Federal Register Vol. 80, No.166,

OPM is issuing a proposed rule that would define Hancock County, MS, as an area of application to the Harrison, MS, NAF FWS wage area. The Navy Exchange and Navy Morale, Welfare, and Recreation in Hancock County is now operating NAF activities at the John C. Stennis Space Center, located in southwestern Mississippi, with a combined total of four NAF employees.

Under section 532.219 of title 5, Code of Federal Regulations, each NAF wage area “shall consist of one or more survey areas, along with nonsurvey areas, if any, having nonappropriated fund employees.” Hancock County does not meet the regulatory criteria under 5 CFR 532.219 to be established as a separate NAF wage area; however, nonsurvey counties may be combined with a survey area to form a wage area. Section 532.219 lists the regulatory criteria that OPM considers when defining FWS wage area boundaries:

• Proximity of largest facilities activity in each county;

• Transportation facilities and commuting patterns; and

• Similarities of the counties in:

○ Overall population,

○ Private employment in major industry categories, and

○ Kinds and sizes of private industrial establishments.

Based on an analysis of the regulatory criteria for defining NAF wage areas, Hancock County, MS, should be defined as an area of application to Harrison, MS, NAF FWS wage area. The proximity criterion favors the Harrison, MS, wage area more than the Orleans, LA, wage area. The transportation facilities criterion does not favor one wage area more than another. The commuting patterns criterion favors the Harrison wage area. Although the overall population, employment sizes, and kinds and sizes of private industrial establishments criterion does not favor one wage area more than another, the industrial distribution pattern for Hancock County is more similar to the Harrison survey area than to the Orleans survey area. While a standard review of regulatory criteria shows mixed results, the proximity and commuting patterns criteria solidly favor the Harrison wage area. Based on this analysis, we propose that Hancock County be defined to the Harrison NAF wage area.

The proposed expanded Harrison NAF wage area would consist of one survey county (Harrison County, MS) and four area of application counties (Mobile County, AL, and Forrest, Hancock, and Jackson Counties, MS). The Federal Prevailing Rate Advisory Committee, the national labor-management committee responsible for advising OPM on matters concerning the pay of FWS employees, recommended this change by consensus. This change would be effective on the first day of the first applicable pay period beginning on or after 30 days following publication of the final regulations.

I certify that these regulations would not have a significant economic impact on a substantial number of small entities because they would affect only Federal agencies and employees.

Accordingly, the U.S. Office of Personnel Management is proposing to amend 5 CFR part 532 as follows:

I. Obtaining Information and Submitting Comments A. Obtaining Information

Please refer to Docket ID NRC-2011-0012 (proposed rule) and Docket ID NRC-2015-0003 (draft guidance) when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to the proposed rule and draft guidance by any of the following methods:

• Federal Rulemaking Web site: Go to http://www.regulations.gov and search for Docket ID NRC-2011-0012 (proposed rule) or Docket ID NRC-2015-0003 (draft guidance).

• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at http://www.nrc.gov/reading-rm/adams.html. To begin the search, select “ADAMS Public Documents” and then select “Begin Web-based ADAMS Search.” For problems with ADAMS, please contact the NRC's Public Document Room (PDR) reference staff at 1-800-397-4209, (301) 415-4737, or by email to [email protected]. The draft guidance, NUREG-2175, is available in ADAMS under Accession No. ML15056A516.

• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.

Please include Docket ID NRC-2011-0012 (proposed rule) or Docket ID NRC-2015-0003 (draft guidance) in your comment submission.

The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at http://www.regulations.gov as well as enter the comment submissions into ADAMS. The NRC does not routinely edit comment submissions to remove identifying or contact information.

If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.

On March 26, 2015 (80 FR 16081), the NRC requested comment on a proposed rule that would amend its regulations that govern LLRW disposal facilities to require new and revised site-specific technical analyses, to permit the development of site-specific criteria for LLRW acceptance based on the results of those analyses, to facilitate implementation, and to better align the requirements with current health and safety standards. Also on March 26, 2015 (80 FR 15930), the NRC requested comments on draft guidance to address the implementation of the proposed regulations (NUREG-2175, “Guidance for Conducting Technical Analyses for 10 CFR part 61”). The public comment periods for the proposed rule and draft guidance closed on July 24, 2015. The NRC has decided to reopen the public comment periods for the proposed rule and draft guidance until September 21, 2015, to allow more time for members of the public to develop and submit their comments.

We invite you to send any written relevant data, views, or arguments about this NPRM. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2015-2984; Directorate Identifier 2015-NE-21-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. We will consider all comments received by the closing date and may amend this NPRM because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this NPRM.

We propose to adopt a new AD for all GE GEnx-1B54, -1B58, -1B64, -1B67, and -1B70 turbofan engine models. This proposed AD was prompted by reports of two IFSDs caused by HPT rotor stage 1 blade failure. This proposed AD would require inspection and conditional removal of affected HPT rotor stage 1 blades. This condition, if not corrected, could result in failure of the HPT rotor stage 1 blades, which could lead to failure of one or more engines, loss of thrust control, and damage to the airplane.

We reviewed GE GEnx-1B Service Bulletin (SB) No. 72-0267 R00, dated April 10, 2015. The SB describes procedures for borescope inspection (BSI) of the HPT rotor stage 1 blades.

We are proposing this NPRM because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This NPRM would require initial and repetitive BSI and conditional removal of affected HPT rotor stage 1 blades.

We estimate that this proposed AD will affect 4 engines installed on airplanes of U.S. registry. We also estimate that it will take about 2 hours per engine to comply with this proposed AD. The average labor rate is $85 per hour. Based on these figures, we estimate the total cost of this proposed AD to U.S. operators to be $680.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

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

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

(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2015-3620; Directorate Identifier 2015-CE-029-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

On September 26, 2014, we issued AD 2014-20-13, Amendment 39-17986 (79 FR 60329, October 7, 2014). That AD required actions intended to address an unsafe condition on all Pacific Aerospace Limited Model 750XL airplanes and was based on mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country.

Since we issued AD 2014-20-13, Amendment 39-17986 (79 FR 60329, October 7, 2014), Pacific Aerospace Limited has revised the related service information and developed a terminating action for the repetitive inspections.

The Civil Aviation Authority (CAA), which is the aviation authority for New Zealand, has issued AD DCA/750XL/18A, dated August 4, 2015 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-3620.

Pacific Aerospace Limited has issued Mandatory Service Bulletin PACSB/XL/068, Issue 5, dated June 29, 2015. This service bulletin reduces the torque setting for the fin forward pickup bolt and introduces a new, improved replacement fin forward pickup plate, part number P/N 11-0375-1, to replace P/N 11-10281-1. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD will affect 18 products of U.S. registry. We also estimate that it would take about 22 work-hours per product to comply with all the requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $1,692 per product.

Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $64,116, or $3,562 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

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

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

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2015-3148; Directorate Identifier 2014-NM-254-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2014-0278, dated December 19, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus Model A320-212, -214, -232, and -233 airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-3148.

We reviewed Airbus Alert Operators Transmission A53N009-14, dated December 17, 2014. The service information describes procedures for repetitive inspections of the pocket radii located between fuselage frames 35 and 40, above stringer 6 on both the left- and right-hand sides, and repair if necessary. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD affects 1 airplane of U.S. registry.

We also estimate that it would take about 3 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $255, or $255 per product.

We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this proposed AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

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

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

3. Will not affect intrastate aviation in Alaska; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part, A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would establish Class E airspace at Pearson Field, Vancouver, WA.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2015-3322; Airspace Docket No. 15-ANM-16.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 1601 Lind Avenue SW., Renton, WA 98057.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking, (202) 267-9677, for a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This document proposes to amend FAA Order 7400.9Y, Airspace Designations and Reporting Points, dated August 6, 2014, and effective September 15, 2014. FAA Order 7400.9Y is publicly available as listed in the ADDRESSES section of this proposed rule. FAA Order 7400.9Y lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) Part 71 by establishing Class E surface area airspace at Pearson Field, Vancouver, WA. A review of the airspace revealed establishment necessary due to current standard instrument approach procedures not contained within controlled airspace.

Class E surface area airspace would be established to an area 4.9 miles west, 4 miles east, 2.9 miles north, and 1.8 miles south of Pearson Field.

Class E airspace designations are published in paragraph 6002 of FAA Order 7400.9Y, dated August 6, 2014, and effective September 15, 2014, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

The FAA has determined this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation; (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified this proposed rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part, A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would establish Class E airspace in the International Falls, MN, area.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2015-3084/Airspace Docket No. 15-AGL-13.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking (202) 267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This document proposes to amend FAA Order 7400.9Y, Airspace Designations and Reporting Points, dated August 6, 2014, and effective September 15, 2014. FAA Order 7400.9Y is publicly available as listed in the ADDRESSES section of this proposed rule. FAA Order 7400.9Y lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), Part 71 by establishing Class E en route domestic airspace extending upward from 1,200 feet above the surface in the International Falls, MN area. This action would contain aircraft while in IFR conditions under control of Minneapolis ARTCC by safely vectoring aircraft from en route airspace to terminal areas.

Class E airspace areas are published in Paragraph 6006 of FAA Order 7400.9Y, August 6, 2014, and effective September 15, 2014, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Reviewing the MBNMS management plan may result in proposed changes to existing plans and policies to address contemporary issues and challenges, and better protect and manage the sanctuary's resources and qualities. The review process is composed of four major stages: (1) Information collection and characterization; (2) preparation and release of a draft management plan and environmental impact statement, and any proposed amendments to the regulations; (3) public review and comment; (4) preparation and release of a final management plan and environmental document, and any final amendments to the regulations. NOAA will also address other statutory and regulatory requirements that may be required pursuant to the Endangered Species Act, Marine Mammal Protection Act, Essential Fish Habitat provisions of the Magnuson-Stevens Act, and the National Historic Preservation Act.

NOAA has prepared a preliminary list of priority topics to consider during the MBNMS management plan review process. We are interested in public comment on these topics, as well as any other topics of interest to the public or other agencies in the context of the MBNMS management plan review. This list does not preclude or in any way limit the consideration of additional topics raised through public comment, government-to-government and interagency consultations, and discussions with partner agencies.

There is a continuing need for characterization, research and monitoring to understand baseline conditions of marine resources within the sanctuary, ecosystem functions, and status and trends of biological and socioeconomic resources. NOAA relies on the continued support of multiple partners and volunteers, and strives to address critical resource protection through collaborative multi-stakeholder management efforts. In addition to updating existing action plans in the management plan, NOAA is considering adding strategies and activities to address the following issues:

Climate Change—Climate change is widely acknowledged, yet there is considerable uncertainty about current and future consequences at local, ecosystem and oceanic scales. Increased coordination and cooperation among science and resource management agencies are required to improve planning, monitoring and adaptive management to address this phenomenon as it pertains to the protection of MBNMS resources.

Wildlife Disturbance—MBNMS is an active area with abundant human use, offering some of the most significant marine wildlife viewing in the world. NOAA is concerned about a variety of human activities that have the ability to disturb marine wildlife. The harassment of wildlife, in particular marine mammals, has increased in recent years due to increased numbers (and proximity) of certain whale species and humans involved in on-the-water activities. Impacts to the MBNMS soundscape are also a concern, as the cumulative effects of underwater noise generated by a variety of human activities have grown over the past half century. Expanded use of unmanned aircraft systems over the sanctuary may also require additional analysis to determine the degree to which these aircraft may, or may not, be causing harm to wildlife.

Water Quality Protection—Water quality is key to ensuring protection for all sanctuary resources. Given the level of coastal development along MBNMS's extensive coastline, runoff of contaminants such as sediments, nutrients, fecal bacteria, pesticides, oil, grease, metals, and detergents from the approximately 7,000 square miles of coastal watershed areas makes the sanctuary vulnerable to coastal water pollution problems. Although MBNMS has an award-winning water quality protection program, NOAA believes that more focused attention on specific water quality issues is needed, as well as a coordinated regional monitoring program to provide meaningful information on conditions, trends, and contaminant loads.

Marine Debris—Coastal marine debris is a persistent and poorly diagnosed problem within the sanctuary that negatively impacts natural and socioeconomic resources and qualities, including marine mammals, turtles and seabirds. NOAA is seeking input on innovative source controls and cleanups could help minimize impacts to sanctuary waters and habitats.

NOAA is considering several modifications to MBNMS regulations and definitions to facilitate resource protection, clarify legal intent, and enhance public understanding. These include: Clarifying the extent of the shoreward sanctuary boundary line and the means by which some of the zones within MBNMS are delineated; clarifying the intent of the prohibition on the take of historical resources; and prohibiting tampering with MBNMS signage and buoys. Other regulatory changes may be considered based on public scoping comments and staff work to adjust various action plans within the management plan.

Other potential regulatory modifications on which NOAA is seeking public input include:

(1) Reducing the required High Surf Warning (HSW) condition for Motorized Personal Watercraft operations at Mavericks to a High Surf Advisory (HSA) condition.

(2) Minimizing disturbance from low overflights in the area of the Common Murre colony at Devil's Slide, a restoration site just beyond the MBNMS boundary line at Point San Pedro (San Mateo County).

(3) Designating of specific zones where fireworks may be permitted within MBNMS.

(4) Updating regulations to clarify the extent of the shoreward sanctuary boundary line.

(5) Ensuring that salvers operating within MBNMS meet minimum industry standards for safety, liability, capacity, and environmentally sensitive salvage techniques during both emergency and non-emergency operations.

(6) Clarifying the definition of “cruise ship” to include not only ships with berths for hire as is currently defined, but also ships with condominiums under private ownership.

(7) Clarifying the intent and applicability of the existing prohibition on deserting a vessel in MBNMS.

Enhancing the public's awareness and appreciation of sanctuary resources is a cornerstone of MBNMS's mission. Recent initiatives, such as visitor centers, video media production, and partnering with recreation and tourism industry offer opportunities for NOAA and other entities to expand educational and outreach contributions and reach larger audiences. NOAA is seeking the public's view on developing and enhancing programs designed to enhance public awareness, including opportunities to participate in environmental research and monitoring.

To inform the MBNMS management plan review, NOAA is updating the Monterey Bay National Marine Sanctuary Condition Report, which was first published in 2009. The 2009 report provided a summary of resources in MBNMS, pressures on those resources, current conditions and recent trends within the Sanctuary, and management responses to mitigate negative impacts. The 2015 Condition Report will update current conditions and recent changes for water quality, habitat, living resources and maritime archaeological resources in the sanctuary. It will also include an assessment of the Davidson Seamount Management Zone which NOAA added to MBNMS in 2009.

A summary of the 2015 Condition Report will be available to the general public during the public scoping period and on the Internet at: http://sanctuaries.noaa.gov/science/condition/welcome.html. The final report will be made available in late December 2015 on the same Web site.

NOAA is interested in hearing the public's view on:

• The potential impacts of the proposed actions discussed above and ways to mitigate these impacts.

• The topics discussed above for the next five to ten years and whether these are the right topics, the priority topics, or if there are additional topics NOAA should consider.

• The effectiveness of the existing management plan in meeting both the mandates of the NMSA and MBNMS goals and objectives.

• The public's view on the effectiveness of the MBNMS programs, including programs focused on: Resource protection; research and monitoring; education; volunteer; and outreach.

• NOAA's implementation of MBNMS regulations and permits.

• Adequacy of existing boundaries to protect sanctuary resources.

• Assessment of the existing operational and administrative framework (staffing, offices, vessels, etc.).

This document also advises the public that NOAA will coordinate its consultation responsibilities under section 7 of the Endangered Species Act (ESA), Essential Fish Habitat (EFH) under the Magnuson Stevens Fishery Conservation and Management Act (MSA), section 106 of the National Historic Preservation Act (NHPA, 16 U.S.C. 470), and Federal Consistency review under the Coastal Zone Management Act (CZMA), along with its ongoing NEPA process including the use of NEPA documents and public and stakeholder meetings to also meet the requirements of other federal laws.

In fulfilling its responsibility under the NHPA and NEPA, NOAA intends to identify consulting parties; identify historic properties and assess the effects of the undertaking on such properties; initiate formal consultation with the State Historic Preservation Officer, the Advisory Council of Historic Preservation, and other consulting parties; involve the public in accordance with NOAA's NEPA procedures, and develop in consultation with identified consulting parties alternatives and proposed measures that might avoid, minimize or mitigate any adverse effects on historic properties and describe them in any environmental assessment or draft environmental impact statement.

This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 937 of the Internal Revenue Code (Code). Section 937 was added to the Code by the American Jobs Creation Act of 2004 (Public Law 108-357, 118 Stat. 1418 (2004)). Section 937(a) provides rules for determining if an individual is a bona fide resident of a U.S. possession (generally referred to in this preamble as a “U.S. territory”).

On April 11, 2005, the Federal Register published temporary regulations (TD 9194, 70 FR 18920) and proposed regulations (REG-159243-03, 70 FR 18949) under section 937, providing rules to implement section 937 and conforming existing regulations to other legislative changes with respect to the U.S. territories. On January 31, 2006, the Federal Register published final regulations (TD 9248, 71 FR 4996) under section 937(a) concerning whether an individual is a bona fide resident of a U.S. territory. Section 1.937-1 was amended on November 14, 2006, and on April 9, 2008, to provide additional guidance concerning bona fide residency in the U.S. territories. See TD 9297 (71 FR 66232) and TD 9391 (73 FR 19350).

