make eligible virtually any entity that did business with a farmer. This was not our intent. As we discussed in the preamble to the proposed rule, many farming operations are evolving to include value-added processing and marketing operations. In many instances, value-added processing and marketing operations are formed by, and for the direct benefit of, eligible borrowers, their families, or other individuals with direct ties to an eligible borrower's production activities. In these instances, the processing or marketing operation is truly part of—or a “direct extension or outgrowth” of—the production operation. However, the ownership structures of these value-added operations are typically crafted to meet tax and liability concerns—rather than System eligibility requirements—and consequently may not satisfy the requirements of our current rule. In a typical situation, a farmer produces an agricultural commodity and is a System borrower. One of the farmer's sons operates an integrated processing facility, using the farmer's resources, to process the commodity. For business, tax, and/or legal reasons, the son is the primary owner of the processing facility; since the son works full time at the processing plant, he is not a “farmer” and the processing entity is therefore not eligible under current FCA rules. New paragraph (a)(5) is intended to ensure that these types of integrated, family operations of System borrowers are eligible for System financing. In order to avoid the “unintended consequences” suggested by the opposition commenters, we have revised new paragraph (a)(5) so that it more clearly reflects our original intent for this provision. As proposed, paragraph (a)(5) would have provided:

(5)Is a legal entity not eligible under paragraph (a)(1) of this section that is a direct extension or outgrowth of an eligible borrower's operation. To obtain financing for a legal entity under this paragraph, the eligible borrower must establish that:

(i)The legal entity was created and operates with the eligible borrower's active support and involvement,

(ii)The legal entity fulfills a business need and supports the operation of the eligible borrower through product branding or other value-added business activity directly related to the operations of the eligible borrower,

(iii)The legal entity and the eligible borrower coordinate to operate in a functionally integrated manner, and

(iv)The legal entity regularly processes or markets some portion of the eligible borrower's throughput. Paragraph (a)(5) of the final rule reads:

(5)Is a legal entity not eligible under paragraph (a)(1) of this section that is a direct extension or outgrowth of an eligible borrower's operation and meets all of the following criteria:

(i)The legal entity was created for the primary purpose of processing or marketing the eligible borrower's throughput and would not exist but for the eligible borrower's involvement,

(iii)The legal entity and the eligible borrower coordinate to operate in a functionally integrated manner, and

(iv)The legal entity regularly receives throughput produced by the eligible borrower representing either:

(A)At least 20 percent of the throughput used by the legal entity in the processing or marketing operation; or

(B)At least 50 percent of the eligible borrower's total output of the commodity processed or marketed. System commenters suggested that the requirement that “the eligible borrower must establish” eligibility criteria should be changed because it is the System lender's responsibility to “establish” eligibility of a borrower. We agree that it is always the System lender's obligation to establish and document a borrower's eligibility. The proposed language sought to ensure that the eligible borrower is sufficiently involved since the loan will be based on his or her credit need. However, we have now more firmly incorporated that concept into paragraph (a)(5)(i) and therefore are deleting this language to avoid confusion and because it is unnecessary. Bankers commented that proposed paragraph (a)(5)(i) was vague and could be satisfied if an eligible borrower simply wrote a letter of support or provided other token “support” for the legal entity. However, as we stated in the proposed rule preamble, “active support and involvement” means more than a token investment of money, time, resources, or throughput. In order to satisfy the commenters concerns and to ensure that the rule is not interpreted in the manner suggested, we have clarified the requirements of paragraph (a)(5)(i) to more closely reflect our original intent. As adopted, in order to qualify for financing under paragraph (a)(5), the legal entity must have been created for the primary purpose of processing or marketing the eligible borrower's throughput and would not exist but for the eligible borrower's involvement. This very high threshold ensures that only those entities that are truly an “extension or outgrowth” of a particular eligible borrower's production operation can qualify under paragraph (a)(5). System commenters also suggested changing the language in paragraph (a)(5)(i) from “the” eligible borrower to “an” eligible borrower so that, for example, when the son takes over the farming operation from the father, it does not destroy eligibility under this section. We believe that the generational transfer of a family farming operation will not destroy eligibility under new paragraph (a)(5). However, we decline to make the suggested change because of the potentially broad implications of the change. Section 613.3010(a)(5) is designed to provide financing to entities that are an extension or outgrowth of a particular eligible borrower's farming operation, helping him or her vertically integrate operations upward into value added activities. The Bankers also assert that paragraph (a)(5)(ii)—under which the legal entity must fulfill a business need and support the operation of the eligible borrower through product branding or other value-added business activity directly related to the operations of the eligible borrower—is unduly vague. The Banker commenters suggested that the local hardware store or other main street businesses “fulfill a business need” of an eligible borrower, therefore meaning that all of those businesses would be eligible. First, as discussed above, retail stores such as the local hardware store are not “processing or marketing” operations and are therefore not eligible for financing under this rule. Second, an entity must meet “all” of the criteria of paragraph (a)(5) in order to be eligible; the bankers do not argue how such business would possibly meet the other required criteria. Therefore, we adopt paragraph (a)(5)(ii) as proposed. Banker commenters made similar vagueness arguments about paragraph (a)(5)(iii), which requires the legal entity and the eligible borrower to coordinate to operate in a “functionally integrated manner.” This requires vertical integration of operations; vertical cooperation or other similar marketing agreements are not sufficient to meet this requirement. We also note that other regulators, such as the Department of Labor and the Internal Revenue Service (IRS), have adopted and implemented regulations dealing with “functional integration” or “integration” of businesses which include “subjective” facts and circumstances criteria; therefore, we believe that our rule is not unduly vague in comparison to those rules. 31 However, in order to address the commenters' concerns on this point, we have added new paragraph (d)(2), which specifically requires each System institution making processing or marketing loans under paragraph (a)(5) to have a procedure for determining functional integration. That procedure requires consideration of all relevant facts and circumstances, which include the extent to which: 31 *See, e.g.* , 26 U.S.C. 509(a)(3); 26 CFR 1.469-4T; 29 CFR 776.26, 784.123. • The operations share resources such as management, employees, facilities, and equipment; • The operations are conducted in coordination with or reliance upon each other; and • The eligible borrower and legal entity are dependent upon each other for economic success. We have changed proposed paragraph (a)(5)(iv) from requiring the eligible borrower to supply “some” throughput (the statutory standard) to requiring that either:

(1)The eligible borrower supply at least 20 percent of the throughput used in the processing or marketing operation; or

(2)the throughput supplied by the eligible borrower to the processing or marketing operation constitutes at least 50 percent of the eligible borrower's total output of the commodity processed or marketed. Therefore, the throughput must be either significant to the processing or marketing operation or significant to the farmer's production operation (or both). Like the change to paragraph (a)(5)(i), this provision is intended to ensure that only those entities that are truly an “extension or outgrowth” of an eligible borrower's production operation can qualify. Ordinarily, particularly with a start-up operation, we would expect that eligible borrowers would supply most of the throughput for a processing or marketing operation under the criteria of (a)(5) and therefore we believe this change reflects our original intent in proposing the rule. E. Section 613.3010(c)—Reporting Requirements To ensure adequate oversight and disclosure of System lending under this section, we adopt a new paragraph (c), which provides: *Reporting requirements* . Each System institution shall include information on loans made under authority of this section in the Reports of Condition and Performance required under § 621.12 of this chapter, in the format prescribed by FCA reporting instructions. FCA makes System “call report” data publicly available through its Web site at *http://www.fca.gov* . Under § 621.13(a) of this chapter, System institutions must prepare Reports of Condition and Performance in accordance with FCA instructions. We anticipate issuing new reporting instructions covering processing and marketing loans made under each of the provisions of § 613.3010 contemporaneously with the effective date of this rule. F. Section 613.3010(d)—Institution Policies In order to address commenters' concerns over the proper application of our eligibility rules, new § 613.3010(d) requires the board of directors of each System institution making processing and marketing loans to legal entities under authority of this section to adopt a policy that addresses eligibility requirements for such legal entities as well as portfolio restrictions and reporting requirements. The final rule also requires each institution to establish procedures for implementing the board policy. Under paragraph (d)(1), the board-adopted policy must provide for procedures on how, at or before the time a loan is made, the institution will document: • Eligible borrower ownership, control, throughput, integration of operations and other factors, as applicable, sufficient to establish eligibility of legal entities at the time a loan is made under this section; and • Each legal entity's plan and intent for maintaining eligible borrower ownership, control, throughput, and integration of operations, as applicable, during the duration of the loan. A number of commenters suggested that continuous monitoring of an entity—after a loan is made—would be necessary in order to ensure that the borrower retained eligibility. However, the Act authorizes System institutions to “make” loans to eligible borrowers. Therefore, eligibility for a System loan is always determined at or before the time the loan is “made,” ( *i.e.* , before money is disbursed to a borrower with a legal obligation to repay). If an eligible “farmer” borrower stops farming 5 years into a 10-year term loan, the loan is not immediately due and the System lender is not obligated to immediately divest the loan. Instead, the borrower is not eligible for any new loan (including any refinancing of an existing loan) from the System lender. Similarly, the eligibility of a processing and marketing entity must be established at the time a loan is made; a new eligibility determination must be made every time the entity seeks additional System credit (including refinancing). However, we believe that an entity that intentionally manipulates its structure solely for eligibility purposes—with no intent or plan to meet eligibility criteria on an ongoing basis—is not an eligible borrower under our rules. Section 613.3010(d)(1)(i) requires the institution to have formal procedures to ensure adequate documentation of the institution's determination that the borrower is eligible at the time a loan is made. We would expect such procedures to include an independent review of the entity's applicable corporate, organizational, marketing and sales documents that support eligibility conclusions. Section 613.3010(d)(1)(ii) further requires each institution to document each borrowing entity's plan and intent for maintaining the eligibility conditions throughout the term of the loan. Each lender must be able to reasonably document—again most likely through reference to the entity's applicable corporate, organizational, marketing and sales documents—that the necessary eligible borrower ownership, control or integration is not a temporary or artificially created condition. To further emphasize that the primary objective of the rule is to help farmers grow into value-added businesses and to address comments that System financing could unduly focus on large entities with limited farmer involvement, we also adopt § 613.3010(d)(2). New § 613.3010(d)(2) requires the board of directors of each System institution making processing and marketing loans to adopt a policy that ensures that the institution develops and implements procedures that encourage financing under paragraph (a)(4) of credit-worthy entities whose operations directly benefit producers, have local community investment support and provide accessible ownership opportunities for local farmers and ranchers. “Accessible ownership opportunities” could include, for example, those that enable participation in the business through minimum investment requirements that are reasonably attainable by individuals in the local community ( *e.g.* , a $25,000 stock purchase minimum rather than $100,000). The new procedures required by § 613.3010(d)(2) do not impose any additional eligibility criteria beyond those contained in § 613.3010(a) and cannot be used as a justification for denying credit to otherwise eligible borrowers. Instead, the requirement is intended to ensure that institutions encourage and enable financing opportunities for entities that are primarily owned by farmers and local investors. This encouragement may take a variety of forms, including targeted marketing, community outreach, technical assistance and other related services to assist with business and marketing plans and other strategic or operational needs of local processing or marketing businesses. There are obvious economic benefits of local ownership to rural communities and each institution's procedures should address how the institution will facilitate lending to those eligible entities. While not a requirement of this rule, FCA generally encourages System institutions to find ways to help facilitate the creation and continuation of farmer-owned processing and marketing businesses. System institutions can help in a variety of ways, including partnering with industry groups, other lenders and government agencies (such as USDA) to promote farmer ownership and encourage a borrower's use of marketplace and government opportunities, including grants and other programs. System institutions can promote the use of federal, state, county, or local grant programs (such as the USDA's Sustainable Agriculture Research and Education Program, Rural Cooperative Development Grant Program, or Value-Added Producer Grant Program) to develop market research and feasibility studies. System institutions can also provide direct help by giving financial assistance (such as through “matching grants”) to independent organizations that provide grants and other financial assistance to farmers. As discussed above, many commenters were critical of the lack of guidance in § 613.3010(a)(5) for determining the key element of “functional integration.” After consideration of those comments, we adopt § 613.3010(d)(3), which requires each institution to have procedures for determining functional integration for loans made under paragraph (a)(5). The procedures must require the institution to consider “all relevant facts and circumstances,” which is a standard used in, for example, IRS rules for determining “integration” of corporate entities. The procedures implemented under paragraph (d)(3) must include, at a minimum, consideration of: • The extent to which the operations share resources such as management, employees, facilities, and equipment; • The extent to which the operations are conducted in coordination with or reliance upon each other; and • The extent to which the eligible borrower and legal entity are dependent upon each other for economic success. While “functional integration” may differ based on the “relevant facts and circumstances” of the operation, we would, at a minimum, expect an institution to find significant resource sharing, operational coordination, and economic interdependence in every “functionally integrated” operation. System lenders must also adequately document their findings supporting a determination of “functional integration.” New paragraph (d)(4) requires adoption of portfolio restrictions necessary to comply with paragraph

(b)(which caps the number of processing and marketing loans that can be made to borrowers who provide less than 20-percent throughput). Section 614.3010(d)(4) also requires formal adoption of any board-defined limits on financing provided under this section. For example, an institution's board should consider market, concentration, or other limiting factors on the institution's processing and marketing lending consistent with the institution's risk-bearing capacity. Finally, new paragraph (d)(5) requires adoption of procedures for reporting requirements necessary to comply with new paragraph

(c)as well as any internal board-defined reporting on financing provided under this section. X. Technical Correction We proposed to correct an omission that inadvertently occurred during the January 30, 1997, regulatory amendments by adding the words “a legal entity or” to the § 613.3000(a)(3) definition of “[p]erson.” This does not provide any additional authority and is in accord with our stated intent published in the 1997 **Federal Register** final rule preamble. We received no comments on this and we adopt the proposed revision as final. XI. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ), the FCA hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, System institutions are not “small entities” as defined in the Regulatory Flexibility Act. List of Subjects in 12 CFR Part 613 Agriculture, Banks, Banking, Credit, Rural areas. For the reasons stated in the preamble, part 613 of chapter VI, title 12 of the Code of Federal Regulations is amended to read as follows: PART 613—ELIGIBILITY AND SCOPE OF FINANCING 1. The authority citation for part 613 continues to read as follows: Authority: Secs. 1.5, 1.7, 1.9, 1.10, 1.11, 2.2, 2.4, 2.12, 3.1, 3.7, 3.8, 3.22, 4.18A, 4.25, 4.26, 4.27, 5.9, 5.17 of the Farm Credit Act (12 U.S.C. 2013, 2015, 2017, 2018, 2019, 2073, 2075, 2093, 2122, 2128, 2129, 2143, 2206a, 2211, 2212, 2213, 2243, 2252). Subpart A—Financing Under Titles I and II of the Farm Credit Act § 613.3000 [Amended] 2. Amend § 613.3000(a)(3) by adding the words “a legal entity or” before the words “an individual”. 3. Amend § 613.3010 by revising paragraph

(a)and adding new paragraphs

(c)and

(d)to read as follows: § 613.3010 Financing for processing or marketing operations.

(a)*Eligible borrowers.* A borrower is eligible for financing for a processing or marketing operation under titles I and II of the Act only if the borrower:

(1)Is a bona fide farmer, rancher, or producer or harvester of aquatic products who regularly produces some portion of the throughput used in the processing or marketing operation; or

(2)Is a legal entity not eligible under paragraph (a)(1) of this section in which eligible borrowers under § 613.3000(b) own more than 50 percent of the voting stock or equity and regularly produce some portion of the throughput used in the processing or marketing operation; or

(3)Is a legal entity not eligible under paragraph (a)(1) of this section in which eligible borrowers under § 613.3000(b) own 50 percent or less of the voting stock or equity, regularly produce some portion of the throughput used in the processing or marketing operation and:

(i)Exercise majority voting control over the legal entity; or

(ii)Constitute a majority of the directors of a corporation, general partners of a limited partnership, or managing members of a limited liability company who exercise control over the legal entity by determining and overseeing the policies, business practices, management, and decision-making process of the legal entity; or

(4)Is a legal entity not eligible under paragraph (a)(1) of this section in which eligible borrowers under § 613.3000(b) meet all of the following criteria:

(i)Own at least 25 percent of the voting stock or equity in the processing or marketing operation;

(ii)Regularly produce 20 percent or more of the throughput used in the processing or marketing operation;

(iii)Maintain representation on the board of directors or in the applicable management structure of the entity.

(5)Is a legal entity not eligible under paragraph (a)(1) of this section that is a direct extension or outgrowth of an eligible borrower's operation and meets all of the following criteria:

(i)The legal entity was created for the primary purpose of processing or marketing the eligible borrower's throughput and would not exist but for the eligible borrower's involvement,

(iii)The legal entity and the eligible borrower coordinate to operate in a functionally integrated manner, and

(iv)The legal entity regularly receives throughput produced by the eligible borrower representing either:

(A)At least 20 percent of the throughput used by the legal entity in the processing or marketing operation; or

(B)At least 50 percent of the eligible borrower's total output of the commodity processed or marketed.

(c)*Reporting requirements.* Each System institution shall include information on loans made under authority of this section in the Reports of Condition and Performance required under § 621.12 of this chapter, in the format prescribed by FCA reporting instructions.

(d)*Institution policies.* The board of directors of each System institution making processing and marketing loans to legal entities under authority of this section must adopt a policy that addresses eligibility requirements for such entities and ensures that the institution, at a minimum, develops and implements:

(1)Procedures on how, at or before the time a loan is made, the institution will document:

(i)Eligible borrower ownership, control, throughput, integration of operations and other factors, as applicable, sufficient to establish eligibility of legal entities at the time a loan is made under this section; and

(ii)Each legal entity's plan and intent for maintaining eligible borrower ownership, control, throughput, and integration of operations, as applicable, during the duration of the loan;

(2)Procedures that encourage financing under paragraph (a)(4) of this section of credit-worthy entities whose operations directly benefit producers, have local community investment support and provide accessible ownership opportunities for local farmers and ranchers.

(3)Procedures for determining functional integration for loans made under paragraph (a)(5) of this section that require consideration of all relevant facts and circumstances, which include the extent to which:

(i)The operations share resources such as management, employees, facilities, and equipment;

(ii)The operations are conducted in coordination with or reliance upon each other; and

(iii)The eligible borrower and legal entity are dependent upon each other for economic success.

(4)Portfolio restrictions necessary to comply with paragraph

(b)of this section and any board-defined limits on financing provided under this section; and

(5)Reporting requirements necessary to comply with paragraph

(c)of this section and any board-defined reporting on financing provided under this section. Dated: May 20, 2008. Roland E. Smith, Secretary, Farm Credit Administration Board. [FR Doc. E8-11742 Filed 5-27-08; 8:45 am] BILLING CODE 6705-01-P NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Parts 700, 704, 705, 707, 708b, 711, 713, 716, 723, 760, and 792 Technical Amendments AGENCY: National Credit Union Administration (NCUA). ACTION: Final rule. SUMMARY: NCUA is amending a number of its regulations by making minor technical corrections and grammatical changes. The amendments delete duplicate words, add proper punctuations, and make other grammatically necessary corrections. The amendments are intended to provide helpful changes to NCUA's regulations. DATES: This rule is effective May 28, 2008. FOR FURTHER INFORMATION CONTACT: Justin M. Anderson, Staff Attorney, Office of General Counsel, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428 or telephone:

(703)518-6540. SUPPLEMENTARY INFORMATION: A. Background In 2007, NCUA internally reviewed its regulations as part of a publication process. NCUA used this opportunity to update and clarify existing regulations. The 2007 review revealed that minor grammatical revisions to certain regulations would be helpful. B. Regulatory Changes This rule provides minor grammatical changes and will not cause any regulatory changes. C. Regulatory Procedures Final Rule Under the Administrative Procedure Act Generally, the Administrative Procedure Act

(APA)requires a federal agency to provide the public with notice and the opportunity to comment on agency rulemakings. The amendments in this rule are not substantive but technical in that they make minor corrections, merely provide clarification or alert users of the regulations to other legal requirements or limitations. The APA permits an agency to forego the notice and comment period under certain circumstances, such as when a rulemaking is technical and not substantive. NCUA finds good cause that notice and public comment are unnecessary under Section 553(b)(3)(B) of the APA. 5 U.S.C. 553(b)(3)(B). NCUA also finds good cause to dispense with the 30-day delayed effective date requirement under Section 553(d)(3) of the APA. 5 U.S.C. 553(d)(3). The rule will, therefore, be effective immediately upon publication. Regulatory Flexibility Act The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a rule may have on a substantial number of small entities (those credit unions under ten million dollars in assets). This rule provides minor, technical changes to certain sections of NCUA's regulations. This rule will not have a significant economic impact on a substantial number of small credit unions, and, therefore, a regulatory flexibility analysis is not required. Paperwork Reduction Act NCUA has determined that this rule will not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. This rule 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. NCUA has determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order. The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families The NCUA has determined that this rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998). Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the APA. 5 U.S.C. 551. The Office of Management and Budget has determined that this rule is not a major rule for purposes of SBREFA. As required by SBREFA, NCUA will file the appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed. List of Subjects 12 CFR Part 700 Credit unions. 12 CFR Part 704 Credit unions, Surety bonds. 12 CFR Part 705 Community development, Credit unions, Loan programs—housing and community development. 12 CFR Part 707 Advertising, Consumer protection, Credit unions, Reporting and recordkeeping requirements, Truth in savings. 12 CFR Part 708b Credit unions, Mergers of credit unions, Reporting and recordkeeping requirements. 12 CFR Part 711 Credit unions. 12 CFR Part 713 Bonds, Credit unions, Insurance. 12 CFR Part 716 Bank deposit insurance, Consumer protection, Credit unions, Privacy. 12 CFR Part 723 Credit unions, Loan programs—business, Reporting and recordkeeping requirements. 12 CFR Part 760 Credit unions, Flood insurance, Mortgages. 12 CFR Part 792 Confidential business information, Freedom of information, Government employees, Privacy. By the National Credit Union Administration Board on May 20, 2008. Mary Rupp, Secretary of the Board. For the reasons discussed above, NCUA is amending 12 CFR parts 700, 704, 705, 707, 708b, 710, 711, 713, 716, 723, 760, and 792 as follows: PART 700—DEFINITIONS 1. The authority citation for part 700 continues to read as follows: Authority: 12 U.S.C. 1752, 1757(6), 1766. § 700.2 [Amended] 2. Section 700.2 is amended by removing the words “means a State” and adding in their place the words “means a state”, and by removing the word “Territories” and adding in its place the word “territories”. PART 704—CORPORATE CREDIT UNIONS 3. The authority citation for part 704 continues to read as follows: Authority: 12 U.S.C. 1766(a), 1781, 1789. § 704.8 [Amended] 4. Section 704.8(a)(4) is amended by removing the word “and” after the phrase “of this section;”. PART 705—COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT UNIONS 5. The authority citation for part 705 continues to read as follows: Authority: 12 U.S.C. 1772C-1; 42 U.S.C. 9822 and 9822 note. 6. Section 705.5(b)(1) introductory text is amended by revising the last sentence to read as follows: § 705.5 Application for participation.

(b)* * *

(1)* * * A nonfederally insured credit union must include the following: PART 707—TRUTH IN SAVINGS 7. The authority citation for part 707 continues to read as follows: Authority: 12 U.S.C. 4311. 8. Section 707.8 is amended by revising paragraph (c)(5) to read as follows: § 707.8 Advertising.

(c)* * *

(5)*Effect of fees.* A statement that fees could reduce the earnings on the account. PART 708b—MERGERS OF FEDERALLY-INSURED CREDIT UNIONS; VOLUNTARY TERMINATION OR CONVERSION OF INSURED STATUS 9. The authority citation for part 708b continues to read as follows: Authority: 12 U.S.C. 1752(7), 1766, 1785, 1786, 1789. § 708b.105 [Amended] 10. Section 708b.105(b) is amended by removing the word “Part” and adding in its place “part” in the first sentence. § 708b.203 [Amended] 11. Section 708b.203(e)(1) is amended by removing the duplicate word “it” appearing after the words “credit union that”. § 708b.301 [Amended] 12. Section 708b.301 is amended as follows: A. Paragraph

(c)is amended by adding a period after the parenthetical “(Insert name of independent entity and address)” in the first full paragraph beginning with “The credit union must”. B. Paragraph

(c)is further amended by removing the word “accounts” and adding in its place the word “account” after the words “if I use different” in the second full paragraph beginning with “I understand if”. C. Paragraph (d)(5) is amended by removing the word “inset” and adding in its place the word “insert” in the parenthetical following the words “a majority voted” in the eighth paragraph beginning with “(insert “20% or more”)”. § 708b.302 [Amended] 13. Section 708b.302 is amended as follows: A. Paragraph

(c)is amended by removing the word “accounts” and adding in its place the word “account” after the words “if I use different” in the second full paragraph beginning with “I Understand if”. B. Paragraph (d)(5) is amended by removing the word “and” and adding in its place the word “an” before the words “entity independent” in the first full paragraph beginning with “The (insert name)”. C. Paragraph (d)(5) is further amended by removing the word “inset” and adding in its place the word “insert” before the words “in favor of” in the eighth paragraph beginning with “(insert “20% or more”)”. 14. Section 708b.303 is amended as follows: A. Paragraph

(b)is amended by revising the first sentence in the second full paragraph to read as set forth below. B. Paragraph (c)(5) is amended by removing the word “and” and adding in its place the word “an” before the words “entity independent” in the first sentence. § 708b.303 Conversion of insurance through merger.

(b)* * * I understand if the merger or conversion of the (insert name of merging credit union) into the (insert name of continuing credit union) is approved, the National Credit Union Administration share (deposit) insurance I now have, up to $100,000, or possibly more if I use different account structures, will terminate upon the effective date of the conversion. * * * PART 711—MANAGEMENT OFFICIAL INTERLOCKS 16. The authority citation for part 711 continues to read as follows: Authority: 12 U.S.C. 1757 and 3201-3208. § 711.2 [Amended] 17. Section 711.2(j) is amended by removing the italicized phrase “ *Low- and moderate-income* ” and adding in its place the italicized phrase “ *Low and moderate-income* ”. PART 713—FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL CREDIT UNIONS 18. The authority citation for part 713 continues to read as follows: Authority: 12 U.S.C. 1761A, 1761B, 1766(a), 1766(h), 1789(a)(11). § 713.4 [Amended] 19. Section 713.4(a) is amended by removing the words “Web site” and adding in its place the word “website”. PART 716—PRIVACY OF CONSUMER FINANCIAL INFORMATION 20. The authority citation for part 716 continues to read as follows: Authority: 15 U.S.C. 6801 *et seq.* , 12 U.S.C. 1751 *et seq.* § 716.3 [Amended] 21. Section 716.3 is amended as follows: A. Paragraph (b)(2)(iii) is amended by removing the italicized words “web sites” and adding in their place the italicized word “ *websites* ” in the paragraph heading, removing the words “web site” and adding in their place the word “website” in the first sentence, and removing the word “form” and adding in its place with the word “from” after the words “not distract attention” in the first sentence. B. Paragraph (e)(2)(iii) is amended by removing the parentheses from the sentence that begins “(The individual” and ends with “institutions involved).” PART 723—MEMBER BUSINESS LOANS 22. The authority citation for part 723 continues to read as follows: Authority: 12 U.S.C. 1756, 1757, 1757A, 1766, 1785, 1789. § 723.21 [Amended] 23. Section 723.21 is amended as follows: A. In the definition of *Construction or development loan,* Example 4 is amended by removing the word “incoming” in the fourth sentence and adding in its place the word “income”. B. The definition of *Net worth* is amended by removing the phrase “low income-designated” and adding in its place the phrase “low-income designated” in the fourth sentence. PART 760—LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS 24. The authority citation for part 760 continues to read as follows: Authority: 12 U.S.C. 1757, 1789; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128. § 760.7 [Amended] 25. Section 760.7 is amended by removing the comma before the words “at any time during” and adding a comma after the words “not covered by flood insurance” in the first sentence. PART 792—REQUESTS FOR INFORMATION UNDER THE FREEDOM OF INFORMATION ACT AND PRIVACY ACT, AND BY SUBPEONA; SECURITY PROCEEDURES FOR CLASSIFIED INFORMATION 26. The authority citation for part 792 continues to read as follows: Authority: 5 U.S.C. 301, 552, 552A, 552B; 12 U.S.C. 1752a(d), 1766, 1789, 1795f; E.O. 12600, 52 FR 23781, 3 CFR, 1987 Comp., p. 235; E.O. 12958, 60 FR 19824, 3 CFR, 1995 Comp., p. 333. § 792.10 [Amended] 27. Section 792.10(b) is amended by removing the words “which meets” and adding in their place the words “that meet” in the third sentence. § 792.16 [Amended] 28. Section 792.16(a) is amended by adding a comma after the words “extends the time” and removing the comma after the words “with written notice” in the second sentence. § 792.28 [Amended] 29. Section 792.28 is amended by moving the period outside the parenthetical “(in case of partial denials)” in the second sentence. § 792.50 [Amended] 30. Section 792.50(a) is amended by removing the parenthetical phrase from the first sentence. § 792.51 [Amended] 31. Section 792.51(b) is amended by removing the words “Personnel Office” wherever they appear in the fourth sentence and adding in their place the words “Office of Human Resources”. [FR Doc. E8-11736 Filed 5-27-08; 8:45 am] BILLING CODE 7535-01-P DEPARTMENT OF DEFENSE Office of the Secretary [DOD-2006-HA-0194; RIN 0720-AB07] 32 CFR Part 199 TRICARE; Certain Survivors of Deceased Active Duty Members; and Adoption Intermediaries AGENCY: Office of the Secretary, DoD. ACTION: Final rule. SUMMARY: This rule confirms as final a January 2007 interim final rule which implements two provisions of the National Defense Authorization Act for Fiscal Year 2006 (NDAA FY06). First, Section 715 of the NDAA FY06 extends the time frame certain dependents of active duty service members

(ADSM)who die while on active duty for more than 30 days shall receive TRICARE medical benefits at active duty dependent payment rates. Second, Section 592 of the NDAA FY06 modifies the requirement for those intermediaries who provide adoption placements. Additionally, this final rule makes an administrative clarification to the following two eligibility provisions: those placed in the legal custody of a member or former member; and those placed in the home of a member or former member in anticipation of adoption. This clarification makes a distinction between the two groups and specifies that for placement into legal custody by court order, the court order must be for a period of 12 consecutive months. DATES: *Effective Date:* This rule is effective June 27, 2008. FOR FURTHER INFORMATION CONTACT: Ms. Ann N. Fazzini,

(303)676-3803 for questions regarding Section 715 as it relates to the TRICARE Basic Program; and also questions regarding Section 592. Mr. Michael Kottyan,

(303)676-3520 for questions regarding Section 715 as it relates to the Extended Health Care Option (ECHO). Mr. John Leininger,

(303)676-3613, for questions regarding TRICARE Prime Remote. Questions regarding payment of specific claims should be addressed to the appropriate TRICARE contractor. SUPPLEMENTARY INFORMATION: Background I. In the **Federal Register** of January 19, 2007 (72 FR 2444), the Department of Defense published for public comment an interim final rule regarding:

(1)Payment rates for dependents of deceased active duty service members;

(2)Modification of requirement for certain intermediaries under certain authorities relating to adoptions; and,