Section 937(a) provides that an individual is a bona fide resident of a U.S. territory if the individual meets a presence test, a tax home test, and a closer connection test. In order to satisfy the presence test, an individual must be present in the U.S. territory for at least 183 days during the taxable year (183-day rule), unless otherwise provided in regulations.

Section 1.937-1 provides several alternatives to the 183-day rule. An individual who does not satisfy the 183-day rule nevertheless meets the presence test if the individual satisfies one of four alternative tests: (1) The individual is present in the relevant U.S. territory for at least 549 days during the three-year period consisting of the current taxable year and the two immediately preceding taxable years, provided the individual is present in the U.S. territory for at least 60 days during each taxable year of the period; (2) the individual is present no more than 90 days in the United States during the taxable year; (3) the individual has no more than $3,000 of earned income from U.S. sources and is present for more days in the U.S. territory than in the United States during the taxable year; or (4) the individual has no significant connection to the United States during the taxable year. The term “significant connection” is generally defined as a permanent home, voter registration, spouse, or minor child in the United States. See § 1.937-1(c)(5). Section 1.937-1 also provides that certain days count as days of presence in the relevant U.S. territory for purposes of the presence test, even if the individual is not physically present in the U.S. territory (constructive presence).

Following the original issuance of § 1.937-1, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) received comments requesting that the presence test be revisited to make it more flexible. These comments included a proposal to allow days of constructive presence for business or personal travel outside of the relevant U.S. territory. The Treasury Department and the IRS have concluded that it would be appropriate to allow additional days of constructive presence subject to certain limitations. Accordingly, these proposed regulations provide an additional rule for calculating days of presence in the relevant U.S. territory for purposes of the presence test in § 1.937-1(c)(1).

Under the proposed amendment, an individual would be considered to be present in the relevant U.S. territory for up to 30 days during which the individual is outside of both the United States and the relevant U.S. territory. The proposed amendment would not apply, however, if the number of days that the individual is considered to be present in the United States during the taxable year equals or exceeds the number of days that the individual is considered to be present in the relevant U.S. territory during the taxable year, determined without taking into account any days for which the individual would be treated as present in the U.S. territory under this proposed amendment. Furthermore, the 30-day constructive presence rule would not apply for purposes of calculating the minimum 60 days of presence in the relevant U.S. territory that is required for the 549-day test under § 1.937-1(c)(1)(ii). Therefore, an individual invoking § 1.937-1(c)(1)(ii) must otherwise be considered to have been present at least 60 days in the relevant U.S. territory in each of the three years in order to benefit from the 30-day constructive presence rule.

These amendments to the regulations are proposed to apply to taxable years beginning after the date these regulations are published as final regulations in the Federal Register.

Until these regulations are published as final regulations in the Federal Register, taxpayers may rely on these proposed regulations with respect to taxable years beginning on or after the date these proposed regulations are published in the Federal Register.

Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the Addresses heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register.

The principal author of these proposed regulations is Cleve Lisecki, formerly of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

Background

This document contains proposed amendments to §§ 1.199-0, 1.199-1, 1.199-2, 1.199-3, 1.199-4(b), 1.199-6, and 1.199-8(i) of the Income Tax Regulations (26 CFR part 1). Section 1.199-1 relates to income that is attributable to domestic production activities. Section 1.199-2 relates to W-2 wages as defined in section 199(b). Section 1.199-3 relates to determining domestic production gross receipts (DPGR). Section 1.199-4(b) describes the costs of goods sold allocable to DPGR. Section 1.199-6 applies to agricultural and horticultural cooperatives. Section 1.199-8(i) provides the effective/applicability dates.

Section 199 was added to the Code by section 102 of the American Jobs Creation Act of 2004 (Pub. L. 108-357, 118 Stat. 1418 (2004)), and amended by section 403(a) of the Gulf Opportunity Zone Act of 2005 (Pub. L. 109-135, 119 Stat. 25 (2005)), section 514 of the Tax Increase Prevention and Reconciliation Act of 2005 (Pub. L. 109-222, 120 Stat. 345 (2005)), section 401 of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432, 120 Stat. 2922 (2006)), section 401(a), Division B of the Energy Improvement and Extension Act of 2008 (Pub. L. 110-343, 122 Stat. 3765 (2008)) (Energy Extension Act of 2008), sections 312(a) and 502(c), Division C of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (Pub. L. 110-343, 122 Stat. 3765 (2008)) (Tax Extenders Act of 2008), section 746(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub. L. 111-312, 124 Stat. 3296 (2010)), section 318 of the American Taxpayer Relief Act of 2012 (Pub. L. 112-240, 126 Stat. 2313 (2013)), and sections 130 and 219(b) of the Tax Increase Prevention Act of 2014 (Pub. L. 113-295, 128 Stat. 4010 (2014)).

Section 199(a)(1) allows a deduction equal to nine percent (three percent in the case of taxable years beginning in 2005 or 2006, and six percent in the case of taxable years beginning in 2007, 2008, or 2009) of the lesser of: (A) The qualified production activities income (QPAI) of the taxpayer for the taxable year, or (B) taxable income (determined without regard to section 199) for the taxable year (or, in the case of an individual, adjusted gross income).

Section 199(b)(1) provides that the amount of the deduction allowable under section 199(a) for any taxable year shall not exceed 50 percent of the W-2 wages of the taxpayer for the taxable year. Section 199(b)(2)(A) generally defines W-2 wages, with respect to any person for any taxable year of such person, as the sum of amounts described in section 6051(a)(3) and (8) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year. Section 199(b)(3), after its amendment by section 219(b) of the Tax Increase Prevention Act of 2014, provides that the Secretary shall provide for the application of section 199(b) in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade or business, or the major portion of a separate unit of a trade or business during the taxable year. Section 199(b)(2)(B) limits the W-2 wages to those properly allocable to DPGR for taxable years beginning after May 17, 2006.

Section 199(c)(1) defines QPAI for any taxable year as an amount equal to the excess (if any) of: (A) The taxpayer's DPGR for such taxable year, over (B) the sum of: (i) The cost of goods sold (CGS) that are allocable to such receipts; and (ii) other expenses, losses, or deductions (other than the deduction under section 199) that are properly allocable to such receipts.

Section 199(c)(4)(A)(i) provides that the term DPGR means the taxpayer's gross receipts that are derived from any lease, rental, license, sale, exchange, or other disposition of: (I) Qualifying production property (QPP) that was manufactured, produced, grown, or extracted (MPGE) by the taxpayer in whole or in significant part within the United States; (II) any qualified film produced by the taxpayer; or (III) electricity, natural gas, or potable water (utilities) produced by the taxpayer in the United States.

Section 199(d)(10), as renumbered by section 401(a), Division B of the Energy Extension Act of 2008, authorizes the Secretary to prescribe such regulations as are necessary to carry out the purposes of section 199, including regulations that prevent more than one taxpayer from being allowed a deduction under section 199 with respect to any activity described in section 199(c)(4)(A)(i).

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register contain amendments to the Income Tax Regulations that provide rules clarifying how taxpayers calculate W-2 wages for purposes of the W-2 wage limitation under section 199(b)(1) in the case of a short taxable year or where a taxpayer acquires, or disposes of, the major portion of a trade or business, or the major portion of a separate unit of a trade or business during the taxable year under section 199(b)(3). The text of those regulations serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations.

Section 401(a), Division B of the Energy Extension Act of 2008 added new section 199(d)(9), which applies to taxable years beginning after December 31, 2008. Section 199(d)(9) reduces the otherwise allowable section 199 deduction when a taxpayer has oil related qualified production activities income (oil related QPAI), and defines oil related QPAI. Section 199(d)(9)(A) provides that if a taxpayer has oil related QPAI for any taxable year beginning after 2009, the amount otherwise allowable as a deduction under section 199(a) must be reduced by three percent of the least of: (i) The oil related QPAI of the taxpayer for the taxable year, (ii) the QPAI of the taxpayer for the taxable year, or (iii) taxable income (determined without regard to section 199).

Section 1.199-1(f) of the proposed regulations provides guidance on oil related QPAI. In defining oil related QPAI, the Treasury Department and the IRS considered the relationship between QPAI and oil related QPAI. Section 199(c)(1) defines QPAI as the amount equal to the excess (if any) of the taxpayer's DPGR for the taxable year over the sum of CGS allocable to such receipts and other costs, expenses, losses, and deductions allocable to such receipts. So, for example, if gross receipts are not included within DPGR, those gross receipts are not included when calculating QPAI. Section 199(d)(9)(B) defines oil related QPAI as QPAI attributable to the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof. In general, gross receipts from the transportation and distribution of QPP are not includable in DPGR because those activities are not considered part of the MPGE of QPP. See § 1.199-3(e)(1), which defines MPGE. Section 199(c)(4)(B)(ii) specifically excludes gross receipts attributable to the transmission or distribution of natural gas from the definition of DPGR.

Based on these considerations, the proposed regulations define oil related QPAI as an amount equal to the excess (if any) of the taxpayer's DPGR from the production, refining, or processing of oil, gas, or any primary product thereof (oil related DPGR) over the sum of the CGS that is allocable to such receipts and other expenses, losses, or deductions that are properly allocable to such receipts. The proposed regulations specifically provide that oil related DPGR does not include gross receipts derived from the transportation or distribution of oil, gas, or any primary product thereof, except if the de minimis rule under § 1.199-1(d)(3)(i) or an exception for embedded services applies under § 1.199-3(i)(4)(i)(B). The proposed regulations further provide that, to the extent a taxpayer treats gross receipts derived from the transportation or distribution of oil, gas, or any primary product thereof as DPGR under § 1.199-1(d)(3)(i) or § 1.199-3(i)(4)(i)(B), the taxpayer must include those gross receipts in oil related DPGR.

The proposed regulations define oil as including oil recovered from both conventional and non-conventional recovery methods, including crude oil, shale oil, and oil recovered from tar/oil sands. Section 199(d)(9)(C) defines primary product as having the same meaning as when used in section 927(a)(2)(C) (relating to property excluded from the term export property under the former foreign sales corporations rules), as in effect before its repeal. The proposed regulations incorporate the rules in § 1.927(a)-1T(g)(2)(i) regarding the definition of a primary product with modifications that are consistent with the definition of oil for purposes of section 199(d)(9).

Section 1.199-1(f)(2) of the proposed regulations provides guidance on how a taxpayer should allocate and apportion costs under the section 861 method, the simplified deduction method, and the small business simplified overall method when determining oil related QPAI. The proposed regulations require taxpayers to use the same cost allocation method to allocate and apportion costs to oil related DPGR as the taxpayer uses to allocate and apportion costs to DPGR.

Section 502(c), Division C of the Tax Extenders Act of 2008 amended the rules relating to qualified films. Section 502(c)(1) added section 199(b)(2)(D) to broaden the definition of the term W-2 wages as applied to a qualified film to include compensation for services performed in the United States by actors, production personnel, directors, and producers.

Section 502(c)(2), Division C of the Tax Extenders Act of 2008 amended the definition of qualified film in section 199(c)(6) to mean any property described in section 168(f)(3) if not less than 50 percent of the total compensation relating to production of the property is compensation for services performed in the United States by actors, production personnel, directors, and producers. The term does not include property with respect to which records are required to be maintained under 18 U.S.C. 2257 (generally, films, videotapes, or other matter that depict actual sexually explicit conduct and are produced in whole or in part with materials that have been mailed or shipped in interstate or foreign commerce, or are shipped or transported or are intended for shipment or transportation in interstate or foreign commerce). Section 502(c)(2), Division C of the Tax Extenders Act of 2008 also amended the definition of a qualified film under section 199(c)(6) to include any copyrights, trademarks, or other intangibles with respect to such film. The method and means of distributing a qualified film does not affect the availability of the deduction.

Section 502(c)(3), Division C of the Tax Extenders Act of 2008 added an attribution rule for a qualified film for taxpayers who are partnerships or S corporations, or partners or shareholders of such entities under section 199(d)(1)(A)(iv). Section 199(d)(1)(A)(iv) provides that in the case of each partner of a partnership, or shareholder of an S corporation, who owns (directly or indirectly) at least 20 percent of the capital interests in such partnership or the stock of such S corporation, such partner or shareholder is treated as having engaged directly in any film produced by such partnership or S corporation, and that such partnership or S Corporation is treated as having engaged directly in any film produced by such partner or shareholder.

The amendments made by section 502(c), Division C of the Tax Extenders Act of 2008 apply to taxable years beginning after December 31, 2007.

Section 1.199-2(e)(1) of the proposed regulations modifies the definition of W-2 wages to include compensation for services (as defined in § 1.199-3(k)(4)) performed in the United States by actors, production personnel, directors, and producers (as defined in § 1.199-3(k)(1)).

To address the amendments to the definition of qualified film in section 199(c)(6) for taxable years beginning after 2007, the proposed regulations amend the definition of qualified film in § 1.199-3(k)(1) to include copyrights, trademarks, or other intangibles with respect to such film. The proposed regulations define other intangibles with a non-exclusive list of intangibles that fall within the definition.

Section 1.199-3(k)(10) provides a special rule for disposition of promotional films to address concerns of the Treasury Department and the IRS that the inclusion of intangibles in the definition of qualified film could be interpreted too broadly. This rule clarifies that, when a taxpayer produces a qualified film that is promoting a product or service, the gross receipts a taxpayer later derives from the disposition of the product or service promoted in the qualified film are derived from the disposition of the product or service and not from a disposition of the qualified film (including any intangible with respect to such qualified film). The rule is intended to prevent taxpayers from claiming that gross receipts are derived from the disposition of a qualified film (rather than the product or service itself) when a taxpayer sells a product or service with a logo, trademark, or other intangible that appears in a promotional film produced by the taxpayer. The Treasury Department and the IRS recognize that a taxpayer can, in certain cases, derive gross receipts from a disposition of a promotional film or the intangibles in a promotional film. The proposed regulations add Example 9 in § 1.199-3(k)(11) relating to a license to reproduce a character used in a promotional film to illustrate a situation where gross receipts can qualify as DPGR because the gross receipts are distinct (separate and apart) from the disposition of the product or service. The Treasury Department and the IRS request comments on how to determine when gross receipts are distinct.

The proposed regulations add four examples in redesignated § 1.199-3(k)(11), formerly § 1.199-3(k)(10), to illustrate application of the amended definition of qualified film that includes copyrights, trademarks, or other intangibles.

The proposed regulations remove the last sentence of § 1.199-3(k)(3)(ii) (which states that gross receipts derived from a license of the right to use or exploit film characters are not gross receipts derived from a qualified film) because gross receipts derived from a license of the right to use or exploit film characters are now considered gross receipts derived from a qualified film.

Section 1.199-3(k)(2)(ii), which allows a taxpayer to treat certain tangible personal property as a qualified film (for example, a DVD), is amended to exclude film intangibles because tangible personal property affixed with a film intangible (such as a trademark) should not be treated as a qualified film. For example, the total revenue from the sale of an imported t-shirt affixed with a film intangible should not be treated as gross receipts derived from the sale of a qualified film. The portion of the gross receipts attributable to the qualified film intangible separate from receipts attributable to the t-shirt may qualify as DPGR, however. The proposed regulations also add Example 10 and Example 11 in redesignated § 1.199-3(k)(11) to address situations in which tangible personal property is offered for sale in combination with a qualified film affixed to a DVD.

Section 1.199-3(k)(3)(i) and (k)(3)(ii) of the proposed regulations address the amendment to section 199(c)(6) (effective for taxable years beginning after 2007) that provides the methods and means of distributing a qualified film will not affect the availability of the deduction under section 199. The exception that describes the receipts from showing a qualified film in a movie theater or by broadcast on a television station as not derived from a qualified film is removed from § 1.199-3(k)(3)(ii) because, if a taxpayer produces a qualified film, then the receipts the taxpayer derives from these showings qualify as DPGR in taxable years beginning after 2007. In addition, Example 4 in § 1.199-3(i)(5)(iii) and Example 3 in § 1.199-3(k)(11) (formerly § 1.199-3(k)(10)) have been revised to illustrate that, for taxable years beginning after 2007, product placement and advertising income derived from the distribution of a qualified film qualifies as DPGR if the qualified film containing the product placements and advertising is broadcast over the air or watched over the Internet.

The proposed regulations also add a sentence to § 1.199-3(k)(6) to clarify that production activities do not include activities related to the transmission or distribution of films. The Treasury Department and the IRS are aware that some taxpayers have taken the inappropriate position that these activities are part of the production of a film. The Treasury Department and the IRS consider film production as distinct from the transmission and distribution of films. This clarification is also consistent with the amendment to the definition of qualified film, which provides that the methods and means of distribution do not affect the availability of the deduction under section 199.

Section 1.199-3(i)(9) of the proposed regulations describes the application of section 199(d)(1)(A)(iv) to partners and partnerships and shareholders and S corporations for taxable years beginning after 2007. The Treasury Department and the IRS have determined that for a partnership to apply the provisions of section 199(d)(1)(A)(iv) to treat itself as having engaged directly in a film produced by a partner, the partnership must treat itself as a partnership for all purposes of the Code. Further, a partner of a partnership can apply the provisions of section 199(d)(1)(A)(iv) to treat itself as having engaged directly in a film produced by the partnership only if the partnership treats itself as a partnership for all purposes of the Code. Section 1.199-3(i)(9)(i) describes generally that a partner of a partnership or shareholder of an S corporation who owns (directly or indirectly) at least 20 percent of the capital interests in such partnership or the stock of such S corporation is treated as having engaged directly in any film produced by such partnership or S corporation. Further, such partnership or S corporation is treated as having engaged directly in any film produced by such partner or shareholder.

Section 1.199-3(i)(9)(ii) of the proposed regulations generally prohibits attribution between partners of a partnership or shareholders of an S corporation, partnerships with a partner in common, or S corporations with a shareholder in common. Thus, when a partnership or S corporation is treated as having engaged directly in any film produced by a partner or shareholder, any other partners or shareholders who did not participate directly in the production of the film are treated as not having engaged directly in the production of the film at the partner or shareholder level. Similarly, when a partner or shareholder is treated as having engaged directly in any film produced by a partnership or S corporation, any other partnerships or S corporations in which that partner or shareholder owns an interest (excluding the partnership or S corporation that produced the film) are treated as not having engaged directly in the production of the film at the partnership or S corporation level.

Section 1.199-3(i)(9)(iii) of the proposed regulations describes the attribution period for a partner or partnership or shareholder or S corporation under section 199(d)(1)(A)(iv). A partner or shareholder is treated as having engaged directly in any qualified film produced by the partnership or S corporation, and a partnership or S corporation is treated as having engaged directly in any qualified film produced by the partner or shareholder, regardless of when the qualified film was produced, during the period in which the partner or shareholder owns (directly or indirectly) at least 20 percent of the capital interests in the partnership or the stock of the S corporation. During any period that a partner or shareholder owns less than 20 percent of the capital interests in such partnership or the stock of such S corporation that partner or shareholder is not treated as having engaged directly in the qualified film produced by the partnership or S corporation for purposes of § 1.199-3(i)(9)(iii), and that partnership or S corporation is not treated as having engaged directly in any qualified film produced by the partner or shareholder.

Section 1.199-3(i)(9)(iv) of the proposed regulations provides examples that illustrate section 199(d)(1)(A)(iv).

Existing § 1.199-3(k)(7)(i) provides a safe harbor that treats a film as a qualified film produced by the taxpayer if not less than 50 percent of the total compensation for services paid by the taxpayer is compensation for services performed in the United States and the taxpayer satisfies the safe harbor in § 1.199-3(g)(3) for treating a taxpayer as MPGE QPP in whole or significant part in the United States. The Treasury Department and the IRS are aware that it may be unclear how the safe harbor in § 1.199-3(k)(7)(i) applies to costs of live or delayed television programs that may be expensed (specifically, whether such expensed costs are part of the CGS or unadjusted depreciable basis of the qualified film for purposes of § 1.199-3(g)(3)). Further, it may be unclear whether license fees paid for third-party produced programs are included in direct labor and overhead when applying the safe harbor in § 1.199-3(g)(3). The proposed regulations clarify how a taxpayer producing live or delayed television programs should apply the safe harbor in § 1.199-3(k)(7)(i); in particular, how a taxpayer should calculate its unadjusted depreciable basis under § 1.199-3(g)(3)(ii). Specifically, proposed § 1.199-3(k)(7)(i) requires a taxpayer to include all costs paid or incurred in the production of a live or delayed television program in the taxpayer's unadjusted depreciable basis of such program under § 1.199-3(g)(3)(ii), including the licensing fees paid to a third party under § 1.199-3(g)(3)(ii). The proposed regulations further clarify that license fees for third-party produced programs are not included in the direct labor and overhead to produce the film for purposes of applying § 1.199-3(g)(3).

Section 199(d)(8)(A) provides that in the case of any taxpayer with gross receipts for any taxable year from sources within the Commonwealth of Puerto Rico, if all of such receipts are taxable under section 1 or 11 for such taxable year, then for purposes of determining the DPGR of such taxpayer for such taxable year under section 199(c)(4), the term United States includes the Commonwealth of Puerto Rico. Section 199(d)(8)(B) provides that in the case of a taxpayer described in section 199(d)(8)(A), for purposes of applying the wage limitation under section 199(b) for any taxable year, the determination of W-2 wages of such taxpayer is made without regard to any exclusion under section 3401(a)(8) for remuneration paid for services performed in Puerto Rico. Section 130 of the Tax Increase Prevention Act of 2014 amended section 199(d)(8)(C) for taxable years beginning after December 31, 2013. As amended, section 199(d)(8)(C) provides that section 199(d)(8) applies only with respect to the first nine taxable years of the taxpayer beginning after December 31, 2005, and before January 1, 2015.

Section 1.199-2(f) of the proposed regulations modifies the W-2 wage limitation under section 199(b) to the extent provided by section 199(d)(8). Section 1.199-3(h)(2) of the proposed regulations modifies the term United States to include the Commonwealth of Puerto Rico to the extent provided by section 199(d)(8).

Section 1.199-3(d)(1) provides that a taxpayer determines, using any reasonable method that is satisfactory to the Secretary based on all of the facts and circumstances, whether gross receipts qualify as DPGR on an item-by-item basis. Section 1.199-3(d)(1)(i) provides that item means the property offered by the taxpayer in the normal course of the taxpayer's business for lease, rental, license, sale, exchange, or other disposition (for purposes of § 1.199-3(d), collectively referred to as disposition) to customers, if the gross receipts from the disposition of such property qualify as DPGR. Section 1.199-3(d)(2)(iii) provides that, in the case of construction activities and services or engineering and architectural services, a taxpayer may use any reasonable method that is satisfactory to the Secretary based on all of the facts and circumstances to determine what construction activities and services or engineering or architectural services constitute an item.

The Treasury Department and the IRS are aware that the item rule in § 1.199-3(d)(2)(iii) has been interpreted to mean that the gross receipts derived from the sale of a multiple-building project may be treated as DPGR when only one building in the project is substantially renovated. The Treasury Department and the IRS have concluded that treating gross receipts from the sale of a multiple-building project as DPGR, and the multiple-building project as one item, is not a reasonable method satisfactory to the Secretary for purposes of § 1.199-3(d)(2)(iii) if a taxpayer did not substantially renovate each building in the multiple-building project. Section 1.199-3(d)(4) of the proposed regulations includes an example (Example 14) illustrating the appropriate application of § 1.199-3(d)(2)(iii) to a multiple building project.

In addition, the Treasury Department and the IRS are aware that taxpayers may be unsure how to apply the item rule in § 1.199-3(d)(2)(i) when the property offered for disposition to customers includes embedded services as described in § 1.199-3(i)(4)(i). The proposed regulations add Example 6 to § 1.199-3(d)(4) to clarify that the item rule applies after excluding the gross receipts attributable to services.

Section 1.199-3(e)(1) provides that the term MPGE includes manufacturing, producing, growing, extracting, installing, developing, improving, and creating QPP; making QPP out of scrap, salvage, or junk material as well as from new or raw material by processing, manipulating, refining, or changing the form of an article, or by combining or assembling two or more articles; cultivating soil, raising livestock, fishing, and mining minerals. The Treasury Department and the IRS are aware that Example 5 in § 1.199-3(e)(5) has been interpreted to mean that testing activities qualify as an MPGE activity even if the taxpayer engages in no other MPGE activity. The Treasury Department and the IRS disagree that testing activities, alone, qualify as an MPGE activity. The proposed regulations add a sentence to Example 5 in § 1.199-3(e)(5) to further illustrate that certain activities will not be treated as MPGE activities if they are not performed as part of the MPGE of QPP. Taxpayers are not required to allocate gross receipts to certain activities that are not MPGE activities when those activities are performed in connection with the MPGE of QPP. However, if the taxpayer in Example 5 in § 1.199-3(e)(5) did not MPGE QPP, then the activities described in the example, including testing, are not MPGE activities.

Section 1.199-3(e)(2) provides that if a taxpayer packages, repackages, labels, or performs minor assembly of QPP and the taxpayer engages in no other MPGE activities with respect to that QPP, the taxpayer's packaging, repackaging, labeling, or minor assembly does not qualify as MPGE with respect to that QPP. This rule has been the subject of recent litigation. See United States v. Dean, 945 F. Supp. 2d 1110 (C.D. Cal. 2013) (concluding that the taxpayer's activity of preparing gift baskets was a manufacturing activity and not solely packaging or repackaging for purposes of section 199). The Treasury Department and the IRS disagree with the interpretation of § 1.199-3(e)(2) adopted by the court in United States v. Dean, and the proposed regulations add an example (Example 9) that illustrates the appropriate application of this rule in a situation in which the taxpayer is engaged in no other MPGE activities with respect to the QPP other than those described in § 1.199-3(e)(2).

Section 1.199-3(f)(1) provides that if one taxpayer performs a qualifying activity under § 1.199-3(e)(1), § 1.199-3(k)(1), or § 1.199-3(l)(1) pursuant to a contract with another party, then only the taxpayer that has the benefits and burdens of ownership of the QPP, qualified film, or utilities under Federal income tax principles during the period in which the qualifying activity occurs is treated as engaging in the qualifying activity.

Taxpayers and the IRS have had difficulty determining which party to a contract manufacturing arrangement has the benefits and burdens of ownership of the property while the qualifying activity occurs. Cases analyzing the benefits and burdens of ownership have considered the following factors relevant: (1) Whether legal title passes; (2) how the parties treat the transaction; (3) whether an equity interest was acquired; (4) whether the contract creates a present obligation on the seller to execute and deliver a deed and a present obligation on the purchaser to make payments; (5) whether the right of possession is vested in the purchaser and which party has control of the property or process; (6) which party pays the property taxes; (7) which party bears the risk of loss or damage to the property; (8) which party receives the profits from the operation and sale of the property; and (9) whether a taxpayer actively and extensively participated in the management and operations of the activity. See ADVO, Inc. & Subsidiaries v. Commissioner, 141 T.C. 298, 324-25 (2013); see also Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221 (1981). The ADVO court noted that the factors it used in its analysis are not exclusive or controlling, but that they were in the particular case sufficient to determine which party had the benefits and burdens of ownership. ADVO, Inc., 141 T.C. at 325 n. 21. Determining which party has the benefits and burdens of ownership under Federal income tax principles for purposes of section 199 requires an analysis and weighing of many factors, which in some contexts could result in more than one taxpayer claiming the benefits of section 199 with respect to a particular activity. Resolving the benefits and burdens of ownership issue often requires significant IRS and taxpayer resources.

Section 199(d)(10) directs the Treasury Department to provide regulations that prevent more than one taxpayer from being allowed a deduction under section 199 with respect to any qualifying activity (as described in section 199(c)(4)(A)(i)). The Treasury Department and the IRS have interpreted the statute to mean that only one taxpayer may claim the section 199 deduction with respect to the same activity performed with respect to the same property. See § 1.199-3(f)(1). Example 1 and Example 2 in § 1.199-3(f)(4) currently illustrate this one-taxpayer rule using factors that are relevant to the determination of who has the benefits and burdens of ownership.

The Large Business and International (LB&I) Division issued an Industry Director Directive on February 1, 2012 (LB&I Control No. LB&I-4-0112-01) (Directive) addressing the benefits and burdens factors. The Directive provides a three-step analysis of facts and circumstances relating to contract terms, production activities, and economic risks to determine whether a taxpayer has the benefits and burdens of ownership for purposes of § 1.199-3(f)(1). LB&I issued a superseding second directive on July 24, 2013 (LB&I Control No. LB&I-04-0713-006), and a third directive updating the second directive on October 29, 2013 (LB&I Control No. LB&I-04-1013-008). The third directive allows a taxpayer to provide a statement explaining the taxpayer's determination that it had the benefits and burdens of ownership, along with certification statements signed under penalties of perjury by the taxpayer and the counterparty verifying that only the taxpayer is claiming the section 199 deduction.

To provide administrable rules that are consistent with section 199, reduce the burden on taxpayers and the IRS in evaluating factors related to the benefits and burdens of ownership, and prevent more than one taxpayer from being allowed a deduction under section 199 with respect to any qualifying activity, the proposed regulations remove the rule in § 1.199-3(f)(1) that treats a taxpayer in a contract manufacturing arrangement as engaging in the qualifying activity only if the taxpayer has the benefits and burdens of ownership during the period in which the qualifying activity occurs. In place of the benefits and burdens of ownership rule, these proposed regulations provide that if a qualifying activity is performed under a contract, then the party that performs the activity is the taxpayer for purposes of section 199(c)(4)(A)(i). This rule, which applies solely for purposes of section 199, reflects the conclusion that the party actually producing the property should be treated as engaging in the qualifying activity for purposes of section 199, and is therefore consistent with the statute's goal of incentivizing domestic manufacturers and producers. The proposed rule would also provide a readily administrable approach that would prevent more than one taxpayer from being allowed a deduction under section 199 with respect to any qualifying activity.

Example 1 has been revised, and current Example 2 has been removed, to reflect the new rule. In addition, the benefits and burdens language has been removed from: (1) The definition of MPGE in § 1.199-3(e)(1) and (3), including Example 1, Example 4, and Example 5 in § 1.199-3(e)(5); (2) the definition of in whole or in significant part in § 1.199-3(g)(1); (3) Example 5 in the qualified film rules in existing § 1.199-3(k)(7); and (4) the production pursuant to a contract in the qualified film rules in § 1.199-3(k)(8).

The Treasury Department and the IRS request comments on whether there are narrow circumstances that could justify an exception to the proposed rule. In particular, the Treasury Department and the IRS request comments on whether there should be a limited exception to the proposed rule for certain fully cost-plus or cost-reimbursable contracts. Under such an exception, the party that is not performing the qualifying activity would be treated as the taxpayer engaged in the qualifying activity if the party performing the qualifying activity is (i) reimbursed for, or provided with, all materials, labor, and overhead costs related to fulfilling the contract, and (ii) provided with an additional payment to allow for a profit. The Treasury Department and the IRS are uncertain regarding the extent to which such fully cost-plus or cost-reimbursable contracts are in fact used in practice. Comments suggesting circumstances that could justify an exception to the proposed rule should address the rationale for the proposed exception, the ability of the IRS to administer the exception, and how the suggested exception will prevent two taxpayers from claiming the deduction for the qualifying activity.

The proposed regulations make several revisions to the hedging rules in § 1.199-3(i)(3). Section 1.199-3(i) of the proposed regulations defines a hedging transaction to include transactions in which the risk being hedged relates to property described in section 1221(a)(1) giving rise to DPGR, whereas the existing regulations require the risk being hedged relate to QPP described in section 1221(a)(1). A taxpayer commented in a letter to the Treasury Department and the IRS that there is no reason to limit the hedging rules to QPP giving rise to DPGR, and the proposed regulations accept the comment.

The other changes to the hedging rules are administrative. Section 1.199-3(i)(3)(ii) of the existing regulations on currency fluctuations was eliminated because the regulations under sections 988(d) and 1221 adequately cover the treatment of currency hedges. Similarly, the rules in § 1.199-3(i)(3)(iii) that address the effect of identification and non-identification were duplicative of the rules in the section 1221 regulations. Accordingly, § 1.199-3(i)(3)(ii) has been revised to cross-reference the appropriate rules in § 1.1221-2(g), and to clarify that the consequence of an abusive identification or non-identification is that deduction or loss, but not income or gain, is taken into account in calculating DPGR.

Section 199(c)(4)(A)(ii) includes in DPGR, in the case of a taxpayer engaged in the active conduct of a construction trade or business, gross receipts derived from construction of real property performed in the United States by the taxpayer in the ordinary course of such trade or business. Under § 1.199-3(m)(2)(i), activities constituting construction include activities performed by a general contractor or activities typically performed by a general contractor, for example, activities relating to management and oversight of the construction process such as approvals, periodic inspection of progress of the construction project, and required job modifications. The Treasury Department and the IRS are aware that some taxpayers have interpreted this language to mean that a taxpayer who only approves or authorizes payments is engaged in activities typically performed by a general contractor under § 1.199-3(m)(2)(i). The Treasury Department and the IRS disagree that a taxpayer who only approves or authorizes payments is engaged in construction for purposes of § 1.199-3(m)(2)(i). Accordingly, § 1.199-3(m)(2)(i) of the proposed regulations clarifies that a taxpayer must engage in construction activities that include more than the approval or authorization of payments or invoices for that taxpayer's activities to be considered as activities typically performed by a general contractor.

Section 1.199-3(m)(2)(i) provides that activities constituting construction are activities performed in connection with a project to erect or substantially renovate real property. Section 1.199-3(m)(5) currently defines substantial renovation to mean the renovation of a major component or substantial structural part of real property that materially increases the value of the property, substantially prolongs the useful life of the property, or adapts the property to a new or different use. This standard reflects regulations under § 1.263(a)-3 related to amounts paid to improve tangible property that existed at the time of publication of the final § 1.199-3(m)(5) regulations (TD 9263 [71 FR 31268] June 19, 2006) but which have since been revised. See (TD 9636 [78 FR 57686] September 19, 2013).