(3)Administrative change—court order/adoption placement. An overview of these three provision follows. II. Payment Rates for Dependents of Deceased Active Duty Service Members. Dependents of active-duty members who died while on active duty have been always eligible for TRICARE; however, their payment rates/cost-sharing provisions have changed over time. Section 715 of the NDAA FY06 modified the cost-sharing provision for certain dependents of deceased active duty members. The reader is referred to the interim final rule published on January 19, 2007 (72 FR 2444), for detailed information regarding this provision. III. Modification of Requirement for Certain Intermediaries Under Certain Authorities Relating to Adoptions. Section 592 of the NDAA FY06 expands those intermediaries who perform adoption placement to include placement by any source authorized by State or local law to provide adoption placement. This expanded language mirrors the language found in Title 10, United States Code, Section 1052, reimbursement for adoption expenses, and provides consistency between personnel benefit policies in chapter 53 of Title 10, United States Code, and eligibility for TRICARE under chapter 55 of Title 10, United States Code. Effective date of the NDAA FY06 (and this provision) is January 6, 2006. The reader is referred to the interim final rule published on January 19, 2007 (72 FR 2444), for detailed information regarding this provision. IV. Administrative Change—Court Order/Adoption Placement. This final rule clarifies the eligibility provisions for an unmarried person who is placed in the legal custody of the member or former member as a result of an order of a court of competent jurisdiction in the United States (or possession of the United States) by stating that the court order must be for a period of at least 12 consecutive months. We currently address a child who is placed in legal custody of a member or former member, but the language unintentionally omitted the 12 consecutive month period required by 10 U.S.C. 1072(2)(I)(i). This rule also clarifies that an unmarried person placed in legal custody of a member or former member is a category that is separate and distinct from those placed for adoption. We accomplish this by providing separate regulatory paragraphs for each group. The reader is referred to the interim final rule published on January 19, 2007 (72 FR 2444), for detailed information regarding this provision. Additionally, for historical information on these two groups, we refer the reader to the final rule that established these groups (64 FR 46133, August 24, 1999). Review of Public Comments *Comment:* One commenter applauded the enhanced benefit, but recommended further direction that this benefit only be extended upon the initiation and/or completion of an appropriate Line of Duty

(LOD)determination. Generally, LOD determinations do not apply for battle injuries or battle-related deaths. This commenter requested that clarification be directed toward ADSM deaths that occur under in-garrison, non-combat operations. *Response:* We appreciate the comment and note that the statutory language provides the benefit “when a member dies while on active duty for a period of more than 30 days.” There are no qualifiers or limitation on this provision; consequently, there is no statutory authority to apply LOD determinations. *Comment:* A second commenter asked about the effective date of the provisions. *Response:* For the payment rates for dependents of deceased active duty family members, the provision is effective with respect to those active duty service members whose death occurred on or after October 7, 2001. The modification of adoption intermediaries is effective January 6, 2006. Regulatory Procedures Executive Order 12866, “Regulatory Planning and Review” Section 801 of title 5, United States Code (U.S.C.) and Executive Order (E.O.) 12866 require certain regulatory assessments and procedures for any major rule or significant regulatory action, defined as one that would result in an annual effect of $100 million or more on the national economy or which would have other substantial impacts. This is not a major rule under 5 U.S.C. 801. It is a significant regulatory action but not economically significant and has been reviewed by the Office of Management and Budget as required under the provisions of E.O. 12866. Section 202, Public Law 104-4, “Unfunded Mandates Reform Act” It has been certified that this rule does not contain a Federal mandate that may result in the expenditure by State, local and tribal governments, in aggregate, or by the private sector, of $100 million or more in any one year. Public Law 96-354, “Regulatory Flexibility Act” (5 U.S.C. 601) The Regulatory Flexibility Act requires that each Federal agency prepare, and make available for public comment, a regulatory flexibility analysis when the agency issues a regulation which would have a significant impact on a substantial number of small entities. In addition, we certify that this final rule will not significantly affect a substantial number of small entities. Public Law 96-511, “Paperwork Reduction Act” (44 U.S.C. Chapter 35) This final rule will not impose additional information collection requirements on the public under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 55). Executive Order 13132, “Federalism” We have examined the impact of the rule under E.O. 13132 and it does not have policies that have federalism implications that would 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, therefore, consultation with State and local officials is not required. List of Subjects in 32 CFR Part 199 Claims, Dental health, Health care, Health insurance, Individuals with disabilities, Military personnel. Accordingly, the interim final rule published January 19, 2007 (72 FR 2444), is confirmed as final without change. Dated: May 19, 2008. Patricia L. Toppings, OSD Federal Register Liaison Officer, Department of Defense. [FR Doc. E8-11738 Filed 5-27-08; 8:45 am] BILLING CODE 5001-06-P DEPARTMENT OF DEFENSE Department of the Navy 32 CFR Part 706 Certifications and Exemptions Under the International Regulations for Preventing Collisions at Sea, 1972 AGENCY: Department of the Navy, DOD. ACTION: Final rule. SUMMARY: The Department of the Navy is amending its certifications and exemptions under the International Regulations for Preventing Collisions at Sea, 1972 (72 COLREGS), to reflect that the Deputy Assistant Judge Advocate General (Admiralty and Maritime Law) has determined that USS STOUT (DDG 55) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with certain provisions of the 72 COLREGS without interfering with its special function as a naval ship. The intended effect of this rule is to warn mariners in waters where 72 COLREGS apply. DATES: This rule is effective May 28, 2008 and is applicable beginning March 26, 2008. FOR FURTHER INFORMATION CONTACT: Commander M. Robb Hyde, JAGC, U.S. Navy, Deputy Assistant Judge Advocate General (Admiralty and Maritime Law), Office of the Judge Advocate General, Department of the Navy, 1322 Patterson Ave., SE., Suite 3000, Washington Navy Yard, DC 20374-5066, telephone 202-685-5075. SUPPLEMENTARY INFORMATION: Pursuant to the authority granted in 33 U.S.C. 1605, the Department of the Navy amends 32 CFR part 706. This amendment provides notice that the Deputy Assistant Judge Advocate General (Admiralty and Maritime Law), under authority delegated by the Secretary of the Navy, has certified that USS STOUT (DDG 55) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with the following specific provisions of 72 COLREGS without interfering with its special function as a naval ship: Annex I, paragraph 3(a), pertaining to the location of the forward masthead light in the forward quarter of the vessel, the placement of the after masthead light, and the horizontal distance between the forward and after masthead lights. The Deputy Assistant Judge Advocate General (Admiralty and Maritime Law) has also certified that the lights involved are located in closest possible compliance with the applicable 72 COLREGS requirements. Moreover, it has been determined, in accordance with 32 CFR parts 296 and 701, that publication of this amendment for public comment prior to adoption is impracticable, unnecessary, and contrary to public interest since it is based on technical findings that the placement of lights on this vessel in a manner differently from that prescribed herein will adversely affect the vessel's ability to perform its military functions. List of Subjects in 32 CFR Part 706 Marine safety, Navigation (water), and Vessels. For the reasons set forth in the preamble, amend part 706 of title 32 of the Code of Federal Regulations as follows: PART 706—CERTIFICATIONS AND EXEMPTIONS UNDER THE INTERNATIONAL REGULATIONS FOR PREVENTING COLLISIONS AT SEA, 1972 1. The authority citation for part 706 continues to read: Authority: 33 U.S.C. 1605. 2. Table Four, Paragraph 16 of § 706.2 is amended by removing the entry for USS STOUT (DDG 55). 3. Table Five, of § 706.2 is amended by revising the following entry for USS STOUT (DDG 55), to read as follows: § 706.2 Certifications of the Secretary of the Navy under Executive Order 11964 and 33 U.S.C. 1605. Table Five Vessel Hull No. Masthead lights not over all other lights and obstructions. Annex I, sec. 2(f) Forward masthead light not in forward quarter of ship. Annex I, sec. 3(a) After mast-head light less than 1/2 ship's length aft of forward masthead Light. Annex I, sec. 3(a) Percentage horizontal separation attained * * * * * * * USS STOUT DDG 55 X X 20.3 * * * * * * * Approved: April 29, 2008. M. Robb Hyde, Commander, JAGC, U.S. Navy, Deputy Assistant Judge Advocate General (Admiralty and Maritime Law). [FR Doc. E8-11836 Filed 5-27-08; 8:45 am] BILLING CODE 3810-FF-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [Docket No. USCG-2008-0354] Drawbridge Operation Regulations; Sacramento River, Rio Vista, CA, Drawbridge Maintenance AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations. SUMMARY: The Commander, Eleventh Coast Guard District, has issued a temporary deviation from the regulation governing the operation of the Rio Vista Drawbridge across the Sacramento River, mile 12.8, at Rio Vista, CA. The deviation is necessary to allow the bridge owner, the California Department of Transportation (Caltrans), to conduct required maintenance of the drawspan. This deviation allows for a 4-hour notice for openings during nighttime. DATES: This deviation is effective between 9 p.m. and 5 a.m., from May 27, 2008 through June 27, 2008. ADDRESSES: Documents indicated in this preamble as being available in the docket are part of docket USCG-2008-0354 and are available online at *www.regulations.gov.* They are also available for inspection or copying two locations: the Docket Management Facility (M-30), U.S. Department of Transportation, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays, and Commander (dpw), Eleventh Coast Guard District, Building 50-2, Coast Guard Island, Alameda, CA 94501-5100, between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: David H. Sulouff, Chief, Bridge Section, Eleventh Coast Guard District, telephone

(510)437-3516. SUPPLEMENTARY INFORMATION: Caltrans requested a temporary change to the operation of the Rio Vista Drawbridge, mile 12.8, Sacramento River, at Rio Vista, CA. The Rio Vista Drawbridge navigation span provides a vertical clearance of 17 feet above Mean High Water in the closed-to-navigation position. The draw opens on signal as required by 33 CFR 117.5. Navigation on the waterway consists of both commercial and recreational vessels. The four-hour notice for openings during the maintenance period, between 9 p.m. and 5 a.m., from May 27, 2008 through June 27, 2008, will allow Caltrans to clear the drawspan of maintenance equipment so as not to delay approaching vessels. This temporary deviation has been coordinated with all affected waterway users. No objections to the proposed temporary deviation were raised. Vessels that can transit the bridge, while in the closed-to-navigation position, may continue to do so at any time. In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: May 19, 2008. C.E. Bone, Rear Admiral, U.S. Coast Guard Commander, Eleventh Coast Guard District. [FR Doc. E8-11862 Filed 5-27-08; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket No. USCG-2008-0395] RIN 1625-AA00 Safety Zone: Edenton 4th of July Celebration Firework Display, Edenton Bay, Edenton, NC AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. SUMMARY: The Coast Guard will implement a safety zone during the Edenton 4th of July Celebration Firework Display, a fireworks display to be held over the waters of the Edenton Bay, Edenton, North Carolina, Vessel traffic in portions on the Edenton Bay adjacent to Edenton, North Carolina, will be restricted during the fireworks display. DATES: This rule is effective July 4, 2008, from 8:30 p.m. to 9:30 p.m. ADDRESSES: Documents indicated in this preamble as being available in the docket are part of docket USCG-2008-0395 and are available online at *www.regulations.gov* . They are also available for inspection or copying at two locations: The Docket Management Facility (M-30), U.S. Department of Transportation, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays, and at Commander Sector North Carolina, 2301 East Fort Macon Road, Atlantic Beach, North Carolina 28512, between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, call C.D. Humphrey, Marine Event Coordinator,

(252)247-4569. If you have questions on viewing the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 202-366-9826. SUPPLEMENTARY INFORMATION: Regulatory Information We did not publish a notice of proposed rulemaking

(NPRM)for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. Publishing an NPRM would be impracticable and contrary to public interest because immediate action is needed to minimize potential danger to the public during the event. The necessary information to determine whether the marine event poses a threat to persons and vessels was not provided to the Coast Guard in sufficient time to publish an NPRM. The potential dangers posed by the pyrotechnic fireworks display make a safety zone necessary to provide for the safety of spectator craft and other vessels transiting the event area. The Coast Guard will issue a broadcast notice to mariners to advise mariners of the restriction and on have on-scene Coast Guard and local law enforcement vessels. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the **Federal Register** . Delaying the effective date would be contrary to the public interest, because immediate action is needed to ensure the safety of the event participants, spectator craft and other vessels transiting the event area. Advance notifications will be made to users of Edenton Bay, via marine information broadcasts, local notice to mariners, commercial radio stations and area newspapers. Background and Purpose On July 4, 2008, Chowan Edenton Optimist Club will sponsor the “4th of July Celebration Firework Display”, on the waters of the Edenton Bay. The event will consist of a fireworks display launched from the eastern shore of Edenton Bay. Due to the need for vessel control during the event, vessel traffic will be temporarily restricted to provide for the safety of participants, spectators and transiting vessels. Discussion of Rule The Coast Guard is establishing a safety zone on specified waters of the Edenton Bay, Edenton, North Carolina. The regulated area includes all waters within a 300 yard radius of position 36°03′04″ N, 076°36′18″ W or approximately 150 yards east of the entrance to Queen Anne Creek, Edenton, North Carolina. The safety zone will be in effect from 8:30 p.m. to 9:30 p.m. on July 4, 2008. The effect will be to restrict general navigation in the regulated area during the fireworks display. Except for persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the regulated area during the enforcement period. The Patrol Commander will notify the public of specific enforcement times by Marine Radio Safety Broadcast. These regulations are needed to control vessel traffic during the event to enhance the safety of participants, spectators and transiting vessels. Regulatory Evaluation This 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 is unnecessary. Although this proposed regulation would prevent traffic from transiting a portion of the Edenton Bay adjacent to Edenton, North Carolina, during the event, the effects of this regulation would not be significant due to the limited duration that the regulated area would be in effect. Extensive advance notifications would be made to the maritime community via Local Notice to Mariners, marine information broadcast, and area newspapers, so mariners can adjust their plans accordingly. Vessel traffic would be able to transit the regulated area when the Coast Guard Patrol Commander deems it is safe to do so. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this 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 rule will not have a significant economic impact on a substantial number of small entities. The owners or operators of vessels intending to transit this section of the Edenton Bay will be impacted during the event. This purposed rule would not have a significant economic impact on a substantial number of small entities for the following reasons. This rule will be enforced for only a short period, from 8:30 p.m. to 9:30 p.m. on July 4, 2008. The regulated area will apply to a segment of the Edenton Bay adjacent to the Edenton waterfront. Marine traffic may be allowed to pass through the regulated area with the permission of the Coast Guard Patrol Commander. In the case where the Patrol Commander authorizes passage through the regulated area during the event, vessels will be required to proceed at the minimum speed necessary to maintain a safe course that minimizes wake near the firework launch site. Before the enforcement period, we would issue maritime advisories so mariners can adjust their plans accordingly. 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. 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. Collection of Information This rule calls 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 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 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 rule will not effect 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 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 rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. Indian Tribal Governments This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does 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 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 rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this rule under Commandant Instruction M16475.lD which guides the Coast Guard in complying with the National Environmental Policy Act of 1969

(NEPA)(42 U.S.C. 4321-4370f), and have concluded 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, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES . List of Subjects in 33 CFR Part 165 Harbors, Marine Safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, and 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, 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. 2. Add temporary § 165.T05-0395 to read as follows: § 165.T05-0395 Edenton Bay, Edenton, North Carolina.

(a)*Safety Zone* . The safety zone includes all waters within a 300 yard radius of position 36°03′04″ North, 076°36′18″ West, approximately one and fifty hundred yards east of the entrance to Queen Anne Creek, Edenton, North Carolina. All coordinates reference Datum NAD 1983.

(b)*Definitions* .

(1)Coast Guard Patrol Commander means a commissioned, warrant, or petty officer of the Coast Guard who has been designated by the Commander, Coast Guard Sector North Carolina.

(2)*Official Patrol* means any vessel assigned or approved by Commander, Coast Guard Sector North Carolina with a commissioned, warrant, or petty officer on board and displaying a Coast Guard ensign.

(3)*Participant* includes all vessels participating in the “4th of July Celebration” under the auspices of the Marine Event Permit issued to the event sponsor and approved by Commander, Coast Guard Sector North Carolina.

(c)*Safety Zone.*

(1)Except for event participants and persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remaining the safety zone.

(2)The Operator of any vessel in the safety zone must:

(i)Stop the vessel immediately when directed to do so by any Official Patrol and then proceed only as directed.

(ii)Comply with the instructions of the Official Patrol.

(iii)(if authorized to proceed) Proceed at the minimum speed necessary to maintain a safe course that minimizes wake near the event site.

(d)*Enforcement period.* This section will be enforced from 8:30 p.m. to 9:30 p.m. on July 4, 2008. Dated: May 16, 2008. June E. Ryan, Captain, U.S. Coast Guard, Captain of the Port North Carolina. [FR Doc. E8-11867 Filed 5-27-08; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket No. USCG-2008-0373] RIN 1625-AA00 Safety Zone: Ambrose Light, Offshore Sandy Hook, NJ, Atlantic Ocean AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. SUMMARY: The Coast Guard is establishing a temporary safety zone in the waters of the Atlantic Ocean within a 250 yard radius of Ambrose Light (LLNR 720) located at position 40°27′00″ N, 073°48′00″ W, approximately 8.35 nautical miles east of Sandy Hook, NJ. This safety zone is necessary to provide for the safety of life, property and the environment on navigable waters of the United States from the hazards associated with the damaged structure and during survey and debris removal at the charted location of Ambrose Light that was recently damaged. This safety zone is intended to keep vessels a safe distance from Ambrose Light during the survey and debris removal operations. DATES: This rule is effective from 11:59 p.m. on May 5, 2008 through 11:59 p.m. on November 1, 2008. ADDRESSES: Documents indicated in this preamble as being available in the docket are part of docket USCG-2008-0373 and are available online at *www.regulations.gov.* They are also available for inspection or copying at two locations: the Docket Management Facility (M-30), U.S. Department of Transportation, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays, and at Coast Guard Sector New York, Room 209, Staten Island, NY 10305 between 8 a.m. and 3 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: If you have questions on this temporary rule, call Lieutenant Commander Mike McBrady, Waterways Management Division, Coast Guard Sector New York

(718)354-2353. If you have questions on viewing the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 202-366-9826. SUPPLEMENTARY INFORMATION: Regulatory Information We did not publish a notice of proposed rulemaking

(NPRM)for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. A notice and comment period was not held for this rulemaking because the safety zone is needed in response to an emergency situation created when the Ambrose Light was struck and damaged by a vessel. A survey and debris removal operations are needed immediately to remove this hazard to navigation. Delaying the necessary survey and debris removal in order to conduct a notice and comment period would be contrary to the public interest. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the **Federal Register** as immediate action is needed to protect vessels transiting the area from the hazards associated with the damaged light tower, area survey, and debris removal operations. Any delay in implementing this rule would be contrary to public interest since immediate action is needed to prevent vessels from transiting the area so as to avoid the potential hazards associated with the unstable light, the possibility of it collapsing, or a vessel grounding on the remains of Ambrose Light (LLNR 720). Background and Purpose On Saturday, November 3, 2007, the M/T AXEL SPIRIT allided with Ambrose Light (LLNR 720) in position 40°27′00″ N, 073°48′00″ W approximately 8.35 nautical miles east of Sandy Hook, NJ. Initial damage assessment indicates that the Ambrose Light is no longer watching properly and in danger of collapse, creating an additional hazard to vessels operating in the area. This safety zone is being created in response to this emergency situation in order to keep mariners away from the hazards associated with the damaged structure and from the hazards associated with survey and debris removal operations. On November 26, 2007 we published a Temporary Final Rule in the **Federal Register** (72 FR 65886) titled “Safety Zone: Ambrose Light, Offshore Sandy Hook, NJ, Atlantic Ocean” establishing a temporary safety zone around Ambrose Light after it was initially struck. This safety zone was effective from November 5, 2007 until May 5, 2008. The Coast Guard's Civil Engineering Unit in Providence, Rhode Island does not expect to award the contract to remove the tower and associated debris until on, or about, May 1, 2008. It is expected that the removal operations will take about 75 days. This 180-day temporary rulemaking will allow for the safe removal and provide for any expected delays due to weather, equipment malfunctions, etc. If the survey and debris removal is completed before November 1, 2008, the Coast Guard will cease enforcement of the safety zone. Discussion of Rule This rule will provide for the safety of vessel traffic in and around Ambrose Light (LLNR 720). This regulation establishes a temporary safety zone on the navigable waters of the Atlantic Ocean within a 250 yard radius of position 40°27′00″ N, 73°48′00″ W, approximately 8.35 nautical miles east of Sandy Hook, NJ. The rule described herein prohibits the transit of vessels through the safety zone unless specifically authorized by the Captain of the Port, New York. This safety zone is in effect from 11:59 p.m. on May 5, 2008 until 11:59 p.m. on November 1, 2008. The zone will be enforced during the entire effective period unless the survey, tower and debris removal operation is completed prior to November 1, 2008. Marine traffic may transit safely outside of the zone during the enforcement period. The Captain of the Port New York will notify the maritime community of the safety zone by publication in the Local Notice to Mariners, Safety Voice Broadcasts, and on the internet at *http://homeport.uscg.mil/newyork.* Regulatory Evaluation This 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 rule will be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. This regulation may have some impact on the public, but the potential impact will be minimized for the following reason: Vessels may transit around the 250 yard safety zone. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this 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 rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which might be small entities: the owners or operators of vessels intending to transit within a 250 yard radius of Ambrose Light (LLNR 720) at 40°27′00″ N, 73°48′00″ W approximately 8.35 nautical miles east of Sandy Hook, NJ. However, this safety zone is not expected to have a significant economic impact on a substantial number of small entities as vessels will be able to transit around the 250 yard safety zone. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). 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 rule calls 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 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 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 rule will not effect 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 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 rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. Indian Tribal Governments This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does 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 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 rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this rule under Commandant Instruction M16475.lD which guides the Coast Guard in complying with the National Environmental Policy Act of 1969

(NEPA)(42 U.S.C. 4321-4370f), and have concluded 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, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. This rule fits category (34)(g) as it establishes a safety zone. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES . List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, and Waterways. For the reasons discussed in the preamble, the Coast Guard amends 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, 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. 2. Add temporary § 165.T01-165 to read as follows: § 165.T01-165 Safety Zone: Ambrose Light, Offshore Sandy Hook, NJ, Atlantic Ocean.

(a)*Location.* The following area is a Safety Zone: All navigable waters of the Atlantic Ocean within a 250 yard radius of Ambrose Light (LLNR 720) at position 40°27′00″ N, 73°48′00″ W, approximately 8.35 nautical miles east of Sandy Hook, NJ.

(b)*Effective Dates.* This regulation is effective from 11:59 p.m. on May 5, 2008 to 11:59 p.m. on November 1, 2008.

(c)*Definitions.* The following definition applies to this section: *On-scene representative,* means any commissioned, warrant, and petty officers of the Coast Guard on board Coast Guard, Coast Guard Auxiliary, and local, state, and federal law enforcement vessels who have been authorized to act on the behalf of the Captain of the Port, New York.

(d)*Regulations.*

(1)The general regulations contained in 33 CFR 165.23 apply.

(2)In accordance with the general regulations in § 165.23 of this part, entry into, transiting, or anchoring within this safety zone is prohibited unless authorized by the Captain of the Port New York, or his on-scene representative. Dated: May 5, 2008. R.R. O'Brien, Jr., Captain, U.S. Coast Guard, Captain of the Port New York. [FR Doc. E8-11868 Filed 5-27-08; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 3 RIN 2900-AG15 Disease Subject to Presumptive Service Connection; Correction AGENCY: Department of Veterans Affairs. ACTION: Correcting amendment. SUMMARY: This document contains a correction to the regulations of the Department of Veterans Affairs

(VA)that governs presumptive service connection for certain diseases from exposure to ionizing radiation during military service. This correction is required in order to amend a cross-reference in the regulation. No substantive change to the content of the regulations is being made by this correcting amendment. DATES: *Effective Date:* May 28, 2008. FOR FURTHER INFORMATION CONTACT: Tracy Wang, Office of Regulation Policy and Management (00REG), Department of Veterans Affairs, 910 Vermont Ave., NW., Washington, DC 20420,

(202)461-4902. SUPPLEMENTARY INFORMATION: VA published a final rule in the **Federal Register** on April 27, 1993 (See 58 FR 25563), to implement Section 2 of the Veterans' Radiation Exposure Amendments of 1992, Public Law 102-578, which amended 38 U.S.C. 1112(c) to repeal the requirement that, to be presumed service connected, specified diseases of veterans who participated in a radiation-risk activity to become at least 10 percent disabling within 40 years after the veterans' last exposure to radiation. Accordingly, VA removed 38 CFR 3.309(d)(3) and redesignated § 3.309(d)(4) as the new § 3.309(d)(3). However, VA neglected to amend the reference to the redesignated § 3.309(d)(3) that appears at § 3.309(d)(3)(vii)(B). This document corrects that omission by removing “(d)(4)(vii)(A)” and adding, in its place, “(d)(3)(vii)(A)”. List of Subjects in 38 CFR Part 3 Administrative practice and procedure, Claims, Disability benefits, Health care, Pensions, Veterans, Vietnam. Approved: May 20, 2008. Robert McFetridge, Assistant to the Secretary for Regulation Policy and Management. For the reasons set out in the preamble, VA is correcting 38 CFR part 3 as follows. PART 3—ADJUDICATION 1. The authority citation for part 3, subpart A continues to read as follows: Authority: 38 U.S.C. 501(a), unless otherwise noted. § 3.309 [Corrected] 2. In § 3.309(d)(3)(vii)(B), remove the phrase “paragraph (d)(4)(vii)(A)” and add, in its place, “paragraph (d)(3)(vii)(A)”. [FR Doc. E8-11725 Filed 5-27-08; 8:45 am] BILLING CODE 8320-01-P DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 21 RIN 2900-AL44 Survivors' and Dependents' Educational Assistance Program Period of Eligibility for Eligible Children and Other Miscellaneous Issues AGENCY: Department of Veterans Affairs. ACTION: Final rule. SUMMARY: The Department of Veterans Affairs

(VA)is amending its regulations governing the Survivors' and Dependents' Educational Assistance

(DEA)program to implement statutory provisions in the Veterans Benefits and Health Care Improvement Act of 2000, the Veterans' Survivor Benefits Improvements Act of 2001, the Veterans Education and Benefits Expansion Act of 2001, the Veterans Benefits Act of 2002, and the Veterans Benefits Act of 2003. As a result of these statutory provisions, certain eligible children may choose the beginning date of their period of eligibility and eligible children who serve on active duty or in the National Guard may receive extensions to the ending date of their period of eligibility. These statutory provisions also allow VA to consider certain qualifying beneficiaries' original claims as having been filed retroactively to their eligibility dates. In addition, they allow certain eligible DEA beneficiaries to be paid for preparatory courses for tests required or used for admission to an institution of higher education or a graduate school. Further, these provisions permit eligible children to receive benefits for such preparatory courses even if the courses are taken before their 18th birthday. This document implements these provisions of law by amending pertinent regulations. DATES: *Effective Date:* This final rule is effective May 28, 2008. *Applicability Date:* Amendments in this final rule are applied retroactively to conform to the effective date of statutory provisions. For more information concerning the dates of applicability, see the supplementary information section of this notice. FOR FURTHER INFORMATION CONTACT: Diane M. Walters, Management and Program Analyst, Education Service, Veterans Benefits Administration, Department of Veterans Affairs (225C), 810 Vermont Ave. NW., Washington DC 20420,

(202)461-9849. (This is not a toll-free number.) SUPPLEMENTARY INFORMATION: This document amends 38 CFR 21.3021, 21.3041, and 21.4131 to include provisions implementing the Veterans Benefits and Health Care Improvement Act of 2000, the Veterans' Survivor Benefits Improvements Act of 2001, the Veterans Education and Benefits Expansion Act of 2001, the Veterans Benefits Act of 2002, and the Veterans Benefits Act of 2003. These provisions allow certain beneficiaries under the Survivors' and Dependents' Educational Assistance

(DEA)program to elect the beginning date of their period of eligibility, to receive an adjusted effective date of payment by considering their claim to have been filed on their eligibility date, to extend their period of eligibility for qualifying periods of active duty service or National Guard duty, and to use DEA benefits for certain preparatory courses. This document also makes clarifying and technical revisions to these regulations, as well as to 38 CFR 21.3040 and 21.3135. For consistency with other regulations, VA is amending § 21.3135(g) to clarify in paragraph (g)(2) that VA considers a stepchild to be a member of the veteran's household even when the stepchild is temporarily not living with the veteran, so long as the actions and intentions of the stepchild and veteran establish that normal family ties have been maintained during the temporary absence. In addition, the information relating to when a stepchild loses his or her eligibility if the stepchild is no longer a member of the veteran's household has been removed from existing paragraph

(d)of § 21.3041 and placed more appropriately in paragraph

(g)of § 21.3135 concerning reduction or discontinuance dates for awards of educational assistance allowance. VA is defining the acronym “P&T” in 38 CFR 21.3021(p) (for purposes of 38 CFR 21, subpart C) as variously meaning permanent and total “disability,” permanently and totally “disabled,” or permanent and total “rating,” when any of these terms are used in reference to a veteran with a service-connected disability determined by VA to be total for the purposes of VA disability compensation where the impairment is reasonably certain to continue throughout the life of the disabled veteran. Other definitions added to § 21.3021 simply restate definitions provided by statute. I. Children's DEA Period of Eligibility Beginning Date (Pub. L. 106-419, 107-14, and 107-330) Under 38 U.S.C. 3512(a), an eligible child's period of eligibility generally begins when the child attains age 18, or on the successful completion of the child's secondary schooling, whichever first occurs, and ends on the child's 26th birthday. Prior to the enactment of the Veterans Benefits and Health Care Improvement Act of 2000 (Pub. L. 106-419), the beginning date of an eligible child's period of eligibility for DEA benefits was defined by statute. There were no circumstances in which the child could elect a beginning date. Effective November 1, 2000, Congress amended 38 U.S.C. 3512(a)(3) to allow certain eligible children to have an opportunity to elect the beginning date of their period of eligibility. The Veterans' Survivor Benefits Improvements Act of 2001 (Pub. L. 107-14) clarified within what time period these children are permitted to elect their beginning date, and the Veterans Benefits Act of 2002 (Pub. L.107-330) clarified the dates the child could elect and also instituted a default date if the child did not make an election within the prescribed time period. Both of these clarifying amendments to 38 U.S.C. 3512(a)(3) are effective retroactive to November 1, 2000. As provided in 38 U.S.C. 3512(a)(3), a child may elect his or her beginning date if— • The service-connected death of the veteran-parent occurs after the child's 18th birthday and before the child's 26th birthday; or • The effective date of the veteran-parent's P&T disability rating, or the notification to the veteran of such rating, is after the child's 18th birthday and before the child's 26th birthday. Under 38 U.S.C. 3512(a)(3), VA is required to provide written notice to children who are entitled to elect the beginning date of their period of eligibility. The written notice must advise eligible children of their right to choose their beginning date and inform them that the deadline to make an election is 60 days from the date of VA's written notice. A child whose eligibility is based on the veteran-parent's death may elect as a beginning date any date between the date of the veteran's death and the date of VA's decision that the death was service-connected. A child whose eligibility is based on the veteran's P&T disability may elect the effective date of the P&T disability rating, the date of notification to the veteran of such rating, or any date in between those two dates. We have amended § 21.3041 to include a new paragraph (i), which describes VA's statutory duty to notify children of these rights. As required by the statute, VA will accept the child's election if it is received no later than 60 days from the date of VA's written notice to the child and if it is in accordance with the choices VA identified in that notice as permissible under the statute. Pursuant to revised § 21.3041(a)(2) and (b)(2), if VA approves the date selected by the child, the child's period of eligibility will be extended beyond the child's 26th birthday to allow for a full 8 years of eligibility after the date selected. Under § 21.3041(i)(2), if an eligible child does not elect a beginning date within 60 days from the date of VA's written notice, the beginning date of his or her period of eligibility will default (in accordance with statutory provisions) to either the date of VA's decision that the veteran's death is service-connected or the date of VA's P&T rating decision, whichever is applicable. To permit an otherwise eligible and entitled child an immediate award of educational assistance under 38 U.S.C. chapter 35, we added § 21.3041(i)(3) to provide that VA will award benefits by selecting as a beginning date the date of VA's decision that the— • Veteran has a P&T disability in the case of a child whose eligibility is derived from a veteran with a P&T disability; or • Veteran's death is service-connected in the case of a child whose eligibility is derived due to the veteran's death. This procedure allows us to award benefits while concurrently notifying the child that he or she may elect another beginning date as described in the preceding paragraphs and specified in the written notice to the child. VA is doing this to expedite payment to eligible children already enrolled at an educational institution and incurring educational expenses. The beginning dates we select are the statutorily required dates when the child does not elect a beginning date within 60 days of our written notice informing the child that he or she may elect the beginning date. If the child does elect a beginning date within 60 days after our written notice, we will adjust the beginning date in accordance with the child's election. II. Extended Period of Eligibility for Certain Eligible Children Ordered to Active Duty or Full-Time National Guard Duty After September 10, 2001 (Pub. L. 107-103 and 108-183) In this final rule, 38 CFR 21.3041(h) implements 38 U.S.C. 3512(h) as amended by the Veterans Education and Benefits Expansion Act of 2001 (Pub. L. 107-103) and the Veterans Benefits Act of 2003 (Pub. L. 108-183). These statutory provisions are effective November 1, 2000, and apply to educational assistance under DEA for months after October 2000. The amendments provide that an eligible child's period of eligibility will be extended for the length of time equal in length to the time the child, during the period of eligibility otherwise applicable to such child, serves on active duty or is involuntarily ordered to full-time National Guard duty, plus an additional 4 months for each qualifying period of active duty service. This extension applies to children who are ordered to active duty after September 10, 2001, under sections 688, 12301(a), 12301(d), 12301(g), 12302, or 12304 of title 10, U.S.C., or who are involuntarily ordered to full-time National Guard duty after September 10, 2001, under 32 U.S.C 502(f). III. Adjusted Effective Date for Certain Eligible Persons (Pub. L. 106-419) Based on the provisions in 38 U.S.C. 5113, as amended by the Veterans Benefits and Health Care Improvement Act of 2000 (Pub. L. 106-419), 38 CFR 21.4131(e) is amended to authorize an adjusted effective date for an award of DEA benefits when specific conditions exist. Generally, educational assistance cannot be awarded retroactively for any period earlier than 1 year prior to the date VA receives an original claim; however, this amendment provides for an exception effective as of November 1, 2000. If the following conditions are met, VA may consider the individual's original DEA application as having been filed on his or her eligibility date for the purpose of awarding retroactive benefits: • An individual's DEA eligibility date is more than 1 year before the date of the initial rating decision establishing DEA eligibility; • VA receives the individual's original claim within 1 year of the date VA made the rating decision establishing DEA eligibility; • The individual claims educational assistance for pursuit of an approved program during a period that is more than 1 year prior to the date VA receives his or her original claim; and • The original application is received by VA on or after November 1, 2000, or is pending action or available remedies as of that date. IV. DEA Eligible Persons May Receive DEA Benefits for Preparatory Courses for Admission to Institutions of Higher Education and for Graduate School Entrance Exams (Pub. L. 106-419) Effective November 1, 2000, the Veterans Benefits and Health Care Improvement Act of 2000 (Pub. L. 106-419) amended the definition of “program of education” in 38 U.S.C. 3501(a)(5) to permit DEA eligible persons to use DEA benefits for preparatory courses for admission to institutions of higher education and for graduate school entrance exams. In addition, the Act amended 38 U.S.C. 3512 to provide that eligible children may pursue these types of courses before their 18th birthday. This document amends the definition of “program of education” in 38 CFR 21.3021(h) to include preparatory courses for admission to institutions of higher education and for graduate school entrance exams as authorized programs of education for DEA eligible persons. The provision to permit eligible children under 18 to pursue these courses is included in 38 CFR 21.3041(a)(1)(ii) and (b)(1)(ii). V. Technical Amendment Current 38 CFR 21.3041(d)(3) prescribes a modified period of eligibility ending date for a child who served on active duty in the Armed Forces. Specifically, it provides that such a child's ending date is 8 years after the child's “first unconditional discharge or release” from duty in the Armed Forces. However, the governing statute, 38 U.S.C. 3512(a)(5), provides that the 8-year period of eligibility shall end after the child's “first discharge or release” from duty with the Armed Forces. The definition of “discharge or release” in 38 U.S.C. 101(18), as amended by Public Law 95-126 on October 8, 1977, makes retaining the word “unconditional” before “discharge or release” unnecessary. Thus, to make the current regulation conform to the statute, we have removed the word “unconditional” from “unconditional discharge or release” in this provision, which is now located in § 21.3041(c). We also removed 38 CFR 21.3042(c) because the paragraph is not necessary if the word “unconditional” is removed from “unconditional discharge or release.” Administrative Procedure Act Substantive changes made by this final rule merely restate or interpret statutory requirements. Accordingly, there is a basis for dispensing with prior notice and comment and a delayed effective date under the provisions of 5 U.S.C. 553. Paperwork Reduction Act of 1995 Provisions in 38 CFR 21.3041(i)(1) constitute a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The Office of Management and Budget