The proposed regulations under § 1.199-3(m)(5) revise the definition of substantial renovation to conform to the final regulations under § 1.263(a)-3, which provide rules requiring capitalization of amounts paid for improvements to a unit of property owned by a taxpayer. Improvements under § 1.263(a)-3 are amounts paid for a betterment to a unit of property, amounts paid to restore a unit of property, and amounts paid to adapt a unit of property to a new or different use. See § 1.263(a)-3(j), (k), and (l). Under the proposed regulations, a substantial renovation of real property is a renovation the costs of which are required to be capitalized as an improvement under § 1.263(a)-3, other than an amount described in § 1.263(a)-3(k)(1)(i) through (iii) (relating to amounts for which a loss deduction or basis adjustment requires capitalization as an improvement). The improvement rules under § 1.263(a)-3 provide specific rules of application for buildings (see § 1.263(a)-3(j)(2)(ii), (k)(2), and (l)(2)), which apply for purposes of § 1.199-3(m)(5).

Section 1.199-4(b)(1) describes how a taxpayer determines its CGS allocable to DPGR. The Treasury Department and the IRS are aware that in the case of transactions accounted for under a long-term contract method of accounting (either the percentage-of-completion method (PCM) or the completed-contract method (CCM)), a taxpayer incurs allocable contract costs. The Treasury Department and the IRS recognize that allocable contract costs under PCM or CCM are analogous to CGS and should be treated in the same manner. Section 1.199-4(b)(1) of the proposed regulations provides that in the case of a long-term contract accounted for under PCM or CCM, CGS for purposes of § 1.199-4(b)(1) includes allocable contract costs described in § 1.460-5(b) or § 1.460-5(d), as applicable.

Existing § 1.199-4(b)(2)(i) provides that a taxpayer must use a reasonable method that is satisfactory to the Secretary based on all of the facts and circumstances to allocate CGS between DPGR and non-DPGR. This allocation must be determined based on the rules provided in § 1.199-4(b)(2)(i) and (ii). Taxpayers have asserted that under § 1.199-4(b)(2)(ii) the portion of current year CGS associated with activities in earlier tax years (including pre-section 199 tax years) may be allocated to non-DPGR even if the related gross receipts are treated by the taxpayer as DPGR. Section 1.199-4(b)(2)(iii)(A) of the proposed regulations clarifies that the CGS must be allocated between DPGR and non-DPGR, regardless of whether any component of the costs included in CGS can be associated with activities undertaken in an earlier taxable year. Section 1.199-4(b)(2)(iii)(B) of the proposed regulations provides an example illustrating this rule.

Section 199(d)(3)(A) provides that any person who receives a qualified payment from a specified agricultural or horticultural cooperative must be allowed for the taxable year in which such payment is received a deduction under section 199(a) equal to the portion of the deduction allowed under section 199(a) to such cooperative that is (i) allowed with respect to the portion of the QPAI to which such payment is attributable, and (ii) identified by such cooperative in a written notice mailed to such person during the payment period described in section 1382(d).

Under § 1.199-6(c), the cooperative's QPAI is computed without taking into account any deduction allowable under section 1382(b) or section 1382(c) (relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions).

Section 1.199-6(e) provides that the term qualified payment means any amount of a patronage dividend or per-unit retain allocation, as described in section 1385(a)(1) or section 1385(a)(3), received by a patron from a cooperative that is attributable to the portion of the cooperative's QPAI for which the cooperative is allowed a section 199 deduction. For this purpose, patronage dividends and per-unit retain allocations include any advances on patronage and per-unit retains paid in money during the taxable year.

Section 1388(f) defines the term per-unit retain allocation to mean any allocation by an organization to which part I of subchapter T applies to a patron with respect to products marketed for him, the amount of which is fixed without reference to net earnings of the organization pursuant to an agreement between the organization and the patron. Per-unit retain allocations may be made in money, property, or certificates.

The Treasury Department and the IRS are aware that Example 1 in § 1.199-6(m) has been interpreted as describing that the cooperative's payment for its members' corn is a per-unit retain allocation paid in money as defined in sections 1382(b)(3) and 1388(f). Example 1 in § 1.199-6(m) does not identify the cooperative's payment for its members' corn as a per-unit retain allocation and is not intended to illustrate how QPAI is computed when a cooperative's payments to its patrons are per-unit retain allocations. The proposed regulations provide an example (Example 4) in § 1.199-6(m) illustrating how QPAI is computed when the cooperative's payments to members for corn qualify as per-unit retain allocations paid in money under section 1388(f). The new example has the same facts as Example 1 in § 1.199-6(m), except that the cooperative's payments for its members' corn qualify as per-unit retain allocations paid in money under section 1388(f) and the cooperative reports per-unit retain allocations paid in money on Form 1099-PATR, “Taxable Distributions Received From Cooperatives.”

Existing § 1.199-3(e)(2) provides that if a taxpayer packages, repackages, labels, or performs minor assembly of QPP and the taxpayer engages in no other MPGE activity with respect to that QPP, the taxpayer's packaging, repackaging, labeling, or minor assembly does not qualify as MPGE with respect to that QPP.

The term minor assembly for purposes of section 199 was first introduced in Notice 2005-14 (2005-1 CB 498 (February 14, 2005)) (see § 601.601(d)(2)(ii)(b)) (Notice 2005-14), and was used (by exclusion) in determining whether a taxpayer met the in-whole-or-in-significant-part requirement. Specifically, section 3.04(5)(d) of Notice 2005-14 states that in connection with the MPGE of QPP, packaging, repackaging, and minor assembly operations should not be considered in applying the general “substantial in nature” test, and the costs should not be considered in applying the safe harbor. The section further states that this rule is similar to the rule in § 1.954-3(a)(4)(iii). The rule in § 1.954-3(a)(4)(iii) applies when deciding whether a taxpayer selling property will be treated as selling a manufactured product rather than components of that sold property.

Section 1.199-3(g) of the current regulations, which superseded Notice 2005-14, does not provide a specific definition of minor assembly, but it does allow taxpayers to consider minor assembly activities to determine whether the taxpayer has met the in-whole-or-in-significant-part requirement (either by showing their activities were substantial in nature under § 1.199-3(g)(2) or by meeting the safe harbor in § 1.199-3(g)(3)). However, the current regulations also contain § 1.199-3(e)(2), which excludes certain activities from the definition of MPGE. Section 1.199-3(e)(2) provides that if a taxpayer packages, repackages, labels, or performs minor assembly of QPP and the taxpayer engages in no other MPGE activity with respect to that QPP, the taxpayer's packaging, repackaging, labeling, or minor assembly does not qualify as MPGE with respect to that QPP. Therefore, a taxpayer with only minor assembly activities would not meet the definition of MPGE and a determination of whether a taxpayer met the in-whole-or-in-significant-part requirement is not made.

In considering whether to provide a specific definition of minor assembly, the Treasury Department and the IRS have found it difficult to identify an objective test that would be widely applicable.

The definition of minor assembly could focus on whether a taxpayer's activity is only a single process that does not transform an article into a materially different QPP. Such process may include, but would not be limited to, blending or mixing two materials together, painting an article, cutting, chopping, crushing (non-agricultural products), or other similar activities. An example of blending or mixing two materials is using a paint mixing machine to combine paint with a pigment to match a customer's color selection when a taxpayer did not MPGE the paint or the pigment. An example of cutting is a taxpayer using an industrial key cutting machine to custom cut keys for customers using blank keys that taxpayer purchased from unrelated third parties. Examples of other similar activities include adding an additive to extend the shelf life of a product and time ripening produce that was purchased from unrelated third parties.

Another possible definition could be based on whether an end user could reasonably engage in the same assembly activity of the taxpayer. For example, assume QPP made up of component parts purchased by taxpayer is sold by a taxpayer to end users in either assembled or disassembled form. To the extent an end user can reasonably assemble the QPP sold in disassembled form, the taxpayer's assembly activity would be considered minor assembly.

The Treasury Department and the IRS request comments on how the term minor assembly in § 1.199-3(e)(2) should be defined and encourage the submission of examples illustrating the term.

Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866 of, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. Comments are requested on all aspects of the proposed regulations. All comments will be available for public inspection and copying at http://www.regulations.gov or upon request.

A public hearing has been scheduled for December 16, 2015, beginning at 10 a.m. in the Auditorium of the Internal Revenue Building, 1111 Constitution Avenue NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. In addition, all visitors must present photo identification to enter the building. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments by November 25, 2015, and an outline of the topics to be discussed and the time to be devoted to each topic by November 25, 2015. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is James Holmes, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

The additions and revision read as follows:

The revisions and additions read as follows:

The public hearings will be held to accept oral comments on all three proposed rulemakings listed in the summary section of this document. Commenters may choose to speak on one or more of the three proposed rulemakings.

All three hearings will begin at 9:00 a.m. and will conclude at 8:00 p.m. (local time). There will be a lunch break from 12:00 p.m. to 1:00 p.m. (local time) and a dinner break from 5:00 p.m. to 6:00 p.m. (local time). To register to speak at the hearings, please use the online registration form available at http://www.epa.gov/airquality/oilandgas/registration.html. For questions regarding registration, please contact Aimee St. Clair at (919) 541-1063. The last day to pre-register to speak at the Denver, CO, and Dallas, TX, hearings will be September 18, 2015. The last day to pre-register to speak at the Pittsburgh, PA, hearing will be September 23, 2015. Additionally, requests to speak will be taken the day of the hearings at the hearings registration desk, although preferences on speaking times may not be able to be fulfilled. Please note that registration requests received before the hearings will be confirmed by the EPA via email. We cannot guarantee that we can accommodate all timing requests and will provide requestors with the next available speaking time, in the event that their requested time is taken. Please note that the time outlined in the confirmation email will be the scheduled speaking time. Depending on the flow of the day, times may fluctuate. If you require the service of a translator or special accommodations such as audio description, we ask that you pre-register for the Denver, CO, and Dallas, TX, hearings no later than September 18, 2015, and the Pittsburgh, PA, hearing no later than September 23, 2015, as we may not be able to arrange such accommodations without advance notice. Please note that any updates made to any aspect of the hearing will be posted online at http://www.epa.gov/airquality/oilandgas/. While the EPA expects the hearings to go forward as set forth above, we ask that you monitor our Web site or contact Aimee St. Clair at (919) 541-1063 to determine if there are any updates to the information on the hearings. The EPA does not intend to publish a document in the Federal Register announcing any such updates.

Oral testimony will be limited to 5 minutes for each commenter. The EPA encourages commenters to provide the EPA with a copy of their oral testimony electronically (via email) before the hearings and in hard copy form at the hearings.

The hearings will provide interested parties the opportunity to present data, views, or arguments concerning the proposed actions. The EPA will make every effort to accommodate all speakers who wish to register to speak at the hearing venues on the day of the hearings. The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as oral comments and supporting information presented at the public hearings. Verbatim transcripts of the hearings and written statements will be included in the dockets for each rulemaking. The EPA plans for the hearings to run on schedule; however, due to on-site schedule fluctuations, actual speaking times may shift slightly.

Because the Denver, CO, and Pittsburgh, PA, hearings are being held at United States government facilities, individuals planning to attend these hearings should be prepared to show valid picture identification to the security staff in order to gain access to the meeting room. Please note that the REAL ID Act, passed by Congress in 2005, established new requirements for entering federal facilities. If your driver's license is issued by American Samoa, Louisiana, Minnesota, New Hampshire or New York, you must present an additional form of identification to enter the federal building. Acceptable alternative forms of identification include: Federal employee badges, passports, enhanced driver's licenses, and military identification cards. For additional information for the status of your state regarding REAL ID, go to http://www.dhs.gov/real-id-enforcement-brief. In addition, you will need to obtain a property pass for any personal belongings you bring with you. Upon leaving the buildings, you will be required to return this property pass to the security desk. No large signs will be allowed in the buildings, cameras may only be used outside of the buildings, and demonstrations will not be allowed on federal property for security reasons.

At all of the hearing locations, atttendees will be asked to go through metal detectors. To help facilitate this process, please be advised that you will be asked to remove all items from all pockets and place them in provided bins for screening; remove laptops, phones, or other electronic devices from their carrying case and place in provided bins for screening; avoid shoes with metal shanks, toe guards, or supports as a part of their construction; remove any metal belts, metal belt buckles, large jewelry, watches; and follow the instructions of the guard if identified for secondary screening. Additionally, no weapons (e.g., pocket knives) or drugs or drug paraphernalia (e.g., marijuana) will be allowed in the buildings. We recommend that you arrive 20 minutes in advance of your speaking time in Denver, CO, Dallas, TX, and Pittsburgh, PA, to allow time to go through security and to check in with the registration desk.

The EPA has established separate dockets for all three of the proposed rulemakings (available at http://www.regulations.gov). For the proposed rulemaking titled, “Source Determination for Certain Emission Units in the Oil and Natural Gas Sector,” the Docket ID No. is EPA-HQ-OAR-2013-0685. For the proposed rulemaking titled, “Oil and Natural Gas Sector: Emission Standards for New and Modified Sources,” the Docket ID No. is EPA-HQ-OAR-2010-0505. For the proposed rulemaking titled, “Review of New Sources and Modifications in Indian Country: Federal Implementation Plan for Managing Air Emissions from True Minor Sources Engaged in Oil and Natural Gas Production in Indian Country,” the Docket ID No. is EPA-HQ-OAR-2014-0606. All three proposed rulemakings are posted at http://www.epa.gov/airquality/oilandgas/actions.html. If you need assistance in accessing any information related to these rulemakings, please contact Ms. Aimee St. Clair, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, by phone at (919) 541-1063, or by email at [email protected].

In the final rules section of this Federal Register, EPA is approving the state's SIP revision as a direct final rule without prior proposal because the Agency views this as a noncontroversial revision amendment and anticipates no relevant adverse comments to this action. A detailed rationale for the approval is set forth in the direct final rule. If no relevant adverse comments are received in response to this action, no further activity is contemplated in relation to this action. If EPA receives relevant adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed action. EPA will not institute a second comment period on this action. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on part of this rule and if that part can be severed from the remainder of the rule, EPA may adopt as final those parts of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the rules section of this Federal Register.

Throughout this document whenever “we,” “us,” or “our” is used, we mean the EPA.

The Act at section 110(a)(2)(C) requires states to develop and submit to the EPA for approval into the state SIP, preconstruction review programs applicable to new and modified stationary sources of air pollutants for attainment and nonattainment areas that cover both major and minor new sources and modifications, collectively referred to as the NSR SIP. The CAA NSR SIP program is composed of three separate programs: Prevention of Significant Deterioration (PSD), NNSR, and Minor NSR. PSD is established in part C of title I of the CAA and applies in areas that are designated as meeting the National Ambient Air Quality Standards (NAAQS), i.e., “attainment areas”, as well as areas designated as “unclassifiable” because there is insufficient information to determine if the area meets the NAAQS. The NNSR SIP program is established in part D of title I of the CAA and applies in areas that are designated as not being in attainment of the NAAQS, i.e., “nonattainment areas.” The Minor NSR SIP program addresses construction or modification activities that do not emit, or have the potential to emit, beyond certain major source thresholds and thus do not qualify as “major” and applies regardless of the designation of the area in which a source is located. The revisions to 20.11.60 NMAC submitted on August 16, 2010 and July 26, 2013 were submitted as revisions to the City of Albuquerque-Bernalillo County NNSR permit program and will be evaluated against the requirements for NNSR programs at 40 CFR 51.160-51.165.

On August 16, 2010, the Governor Bill Richardson submitted revisions to the New Mexico SIP that incorporated revisions to the NMAC for the City of Albuquerque-Bernalillo County. The August 16, 2010, submittal includes final revised regulation sections 1, 2, 6, 7, 12 through 27 (including five new additional sections) in 20.11.60 NMAC, Permitting in Nonattainment Areas. The updates that were accepted by the Albuquerque-Bernalillo County Air Quality Control Board constitutes the integration of language that is consistent with federal NNSR permitting regulations.

On July 26, 2013, the designee of the Governor, New Mexico Environment Department Cabinet Secretary, Ryan Flynn, submitted revisions to the SIP. This SIP submittal incorporated revisions to the NMAC for the City of Albuquerque-Bernalillo County. It includes final revised regulation sections 6, 7, 12, 13, and 15 in 20.11.60 NMAC, Permitting in Nonattainment Areas. The updates that were accepted by the Albuquerque-Bernalillo County Air Quality Control Board constitutes the integration of language that is consistent with federal NNSR permitting regulations.

The EPA also received in the August 16, 2010 submittal revisions to regulations within 20.11.61 NMAC—Prevention of Significant Deterioration (PSD) permitting program and Infrastructure SIP for Particulate Matter less than 2.5 Micrometers (PM2.5) and Ozone (O3). In the July 26, 2013 submittals, revisions to regulations within 20.11.61 NMAC-PSD permitting program and 20.11.42 NMAC—Operating Permits were also included. The revisions to 20.11.61 NMAC were submitted as revisions to the New Mexico SIP. The 20.11.42 NMAC revisions were submitted as an update the title V program. As part of this review, EPA is taking action only on the submitted revisions to 20.11.60 NMAC. We are addressing the amended regulations in 20.11.61 NMAC as part of separate SIP action (See 80 FR 28901); for the revisions to 20.11.42 NMAC, it will be addressed separately in a later action to update the NM title V program.