(OMB)approved this collection of information under control number 2900-0703. Unfunded Mandates The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in an expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This final rule will have no such effect on State, local, and tribal governments, or the private sector. Executive Order 12866 Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Executive Order classifies a “significant regulatory action,” requiring review by OMB unless OMB waives such review, as any regulatory action that is likely to result in a rule that may:

(1)Have an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2)create a serious inconsistency or otherwise interfere with an action planned or taken by another agency;

(3)materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof; or

(4)raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. The economic, interagency, economic, legal, and policy implications of this final rule have been examined and it has been determined that it is not a significant regulatory action under the Executive Order. Regulatory Flexibility Act The Secretary of Veterans Affairs hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This final rule primarily affects only individuals. This rule reflects the statutory expansion of Survivors' and Dependents' Educational Assistance program eligibility by: • Permitting certain eligible children to elect the beginning date of their DEA period of eligibility; • Extending the period of eligibility for certain eligible children ordered to active duty or full-time National Guard duty; • Allowing certain beneficiaries to receive DEA benefits retroactive to their eligibility date; and • Allowing eligible beneficiaries to be paid for preparatory courses for tests required or used for admission to institutions of higher education and graduate schools. Pursuant to 5 U.S.C. 605(b), this final rule, therefore, is exempt from the initial and final regulatory flexibility analyses requirements of sections 603 and 604. Pursuant to 5 U.S.C. 603 and 604, an additional reason that those regulatory flexibility analyses requirements are not applicable to this final rule is that no notice of proposed rulemaking was required by law for this rulemaking. Catalog of Federal Domestic Assistance Program Numbers The Catalog of Federal Domestic Assistance number and title for the program affected by this final rule is 64.117, Survivors and Dependents Educational Assistance. List of Subjects in 38 CFR Part 21 Administrative practice and procedure, Armed forces, Civil rights, Claims, Colleges and universities, Conflicts of interests, Defense Department, Education, Employment, Grant programs-education, Grant programs-veterans, Health care, Loan programs-education, Loan programs-veterans, Manpower training programs, Reporting and recordkeeping requirements, Schools, Travel and transportation expenses, Veterans, Vocational education, Vocational rehabilitation. Approved: May 20, 2008. Gordon H. Mansfield, Deputy Secretary of Veterans Affairs. For the reasons set out in the preamble, the Department of Veterans Affairs amends 38 CFR part 21 (subparts C and D) as follows: PART 21—VOCATIONAL REHABILITATION AND EDUCATION Subpart C—Survivors' and Dependents' Educational Assistance Under 38 U.S.C. Chapter 35 1. The authority citation for part 21, subpart C continues to read as follows: Authority: 38 U.S.C. 501(a), 512, 3500-3566, and as noted in specific sections. 2. Amend § 21.3021 by: a. Adding an introductory paragraph. b. Revising paragraph (h). c. Adding new paragraphs (m), (n), (o), (p), (q), (r), and (s). The revision and additions read as follows: § 21.3021 Definitions. For the purposes of subpart C and the payment of basic educational assistance under 38 U.S.C. chapter 35, the following definitions apply.

(h)*Program of education.* The term *program of education* means any curriculum or any combination of unit courses or subjects pursued at an educational institution that is generally accepted as necessary to fulfill the requirements for the attainment of a predetermined and identified educational, professional, or vocational objective. The term program of education also includes—

(1)A preparatory course for a test that is required or used for admission to an institution of higher education;

(2)A preparatory course for a test that is required or used for admission to a graduate school; and

(3)A licensing or certification test, the successful completion of which demonstrates an individual's possession of the knowledge or skill required to enter into, maintain, or advance in employment in a predetermined and identified vocation or profession, provided such tests and the licensing or credentialing organizations or entities that offer such tests are approved by VA. (Authority: 38 U.S.C. 3002(3), 3501 (a)(5))

(m)*Institution of higher education.* The term *institution of higher education* has the same meaning as provided in § 21.7020(b)(45). (Authority: 38 U.S.C. 3002(3), 3501(a)(5))

(n)*Graduate school.* The term *graduate school* has the same meaning as provided in § 21.7020(b)(46). (Authority: 38 U.S.C. 3002(3), 3501(a)(5))

(o)*Eligibility date.* The term *eligibility date* means the date on which an individual becomes an eligible person (as defined in paragraph

(a)of this section). (Authority: 38 U.S.C. 5113)

(p)*P&T* means permanent and total “disability,” permanently and totally “disabled,” or permanent and total “rating,” when any of these terms are used in reference to a veteran with a service-connected disability rating determined by VA to be total for the purposes of VA disability compensation where the impairment is reasonably certain to continue throughout the life of the disabled veteran. (Authority: 38 U.S.C. 3501(a)(8))

(q)*Initial rating decision.* The term *initial rating decision* means, with respect to an eligible spouse or child, a decision made by VA that establishes for the person from whom such eligibility is derived—

(1)Service connection for the cause of the person's death;

(2)A service connected P&T disability; or

(3)For a member of the Armed Forces, a P&T disability incurred or aggravated in the line of duty in the active military, naval, or air service if the member is hospitalized or receiving outpatient medical care, services, or treatment, and is likely to be discharged or released from such service for such disability. (Authority: 38 U.S.C. 5113)

(r)*Effective date of the P&T rating.* The term *effective date of the P&T rating* means the date from which VA considers that the veteran's P&T disability commenced for purposes of VA benefits, as determined by the initial rating decision. (Authority: 38 U.S.C. 3512(d))

(s)*First finds.* The term *first finds* means the effective date of the P&T rating or the date VA first notifies the veteran of that rating, whichever is more advantageous to the child. (Authority: 38 U.S.C. 3512(d)) § 21.3040 [Amended] 3. Amend paragraph

(d)of § 21.3040 by removing “§ 21.3041(e)(2).” and adding, in its place, “§ 21.3041(g)(2).” 4. Revise § 21.3041 to read as follows: § 21.3041 Periods of eligibility; child.

(a)*Eligibility derived from a veteran with a P&T disability.* An eligible child's period of eligibility generally begins on the child's 18th birthday, or on the successful completion of the child's secondary schooling, whichever first occurs. The period of eligibility generally ends on the earlier of the date of the child's 26th birthday or the date the veteran is no longer P&T disabled. VA will extend an eligible child's period of eligibility for the reasons listed in paragraphs

(g)and

(h)of this section. See paragraph

(c)of this section if the child serves on duty in the Armed Forces as an eligible child after his or her 18th birthday and before his or her 26th birthday. If the veteran dies while the P&T rating is in effect and before the eligible child's 26th birthday, see paragraph

(b)of this section to determine the new period of eligibility. Exceptions to this general period of eligibility are as follows:

(1)*Period of eligibility may begin before the child's 18th birthday.* The period of eligibility may begin before the eligible child's 18th birthday for one of the reasons in paragraphs (a)(1)(i), (ii), or

(iii)of this section. The period of eligibility ends on the earlier of the date the veteran is no longer rated P&T disabled or the date of the child's 26th birthday. See § 21.3135(h) if the veteran is no longer rated P&T disabled.

(i)The child completed compulsory school attendance under applicable State law (see § 21.3040(a) and (b));

(ii)The child is pursuing a course designed to prepare him or her for an examination required or used for entrance into an institution of higher education or a graduate school; or

(iii)The child is beyond his or her 14th birthday and has a physical or mental handicap (see § 21.3040(a)). (Authority 38 U.S.C. 3512(a))

(2)*Period of eligibility may begin after the child's 18th birthday.* A child's period of eligibility may begin after his or her 18th birthday if VA first finds the veteran has a P&T disability after the child's 18th birthday but before the child's 26th birthday. See paragraph

(e)of this section if an adopted child becomes eligible through qualifying as the veteran's child after VA first finds the veteran has a P&T disability. See paragraph

(f)of this section if a stepchild becomes eligible through qualifying as the veteran's child after VA first finds the veteran is P&T disabled.

(i)*Beginning date if the effective date of the initial P&T rating is before the child's 18th birthday and notification to the veteran occurs after the child's 18th birthday and before his or her 26th birthday.* If the effective date of the P&T rating is before the child's 18th birthday, and the date of notification to the veteran occurs after the child's 18th birthday but before the child's 26th birthday, the child may elect the beginning date of his or her period of eligibility. (See paragraph

(i)of this section for election requirements.) If the child elects a beginning date that is before his or her 18th birthday, the period of eligibility ends the earlier of the date that the veteran is no longer rated P&T disabled, or the date of the child's 26th birthday. If the child elects a beginning date after his or her 18th birthday, the period of eligibility ends the earlier of the date the veteran is no longer rated P&T disabled or 8 years after the beginning date the child elects. (See § 21.3135(h) if the veteran is no longer rated P&T disabled.) The child can elect as a beginning date ei ther—

(A)The date of his or her 18th birthday;

(B)The date he or she completed compulsory school attendance under applicable State law (see § 21.3040(a) and (b)), if that date is on or after the effective date of the P&T rating and before his or her 18th birthday;

(C)The date he or she begins a course designed to prepare him or her for an examination required or used for entrance into an institution of higher education or a graduate school, if that date is on or after the effective date of the P&T rating and before the date of notification to the veteran of the P&T rating. If the child elects the beginning date of enrollment in such course, he or she may not receive educational assistance for pursuit of secondary schooling unless secondary school pursuit is otherwise authorized (see § 21.3040);

(D)The date VA notifies the veteran of t he P&T rating; or

(E)Any date between the applicable date described in paragraphs (a)(2)(i)(A) through

(C)of this section and the date in paragraph (a)(2)(i)(D) of this section.

(ii)*Beginning date if the effective date of the P&T rating is after the child's 18th birthday and before child's 26th birthday.* If the effective date of the P&T rating occurs after the child's 18th birthday but before the child's 26th birthday, the child may elect the beginning date of his or her period of eligibility. (See paragraph

(i)of this section for election requirements.) The period of eligibility ends the earlier of the date the veteran is no longer rated P&T disabled, or 8 years after the beginning date the child elects. (See § 21.3135(h) if the veteran is no longer rated P&T disabled.) The child can elect as a beginning date—

(A)The effective date of the P&T rating;

(B)The date VA notifies the veteran of the vet eran's P&T rating; or

(C)Any date in between. (Authority: 38 U.S.C. 3512)

(b)*Eligibility derived as the result of veteran's death.* An eligible child's period of eligibility begins on the child's 18th birthday, or on the successful completion of the child's secondary schooling, whichever first occurs. The period of eligibility ends on the child's 26th birthday. VA will extend an eligible child's period of eligibility for reasons shown in paragraphs

(g)and

(h)of this section. See paragraph

(c)of this section if the child serves on duty in the Armed Forces as an eligible child after his or her 18th birthday and before his or her 26th birthday. Exceptions to this general period of eligibility are as follows:

(1)*Period of eligibility may begin before the child's 18th birthday.* The period of eligibility may begin before the eligible child's 18th birthday for one of the reasons in paragraphs (i), (ii), or

(iii)of this paragraph. The ending date of the period of eligibility is the child's 26th birthday.

(i)The child completed compulsory school attendance under applicable State law (see § 21.3040(a) and (b));

(ii)The child is pursuing a course designed to prepare him or her for an examination required or used for entrance into an institution of higher education or a graduate school; or

(iii)The child is beyond his or her 14th birthday and has a physical or mental handicap (see § 21.3040(a)). (Authority 38 U.S.C. 3512(a))

(2)*Period of eligibility may begin after the child's 18th birthday.* If the veteran's death occurs after the child's 18th birthday but before the child's 26th birthday, the child may elect the beginning date of his or her period of eligibility. The period of eligibility ends 8 years after the beginning date the child elects. See paragraph

(i)of this section for election requirements. VA may extend the period of eligibility for one of the reasons shown in paragraph

(g)or

(h)of this section. See paragraph

(c)of this section if the child serves in the Armed Forces as an eligible person after his or her 18th birthday and before his or her 26th birthday. The child can elect as a beginning date any date between the—

(i)Date of the veteran's death; or

(ii)Date of VA's decision that the veteran's death was service-connected. (Authority: 38 U.S.C. 3512(a)(3))

(c)*Period of eligibility for a child who serves on duty in the Armed Forces as an eligible person.* If the child serves on duty in the Armed Forces as an eligible person (as defined in § 21.3021(a)(1)) after the child's 18th birthday and before the child's 26th birthday, the child is eligible for a modified ending date based on the provisions of this paragraph. Under the provisions of this paragraph, the period of eligibility ends 8 years after the date of the child's first discharge or release from such duty, or the child's 31st birthday, whichever is earlier. VA may extend the ending date for one of the reasons shown in paragraph

(g)of this section. See paragraph

(h)of this section if the child is ordered to active duty as a reservist. (Authority: 38 U.S.C. 3512(a)(5))

(d)*Eligibility derived from a parent who is listed by the Armed Forces as missing in action, captured in the line of duty, or forcibly detained or interned in line of duty by a foreign government or power.*

(1)If a child establishes eligibility through the provisions of § 21.3021(a)(1)(iv) after his or her 18th birthday but before his or her 26th birthday, the period of eligibility will end on the earliest of the following dates:

(i)When the parent is no longer listed as described in § 21.3021(a)(1)(iv);

(ii)Eight years after the date on which the child becomes eligible under such provisions; or

(iii)The child's 31st birthday.

(2)VA may extend the ending date for one of the reasons shown in paragraphs

(g)or

(h)of this section. See § 21.3135(i) if the child is enrolled in an educational institution and the child's ending date is based on paragraph (d)(1)(i) of this section. See paragraph

(c)of this section if the child serves in the Armed Forces as an eligible person after his or her 18th birthday and before his or her 26th birthday. (Authority: 38 U.S.C. 3512(a)(5))

(e)*Adopted child qualifies after VA firsts finds the veteran P&T disabled.* If an adopted child becomes eligible through qualifying as the veteran's child (see 38 CFR 3.57(c)) and the date the child so becomes eligible is after VA first finds the veteran is P&T disabled, the beginning date of eligibility is the date determined pursuant to paragraphs

(a)through

(d)of this section, but in no event before the date the adopted child qualifies as the veteran's child under § 3.57(c) of this chapter. The ending date is the child's 26th birthday. VA may extend the period of eligibility for one of the reasons in paragraph

(g)or

(h)of this section. See paragraph

(c)of this section if the child serves on duty in the Armed Forces as an eligible person. (Authority: 38 U.S.C. 3501)

(f)*Stepchild qualifies after VA first finds the veteran P&T disabled.* If a stepchild becomes eligible through qualifying as the veteran's child and a member of the veteran's household after VA first finds the veteran is P&T disabled, the beginning date of the period of eligibility is the date determined pursuant to paragraphs

(a)through

(d)of this section, but in no event before the date he or she becomes the veteran's stepchild and a member of the veteran's household. The ending date of the period of eligibility is the stepchild's 26th birthday. VA may extend the ending date for one of the reasons in paragraphs

(g)or

(h)of this section. See paragraph

(c)of this section for the ending date of the period of eligibility if the stepchild serves on active duty in the Armed Forces as an eligible person. See § 21.3135(g) for award discontinuance dates if the veteran and the stepchild's natural or adopted parent divorce or the stepchild ceases to be a member of the veteran's household.

(g)*Extensions to ending dates.*

(1)If an eligible child suspends pursuit of his or her program due to conditions that VA determined were beyond the child's control, VA may extend the period of eligibility ending date (see § 21.3043). VA cannot grant an extension beyond age 31 to those children whose period of eligibility ending date (as determined under paragraphs

(a)through

(f)of this section) is subject to an age limitation.

(2)If an eligible child's period of eligibility ending date (as determined under paragraphs

(a)through (f), or

(h)of this section) occurs while the child is enrolled in an educational institution, VA may extend the period of eligibility (extensions may be made beyond age 31)—

(i)To the end of the quarter or semester, for a child enrolled in an educational institution that regularly operates on the quarter or semester system; or

(ii)To the end of the course, not to exceed 12 weeks, for a child who completed a major portion of a course while enrolled in an educational institution that operates under other than a quarter or semester system.

(3)If an eligible child's period of eligibility ending date (as determined under paragraphs

(a)through (f), or

(h)of this section) occurs while the child is pursuing training in a training establishment (as defined in § 21.4200(c)), VA cannot extend the ending date. (Authority: 38 U.S.C. 3512(a)(7)(c)).

(h)Notwithstanding any other provision of this section, if during an eligible child's period of eligibility, as determined in paragraphs

(a)through

(g)of this section, but after September 10, 2001, an eligible child is ordered to active duty or involuntarily ordered to full-time National Guard duty VA will grant an extension of the child's period of eligibility. The extension will be equal to the length of the period served plus an additional 4 months for each qualifying period and applies if after September 10, 2001, the eligible child is—

(i)Ordered to serve on active duty under section 688, 12301(a), 12301(d), 12301(g), 12302, or 12304 of title 10, United States Code; or

(ii)Involuntarily ordered to full-time National Guard duty under section 502(f) of title 32, United States Code. (Authority: 38 U.S.C. 3512(h))

(i)*Elections.*

(1)VA must provide written notice to certain eligible children informing them of their right to elect the beginning date of their period of eligibility. The written notice must identify the beginning dates the child may choose from and must contain a statement that the child must make the election within 60 days of the date of the written notice. An eligible child may elect his or her beginning date if—

(i)The effective date of the P&T rating is before the child's 18th birthday, and date of the notification to the veteran from whom the child derives eligibility occurs after the child's 18th birthday but before the child's 26th birthday (see paragraph (a)(2)(i) of this section);

(ii)The effective date of the P&T rating, or the date of notification to the veteran from whom the child derives eligibility, occurs after the child's 18th birthday but before the child's 26th birthday (see paragraph (a)(2)(ii) of this section);

(iii)The veteran's death occurs after the child's 18th birthday but before the child's 26th birthday (see paragraph (b)(2) of this section);

(iv)The child makes such election within 60 days of VA's written notice to the child informing him or her of the right to elect his or her beginning date; and

(v)The child's election is in accordance with the choices VA identified in the written notice described in paragraph (i)(1) of this section.

(2)If the child does not elect a beginning date within 60 days of VA's written notice informing him or her of the right to elect a beginning date, the period of eligibility beginning date will be whichever of the following applies-(i) The date of VA's decision that the veteran has a P&T disability; or

(ii)The date of VA's decision that the veteran's death is service-connected.

(3)If upon review of the child's application VA determines the child is entitled to and eligible for an immediate award of educational assistance under 38 U.S.C. chapter 35, VA will for purposes of such award—

(i)Consider the beginning date of the child's period of eligibility to be the date of VA's decision that the—

(A)Veteran has a P&T disability in the case of a child whose eligibility is derived from a veteran with a P&T disability; or

(B)Veteran's death is service-connected in the case of a child whose eligibility is derived due to the veteran's death.

(ii)Notify the child of his or her right to elect a beginning date in accordance with paragraph (i)(1) of this section.

(iii)Adjust the child's beginning date based on the child's election if the child makes an election within 60 days after VA's written notice in accordance with paragraph (i)(1) of this section. (Authority: 38 U.S.C. 3512(A)(3), (A)(4)) (The Office of Management and Budget has approved the information collection provisions in this section under control number 2900-0703). § 21.3042 [Amended] 5. Amend § 21.3042 by removing paragraph (c). 6. Amend § 21.3135 by revising paragraph

(g)to read as follows: § 21.3135 Reduction or discontinuance dates for awards of educational assistance allowance.

(g)*Eligible stepchild ceases to be a stepchild or stepchild ceases to be a member of the veteran's household.*

(1)If the child ceases to be the veteran's stepchild because the veteran and the stepchild's natural or adoptive parent divorce, the eligibility ending date is as follows:

(i)If the child ceases to be the veteran's stepchild while the child is not in training, the ending date of the child's period of eligibility is the date on which the child ceases to be the veteran's stepchild.

(ii)If the child ceases to be the veteran's stepchild while the child is training in a school organized on a term, semester, or quarter basis, the ending date of the child's eligibility is the last day of the term, semester, or quarter during which the child ceases to be the veteran's stepchild.

(iii)If the child ceases to be the veteran's stepchild while the child is training in a school not organized on a term, semester, or quarter basis, the ending date of the child's eligibility is the end of the course, or 12 weeks from the date on which the child ceases to be the veteran's stepchild, whichever is earlier.

(2)If the stepchild ceases to be a member of the veteran's household, he or she is no longer eligible. For purposes of this paragraph, VA considers a stepchild a member of the veteran's household even when the stepchild is temporarily not living with the veteran, so long as the actions and intentions of the stepchild and veteran establish that normal family ties have been maintained during the temporary absence. VA will determine the stepchild's eligibility ending date as follows:

(i)If the stepchild ceases to be a member of the veteran's household while the stepchild is not in training, the eligibility ending date is the date on which the stepchild ceases to be a member of the veteran's household.

(ii)If the stepchild ceases to be a member of the veteran's household while the stepchild is training in a school organized on a term, semester, or quarter basis, the ending date of the stepchild's eligibility is the last day of the term, semester, or quarter during which the stepchild ceases to be a member of the veteran's household.

(iii)If the stepchild ceases to be a member of the veteran's household while the stepchild is training in a school not organized on a term, semester, or quarter basis, the ending date of the stepchild's eligibility is the end of the course, or 12 weeks from the date on which the stepchild ceases to be a member of the veteran's household. See § 21.3041(f). (Authority: 38 U.S C. 101(4)(a), 3501) Subpart D—Administration of Educational Assistance Programs 7. The authority citation for part 21, subpart D continues to read as follows: Authority: 10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a), chs. 30, 32, 34, 35, 36, and as noted in specific sections. 8. Amend § 21.4131 in paragraph (d)(1)(i)(A) by removing “by § 21.3041(a) or

(b)or by” and adding, in its place, “under § 21.3041 or under” and by adding paragraph

(e)to read as follows: § 21.4131 Commencing dates.

(e)*Adjusted effective date for award of educational assistance under 38 U.S.C. chapter 35 based on an original claim.* When determining the commencing date under § 21.4131(d)(1), the Secretary will consider an eligible person's application for Survivors' and Dependents' Educational Assistance under 38 U.S.C. chapter 35 as having been filed on his or her eligibility date if—

(1)The eligibility date is more than 1 year before the date of the initial rating decision that establishes either:

(i)The veteran's death is service-connected, or

(ii)The veteran has a P&T disability;

(2)The eligible person files his or her original application for benefits under 38 U.S.C. chapter 35 with VA within 1 year of the initial rating decision;

(3)The eligible person claims educational assistance for pursuit of an approved program of education for a period that is more than 1 year before the date VA receives his or her original claim;

(4)VA either:

(i)Received the original application on or after November 1, 2000; or

(ii)Received the original application and, as of November 1, 2000, either—

(A)Had not acted on it; or

(B)Had denied it in whole or in part, but the claimant remained entitled to pursue available administrative and judicial remedies as to the denial; and

(5)The eligible person would have been eligible to educational assistance under 38 U.S.C. chapter 35 if he or she had filed a claim on his or her eligibility date. (Authority: 38 U.S.C. 5113; Pub. L. 106-419, 114 Stat. 1832) [FR Doc. E8-11726 Filed 5-27-08; 8:45 am] BILLING CODE 8320-01-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2007-0339; FRL-8363-7] Fluopicolide; Pesticide Tolerances AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: This regulation establishes tolerances for residues of fluopicolide in or on vegetable, root, subgroup 1A, except sugar beet and carrot; vegetable, leaves of root and tuber, group 2; vegetable, bulb, group 3-07; and Brassica, head and stem, subgroup 5A. Interregional Research Project Number 4 (IR-4) requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA). In connection with a request for new uses of the active ingredient, fluopicolide, the Agency has also evaluated the toxicity and exposure databases for 2,6-dichlorobenzamide

(BAM)which is a common metabolite/degradate of dichlobenil and fluopicolide. Further characterization of fluopicolide and its metabolite BAM, will be discussed herein of this document. DATES: This regulation is effective May 28, 2008. Objections and requests for hearings must be received on or before July 28, 2008, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION) . ADDRESSES: EPA has established a docket for this action under docket identification

(ID)number EPA-HQ-OPP-2007-0339. To access the electronic docket, go to *http://www.regulations.gov* , select “Advanced Search,” then “Docket Search.” Insert the docket ID number where indicated and select the “Submit” button. Follow the instructions on the regulations.gov website to view the docket index or access available documents. All documents in the docket are listed in the docket index available in regulations.gov. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available in the electronic docket at *http://www.regulations.gov* , or, if only available in hard copy, at the OPP Regulatory Public Docket in Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. The Docket Facility is open from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The Docket Facility telephone number is

(703)305-5805. FOR FURTHER INFORMATION CONTACT: Barbara Madden, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number:

(703)305-6463; e-mail address: *madden.barbara@epa.gov* . SUPPLEMENTARY INFORMATION: I. General Information A. Does this Action Apply to Me? You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities: • Crop production (NAICS code 111). • Animal production (NAICS code 112). • Food manufacturing (NAICS code 311). • Pesticide manufacturing (NAICS code 32532). This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT . B. How Can I Access Electronic Copies of this Document? In addition to accessing an electronic copy of this **Federal Register** document through the electronic docket at *http://www.regulations.gov* , you may access this **Federal Register** document electronically through the EPA Internet under the “ **Federal Register** ” listings at *http://www.epa.gov/fedrgstr* . You may also access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's pilot e-CFR site at *http://www.gpoaccess.gov/ecfr* . C. Can I File an Objection or Hearing Request? Under section 408(g) of FFDCA, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2007-0339 in the subject line on the first page of your submission. All requests must be in writing, and must be mailed or delivered to the Hearing Clerk as required by 40 CFR part 178 on or before July 28, 2008. In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket that is described in ADDRESSES . Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit this copy, identified by docket ID number EPA-HQ-OPP-2007-0339, by one of the following methods: • *Federal eRulemaking Portal* : *http://www.regulations.gov* . Follow the on-line instructions for submitting comments. • *Mail* : Office of Pesticide Programs

(OPP)Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001. • *Delivery* : OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is

(703)305-5805. II. Petition for Tolerance In the **Federal Register** of June 27, 2007 (72 FR 35237) (FRL-8133-4), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 7E7172) by IR-4, 500 College Road East, Suite 201 W, Princeton, NJ 08540. The petition requested that 40 CFR 180.627 be amended by establishing tolerances for residues of the fungicide fluopicolide, [2,6-dichloro- *N* -[[3-chloro-5-(trifluoromethyl)-2-pyridinyl]methyl]benzamide], in or on vegetable, root and tuber, group 1 at 0.2 parts per million (ppm); vegetable, leaves of root and tuber, group 2 at 12.0 ppm; vegetable, bulb, group 3 at 5.0 ppm; chive, fresh leaves at 5.0 ppm; chive, Chinese, fresh leaves at 5.0 ppm; daylily, bulb at 5.0 ppm; elegans hosta at 5.0 ppm; fritillaria, bulb at 5.0 ppm; fritillaria, leaves at 5.0 ppm; garlic, serpent, bulb at 5.0 ppm; kurrat at 5.0 ppm; lady's leek at 5.0 ppm; leek, wild at 5.0 ppm; lily, bulb at 5.0 ppm; onion, Beltsville bunching at 5.0 ppm; onion, Chinese, bulb at 5.0 ppm; onion, fresh at 5.0 ppm; onion, macrostem at 5.0 ppm; onion, pearl at 5.0 ppm; onion, potato, bulb at 5.0 ppm; onion, tree, tops at 5.0 ppm; shallot, bulb at 5.0 ppm; shallot, fresh leaves at 5.0 ppm; and brassica, head and stem, subgroup 5A at 5.0 ppm. The notice referenced a summary of the petition prepared by Valent Corporation, the registrant, which is available to the public in the docket, *http://www.regulations.gov.* There were no comments received in response to the notice of filing. Based upon review of the data supporting the petitions, EPA has revised certain proposed tolerance levels and corrected commodity definitions as follows: 1. The Agency determined that adequate data are available to support establishing a tolerance for the bulb vegetable crop group 3-07. IR-4 petitioned for a tolerance for bulb vegetable group 3 as well as individual tolerances on chive, fresh leaves; chive, Chinese, fresh leaves; daylily, bulb; elegans hosta; fritillaria, bulb; fritillaria, leaves; garlic, serpent, bulb; kurrat; lady's leek; leek, wild; lily, bulb; onion, Beltsville bunching onion; Chinese, bulb; onion, fresh; onion, macrostem; onion, pearl; onion, potato, bulb; onion, tree, tops; shallot, bulb; and shallot, fresh leaves (PP 7E7172). In the **Federal Register** of December 7, 2007 (72 FR 69150) (FRL-8340-6), EPA issued a final rule that revised the crop grouping regulations. As part of this action, EPA expanded and revised bulb vegetable group 3. Changes to crop group 3 (bulb vegetable) included adding new commodities, revising existing subgroups and creating new subgroups (including bulb vegetable crop group 3-07 consisting of the commodities requested in PP 7E7172 and cultivars, varieties, and/or hybrids of these). EPA indicated in the December 7, 2007 final rule as well as the earlier May 23, 2007 proposed rule (72 FR 28920) that, for existing petitions for which a notice of filing had been published, the Agency would attempt to conform these petitions to the rule. Therefore, consistent with this rule, EPA is establishing tolerances on bulb vegetable crop group 3-07. Bulb vegetable crop group 3-07 consists of a variety of commodities for which tolerances were requested in PP 7E7172. EPA concludes it is reasonable to revise the petitioned-for tolerances so that they agree with the recent crop grouping revisions because: i. Although the subgroup includes several new commodities, these commodities were proposed as individual tolerances and are closely related minor crops which contribute little to overall dietary or aggregate exposure and risk; ii. Fluopicolide exposure from these added commodities was considered when EPA conducted the dietary and aggregate risk assessments supporting this action and iii. The representative commodities for the revised subgroup has not changed. 2. Based upon review of the data supporting PP 7E7172, EPA has also revised the tolerance levels for vegetable, root, subgroup 1A, except sugar beet and carrot to 0.15 ppm; vegetable, leaves of root and tuber, group 2 to 15.0 ppm; and vegetable, bulb, crop group 3-07 to 7.0 ppm. EPA revised these tolerance levels based on analyses of the residue field trial data using the Agency's Tolerance Spreadsheet in accordance with the Agency's Guidance for Setting Pesticide Tolerances Based on Field Trial Data Standard Operating Procedure (SOP). EPA has also determined that it is not appropriate to establish tolerances on sugar beet and carrot at this time and revised the subgroup tolerance accordingly. III. Aggregate Risk Assessment and Determination of Safety Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide fluopicolide residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide fluopicolide residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide fluopicolide residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide fluopicolide residue. . . .” Consistent with section 408(b)(2)(D) of FFDCA, and the factors specified in section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for the petitioned-for tolerances for residues of fluopicolide, [2,6-dichloro- *N* -[[3-chloro-5-(trifluoromethyl)-2-pyridinyl]methyl]benzamide] as an indicator of combined residues of fluopicolide and its metabolite BAM on vegetable, root, subgroup 1A, except sugar beet and carrot at 0.15 ppm; vegetable, leaves of root and tuber, group 2 at 15.0 ppm; vegetable, bulb, crop group 3-07 at 7.0 ppm; and brassica, head and stem, subgroup 5A at 5.0 ppm. EPA's assessment of exposures and risks associated with establishing tolerances follow. A. Toxicological Profile EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Specific information on the studies received and the nature of the adverse effects caused by fluopicolide and its metabolite BAM as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at *http://www.regulations.gov* in documents entitled *Floupicolide: Human Health Risk Assessment for the Establishment of Tolerances* for use on root vegetables (subgroup 1A), leaves of root and tuber vegetables (group 2), bulb vegetables (group 3), and head and stem brassica (subgroup 5A) on pages 29-35; and *BAM as a Metabolite/Degradate of Fluopicolide and Dichlobenil. Human Health Risk Assessment for proposed uses of Fluopicolide* on tuberous and corm vegetables, leafy vegetables (except brassica), fruiting vegetables, cucurbit vegetables, grapes, turf, and ornamentals, and for indirect or inadvertent residues on the rotational crop wheat on pages 54-62. Each of these risk assessments is contained within in docket ID number EPA-HQ-OPP-2007-0339. In general, the toxicology studies conducted on fluopicolide demonstrate few or no biologically significant toxic effects at relatively low-dose levels in animal studies and only mild or no toxic effects at high doses. The subchronic and chronic toxicity studies showed that the primary effects of fluopicolide are in the liver. The toxicological database indicates that technical grade fluopicolide has relatively low acute toxicity. Fluopicolide is not a dermal sensitizer, primary eye irritant, or primary skin irritant. Fluopicolide is also not neurotoxic, carcinogenic, nor mutagenic. Fluopicolide is not a developmental or reproductive toxicant. There is no evidence of increased susceptibility of rat or rabbit fetuses to *in utero* or post-natal exposure to fluopicolide. No toxic effects were observed in studies in which fluopicolide was administered by the dermal routes of exposure. The rabbit developmental and rat chronic/carcinogenicity studies were considered co-critical for endpoint selection. The toxicological profile for fluopicolide suggests that increased durations of exposure (i.e., 90-day versus chronic) does not significantly increase the severity of observed effects. The rabbit developmental and rat chronic/cancer studies were therefore considered for all exposure scenarios. BAM is a metabolite and/or environmental degradate of both the fungicide fluopicolide and the herbicide dichlobenil. Residues of BAM from uses of both fluopicolide and dichlobenil were considered when assessing BAM as a metabolite/degradate resulting from proposed uses of fluopicolide. BAM was assessed separately since there is no common toxicological effect for BAM and other fluopicolide residues of concern. The submitted acute and chronic studies on BAM were sufficient to evaluate human hazard potential. BAM demonstrated moderate acute toxicity via the oral route of exposure. In subchronic and chronic toxicity studies, the primary oral effects seen in the rat and dog were body weight changes. Adverse liver effects were also observed but at doses of BAM that were higher than those of dichlobenil. There is no evidence that BAM is either mutagenic or clastogenic nor is there evidence of endocrine mediated toxicity. BAM is considered to be neurotoxic. In the absence of carcinogenicity study data for a second species, the EPA has assumed that BAM's carcinogenic potential is similar to that of dichlobenil, the parent compound having the greatest carcinogenicity potential. Dichlobenil is classified as “group C, possible human carcinogen.” Quantification of cancer risk is based on the reference dose

(RfD)approach which requires comparison of the chronic exposure to the RfD. Using this methodology will adequately account for all chronic toxic effects, including carcinogenicity, likely to result from exposure to dichlobenil and therefore to BAM. B. Toxicological Endpoints For hazards that have a threshold below which there is no appreciable risk, a toxicological point of departure

(POD)is identified as the basis for derivation of reference values for risk assessment. The POD may be defined as the highest dose at which no adverse effects are observed (the NOAEL) in the toxicology study identified as appropriate for use in risk assessment. However, if a NOAEL cannot be determined, the lowest dose at which adverse effects of concern are identified (the LOAEL) or a Benchmark Dose

(BMD)approach is sometimes used for risk assessment. Uncertainty/safety factors

(UFs)are used in conjunction with the POD to take into account uncertainties inherent in the extrapolation from laboratory animal data to humans and in the variations in sensitivity among members of the human population as well as other unknowns. Safety is assessed for acute and chronic dietary risks by comparing aggregate food and water exposure to the pesticide to the acute population adjusted dose

(aPAD)and chronic population adjusted dose (cPAD). The aPAD and cPAD are calculated by dividing the POD by all applicable UFs. Aggregate short-term, intermediate-term, and chronic-term risks are evaluated by comparing food, water, and residential exposure to the POD to ensure that the margin of exposure

(MOE)called for by the product of all applicable UFs is not exceeded. This latter value is referred to as the Level of Concern (LOC). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect greater than that expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see *http://www.epa.gov/pesticides/factsheets/riskassess.htm* . A summary of the toxicological endpoints for fluopicolide and its metabolite BAM used for human risk assessment can be found at *http://www.regulations.gov* in documents entitled: *Fluopicolide Human Health Risk Assessment for the Establishment of Tolerances* for use on root vegetables (subgroup 1A), leaves of root and tuber vegetables (group 2), bulb vegetables (group 3), and head and stem brassica (subgroup 5A) on pages 10-11; and *BAM as a Metabolite/Degradate of Fluopicolide and Dichlobenil. Human Health Risk Assessment for proposed uses of Fluopicolide* on root vegetables (subgroup 1A), leaves of root and tuber vegetables (group 2), bulb vegetables (group 3), and head and stem brassica (subgroup 5A) on pages 3-4. Each of these risk assessments is contained within in docket ID number EPA-HQ-OPP-2007-0339. C. Exposure Assessment 1. *Dietary exposure from food and feed uses* . In evaluating dietary exposure to fluopicolide and its metabolite BAM, EPA considered exposure under the petitioned-for tolerances as well as all existing fluopicolide and its metabolite BAM tolerances in 40 CFR 180.627 and the exposures from BAM from existing dichlobenil tolerances under 180.231. EPA assessed dietary exposures from fluopicolide and its metabolite BAM in food as follows: i. *Acute exposure* . Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure. a. *Fluopicolide* . No effects were identified in the toxicological studies for fluopicolide; therefore, a quantitative acute dietary exposure assessment was not conducted. b. *BAM* . In estimating acute dietary exposure to BAM, EPA used food consumption information from the U.S. Department of Agriculture

(USDA)1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII). As to residue levels in food, maximum residues of BAM from fluopicolide and dichlobenil field trials on food commodities with established/pending tolerances were included in the assessment. The assessments used 100 percent crop treated

(PCT)except for apples, blueberries, cherries, peaches, pears, and raspberries. No livestock tolerances are established or proposed for either fluopicolide or dichlobenil. ii. *Chronic exposure* .—a. *Fluopicolide* . In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, EPA assumed all foods for which there are tolerances or for which tolerances are being established contain tolerance-level residues and 100 PCT. b. *BAM* . In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, EPA assumed, maximum residues of BAM from fluopicolide and dichlobenil field trials on food commodities with established/pending tolerances were included in all foods for which there are tolerances. The assessments used 100 PCT except for apples, blueberries, cherries, cranberries, peaches, pears, and raspberries. No livestock tolerances are established or proposed for either fluopicolide or dichlobenil. iii. *Cancer* . Fluopicolide has been classified as “not likely to be carcinogenic to humans.” Therefore a cancer dietary exposure assessment was not conducted for the parent fluopicolide. Additionally, EPA has determined BAM's potential for carcinogenicity is similar to that of dichlobenil, which is classified as “group C, possible human carcinogen.” Quantification of cancer risk is based on the reference dose

(RfD)approach which requires comparison of the chronic exposure to the RfD. Using this methodology will adequately account for all chronic toxic effects, including carcinogenicity, likely to result from exposure to BAM. Therefore, a separate cancer exposure assessment was not conducted. iv. *Anticipated residue and PCT information* . Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must pursuant to FFDCA section 408(f)(1) require that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such Data Call-Ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of this tolerance. Section 408(b)(2)(F) of FFDCA states that the Agency may use data on the actual percent of food treated for assessing chronic dietary risk only if: a. The data used are reliable and provide a valid basis to show what percentage of the food derived from such crop is likely to contain such pesticide residue. b. The exposure estimate does not underestimate exposure for any significant subpopulation group. c. Data are available on pesticide use and food consumption in a particular area, the exposure estimate does not understate exposure for the population in such area. In addition, the Agency must provide for periodic evaluation of any estimates used. To provide for the periodic evaluation of the estimate of PCT as required by FFDCA section 408(b)(2)(F), EPA may require registrants to submit data on PCT. The Agency used PCT information as follows: For the BAM acute assessment, maximum PCT estimates were used for the following commodities: Apples (2.5%), blueberries (2.5%), cherries (2.5%), peaches (2.5%), pears (2.5%) and raspberries (2.5%). For the BAM chronic assessment, average PCT estimates were used for the following commodities: Apples (1%), blueberries (1%), cherries (1%), peaches (1%), pears (1%), raspberries (1%) and cranberries (45%). EPA uses an average PCT for chronic dietary risk analysis. The average PCT figure for each existing use is derived by combining available federal, state, and private market survey data for that use, averaging by year, averaging across all years, and rounding up to the nearest multiple of five percent except for those situations in which the average PCT is less than one. In those cases <1% is used as the average and <2.5% is used as the maximum. EPA uses a maximum PCT for acute dietary risk analysis. The maximum PCT figure is the single maximum value reported overall from available Federal, State, and private market survey data on the existing use, across all years, and rounded up to the nearest multiple of five percent. In most cases, EPA uses available data from United States Department of Agriculture/National Agricultural Statistics Service (USDA/NASS), Proprietary Market Surveys, and the National Center for Food and Agriculture Policy (NCFAP) for the most recent six years. The Agency believes that the three conditions listed in this unit have been met. With respect to Condition a, PCT estimates are derived from Federal and private market survey data, which are reliable and have a valid basis. The Agency is reasonably certain that the percentage of the food treated is not likely to be an underestimation. As to Conditions b, and c, regional consumption information and consumption information for significant subpopulations is taken into account through EPA's computer-based model for evaluating the exposure of significant subpopulations including several regional groups. Use of this consumption information in EPA's risk assessment process ensures that EPA's exposure estimate does not understate exposure for any significant subpopulation group and allows the Agency to be reasonably certain that no regional population is exposed to residue levels higher than those estimated by the Agency. Other than the data available through national food consumption surveys, EPA does not have available information on the regional consumption of food to which BAM may be applied in a particular area. 2. *Dietary exposure from drinking water* . The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for fluopicolide in drinking water. These simulation models take into account data on the physical, and fate/transport characteristics of fluopicolide. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at *http://www.epa.gov/oppefed1/models/water/index.htm* . No monitoring data were available for fluopicolide or BAM. Drinking water residues of fluopicolide (parent) were modeled for exposures resulting from uses on grapes, vegetables, and turf, which are the uses that are expected to yield the highest estimated environmental concentrations (EECs). Drinking water residues for BAM were modeled for exposures resulting from the use currently registered on dichlobenil for control of nutsedge. This use is expected to yield the highest EECs for BAM. Based on the Pesticide Root Zone Model/Exposure Analysis Modeling System (PRZM/EXAMS) and Screening Concentration in Ground Water (SCI-GROW), the estimated drinking water concentrations (EDWCs) of fluopicolide for acute exposures are estimated to be 26.81 parts per billion

(ppb)for surface water and 0.64 ppb for ground water. Chronic exposures are estimated to be 8.34 ppb for surface water and 0.64 ppb for ground water. Based on the PRZM/EXAMS and SCI-GROW models, the EDWCs of BAM for acute exposures are estimated to be 20.9 ppb for surface water and 56.2 for ground water. Chronic exposures are estimated to be 8.61 ppb for surface water and 56.2 ppb for ground water. Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For acute dietary risk assessment for BAM, the water concentration value of 56.2 ppb was used to assess the contribution to drinking water. For chronic dietary risk assessment, the water concentration of value 8.34 ppb and 56.2 were used to assess the contribution to drinking water for fluopicolide and BAM, respectively. 3. *From non-dietary exposure* . The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Fluopicolide is currently registered for the following uses that could result in residential exposures: Residential turf grass and recreational sites.The labels do not prohibit homeowners from using these products; therefore, residential handlers may receive short-term dermal and inhalation exposure to fluopicolide when mixing, loading and applying the formulations. Dermal exposure is likely for adults and children entering treated lawns. Toddlers may also experience exposure via incidental non-dietary ingestion during postapplication activities on treated turf. EPA assessed residential exposure for fluopicolide using the following assumptions: i. Handler exposure scenarios resulting from residential lawn applicators were assessed for 1. mix/load and spot application of liquid formulation (low-pressure hand sprayer), and 2. mix/load and broadcast application of liquid formulation (garden hose-end sprayer). Post-application exposure scenarios resulting from lawn treatment were assessed for 1. adult and toddler postapplication dermal exposure, 2. toddlers' incidental ingestion of pesticide residues on lawns from hand-to-mouth transfer, 3. toddlers' object-to-mouth transfer from mouthing of pesticide-treated turfgrass, and 4. toddlers' incidental ingestion of soil from pesticide-treated residential areas. There are short and intermediate term exposures for fluopicolide. BAM exposure estimates are based on fluopicolide use only since the use pattern for dichlobenil is not expected to result in scenarios with significant residential/non-occupational exposure. Exposure to BAM from fluopicolide uses on residential turfgrass and recreational sites, such as golf courses, has been evaluated. Residential handler exposure was not evaluated because the metabolite BAM is believed to form slowly in plants and soil after the product containing the parent (fluopicolide) has been applied. EPA assessed residential exposure for BAM using the following assumptions: ii. Post-application exposure scenarios resulting from lawn treatment were assessed for 1. adult and toddler postapplication dermal exposure, 2. toddlers' incidental ingestion of pesticide residues on lawns from hand-to-mouth transfer, 3. toddlers' object-to-mouth transfer from mouthing of pesticide-treated turfgrass, and 4. toddlers' incidental ingestion of soil from pesticide-treated residential areas. Short and intermediate term exposures for fluopicolide are expected. 4. *Cumulative effects from substances with a common mechanism of toxicity* . Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.” Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to fluopicolide (parent) and its metabolite BAM, and any other substances. For the purposes of this tolerance action, therefore, EPA has not assumed that fluopicolide (parent) and its metabolite BAM has a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see the policy statements released by EPA's Office of Pesticide Programs concerning common mechanism determinations and procedures for cumulating effects from substances found to have a common mechanism on EPA's website at *http://www.epa.gov/pesticides/cumulative/* . D. Safety Factor for Infants and Children 1. *In general* . Section 408(b)(2)(c) of FFDCA provides that EPA shall apply an additional tenfold

(10X)margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA safety factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor. 2. *Prenatal and postnatal sensitivity* . There is no evidence of increased susceptibility of rat or rabbit fetuses or pups to *in utero* or post-natal exposure to fluopicolide. 3. *Conclusion* . EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1X. That decision is based on the following findings: i. The toxicity database for fluopicolide is complete. ii. There is no indication that fluopicolide is a neurotoxic chemical and there is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity. iii. There is no evidence that fluopicolide results in increased susceptibility in *in utero* rats or rabbits in the prenatal developmental studies or in young rats in the two-generation reproduction study. iv. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments were performed based on 100 PCT and tolerance-level residues. EPA made conservative (protective) assumptions in the ground water and surface water modeling used to assess exposure to fluopicolide in drinking water. EPA used similarly conservative assumptions to assess postapplication exposure of children as well as incidental oral exposure of toddlers. These assessments will not underestimate the exposure and risks posed by fluopicolide. BAM: EPA is retaining the 10X FQPA SF for BAM for those exposure scenarios that do not rely on dichlobenil toxicity data. These scenarios are acute dietary for the general population including infants and children, females 13-49 years of age, chronic dietary, and incidental oral non-dietary. This is due to the incompleteness of the data base with regard to the systemic neurotoxic potential of BAM, including olfactory toxicity via the oral route of exposure. For the dermal and inhalation routes of exposures, for which the Agency is relying on dichlobenil toxicity data. EPA has reduced the FQPA SF for BAM toxicity to 1X. The reasons for this are that, based on a comparison of toxicity via the intraperitoneal route of exposure, higher doses of BAM are needed to induce levels of olfactory toxicity that are similar to those caused by dichlobenil (Brandt *et al* . 1990; Brittebo *et al* . 1991; Eriksson and Brittebo 1995). Olfactory toxicity was the endpoint chosen for these exposure scenarios. E. Aggregate Risks and Determination of Safety EPA determines whether acute and chronic pesticide exposures are safe by comparing aggregate exposure estimates to the aPAD and cPAD. The aPAD and cPAD represent the highest safe exposures, taking into account all appropriate SFs. EPA calculates the aPAD and cPAD by dividing the POD by all applicable UFs. For linear cancer risks, EPA calculates the probability of additional cancer cases given the estimated aggregate exposure. Short-term, intermediate-term, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the POD to ensure that the MOE called for by the product of all applicable UFs is not exceeded. 1. *Acute risk* . An acute aggregate risk assessment takes into account exposure estimates from acute dietary consumption of food and drinking water. No adverse effect resulting from a single-oral exposure was identified and no acute dietary endpoint was selected. Therefore, fluopicolide is not expected to pose an acute risk. Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to BAM will occupy 28% of the aPAD for all infants <1 year old and females 13-49 years old, the population groups receiving the greatest exposure. 2. *Chronic risk* . Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to fluopicolide from food and water will utilize 11% of the cPAD for children 1-2 years old, and chronic exposure to BAM from food and water will utilize 93% of the cPAD for all infants <1 year old, the population group receiving the greatest exposure. Based on the explanation in Unit III.C.3., regarding residential use patterns, chronic residential exposure to residues of fluopicolide and its metabolite is not expected. 3. *Short-term and intermediate-term risk* . Short-term and intermediate-term aggregate exposure takes into account short-term and intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Fluopicolide is currently registered for uses that could result in short and intermediate term residential exposure and the Agency has determined that it is appropriate to aggregate chronic exposure through food and water with short-term and intermediate-term residential exposures to fluopicolide. Using the exposure assumptions described in this unit for short-term and intermediate-term exposures, EPA has concluded the combined short-term and intermediate-term food, water, and residential exposures aggregated for fluopicolide result in aggregate MOEs of 300 for children 1-2 years. As discussed in the unit for short-term and intermediate-term exposures, exposures to BAM may result based on use of fluopicolide only since the use pattens for dichlobenil are not expected to result in scenarios with significant residential/non-occupational exposure. Exposure to BAM from fluopicolide uses on residential turfgrass and recreational sites, such as golf courses, has been evaluated. The Agency has determined that it is appropriate to aggregate chronic exposure through food and water with short and intermediate term residential exposures to BAM. Using the exposure assumptions described in this unit for short-term and intermediate-term exposures for BAM, EPA has concluded the combined short and intermediate term food, water, and residential exposures aggregated result in aggregate MOEs of 3200 for all infants <1 year old and 5,400 for children 1-2 years old. 4. *Aggregate cancer risk for U.S. population* . Fluopicolide has been classified as “not likely to be carcinogenic to humans.” As such, an estimate of cancer risk is not warranted for parent fluopicolide. EPA has determined BAM's potential for carcinogenicity is similar to that of dichlobenil, which is classified as “group C, possible human carcinogen.” Quantification of cancer risk is based on the RfD approach which requires comparison of the chronic exposure to the RfD. Therefore, the chronic risks discussed in Unit III.E.2. are considered protective of both non-cancer and cancer effects. 5. *Determination of safety* . Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to fluopicolide and its metabolite BAM residues. IV. Other Considerations A. Analytical Enforcement Methodology Adequate enforcement methodology liquid chromatography mass spectrometry ((LC/MS/MS) method, Method RM-43C-2) is available to enforce the tolerance expression for fluopicolide. Enforcement methodology (LC/MS/MS Method, Methods 00782, 00782/M001, 00782/M002, and 00782/M003) is available to adequately enforce the tolerance expression for BAM. The methods may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number:

(410)305-2905; e-mail address: *residuemethods@epa.gov* . B. International Residue Limits No Codex, Canadian, or Mexican maximum residue limits

(MRLs)or tolerances have been established for fluopicolide. V. Conclusion Therefore, tolerances are established for residues of fluopicolide, [2,6-dichloro-N-[[3-chloro-5-(trifluoromethyl)-2-pyridinyl]methyl]benzamide] as an indicator of combined residues of fluopicolide and its metabolite BAM on vegetable, root, subgroup 1A, except sugar beet and carrot at 0.15 ppm; vegetable, leaves of root and tuber, group 2 at 15.0 ppm; vegetable, bulb, crop group 3-07 at 7.0 ppm; and brassica, head and stem, subgroup 5A at 5.0 ppm. VI. Statutory and Executive Order Reviews This final rule establishes tolerances under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget

(OMB)has exempted these types of actions from review under Executive Order 12866, entitled * Regulatory Planning and Review * (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final 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) or Executive Order 13045, entitled *Protection of Children from Environmental Health Risks and Safety Risks* (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 *et seq* ., nor does it require any special considerations under Executive Order 12898, entitled *Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations* (59 FR 7629, February 16, 1994). Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act

(RFA)(5 U.S.C. 601 *et seq* .) do not apply. This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled *Federalism* (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled *Consultation and Coordination with Indian Tribal Governments* (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995

(UMRA)(Public Law 104-4). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note). VII. Congressional Review Act The Congressional Review Act, 5 U.S.C. 801 *et seq* ., generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of this final rule in the **Federal Register** . This final rule is not a “major rule” as defined by 5 U.S.C. 804(2). List of Subjects in 40 CFR Part 180 Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements. Dated: May 14, 2008. Donald Stubbs, Acting Director, Registration Division, Office of Pesticide Programs. Therefore, 40 CFR chapter I is amended as follows: PART 180—[AMENDED] 1. The authority citation for part 180 continues to read as follows: Authority: 21 U.S.C. 321(q), 346a and 371. 2. Section 180.627 is amended by alphabetically adding the following commodities to the table in paragraph

(a)to read as follows: § 180.627 Fluopicolide; tolerances for residues.

(a)* * * Commodity Parts per million Brassica, head and stem, subgroup 5A 5.0 * * * * * Vegetable, bulb, crop group 3-07 7.0 * * * * * Vegetable, leaves of root and tuber, group 2 15.0 Vegetable, root, subgroup 1A, except sugar beet and carrot 0.15 * * * * * [FR Doc. E8-11853 Filed 5-27-08; 8:45 am] BILLING CODE 6560-50-S ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2005-0309; FRL-8365-2] Hexythiazox; Pesticide Tolerances AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: This regulation establishes tolerances for combined residues of hexythiazox in or on corn, field, grain; corn, field, stover; and corn, field, forage. Gowan Company requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA). DATES: This regulation is effective May 28, 2008. Objections and requests for hearings must be received on or before July 28, 2008, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION ). ADDRESSES: EPA has established a docket for this action under docket identification

(ID)number EPA-HQ-OPP-2005-0309. To access the electronic docket, go to *http://www.regulations.gov* , select “Advanced Search,” then “Docket Search.” Insert the docket ID number where indicated and select the “Submit” button. Follow the instructions on the regulations.gov website to view the docket index or access available documents. All documents in the docket are listed in the docket index available in regulations.gov. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information

(703)305-5805. FOR FURTHER INFORMATION CONTACT: Olga Odiott, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number:

(703)308-9369; e-mail address: *odiott.olga@epa.gov* . SUPPLEMENTARY INFORMATION: I. General Information A. Does this Action Apply to Me? You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities: • Crop production (NAICS code 111). • Animal production (NAICS code 112). • Food manufacturing (NAICS code 311). • Pesticide manufacturing (NAICS code 32532). This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT . B. How Can I Access Electronic Copies of this Document? In addition to accessing an electronic copy of this **Federal Register** document through the electronic docket at *http://www.regulations.gov* , you may access this **Federal Register** document electronically through the EPA Internet under the “ **Federal Register** ” listings at *http://www.epa.gov/fedrgstr* . You may also access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's pilot e-CFR site at *http://www.gpoaccess.gov/ecfr* . C. Can I File an Objection or Hearing Request? Under section 408(g) of FFDCA, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2005-0309 in the subject line on the first page of your submission. All requests must be in writing, and must be mailed or delivered to the Hearing Clerk as required by 40 CFR part 178 on or before July 28, 2008. In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket that is described in ADDRESSES . Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit this copy, identified by docket ID number EPA-HQ-OPP-2005-0309, by one of the following methods: • *Federal eRulemaking Portal* : *http://www.regulations.gov* . Follow the on-line instructions for submitting comments. • *Mail* : Office of Pesticide Programs

(703)305-5805. II. Petition for Tolerance In the **Federal Register** of March 1, 2006 (71 FR 10506) (FRL-7756-4), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 5F6953) by Gowan Company, 370 South Main Street, Yuma, AZ 85364. The petition requested that 40 CFR 180.448 be amended by establishing tolerances for combined residues of the insecticide hexythiazox, trans-5-(4-chlorophenyl)-N-cyclohexyl-4-methyl-2-oxothiazolidine-3-carboxamide and its metabolites containing the (4-chlorophenyl)-4-methyl-2-oxo-3-thiazolidine moiety, in or on corn, field, grain at 0.05 parts per million (ppm); corn, field, stover at 2.0 ppm; and corn, field, forage at 2.0 ppm. That notice referenced a summary of the petition prepared by Gowan Company, the registrant, which is available to the public in the docket, *http://www.regulations.gov* . Comments were received on the notice of filing. EPA's response to these comments is discussed in Unit IV.C. Based upon review of the data supporting the petition, EPA has revised the tolerance levels to 0.02 ppm for corn, field, grain; 2.5 ppm for corn, field, stover; and 6.5 ppm for corn, field, forage. The reasons for these changes are explained in Unit IV.D. III. Aggregate Risk Assessment and Determination of Safety Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue....” Consistent with section 408(b)(2)(D) of FFDCA, and the factors specified in section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for the petitioned-for tolerances for combined residues of hexythiazox on corn, field, grain at 0.02 ppm; corn, field, stover at 2.5 ppm; and corn, field, forage at 6.0 ppm. EPA's assessment of exposures and risks associated with establishing tolerances follows. A. Toxicological Profile EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Hexythiazox has a low order of acute toxicity for the oral, dermal and inhalation routes of exposure. It produces mild eye irritation, is not a dermal irritant, and is negative for dermal sensitization. The target organs of hexythiazox are the liver and adrenal glands, with the dog being the most sensitive species. In a subchronic toxicity study in rats, increased liver and adrenal weights as well as adrenal histopathology (fatty degeneration of the adrenal zone fasciculata) were seen. In a 4-week range-finding study in dogs, effects included increased liver and adrenal weights (reported in the chronic dog study). Chronic studies in dogs, rats, and mice support the liver and adrenal effects seen in the subchronic studies. In the chronic dog study, increased liver and adrenal weights were observed, along with associated histopathology of the liver (hypertrophy) and adrenal glands (adrenal cortex hypertrophy). In the chronic feeding/carcinogenicity studies in rats and mice, effects included decreased body weight gain and increased liver weights. The effects of hexythiazox on the adrenal glands could be an indication of endocrine disruption. However, in all studies in which these effects were seen, a NOAEL was determined. The data provided no indication of increased susceptibility in rats or rabbits from *in utero* and post-natal exposure to hexythiazox. There was no evidence of carcinogenicity in male and female rats; however, there were increased incidences of malignant and combined benign/malignant liver tumors in female B6C3FT mice. Hexythiazox was not mutagenic in bacteria or Chinese hamster ovary

(CHO)cells. It was negative for chromosomal aberrations in CHO and did not cause unscheduled DNA synthesis

(UDS)in primary rat hepatocytes. In an acceptable micronucleus assay, there was no statistically significant increase in the frequency of micronucleated polychromatic erythrocytes in bone marrow of treated mice after any dose or treatment time. Hexythiazox has been found classified as nonmutagenic. Specific information on the studies received and the nature of the adverse effects caused by hexythiazox as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies are discussed in the final rule published in the **Federal Register** of December 30, 2005 (70 FR 77363) (FRL-7752-1). B. Toxicological Endpoints For hazards that have a threshold below which there is no appreciable risk, a toxicological point of departure

(BMD)approach is sometimes used for risk assessment. Uncertainty/safety factors

(aPAD)and chronic population adjusted dose (cPAD). The aPAD and cPAD are calculated by dividing the POD by all applicable UFs. Aggregate short-, intermediate-, and chronic-term risks are evaluated by comparing food, water, and residential exposure to the POD to ensure that the margin of exposure