The current SIP-approved version of 20.11.60 NMAC, Permitting in Nonattainment Areas, was last approved by EPA on April 26, 2007, and became effective on May 29, 2007. See 72 FR 20728. Substantive revisions to the City of Albuquerque-Bernalillo County NNSR program amend the existing state regulations to address the following federal NNSR requirements promulgated by the EPA:

• Implementation of the NSR Program for PM2.5 (73 FR 28321);

• PSD for PM2.5-Increments, Significant Impact Levels (SILs) and Significant Monitoring Concentration (SMC) (75 FR 64864);

• Final Rule to Implement the 8-hour Ozone (O3) NAAQS-Phase 2; Final Rule to Implement Certain Aspects of the 1990 Amendments Relating to NSR and PSD as They Apply to Carbon Monoxide (CO), PM and O3 NAAQS (70 FR 71612);

• PSD and NNSR: Reasonable Possibility in Recordkeeping (72 FR 72607); and

• PSD and NNSR: Reconsideration of Inclusion of Fugitive Rule; Interim Rule; Stay and Revisions (76 FR 17548).

Further, the amendments contained in the two submittals revise the rules to conform to the latest changes to New Mexico Air Code for the City of Albuquerque-Bernalillo County laws which must continue to meet minimum federal requirements and include grammatical and formatting corrections. In addition, more headings were added to provide clarity to the rules.

The EPA's evaluation of the revisions to the New Mexico SIP for the City of Albuquerque-Bernalillo County NNSR program included a line-by-line comparison in the TSD of the proposed revisions with the federal requirements. State and local permitting authorities may meet the requirements of 40 CFR part 51 with different but equivalent regulations. While some permitting authorities choose to incorporate by reference the applicable federal rules, other permitting authorities (such as the City of Albuquerque-Bernalillo County) choose to draft rules that track the federal language but contain differences. We found that in most cases, the state regulatory language is identical to the federal rule. Where the rules are not identical, they are at least consistent and support the federal rules and definitions. The EPA is therefore making a preliminary determination that the City of Albuquerque-Bernalillo County has adopted the necessary elements for the NNSR program to comply with the federal regulatory requirements for implementation of the PM2.5 and O3 NAAQS.

We evaluated and are proposing to approve the revisions to 20.11.60 NMAC submitted for SIP inclusion on August 16, 2010 and July 26, 2013. The EPA has made the preliminary determination that the revisions are approvable because the submitted rules are adopted and submitted in accordance with the CAA and are consistent with the EPA's regulations for NNSR permitting at 40 CFR 51.160-51.165. Therefore, under section 110 and part D of the Act, and for the reasons presented above and our accompanying TSD, the EPA proposes to fully approve the specific revisions to the New Mexico SIP for the City of Albuquerque-Bernalillo County as identified below.

• Revisions to 20.11.60.1 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.2 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.6 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010; and adopted on April 10, 2013 and submitted on July 26, 2013

• Revisions to 20.11.60.7 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010; and adopted on April 10, 2013 and submitted on July 26, 2013

• Revisions to 20.11.60.12 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010; and adopted on April 10, 2013 and submitted on July 26, 2013

• Revisions to 20.11.60.13 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010; and adopted on April 10, 2013 and submitted on July 26, 2013

• New 20.11.60.14 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• New 20.11.60.15 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010; and adopted on April 10, 2013 and submitted on July 26, 2013

• New 20.11.60.16 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.17 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.18 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• New 20.11.60.19 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• New 11.60.20 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.21 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.22 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.23 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.24 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.25 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.26 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

• Revisions to 20.11.60.27 NMAC as adopted on July 14, 2010 and submitted on August 16, 2010;

The EPA is proposing to find that the August 16, 2010 and July 26, 2013, submittals together addresses all required NNSR elements for the implementation of the 8-hour ozone NAAQS and the 1997 and 2006 PM2.5 NAAQS. We note that the City of Albuquerque-Bernalillo County NNSR program does not include regulation of VOCs and ammonia as PM2.5 precursors. However, section 189(e) of the Act requires regulation of PM2.5 precursors that significantly contribute to PM2.5 levels “which exceed the standard in the area” and PM2.5 levels in the City of Albuquerque-Bernalillo County do not currently exceed the standard. In the event that an area is designated nonattainment for the 2012 PM2.5 NAAQS or any other future PM2.5 NAAQS, New Mexico for the City of Albuquerque-Bernalillo County will have a deadline under section 189(a)(2) of the CAA to make a submission addressing the statutory requirements as to that area, including the requirements in section 189(e) that apply to the regulation of PM2.5 precursors.

In this action, we are proposing to include in a final rule regulatory text that includes incorporation by reference. In accordance with the requirements of 1 CFR 51.5, we are proposing to incorporate by reference revisions to the New Mexico State regulations for the City of Albuquerque-Bernalillo County as described in the Proposed Action section above. We have made, and will continue to make, these documents generally available electronically through www.regulations.gov and/or in hard copy at the EPA Region 6 office.

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. See, 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.);

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

The Council adopted Framework Adjustment 4 to the Atlantic Herring Fishery Management Plan at its April 22, 2014, meeting. The Council submitted Framework 4 to NMFS for review on July 18, 2014, and resubmitted to NMFS on February 27, 2015, and April 30, 2015.

This proposed rule includes management measures recommended by the Council in Framework 4 intended to further enhance catch monitoring and address discarding in the herring fishery. If implemented, Framework 4 would clarify the slippage definition, require limited access herring vessels to report slippage events on the daily vessel monitoring system (VMS) catch report, and establish slippage consequences. Slippage consequence measures would require vessels with All Areas (Category A) or Areas 2/3 (Category B) Limited Access Herring Permits to move 15 nautical miles (27.78 km) following an allowable slippage event, slippage due to safety, mechanical failure, or excess catch of spiny dogfish, and to terminate a fishing trip and return to port following a non-allowable slippage event, slippage for any other reason.

This proposed rule includes two additional management measures also recommended by the Council in Framework 4. These measures include requiring volumetric catch estimates to be collected aboard vessels with limited access herring permits and requiring vessels with Category A or B herring permits to have fish holds empty of fish when departing on a herring trip. NMFS specifically seeks public comment on the consistency of these measures with the Magnuson-Stevens Fisheries Conservation and Management Act (MSA) and other applicable law.

Additionally, this proposed rule contains minor corrections to existing regulations. NMFS proposes these adjustments under the authority of section 305(d) to the MSA, which provides that the Secretary of Commerce may promulgate regulations necessary to ensure that adjustments to a fishery management plan (FMP) are carried out in accordance with the FMP and the MSA. These adjustments, which are identified and described below, are necessary to clarify current regulations or the intent of the Herring FMP, and would not change the intent of any regulations.

The proposed regulations are based on the measures in Framework 4. The Council developed Framework 4 to build on catch monitoring improvements implemented in Amendment 5 to the Herring FMP (79 FR 8786, February 13, 2014) and to address dealer reporting requirements and slippage caps that NMFS disapproved as part of Amendment 5.

NMFS supports improvements to fishery dependent data collections and shares the Council's concern for reducing unnecessary discarding. During the development of Framework 4, NMFS expressed concern with the lack of rationale supporting two of the measures in Framework 4, specifically the measures requiring volumetric estimates of total catch and empty fish holds at the beginning of a trip. The Council did not provide evidence of specific problems with catch monitoring or discarding that these measures would address, nor did it demonstrate how these measures would rectify any such problems. Therefore, NMFS urged the Council to ensure Framework 4 provided adequate justification to support these measures. At this time, NMFS does not consider Framework 4 to contain sufficient justification for these measures and NMFS remains concerned that the utility of these measures does not outweigh the compliance, administration, and enforcement costs.

This proposed rule describes concerns about these measures' consistency with the MSA and other applicable law. Following public comment, NMFS will determine if these two measures can be approved or if they must be disapproved. NMFS seeks public comment on all proposed measures in Framework 4, and, in particular, NMFS seeks public comment on the proposed requirements for volumetric estimates of total catch and empty fish holds at the beginning of a trip and whether these measures should be approved or disapproved.

Framework 4 would require vessels with limited access herring permits to have their fish holds certified and Northeast Fisheries Science Center (NEFOP) observers to collect volumetric estimates of total catch by measuring the volume of fish in the hold prior to offloading. Observers would convert the volumetric estimate to a weight and submit the estimated weight to the Greater Atlantic Regional Fisheries Office (GARFO) for a cross-check of vessel trip reports (VTRs) and dealer reports.

Vessels with limited access herring permits that store herring catch in fish holds would be required to certify the capacity of their fish holds and mark their holds at regular intervals to facilitate collection of volumetric catch estimates. The fish hold capacity measurement would need to be certified by one of the following entities: (1) A Certified Marine Surveyor with a fishing specialty by the National Association of Marine Surveyors (NAMS); (2) an Accredited Marine Surveyor with a fishing specialty by the Society of Accredited Marine Surveyors (SAMS); (3) employees or agents of a classification society approved by the U.S. Coast Guard pursuant to 46 U.S.C. 3316(c); (4) the Maine State Sealer of Weights and Measures; (5) a professionally-licensed and/or registered Marine Engineer; or (6) a Naval Architect with a professional engineer license. This proposed list of entities is consistent with the list of entities approved to certify fish hold capacities in the Atlantic Mackerel, Squid, and Butterfish FMP. As part of the limited access herring permit renewal process in 2016, vessel owners would be required to submit a certified fish hold capacity measurement to NMFS with a signed certification by the individual or entity that completed the measurement specifying how they met the definition of a qualified individual or entity.

Regulations in the State of Maine already require that herring vessels have their fish holds measured and “sealed” by the State Sealer of Weights and Measures. Additionally, regulations at 50 CFR 648.4(a)(5)(iii)(H)(1) specifying vessel upgrade restrictions require that Tier 1 and Tier 2 limited access Atlantic mackerel vessels certify the capacity of their fish holds and submit this information to NMFS. Therefore, many vessels that participate in the herring fishery may already have the information necessary to determine the capacity of their fish holds.

Vessels with limited access herring permits would be required to obtain and retain on board a NMFS-approved measuring stick that would be available to the observer to measure the amount of fish in the fish hold. At the completion of a fishing trip, but prior to offloading, the observer would lower the NMFS-approved measuring stick into the fish hold(s) to measure the amount of fish and then estimate the total volume of fish on board. Once the observer estimates the total volume of fish in the fish hold, the observer would calculate the total weight of fish on board based on NMFS-approved volume to weight conversions. Framework 4 proposes the following conversions: (1) 1 cubic foot (0.28 cubic m) = 56.2 pounds (25.49 kg); (2) 1.244 cubic feet (0.035 cubic m) = 1 bushel herring (0.035 cubic m) = 70 pounds (31.75 kg); (3) 1 hogshead (0.62 cubic m) = 17.5 bushels (0.62 cubic m) = 1,225 pounds (555.65 kg). Additionally, Framework 4 proposes that 5 percent of the total weight would be deducted to account for water in the fish hold. Once the final estimate of total weight of fish is determined by the observer, that estimate would be recorded along with other sampling data collected on that fishing trip. After the observer's data are checked and finalized by NEFOP, the observer's estimate of total catch would be made available to GARFO for the purpose of cross-checking VTRs and dealer data.

Currently, observers do not estimate total catch in the herring fishery. Estimating the volume of fish in fish holds is an accepted practice elsewhere in the world, particularly Europe, to estimate the weight of total catch. However, requiring observers in the herring fishery to collect volumetric estimates of total catch would necessitate significant development of this measure prior to implementation, including developing a sampling protocol, approving volume to weight conversions and deductions to account for water in the fish hold, training observers, and evaluating how to use the data. Additionally, observers in the herring fishery are not currently required to stay with the vessel after landing and contracts for observers do not include sampling responsibilities when the vessel is in port. Requiring observers to sample vessels in port would require modifications to the description of observer duties and contracts with observer service providers.

The requirement for observers to estimate the amount of catch in the fish hold is intended to enhance catch monitoring in the herring fishery by providing an independent estimate of total catch. This measure was developed to address stakeholder concerns with NMFS's reliance on industry-reported catch data to monitor the herring fishery. Specifically, some stakeholders, including environmental organizations, the groundfish industry, and recreational fishing groups, believe that herring catch is not accurately reported by the industry and that large discrepancies exist between vessel and dealer reports. The herring industry, in general, does not believe that herring catch is being misreported but, in an effort to address stakeholder concerns, supports the requirement for observers to collect an estimate of total catch.

Vessels and dealers report catch by species. VTRs, in combination with observer data, are used by NMFS in herring stock assessments and to track catch against catch caps in the herring fishery, while dealer data are used to track catch against herring annual catch limits. The proposed measure would provide an estimate of total catch, but not catch by species. Therefore, the volumetric estimate could not be used to replace either VTRs or dealer data and it could not be used for catch monitoring or stock assessments. While the data generated under this proposed measure would not replace industry-reported data used for quota monitoring and stock assessments, it is intended to help measure the utility of industry-reported catch data, identify, catch reporting issues, and alleviate concerns that vessel operators and dealers collude to misreport catch.

Framework 4 does not provide evidence of misreporting by the herring industry, but it does highlight past differences between the amount of herring reported by vessels and dealers. Prior to 2008, discrepancies between VTRs and dealer data ranged from 4 percent to 54 percent. The vessel hail estimate (reported on the VTR) is different than amount of fish purchased (reported by dealers) so differences between these data sets are expected. However, discrepancies between VTR and dealer data greater than 10 percent are considered substantial.

In recent years, discrepancies between VTRs and dealer data have been minimal. VTRs were higher than dealer reports in 2009 (2 percent), 2010 (1.3 percent), 2011 (1.2 percent), and 2013 (0.1 percent) and less than dealer reports in 2012 (0.1 percent). As described in NMFS's April 17, 2014, letter to the Council, GARFO has improved the process for cross-checking and resolving differences between VTR and dealer data. Staff use advanced programming to match VTR and dealer data for each trip and identify records that do not match. They then investigate each unmatched record to determine the cause of the discrepancy and make the correction to the appropriate data set. This investigation process includes interviews with dealers, vessel operators, and owners to obtain supporting documentation for the correction and to ensure industry concurs with the data corrections. Given that discrepancies between VTR and dealer data are investigated and resolved, NMFS does not consider as necessary the proposed measure for observers to collect a volumetric estimate of total catch to help identify or resolve discrepancies between VTR and dealer data.

Framework 4 discusses the concern that catch is not being accurately reported, but cautions whether the proposed measure would be more accurate than methods currently used by vessel operators or dealers to estimate catch. The volumetric conversions proposed in Framework 4 are based on herring harvested in other parts of the world. Using a volumetric conversion assumes consistency in the size, weight, and density of the catch, but there can be substantial variability in the catch composition of the herring fishery, depending on the area and season. The proposed 5 percent deduction from total weight to account for water in the tanks is based on best known practices among the industry, but the Council did not rigorously evaluate the amount of the deduction. For these reasons, Framework 4 explains that converting a volume of total fish to pounds based on a herring-based conversion could produce less accurate catch estimates than current vessel or dealer estimates. Because of the potential variability and uncertainties associated with volumetric estimates and volumetric conversions, catch estimates derived under this proposed measure would not be used to replace any current estimates of herring catch. Therefore, the impact of this proposed measure on the herring resource is likely to be negligible.

Framework 4 suggests that portside samplers, in addition to observers, could provide independent catch verification in the herring fishery. Currently, the portside sampling program that samples the herring fishery is a voluntary program administered by the states of Massachusetts and Maine. It is not possible to implement a mandatory Federal data collection through a voluntary state sampling program. It may be possible to collect catch data in a future Federal portside sampling program, such as the portside sampling alternative for the midwater trawl fleet being considered in the Council's Industry-Funded Monitoring Omnibus Amendment, provided that the data collected would improve monitoring in the herring fishery.

During the development of Framework 4, NMFS expressed concern regarding the utility of the proposed measure and the reliability of a volumetric estimate of total catch. When the Council adopted Framework 4 at its April 2014 meeting, NMFS commented that it was unclear how GARFO would use the volumetric estimate of total catch and whether a volumetric estimate collected by an observer would be any more accurate than either the vessel or dealer reported data. Framework 4 describes that the proposed measure is intended to enhance catch monitoring, but it does not describe the specifics of how the volumetric catch estimate will be used to cross-check vessel and dealer data. In recent years, discrepancies between VTR and dealer reports have averaged approximately 1 percent; therefore, using the volumetric estimate to resolve those discrepancies does not seem necessary. Additionally, because of assumptions inherent in the calculation to convert volume to weight, Framework 4 cautions that the proposed measure could result in the catch estimate less accurate than either the vessel or dealer data.

In summary, NMFS seeks public comment on whether and how the proposed measure has practical utility that outweighs its additional compliance and administrative costs. Specifically, NMFS seeks comment on whether and how the benefit of the information provided from this measure compares to the additional burden on vessel owner/operators to certify their fish holds and make available a measuring stick for observers, consistent with the requirements of MSA National Standards 5 and 7 and the Paperwork Reduction Act (PRA). NMFS seeks comment on the quality of the information produced and whether and how it is relevant to and sufficient for the purposes of monitoring the fishery, facilitating inseason management, or judging the performance of the management regime, consistent with the requirements of MSA National Standard 2. NMFS also seeks comment on whether and how this measure allows the fishery to operate at the lowest possible administrative and enforcement costs relative to any additional monitoring benefit provided by this measure, consistent with the requirements of MSA National Standard 5. Lastly, NMFS seeks comment on the accuracy of the burden estimate, ways to enhance the quality or utility of the information collected, and ways to minimize the burden of the information collection. After evaluating public comment, NMFS will determine if the proposed volumetric catch estimate requirement can be approved or if it must be disapproved.