(USDA)1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII). As to residue levels in food, EPA tolerance-level residues, 100% crop treated (PCT), and DEEM-FCID (ver 7.81) default processing factors for all plant and livestock residues. ii. *Chronic exposure* . In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, EPA used PCT estimates, average field trial residues, experimentally determined processing factors when available, and anticipated livestock residues (dietary burden calculated using average field trial residues). iii. *Cancer* . Cancer risk was assessed using the same estimates as discussed in Unit III.C.1.ii., chronic exposure. iv. *Anticipated residue and PCT information* .Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must require pursuant to FFDCA section 408(f)(1) that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such data call-ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of these tolerances. Section 408(b)(2)(F) of FFDCA states that the Agency may use data on the actual percent of food treated for assessing chronic dietary risk only if: *Condition a* . The data used are reliable and provide a valid basis to show what percentage of the food derived from such crop is likely to contain the pesticide residue. *Condition b* . The exposure estimate does not underestimate exposure for any significant subpopulation group. *Condition c* . Data are available on pesticide use and food consumption in a particular area, the exposure estimate does not understate exposure for the population in such area. In addition, the Agency must provide for periodic evaluation of any estimates used. To provide for the periodic evaluation of the estimate of PCT as required by FFDCA section 408(b)(2)(F), EPA may require registrants to submit data on PCT. The Agency used PCT information as follows: 1% for apples, cherries, and prunes; 5% for almonds, apricots, mint, peaches, pears, plums, and walnuts; 10% for dates, caneberries, and nectarines; 25% for strawberries; and 50% for hops. In most cases, EPA uses available data from United States Department of Agriculture/National Agricultural Statistics Service (USDA/NASS), proprietary market surveys, and the National Pesticide Use Database for the chemical/crop combination for the most recent 6 years. EPA uses an average PCT for chronic dietary risk analysis. The average PCT figure for each existing use is derived by combining available public and private market survey data for that use, averaging across all observations, and rounding to the nearest 5%, except for those situations in which the average PCT is less than one. In those cases, 1% is used as the average PCT and 2.5% is used as the maximum PCT. EPA uses a maximum PCT for acute dietary risk analysis. The maximum PCT figure is the highest observed maximum value reported within the recent 6 years of available public and private market survey data for the existing use and rounded up to the nearest multiple of 5%. The Agency used projected percent crop treated

(PPCT)information as follows: 15% for grapes and 18% for oranges. EPA estimates PPCT for a new pesticide use by assuming that the PCT during the pesticide's initial five years of use on a specific site will not exceed the average PCT of the dominant pesticide (i.e., the one with the greatest PCT) on that site over the most recent surveys. Comparisons are only made among pesticides of the same pesticide types (i.e., the dominant insecticide on the use site is selected for comparison with a new insecticide). The PCTs included in the average may be each for the same pesticide or for different pesticides since the same or different pesticides may dominate for each year selected. Typically, EPA uses USDA/NASS as the source for raw PCT data because it is publicly available and does not have to be calculated from other available data sources. When a specific use site is not surveyed by USDA/NASS, EPA uses proprietary data and calculates the estimated PCT. This estimated PPCT, based on the average PCT of the market leader, is appropriate for use in the chronic dietary risk assessment. This method of estimating a PPCT for a new use of a registered pesticide or a new pesticide produces a high-end estimate that is unlikely, in most cases, to be exceeded during the initial five years of actual use. The predominant factor that bears on whether the estimated PPCT could be exceeded is whether there are concerns with pest pressures as indicated in emergency exemption requests or other readily available information. All information currently available has been considered for hexythiazox, and it is the opinion of EPA that it is unlikely that the actual PCT for hexythiazox will exceed the estimated PPCT during the next five years. The Agency believes that the three conditions discussed in Unit III.C.1.iv. have been met. With respect to Condition a, PCT estimates are derived from Federal and private market survey data, which are reliable and have a valid basis. The Agency is reasonably certain that the percentage of the food treated is not likely to be an underestimation. As to Conditions b and c, regional consumption information and consumption information for significant subpopulations is taken into account through EPA's computer-based model for evaluating the exposure of significant subpopulations including several regional groups. Use of this consumption information in EPA's risk assessment process ensures that EPA's exposure estimate does not understate exposure for any significant subpopulation group and allows the Agency to be reasonably certain that no regional population is exposed to residue levels higher than those estimated by the Agency. Other than the data available through national food consumption surveys, EPA does not have available reliable information on the regional consumption of food to which hexythiazox may be applied in a particular area. 2. *Dietary exposure from drinking water* . The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for hexythiazox in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of hexythiazox. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at *http://www.epa.gov/oppefed1/models/water/index.htm* . Based on the Pesticide Root Zone Model /Exposure Analysis Modeling System (PRZM/EXAMS) and Screening Concentration in Ground Water (SCI-GROW) models, the estimated drinking water concentrations (EDWCs) of hexythiazox 1. The EDWCs for acute exposures are estimated to be 4.23 parts per billion

(ppb)for surface water and 0.00503 ppb for ground water. 2. The EDWCs for chronic exposures for non-cancer assessments are estimated to be 2.26 ppb for surface water and 0.00503 ppb for ground water. 3. The EDWCs for chronic exposures for cancer assessments are estimated to be 1.72 ppb for surface water and 0.00503 ppb for ground water. Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. 1. For acute dietary risk assessment, the water concentration value of 4.23 ppb was used to assess the contribution to drinking water. 2. For chronic dietary risk assessment, the water concentration of value 2.26 ppb was used to assess the contribution to drinking water. 3. For cancer dietary risk assessment, the water concentration of value 1.72 ppb was used to assess the contribution to drinking water. 3. *From non-dietary exposure* . The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Hexythiazox is not registered for any specific use patterns that would result in residential exposure. 4. *Cumulative effects from substances with a common mechanism of toxicity* . Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.” EPA has not found hexythiazox to share a common mechanism of toxicity with any other substances, and hexythiazox does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that hexythiazox does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's website at *http://www.epa.gov/pesticides/cumulative* . D. Safety Factor for Infants and Children 1. *In general* . Section 408(b)(2)(c) of FFDCA provides that EPA shall apply an additional tenfold

(10X)margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA safety factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor. 2. *Prenatal and postnatal sensitivity* . The prenatal and postnatal toxicology data base indicates no increased susceptibility of rats or rabbits to in utero and/or postnatal exposure to hexythiazox. 3. *Conclusion* . EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1X. That decision is based on the following findings: i. The toxicity database for hexythiazox is adequate for selecting toxicity endpoints for risk assessment. The toxicity profile of hexythiazox can be characterized for all effects, including potential developmental, reproductive, and neurotoxic effects. ii. There is no evidence that hexythiazox is a neurotoxic chemical and there is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity. iii. There is no evidence that hexythiazox results in increased susceptibility in *in utero* rats or rabbits in the prenatal developmental studies or in young rats in the 2-generation reproduction study. iv. The concern for endocrine related effects (increase in ovarian weight and adrenal weights and/or adrenal pathology) seen in various species is low because there is a well established NOAEL protecting from the effects, no reproductive parameters were affected in the 2-generation reproduction study at the highest dose tested (180 mg/kg/day), there is no evidence of increased susceptibility of infants and children in the database and the doses selected for the cRfD and intermediate and long-term dermal and inhalation exposure assessments are based on the NOAELs protecting from the endocrine related effects. EPA concluded that the selected endpoints adequately account for these potential effects and no additional data are required. v. There are no residual uncertainties identified in the exposure databases. Although the chronic food exposure assessment is refined, EPA believes that the assessment is based on reliable data and will not underestimate exposure/risk. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to hexythiazox in drinking water. These assessments will not underestimate the exposure and risks posed by hexythiazox. E. Aggregate Risks and Determination of Safety EPA determines whether acute and chronic pesticide exposures are safe by comparing aggregate exposure estimates to the aPAD and cPAD. The aPAD and cPAD represent the highest safe exposures, taking into account all appropriate SFs. EPA calculates the aPAD and cPAD by dividing the POD by all applicable UFs. For linear cancer risks, EPA calculates the probability of additional cancer cases given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the POD to ensure that the MOE called for by the product of all applicable UFs is not exceeded. 1. *Acute risk* . Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to hexythiazox will occupy <1% of the aPAD for (females 13-49 years old) the population group receiving the greatest exposure. 2. *Chronic risk* . Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to hexythiazox from food and water will utilize 1% of the cPAD for (children 1-2 years old) the population group receiving the greatest exposure. There are no residential uses for hexythiazox. 3. *Short-term risk* . Short-term aggregate exposure takes into account short-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Hexythiazox is not registered for any use patterns that would result in residential exposure. Therefore, the short-term aggregate risk is the sum of the risk from exposure to hexythiazox through food and water and will not be greater than the chronic aggregate risk. 4. *Intermediate-term risk* . Intermediate-term aggregate exposure takes into account intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Hexythiazox is not registered for any use patterns that would result in intermediate-term residential exposure. Therefore, the intermediate-term aggregate risk is the sum of the risk from exposure to hexythiazox through food and water, which has already been addressed, and will not be greater than the chronic aggregate risk. 5. *Aggregate cancer risk for U.S. population* . Using the exposure assumptions described in this unit for chronic exposure, EPA has estimated increased cancer risk from exposure to hexythiazox at 2 in 1 million (2 x 10 - 6 ). Based on a critical commodity analysis, the major contributors to the cancer risk were water (38% of total exposure), strawberry (20% of total exposure), and field corn syrup (16% of total exposure). Under the reasonable certainty of no harm standard in FFDCA section 408(b)(2)(A)(ii), cancer risks must be no greater than negligible. EPA interprets negligible cancer risks to be risks within the range of an increased cancer risk of 1 in 1 million. Risks as high as 3 in 1 million have been considered to be within this risk range. EPA concludes that the estimated cancer risk for hexythiazox is within the negligible risk range. The Agency notes that hexythiazox has been classified as a possible human carcinogen based on increased incidence of liver tumors in female mice. No chemical-related oncogenic effects were reported in male mice or in male and female rats, and hexythiazox has been classified as nonmutagenic. 6. *Determination of safety* . Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population or to infants and children from aggregate exposure to hexythiazox residues. IV. Other Considerations A. Analytical Enforcement Methodology Adequate enforcement methodology (Method AMR-985-87,) is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number:

(410)305-2905; e-mail address: *residuemethods@epa.gov* . B. International Residue Limits There are no currently established CODEX, Canadian, or Mexican MRLs for residues of hexythiazox in/on the subject commodities. C. Response to Comments There was one comment received on the notice of filing. The commenter, B. Sachua, requested that a zero tolerance be set for hexythiazox based on the commenter's generalized criticisms of EPA's risk assessment process. EPA has responded to B. Sachua's generalized comments for hexythiazox and other chemicals on several occasions. (See the **Federal Register** of March 22, 2006 (71 FR 14409) (FRL-7768-3); and the **Federal Register** January 7, 2005 (70 FR 1349) (FRL-7691-4). D. Revisions to Petitioned-For Tolerances EPA revised the proposed tolerance levels (from 0.05 to 0.02 ppm for corn, field, grain; 2.0 to 2.5 ppm for corn, field, stover; and 2.0 to 6.5 ppm for corn, field, forage) based on the field trial data and the maximum residue limit

(MRL)tolerance calculator. V. Conclusion Therefore, tolerances are established for combined residues of hexythiazox, trans-5-(4-chlorophenyl)-N-cyclohexyl-4-methyl-2-oxothiazolidine-3-carboxamide and its metabolites containing the (4-chlorophenyl)-4-methyl-2-oxo-3-thiazolidine moiety (expressed as parent), in or on corn, field, grain at 0.02 ppm; corn, field, stover at 2.5 ppm; and corn, field, forage at 6.0 ppm. VI. Statutory and Executive Order Reviews This final rule establishes tolerances under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget

(OMB)has exempted these types of actions from review under Executive Order 12866, entitled *Regulatory Planning and Review* (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final 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) or Executive Order 13045, entitled *Protection of Children from Environmental Health Risks and Safety Risks* (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 *et seq* ., nor does it require any special considerations under Executive Order 12898, entitled *Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations* (59 FR 7629, February 16, 1994). Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act

(UMRA)(Public Law 104-4). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note). VII. Congressional Review Act The Congressional Review Act, 5 U.S.C. 801 *et seq* ., generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of this final rule in the **Federal Register** . This final rule is not a “major rule” as defined by 5 U.S.C. 804(2). List of Subjects in 40 CFR Part 180 Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements. Dated: May 16, 2008. Daniel J. Rosenblatt, Acting Director, Registration Division, Office of Pesticide Programs. Therefore, 40 CFR chapter I is amended as follows: PART 180—[AMENDED] 1. The authority citation for part 180 continues to read as follows: Authority: 21 U.S.C. 321(q), 346a and 371. 2. Section 180.448 is amended by alphabetically adding the following commodities to the table in paragraph

(c)to read as follows: § 180.448 Hexythiazox, tolerances for residues.

(c)* * * Commodity Parts per million Corn, field, grain 0.02 Corn, field, stover 2.5 Corn, field, forage 6.0 * * * * * [FR Doc. E8-11892 Filed 5-27-08; 8:45 am] BILLING CODE 6560-50-S DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 300 [Docket No. 080515668-8669-01] RIN 0648-AW82 Pacific Halibut Fisheries; Guideline Harvest Levels for the Guided Recreational Halibut Fishery; Correction AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Final rule; correcting amendments. SUMMARY: This action corrects the regulatory text of a final rule published on August 8, 2003 (68 FR 47256), that implemented guideline harvest levels

(GHLs)for the guided sport charter vessel fishery in the International Pacific Halibut Commission Regulatory Areas 2C and 3A. The table of GHLs as they relate to the total constant exploitation yield contains errors in the conversions from pounds to metric tons, and rounding errors for some metric equivalents. This action is necessary to correct the errors in that table. DATES: Effective May 28, 2008. FOR FURTHER INFORMATION CONTACT: Julie Scheurer,

(907)586-7356. SUPPLEMENTARY INFORMATION: A final rule published August 8, 2003 (68 FR 47256, RIN 0648-AK17), implemented guideline harvest level

(GHL)measures for managing the harvest of Pacific halibut ( *Hippoglossus stenolepis* ) in the charter sport fishery in International Pacific Halibut Commission

(IPHC)Regulatory Areas 2C and 3A in and off Alaska. This correcting amendment revises the table at 50 CFR 300.65(c)(1) that lists GHLs corresponding to different levels of the total constant exploitation yield set annually by the IPHC. Need for Correction The table at § 300.65(c)(1) contains three metric conversion errors, several rounding errors, and missing paragraph designations. Paragraphs (c)(1)(i) through

(v)refer to different benchmark levels for the total constant exploitation yield for Area 2C. There are no similar paragraph designations for the benchmark levels for Area 3A. Paragraph designations are added for the Area 3A table entries for consistency. This final rule corrects the conversion to metric equivalent errors and rounding errors, adds new paragraph designations to paragraph (c)(1), and reorganizes the table into two columns instead of four for clarity and ease of reading. Classification Pursuant to 5 U.S.C. 553(b)(B), the Acting Assistant Administrator for Fisheries finds there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be unnecessary. Notice and comment are unnecessary because this action makes only minor, non-substantive changes to the metric equivalents for the GHLs, and reorganizes the table to make it easier to read and understand. The IPHC conducts its analyses and sets limits using pounds. Likewise, Canadian and U.S. management agencies use pounds to measure and report halibut catch information. These corrections will not affect the results of analyses conducted to support management decisions in the halibut fishery nor change the total catch of halibut in the charter halibut fishery. This rule does not make any substantive change in the rights and obligations of charter vessel anglers managed under the GHL halibut regulations. No aspect of this action is controversial and no change in operating practices in the fishery is required. NMFS therefore determines that APA requirements for public notice and comment are unnecessary for this action and determines that this rule is not subject to the 30-day delay in effectiveness requirement at 5 U.S.C. 553(d). This final rule complies with the Halibut Act and the North Pacific Fishery Management Council's authority to implement allocation measures for the management of the halibut fishery. List of Subjects in 50 CFR Part 300 Fisheries, Fishing, Reporting and recordkeeping requirements, Treaties. Dated: May 21, 2008. Samuel D. Rauch III Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service. For the reasons set out in the preamble, 50 CFR part 300 is corrected as follows: PART 300—INTERNATIONAL FISHERIES REGULATIONS 1. The authority citation for 50 CFR part 300, subpart E, continues to read as follows: Authority: 16 U.S.C. 773-773k. 2. In § 300.65, paragraph (c)(1) is revised to read as follows: § 300.65 Catch sharing plan and domestic management measures in waters in and off Alaska.

(c)* * *

(1)The annual GHLs for Regulatory Areas 2C and 3A are determined as follows: If the Annual Total Constant Exploitation Yield for Halibut is More Than: Then the GHL will be:

(i)Regulatory Area 2C

(A)9,027,000 lb (4,094.6 mt) 1,432,000 lb (649.5 mt)

(B)7,965,000 lb (3,612.9 mt) 1,217,000 lb (552.0 mt)

(D)5,841,000 lb (2,649.4 mt) 931,000 lb (422.3 mt)

(E)4,779,000 lb (2,167.7 mt) 788,000 lb (357.4 mt)

(ii)Regulatory Area 3A

(A)21,581,000 lb (9,789.0 mt) 3,650,000 lb (1,655.6 mt)

(B)19,042,000 lb (8,637.3 mt) 3,103,000 lb (1,407.5 mt)

(D)13,964,000 lb (6,334.0 mt) 2,373,000 lb (1,076.4 mt)

(E)11,425,000 lb (5,182.3 mt) 2,008,000 lb (910.8 mt) [FR Doc. E8-11881 Filed 5-27-08; 8:45 am] BILLING CODE 3510-22-S DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 15 CFR Part 902 50 CFR Part 300 [Docket No. 071031633-8385-02] RIN 0648-AW23 Pacific Halibut Fisheries; Guided Sport Charter Vessel Fishery for Halibut AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Final rule. SUMMARY: NMFS implements regulations to limit the harvest of Pacific halibut by guided sport charter vessel anglers in International Pacific Halibut Commission Area 2C of Southeast Alaska to the guideline harvest level

(GHL)of 931,000 lb (422.3 mt). The intended effect of this action is to reduce the poundage of halibut harvested by the guided sport charter vessel sector in Area 2C to the GHL while minimizing adverse impacts on the charter fishery, its sport fishing clients, the coastal communities that serve as home ports for this fishery, and fisheries for other species. This final rule implements three restrictions for the guided sport charter vessel fishery for halibut in Area 2C: a one-fish daily bag limit, no harvest by the charter vessel guide and crew, and a line limit equal to the number of charter vessel anglers onboard, not to exceed six lines. DATES: Effective June 1, 2008. ADDRESSES: Copies of the Environmental Assessment (EA), Regulatory Impact Review (RIR), and Final Regulatory Flexibility Analysis

(FRFA)prepared for this action may be obtained from the North Pacific Fishery Management Council (Council) at 605 West 4th, Suite 306, Anchorage, Alaska 99501-2252, 907-271-2809, or the NMFS Alaska Region, P.O. Box 21668, Juneau, Alaska 99802, Attn: Ellen Sebastian, and on the NMFS Alaska Region Web site at *http://www.noaa.fakr.gov* . Written comments regarding the burden-hour estimates or other aspects of the collection of information requirements contained in this rule may be submitted to NMFS at the above address, and by e-mail to *David_Rostker@omb.eop.gov* or by fax to 202-395-7285. FOR FURTHER INFORMATION CONTACT: Sue Salveson, 907-586-7228, or Julie Scheurer, 907-586-7356. SUPPLEMENTARY INFORMATION: The International Pacific Halibut Commission

(IPHC)and NMFS manage fishing for Pacific halibut ( *Hippoglossus stenolepis* ) through regulations established under the authority of the Northern Pacific Halibut Act of 1982 (Halibut Act). The IPHC promulgates regulations governing the halibut fishery under the Convention between the United States and Canada for the Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea (Convention). The IPHC's regulations are subject to approval by the Secretary of State with concurrence by the Secretary of Commerce (Secretary). After approval by the Secretaries of State and Commerce, the IPHC regulations are published in the **Federal Register** as annual management measures pursuant to 50 CFR 300.62. The annual management measures for 2008 were published on March 7, 2008 (73 FR 12280). The Halibut Act also provides the Council with authority to recommend regulations to the Secretary to allocate harvesting privileges among U.S. fishermen. This process requires the Council to submit a recommendation to the Secretary as a proposed rule for publication in the **Federal Register** along with supporting analyses as required by other applicable law. The Council is developing a regulatory program to manage the guided sport charter vessel fishery for halibut. This final rule is a step toward the Council's effort to stabilize relative harvest between the Area 2C charter vessel and commercial halibut fisheries while a longer term management program is developed and implemented. The proposed longer term program under development currently includes a proposed limited entry program for charter businesses, a catch sharing plan, and compensated reallocation from the commercial to charter fishing sectors. This final rule is linked to the overall management of the halibut fisheries by the IPHC and a previous regulation approved by the Secretary that establishes a guideline harvest level

(GHL)for managing the harvest of halibut by the guided sport charter vessel fishery (August 8, 2003; 68 FR 47256). Background and Need for Action The background and need for this action were described in the preamble of the proposed rule published in the **Federal Register** on December 31, 2007 (72 FR 74257). In summary, this final rule will implement a one-fish daily bag limit for guided sport charter vessel anglers in Area 2C to reduce the poundage of halibut harvested by the guided sport charter vessel sector in Area 2C to the GHL while minimizing adverse impacts on the charter fishery, its sport fishing clients, the coastal communities that serve as home ports for this fishery, and fisheries for other species. Management of the Halibut Fisheries A complete description of how the halibut fisheries are managed can be found in the preamble to the proposed rule. In short, the IPHC annually determines the amount of halibut that may be removed from the resource without causing biological or conservation problems on an area-by-area basis in all areas of Convention waters. The IPHC estimates the exploitable biomass and calculates the target amount of allowable mortality for a given area. This target level is called the total constant exploitation yield

(CEY)and it represents the target level for total removals (in net pounds) for that area in the coming year. The IPHC subtracts estimates of all non-commercial removals (sport, subsistence, bycatch, and wastage) from the Total CEY. The remaining CEY, after the removals are subtracted, is the maximum catch or AFishery CEY” for an area's directed commercial fixed gear fishery. Guideline Harvest Level A more thorough discussion of the development of the guideline harvest level

(GHL)is provided in the preamble to the proposed rule (December 31, 2007; 72 FR 74257) and in the rule that first implemented the GHL (August 8, 2003; 68 FR 47256). The Area 2C GHL is established in regulations at 50 CFR 300.65(c) and is a benchmark for monitoring the charter vessel fishery relative to the commercial fishery and other sources of fishing mortality. The fishery is not closed when the GHL is reached, but it is the Council's policy that the charter vessel fishery should not exceed the GHL. To accommodate fluctuations in halibut abundance, the Council adjusts the GHL step-wise according to the total CEY determined annually by the IPHC. Specifically, the Council linked a step-wise reduction in the GHL in any one year to the decrease in the total CEY as compared to the 1999-2000 stock abundance. Since 2003 when the GHL became effective, it has never been reduced below its maximum level because declines in the total CEY have not been sufficient to trigger the first step reduction of the GHL. This situation changed in 2008 when the total CEY for Area 2C was markedly reduced, resulting in a GHL of 931,000 lb (422.3 mt). If the CEY were to increase in the future, the GHL could increase up to a maximum of 1.432 million lb (649.5 mt) for Area 2C. Recent Harvests of Halibut in Area 2C The GHL was implemented in 2003, and the charter vessel fishery has exceeded the GHL for Area 2C every year since 2004. In 2006, the charter harvest exceeded its 2006 Area 2C GHL by 380,000 lb (172.4 mt) or 26.5 percent. In 2007, the Secretary of Commerce took regulatory action to reduce sport fish harvest of halibut in Area 2C by amending the two-fish bag limit with the restriction that at least one of the two halibut retained could be no longer than 32 in (81.3 cm) with its head on. Alaska Department of Fish and Game (ADF&G) preliminary estimates of the Area 2C halibut harvest by the charter vessel fishery in 2007 again indicated that the GHL was exceeded, although by a smaller amount. The Council recommended this final rule specifically to maintain the charter vessel fishery at its GHL. In June 2007, the Council adopted a preferred alternative that contained two options. The Council recommended that the selection between the options would depend on whether the CEY decreased substantially for 2008. Not knowing in June 2007 how the GHL might be affected by total CEY established by the IPHC in January 2008, the Council recommended a suite of charter vessel fishery restrictions if the GHL were to remain the same in 2008 (proposed rule Option A) and a more restrictive suite of restrictions if the GHL were to decrease in 2008 (proposed rule Option B). At the IPHC annual meeting in January 2008, the IPHC set the 2008 total CEY for Area 2C was set at 6.5 million lb (2,948.4 mt). This is a 4.3 million lb (1,950.4 mt) reduction from the 2007 total CEY of 10.8 million lb (4,899.0 mt). 2008 GHL for Area 2C NMFS published a notice of the guideline harvest levels for Areas 2C and 3A for 2008 on February 5, 2008 (73 FR 6709). As established by the original rule that implemented the GHL (August 8, 2003; 68 FR 47256), the GHL will step down if the IPHC reduces the CEY below certain benchmarks. The 2008 CEY resulted in a three-step reduction in the GHL for Area 2C. The 2008 GHL for Area 2C is 931,000 lb (422.3 mt). The Action With this final rule, NMFS implements the following management measures to restrict halibut harvest by the charter vessel sector to the GHL for Area 2C: • The number of halibut caught and retained by each charter vessel angler in Area 2C is limited to no more than one halibut of any size per calendar day; • A charter vessel guide, a charter vessel operator, and crew of a charter vessel must not catch and retain halibut during a charter vessel fishing trip; and • The number of lines used to fish for halibut must not exceed six or the number of charter vessel anglers onboard the charter vessel, whichever is less. No annual limit for individual anglers will be implemented in Area 2C for 2008. NMFS notes that a two-fish daily bag limit for sport fish anglers is established under annual IPHC regulations for all waters off Alaska. If an angler onboard a charter vessel in Area 2C retains a halibut, then that angler may retain only one additional halibut that day and only if that additional halibut was caught in an IPHC regulatory area other than Area 2C. This is most pertinent to charter vessels that may fish adjacent Areas 2C and 3A in a single day. While charter vessel guides, operators, and crew will be prohibited from catching and retaining halibut, they are not prohibited from demonstrating fishing techniques to their clients. Summary of Comments The proposed rule was published in the **Federal Register** on December 31, 2007 (72 FR 74257), and invited public comments until January 30, 2008. NMFS received 273 letters, e-mails, and faxes before the deadline containing 107 unique comments on the proposed rule. NMFS received 162 letters in favor, 102 letters in opposition, 8 letters in partial support, and one letter stating an ambiguous position on the proposed rule. Of the letters from which affiliations could be determined, 96 were from the commercial industry, 61 from the charter industry, 14 from local businesses, 2 from fisheries management organizations (IPHC and ADF&G), and 24 letters were received from anglers and members of the general public. Three form letters were received. Ten copies of one letter in support of the one-fish daily bag limit were received. One form letter was received from 51 individuals who opposed the proposed rule because it did not include a sunset provision. The third form letter was from 13 businesses that opposed the proposed rule citing negative economic effects to their communities. Additionally, two letters in favor of the proposed rule were received, one signed by 24 commercial fisherman, and another signed by 15 deckhands. Comments in favor of the rule generally expressed support for limiting the guided sport charter vessel sector harvest to the GHL to ensure conservation of the halibut stock and to avoid further reallocations from the commercial sector. Most comments against the rule cited economic hardship to businesses and communities, inability to retain clients who will choose to fish in other areas with more lenient restrictions, and the need for what was perceived by the commenters as a more equitable allocation split between the commercial and charter sectors, as reasons for their opposition. Comments and Responses Allocation Issue *Comment 1:* NMFS should impose restrictions on the commercial fishing sector, including reducing commercial bycatch levels and the commercial set-line quota instead of limiting the halibut charter fishery. *Response:* This rule is not designed to impose further restrictions on commercial fisheries that take halibut. The commercial fishery for halibut as well as the commercial fishery for groundfish that takes halibut as bycatch to the harvest of other species are limited to a specified amount of halibut mortality. Unlike the charter vessel fishery for halibut, these commercial fisheries are closed each year when their limits are reached. *Comment 2:* All sectors need to stay within their allocations and measures should be implemented to restrict the charter sector to the GHL. Due to a declining estimate in biomass, and charter fishery overages of the GHL, the Area 2C commercial fishery has taken a 42 percent reduction in allowable harvest between 2006 and 2008. Achievement of IPHC's harvest goals and management objectives depends on implementation of the proposed action. To choose an option that won't hold the charter sector at or below the GHL would result in continued reallocation of the halibut resource. Option B in the proposed rule is the only option that will reduce harvest to the 2008 GHL. *Response:* NMFS is implementing management measures in the final rule that are intended to reduce the Area 2C charter halibut harvest amount to the 2008 GHL. *Comment 3:* Change how allocations are divided between the charter and commercial sectors. *Response:* Establishing a new process for allocating Pacific halibut among different sectors is outside the scope of the proposed action; however, the Council is considering options for reallocating halibut between the commercial and charter sectors and received public testimony at its April 2008 meeting. Final action is scheduled for October 2008. *Comment 4:* The Council has stated that its intent is to manage the charter halibut fishery to the GHL until a long term plan is adopted including a limited entry program for halibut charter businesses and potentially new regulations on the allocation of halibut between the commercial and charter fisheries. *Response:* NMFS agrees. See response to Comment 3. *Comment 5:* The IFQ program has allowed commercial fisherman to fish shallower waters and deplete fish that sport fisherman would otherwise catch. *Response:* Current data do not clearly indicate whether nearshore depletions are occurring, or what the causes, magnitude, and geographical distribution of nearshore depletions might be. While it is accurate that commercial fishermen may fish in areas that are accessible to sport fishermen, any localized depletions resulting from high halibut catch rates may be offset by egg and larval drift and migrations of juveniles and adults. Information about local biomass, immigration and emigration rates, seasonal changes, and the relationship of these factors with environmental characteristics is not available at a fine enough scale to indicate whether localized depletions are occurring in Area 2C. This final rule is not expected to significantly impact the sustainability of the halibut stock. As discussed in the EA/RIR/IRFA, the IPHC sets catch limits for the commercial fishery in proportion to the amount of halibut that may be sustainably removed. This strategy protects against overharvest and distributes the fishing effort over the entire geographic range for halibut to prevent regional depletion. The IPHC does not expect small scale local depletion to have a significant biological effect on the resource as a whole. *Comment 6:* There is no balance between the commercial and sport fisheries. Commercial catch is increasing while the charter industry is being faced with a cut. The proposed rule states that, “from 1997 to 2006, the average annual removal of halibut was about 12.454 million pounds and of this, the commercial fishery harvested 76.7 percent or 9.522 million pounds per year. From 2004 to 2006, the average annual removal of halibut was 14.142 million pounds, and of this the commercial fishery harvested 73.8 percent or 10.437 million pounds per year.” While it is true there has been some growth in the charter sector harvest, the commercial harvest did not decrease, but in fact, increased. While sport fish catch is being reduced, the commercial sector will be able to harvest 2.28 million pounds over the IPHC's CEY for 2008. *Response:* The catch limit for the commercial halibut fishery and the guideline harvest level for the sport fishery are derived from the same estimate of total halibut biomass. The biomass allocation among areas is estimated from the annual setline survey data and estimates of bottom area. The catch limits are biologically based. NMFS acknowledges that the commercial catch increased from the period 2000-2003 to somewhat higher levels in 2004-2006 (reflecting improved biological factors and technical improvements to the IPHC assessments in those years); however, it is incorrect that the commercial catch is increasing while the charter industry is being faced with a cut. IPHC data show that the commercial catch declined in each year from 2006 to 2008. Between 2007 and 2008, the commercial catch limit in Area 2C was reduced from 8,510,000 pounds in 2007 to 6,210,000 pounds in 2008. This is a reduction of 27 percent and follows a 20 percent reduction in the commercial catch limit in 2007 from the 2006 level. *Comment 7:* The preliminary 2007 charter harvest estimate is 1.7 million pounds, only 270,000 pounds over the GHL. NMFS is giving poundage back to the commercial fleet and cutting the charter catch. *Response:* As described in the preamble to this rule, the 2008 GHL was reduced to 931,000 lb. While the preliminary estimate of 2007 charter vessel harvest is 270,000 lb over the 2007 GHL, this level of harvest would exceed the 2008 GHL by about 770,000 lb. The one-fish daily limit implemented under this final rule is the only proposed measure that may adequately reduce harvest to the current GHL. The commercial Area 2C Fishery CEY is set by the IPHC and includes a buffering provision for large changes in catch limits. The amount of this buffer does not affect the GHL and does not represent pounds of fish given back to the commercial sector at the expense of the charter sector. The charter vessel GHL is established in regulations at § 300.65(c) and is adjusted in a stepwise manner based on the Total CEY established annually by the IPHC. The GHL table in regulations at § 300.65(c), adjusts the GHL to 931,000 lb when the Total CEY for Area 2C is more than 5.841 million lb, but less than 6.903 million lb. The IPHC set the 2008 Total CEY to 6.50 million lb, which is above 5.841 million lb. In 2007, the GHL was set at 1.432 million lb under § 300.65(c) and the 2007 Total CEY of 11.40 million lb. The difference between the 2008 GHL of 931,000 lb and the 2007 GHL of 1,432,000 lb is about 500,000 lb. This 500,000 is not cut from the 2007 GHL. Rather, the 2008 GHL is reduced consistent with the lower Total CEY in 2008 and the stepwise manner in which GHL is established under § 300.65(c). Community Effects *Comment 8:* Tourism benefits more Alaskans than commercial fishing. Tourism supports a wide variety of businesses that will be affected by reduced demand for halibut charter trips. Lodges and charter industry bring jobs and money to local communities and businesses, including Alaska Airlines and the Alaska Marine Highway System. Communities have invested a lot of money to encourage tourism and this rule will undermine those efforts. *Response:* NMFS agrees that the charter industry is an important industry for many communities, generating jobs and revenue for the communities involved as well as direct employment for the guides and crew. A reduction in the daily bag limit for guided charter clients will affect those communities and their efforts to develop guided charter industries. The analysis indicates that the segment of the charter industry that caters to cruise ship tourists will not be impacted by changes to the daily bag limit to the same extent as the lodge-based guided charter businesses. Moreover, tourists on the four hour charter fishing trips associated with cruise ships often do not have enough time to harvest two halibut. Tourists coming to communities on cruise ships and choosing to take a charter trip for halibut will likely continue to do so and businesses that cater to these tourists will continue to benefit from their visits. NMFS acknowledges that independent or repeat tourists who book day vacations at lodges may consider the reduced halibut bag limit in their decision to book a vacation, along with considerations for alternative fishing or tourist opportunities that may be offered. The potential impact on bookings and demands for tourist activities is discussed in the analysis supporting this final rule, but quantitative estimates of how such impacts will influence demand for these services and commensurate impacts on local communities are unavailable. *Comment 9:* Tourist hopes and expectations of catching a “barn door” (i.e., a very large halibut) are fading along with their willingness to pay for trips. Sufficient incentive must remain to attract visitors. *Response:* A tourist's expectation to catch a large halibut still exists if the bag limit is one fish. This expectation and the fishing experience itself often are the key factors in deciding to board a charter vessel, not the daily bag limit. Furthermore, for much of the charter fishing season, there are opportunities to catch other sport fish species during a trip. This contributes to one of the incentives to hire a charter vessel, which is to optimize the experience of sport fishing in Alaska by fishing for more than one species. *Comment 10:* Announcing new regulations at the beginning of a season creates confusion and frustration and makes it hard to attract and retain business. The proposed restrictions on the charter fishery will negatively impact the ability of lodge owners to book trips and many lodges have already pre-booked vacations for the 2008 season. *Response:* NMFS agrees that a change in charter fishing regulations in the months prior to a fishing season will be disruptive and may cause some clients to reconsider bookings. However, information about the potential for this action has been available since mid-2007. In June 2007, the Council announced its intention to adopt a one-fish bag limit if necessary to reduce the charter fishery harvest to the 2008 GHL. The proposed rule for this action was published in the **Federal Register** on December 31, 2007 (72 FR 74257), with a public comment period that closed on January 30, 2008. The results of the IPHC annual meeting were published on January 22, 2008, and included an Area 2C CEY that triggered a reduction in the GHL to 931,000 lb GHL. This reduced GHL prompted selection of the Council's proposed one-fish bag limit as the preferred management option to limit harvest to the GHL. NMFS took action to inform the public and charter industry about the proposed regulation changes as soon as possible through an information bulletin published on its Web site and a press release. *Comment 11:* The proposed annual limit disproportionately affects multi-day lodge and charter operations while allowing cruise-based day charters, the sector that comprises the main growth of the industry, to continue. Both Options A and B would have profound negative effects on lodge-based charter operations. *Response:* The EA/RIR/IRFA and the proposed rule acknowledged that the proposed actions may have greater adverse impacts on the lodge-based sector of the guided charter vessel industry than on the day-boat sector (see response to Comment 8). *Comment 12:* This rule creates a marketing disadvantage for businesses in Area 2C and will discourage clients from coming to Southeast Alaska. Our businesses rely on repeat customers. Many of these customers will now go to fish in other areas. *Response:* NMFS believes this comment applies primarily to the lodge-based segment of the guided charter industry. As indicated in the analysis, the cruise-based component relies primarily on people arriving in Alaska for one-time visits who have little opportunity to fish in other areas and are not likely to be repeat customers. NMFS acknowledges that lodge-based guided charter clients have more opportunities to substitute fishing experiences to other regions of Alaska or outside of Alaska. They also may shift to targeting a different species. Models are not available to predict the number of clients that will choose to not take a charter vessel trip in Area 2C as a direct result of this final rule, or to estimate the proportion of clients who would choose to maximize their experience with some other type of fishing experience. Other than acknowledging the potential for lost business, as was done in the EA/RIR/IRFA, NMFS cannot forecast the probability or extent to which this might occur. *Comment 13:* The bag limit should be the same for the entire British Columbia and Alaska coastline so that no one area is more desirable than another to anglers. *Response:* NMFS lacks the authority to manage halibut in British Columbia. This action is in response to concerns that are specific to Area 2C. *Comment 14:* Small charter operations will not be able to survive this restriction. *Response:* NMFS agrees that this action may have adverse impacts on charter businesses and that some may fail or leave the business. This possibility is mentioned in the analysis. Likewise, some businesses may benefit from reduced competition if other businesses close. NMFS does not agree that all small charter businesses will be forced to leave the business. Alternative and Future Management Measures *Comment 15:* Allow the proposed limited entry program (moratorium) for guided sport charter vessel businesses to go into place to preserve the current charter vessel fleet. The number of boats should be limited, not the number of fish. *Response:* The Council adopted a proposal at its April 2007 meeting to limit the number of businesses and vessels permitted to participate in the guided sport charter vessel fishery for halibut. NMFS currently is developing a proposed rule to implement the Council's action. Publication of the proposed rule is scheduled for Spring 2008. Pending consideration of public comment and approval of the proposed limited entry program by the Secretary of Commerce, fishing under the limited entry program would begin in 2010. A limited entry program would limit the number of businesses and vessels, but not the amount of halibut harvested. The amount of halibut harvested in this fishery would need to be regulated by other management measures, including GHL restrictions (if the GHL program is not replaced with a different allocation) or an individual fishing quota program designed specifically for the guided sport charter vessel fishery for halibut. Limited entry programs in commercial fisheries only weakly influence the amount of fish harvested because harvesters adapt by changing their fishing effort and methods. Ancillary regulations are needed to control the amount of harvest. If the number of halibut charter vessel businesses was limited, the fishery could still maximize harvest by modifying vessel size, capital inputs, number of trips, length of trips, and the number of people in a fishing party. Thus, harvest restrictions such as those implemented under this final rule are necessary because effort controls alone are not sufficient to reduce harvest. *Comment 16:* Don't impose an annual catch limit; instead impose a one-fish daily limit and move toward a limited entry program. *Response:* NMFS agrees that a one-fish daily bag limit is an appropriate management measure to limit the harvest of the guided sport charter vessel for halibut to the reduced GHL established for 2008. Even the most conservative annual catch limit considered by the Council (4 fish a year) would not result in a harvest reduction sufficient to meet the objective of this final rule. Thus, an annual catch limit is not included as a provision of the final rule. NMFS is developing a proposed rule to establish a limited entry program for the halibut guided sport charter vessel businesses and expects a proposed rule to be published in Spring 2008 for public review and comment. Also see response to Comment 15. *Comment 17:* Under the moratorium [limited entry program], charter operators will have to buy their rights to fish while the original commercial IFQs were given away. *Response:* The nature and restrictions of the proposed limited entry program for guided sport charter vessel businesses will be best addressed under the proposed rule to implement that program once it is published. However, charter vessel business owners who initially qualify under the limited entry program for participation in the guided sport charter vessel fishery for halibut would not be required to purchase their privilege for ongoing participation. This is similar to the initial allocation of commercial IFQ. *Comment 18:* With a new allocation decision and interim management plan due this October from the Council, it seems unnecessary to inflict serious harm on the charter industry in the meantime. *Response:* NMFS disagrees that it is unnecessary to reduce the guided sport charter vessel fishery harvest of halibut to the GHL. The purpose of this final rule is to reduce harvest to the GHL, and to provide a measure of stability to the halibut industry and coastal communities while the Council develops a long-term plan for the charter sector. The Council has initiated additional analyses of sector allocations and a means for compensated reallocation of halibut from the commercial to the charter vessel halibut fishery that would allow the charter sector to grow. The Council also is exploring options for a share-based program for the charter halibut fishery. Pending timely Council action and Secretarial review and approval, regulations implementing alternative allocations and associated management measures are unlikely to be effective until 2010 or 2011, and would become effective concurrently or after a proposed limited entry program for halibut charter businesses is implemented if approved by the Secretary (see response to Comment 15). To wait several years to reduce the harvest in the halibut charter fishery to the GHL while longer term allocation solutions are developed and implemented would frustrate the IPHC's attempt to manage halibut mortality to the Total CEY based on projected charter fishery harvests at the GHL level, and would continue the ongoing *de facto* reallocation of halibut from the commercial sector to the charter sector. NMFS acknowledges that a policy decision to maintain the charter fishery harvest at the GHL until such time a different allocation system is implemented will constrain the growth of charter sector harvest of halibut and impose costs on charter businesses. The EA/RIR/IRFA supporting the final rule addresses these costs, although the assessment of the economic effects is qualitative due to lack of data. *Comment 19:* Develop a stable, long-term management plan for the halibut charter sector. *Response:* NMFS agrees that a more stable management program for the halibut charter sector is necessary and is coordinating with the Council and other management agencies to accomplish this through a sequence of proposed management changes. The first step in this sequence is the proposed implementation of a limited entry program for halibut charter sector businesses. Also see response to Comment 18. *Comment 20:* Develop a catch sharing plan for Area 2C. *Response:* The Council is considering a catch sharing plan for the halibut charter vessel and commercial fishery sectors. The Council initially reviewed the alternatives for a catch sharing plan at its April 2008 meeting and final action is scheduled for October 2008. Also see responses to Comments 3, 18, and 19. *Comment 21:* The Council is moving toward long-term solutions. To change management now will disrupt ongoing analyses. *Response:* The Council and NMFS' management objective for the halibut guided sport charter vessel fishery since 2003 has been to maintain harvest amounts to the GHL. Since 2004, the charter vessel fishery in Area 2C has exceeded GHL by amounts that range between 122 percent and 136 percent. Until 2006, administrative and implementation issues delayed responsive management actions to reduce harvest of halibut in the Area 2C charter vessel fishery. In cooperation with ADF&G, these issues largely have been resolved and NMFS and the Council are moving forward to manage the charter vessel fishery consistent with management objectives set forth since 2003. NMFS disagrees that management of this fishery to reduce harvest to the GHL would disrupt ongoing analyses; this final rule does not change the long-term solutions for the charter vessel fishery under consideration by the Council nor does it prevent future management actions that the Council may wish to consider as new information becomes available. See also response to Comment 18. *Comment 22:* Restrict the guided sport charter vessel fishery to only allow retention of halibut greater than 32 inches in length like the commercial sector in order to protect recruits of the halibut biomass. Halibut only twenty inches in length and weighing five pounds have been brought back to the dock by charter vessel anglers. Charter vessel anglers should also have a maximum poundage. *Response:* Restricting the charter vessel fishery to retention of fish over 32 inches without other harvest constraints would not meet the intent of reducing harvest in this fishery to the GHL. Implementing a size limit in addition to the one-fish daily bag limit would be overly restrictive. Other reasons may exist to consider size restrictions in the charter fishery in the future, but not as a provision of this final rule. NMFS notes that the Council did consider minimum size limits of 45 and 50 inches on a second fish (assuming a two-fish bag limit) as part of the EA/RIR/IRFA supporting this final rule. A key reason why the Council rejected alternatives with minimum size limits was the difficulty in measuring larger fish. *Comment 23:* Maintain the status quo for the Area 2C charter harvest restrictions. *Response:* NMFS disagrees. The estimated harvests under status quo (1.333 to 1.448 million lb) substantially exceed the GHL of 0.931 million lb. Thus, the status quo alternative would not achieve the policy objective of the Council, NMFS, and other management agencies to maintain charter sector harvest amounts to the GHL while longer term solutions are developed and implemented for stabilizing the allocation of halibut between the commercial and charter sectors. *Comment 24:* Implement a compensated reallocation program to use taxpayer money to buy back IFQ for the sport fishery sector. It is only reasonable that the responsible government agencies fund this reallocation because they have been shortsighted and inactive in response to increasing charter demand. *Response:* The Secretary of Commerce does not have statutory authority to use government funds to purchase halibut quota share

(QS)or lease halibut IFQ for use in the charter vessel fishery; this would require congressional action and funding and was outside the scope of the proposed rule. NMFS notes that the Council is considering a provision that would allow charter vessel businesses to lease IFQ from commercial halibut QS holders. The Council is scheduled to take final action on this and other provisions supporting a compensated reallocation program for the charter and commercial fishing sectors at its October 2008 meeting. *Comment 25:* Implement a charter individual fishing quota program. If charter IFQs had been enacted shortly after they were proposed in 1993, the rapid growth of the charter fleet could have been controlled. *Response:* The Council did propose an IFQ program for the halibut charter sector in 2001, but NMFS declined to publish a proposed rule to implement the Council's program for several reasons, including questions about the reliability of data supporting the proposed program. Had an acceptable IFQ program been implemented, NMFS agrees that the current allocation problems between the commercial and charter sectors could have been reduced and easier to address. *Comment 26:* Consider a slot limit based on size or weight that both commercial and charter boats abide by to protect the long-term recruitment of future halibut stocks. It also would be much easier for the resource agencies to monitor and audit such a rule with at-sea inspections and audits of landed fish at processing facilities. *Response:* The purpose of the final rule is to reduce the charter vessel fishery harvest to the GHL established for this fishery. Restricting the charter vessel fishery to size or weight limits without other harvest constraints would not meet the intent of reducing harvest to the GHL. The EA/RIR/IRFA developed by the Council did consider halibut slot limits; these were rejected because this approach could potentially result in an increased harvest, contrary to the objective of this final rule. Further, the options that would implement minimum size limits of 45 or 50 inches in length were rejected in large part because of the difficulty in measuring and releasing large fish without injuring them. There are safety concerns for crew and clients when attempting to measure large, heavy, muscular fish. Other reasons may exist to consider size or weight restrictions in the charter fishery in the future, but not as a provision of this final rule *Comment 27:* Subsistence issues need to be addressed before this issue. The subsistence limits are too high and the amount of subsistence fish that is sold is not monitored. *Response:* NMFS acknowledges that the halibut resource is fully utilized in Area 2C and that the three major categories of use are commercial, sport, and subsistence harvest. This final rule addresses an allocation issue between two of the larger users of halibut: the commercial and charter halibut fisheries, which account for 72 percent and 13 percent of total removals in Area 2C, respectively. While subsistence harvest of halibut is a source of mortality, it comprises the smallest use at 4 percent of total removals (See section 1.10.1 of the EA/RIR/IRFA). The Council, through regulations, established an allowed use of the halibut resource by subsistence users. The Council and NMFS disagree that the subsistence use of halibut is too high and must be further restricted prior to proceeding with this final rule. NMFS acknowledges that monitoring catch and total mortality (retained and discard) in the subsistence fishery poses unique concerns and challenges and has asked ADF&G for estimates of subsistence removals to evaluate trends in subsistence harvests. Subsistence harvest is estimated using specialized survey methods tailored for that sector. ADF&G staff report that the subsistence harvest has remained relatively stable during recent years, which is another reason why NMFS does not believe that subsistence harvest needs to be reduced before taking this action. *Comment 28:* Female halibut should all be catch and release. Discourage retention of small halibut. A rule should be developed to release sport caught halibut over 200 pounds. *Response:* The comment presumes that large females contribute disproportionately to reproduction and that harvest of these females will substantially decrease juvenile halibut abundance. In 1999, the IPHC reviewed options for a maximum size limit of 60 inches (150 cm) in the commercial fishery and concluded that, based on the research at the time, it did not add substantial production to the stock. Applying the limit to the sport fishery would have an even smaller benefit because the sport fishery harvest is much smaller than commercial harvest, and also because this action would only apply to Area 2C. The halibut stock is managed as a single population throughout its entire range. See also the response to Comment 26. *Comment 29:* The one-fish daily bag limit should be imposed on the whole state, not just one area. *Response:* The harvest of halibut by the charter vessel fishery in Area 2C has exceeded the annual GHL each year since 2004 by significant amounts. Conversely, the charter vessel harvest of halibut in Area 3A has not exceeded the annual GHL and restrictions on this fishery are unwarranted at this time. NMFS recognizes that different restrictions for the charter vessel sector in different IPHC regulatory areas off Alaska may influence where potential clients choose to fish. However, applying different regulations and bag limits to different areas is a common practice in fishery management. Although a one-fish daily bag limit in Area 2C may change the demand for charter trips if anglers are unwilling to substitute other species, many clients associated with cruise vessels likely will continue to fish in Area 2C because their fishing time is limited to half-day trips, which may not provide enough time to harvest two halibut. *Comment 30:* Implement the Federal prohibition on skipper and crew harvest of halibut. Making this a Federal regulation will relieve the restriction on skipper and crew harvest of other species. Skipper and crew harvest is abused, sold to restaurants, or used as a guarantee that clients will have fish to take home. *Response:* NMFS notes the support for the part of the final rule that prohibits the catch and retention of halibut by charter vessel guides, operators, and crew. This action allows ADF&G to remove the emergency order that prevents skippers and crew from retaining any species of fish while on a saltwater charter trip. Thus, this rule could relieve a burden on crew compared to the previous emergency order. This prohibition also will help attain the management objective of limiting the charter vessel harvest of halibut in Area 2C to the GHL while minimizing adverse impacts on the charter fishery, its clients, and its home ports. *Comment 31:* Modify the skipper and crew provision to allow personal use fishing before May 16 and after August 15, or some other dates outside the tourist season, for halibut. Making a special trip wastes resources. This would minimize the impact of the regulation on skipper and crew by compensating them and allowing them to catch fish for food while working. *Response:* NMFS acknowledges that the prohibition on retention of halibut by charter vessel guides, operators, and crew could lead to higher operating costs for harvesting halibut for personal use. However, as noted in the response to Comment 30, this final rule will improve the opportunity for charter vessel guides, operators, and crew to retain non-halibut catch while clients are onboard, thus enhancing personal use fishing opportunities for species other than halibut. *Comment 32:* Remove the prohibition on skipper and crew harvest. No one at ADF&G, the Council, or IPHC can say or prove that skipper and crew harvest was included in the original GHL calculations. Crew harvest records began voluntarily in 1998 with the logbook program. Uncertainty exists whether this harvest was included with “other” sport harvest and whether policy makers considered skipper and crew harvest as part of the GHL when it was established. Thus, it is unethical to continue this prohibition based on the GHL. *Response:* The Council and NMFS, working with stakeholders, have approved a prohibition on charter vessel guide, operator, and crew catch and retention of halibut as a preferred first tool for restricting harvest. Notwithstanding whether crew harvest of halibut was voluntarily reported in charter vessel logbooks submitted to ADF&G when the logbook program first was established, the Council and NMFS have specified their intent that this harvest be part of the existing GHL. As noted in Section 2.6.3.2 of the EA/RIR/FRFA supporting this final rule, the ADF&G estimates that the State prohibition on crew-caught halibut reduced harvest in the charter vessel fishery by between 78,000 lb and 84,000 lb in 2006. See also responses to Comments 30 and 31. *Comment 33:* Maintain the status quo regulations and add a six-fish annual limit. *Response:* The status quo restrictions on the Area 2C charter vessel fishery with a six-fish annual catch limit would not reduce harvest to the current GHL of 931,000 lb. Instead, this option would result in an estimated harvest of between 1.3 and 1.4 million pounds, an unacceptable overage of the GHL. A one-fish daily bag limit, the primary provision implemented by NMFS in this final rule, is the only management measure that may reduce the harvest to the GHL, as indicated by the analysis. Enforcement and Recordkeeping and Reporting Requirements *Comment 34:* Better enforcement and better data are needed for existing regulations. Many charter operators are not obeying restrictions because they know there is no enforcement in their area. As a result, harvest estimates are not accurate. Improve funding for better logbook analysis and more active enforcement by the USCG and NMFS. Many charter clients are transporting many more fish than allowed under the existing regulations. *Response:* Significant effort is being made to improve reporting. ADF&G has made numerous changes to their logbook program in recent years. For example, ADF&G has conducted dockside checks and post season client verifications to validate logbooks. In addition, NMFS has coordinated with ADF&G to establish new logbook requirements that will further validate halibut harvest information recorded in the state's Saltwater Sport Fishing Charter Trip Logbook, including requiring the signatures of anglers to verify that the number of halibut caught and recorded is accurate. ADF&G supports this requirement as it will lead to more reliable logbook data and more accurate estimates of charter halibut harvest. NMFS believes that enhanced recordkeeping and reporting, together with ongoing cooperative monitoring and enforcement by State and Federal enforcement personnel as time and resources allow will serve as a deterrent to large scale violations of sport fish regulations. *Comment 35:* There is a lack of monitoring and enforcement of commercial catch. The published commercial catch data are flawed and commercial fisherman are not being held to their targets. *Response:* NMFS disagrees. Although no fishery is exempt from illegal fishing activity, NMFS believes that current monitoring and enforcement efforts are sufficient to maintain control of the commercial halibut fishery and that reported catch is sufficiently accurate for management of the fishery and the halibut resource. The commercial quota system for halibut is administered, regulated, and enforced by NMFS to insure harvests are within quota limits and to monitor and enforce the amount of quota that each commercial fisherman is allowed to harvest. Enforcement of halibut regulations for Alaska is accomplished through complementary efforts of NMFS Office for Law Enforcement (OLE), Alaska State enforcement agencies, and the U.S. Coast Guard. Alaska Wildlife Troopers (Alaska Department of Public Safety) also perform inspections, audits, and patrol hours to monitor and enforce Federal commercial halibut fishery regulations under a Joint Enforcement Agreement between NOAA OLE and the Alaska Wildlife Troopers. *Comment 36:* Many charter operators are illegal and do not comply with Alaska Statute 38.05. If we enforced this statute, there would be less of a problem with the charter harvest levels. *Response:* The Secretary is not responsible for enforcing State of Alaska statutes. Comments regarding the enforcement of State statutes are more appropriately addressed to the State of Alaska. *Comment 37:* Enforcement of the regulations is impossible. When considering enforcement of annual limits, charter operators cannot be held responsible for client actions because the operator doesn't know what the client may have previously harvested. *Response:* NMFS believes that enforcement of this final rule is possible. This final rule does not include provisions for an annual catch limit. Thus, recordkeeping and reporting requirements proposed to monitor and enforce such a limit have been removed from the final rule. All other proposed federal recordkeeping requirements are retained to increase the accuracy of data collection and recorded information (see response to Comment 34). *Comment 38:* Keep the angler signature provision. This will lead to more accurate reporting. *Response:* NMFS agrees and has maintained this requirement (see response to Comment 34). *Comment 39:* The current carcass retention provisions are unreasonable. On live-aboard charters, it is not reasonable to carry around whole fish for days when they could be processed and vacuum packed onboard. The current requirements create storage issues, reduce meat quality, and create a timing problem after returning to port to process fish and transport clients and their fish to the airport in time. Inspectors should be able to estimate the number of fish from the packages. *Response:* This final rule does not require the retention of halibut carcasses. When the rule that implemented a 2-fish daily bag limit with one-fish under 32 inches in length went into effect in Area 2C in 2007, the carcass retention requirement was necessary to determine head-on length for enforcement purposes. This final rule will rescind the requirement at § 300.66(m) to retain carcasses onboard. However, IPHC regulations require that for Convention waters off the coast of Alaska no person shall possess onboard a fishing vessel, including charter vessels and pleasure craft, halibut that have been filleted, mutilated, or otherwise disfigured in any manner except that each halibut may be cut into no more than two ventral and two dorsal pieces, and two cheeks, all with skin on (paragraph (28)(2) of the Pacific Halibut Annual Management Measures; March 7, 2008; 73 FR 12280). This change allows enforcement officers to count the number of fish in possession by an angler. *Comment 40:* NMFS should retain the requirement to bring halibut carcasses to shore for measurement. Accurate creel survey lengths are fundamental to estimating the catch of the charter fleet. Fish that are filleted at sea cannot be measured. *Response:* NMFS agrees that carcass retention facilitates enforcement and more accurate data collection, but it is unnecessarily burdensome to charter operators given that this final rule does not implement a size limit on retained halibut. Further, charter operators have expressed concerns about disposal of carcasses at ports, time constraints, the diminished meat quality of fish that are not processed immediately, and limited storage space onboard some vessels. These concerns were especially pronounced for charter operators who run multi-day trips or more than one trip in a day. To respond to these concerns and to address the need for better enforcement, the IPHC adopted a regulation that is described in the response to Comment 39. *Comment 41:* The proposed paperwork requirement for monitoring the annual catch limit is burdensome and time consuming for operators and anglers. The requirement to print the angler name is redundant. It would be better to collect youth and senior angler information for inclusion in the database when issuing the harvest cards. Furthermore, the proposed requirement for anglers to retain their licenses for three years is unreasonable, the license paper is flimsy and hard to keep track of, and retention is a burden for clients. *Response:* Under Option A, which would have implemented an annual catch limit for Area 2C, it would have been necessary for anglers to retain their licenses in the event that discrepancies arose in the logbook data. However, because NMFS is implementing Option B, the one-fish daily bag limit, the requirement to retain angler licenses is no longer necessary and has been removed from the final rule. Other requirements for recording the angler name and license number are retained to improve accuracy of recorded information. Also see response to Comment 34. *Comment 42:* Issue harvest tags with licenses instead of the burdensome recordkeeping and reporting requirements proposed to monitor and enforce an annual catch limit. *Response:* NMFS is not implementing the proposed annual catch limit because this management tool would not reduce the Area 2C charter vessel harvest to the 2008 GHL. Harvest tags are not required for the monitoring and enforcement of a one-fish daily bag limit. Guideline Harvest Level *Comment 43:* Rescind the GHL. *Response:* Rescinding the GHL is outside the scope of this action. See Response to Comment 46. *Comment 44:* Maintain the GHL and manage halibut charter vessel harvest to that level. The GHL was set at 125 percent of the charter vessel fishery's highest historic harvest to allow for growth in the industry. The GHL was exceeded in 2004-2007 and the charter fleet is still growing with an increased number of clients served, fishing trips, and active vessels. *Response:* NMFS acknowledges the comment. This final rule does not change the GHL provisions, only the management measures necessary to control harvest to the GHL. *Comment 45:* If the GHL doesn't increase with the CEY, why should the GHL decrease with the CEY? Commercial IFQ shareholders are afforded a buffering mechanism by the IPHC to soften the economic impacts of a rapidly declining CEY. The guided sport halibut fleet should be afforded similar buffering. Also, the stair step feature of the GHL is not compatible with the slow up/fast down