Framework 4 would require fish holds of vessels with Category A or B limited access herring permits to be empty of fish before leaving the dock on any trip declared into the herring fishery. A waiver may be issued by an authorized law enforcement officer when fish have been reported as caught and cannot be sold due to the condition of fish.

The Council proposed this measure to enhance catch monitoring and discourage wasteful fishing practices in the herring fishery. The practice of discarding unmarketable fish on a subsequent trip is not known to be prevalent in the herring fishery, but some stakeholders are concerned that fish not purchased by a dealer, and discarded on a subsequent trip, may not be reported on the VTR. The Council intended this measure to discourage the discarding of unreported fish, provide a mechanism to document when harvested fish become unmarketable, and prevent vessel operators from mixing fish from multiple trips in the hold, potentially biasing catch data.

Initially, this measure consisted of only the requirement that vessel fish holds be empty of fish at the beginning of a herring trip. But recognizing that there may be unforeseen events that make it difficult to sell fish (e.g., refrigeration failure, poor condition, lack of market), the Council proposed the waiver provision to mitigate the potential costs associated with disposing of unmarketable catch on land. The Council intended the waiver to provide a mechanism to verify that fish had been reported and document the nature and extent to which vessels are departing on trips with fish in their holds. Additionally, some vessels in the herring fishery land their catch in multiple ports, and the Council intended that the waiver provision would allow that practice to continue.

NMFS is concerned with the lack of justification for this measure and how the compliance and enforcement costs associated with this measure seem to outweigh the benefits. NMFS would still need to significantly develop this measure prior to implementation, including developing a protocol for checking if fish holds are empty of fish, developing guidance for when/how waivers would be issued, specifying what a vessel must do if it cannot obtain a waiver, and developing a process to use/track waivers. At the April 2014 Council meeting, NMFS commented that it was unclear how this requirement would improve catch data and urged the Council to ensure that Framework 4 provided clear rationale for this measure.

While prohibiting the disposal of unmarketable catch at sea, unless a waiver is issued, may discourage wasteful fishing practices, there is insufficient support in the record to determine whether this practice is frequently occurring in the herring fishery. The costs associated with a herring trip, such as fuel, crew wages, and insurance, are substantial, so it is unlikely that vessel owners/operators are harvesting fish with the intention to discard rather than sell the fish. Additionally, Framework 4 acknowledges that disposing of unmarketable catch at sea on a subsequent fishing trip is not known to occur regularly in the herring fishery.

Framework 4 explains that it is unclear whether unmarketable catch discarded at sea on a subsequent trip is reported. Part of the justification for the waiver provision is to provide a way to verify that fish have been reported and document the extent to which vessels are departing on trips with fish in their holds. However, the Council's proposed waiver provides no way of verifying the amount of fish reported relative to the amount of fish left in the hold. Therefore, NMFS does not consider this measure to contain a viable mechanism to verify whether harvested fish that are left in the hold were reported by the vessel.

Because the proposed measure lacks a mechanism to verify or correct the amount of fish reported on the VTR, the proposed measure is unlikely to improve catch monitoring in the herring fishery. In contrast, the compliance and enforcement costs associated with the proposed measure may be high. For example, vessel operators needing to dispose of fish at sea may lose time and money waiting for an authorized law enforcement officer to travel to their vessel, inspect it, and issue a waiver. Additionally, it would likely be time consuming for authorized officers to issue waivers and would divert resources from other law enforcement duties.

This proposed measure is also intended to enhance catch monitoring in the herring fishery by preventing vessel operators from mixing fish from multiple trips in the hold and biasing catch data. NEFOP observers sample the catch while it is on the deck, before it is placed in the fish hold, so there is no chance that observers would be sampling fish from multiple trips that were mixed in the hold. The herring fishery is also sampled portside by the Massachusetts' Department of Marine Fisheries (MA DMF) and Maine's Department of Marine Resources. Mixing of catch from multiple fishing trips, although unlikely, may have the potential to bias landings data used to inform herring stock assessments, state management spawning closures, and the river herring avoidance program operated by the University of Massachusetts' School of Marine Fisheries and MA DMF.

The Atlantic States Marine Fisheries Commission is also considering a requirement that vessel fish holds be empty of fish before vessels depart on a herring fishing trip in Amendment 3 to its Interstate FMP for Atlantic Herring. Establishing a similar provision in this action may promote coordination between Federal and state management of the herring fishery, but for the reasons described above, it is unlikely to improve catch monitoring in the herring fishery.

In summary, NMFS seeks public comment on whether and how the proposed measure has practical utility that outweighs its additional compliance and enforcement costs. Specifically, NMFS seeks comment on whether and how requiring empty fish holds improves catch monitoring and how any benefit of catch monitoring provided by requiring empty fish holds compares to the additional burden on vessel owner/operators to obtain a waiver from an authorized officer, consistent with the requirements of MSA National Standard 7 and the PRA. NMFS also seeks comment on whether and how the measure minimizes costs, avoids unnecessary duplication, and provides fishermen with the greatest possible freedom of action in conducting business or imposes an unnecessary enforcement burden relative to the requirements of MSA National Standard 7. Further, NMFS seeks comment on the proposed measure's efficient use of fishery resources, specifically whether and how this measure allows the fishery to operate at the lowest possible enforcement costs relative to the requirements of MSA National Standard 5. Lastly, NMFS seeks comment on the accuracy of the burden estimate, ways to enhance the quality or utility of the information collected, and ways to minimize the burden of the information collection. After evaluating public comment, NMFS will determine if the proposed empty fish hold requirement can be approved or if it must be disapproved.

Framework 4 proposes clarifications to slippage measures implemented in Amendment 5 (79 FR 8786, February 13, 2014). Currently, slippage requirements exist for vessels with limited access herring permits and midwater trawl vessels fishing in Groundfish Closed Areas.

Slippage is currently defined at 50 CFR 648.2 as catch that is discarded prior to it being brought aboard a vessel issued a herring permit and/or prior to making it available for sampling and inspection by a NMFS-approved observer. Slippage includes releasing catch from a codend or seine prior to the completion of pumping the catch aboard and the release of catch from a codend or seine while the codend or seine is in the water. Fish that cannot be pumped and remain in the codend or seine at the end of pumping operations are characterized as operational discards, not slippage. Discards that occur after the catch is brought on board and sorted are also not considered slippage.

Measures at § 648.11(m)(4) prohibit slippage aboard any vessel issued a limited access herring permit and carrying a NMFS-approved observer, except when safety or mechanical failure necessitate slipping catch or when excess catch of spiny dogfish prevents fish from being pumped aboard the vessel. Vessel may also make test tows without pumping catch on board for sampling, provided the gear is re-set without releasing its contents and all catch from test tows would be available to the observer to sample when the next tow is brought on board. If catch is slipped for any the reasons described previously, the vessel operator must complete and sign a Released Catch Affidavit detailing where, when, and why catch was slipped and the estimated weight of each species either retained or slipped on that tow. A completed affidavit must be submitted to NMFS within 48 hr of the end of the trip.

When midwater trawl vessels are fishing in the Groundfish Closed Areas, measures at § 648.202(b) require those vessels to carry an observer and prohibit slippage, except when slippage is due to safety, mechanical failure, or excess catch of spiny dogfish, and operational discards. Operational discards are the relatively small amounts of fish that remain in the codend or seine after catch is pumped aboard the vessel. The Groundfish Closed Areas include Closed Area I, Closed Area II, Nantucket Lightship Closed Area, Cashes Ledge Closure Area, and the Western Gulf of Maine Closure Area. Midwater trawl vessels fishing in the Groundfish Closed Areas may make test tows, but if catch is slipped or operationally discarded, the vessel must immediately exit the Groundfish Closed Areas for the remainder of that trip and complete a Released Catch Affidavit within 48 hr of the end of the trip.

When sampling catch at-sea, observers document all catch not brought on board and categorize the catch based on disposition code. Those codes are later evaluated to determine if they were discard, slippage, or operational discard events. Consistent with the recommendations of the Herring Plan Development Team, the Council believes that clarifying the treatment of catch not brought on board should enhance the effectiveness and enforceability of existing and proposed management measures to address slippage.

Framework 4 proposes to maintain the existing requirements that prohibit operational discards aboard midwater trawl vessels fishing in the Groundfish Closed Areas but allow operational discards to occur on board herring vessels fishing outside the Groundfish Closed Areas. Current observer protocols include documenting operational discards and existing regulations require vessel operators to assist the observer with this process. Because it can be time and labor intensive to bring these small amounts of fish on board the vessel, the compliance costs associated with prohibiting operational discards outside the Groundfish Closed Areas would likely outweigh any benefits to the catch monitoring program and the herring resource. Especially considering that hauls containing operational discards are considered to be “observed” hauls as the amount and composition of operational discards can be estimated by observers. For these reasons, the Council decided to maintain the existing requirements that prohibit operational discards aboard midwater trawl vessels fishing in the Groundfish Closed Areas but allow operational discards to occur on herring vessels fishing outside the Groundfish Closed Areas.

Framework 4 proposes clarifying slippage, such that a slippage event due to safety, mechanical failure, or excess catch of spiny dogfish would be categorized as an “allowable” slippage event and slippage for any other reason would be categorized as a “non-allowable” slippage event. These proposed categorizations are intended to help clarify the type of slippage event and would then be used to determine whether a vessel would be subject to any slippage consequences proposed in Framework 4.

Framework 4 proposes that catch not brought on board due to gear damage would be categorized as mechanical failure and, therefore, as an allowable slippage event. Although a gear failure that results in the release of catch from a codend is often beyond the control of the captain and crew, instances of catch released due to gear damage are similar to instances of catch released due to mechanical failure. Therefore, the Council believes that catch released due to gear damage should be categorized as mechanical failure and an allowable slippage event. As an allowable slippage event, catch not brought on board due to gear damage would be subject to existing slippage requirements and a slippage consequence proposed in Framework 4.

Framework 4 proposes that catch that falls out of or off of gear and is not brought on board would not be categorized as a slippage event. In general, only small amounts of catch fall out or off of gear during fishing and/or when catch is being brought aboard the vessel, unlike the potential for catch loss due to mechanical failure. Therefore, the Council believes that fish that fall out of the gear should be categorized as discarded catch, but not slippage. For these reasons, instances of catch falling out or off of gear during fishing and/or when catch is being brought aboard the vessel would not be subject to existing slippage requirements or any proposed slippage consequences in Framework 4.

Building on the slippage restrictions established in Amendment 5, Framework 4 proposes requiring vessels to move away from the slippage location following an allowable slippage event before resuming fishing. Specifically, vessels with Category A or B herring permits slipping catch, due to safety, mechanical failure, or excess catch of spiny dogfish, would be required to move at least 15 nautical miles (27.78 km) away from the slippage event location. The vessel would be allowed to move 15 nautical miles (27.78 km) away in any direction, but it would be prohibited from resuming fishing until it was at least 15 nautical miles (27.78 km) from the location of the allowable slippage event. Additionally, the vessel would be required to remain at least 15 nautical miles (27.78 km) from the slippage event location for the duration of that fishing trip.

Framework 4 also proposes a trip termination consequence for non-allowable slippage events. Specifically, vessels with Category A or B herring permits slipping catch, for any reason other than safety, mechanical failure, or excess catch of spiny dogfish, would be required to immediately stop fishing and return to port. After having returned to port and terminated the fishing trip, vessels would be allowed to initiate another fishing trip, consistent with the existing pre-trip notification requirements (e.g., contact NEFOP to request an observer, VMS trip/gear declaration) for limited access vessels participating in the herring fishery.

Vessels with Category A or B limited access herring permits fishing with midwater trawl gear in the Groundfish Closed Areas would also be subject to these proposed slippage consequences. Midwater trawl vessels are currently required to exit the Groundfish Closed Areas following an allowable slippage event and remain outside the Groundfish Closed Areas for the duration of that trip. Under these proposed slippage consequences, vessels with Category A or B limited access herring permits fishing with midwater trawl gear in the Groundfish Closed Area would also be required to move at least 15 nautical miles (27.78 km) away from the slippage location following an allowable slippage event. Therefore, following an allowable slippage event, a midwater trawl vessel would need to exit the Groundfish Closed Areas and remain outside of the Groundfish Closed Areas for the remainder of the fishing trip. If the vessel has been issued a Category A or B limited access herring permit, the vessel would also be required to move at least 15 nautical miles (27.78 km) away from the slippage event and remain at least 15 nautical miles (27.78 km) away from the slippage event for the remainder of the fishing trip. Additionally, vessels with Category A or B limited access herring permits fishing with midwater trawl gear in the Groundfish Closed Areas would be required to terminate the fishing trip and return to port following a non-allowable slippage event.

The Council believes that additional consequences for both allowable and non-allowable slippage events will enhance the catch monitoring program established through Amendment 5 by further discouraging slippage in the herring fishery. The herring fishery is a relatively high-volume fishery capable of catching large quantities of fish in a single tow. Therefore, even a few slippage events have the potential to substantially affect species composition data, especially extrapolations of incidental catch. The Council recommended the requirement that vessels move at least 15 nautical miles (27.78 km) following an allowable slippage event for two reasons. First, the 15-nautical mile (27.78-km) move requirement would apply uniformly to all vessels that slipped catch, unlike other considered alternatives (e.g., leaving a management area, leaving a statistical area) where the magnitude of the move would have depended upon the location of the allowable slippage event. Second, the Council believes the 15-nautical mile (27.78-km) move requirement would likely provide sufficient incentive (i.e., costing time and fuel) for herring vessels to minimize slippage while still maximizing opportunities for participating in the herring fishery and fully utilizing the available yield. Additionally, the Council recommended the requirement that vessels terminate their fishing trip following a non-allowable slippage event to reiterate the importance of minimizing slippage. The Mid-Atlantic Fishery Management Council recommended these same slippage consequences for allowable and non-allowable slippage events in the mackerel fishery as part of Framework 9 to the Atlantic Mackerel, Squid, and Butterfish FMP. Many vessels participate in both the herring and mackerel fisheries, and implementing consistent slippage consequences across these fisheries is expected to improve compliance and enforcement of these measures.

Slippage is a significant concern for many stakeholders because they believe it undermines the ability to collect unbiased estimates of herring catch, as well as other species, in the herring fishery. Stakeholders expressed support for proposed measures to address slippage in Framework 4, suggesting that implementing these measures would further ensure that there is accountability for all catch in the herring fishery. Framework 4 explains that when the benefits of slipping catch outweigh the costs of slipping catch, vessel operators are likely to slip catch. Additionally, Framework 4 describes the impact of the slippage consequence measures as low positive for the herring resource and low negative for the herring industry. Minimizing slippage events and better documentation of slipped catch may improve estimates of bycatch in the fishery. To the extent that the amount and species composition of slipped catch can be sampled and/or estimated, catch monitoring will be enhanced. To the extent that slippage events can continue to be reduced, bycatch can be further minimized.

Framework 4 proposes requiring vessels with limited access herring permits to report slippage events, including the reason for the slippage event, via the herring daily VMS catch report. This report, in combination with observer data, would help enhance the enforceability of existing slippage requirements, such as completing a released catch affidavit, as well as the slippage consequences proposed in Framework 4.

This proposed rule also contains minor clarifications and corrections to existing regulations. NMFS proposes these adjustments under the authority of section 305(d) to the MSA, which provides that the Secretary of Commerce may promulgate regulations necessary to ensure that framework adjustments to FMPs are carried out in accordance with the FMP and the MSA. These adjustments, which are identified and described below, are necessary to clarify current regulations and would not change the intent of any regulations.

NMFS proposes to add a transiting provision for herring management areas with seasonal sub-ACLs. This provision would allow vessels to transit herring management areas during periods when zero percent of the sub-ACL for those areas was available for harvest with herring harvested from other herring management areas aboard, provided gear was stowed and not available for use. This provision was overlooked during rulemaking for Framework Adjustment 2 to the Herring FMP and is consistent with the intent of that action. NMFS proposes to remove regulations at § 648.80(d)(7) describing requirements for midwater trawl vessels fishing in Groundfish Closed Area I because they are redundant with regulations at § 648.202(b) describing requirements for midwater trawl vessels fishing in any of the Groundfish Closed Areas. NMFS proposes adding the definition of operational discards at § 648.2 and clarifying that operational discards are not permitted aboard midwater trawl vessels fishing in Groundfish Closed Areas, unless those fish have first been made available to an observer for sampling. NMFS proposes revising references to individual years in regulations for carryover at § 648.201 to more correctly describe the timing of carryover. Lastly, NMFS proposes to correct coordinates for Herring Management Area 2 at § 648.200(f)(2) to more accurately define the area.

Except for the proposed measures requiring volumetric estimates of catch and empty fish holds at the beginning of a trip and pursuant to section 304(b)(1)(A) of the MSA, the NMFS Assistant Administrator has preliminarily determined that this proposed rule is consistent with the Atlantic Herring FMP; other provisions of the MSA; and other applicable law, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

The Council prepared an IRFA, as required by section 603 of the Regulatory Flexibility Act (RFA). The IRFA describes the economic impact this proposed rule, if adopted, would have on small entities. A summary of the analysis follows. A copy of this analysis is available from the Council or NMFS (see ADDRESSES) or via the Internet at www.greateratlantic.fisheries.noaa.gov.