(SUFD)policy of the IPHC. *Response:* This rule was not designed to change either the 2008 GHL published in the **Federal Register** (73 FR 6709, February 5, 2008) or the GHL regulations at 50 CFR 300.65. The GHL “stair steps” down only during periods when the CEY established by the IPHC falls below benchmark levels in the GHL regulation. To change the GHL regulations would require separate rulemaking. The Council incorporated an element of buffering into the GHL rule by setting the maximum at 125 percent of the 1995-1999 average harvest to allow for growth in the charter industry. NMFS notes that, should the CEY increase from the 2008 level, the GHL could increase as well to a maximum of 1.432 million lb, consistent with the procedures described in regulations. The SUFD procedure used by the IPHC is not incompatible with the stair step feature of the GHL. Federal regulations require certain levels for the GHL based on the annual Total CEY, not procedures used by the IPHC to derive that annual Total CEY. *Comment 46:* The GHL setting process is flawed. The GHL is too low and needs to be changed. The GHL was proposed and implemented with only commercial interests voting on the Council. The GHL has been the same for 14 years and deserves some kind of update or allowance. *Response:* The Council first began discussing the guided charter fishery for halibut in 1993. After 10 years of debate, the GHLs were established for Areas 2C and 3A (August 8, 2003; 68 FR 47259). This rule set the maximum GHL for Area 2C at 1.432 million lb (649.5 mt), and included a mechanism for reducing the GHL in years of low abundance as determined by the IPHC. Since implementation, the GHL has remained at its maximum level until this year when reduced stock abundance estimates triggered a reduction. Guided sport charter vessel harvest exceeded the maximum GHL in 2004, 2005, and 2006 and is estimated to have again exceeded the GHL in 2007. The maximum GHL cannot be increased without a change to regulations. Revising the GHL and the halibut sector allocations are beyond the scope of this final rule. *Comment 47:* The GHL is just a guideline, not a hard cap. *Response:* NMFS acknowledges that area-specific GHLs were established in 2003 as a guideline that, if exceeded, could prompt responsive management action to reduce charter vessel harvest amounts. The GHL has been exceeded since 2004. Thus, management action to reduce harvest to the GHL is completely within the management objective for the GHL provisions. The fact that a time lag exists between when a GHL overage occurs and responsive management action is implemented through rulemaking also was acknowledged when the GHLs were established. *Comment 48:* Modify the final rule to accurately reflect the charter GHL that is associated with the IPHC-adopted Total CEY and the effect of Option B compared to that GHL, not the GHL of 1.217 million lb. *Response:* NMFS agrees and has reported the new GHL of 931,000 lb (422.3 mt) in this final rule and its associated EA/RIR/FRFA. A notice of the 2008 GHLs for Areas 2C and 3A was published in the **Federal Register** on February 5, 2008 (73 FR 6709). When the proposed rule was written, NMFS anticipated that the IPHC might reduce the CEY, triggering a reduction in the GHL, and wrote the proposed rule in a manner to allow final action notwithstanding the reduction. *Comment 49:* The proposal to simultaneously reduce the GHL and implement management measures to reduce harvest to the new GHL is contrary to the existing regulations regarding use of GHLs. Option B violates the Administrative Procedures Act (APA), and both options violate the purpose and intent of the charter fishery regulatory regime. *Response:* NMFS disagrees. The Council recognized that the GHL might be adjusted downward from the maximum GHL that was in place when it recommended the management measures for this final rule in June 2007. Thus, the Council proposed two different sets of management measures; one if the GHL remained unchanged in 2008, and a second more restrictive set of management measures if GHL was reduced. Both sets of management measures were published in the **Federal Register** for public review and comment. The comment period on the proposed rule extended beyond the IPHC meeting in mid-January, when the new and reduced total halibut CEY of 6,500,000 lb (2,948.4 mt) for Area 2C was established for 2008. This CEY resulted in a reduced GHL based on existing regulations at 50 CFR 300.65(c). NMFS published a notice in the **Federal Register** of this downward adjustment on February 5, 2008 (73 FR 6709). This was a nondiscretionary action given that the regulations at 50 CFR 300.65 clearly established how the GHL steps down when Total CEY is reduced below certain benchmarks. Given that a one-fish bag limit was proposed by the Council if the GHL was reduced, analyzed in the EA/RIR/IRFA supporting this action, and noticed in the proposed rule under APA rulemaking procedures, NMFS believes the public had adequate notice and opportunity for review and comment on the actions implemented under this final rule and that this action is consistent with the APA and the GHL management provisions. Applicability of the Rule *Comment 50:* The proposed rule discriminates against anglers fishing from charter vessels, especially those who because of age, physical ability, or financial limits cannot operate or buy their own boat. It is not fair to discriminate against charter clients so the status quo should be maintained. Equal access and equal protection rights are being violated. *Response:* NMFS does not agree that this rule discriminates against charter anglers because age, physical ability, and financial status are not the subject of this regulation. This final rule was designed to reduce the harvest of halibut in the charter vessel fishery to the GHL to address the current allocation problem between the halibut charter fishery and the commercial fishery. Recreational anglers who wish to fish from a charter vessel may still elect to do so. The final rule does not discriminate between U.S. citizens based on age, physical ability, or ownership of a vessel. *Comment 51:* Support 6-fish annual catch limit for non-resident anglers only. *Response:* NMFS disagrees. If this rule were applied only to non-resident anglers, then Federal management of this Federal resource would discriminate among U.S. citizens based on their state of residence. This would be contrary to the Halibut Act, contrary to basic rights and obligations in existing Federal law, and could not reasonably be considered necessary to promote conservation. Moreover, this action would not reduce charter harvest to the 2008 GHL and therefore would not accomplish the objective of this action. *Comment 52:* Apply restrictions to self-guided anglers as well. The proposed action discriminates between sport fishermen with and without their own boats. Self-directed anglers are only held to the 2-fish daily limit. Include bare boat charters or self-guided trips in restriction. Including self-directed anglers in the 2-fish with size limits regulation would further decrease sport harvest. Self-directed harvest equals about 67 percent of the guided harvest. If all sport anglers in Area 2C were held to the limit, perhaps further restrictions would not be necessary. *Response:* The Halibut Act under the Convention does not prevent the Secretary from tailoring a management action so that it addresses the concern that prompted action in a reasonable manner. The objective of this final rule is to reduce the harvest of halibut in the Area 2C guided sport charter vessel fishery to the GHL. The reason for this action is clearly indicated in the preambles to the proposed and final rules. The Council did not recommend limiting other recreational harvest, subsistence harvest, or bycatch and wastage in the commercial fishery because harvest data in the EA/RIR/IRFA show that removals from categories other than the guided charter vessel sector have remained relatively stable during the past 5 years and have not grown at the rate of the guided charter vessel fishery. Therefore, self-guided anglers were not considered part of the problem addressed by the Council and this final rule. Guided charter harvests rose each year from about 1.28 million pounds in 2003 to 2.03 million pounds in 2006. It is this information that prompted the Council to propose provisions to limit Area 2C charter vessel angler harvest consistent with the Halibut Act under the Convention. *Comment 53:* Expand the proposed harvest restriction to all non-resident anglers, guided and unguided. *Response:* Federal law prohibits applying different regulations to anglers based on state residency. The regulations will apply to all charter vessel anglers, regardless of state of residency. Expanding the restriction beyond the guided charter vessel fishery is beyond the scope of this action. See also responses to Comments 51 and 52. *Comment 54:* Apply restrictions to all anglers, but only during June, July, and August, with more lenient restrictions during the rest of the season. *Response:* NMFS interprets the comment as suggesting that the one-fish daily bag limit for charter vessel anglers be applied to both guided and unguided recreational anglers, and be limited for both to the months of June, July, and August. The application of the rule to the unguided sport fishery would not address the problem identified by the Council, or the objectives defined for this action. *Comment 55:* The charter industry should not be considered part of the sport fishery. The charter and lodge fishers are, in effect, commercial fishers. *Response:* Fish caught in commercial fisheries enter commerce, that is, they are sold to consumers, whereas fish caught in recreational fisheries are for personal consumption. This is a fundamental difference between commercial and sport fisheries and the reason why the guided sport charter vessel industry is not considered a commercial fishery. Data and Data Quality *Comment 56:* ADF&G catch data are flawed, and no scientific basis exists for imposing increased restrictions on the halibut charter fishery. *Response:* The analysis supporting this final action uses sport fishing data collected by ADF&G through its postal survey, logbook program, and creel survey program. These data comprise the best scientific information available for the EA/RIR/IRFA and are appropriate for use in estimating the impact of the final rule on the charter halibut and commercial sectors. These data collection programs have been reviewed by the Council's Scientific and Statistical Committee and use statistical methods accepted by the scientific community to collect and extrapolate sport fishing information, including the disclosure of known statistical biases and verification of data collection methodology. *Comment 57:* The Council motion for this action was based on the ADF&G's projection that the 2006 charter harvest was 46 percent over the GHL. ADF&G's final estimate for 2006 charter halibut catch was less than the initial estimate. Update the analysis to recognize that 2006 harvest was substantially lower than initially estimated. *Response:* NMFS acknowledges that the preliminary estimate of 2006 charter halibut harvest in Area 2C was higher than the final estimate; however, both estimates were above the GHL of 1.432 million lb (649.5 mt). The preliminary estimate for 2006 was 2.029 million lb (920.3 mt), 42 percent over the GHL, and the final estimate was 1.804 million lb (818.3 mt), 26 percent over the GHL. This overage indicates the ongoing need for management measures to reduce harvest to the GHL. The EA/RIR/IRFA was updated to reflect the final harvest estimate for the Area 2C halibut charter fishery (See Table A4-1). *Comment 58:* The regulation that went into place in 2007 for a two-fish bag limit with one fish under 32 inches in length substantially reduced the guided sport charter vessel harvest of halibut. Data from 2007 are not yet available to evaluate the effectiveness of this regulation or the need for further restriction. *Response:* The management measures implemented for the halibut charter fishery in 2007 were expected to reduce charter halibut harvest by 518,000 lb (235.0 mt). The preliminary estimate of charter halibut harvest in Area 2C for 2007 is 1.70 million lb (771.1 mt), plus or minus 15 percent (between 1.45 million lb (657.7 mt) and 1.96 million lb (889.0 mt)). Even at the lower end of this range, harvest was still slightly above the 2007 GHL. In 2008 a reduction in the Total CEY set by the IPHC triggered a reduction of the Area 2C GHL to 931,000 lb (422.3 mt). The 2007 rule would not reduce harvest enough to meet the new 2008 GHL. According to the analysis for this action, the one-fish daily bag limit is the only alternative analyzed that may reduce harvest enough to meet the new 2008 GHL. *Comment 59:* Sport landings of halibut contribute minimally to the overall mortality in the fishery. Projections based on historical data indicate that halibut sport landings are stable and not likely to increase dramatically in the near future. Even the best recreational data collection programs can not accurately estimate harvest. As such, managers need to look at trends and not yearly estimates in setting limits. *Response:* The guided sport charter vessel sector's contribution to overall mortality is not minimal and has been increasing. It was noted in the analysis that between 2002-2006, guided sport charter vessel harvests accounted for 13 percent of the removals from Area 2C, and were the second largest source of removals after commercial harvest. Table 17 of the analysis provides information on harvests from 1995 to 2006 for the guided and unguided components of the sport fishery. Unguided harvests have fluctuated between 0.723 million lb and 1.187 million lb with no clear increasing or decreasing trend. In contrast, guided sport charter vessel fishery harvests have increased. Between 1999 and 2006 guided harvest amounts rose each year from 0.938 million lb in 1999 to 2.035 million lb in 2006. The Area 2C charter fishery has consistently harvested more than the GHL. By Council policy, this necessitates corrective action to limit the charter fishery to the GHL. *Comment 60:* Charter harvest is overestimated. Operators inflate logbook numbers in hopes of receiving extra quota share. Most charter fish are in the 5-10 lb range, much smaller than the 18-20 lb average that is used by ADF&G as an estimator. *Response:* The analysis supporting this final action uses sport fishing data collected by ADF&G through its postal survey, logbook program, and creel survey program. These data comprise the best scientific information available for the EA/RIR/IRFA and are appropriate for use in estimating the impact of the final rule on the charter halibut and commercial sectors (see Comment 56). The weight estimates for the charter halibut fishery used in the analysis supporting this final rule were obtained from halibut measurements taken by the ADF&G creel survey that are extrapolated using a length-to-weight relationship published by the IPHC. These measurements are taken in port with a creel sampling technician and represent a sample of harvested halibut that have not been mutilated in such a way that they cannot be measured. Length information from all sampled ports is used in determining the average size of halibut for Area 2C. The proportion of harvested fish that are measured by ADF&G varies by port; however, these estimates provide the best available information about the size and weight composition of halibut harvested in the guided sport charter vessel fishery. These data collection programs have been reviewed by the Council's Scientific and Statistical Committee and use statistical methods accepted by the scientific community to collect and extrapolate sport fishing information, including the disclosure of known statistical biases and verification of data collection methodology. *Comment 61:* Page ix of the Executive Summary of the EA/RIR/IRFA states that the analysis “employs the best information available, in this case, 2006 ADF&G Saltwater Charter Vessel Logbook data.” We believe this is erroneous. Most ADF&G data for the charter fishery comes from a combination of the Statewide Harvest Survey and logbook data. *Response:* The ADF&G released its final estimate of the 2006 charter harvest in September 2007. This final estimate was based on the 2006 Statewide Harvest Survey. This new information became available after the Council's initial review of the analysis when it made its recommendations in June 2007. However, this new information was used to prepare Appendix IV to the EA/RIR/IRFA that was released in November 2007. This appendix updates the earlier results. The Secretary is considering this new information in making the final decision about this action. The wording in the Executive Summary of the November 2007 EA/RIR/IRFA was not updated to accurately reflect the full range of information being considered by the Secretary and will be corrected. Comments Regarding the Economic Analysis *Comment 62:* The analysis did not fully consider the economic effects on small businesses and coastal communities. The analysis is not based on the best available data. *Response:* NMFS used data including the most recent logbook and statewide fishery survey information available from ADF&G, a 2005 study of the charter fishery in Sitka conducted by the McDowell Group, an analysis of charter anglers in South Central Alaska prepared by the University of Alaska, and the key informant interviews that were noted in the EA/RIR/IRFA. This is the best available information. However, the data available for the analysis of this action are limited. The information that would be necessary to provide a complete quantitative analysis of the impacts of this action on the commercial or charter boat sectors, and to estimate the impacts these sectors would have on the regional economy, is not available. This information would include survey-based models of anglers' behavioral responses to the regulation, detailed information on the revenues and costs of commercial and guided charter operations, a model of guided charter responses to changing client behavior, and income and employment impact multipliers for the regional communities in Southeast Alaska. In the absence of more detailed information, the EA/RIR/FRFA provides a qualitative discussion of the impacts on the charter operations and on the communities dependent on them. Specific community concerns are reflected in the choice of the alternatives. Commenters have noted that the analysis recognizes that the options would have significant negative impacts on the guided charter fishery and might put some operators out of business, and that the notice of proposed rulemaking describes the disproportionate impact on lodge-based charter operations. *Comment 63:* This final rule will have adverse economic impacts on Juneau area businesses. The guided sport charter vessel industry supports a wide variety of local businesses, including restaurants, souvenir shops, hotels, fish processors, and outdoor stores. *Response:* NMFS acknowledges that limitations on the charter vessel harvest of halibut in Area 2C could have an impact on demand for charter services and on local businesses supporting fishing opportunities. The analysis supporting this action assesses these impacts to the extent possible with the information available. See also response to Comment 62. *Comment 64:* The Council does not understand and is unwilling to examine the true economic value of halibut to the guided sport charter vessel industry. There is no evidence that the charter fishery is growing exponentially. A thorough economic analysis of the guided sport charter vessel industry is needed before making decisions that affect the recreational fishing industry. *Response:* The analysis does not claim that the guided charter fishery is growing exponentially. However, the charter industry has grown in recent years, in terms of pounds of fish harvested (see response to Comment 59), and in the number of businesses, vessels, and trips (see response to Comment 105). The EA/RIR/FRFA recognizes the value of halibut to the guided sport charter vessel fishery and to local communities dependent on the charter fishery, and acknowledges the potential for losses because of a one-fish bag limit. *Comment 65:* The Council's intent in its motion was misrepresented in the purpose statement in the EA/RIR/IRFA and proposed rule, which state that the proposed measures to restrict charter halibut harvest if the GHL would be implemented if the GHL is reduced to 1.217 million lb in 2008. The Council motion only states, “if the GHL is reduced,” and does not specify the amount of the reduction. *Response:* NMFS did not intend to misrepresent the Council's intent. At the time of the Council action, IPHC staff indicated that there was the potential for the Total CEY to fall below the point that would trigger a change in the GHL. However, the CEY established by the IPHC after its 2008 annual meeting was 6.5 million lb in Area 2C—a level low enough to trigger a three step drop in the GHL from 1.432 million lb to 0.931 million lb, effectively bypassing the 1.217 million lb level. The Council's intent is clear that it intended Option B to be implemented if the drop in the CEY was large enough to trigger any reduction in the GHL. At the time of the Council's action it was not anticipated that the GHL would stair step down more than one level. *Comment 66:* A quantitative rather than qualitative analysis of the impacts to the guided sport charter vessel industry is needed. In the absence of a comprehensive economic analysis that accurately assesses the economic impact of all options to both guided recreational and commercial sectors, the Secretary has no meaningful economic data upon which to fairly base his decision. This supports continuation of the status quo until the analysis shortfalls are fully addressed. Although some quantitative estimates are made of the impact to longline fishermen, there is no quantitative discussion of adverse impacts on charter fishermen and there is no quantitative comparison of impacts to the longline and charter sectors. *Response:* NMFS notes that there are fundamental differences between the longline and charter operations that affect the ability to estimate gross revenues impacts on the two sectors. The output of the commercial longline sector is halibut. The output of the commercial longline sector in Area 2C is small enough compared to overall output on the West Coast that the impact of changes in Area 2C production on Area 2C halibut prices are probably small. Under these conditions, NMFS has been able to estimate the gross revenues of the status quo and other alternatives on the commercial longline sector. However the situation is very different in the charter sector. The output in the charter sector is not halibut, but days of client fishing time. To estimate gross revenue changes in the guided charter fleets, NMFS would have to have separate demand models based on survey research, which would permit the determination of changes in client participation in the lodge-based and cruise ship-based industry segments in response to changes in the bag limit, and the competitive adaptations that the charter operations would make. The information necessary for these estimates for the charter sector is not available. NMFS did make inferences using survey research from South Central Alaska to the extent possible. NMFS notes that the gross revenue estimates provided for the longline sector are an incomplete quantitative analysis of that sector as well since they do not address the issue of the impact of the alternatives on the profitability of these fishing operations. NMFS must choose a management option to restrict harvest to the GHL. To maintain the status quo would be, in fact, a choice of a particular policy to allow charter harvests to continue to exceed the GHL despite the current regulations in place. Status quo with respect to the regulations is not status quo in the fishery due to the growth of the guided sport charter vessel industry in Area 2C and the new stock information from the coastwide model. *Comment 67:* There is no economic analysis of the cost of enforcement of an annual limit. *Response:* The Regulatory Impact Review contains an economic analysis of the cost of enforcement of the annual limit in section 2.7.4.3. Additionally, this section references a discussion paper that was presented to the Council in October 2006 that contains a more thorough analysis of the cost of implementing and enforcing an annual limit. This discussion paper is available on the North Pacific Fishery Management Council's Web site at *http://www.fakr.noaa.gov/npfmc.* Enforcement issues and costs are discussed, as well as the estimated costs for compliance that would be imposed on the industry. However, because Option B was selected, NMFS is not implementing an annual limit. Therefore the costs associated with enforcing an annual limit will not apply. NMFS believes that sufficient information was provided to permit a decision among the alternatives. *Comment 68:* The appropriate geographic scope of the analysis should be the coastal home ports for the guided sport charter vessel fleet, not the national economy. *Response:* NMFS is required to examine net benefits to the Nation under Executive Order 12866. NMFS also examines regional and sector impacts in the analysis. However, in the section of the analysis referred to by this comment, NMFS explicitly examines the effects on net benefits to the Nation and makes the point that from a national perspective, the benefits of an alternative to one sector are likely to be offset by the costs to another. The analysis states that some impacts that adversely affect regional and community interests have distributive elements that prevent them from being considered either benefits or costs at the national level. This is a standard cost-benefit convention, in which the accounting stance affects evaluations of net benefits or costs. It considers the costs to local and regional interests. The choice of the preferred alternative, in fact, depends in part on local impact considerations evaluated in the analysis. For example, the analysis notes that Option 1 of Alternative 2 (one trip per vessel per day) would disproportionately impact small charter operators in major cruise ports and was thus rejected. *Comment 69:* The cost of this action to the guided sport charter vessel industry is not justified by the benefit to the longline fishery. The rule will provide virtually no benefit to the commercial sector before it is superseded in 2010 by the long-term allocation program currently under development. The negative consequences of the proposed rule on the charter sector far outweigh any potential benefit to the commercial sector. *Response:* While the Council is considering new management measures to replace those in this action, and while it has stated its intent to implement those measures in 2010, NMFS cannot assume that this will, in fact, take place, or that it will take place by 2010. The Council has not yet agreed on which management measures to implement and it may be several years before a decision is reached. The proposed program then would need to be approved by the Secretary of Commerce. The analysis suggests that the expected burden on the longline fishery and its consumers rises significantly in the years after 2010. The objective of this action is to limit halibut harvest by the guided sport charter vessel industry to the GHL. Inherently and inevitably, this will constrain overall charter harvests and will have adverse economic impacts on charter fishing operations. NMFS notes that cost-benefit analysis, economic impact analysis, and evaluations of the costs and benefits to different sectors of the industry are only some of the factors that the Council and Secretary are required to take into account when they make policy decisions. It is not possible to conduct a comprehensive quantitative cost and benefit analysis or compare quantitatively the benefits and costs to the commercial longline or charter industries, or to the regional economy with the information available, and such an analysis is not required before action can be taken. There is limited information available on the economics of longline halibut fishing, charter operations that cater to cruise ship clients, and lodge-based operations. Similarly, there is limited information on how these types of operations interact with the local community and regional economies to generate secondary or indirect income and jobs in firms supplying the commercial firms or the guided charter operations and their clients. Given that lack of information, NMFS has used the best available scientific information. *Comment 70:* Tables 56 and 58 in the EA/RIR/IRFA project hypothetical ex-vessel losses and consumers' surplus losses to the commercial fishery associated with guided sport catches over the period from 2006 to 2015. The following changes and revisions to these tables are necessary:

(a)Change the 2006 guided sport catch estimates in Appendix IV to reflect the final 2006 catch estimate;

(b)use a more appropriate projection for annual growth in the guided sport charter vessel industry;

(c)account for the IPHC's practice of increasing and decreasing commercial harvest limits with a lag to changes in the CEY (the “slow-up/fast-down” or SUFD approach). *Response:* Revised versions of Tables 56 and 58 have been added to Appendix IV. The revisions include the final 2006 guided sport charter vessel sector harvest, updated charter industry growth rates, the IPHC's 2008 CEY, and the 0.931 million lb GHL that will take effect in 2008 as a result of the lowered CEY. However, the tables were not prepared to provide predictions of actual revenue losses over the time period. The purpose of the original tables in the body of the text, and the revised versions in the appendix was to illustrate the potential magnitudes of the revenue losses that might accrue to the longline sector if a number of factors remain constant. The tables were not meant to provide forecasts. For example, the tables incorporate a number of simplifying factors such as constant values for the Total CEY, ex-vessel prices, commercial underage, and unguided sport fish catch. The tables do not estimate these values or incorporate official estimates from other agencies as these estimates change regularly and materially. As a result NMFS has not made change (c), and has made change

(b)only to the extent of updating the growth rate to reflect new information for 2006. *Comment 71:* The analysis does not address losses to recreational anglers denied access to halibut. *Response:* It is accurate that the analysis focuses primarily on the impacts of the actions on the longline and charter industries, and the communities dependent on them. The analysis does not estimate the loss in consumers' surplus from the preferred alternative. The information to estimate this does not exist since models of angler behavior in Southeast Alaska are unavailable. The discussion in Section 2.7.5 indicates that recreational anglers can expect a reduction in their benefits from charter fishing from this action. The analysts based their assessments on modeling that had been done in other areas of Alaska. The analysis points out that clients would no longer be able to take a second fish, and has a long section discussing the impact in terms of the change in anglers' cost per fish, of the potential reduction in angler demand for fishing experiences in Southeast Alaska, and of the potential for anglers to shift to other activities in Southeast Alaska or in other areas. *Comment 72:* The EA/RIR/IRFA identifies the lack of socioeconomic information on the charter fishery as a source of concern to the Council. If the Council lacks the socioeconomic information to adequately evaluate comparative loss scenarios, it does not have a valid problem statement, by definition. Commercial quota share values have not been reduced, contrary to the problem statement, and there has been no resultant economic hardship to the commercial sector. The analysis fails to use readily available information, including information on quota share prices, to address this issue. *Response:* Although the Council and Secretary are always striving to obtain more information to assist in determinations, the Council had sufficient information to develop a problem statement. Furthermore, the analysis developed for this action, based on the best available information, provided the Council and Secretary with sufficient information to take action. See response to Comment 73 regarding trends in commercial quota share values. *Comment 73:* Restrict the charter sector because their overages are reducing the commercial sector's allowance and devaluing purchased IFQs. *Response:* NMFS examined a time series of the value of transferred quota share units from before the charter fishery began exceeding the GHL to the present and there was no evidence of a cause and effect relationship between harvest overages and the value of quota shares. The only trend these data demonstrated was an overall increase in the value of shares transferred from 2000 through 2007. Many factors contribute to valuation of quota shares at any particular time including cold storage holdings, timing within the fishing season, pre-season market prices, availability of lower interest loans, seller motivation, and whether the IFQ pounds are transferred with the quota share. *Comment 74:* Commercial fishermen receive more money as supply declines. This is not the case for charter operators. *Response:* NMFS agrees that market-driven prices paid to commercial halibut fishermen for halibut can increase when supply becomes limited and market demand is high. This can offset quantity-driven revenue losses. It is unlikely that commercial fishermen will obtain higher prices for halibut as a result of this rule because the Area 2C commercial halibut fishery contributes only modestly to the overall coastwide halibut production. The guided sport charter vessel industry is selling a fishing experience, one part of which is the possibility of catching halibut. NMFS agrees that a one-fish bag limit that reduces the amount of halibut an angler may catch and retain could reduce the price that charter operators can charge for their service. The actual impact on price is unclear and will depend, for example, on the ways that charter operations modify their services to adapt to the new limit. *Comment 75:* The analysis incorrectly concludes that “increases in regional expenditures associated with increases in charter-based sport fishing are likely to be offset by decreases in regional expenditures associated with commercial fishing.” *Response:* This commenter refers to a statement in a paragraph in the analysis discussing net national benefits under Alternative 1. The analysis notes that the principal source of benefits from the charter fishery is the benefits to clients, because the competitive nature of the charter fishery is likely to drive profits close to zero. The author notes that it is unlikely that changes in regional expenditures will result in changes in net national benefits, in part because increased charter-based regional expenditures are likely to be offset by decreases in regional expenditures associated with commercial fishing. This is clearly advanced as one reason not to expect increased national benefits, in a cost-benefit analysis sense, from an expanding charter fishery. The author is using “expenditures” here as a proxy for sectoral activity and sectoral profits and rents—which he has already indicated are likely to be small. The author indicates that an offset is likely, not certain. The author clearly did not intend to assert a dollar for dollar offset. The language in the analysis has been modified to insert the words, “at least partially” before the word “offset” to clarify this. *Comment 76:* Table 56 of the EA/RIR/IRFA assumes an inappropriate constant rate of growth in charter sector harvest when the actual data indicate that charter rates decreased in both 2006 and 2007. The analysis is inadequate, biased, devoid of data, and uses arbitrary assumptions, and speculative data and scenarios. The analysis depends on interviews with a small number of key informants instead of on a survey of 696 potentially affected charter vessel operators. NMFS has been remiss in not collecting, presenting, and evaluating the best available data. *Response:* Table 56 has been revised in Appendix IV (Table A4-2) to assume a growth rate for the charter sector harvest of 5.7 percent. This is the growth rate that was observed from 1995 to 2006. The rate was adjusted down from an earlier estimate rate of 6.8 percent to reflect the lower final participation rate estimate for 2006 based on the Statewide Harvest Survey (SWHS). Limited information was available for the preparation of this analysis. The analysts however, drew on available data and modified the analysis to reflect newer data as it became available (in particular, adding Appendix IV to update the analysis to take account of the SWHS information for 2006 that became available in the fall of 2007). The analysts consistently sought to ground the analysis in concrete numbers and information. As noted in the response to Comment 70, the results in this table are not meant to provide a forecast of future impacts, but to illustrate possible revenue losses under certain assumptions. The analysis is not biased; analysts sought to identify and qualitatively describe the impacts of the actions on all the parties. The key informant information was not used in place of or as a substitute for phone, mail or personal interview surveys. Key informant information was used to provide factual information and to provide context for information obtained from other sources. NMFS has drawn on the best available information to inform this discussion, including the most recent logbook and statewide fishery survey information available from the ADF&G, a 2005 study of the charter fishery in Sitka conducted by the McDowell Group, an analysis of charter anglers in South Central Alaska prepared by the University of Alaska, and the key informant interviews that were noted. Conservation *Comment 77:* Halibut harvest by the guided sport charter vessel fishery should be managed to stay below the GHL because of concerns about depletion of local stocks and the long term effects on local businesses. Overharvest by the charter sector requires subsistence and local sport anglers to travel farther to catch halibut. *Response:* See response to Comment 15 concerning localized depletion. NMFS does not have data to confirm that short term localized depletions of halibut are due to focused harvest activity by one or more sectors. *Comment 78:* There is no evidence that the proposed regulations will have any effect on halibut recovery or that the charter fishery has a negative effect on the fishery. NMFS should use the best available science. *Response:* Neither the EA/RIR/IRFA nor the proposed rule for this action identify overfished halibut stocks as the problem, or halibut recovery as an objective of this action. The IPHC sets allowable commercial catch limits taking account of the status of the stocks and projections of overall removals by all sectors. The charter fishery is not subject to a harvest quota, but estimated charter harvests are subtracted from the Total CEY to determine the Fishery CEY that forms the basis of the catch limit for the commercial fishery. While the procedures used by the IPHC can lead to harvests in excess of the Total CEY in a year, over time they should constrain harvests to biologically sustainable levels. *Comment 79:* The IPHC does not view this as a conservation issue. The IPHC would never allow an overharvest of the Total CEY if there was a conservation issue. It should be very clear that due to the conservative nature of IPHC harvest calculations, overharvest of the Area 2 Total CEY by 60 to 85 percent is possible without resulting in a conservation issue. The proposed rule deals with a pure allocation issue and does not present any resource conservation questions. *Response:* NMFS agrees. The healthy status of the halibut stock is evidence that IPHC policies are conservative and successful. *Comment 80:* Hunters and fishermen have strong conservation values and are willing to pay for conservation initiatives. Increasing restrictions will discourage people from participating in these activities and will undermine their support for conservation causes. *Response:* NMFS believes that this comment refers to recreational hunters and fishermen who have been, and continue to be, an important source of funding and support for conservation programs. As user numbers increase, regulatory regimes governing sport, personal use, and subsistence harvests of fish and game have become much more restrictive and complex. Many programs, such as those that issue limited numbers of permits through lotteries, are much more restrictive than this action. However, hunters and fishermen have continued to be supportive of conservation. NMFS does not believe that this action will appreciably reduce that support. *Comment 81:* There is a conservation issue. The Area 2C stock is overfished and fishing needs to be limited to an extent that ensures the long term sustainability of the stock. *Response:* NMFS disagrees. The best available evidence indicates that the Area 2C stock is not overfished and the IPHC has not made that determination. Overages of the GHL are accounted for in the methods the IPHC uses to set the annual commercial catch limit to ensure that the halibut stock is not overfished. NMFS agrees that fishing limits need to be adhered to, in order to maintain the long term health of the halibut stock, and has therefore proposed this rule to reduce the charter fleet harvest to the GHL. *Comment 82:* Unconstrained growth of the charter industry threatens the health of the fishery. In any one year, CEY may be overharvested if the projected charter harvest is higher than the assumed GHL level. These overages result in adjustments to the CEY and commercial catch limit the following year. Thus the issue poses a potential conservation concern, as well as a reallocation of allowable harvest. *Response:* NMFS agrees that if the guided charter fishery grows in any single year, halibut removals will exceed planned IPHC removals in the short run and the actual harvest rate may be greater than the rate on which the CEY for a year is based. However, in the medium and long term, the IPHC will adjust its harvest allowances for the commercial setline fishery to take account of changes in guided charter harvests. While this process will take place gradually over time, NMFS does not expect it to seriously affect the health of the halibut stock, unless the guided charter fishery were to grow at an unexpectedly high rate. Halibut are a long-lived species and the health of the stock depends less on removals in any single year (the short run) than it does on removals over a longer multiple-year period. The IPHC has also adopted conservative harvest policies to protect against resource damage. Furthermore, the environmental analysis prepared for this rule did not find that failure to limit the guided sport charter vessel halibut harvest to the GHL would cause significant environmental impacts on the resource. *Comment 83:* We disagree with the statement in the Executive Summary of the EA/RIR/IRFA that states, “none of the alternatives would affect the health of the halibut stock since the IPHC sets limits on total halibut removals.” The IPHC does consider all removals, but if one sector continually over-harvests the amount the IPHC uses for the calculations when setting catch limits, damage to the resource occurs. The charter sector's harvest in excess of the GHL is one of the contributing factors to the biomass decline in Area 2C. The IPHC appropriately uses the associated GHL for the charter sector as determined by the Total CEY. *Response:* NMFS agrees that the charter fishery has exceeded the GHL for several years and that is one of the primary reasons for taking this action. As stated in the response to Comment 81, the IPHC has not determined that the Area 2C stock is overfished (see also response to Comment 82). *Comment 84:* Both the commercial and charter sectors are facing large cuts. These are necessary for the long term sustainability of the resource. Both sectors must reduce harvests and share in the conservation of the resource. *Response:* The reduction in the 2008 Area 2C CEY will be shared by the commercial fishery, through the reduction in the Fishery CEY, and by the guided sport fishery, through the reduction of the GHL from 1.432 million lb to 0.931 million lb and the implementation of a one-fish daily limit. This reduction in the GHL is not a part of this action, but is a consequence of the final rule adopting the stair-stepped GHL that was promulgated on August 8, 2003 (68 FR 47256). Unguided angler harvests and subsistence harvests are not restricted; however, these have been relatively minor components of the overall harvest to date, accounting for an average of 11 percent of the harvest between them. Miscellaneous other uses have accounted for about 6 percent. Coastwide Model and IPHC Issues *Comment 85:* The coastwide model represents the best available scientific information and thus should be used for setting the CEY. It is not appropriate to use the coastwide model in some areas and the closed area model in others. *Response:* NMFS agrees that the coastwide assessment is considered the best available science to estimate the entire biomass of the stock of Pacific halibut and that using this total biomass to estimate the Total CEY is the best approach available at this time. The IPHC adopted the coastwide assessment in 2008 after rigorous external review to evaluate the technical merit; this approach is used to estimate biomass in all IPHC management areas. The closed area model is no longer used by IPHC. *Comment 86:* The GHL triggers were based on the 1999-2000 average Total CEY, which was calculated using the Closed Area assessment model. If we continued to use the Closed Area model, the Area 2C Total CEY would be 9.8 million pounds, well above the first stair step for the GHL. Careful review of the 2003 final rule for the GHL shows that there is no mention of which Total CEY the GHL must be based upon. Because both have been published by the IPHC, the Secretary has the discretion to choose which Total CEY to use. The GHL was established using the Closed Area model and should continue to be based on that model. *Response:* The IPHC adopted the coastwide assessment in 2008 after rigorous external review to evaluate its technical merit. This approach is used to estimate biomass in all IPHC management areas. This assessment was used to make the IPHC's recommendations for the CEY that were approved by the Secretary. The final rule establishing the GHLs for the halibut charter fishery in 2003 acknowledged that the Total CEY used to stair step the GHLs is “the total target biomass that may be removed each year. The Commission sets the CEY based on the best available information and the professional judgment of the IPHC. As such, it may reflect uncertainty or changes in the stock assessment modeling” (68 FR 47259, August 8, 2003). Thus, the 2003 GHL final rule is correctly silent on setting any requirement for how the CEYs should be determined, other than stating that it is up to the IPHC to use the best available information and its professional judgment. NMFS continues to support the IPHC's decision to adopt the coastwide assessment as the best available science. Further, the resultant 2008 Total CEY and downward adjustment of GHL in Area 2C is based on the best available science and is consistent with the intent of the Council and NMFS when the GHLs were established in 2003. Unintended Effects of the Rule *Comment 87:* The proposed action will shift charter fishing effort to other groundfish species. *Response:* NMFS acknowledges that this action may cause some charter businesses to modify their operations to provide alternative or supplementary fishing experiences for their clients. The environmental assessment reviewed the potential impacts on other species, such as salmon or rockfish, and found that they would not have significant impacts on those resources. These stocks are managed by the State of Alaska and NMFS using biological benchmarks that prompt agency response to constrain harvest to maintain sustainable stocks. Thus, an increase in sport harvest of these species may lead to increased allocation problems between sport and commercial sectors. However, any such allocation problem would occur within the confines of the management measures established by Federal and State governments to maintain sustainable stocks. *Comment 88:* The proposed limits on the charter fishery will result in increased catch and release or bycatch mortality as charter anglers try to catch the largest fish possible. *Response:* NMFS acknowledges that this action may cause increased catch and release or bycatch mortality, but NMFS believes that the impact on the resource will not be significant. Appendix II of the EA/RIR/FRFA discusses the choice of a hook and release mortality rate for the Area 2C charter halibut fishery. It concludes that the overall estimate of hooking mortality is 4.8 percent. The environmental assessment took account of release mortality in its analysis of the various alternatives and did find that the preferred alternative (Alternative 2, Option 4) had the highest catch and release mortality of the alternatives. However, the analysis concluded that none of the alternatives would increase release mortality substantially above the status quo and did not find that any of the alternatives would have a significant impact on the halibut resource. *Comment 89:* A one-fish annual limit will not impede an angler's ability to catch and release fish and will not keep anglers from fishing in Area 2C any more than the status quo. With a one-fish daily limit, anglers can keep fish of any size and will only lose the opportunity to keep a second fish smaller than 32 inches in length or about 11 pounds. *Response:* NMFS acknowledges the comment. Consistency With Other Laws *Comment 90:* The intent of Executive Order 12962 is to provide guidance to NMFS to improve the potential productivity of aquatic resources for recreational fisheries. The proposed rule improves productivity for commercial fisheries. *Response:* This rule does not violate Executive Order (E.O.) 12962. To the extent permitted by law, E.O. 12962 directs Federal agencies to improve the quality, function, sustainability, productivity, and distribution of aquatic resources for increased recreational fishing opportunities. This rule is promulgated to meet the management goals set forth in the Halibut Act under the Convention and implemented by the Secretary. These management goals include setting annual limits on the amount of halibut that may be removed without compromising the long-term sustainability of the halibut stock, including the achievement of maximum sustainable yield for halibut fisheries. *Comment 91:* This rule does not comply with the Halibut Act which states that allocations shall be fair and equitable to all such fishermen. The fast down portion of the SUFD gives an advantage to the commercial sector that the charter sector does not receive. *Response:* This final rule was not designed to change either the 2008 GHL published in the **Federal Register** (73 FR 6709, February 5, 2008) or the GHL regulations at 50 CFR 300.65. The GHL steps down only when the CEY established by the IPHC falls below benchmark levels in the GHL regulation. To change the GHL regulations would require separate rulemaking. The “slow-up/fast-down”

(SUFD)component of the IPHC's management regime is not necessarily advantageous to the commercial sector. It is designed to ameliorate the impacts of large changes in biomass. If the CEY is bigger than the previous year's catch limit, then the IPHC staff's recommended catch limit is only allowed to increase by 33 percent of the difference. If the CEY is less than the previous year's catch limit, the recommended catch limit reduction is limited to 50 percent of the difference. The commercial catch limit increases and decreases with changes in biomass, even with a static GHL, whereas changes to the charter sector's GHL occur in a stepwise manner only when specific CEY levels are established by the IPHC (see § 300.65(i)(1)). NMFS believes the commercial longline fishery and guided sport charter vessel fishery situations are not comparable. The longline fishery is controlled by a hard cap that is extended, through the IFQ system, to individual longline fishermen. The hard cap is modified through time to reflect changes in the fishery biomass and the harvest by other sectors. The hard cap modification takes place gradually over a series of years. The guided sport charter fishery has not been subject to a hard cap, and this action will not impose a hard cap on the output of the guided sport fishery as a whole, or on individual businesses within it. Miscellaneous *Comment 92:* Halibut is a public resource and the public should not be denied the opportunity to fish for it. *Response:* This final rule does not deny the public the opportunity to harvest halibut. Although this rule is designed to reduce the poundage of halibut harvested in Area 2C by the guided sport charter vessel fishery, it maintains the opportunity of charter vessel anglers to harvest one halibut per day, and has no effect on recreational anglers not fishing from a charter vessel. In addition, this final rule supports the management goals set forth in the Halibut Act under the Convention and the allocation objectives set forth by the Council and approved by the Secretary of Commerce. The management goals include setting annual limits on the amount of halibut that may be removed without compromising the long-term sustainability of the halibut stock, including the achievement of maximum sustainable yield for all halibut fisheries (commercial, subsistence, and sport). The allocation objectives are intended to limit the harvest of halibut in the charter fishery to the annual GHL. *Comment 93:* There is no sunset provision for the rule. This goes against the Council motion to restrict charter harvest for 2008 only until the charter moratorium goes into place in 2009. There was a misunderstanding during the Council process that this regulation would continue indefinitely. Additional measures like the “Permanent Solution,” “Compensated Reallocation,” and “Initial Allocation” will also go into effect before 2009. The rule needs to go through the whole Council process again because of this misunderstanding on the duration of the measures. The public process requires clear and unambiguous language. *Response:* NMFS disagrees that this final rule was intended by the Council to be effective only for 2008 and that the Council is required to reconsider this action to clarify this point. Although NMFS is developing a proposed rule to implement a limited entry program for charter vessel businesses, fishing under the proposed limited entry program would not occur before 2010 pending the rule's approval by the Secretary of Commerce. While the Council is considering other management programs for the charter vessel fishery for halibut, the schedule for Council action on these programs and the subsequent rulemaking process would not allow their implementation before 2010. NMFS intends to encourage Council consideration of changes to GHL measures in the event the annual GHL is adjusted upward or downward from the 2008 level with changes of Total CEY. Any such changes would require separate Council analysis and consideration, as well as subsequent rulemaking. This was the process intended by the Council when it voted in June 2007 to adopt the actions implemented under this final rule. *Comment 94:* Adjacent management areas will have more favorable management regimes in place that will further negatively affect Area 2C charter fisheries and the Council may need to review this issue in a manner that allows for adjustments in time for the 2009 fishery if biomass abundance supports an increase in the CEY. *Response:* NMFS agrees. See response to Comment 93. *Comment 95:* Much of the fish caught by sport anglers is wasted and the focus is on catching trophy fish for bragging rights, not the meat. Many charter clients take the fish home to give away or sell to pay for their trip. *Response:* The purpose of this final rule is to reduce harvest of halibut in the Area 2C charter vessel fishery to the GHL. It is not intended to manage what anglers choose to do with legally harvested halibut; including choices of keeping or giving away harvested fish. It is illegal to commercially sell recreationally harvested halibut. Violators are subject to civil penalties and prosecution. *Comment 96:* The six-line limit puts Area 2C at a disadvantage to other areas that can fish more lines. Larger boats that can accommodate more than six lines are safer and more cost effective to operate. These regulations put an undue hardship on Area 2C charter operations. *Response:* NMFS recognizes that different restrictions for the charter vessel sector in different IPHC regulatory areas may influence where potential clients choose to fish. Line limits have been in place under State regulations since 1997. This regulation puts that line limit in Federal regulations. *Comment 97:* The Sitka area Local Area Management Plan

(LAMP)forces charter operators to fish beyond protected waters so fishing is more weather dependent. A one-fish daily limit combined with weather considerations could limit clients' opportunities to such an extent that a trip to Sitka would not be worthwhile. *Response:* The EA/RIR/FRFA for this final rule acknowledges the possibility that consumer demand for charter vessel trips in Area 2C to fish for halibut could be impacted by the one-fish daily bag limit (see sections 2.6.3.4 and 2.7.3.4). The analysis also notes that Sitka may be less likely to experience this reduction in demand because it has greater potential for multi-species charter trips compared to Inside Passage communities such as Juneau or Ketchikan. *Comment 98:* Two very large year classes will recruit into the fishery beginning in 2010, therefore this rule is unnecessary. *Response:* The current stock assessment does suggest that two extremely large year classes—1999 and 2000—could grow to exploitable size over the next few years. These year classes appear to be larger than those in 1987 and 1988 that supported past higher harvests. It is important to note that size-at-age is smaller than 20 years ago. This has two important ramifications. First it means that the 1999 and 2000 year classes are only just beginning to reach the exploitable size range and therefore their true contribution to the population is still quite uncertain. Second, it means that for a given number of halibut, biomass will be lower than in the past. By assuming the size-at-age relationship remains the same as this year, then the projections for the exploitable biomass and spawning biomass are very optimistic and current declines are apt to reverse. However, the harvest rate should remain around 20 percent of the exploitable biomass so that when the biomass increases, higher Total CEY and commercial catch limits will follow. If the Total CEY is increased, current GHL regulations would allow for an increase of the GHL up to the maximum level of 1.432 million lb. *Comment 99:* There is a commercial bias in the IPHC and North Pacific Fisheries Management Council. Since the 1980s the IPHC and Council have supported explosive growth in commercial harvest while stifling the charter sector. The charter vessel owners do not have representation in these bodies, therefore all decisions tend to favor the commercial sector. *Response:* The IPHC and the Council are the bodies established by treaty and Congress and given the authority to make decisions and recommendations about the management of the halibut fisheries. They have made their decisions through transparent and public processes, and in a manner that is consistent with the requirements of the relevant statutes. This final rule is an outgrowth of the 2003 GHL rule for the charter vessel fishery; annual changes to the GHL are linked directly to the Total CEY amount determined annually by the IPHC. The Council has the authority to consider and recommend management policy to address allocation issues among different domestic sector users of halibut off Alaska, including the commercial and charter vessel fisheries. In 1998 the Council initiated a public process to identify GHL management options and formed a GHL committee comprised of numerous representatives from the charter industry. This committee has evolved over time to develop longer term solutions for Council consideration that provide harvest stability between these two sectors. The Council has used the recommendations from this committee to formulate its GHL management options. Furthermore, the Secretary of Commerce reviews all Council policy recommendations and actions for consistency with the Halibut Act and Convention, as well as with other applicable law. NMFS does not believe that this final rule inappropriately favors the commercial fishing sector. *Comment 100:* An annual limit is not needed because sport anglers are self-limiting. As fish stocks decline, fewer anglers go fishing and harvest decreases. *Response:* This final rule does not establish an annual catch limit and instead relies primarily on a one-fish daily bag limit to reduce charter vessel harvest to the GHL. Harvest in the Area 2C charter vessel fishery has exceeded the GHL every year since 2004 and harvest amounts have consistently increased, although the rate of increase has varied from year to year. Given this trend and the current level of harvest, NMFS does not believe the charter vessel harvest of halibut in Area 2C would decrease to the GHL level without the limitations established in this final rule. *Comment 101:* Clarify the definition of a charter vessel. The definition as written creates a loophole where a hired vessel may have a professional guide onboard who is not the “operator” of the vessel. *Response:* NMFS agrees that the current definition of “charter vessel” is problematic. NMFS intends to address this problem under separate rulemaking as explained under Changes from the Proposed Rule, below. *Comment 102:* Commercial setline fishermen provide consumers their only access to halibut unless they can afford an expensive trip to Alaska to catch their own. *Response:* NMFS acknowledges the comment. *Comment 103:* Halibut are resilient and survive well when caught and released properly. Support the one-fish bag limit and encourage catch and release fishing. Catch and release policies are in place elsewhere and do not limit tourist demand for fishing. *Response:* NMFS acknowledges the comment. NMFS notes that Appendix II of the EA/RIR/IRFA reviews the available scientific information on hook and release mortality rates, and recommended the use of a 5 percent rate for the analysis of regulatory restrictions on the Area 2C charter vessel fishery. *Comment 104:* Charter operators don't have to pay anything for the fish they harvest whereas the commercial sector must purchase IFQs. *Response:* NMFS acknowledges the comment. *Comment 105:* Growth of charter industry is tapering and charter vessel catch is declining. *Response:* Final harvest information from 2007, a year subject to new management measures, is not yet available. NMFS would expect that the rate of growth in the Area 2C halibut harvest by charter vessels to slow with increased harvest limitations, however, preliminary data suggests that the 2007 harvest still exceeded the 2007 GHL. Given the reduced GHL in 2008, harvest must be further limited by this final rule so that GHL is not again exceeded. The data in the EA/RIR/FRFA supporting the final rule cover the period through 2006. The data available in the analysis show positive growth in the number of clients in every year but one since 2000, and accelerating growth in the number of clients in every year since 2002. The number of active vessels showed some decline from 2000 to 2002, but has increased in each year since then. The total number of trips by active vessels decreased from 2000 to 2002, but has increased in each year since then. Charter harvests of halibut have shown positive growth in every year from 2000 to 2006. In 2007 there were 403 active licensed guided charter businesses in Area 2C compared to 381 in 2005 and 395 in 2006. Likewise in 2007 there were 724 active vessels in Area 2C compared to 654 in 2005 and 680 in 2006, indicating continued growth in the industry. *Comment 106:* More regulation of the charter fleet is not going to have an appreciable positive effect on the sport fishing in our area. Commercial fishing is what is hurting the stocks. *Response:* The halibut stock is conservatively managed under the policies and catch limitations developed annually by the IPHC (see response to Comment 81). The objective of this final rule is to reduce the charter vessel harvest of halibut to the established GHL level while a longer term solution toward sector stability and resource allocation is developed and implemented. *Comment 107:* An annual limit is draconian and would devastate the industry. If an annual limit is necessary, go with the six-fish limit. *Response:* The final rule does not implement an annual harvest limit. NMFS acknowledges that the one-fish daily bag limit implemented under this final rule also will impose costs on the charter vessel sector (see responses to Comments 33, 62, 66, and 69 addressing impacts of the one-fish bag limit). However, these costs are necessary to maintain harvest within the GHL. Changes From the Proposed Rule The final rule is revised from the proposed rule (72 FR 74257) in that the option that was proposed to address the circumstance of a GHL reduction (Option B) was chosen because the total CEY recommended by the IPHC for Area 2C in 2008 required a reduction in the GHL for Area 2C in 2008. The selection of Option B required revisions to recordkeeping and recording requirements to ensure that sufficient information is collected to manage and enforce harvest limitations in Area 2C. The following recordkeeping and recording information is required to enforce this final rule: charter vessel business owner license number, charter vessel guide license number, date, regulatory area fished, angler sport fishing license number and printed name, number of halibut retained, charter vessel guide signature, and charter vessel angler signature. Additionally, for charter vessels fishing for halibut in both Areas 2C and 3A in a single trip, separate logbook data sheets must be maintained for each area if halibut are caught and retained. Three definitions are revised (charter vessel angler, charter vessel fishing trip, and charter vessel guide) and four definitions are added (charter vessel operator, charter vessel services, crew member, and sport fishing guide services) to clarify limitations and recordkeeping and reporting requirements. These revised and added definitions are derived from State of Alaska definitions used to define guided sport fishing activities and are intended to clarify who may and may not catch and retain halibut and who is responsible for recordkeeping and reporting requirements in § 300.65(d). The definition of charter vessel is not revised by this rule. However, the definition of charter vessel is currently proposed for revision in the proposed rule to revise the subsistence halibut program (April 14, 2008; 73 FR 20008). Currently, the definition of charter vessel is: “Charter vessel means a vessel used for hire in sport fishing for halibut, but not including a vessel without a hired operator.” The new definition of charter vessel in the subsistence halibut program proposed rule is: “Charter vessel means a vessel registered as a sport fishing guide vessel with the Alaska Department of Fish and Game.” Due to comments received on the proposed rule to implement GHL management measures in Area 2C , and further consideration of the interactions between charter fishing and subsistence fishing, NMFS believes that the charter vessel definition proposed in the subsistence rule likely will need further refinement, including reference to charter vessel services and the specific regulations to which this definition would apply ( *i.e.* , § 300.65(d) and (e)). Persons interested in commenting on the definition of charter vessel are referred to that proposed rule for more details. The following requirements from the proposed rule for this action to implement GHL management measures in Area 2C were removed because an annual catch limit is not implemented in this final rule and these requirements were determined to be no longer necessary: *Angler license record and retention* . NMFS has removed from the final rule the proposed requirements that anglers record the number of halibut caught and retained in Area 2C on the back of their licenses, and that they retain their licenses for three years. *Year-to-date halibut caught* . To enforce an annual catch limit, NMFS proposed requiring that guides record in the logbook the number of halibut caught year-to-date as recorded on the back of the angler's license. This requirement no longer is needed. *Youth angler information* . NMFS proposed requiring that youth names and birth dates be recorded in the logbook to better track and enforce an annual catch limit. Because no annual catch limit is being implemented, the date of birth for youth anglers will not be required in Federal regulations; however, the State of Alaska will still require that this information be recorded. In addition, NMFS removes existing requirements for the retention of halibut carcasses. To help enforce the two-fish daily bag limit with size restrictions that went into place in Area 2C in 2007, NMFS prohibited mutilating or otherwise disfiguring a halibut carcass such that the head-on length could not be determined. This requirement to retain carcasses is no longer necessary with a one-fish daily bag limit and is removed from regulations at § 300.66(m). The IPHC adopted new standards in 2008 that were published in the annual management measures on March 7, 2008 (73 FR 12280). The new IPHC requirement for Alaska states that no person shall possess onboard a fishing vessel, including charter vessels and pleasure craft, halibut that have been filleted, mutilated, or otherwise disfigured in any manner except that each halibut may be cut into no more than two ventral and two dorsal pieces, and two cheeks, all with skin on. This change allows enforcement officers to count the number of fish in possession by an angler. The organization of § 300.65(d) is changed from the proposed rule to clarify the requirements for Areas 2C and 3A. In addition, numerous technical changes were made to clarify the regulatory intent and to ensure that consistent terminology is used. Finally a new prohibition

(p)was added to § 300.66 to ensure that charter vessel operators, guides, anglers, and crew members do not refuse to present any identification card, U.S. Coast Guard operator's license, permit, license, or Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip Logbook upon the request of an authorized officer. Classification This final rule has been determined to be not significant for the purposes of Executive Order (E.O.) 12866. This final rule complies with the Halibut Act and the Secretary's authority to implement allocation measures for the management of the halibut fishery. A Final Regulatory Flexibility Analysis

(FRFA)was prepared, as required by section 604 of the Regulatory Flexibility Act. The FRFA describes the impact of this rule on directly regulated small entities and compares that impact to the impacts of other alternatives that were considered. A copy of this analysis is available from NMFS (see ADDRESSES ). A description of this action, an explanation for why it is being considered, the legal basis for this action, and changes made to the rule in response to public comments are discussed above. In 2005, 381 charter businesses operated 654 charter vessels in Area 2C; in 2007, 403 businesses operated 724 vessels. All of these operations are assumed to be small entities, with annual gross revenues of less than the limit of $6.5 million dollars for charter vessels. The largest companies involved in the fishery, lodges or resorts that offer accommodations as well as an assortment of visitor activities, may be large entities under the Small Business Administration size standard. Key informant interviews have indicated that the largest of these companies may gross more than $6.5 million per year, but also that it was possible for all the entities involved in the charter vessel halibut of harvest to have grossed less than this amount. The number of small entities is likely to be overestimated because of the limited information on vessel ownership and operator revenues. However, it is likely that nearly all entities qualify as small businesses. The proposed regulation was published in the **Federal Register** on December 31, 2007 (72 FR 74257). An Initial Regulatory Flexibility Analysis

(IRFA)was prepared, and described in the classifications section of the preamble to the proposed rule. The public comment period ended on January 30, 2008. NMFS received 107 unique comments in 273 letters, faxes, and e-mails on the proposed rule and 21 comments that pertain directly to the IRFA and small entities regulated by this action. Summaries of the comments, and NMFS' responses, may be found in the preamble to this action. NMFS examined two alternatives for this action: the no-action or status quo alternative, and the action alternative. Alternative 1, the status quo, would retain the two-fish bag limit with one of the two fish less than or equal to 32 inches (83.1 cm) in length, without changes. Alternative 2, the action alternative, had 13 options for different combinations of management measures to restrict the charter halibut harvest to the Area 2C GHL. The options included limiting vessels to one trip per day; restricting harvest by guide and crew while clients are onboard; limiting the number of lines to six per vessel, not to exceed the number of paying clients onboard; daily bag limits of one or two fish (including sub-options for size limit slots and specific months when the bag limit would apply); and annual harvest limits of four, five, or six fish per charter angler. Two preferred options (Option A and Option B) were selected by considering different combinations of management measures that would minimize the impacts on small entities while still meeting the management objective of restricting the charter vessel harvest of halibut to the GHL. Option A, which would have been implemented if the 2008 GHL had been greater than 1.217 million lb, included the following measures in addition to the existing two halibut daily limit with size restrictions:

(1)A prohibition on halibut harvest by charter vessel guides, operators, and crew while clients were onboard;

(2)a limit on the number of fishing lines that may be used on a charter vessel of six or the number of charter vessel anglers onboard, whichever is less; and

(3)an annual catch limit of four halibut per charter vessel angler. Option B is being implemented because the 2008 GHL fell below 1.217 million lb. It includes the same prohibition on guide and crew harvest and line limits as Option A. However, Option B includes a one-fish daily bag limit rather than the two-fish daily limit with size restrictions and the proposed four-fish annual harvest limit in Option A. Other options would have had a smaller impact on the directly regulated guided charter operations because they would have reduced guided charter harvests less and had smaller impacts on demands for guided charter services. However, Option B was the only alternative that would have met the objectives of this action to reduce the guided charter harvest to the guideline harvest level. The guideline harvest level in 2008 is 0.931 million lb. The estimates of possible production under Option B ranged from 82 percent to 117 percent of the GHL. No other alternative or option had a range of estimated harvest levels that included the 2008 GHL. Collection of Information This rule includes a collection of information requirement subject to the Paperwork Reduction Act

(PRA)and that has been approved by OMB under Control Number 0648-0575. The public reporting burden for charter vessel guide respondents to fill out and submit logbook data sheets is estimated to average four minutes per response. The public reporting burden for charter vessel anglers to sign the logbook is estimated to be one minute per response. These estimates include the time required for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The total public reporting burden for this collection is estimated at 3,134 hours. Send comments regarding this burden estimate, or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS (see ADDRESSES ) and by e-mail to *David_Rostker@omb.eop.gov* , or fax to 202-395-7285. Notwithstanding any other provision of the law, no person is required to respond to, and no person shall be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number. Small Entity Compliance Guide Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule, or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, NMFS Alaska Region has developed an Internet site that provides easy access to details of this final rule, including links to the final rule, and frequently asked questions regarding Program. The Small Entity Compliance Guide for the Program is available on the Internet at *http://www.fakr.noaa.gov* . Copies of this final rule are available upon request from the NMFS, Alaska Regional Office (see ADDRESSES ). Executive Order 12962 This action is consistent with E.O. 12962 which directs Federal agencies to improve the quantity, function, sustainable productivity, and distribution of aquatic resources for increased recreational fishing opportunities “to the extent permitted by law and where practicable.” This E.O. does not diminish NMFS' responsibility to address allocation issues, nor does it require NMFS or the Council to limit their ability to manage recreational fisheries. E.O. 12962 provides guidance to NMFS to improve the potential productivity of aquatic resources for recreational fisheries. This rule does not diminish that productivity or countermand the intent of E.O. 12962. Administrative Procedure Act A June 1, 2008 effective date for this action is necessary to effectuate the Council's intent to limit the charter halibut sector's harvest to the federally mandated GHL, found at 50 CFR 300.65(c). If this action is not in place by the beginning of the peak season for the charter halibut sector (June, July, and August), the intent of the Council will be thwarted as this is time of peak harvest and when the harvest limitations would have its greatest impact. During the “shoulder seasons,” i.e., before and after June, July, and August, charter halibut fishing is occurring, but to a lesser extent, and hence the harvest limitations would have a smaller impact. Also, having the harvest limitations effective as of June 1, 2008, would avoid the confusion that could occur to the charter halibut industry and its clients if the rule became effective after the peak season had begun. It is for these reasons that NMFS finds that there is good cause to waive the 30-day delayed effectiveness period under 5 U.S.C. 553(d)(3) to the extent that it would allow for a June 1, 2008, effective date. List of Subjects 15 CFR Part 902 Reporting and recordkeeping requirements. 50 CFR Part 300 Fisheries, Fishing, Reporting and recordkeeping requirements, Treaties. Dated: May 21, 2008. Samuel D. Rauch III, Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service. For the reasons set out in the preamble, NMFS amends 15 CFR chapter IX, and 50 CFR chapter III as follows: 15 CFR Chapter IX PART 902—NOAA INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK REDUCTION ACT: OMB CONTROL NUMBERS 1. The authority citation for part 902 continues to read as follows: Authority: 44 U.S.C. 3501 *et seq.* 2. In § 902.1, in the table in paragraph

(b)under the entry “ *50 CFR* ”, add an entry for “300.65(d)” in alphanumeric order to read as follows: § 902.1 OMB control numbers assigned pursuant to the Paperwork Reduction Act.

(b)* * * CFR part or section where the information collection requirement is located Current OMB control number (all numbers begin with 0648-) * * * * * *50 CFR* * * * * * 300.65(d) -0575 * * * * * 50 CFR Chapter III PART 300—INTERNATIONAL FISHERIES REGULATIONS 3. The authority citation for 50 CFR part 300, subpart E, continues to read as follows: Authority: 16 U.S.C. 773-773k. 4. In § 300.61, add definitions for “Area 3A”, “Charter vessel angler”, “Charter vessel fishing trip”, “Charter vessel guide”, “Charter vessel operator”, “Charter vessel services”, “Crew member”, and “Sport fishing guide services” in alphabetical order to read as follows: § 300.61 Definitions. *Area 3A* means all waters between Area 2C and a line extending from the most northerly point on Cape Aklek (57°41′15″ N. latitude, 155°35′00″ W. longitude) to Cape Ikolik (57°17′17″ N. latitude, 154°47′18″ W. longitude), then along the Kodiak Island coastline to Cape Trinity (56°44′50″ N. latitude, 154°08′44″ W. longitude), then 140° true. *Charter vessel angler* , for purposes of § 300.65(d), means a person, paying or nonpaying, using the services of a charter vessel guide. *Charter vessel fishing trip* , for purposes of § 300.65(d), means the time period between the first deployment of fishing gear into the water from a charter vessel after any charter vessel angler in onboard and the offloading of one or more charter vessel anglers or any halibut from the charter vessel. *Charter vessel guide* , for purposes of § 300.65(d), means a person who is required to have an annual sport guide license issued by the Alaska Department of Fish and Game, or a person who provides sport fishing guide services. *Charter vessel operator* , for purposes of § 300.65(d), means the person in control of the vessel during a Charter vessel fishing trip. *Charter vessel services* , for purposes of § 300.65(d), means the use of a vessel by a charter vessel guide to provide assistance for compensation to a person who is sport fishing from that vessel. *Crew member* , for purposes of § 300.65(d), means an assistant, deckhand, or similar person who works directly under the supervision of and on the same vessel as a charter vessel guide. *Sport fishing guide services* , for purposes of § 300.65(d), means assistance, for compensation, to a person who is sport fishing, to take or attempt to take fish by accompanying or directing such person who is sport fishing during any part of a charter vessel fishing trip. Sport fishing guide services does not include services provided by a crew member. 5. In “ 300.65, revise paragraph

(d)to read as follows: § 300.65 Catch sharing plan and domestic management measures in waters in and off Alaska.

(d)*Charter vessels in Area 2C and Area 3A* —(1) *General requirements* —(i) *Logbook submission* . Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip Logbook data sheets must be submitted to the appropriate Alaska Department of Fish and Game office according to the time schedule printed in the instructions at the beginning of the logbook.

(ii)The charter vessel guide is responsible for complying with the reporting requirements of this paragraph (d). The employer of the charter vessel guide is responsible for ensuring that the charter vessel guide complies with the reporting requirements of this paragraph (d).

(2)*Charter vessels in Area 2C* —(i) *Daily bag limit* . The number of halibut caught and retained by each charter vessel angler in Area 2C is limited to no more than one halibut per calendar day.

(ii)*Charter vessel guide and crew restriction* . A charter vessel guide, a charter vessel operator, and any crew member of a charter vessel must not catch and retain halibut during a charter fishing trip.

(iii)*Line limit* . The number of lines used to fish for halibut must not exceed six or the number of charter vessel anglers onboard the charter vessel, whichever is less.

(iv)*Recordkeeping and reporting requirements in Area 2C* . Each charter vessel angler and charter vessel guide onboard a charter vessel in Area 2C must comply with the following recordkeeping and reporting requirements (see paragraphs (d)(2)(iv)(A) and

(B)of this section):

(A)*Charter vessel angler signature requirement* . At the end of a charter vessel fishing trip, each charter vessel angler who retains halibut caught in Area 2C must acknowledge that his or her information and the number of halibut retained

(kept)are recorded correctly by signing the back of the Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip Logbook data sheet on the line number that corresponds to the angler's information on the front of the logbook data sheet.

(B)*Charter vessel guide requirements* . For each charter vessel fishing trip in Area 2C, the charter vessel guide onboard the charter vessel is required to record the following information (see paragraphs (d)(2)(iv)(B)( *1* ) through ( *8* ) of this section) in the Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip Logbook: *(1) Business owner license number* . The sport fishing operator business license number issued by the Alaska Department of Fish and Game to the charter vessel guide or the charter vessel guide's employer. *(2) Guide license number* . The Alaska Department of Fish and Game sport fishing guide license number held by charter vessel guide who certified the logbook data sheet. *(3) Date* . Month and day for each charter vessel fishing trip taken. A separate logbook data sheet is required for each charter vessel fishing trip if two or more trips were taken on the same day. A separate logbook data sheet is required for each calendar day that halibut are caught and retained during a multi-day trip. *(4) Regulatory area fished* . Circle the regulatory area (Area 2C or Area 3A) where halibut were caught and retained during each charter vessel fishing trip. If halibut were caught and retained in Area 2C and Area 3A during the same charter vessel fishing trip, then a separate logbook data sheet must be used to record halibut caught and retained for each regulatory area. *(5) Angler sport fishing license number and printed name* . Before a charter vessel fishing trip begins, record for each charter vessel angler the Alaska Sport Fishing License number for the current year, resident permanent license number, or disabled veteran license number, and print the name of each paying and nonpaying charter vessel angler onboard that will fish for halibut. Record the name of each youth angler under 16 years of age. *(6) Number of halibut retained* . For each charter vessel angler, record the number of halibut caught and retained during the charter vessel fishing trip. *(7) Signature* . At the end of a charter vessel fishing trip, acknowledge that the recorded information is correct by signing the logbook data sheet. *(8) Angler signature* . The charter vessel guide is responsible for ensuring that anglers comply with the signature requirements at paragraph (d)(2)(iv)(A) of this section.

(3)*Charter vessels in Area 3A* . For each charter vessel fishing trip in Area 3A, the charter vessel guide onboard the charter vessel is required to record the regulatory area (Area 2C or Area 3A) where halibut were caught and kept by circling the appropriate area in the Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip Logbook. If halibut were caught and retained in Area 2C and Area 3A during the same charter vessel fishing trip, then a separate logbook data sheet must be used to record halibut caught and retained for each regulatory area. 6. In § 300.66, revise paragraph

(m)and add paragraphs (n), (o), and

(p)to read as follows: § 300.66 Prohibitions.

(m)Exceed any of the harvest or gear limitations specified at § 300.65(d).

(n)Fail to comply with the requirements at § 300.65(d).

(o)Fail to submit or submit inaccurate information on any report, license, catch card, application or statement required under § 300.65.

(p)Refuse to present any identification card, U.S. Coast Guard operator's license, permit, license, or Alaska Department of Fish and Game Saltwater Sport Fishing Charter Trip logbook upon the request of an authorized officer. [FR Doc. 08-1301 Filed 5-22-08; 2:39 pm]

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