This action proposes measures intended to further enhance catch monitoring and address discarding in the herring fishery. The preamble to this rule includes a complete description of the reasons why this action is being considered; therefore, those reasons are not repeated here.

This action proposes measures intended to further enhance catch monitoring and address discarding in the herring fishery. The preamble to this proposed rule includes a complete description of the objectives of and legal basis for this action; therefore, that description is not repeated here.

This action proposes measures to regulate the activity of vessels with limited access herring permits and vessels with Category A or B limited access herring permits. Therefore, the regulated entity is the business that owns at least one limited access herring permit.

In 2013, the most recent full year of fishery permit data, 93 fishing vessels were issued a limited access herring permit. Vessels and/or permits may be owned by entities affiliated by stock ownership, common management, identity of interest, contractual relationships, or economic dependency. For the purposes of this analysis, ownership entities are defined by those entities with common ownership personnel as listed on permit application documentation. Only permits with identical ownership personnel are categorized as an affiliated entity. For example, if five permits have the same seven personnel listed as co-owners on their application paperwork, those seven personnel form one ownership entity, covering those five permits. If one or several of the seven owners also own additional vessels, with sub-sets of the original seven personnel or with new co-owners, those ownership arrangements are deemed to be separate entities for the purpose of this analysis.

Based on this ownership criterion, NMFS dealer data for recent years (2010-2013), and the size standards for finfish and shellfish firms, there are 68 regulated fishing firms with a limited access herring permit. Of those 68 firms, there are 61 small entities and 7 large entities. Not all of these permitted firms are active: Only 32 small entities and 5 large entities were actively fishing for herring during the last 3 years. Additionally, there are 32 regulated fishing firms that hold Category A or B herring permits. Of those 32 firms, there are 27 small entities and 5 large entities. Not all of these permitted firms are active: Only 19 small entities and 5 large entities were actively fishing for herring during the last 3 years.

This action proposes collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the PRA. This requirement will be submitted to OMB for approval under Control Numbers 0648-0202 and 0648-0674.

This action proposes that limited access vessels report slippage events via the daily VMS herring catch report. All limited access herring vessels are currently required to submit daily VMS catch reports, therefore, reporting slippage via VMS is not expected to cause any additional time or cost burden above that which was previously approved under OMB Control Number 0648-0202.

This action proposes that vessels with limited access herring permits that store herring catch in fish holds would be required to certify the capacity of their fish holds and mark their holds at regular intervals to facilitate collection of volumetric catch estimates. The fish hold capacity measurement would need to be certified by one of the following entities: (1) A Certified Marine Surveyor with a fishing specialty by the National Association of Marine Surveyors (NAMS); (2) an Accredited Marine Surveyor with a fishing specialty by the Society of Accredited Marine Surveyors (SAMS); (3) employees or agents of a classification society approved by the U.S. Coast Guard pursuant to 46 U.S.C. 3316(c); (4) the Maine State Sealer of Weights and Measures; (5) a professionally-licensed and/or registered Marine Engineer; or (6) a Naval Architect with a professional engineer license. Additionally, vessels would be required to obtain and carry on board a NMFS-approved measuring stick that would be available to observers to place into the fish hold(s) to measure the amount of fish. Each hold volume measurement done by a certified marine surveyor is estimated to cost $300-$400. The cost of the NMFS-approved measuring stick is unknown at this time, but expected to be minimal. Ninety-three vessels were issued a limited access herring permit in 2013. Therefore, an estimated 93 vessels would be required to submit a fish hold volume measurement at the time of permit issuance in 2016 and obtain and carry on board a NMFS-approved measuring stick.

This action also proposes that vessels with Category A or B limited access herring permits would be required to have empty holds prior to departing on a herring trip. A waiver may be issued by an authorized law enforcement officer when fish have been reported as caught and cannot be sold due to the condition of fish. Forty-three vessels were issued a Category A or B limited access herring permit in 2013. Therefore, an estimated 43 vessels would be required to obtain a waiver from an authorized officer prior to leaving the dock on a herring trip with fish in the hold. The burden to the vessel operator/owner associated with obtaining a waiver would be any loss of time and/or money waiting for an authorized officer to travel to their vessel, inspect it, and issue a waiver.

Public comment is sought regarding: Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to the Regional Administrator (see ADDRESSES), and email to [email protected], or fax to (202) 395-5806.

Notwithstanding any other provisions of the law, no person is required to, nor shall any person 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. All currently approved NOAA collections of information may be viewed at: http://www.cio.noaa.gov/services_programs/prasubs.html.

This action does not duplicate, overlap, or conflict with any other Federal law.

This action considered alternatives to the proposed action, but, according to the analysis in Framework 4, the non-selected alternatives would not have met the stated goal of the action, minimized any significant economic impact on small entities compared to the proposed action, or been consistent with applicable law.

To help minimize slippage, Framework 4 considered slippage consequence measures that would have required vessels to leave either a herring management or statistical area following an allowed slippage event and remain out of that area for the remainder of the trip. The economic cost of complying with these requirements and their effectiveness at deterring slippage would have arbitrarily depended upon the location of the slippage event and the magnitude of the required move. Therefore, the impact of the non-selected alternatives would not have applied uniformly to all vessels that slipped catch, unlike the impact of complying with the proposed action requiring vessels to move 15 nautical miles (27.78 km), and the non-selected alternatives may not minimize bycatch to the extent practicable. Framework 4 also considered only requiring trip termination following non-allowable slippage events, rather than the proposed action of requiring both a 15-nautical mile (27.78-km) move following allowable slippage events and trip termination following non-allowable slippage events. The proposed action was selected rather than just a trip termination requirement because the proposed action likely provides a greater incentive to not slip catch, thereby helping to minimize bycatch to the extent practicable.

To help identify errors with catch information in the herring fishery, Framework 4 considered requiring dealers to have vessel representatives corroborate dealer landings data and requiring VTRs and dealers reports to be submitted daily rather than weekly. The analysis in Framework 4 indicated that both these non-selected alternatives would have only had a negligible impact on improving the quality of catch information in the herring fishery. Additionally, the reporting burden associated with these non-selected alternatives would have likely been greater than the reporting burden associated with the proposed action requiring vessel fish holds to be empty of fish at the beginning of a herring trip.

Lastly, to improve the quality of herring catch information, Framework 4 considered requiring dealers to estimate herring landings based on standardized weight conversions for specific volumes of herring (e.g., box, storage tote, or truck). The economic cost of complying with these non-selected alternatives would have likely been similar to the costs associated with the proposed action requiring volumetric catch estimates to be collected aboard limited access herring vessels. However, the Framework 4 analysis suggests that the benefit of these non-selected alternatives would likely have been variable, depending on the accuracy of the weight conversions, and may have been more uncertain than any benefit resulting from the proposed action.

For the reasons set out in the preamble, 50 CFR part 648 is proposed to be amended as follows:

This action would amend the Pacific Coast groundfish fishery regulations to eliminate redundancies and inconsistencies relative to the use of midwater trawl gear in the Shorebased Individual Fishing Quota Program (Shorebased IFQ Program). The action is consistent with policy decisions that the Pacific Fishery Management Council (Council) made during the implementation of Amendment 20 to the Pacific Coast Groundfish Fishery Management Plan (groundfish FMP).

In 2011, a trawl catch share program was implemented under Amendment 20 to the groundfish FMP. The trawl catch share program included the Shorebased IFQ Program, where individual permit holders receive quota pounds (QP) that they can fish for, lease, or sell. Permit holders also receive QP to cover catch of Pacific Halibut.

In anticipation of the trawl catch share program, the groundfish regulations were restructured on October 1, 2010 (75 FR 60868). When the Shorebased IFQ Program was implemented, the midwater Pacific whiting shorebased fishery and the bottom trawl fishery were merged to create a single Shorebased IFQ fishery. Many of the pre-IFQ fishery management measures relating to time and area management were retained in the regulations for use in the Shorebased IFQ Program. However, integrating pre-IFQ regulations with new regulations for the Shorebased IFQ Program resulted in inconsistencies and numerous unclear and confusing management restrictions relative to the use of midwater trawl gear.

Groundfish fishery management includes the use of time and area restrictions. Time and area restrictions affecting the use of midwater trawl gear include: Trawl Rockfish Conservation Areas, Pacific whiting primary seasons, Ocean Salmon Conservation Zones (OSCZs), Bycatch Reduction Areas (BRAs), and Klamath and Columbia River salmon conservation zones. In addition, there are midwater trawl trip limit restrictions for operating shoreward of the 100 fathom (fm) contour in the Eureka area, and a prohibition on night fishing south of 42° north latitude.

Vessel monitoring systems (VMSs) that automatically transmit hourly position reports to NMFS Office of Law Enforcement (OLE) are the primary management tool used to monitor vessel compliance with time and area restrictions. All vessels in the Shorebased IFQ Program are required to have an operational VMS. In addition, each vessel operator is required to submit a declaration report to OLE that allows the vessel's position to be linked to the type of fishing gear being used. In some cases, the declaration also identifies the particular species the vessel is fishing for and the target strategy. For the Shorebased IFQ Program, vessels using midwater trawl may declare either “limited entry midwater trawl, non-whiting shorebased IFQ” or “limited entry midwater trawl, Pacific whiting shorebased IFQ.”

Midwater trawl gear has primarily been used to target Pacific whiting, but can also be used to target other groundfish species. Prior to 2002, when widow rockfish was declared overfished, midwater trawl was used to target widow rockfish, yellowtail rockfish, and, to a lesser extent, chilipepper rockfish. During the rebuilding period for widow rockfish, the access to co-occurring species was constrained by the low widow rockfish Annual Catch Limits (ACLs). Since widow rockfish was declared rebuilt in 2012, there has been increased interest in targeting non-whiting groundfish with midwater trawl gear, particularly in the management area north of 40°10′ north latitude. Since 2011, midwater trawl gear has been used to target Pacific whiting and non-whiting north of 40°10′ north latitude by vessels in the Shorebased IFQ Program. South of 40°10′ north latitude midwater trawling has been allowed year round seaward of the trawl RCAs for all target species.

Groundfish management includes restrictions on the retention of certain non-groundfish species, including prohibited and protected species. Prohibited species include all salmonids, Pacific halibut, and Dungeness crab off Oregon and Washington. Protected species include marine mammals, seabirds, sea turtles, and species such as green sturgeon and eulachon, which are listed under the Endangered Species Act (ESA). Generally, prohibited species must be returned to the sea as soon as practicable with a minimum of injury. An exception to the retention restrictions may be made for tagged fish, or when retention is authorized by other applicable law. Pacific halibut may be retained until landing by vessels in the Pacific whiting fishery that do not sort the catch at sea only pursuant to NMFS donation regulations. Amendment 10 to the groundfish FMP and Amendment 12 to the Pacific Coast Salmon FMP (salmon FMP) were revised to allow salmon bycatch to be retained until landing in cases where the Council determines it is beneficial to the management of the groundfish and salmon resources. Under a Council and NMFS approved program, salmon must remain a prohibited species; and, at a minimum, the requirements must allow for accurate monitoring of the retained salmon and must not provide incentives for fishers to increase salmon bycatch or allow salmon to reach commercial markets.

From 2007 through 2010, prior to the Shorebased IFQ Program, the Pacific whiting shorebased fishery was composed of vessels landing 10,000 pounds or more of Pacific whiting on a trip and was managed under exempted fishing permits (EFPs). The terms and conditions of the EFPs established “maximized retention” provisions where only species longer than 6 feet and minor amounts of operational discards were allowed to be discarded. The EFPs allowed vessels to land catch containing prohibited and protected species. The EFPs issued to first receivers specified handling and disposition measures for prohibited species. In 2011, with implementation of the Shorebased IFQ Program, a maximized retention provision was added to the groundfish regulations. However, the provision did not address the retention of prohibited species other than Pacific halibut, nor did it establish handling and disposition requirements for prohibited species. For consistency with the salmon FMP and Pacific halibut regulations, provisions for the retention and disposition of prohibited species would be added by this rule.

Protected species are species protected under the ESA, the Marine Mammal Protection Act, the Migratory Bird Treaty Act, and Executive Order 13186. A December 2012, section 7 biological opinion for the groundfish fishery included reasonable and prudent measures that require the collection of important biological data on specific protected species. The West Coast Groundfish Observer Program (WCGOP) has sampling protocols for sampling discards at-sea that includes the collection of biological data on marine mammals, seabirds, turtles, eulachon, and green sturgeon. However, protected species in maximized retention landings are not sampled by observers. Therefore, regulatory revisions are necessary to assure that valuable biological data are gathered.

As noted above, the following changes are intended to revise the regulations consistent with previous actions taken by the Council to implement Amendment 20. This action is needed to eliminate inconsistencies and confusion in the current regulations.

The proposed regulations would revise the definition of Pacific whiting trip consistent with Appendix E of the groundfish FMP, which details the Final Preferred Alternative adopted under Amendment 20, and which is consistent with the Environmental Impact Statement analysis conducted in support Amendment 20. Appendix E defines non-whiting landings as those with less than 50 percent Pacific whiting by weight. Therefore, this proposed rule would define landings with 50 percent or more Pacific whiting by weight as Pacific whiting shorebased IFQ trips.

The current regulations do not have a minimum threshold for the amount of Pacific whiting that must be harvested on a Pacific whiting shorebased IFQ trip. Without a minimum threshold, vessels fishing north of 40°10′ north latitude have been making Pacific whiting shorebased IFQ declarations while targeting both Pacific whiting and non-whiting groundfish. The groundfish regulations include mitigation measures to reduce the take of Chinook salmon that are specific to the targeting of Pacific whiting and that are in some cases contrary to fishing practices for non-whiting species (e.g., a prohibition on night fishing when historically widow rockfish aggregations were targeted at night with midwater trawl gear). Clearly defining the criteria for a Pacific whiting IFQ trip and identifying which time area restrictions apply to all midwater trawl and which time area restrictions apply to the targeting of Pacific whiting will result in regulations that are clear and therefore will benefit both management and the public. The proposed change was discussed by the Council at its November 2014 meeting, and the Council concurred with defining trips with more than 50 percent whiting as Pacific whiting trips.

General definitions at 50 CFR 660.11 would be revised to add a definition for protected species. Adding the definition allows the term to be clearly used relative to the handling and disposition requirements established in the regulations. General prohibitions at 50 CFR 660.12 would be revised to prohibit the retention of protected species except as allowed for vessels on maximized retention trips. In 50 CFR 660.12 and 660.55, pre-IFQ terminology would be revised consistent with the terms established under the IFQ program.

Regulations pertaining to automatic actions in the specification and management measures provision at 50 CFR 660.60 would be updated by this action. Paragraph (c)(3)(i) of § 660.60 would be revised for readability and to clarify how BRAs may be implemented. Pre-IFQ terminology for the Pacific whiting fishery sectors would be revised consistent with the terms established under the IFQ program; an inactive Internet link would be replaced with an active link; an automatic action currently specified in regulation at 50 CFR 660.150(h)(2) would be added to the list of allowed automatic actions; and language would be added to clarify where the effective date for automatic actions is specified. These actions are being taken for consistency between the different subparts of groundfish regulations.

Regulations at 50 CFR 660.60 would be revised to add an allowance for prohibited species retention until landing on maximized retention trips in the Pacific whiting Shorebased IFQ Program. Appendix E of the groundfish FMP indicates that maximized retention is an option for Pacific whiting shorebased IFQ vessels and that Pacific halibut may be retained until landing. The Council originally considered maximized retention for the Shorebased IFQ Program at its June 2008 meeting as elements of the tracking, monitoring, and enforcement structure for ongoing management. In 2008, a maximized retention program had been recommended by the Council for implementation in Amendment 10 to the groundfish FMP prior to the start of an IFQ program. The implementing regulations for Amendment 10 included maximized retention requirements and video monitoring for vessels targeting Pacific whiting in the Pacific whiting shorebased fishery. Because Amendment 20 required full observer coverage and did not provide for video monitoring, the Amendment 10 regulations were never implemented. In late 2010, during the final stages of implementation of the Shorebased IFQ Program, the public requested and NMFS agreed to provide the maximized retention opportunity that had existed prior to the Shorebased IFQ Program. Previously, maximized retention was not addressed in the regulations, but was defined in the Maximized Retention and Monitoring Program EFPs issued to the Pacific whiting shorebased fishery. This proposed rule would revise the groundfish regulations to include a maximized retention opportunity along with appropriate disposition requirements.

This proposed rule would revise the language explaining the purpose and scope of subpart D at 50 CFR 660.100 for clarity. The regulations at 50 CFR 660.111 contain the trawl definitions. The proposed rule would revise the definitions for Catcher/Processor Coop Program, Mothership Coop Program, Pacific whiting IFQ fishery, Pacific whiting IFQ trip, and Shorebased IFQ Program for clarity. The term Pacific whiting IFQ trip would specify that a qualifying trip must be 50 percent or more Pacific whiting by weight. New definitions for maximized retention and Pacific whiting fishery are being added for clarity.

The trawl fishery prohibitions at 50 CFR 660.112 would be revised to clearly prohibit first receivers from disposing of prohibited and protected species without sorting them from maximized retention landings and to clearly state that all midwater trawl is prohibited outside the Pacific whiting primary season north of 40°10′ north latitude. Redundant regulatory text at 50 CFR 660.112(b)(2)(ii) would be removed. Duplicate language pertaining to the weighing of catch, which is also stated in regulations at 50 CFR 660.130(d), would be removed and only sorting provisions would be retained.

Numerous minor changes would be made throughout the regulations at 50 CFR 660.130 to align the regulations with the terms defined at 50 CFR 660.11 and 660.111 and to revise pre-IFQ terminology to be consistent with the terms established under trawl rationalization. Currently, regulations at 50 CFR 660.130(c)(3) pertain to the use of midwater trawl gear both north and south of 40°10′ north latitude. This rule would add language to clearly state that midwater trawl gear is required for vessels targeting Pacific whiting during the primary seasons north of 40°10′ north latitude, and that midwater trawl gear is allowed for vessel targeting non-whiting species during the Pacific whiting Shorebased IFQ Program primary season. The action would remove a restriction that allows midwater trawl to only be used by vessels participating in the Pacific whiting Shorebased IFQ fishery that is stated at 50 CFR 660.130(c)(3) and repeated at 50 CFR 660.130(c)(4)(i)(F). These changes would allow vessels using midwater trawl gear north of 40°10′ north latitude to declare either “limited entry midwater trawl, non-whiting shorebased IFQ” or “limited entry midwater trawl, Pacific whiting shorebased IFQ” consistent with the target strategy.

North of 40°10′ north latitude vessels are allowed to carry multiple types of midwater gear, but may only declare one target strategy (whiting or non-whiting) on a trip. The regulations at 50 CFR 660.130(c)(4) would be revised for clarity. Because all midwater trawl gears have similar closed area restrictions, carrying multiple types of midwater trawl gear is not expected to affect enforcement of the closed areas. The fishery restriction at 50 CFR 660.130(c)(4)(i)(F) that only allows midwater trawl gear to be used in the Pacific whiting fishery would be removed.

The proposed rule would remove redundant regulatory text at 50 CFR 660.130(d)(i). Duplicate language pertaining to the sorting of catch, which is the same requirement stated in regulations at 50 CFR 660.112(b)(2)(ii), would be removed. Because the paragraph addresses the weighing of catch, language specific to weighing would be retained. Regulations pertaining to catch weighing requirements for Pacific whiting IFQ trips at 50 CFR 660.140(j)(2) would be consolidated and revised for clarity.

The regulations at 50 CFR 660.130(e)(4)(i) would be revised to clearly state that vessels using midwater trawl gear, regardless of the target species, are exempt from the trawl RCA restrictions in the area north of 40°10′ north latitude during the dates of the Pacific whiting primary season. This allowance already exists under the current regulations, but is confusing because the regulations may be interpreted as requiring that vessels must declare “limited entry midwater trawl, Pacific whiting shorebased IFQ” regardless of the target species. Adding clarity to the regulations and allowing either midwater trawl declaration is expected to reduce confusion for members of industry.

Regulatory language at 50 CFR 660.131(a) and (b) would be revised to remove pre-IFQ terminology for the Pacific whiting sectors, consistent with the terms established under trawl rationalization. The regulations specific to the BRAs would be moved. Trip limit restrictions for midwater trawl seaward of the 100 fm depth contour in the Eureka area are currently found at 50 CFR 660.131(d). For consistency with the other sections of the regulations, the requirement to use the 100 fm line shown on NOAA charts would be replaced with a requirement to use the 100 fm depth contour defined in groundfish regulations at 50 CFR 660.73.

Regulations pertaining to the disposition of prohibited species would be added to the Shorebased IFQ Program regulations at 50 CFR 660.140(g). For vessels on Pacific whiting IFQ trips engaged in maximized retention, clearly stating handling and disposition requirements for prohibited species and protected species would allow for accurate monitoring; would reduce incentives for increased bycatch by clearly stating that protected and prohibited species must not reach commercial markets; and would identify a preference for catch to be handled in a manner that preserves the quality for human consumption for donation to a local food share or other appropriate charitable organizations. The disposition of salmon would be consistent with salmon FMP. The disposition of Pacific halibut and Dungeness crab would be consistent with Pacific halibut regulations and state regulations.

Regulatory language at 50 CFR 660.140(b) is revised for clarity and duplicate language is removed. Retention requirements specified at 50 CFR 660.140(g) are revised such that the maximized retention requirements are clearly stated. New provisions are added at 50 CFR 660.140(g) relative to the disposition of prohibited species and protected species in maximized retention landings. First receivers that accept maximized retention landings would be responsible for following the handling and disposition protocols and for maintaining records of the disposition. Under EFPs, the vessels abandoned prohibited species to the state of landing, and each state had agreements with the first receivers and coordinated the donation or disposal of the prohibited species. The states no longer have resources to coordinate such activity. Under the IFQ program, first receivers are licensed to process IFQ catch. It is therefore reasonable for each first receiver who accepts maximized retention landings to be responsible for the disposition of the prohibited and protected species.

NMFS has made a preliminary determination that the proposed action is consistent with groundfish FMP, the MSA, and other applicable law. In making its final determination, NMFS will take into account the complete record, including the data, views, and comments received during the comment period. The EA is available for public comment (See ADDRESSES) and is available on line at www.westcoast.fisheries.noaa.gov/publications/nepa/groundfish/groundfish_nepa_documents.html.

An environmental assessment (EA) was prepared for this action. The EA includes socio-economic information that was used to prepare the RIR and IRFA. The EA is available on the Council's Web site at www.pcouncil.org/. This action also announces a public comment period on the EA.

The Office of Management and Budget has determined that this proposed rule is not significant for purposes of Executive Order 12866.

An initial regulatory flexibility analysis (IRFA) was prepared, as required by section 603 of the Regulatory Flexibility Act (RFA). The IRFA describes the economic impact this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained at the beginning of this section in the preamble and in the SUMMARY section of the preamble. A copy of the IRFA is available from NMFS (see ADDRESSES). Under the RFA, the term “small entities” includes small businesses, small organizations, and small governmental jurisdictions. The Small Business Administration (SBA) has established size criteria for all major industry sectors in the United States, including fish harvesting and fish processing businesses. A business involved in fish harvesting is a small business if it is independently owned and operated and not dominant in its field of operation (including its affiliates) and if it has combined annual receipts not in excess of $20.5 million (previously $19 million) for all its affiliated operations worldwide. For marinas and charter/party boats, a small business is one with annual receipts not in excess of $7.5 million (previously $7 million). For purposes of rulemaking, NMFS is also applying the $20.5 million standard to catcher/processors because they are involved in the commercial harvest of finfish. A seafood processor is a small business if it is independently owned and operated, not dominant in its field of operation, and employs 500 or fewer persons on a full time, part time, temporary, or other basis, at all its affiliated operations worldwide. A wholesale business servicing the fishing industry is a small business if it employs 100 or fewer persons on a full time, part time, temporary, or other basis, at all its affiliated operations worldwide. A small organization is any nonprofit enterprise that is independently owned and operated and is not dominant in its field. A small governmental jurisdiction is a government of cities, counties, towns, townships, villages, school districts, or special districts with populations of less than 50,000.

NMFS is issuing this proposed rule to modify midwater trawl restrictions for vessels participating in the Shorebased IFQ Program under the authority of the groundfish FMP and the Magnuson-Stevens Act. The proposed rule would amend the regulations to remove redundancies and inconsistencies relative to the use of midwater trawl gear, and would add provisions to fully implement “maximized retention” allowances for vessels targeting Pacific whiting. Maximized retention encourages full retention of all catch while recognizing that minor discard events may occur. Two alternatives, each with sub-options, are being considered.

• North of 40°10′ north latitude midwater trawl gear may be used by vessels with a “Limited entry midwater trawl, Pacific whiting shorebased IFQ” declaration after the start of the primary season. Vessels may use midwater trawl gear to target Pacific whiting and non-whiting if the vessel also fishes in the Pacific whiting fishery.

• There is no requirement to target or land Pacific whiting on a Pacific whiting IFQ trip.

• Vessels with a “Limited entry midwater trawl, Pacific whiting shorebased IFQ” declaration may fish within the RCAs after the start of the primary season.

• Other than Pacific Halibut, prohibited species and protected species retention until landing is prohibited.

• Vessels North of 40°10′ north latitude may carry multiple types of midwater gear and both whiting and non-whiting target strategies are allowed on the same trip, however the vessel must have a valid “Limited entry midwater trawl, Pacific whiting shorebased IFQ” declaration.

• Midwater trawl gear will be allowed for all target species with a valid declaration for either “limited entry midwater trawl, non-whiting shorebased IFQ” or “limited entry midwater trawl, Pacific whiting shorebased IFQ.” Non-whiting vessels would not be obligated to also target Pacific whiting.

• A Pacific whiting IFQ trip must be 50 percent or more whiting by weight at landing.

• Midwater trawl gear will be allowed within the trawl RCAs and EFH conservation areas for all target species.

• For vessels targeting Pacific whiting on “maximized retention” trips, prohibited and protected species must be retained until landing.

• The disposition of salmon would be specified such that it is consistent with salmon FMP.

• The disposition of Pacific halibut and Dungeness crab would be specified so they are consistent with Pacific halibut regulations and state regulations.

• The disposition of protected species would be consistent with the current biological opinions.

• North of 40°10′ north latitude, vessels will be allowed to carry multiple types of midwater gear, but:

Sub-option A (preferred): Allow only one target strategy (whiting or non-whiting) on a trip.

Sub-option B: Allow both whiting and non-whiting target strategies on the same trip. However, “maximized retention” would not be allowed if the landed catch was greater than 50 percent non-whiting species.

Under No Action, it is unclear whether vessels using midwater trawl north of 40°10′ north latitude must submit a declaration for “limited entry midwater trawl, Pacific whiting shorebased IFQ” even if they intend to target non-whiting species. Alternative 2 results in a low positive impact over No Action as it removes the prohibition that restricts midwater trawl to the Pacific whiting fishery north of 40°10′ north latitude and allows for the use of either midwater trawl declaration. Alternative 2 would improve tracking of activity relative to time/area restrictions and the specific target strategy. Aligning the declaration with the activity could allow for a more surgical management response that can be clearly understood by harvesters.

Under No Action, Pacific whiting trips would not be defined. Alternative 2 establishes criteria for a Pacific whiting trip as being landings that are 50 percent or more Pacific whiting by weight at landing. Alternative 2 is not expected to have a measureable effect on the vast majority of midwater trawl trips targeting Pacific whiting. Only a small number of vessels may have reduced flexibility under Alternative 2 sub-option A (one target strategy per trip) because a vessel operator cannot change the target fishing strategy after they leave port. However, sub-option A is most similar to how harvesters currently operate. Either sub-option provides clarity and eliminates inconsistencies, making the regulations less complicated for harvesters and easier to enforce. Revising the groundfish regulations for clarity under Alternative 2 is expected to provide more equitable opportunity for non-whiting vessels north of 40°10' north latitude as it is clear they do not need to also fish for Pacific whiting.

Time/Area restrictions under No Action include Rockfish Conservation Areas (RCAs), Klamath River conservation zone, Columbia River conservation zone, Ocean Salmon Conservation Zones (OSCZs), Bycatch Reduction Areas (BRAs), the Eureka area 100 fm restriction, prohibition on night fishing south of 42°00′ north latitude and the Pacific whiting primary seasons. These restrictions were initially implemented to reduce incidental catch of Chinook salmon in the Pacific whiting fisheries. The Klamath River conservation zone, Columbia River conservation zone, OSCZs, and the prohibition on night fishing are specific to the targeting of Pacific whiting and would remain linked to the targeting of whiting under both No Action and Alternative 2. The impacts of No Action on the closed areas are neutral as no changes would be made to reduce the confusion by fishermen or enforcement about prohibited or allowed activities. Because widow rockfish were historically targeted at night with low bycatch, Alternative 2 revisions would clearly state that the prohibition on night fishing does not apply to non-whiting targeting. BRAs have evolved since their initial implementation in 2007 when they applied specifically to the targeting of whiting. Since 2013, the BRAs have been considered as a tool for use in the Pacific whiting sectors (all midwater trawl). Alternative 2 revisions would clearly state that the BRAs and RCA exemptions apply to all midwater trawl. Providing clarification on how time/area restrictions relate to specific target fishing activity under Alternative 2 is expected to reduce regulatory complexity and eliminate contradictory regulations. Changes under Alternative 2 are expected to be beneficial to the harvesters, managers, and enforcement.

Maximized retention is allowed under No Action. However, supporting regulations would not be added to reduce confusion regarding the landing of maximized retention catch for non-whiting target strategies. Provisions would not be added to allow the retention of prohibited species under No Action. The socio-economic impacts of managing under No Action are neutral, providing restrictions on the retention of prohibited species continue to be unenforced. Alternative 2 would revise the regulations to clearly state that maximized retention would only be allowed for trips targeting Pacific whiting, consistent with the provisions of Amendment 20. Because of relatively low bycatch by vessels targeting Pacific whiting, maximized retention allows sorting to be delayed until landing. Because whiting flesh deteriorates rapidly once the fish are caught, whiting must be minimally handled and immediately chilled to maintain the flesh quality. Allowing Pacific whiting shoreside vessels to retain unsorted catch benefits harvesters by enabling whiting quality to be maintained. Under Alternative 2, provisions would be added to allow Pacific whiting vessels to retain otherwise prohibited species until landing. Non-whiting vessels would have to continue to sort prohibited and protected species at sea. Some non-whiting landings under maximized retention have had a greater variety in bycatch than is typically seen in Pacific whiting landings and have been landed at first receivers with only one catch monitor. Long offloads associated with sorting and weighing non-whiting maximized retention catch has resulted in offload time exceeding the catch monitor's allowed work hours in a 24 hour period. Alternative 2 would also provide clarification on the disposition of protected species for maximized retention landings. Revisions to the maximized retention requirements under Alternative 2 are expected to reduce regulatory complexity and eliminate contradictory regulations, benefiting harvesters.

Under No Action, Pacific whiting trips would continue to be undefined and no protocols for handling or disposing of prohibited or protected species would be defined. The impacts of No Action are neutral, as first receivers would use current methods to identify maximized retention deliveries and determine how to handle and dispose of prohibited and protected species. Defining Pacific whiting trips under Alternative 2 should make it easier for first receivers/processors to identify which trips are classified as “maximized retention” such that it would be more clear which groundfish regulations apply. Alternative 2 specifies handling and disposition of prohibited and protected species. Clear protocols for the disposition of prohibited catch should reduce complexity and confusion for first receivers/processors. Currently, provisions that affect the disposition of prohibited or protected species exist in various federal regulations, non-groundfish FMPs, and ESA biological opinions. Clarifying these provisions in the groundfish regulations would reduce complexity in the requirements for disposition and handling of maximized retention catch and result in a low positive benefit to first receivers/processors. First receivers are currently taking salmon and grinding and processing the fish into fish meal and/or providing edible fish to food pantries, soup kitchens, or other non-profit organizations. In some states, state agencies have assisted in the transfer of fish to food banks, but this assistance is being withdrawn. However, NMFS concludes that these new regulations do not impose any significant burden on first receivers as they are consistent with current first receiver practices and with prior practices established under the 2007-2010 whiting EFPs.

This action would clarify the regulatory requirements for vessels using midwater trawl gear in the Pacific Coast Groundfish Fishery Shorebased Individual Fishery Quota Program. This action is needed to eliminate inconsistencies and confusion in the current regulations. For vessels targeting Pacific whiting, the action would clarify that the retention of prohibited and protected species is allowed until landing. The disposition of prohibited and protected species would be specified consistent with the Pacific Coast Groundfish Fishery Management Plan, the Pacific Coast Salmon Fishery Management Plan and other applicable law. As this rule is about clarifying the regulations, we do not believe that this rule will have a significant impact when comparing small versus large businesses in terms of disproportionality and profitability given available information. Nonetheless, NMFS has prepared this IRFA. Through the rulemaking process associated with this action, we are requesting comments on this conclusion.

This proposed rule contains a collection-of-information requirement subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been submitted to OMB for approval as revisions to OMB collection 0648-0619. Relative to OMB collection 0648-0619 the public reporting burden for first receivers to retain records showing the disposition of prohibited and protected species is estimated to average 1 minute per response.

Public comment is sought regarding: Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to (enter office name) at the ADDRESSES above, and by email to [email protected] 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 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.

Pursuant to Executive Order 13175, this proposed rule eliminated redundancies and inconsistencies with state law relative to the use of midwater trawl gear and does not have a direct effect on tribes. The action is consistent with policy decisions that the Council made during the implementation of Amendment 20 to the Pacific Coast Groundfish Fishery Management Plan which was developed after meaningful consultation and collaboration with tribal officials from the area covered by the groundfish FMP. Under the Magnuson-Stevens Act at 16 U.S.C. 1852(b)(5), one of the voting members of the Pacific Council must be a representative of an Indian tribe with federally recognized fishing rights from the area of the Council's jurisdiction. The proposed regulations do not have a direct effect on the tribes.

For the reasons set out in the preamble, 50 CFR part 660 is proposed to be amended as follows: