Federal Register Vol. 80, No.246,

DOE intends to incorporate by reference the following industry standard into part 429 and appendix A to subpart F of part 431: ANSI/AHRI Standard 340/360-2007, (“AHRI 340/360-2007”), “2007 Standard for Performance Rating of Commercial and Industrial Unitary Air-Conditioning and Heat Pump Equipment,” with Addenda 1 and 2, approved by ANSI on October 27, 2011. This industry standard provides guidance regarding a variety of different elements related to the testing of commercial and industrial unitary air-conditioning and heat pump equipment, including definitions, classifications, as well as testing, rating, data, and operating requirements. ANSI/AHRI Standard 340/360-2007 is readily available from the Air-Conditioning, Heating, and Refrigeration Institute, 2111 Wilson Blvd., Suite 500, Arlington, VA 22201, (703) 524-8800, or go to: http://www.ahrinet.org.

DOE intends to incorporate by reference the following industry standard into appendix A to subpart F of part 431: ANSI/ASHRAE Standard 37-2009, (“ANSI/ASHRAE 37”), “Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment,” approved by ASHRAE on June 20, 2009. This testing standard details test methods for the equipment addressed by this rulemaking. Copies of this testing standard are readily available from the American Society of Heating, Refrigerating, and Air-Conditioning Engineers, 1791 Tullie Circle NE., Atlanta, GA 30329, (800) 527-4723, or through its Web site at https://www.ashrae.org.

These standards are described further in section IV.M.

Title III of the Energy Policy and Conservation Act of 1975 (42 U.S.C. 6291, et seq.; “EPCA” or, “the Act”) sets forth a variety of provisions designed to improve energy efficiency. (All references to EPCA in this document refer to the statute as amended through the Energy Efficiency Improvement Act of 2015, Public Law 114-11 (April 30, 2015).) Part C of Title III, which for editorial reasons was redesignated as Part A-1 upon incorporation into the U.S. Code (42 U.S.C. 6311-6317, as codified), establishes the Energy Conservation Program for Certain Commercial and Industrial Equipment. Among the equipment covered under this statutory framework are small, large, and very large air-cooled commercial package air conditioning and heating equipment—which are referred to in this notice as commercial unitary air conditioners (CUACs) and commercial unitary heat pumps (CUHPs). These equipment are the subject of this document. (42 U.S.C. 6311(1)(B)-(D))

Under EPCA, the energy conservation program consists essentially of four parts: (1) testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. The testing requirements consist of test procedures that manufacturers of covered equipment must use as the basis for (1) certifying to DOE that their equipment complies with the applicable energy conservation standards adopted under EPCA, and (2) making representations about the efficiency of that equipment. Similarly, DOE must use these test procedures to determine whether the equipment complies with any relevant standards promulgated under EPCA.

DOE's test procedure for CUACs and CUHPs is codified at Title 10 of the Code of Federal Regulations (CFR), § 431.96. The current regulations require that manufacturers use ANSI/AHRI 340/360-2007, “2007 Standard for Performance Rating of Commercial and Industrial Unitary Air-Conditioning and Heat Pump Equipment” (ANSI/AHRI 340/360-2007), when measuring the efficiency of a given CUAC or CUHP and certifying that equipment as compliant with the applicable standard.1 77 FR 28928, 28990 (May 16, 2012) (final rule specifying applicable energy conservation standards and test procedures for various commercial and industrial equipment, including CUACs and CUHPs).

On February 1, 2013, DOE published a request for information and notice of document availability regarding the potential amendment of the energy conservation standards for CUACs and CUHPs. 78 FR 7296. DOE solicited information from the public to help determine whether national standards more stringent than the current ones would result in a significant amount of additional energy savings and whether those national standards would be technologically feasible and economically justified. DOE also sought information from the public on the merits of adopting the integrated energy efficiency ratio (IEER) as the energy efficiency descriptor for small, large, and very large air-cooled commercial air conditioners and heat pumps, and which includes provisions to measure equipment performance under partial-load operating conditions. Currently, manufacturers must measure the energy efficiency of their equipment using the energy efficiency ratio (EER), which measures the full-load efficiency of a given unit. The procedure to follow when measuring and calculating that value, like the proposed IEER metric, is found in ANSI/ASHRAE 340/360-2007. See ANSI/ASHRAE 340/360-2007, sec. 6. Comments received on the topic of IEER are discussed in a related notice of proposed rulemaking (NOPR) published September 30, 2014, which sought to amend the CUAC and CUHP energy conservation standards. 79 FR 58948.

Subsequently, on April 1, 2015, DOE issued a notice of intent to establish the Commercial Package Air Conditioners and Heat Pumps and Commercial Warm Air Furnaces Working Group to negotiate potential amendments to the energy conservation standards for this equipment. 80 FR 17363. This Working Group was established under the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) in accordance with the Federal Advisory Committee Act and the Negotiated Rulemaking Act. See 5 U.S.C. Appendix—Federal Advisory Committee Act and 5 U.S.C. 561-570a. The Working Group, which consisted of 17 members, including one member from ASRAC and one DOE representative, met six times (five times in person and once by teleconference). The meetings were held on April 28, May 11-12, May 20-21, June 1-2, June 9-10, and June 15, 2015. The Working Group successfully reached consensus on energy conservation standards for CUACs, CUHPs, and commercial warm air furnaces, which the Working Group provided as recommendations as part of a Term Sheet for submission to ASRAC. The group also chose to provide test procedure and metric-related recommendations to the ASRAC. ASRAC voted unanimously to approve the Working Group's recommendations on June 17, 2015. Participants in the Working Group consisted of the following entities aside from DOE:

DOE initiated a rulemaking to amend the test procedure and associated certification requirements for CUACs and CUHPs to implement certain of the Working Group's recommendations regarding the metric and test procedure. On August 6, 2015, DOE published a NOPR (August 2015 NOPR), 80 FR 46870, in which DOE proposed to clarify aspects of the CUAC and CUHP test procedure. These clarifications include, among other things, limiting the incorporation by reference of ANSI/AHRI 340/360-2007 to certain sections and addenda, specifying requirements for indoor airflow adjustment and reporting, clarifying requirements for condenser head pressure controls, clarifying the unit of measurement for airflow, establishing a tolerance on percent load for IEER part-load tests, and defining the term IEER. In this final rule, DOE responds to comments received from stakeholders in response to the NOPR.

EPCA sets forth the general criteria and procedures DOE must follow when prescribing or amending test procedures for covered equipment. See generally 42 U.S.C. 6314. EPCA provides in relevant part that any test procedures prescribed or amended under this section must be reasonably designed to produce test results that measure the energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use, and must not be unduly burdensome to conduct. (42 U.S.C. 6314(a)(2)) In addition, if DOE determines that a test procedure amendment is warranted, it must publish proposed test procedures and offer an opportunity for the public to present oral and written comments. (42 U.S.C. 6314(b))

EPCA also requires DOE to evaluate its test procedures at least once every 7 years for each class of covered equipment (including CUACs and CUHPs) to determine if an amended test procedure would more accurately or fully comply with the requirement to be reasonably designed to produce test results that reflect the energy efficiency, energy use, and operating costs during a representative average use cycle. DOE must either prescribe amended test procedures or publish a notice in the Federal Register regarding its determination not to amend test procedures. (42 U.S.C. 6314(a)(1)-(2))

DOE considers the activity associated with this rulemaking sufficient to satisfy this review requirement.

This final rule clarifies aspects of DOE's test procedure for CUACs and CUHPs to improve the consistency and accuracy of the results generated when using that procedure. The rule clarifies how to test for compliance with the current energy conservation standards along with those standards that DOE anticipates adopting consistent with the Working Group's Term Sheet. The rule also amends certain certification, compliance, and enforcement provisions. DOE has determined that this final rule will not change the measured energy efficiency of CUACs and CUHPs when compared to the current test procedure.

This final rule amends the test procedure for CUACs and CUHPs in appendix A to subpart F of part 431 and adds new equipment-specific certification and enforcement provisions in 10 CFR 429.43 and 429.134. With respect to the latter of these changes, a new § 429.134(g) would be added to the pre-existing provisions already contained in § 429.134(a)-(f). The rule also amends certain definitions found in 10 CFR 431.92 and updates certain materials incorporated by reference in 10 CFR 431.95.

In response to the August 2015 NOPR, six interested parties submitted written comments: Air-Conditioning, Heating and Refrigeration Institute (AHRI); United Technologies Corporation (Carrier), Ingersoll Rand, the California Investor-Owned Utilities (Cal. IOUs), Goodman Manufacturing Company (Goodman), and Lennox International Inc. (Lennox). Interested parties commented on a range of issues, including those DOE identified in the August 2015 NOPR, as well as several other pertinent issues related to DOE's proposal. Commenters also offered thoughts on further opportunities to improve the clarity of the test procedure. These issues, as well as DOE's responses to them and the resulting changes to DOE's proposal, are discussed in the subsequent sections.

In response to the August 2015 NOPR, DOE received input on a variety of test procedure issues, including: (1) sections of ANSI/AHRI 340/360-2007 incorporated by reference; (2) indoor airflow adjustment and reporting; (3) condenser head pressure controls; (4) the unit of measurement for airflow; (5) the tolerance on percent load for IEER part-load tests; (6) the definition of IEER; and (7) additional provisions in the current test procedure. DOE's treatment of these issues is addressed below.

As noted previously, DOE intends to incorporate by reference ANSI/AHRI Standard 340/360-2007, (“AHRI 340/360-2007”), “2007 Standard for Performance Rating of Commercial and Industrial Unitary Air-Conditioning and Heat Pump Equipment,” which was approved by ANSI on October 27, 2011, and updated by addendum 1 in December 2010 and addendum 2 in June 2011. This industry standard provides guidance regarding a variety of different elements related to the testing of commercial and industrial unitary air-conditioning and heat pump equipment, including definitions, classifications, as well as testing, rating, data, and operating requirements. (ANSI/AHRI Standard 340/360-2007 is readily available from the Air-Conditioning, Heating, and Refrigeration Institute, 2111 Wilson Blvd., Suite 500, Arlington, VA 22201, (703) 524-8800, or go to: http://www.ahrinet.org.)

In its August 2015 NOPR, DOE proposed to specify that when testing CUACs and CUHPs for the EER, coefficient of performance (COP), and IEER metrics, only certain sections of ANSI/AHRI 340/360-2007 would be required—specifically, sections 3, 4, and 6 (omitting section 6.3)—rather than applying the entirety of ANSI/AHRI 340/360-2007. DOE also proposed not to incorporate section 5 of that testing standard, and to incorporate by reference ANSI/ASHRAE 37-2009, which was previously incorporated by reference through section 5 of ANSI/AHRI 340/360-2007. 80 FR at 46873.

Responding to this aspect of DOE's proposal, AHRI, Carrier, Ingersoll Rand, Goodman, and Lennox commented that DOE should reference ANSI/AHRI Standard 340/360-2015 after its final version is released. (AHRI, No. 8 at p. 1; Carrier, No. 11 at p. 2; Ingersoll Rand, No. 9 at p. 13; Goodman, No. 14 at p. 2; Lennox, No. 13 at p. 2, 6) They commented that this revised testing standard addresses the issues that DOE raised in the NOPR and additional items identified by industry to improve the test procedure. In addition, Lennox noted that EPCA requires DOE to use those test procedures that are generally accepted by industry. (Lennox No. 13 at pp. 2, 6) See also 42 U.S.C. 6314(a)(4)(A) (indicating that the test procedures for commercial package air conditioning and heating equipment shall be those “generally accepted industry testing procedures or rating procedures” developed or recognized by AHRI or ASHRAE “as referenced in ASHRAE/IES Standard 90.1 and in effect on June 30, 1992”). Additionally, AHRI commented that sections 6.5 and 6.6 of the soon-to-be-released version of AHRI 340/360-2015, which address verification testing uncertainty and uncertainty allowances, respectively, should be referenced as well. AHRI commented that doing so will help the user of the standard more fully understand the causes of why measured capacity and efficiency may vary, which, in its view, will be helpful to laboratories performing tests to complete the uncertainty analyses required by ISO 17025.2

AHRI agreed with DOE's proposal to incorporate by reference ANSI/ASHRAE 37-2009. (AHRI, No. 8 at p. 2) AHRI noted that ANSI/AHRI 340/360-2015 has updated the reference to ANSI/ASHRAE 37-2009, and that section 5 of ANSI/AHRI 340/360-2015 addresses items related to unit setup and operating conditions that are not currently covered by ANSI/ASHRAE 37-2009.

Carrier commented that ANSI/AHRI 340/360-2015 requires that corrections be made for the impact of atmospheric pressure changes and resulting air density changes. Carrier requested that DOE adopt Appendix D of ANSI/AHRI 340/360-2015 to better account for changes in atmospheric pressure and altitude changes of test laboratories. (Carrier No. 11 at p. 3)

AHRI and Carrier commented that DOE uses a confidence level of 95 percent in the sampling requirements given in 10 CFR 429.43, whereas section 6.4 of ANSI/AHRI 340/360-2015 uses a confidence level of 90 percent. (AHRI, No. 8 at p. 2; Carrier No. 11 at p. 2) AHRI and Carrier noted that commercial equipment has as much, if not more, uncertainty and variability in testing than residential equipment, and that 90 percent is an appropriate confidence level.

After reviewing the comments from the August 2015 NOPR, DOE agrees that many of the raised issues are addressed in the draft version of ANSI/AHRI 340/360-2015. However, DOE is still investigating whether certain provisions in the draft ANSI/AHRI 340/360-2015 will change measured efficiency. Furthermore, a final version of the new standard was not available during the preparation of this final rule. For these reasons, DOE declines to adopt ANSI/AHRI 340/360-2015 in whole or in part at this time. In this final rule, DOE amends its test procedure to reference sections 3, 4, and 6 (omitting section 6.3) of ANSI/AHRI 340/360-2007. DOE may, however, consider incorporating the final version of ANSI/AHRI 340/360-2015, or additional provisions within it, in a future test procedure rulemaking, as discussed in section III.C. With respect to ANSI/ASHRAE 37-2009, DOE already incorporates by reference this testing standard in part 431.

In the NOPR, DOE did not make any proposals regarding the confidence level in its certification and enforcement provisions. Accordingly, DOE declines to adopt provisions on this issue without holding further public comment. While DOE is open to considering changes to its confidence level in the future, manufacturers or other parties with access to relevant data should provide data regarding the variability of units in production and testing to enable DOE to facilitate its efforts to make any necessary adjustments in an appropriate future rulemaking proceeding.

In the August 2015 NOPR, DOE proposed that equipment must be tested using the motor and drive assembly and settings specified in the certification report (supplemental testing instruction PDF), and that the external static pressure (ESP) during testing remain within the tolerances set forth in Section 6.1.3.2 of ANSI/AHRI 340/360-2007 with the indoor airflow rate staying within +/−5 percent of the manufacturer-rated full-load indoor airflow rate. DOE proposed that the unit and/or test facility be adjusted to set up the unit such that both the airflow and ESP are within the required tolerances. See 80 FR at 46873 (noting situations in which a test facility's equipment may need adjusting to maintain the proposed tolerances).

ANSI/AHRI 340/360-2007, section 6.1.3.2.e, specifies that the full-load cooling airflow rate (in SCFM) must be employed, irrespective of resulting ESP, for all situations other than full-load cooling in which full-load airflow is used (e.g., full-load heating). DOE proposed that the +/−5 percent tolerance for airflow rate must be applied for these other conditions as well. DOE also indicated that it interpreted this section to mean that a test facility adjustment can be made to obtain the proper airflow (i.e. to maintain airflow within the proposed tolerance), but that the unit under test itself cannot be adjusted, and that there is no ESP requirement for this part of the test. 80 FR at 46873.

In addition, DOE proposed that in cases where a unit is designed to operate with a different indoor airflow rate for cooling and heating modes, manufacturers would report the individual indoor airflow rates in cooling and heating modes. DOE also proposed that a manufacturer must include in its certification report the adjusted indoor airflow at each part-load condition. 80 FR at 46873.

Responding to the NOPR, AHRI and Carrier agreed that the tester must use the same motor and drive kit that was used to determine the certified rating, as specified in the manufacturer's certification information. (AHRI, No. 8 at p. 5; Carrier No. 11 at p. 4) AHRI, Carrier, Goodman, and Lennox agreed that a tolerance for indoor airflow is needed to ensure that it closely approximates the manufacturer's rated full-load indoor airflow rate. (AHRI, No. 8 at p. 5; Carrier No. 11 at p. 4; Goodman, No. 14 at p. 1; Lennox, No. 13 at p. 4) However, these commenters indicated that a 5 percent tolerance would result in too much variation in EER and cooling capacity. The commenters recommended that the airflow should be allowed to vary by +/−3 percent of the rated full-load indoor airflow rate to reduce test uncertainty and to ensure the variations in EER and cooling capacity are at acceptable levels. (AHRI, No. 8 at p. 5; Carrier No. 11 at p. 4; Goodman, No. 14 at p. 1; Lennox, No. 13 at p. 4)

In contrast, AHRI commented that no adjustments should be made to the airflow or the ESP during the heating test after it is set during the cooling test. (AHRI, No. 8 at p. 5). Goodman generally agreed with this view. (Goodman, No. 14 at p. 2) DOE's proposal would require adjustments to the test facility's equipment (but not the tested unit's fan settings) to maintain the full-load airflow rate when switching from the cooling test to the heating test, without regard to the resulting ESP. The method AHRI described is inconsistent with DOE's proposed method, because it would prohibit making adjustments to the ESP when switching from the cooling test to the heating test, whereas the proposal would allow the ESP to change between the cooling and heating tests as long as the full-load airflow rate is maintained. Lennox agreed with DOE's proposed approach to maintain the full-load airflow rate when switching from the cooling test to the heating test by making adjustments to the test facility's equipment—and not to the tested unit's fan settings—without regard to the resulting ESP. Lennox suggested that a +/−3 percent tolerance should apply to the full-load indoor airflow rate during the heating test. (Lennox, No. 13 at p. 5) Carrier also supported making adjustments to the test facility's equipment, but not to the unit's fan settings, to maintain proper airflow. Carrier also commented that the proposed ANSI/AHRI 340/360-2015 includes a requirement to manually adjust fan speed during the heating cycle if the unit is equipped with automatic controls that control the fan speed in heating mode. (Carrier No. 11 at pp. 4-5)

AHRI, Carrier, Goodman, and Lennox agreed with DOE that indoor airflow should be reported in both cooling and heating mode if they are different. (AHRI, No. 8 at p. 6; Carrier, No. 11 at p. 5; Goodman, No. 14 at p. 2; Lennox, No. 13 at p. 5) AHRI and Carrier are not aware of any equipment that has a different airflow for heating and cooling but believe that it could be an option in the future.

After reviewing the comments on the NOPR, DOE agrees that a 5-percent tolerance on the rated full-load indoor airflow rate would allow more variation than desired in the EER and cooling capacity. Test results provided by manufacturers regarding the range of potential variation are greater than the estimates DOE initially made, which supported the 5 percent proposal. Based on the additional information provided by manufacturers, DOE is revising its proposed tolerance level on the rated full-load indoor airflow rate from 5 percent to 3 percent. Additionally, given the generally positive feedback received in response to its proposed approach, DOE is also adopting its proposal that full-load airflow rate be maintained when switching from cooling mode to heating mode by adjusting the test facility (but not the unit under test) without regard to the resulting ESP. In addition, DOE is adopting its proposed certification and reporting requirements with minor clarifications. Specifically, a manufacturer must include in its certification report the adjusted indoor airflow at each part-load condition for both cooling and heating modes. In cases where a model is designed to operate with the same indoor airflow rate for cooling and heating modes, the reported numbers may be the same for each mode.

In the August 2015 NOPR, DOE proposed to specify that condenser head pressure controls, if included with the unit, must be active during testing. DOE proposed that if a unit with condenser head pressure controls cannot achieve steady-state operation with the controls active, and thus cannot be tested, the manufacturer would have to request a waiver. DOE also requested comment on whether there are any units on the market with condenser head pressure controls that would prevent the unit from achieving steady-state under the test conditions, and if so, how should DOE address these kinds of units for testing purposes. 80 FR at 46873-46874.

In response, AHRI, Carrier, Ingersoll Rand, Goodman, and Lennox agreed with DOE's proposal to keep the head pressure controls active in automatic mode if present. (AHRI, No. 8 at p. 6; Carrier, No. 11 at p. 5; Ingersoll Rand, No. 9 at p. 31; Goodman, No. 14 at p. 2; Lennox, No. 13 at p. 5) AHRI, Carrier, Goodman, and Lennox also commented that the current draft of ANSI/AHRI 340/360-2015 clarifies the requirements for running the head pressure control in automatic mode and also provides a new test procedure to determine the rating performance when head pressure control results in unstable operation.

After reviewing the comments, DOE is clarifying the current test procedure to specify that condenser head pressure controls, if included with the unit, must be active during testing, as proposed in the NOPR. As noted previously, AHRI 340/360-2015 is still a draft document, and DOE is not incorporating it by reference in this rule. In addition, DOE declines at this time to adopt a test method like that in AHRI 340/360-2015 regarding rating performance when head pressure control results in unstable operation. DOE will continue to review this industry testing standard and may consider adopting a method to address this issue in the future after a full public comment process.

DOE also proposed that all instances of CFM as a unit of airflow must be interpreted to mean SCFM where they appear in the sections of ANSI/AHRI 340/360-2007, incorporated by reference in 10 CFR part 431, subpart F. 80 FR at 46874.

In response, AHRI, Carrier and Ingersoll Rand agreed with this approach. (AHRI, No. 8 at p. 4; Carrier No. 11 at p. 3; Ingersoll Rand No. 9 at p. 14) Each of these commenters recommended adopting ANSI/AHRI 340/360-2015, which would provide clear instructions to ensure that airflow is measured in SCFM for testing. AHRI noted that this issue is already addressed in ANSI/AHRI 340/360-2007 through the reference to ASHRAE 37-2009, which defines the unit of airflow as standard CFM.

As noted in section III.A.1, DOE declines to reference ANSI/AHRI 340/360-2015 at this time. Further, although section 7.7.2.3 of ASHRAE 37-2009 may be interpreted as an indication that airflow rate is to be expressed in terms of standard air in all test standards that incorporate it by reference, this interpretation may not be sufficiently clear from the relevant text of the current test procedure, which refers to both CFM and SCFM in various locations. Hence, DOE is clarifying the test procedure to indicate that all instances of CFM as a unit of airflow must be interpreted to mean SCFM where they appear in the sections of ANSI/AHRI 340/360-2007 incorporated by reference in 10 CFR part 431, subpart F.

DOE proposed applying a +/−3-percent tolerance to each part-load test point in the IEER calculation, and formally requested comment on the appropriateness of establishing such a tolerance level. See 80 FR at 46878-46879 (request for comment) and 80 FR at 46874 (discussing DOE's +/−3-percent tolerance proposal). Specifically, if the measured load fraction is within 3 percent of the target load fraction, the measured EER would not have to be adjusted using interpolation or application of the degradation factor for cyclic operation.

Responding to this aspect of the proposal, AHRI, Goodman, and Lennox agreed in principle with setting a tolerance on the part-load percent load when the unit cannot run at precisely 75-percent, 50-percent, and 25-percent part-load capacities. The commenters also agreed with DOE's tolerance level of 3 percent. (AHRI, No. 8 at p. 6; Goodman, No. 14 at p. 2; Lennox, No. 13 at p. 6)

However, AHRI and Carrier commented that implementing the 3-percent tolerance without also adopting some other provisions of ANSI/AHRI 340/360-2015 would vary IEER results by as much as 5 percent, a magnitude they considered inappropriate. (AHRI, No. 8 at p. 6; Carrier No. 11 at p. 3) AHRI stated that this variation could be reduced significantly by changing the condenser air inlet temperature used for each given part-load point. Specifically, AHRI 340/360-2007 relies on condenser air inlet temperatures as a function of percent load, while AHRI 340/360-2015 specifies condenser air inlet temperatures that are fixed for each rating point percent load. (AHRI, No. 9 at p. 6) The relationship between condenser air inlet temperature and percent load is provided in section 6.2.2 of AHRI 340/360-2007. AHRI stated that adopting the proposed 3-percent tolerance for part-load tests with the current approach would result in an IEER variation of −4.6 percent to +4.8 percent. However, if the condenser air entering temperature is fixed to the target percent load, then IEER variations would be reduced to 1.5 or 1.6 percent. (AHRI, Public Meeting Transcript, No. 15 at p. 33-36) AHRI and Carrier, as well as Goodman and Lennox, proposed that DOE reference ANSI/AHRI 340/360-2015 (section 6.2) which includes the +/− 3-percent load fraction tolerance along with the other revisions to the IEER testing procedures. (AHRI, No. 8 at pp. 6-7; Carrier, No. 11 at p. 3; Goodman, No. 14 at p. 2; Lennox, No. 13 at p. 6)

After reviewing the comments on the appropriateness of establishing a 3-percent tolerance on each part-load test point, as proposed in the NOPR, DOE is adopting the 3-percent part-load test point tolerance, and is also adopting the suggestion from several commenters for setting the condenser inlet air temperature for the test, which commenters viewed as being linked to the revised 3-percent tolerance level. DOE is adopting this suggestion in response to stakeholders' comments that a 3-percent tolerance on part-load testing would not be appropriate unless the condenser air entering temperature is fixed at the temperature for the target part-load point. Adopting this suggested approach will help reduce the variability in test results for variations in percent load within 3-percent of the target part-load point. AHRI supported this approach with data demonstrating how implementing this requirement for setting the condenser air entering temperature would reduce the variability in test results. (AHRI, No. 7 at p. 18) In addition, this change has the potential to significantly reduce test burden, since the current test procedure requirement, by specifying condenser inlet air temperature as a function of the measured load fraction, can lead to multiple repetitions of the test if the measured load fraction is different than the load fraction used to calculate the air temperature used for the test. Also, the suggested approach from the commenters is more consistent with the way a unit would actually operate in the field. Specifically, when a unit cycles between operating levels to satisfy an average load represented by the target load fraction, the ambient temperature remains constant. DOE investigated potential changes in measurement associated with this test procedure change and found that it would not change the measurement unless the interpolation method is used to determine one or more of the part-load EER levels and for which one of the measurements used for the interpolation(s) has a measured percent load less than 44.4 percent. Also, for typical units that fit this description, the change in the measurement is less than one percent. With respect to IEER, DOE concludes this is a de minimis change, the extent of which would not impact a model's ability to comply with a given IEER standard or alter the measured energy efficiency of the covered equipment.

DOE has elected to implement the additional change regarding condenser air inlet temperature by noting this difference with respect to AHRI 340/360-2007 within the regulatory language in the CFR rather than incorporating by reference the 2015 version of the standard—DOE's decision not to incorporation AHRI 340/360-2015 by reference is discussed in section III.A.1.

DOE proposed to define IEER (i.e. integrated energy efficiency ratio) as meaning “a single number part-load efficiency based on weighting of EER at various load capacities, as measured in appendix A to subpart F of part 431, expressed in Btu/watt-hour.” (80 FR at 46880)

In response to this proposed definition, AHRI and Carrier agreed that the definition of IEER must be improved and clarified. (AHRI, No. 8 at p. 4; Carrier, No. 11 at pp. 3-4) However, AHRI and Carrier commented that DOE's definition does not account for the operating conditions and rating conditions required to accurately rate IEER. They commented that this is a significant aspect of the IEER metric and it should be mentioned in the definition to avoid any misrepresentation. AHRI and Carrier further commented that the DOE definition also proposes to reference the new DOE appendix A, which does not directly address the requirements for IEER and refers back to AHRI 340/360. AHRI and Carrier suggested as an alternative that DOE use the IEER definition in ANSI/AHRI 340/360-2015. (AHRI, No. 8 at p. 4; Carrier, No. 11 at pp. 3-4)

The draft version of ANSI/AHRI 340/360-2015 section 3.11 defines IEER as “a weighted calculation of mechanical cooling EERs at full-load and part-load Standard Rating Conditions, defined in Section 6.2, expressed in Btu/Wh.”

Ingersoll Rand suggested a different definition for IEER: “Integrated energy efficiency ratio, or IEER, means the cooling energy efficiency descriptor for packaged air-conditioning and heating equipment (air-cooled with a rated cooling capacity ≥65,000 Btu/h), determined as a single number part-load efficiency based on weighting of EER at various load capacities, as measured in appendix A to subpart F of part 431, expressed in Btu/watt-hour.” (Ingersoll Rand, No. 9 at p. 2) Ingersoll Rand made this suggestion to clarify that: (1) IEER is the only cooling efficiency descriptor for CUAC and CUHP and (2) IEER is specific to CUAC and CUHP and does not apply to other commercial package air-conditioning and heating equipment. (Id.)

DOE agrees that the rating conditions for IEER could be acknowledged in the definition. However, DOE declines to reference AHRI 340/360 directly, as all representations of IEER must be made based on DOE's test procedure, which contains additional provisions beyond those in the referenced industry standard. Therefore, DOE is adopting a modified definition for IEER that references rating conditions rather than load capacities, but still specifies that measurements be made in accordance with appendix A. DOE also declines to include equipment references at this time. In the future, DOE may adopt energy conservation standards based on IEER for equipment other than CUAC and CUHP. Hence, DOE declines to specify or otherwise limit what equipment uses this metric. DOE addresses Ingersoll Rand's concern regarding the efficiency descriptor in section III.D.

DOE does agree that the IEER is intended to measure cooling provided by the refrigeration system, i.e. “mechanical cooling”, and does not address other modes of cooling that the equipment might provide. As an example, CUAC and CUHP equipment may provide economizer cooling, which involves use of cool outdoor air during cool weather to cool the interior of a building without the use of refrigeration system operation.

For these reasons, DOE is adopting the following definition for IEER:

Integrated energy efficiency ratio, or IEER, means a weighted average calculation of mechanical cooling EERs determined for four load levels and corresponding rating conditions, as measured in appendix A to subpart F of part 431, expressed in Btu/watt-hour.

Current DOE regulations include provisions for refrigerant charging and airflow rate relevant to multiple equipment categories, including CUACs and CUHPs. (10 CFR 431.96(e)) DOE proposed adding these provisions to the proposed appendix A, section (5) for CUACs and CUHPs, while maintaining the original provision in 431.96(e) for the other relevant equipment categories. 80 FR at 46881. These provisions require that if a manufacturer specifies a range (rather than a specific rating value) of superheat, sub-cooling, and/or refrigerant charge pressure in its installation and operation manual, any value within that range may be used to determine refrigerant charge or mass of refrigerant.

In response to the NOPR, Goodman stated that manufacturers typically specify a broader range of superheat or subcooling for field charging than would be accepted in the laboratory (because field measurement equipment is not as accurate as laboratory measurement equipment). Goodman further added that the AHRI certification program has a policy of adjusting charge to the middle of the range, which makes the test more accurate. (Goodman, No. 14 at p. 3)

DOE notes that the refrigerant charge, superheat, and subcooling values are interrelated such that DOE does not believe Goodman's suggestion of hitting the midpoint of all of the ranges can be achieved in all cases. Consequently, DOE is not requiring that the test be performed at the midpoint of each of the ranges. Instead, DOE is clarifying that test labs should only be adjusting charge once for both the cooling and heating test and a test lab should aim for the middle of the subheat or subcool range. However, DOE emphasizes that any point in the range is still acceptable at this point in time. Should industry believe additional specificity regarding these provisions would improve repeatability or reproducibility, DOE may consider further amendments in a future rulemaking. For consistency in testing, DOE will follow the approach of attempting to achieve the midpoint of one of the values, which it considers to be a best practice.

In regards to airflow, DOE currently requires that the airflow rate used for testing must be in the installation and operations manual shipped with the basic model and clearly identified as the value used to generate DOE performance ratings; otherwise, a value of 400 SCFM per ton is used. See 10 CFR 431.96(e). Responding to DOE's proposal to include this set of requirements as part of appendix A, Goodman noted that manufacturers who certify through AHRI have the full-load cooling capacity shown in the AHRI Directory of Certified Product Performance, and that the value in that directory should be used as opposed to using 400 SCFM per ton. (Goodman, No. 14 at p. 3)

DOE notes that for commercial package air conditioning and heating equipment, manufacturers are currently required to certify rated airflow in SCFM for each fan coil. See 10 CFR 429.43(b)(4)(i)-(ii) (specifying certification report contents for commercial package air conditioning and heating equipment). As noted earlier, DOE is clarifying this requirement as described in section III.A.2. DOE expects the certified airflow values to be consistent with those in the installation manual and reported to AHRI, because the airflow used in tests (whether for certifying performance to DOE or as used by AHRI) should be the same airflow that installers would use when setting up the unit based on the installation instructions. However, in the event a manufacturer fails to report airflow to DOE, the specified value of 400 SCFM per ton prescribed by 10 CFR 431.96(e) will continue to apply.

In addition to addressing various aspects related to the testing of CUACs and CUHPs, DOE also proposed various certification and enforcement-related provisions with respect to this equipment. Additionally, DOE proposed including provisions related to the reporting of IEER values for certification and compliance purposes once the compliance dates for the standards recommended by the Working Group are reached. These issues are addressed in the following sections.

DOE proposed that the cooling capacity represented and subsequently certified to DOE for a given basic model must be the average of the capacities measured for the sample of units tested to certify that basic model, rounded according to the multiples in Table 4 in ANSI/AHRI 340/360-2007. DOE also proposed that when conducting assessment and enforcement testing, it would measure the total cooling capacity pursuant to the test requirements of 10 CFR 431.96 for each unit tested, and the results of the measurement(s) would be compared to the value of cooling capacity certified by the manufacturer. The manufacturer-certified cooling capacity will be considered valid if the cooling capacity determined through DOE testing is within 5 percent of the certified cooling capacity. (80 FR at 46874)

With respect to the certification requirements, Lennox disagreed with DOE's proposal to require that the certified cooling capacity be the average of the capacities measured for the sample of units tested. (Lennox, No. 13 at p. 3) Lennox stated that conservative capacity ratings subject equipment to more stringent efficiency standards. Lennox further commented that if forced to reclassify equipment into higher-capacity classes, manufacturers could face unduly burdensome administrative and procedural obligations without any benefit to energy efficiency. Lennox also stated that if conservatively-rated equipment is categorized into a larger equipment class, it can change the test conditions (i.e. ESP), resulting in a further change from the designed capacity and IEER level of the product. Lennox added that in the past, DOE has allowed manufacturers to conservatively rate products, such as in the final rule establishing AEDMs for commercial air-conditioning and refrigeration equipment and walk-in coolers and freezers. (Lennox, No. 13 at pp. 3-4)

Ingersoll Rand commented that, while DOE's certification regulations typically require manufacturers to report capacity, DOE does not specify that manufacturers determine capacity through testing specified by DOE, and that DOE has not found that capacity is a measure of energy consumption as defined by EPCA at 42 U.S.C. 6291(8). (Ingersoll Rand, No. 9 at p. 13) Ingersoll Rand also noted that DOE had not demonstrated why such a proposal is necessary. (Id.)

With respect to the enforcement testing provisions, AHRI, Ingersoll Rand, and Goodman commented that a tolerance of 5 percent should not be applied to capacity because there are many factors that can affect measured capacity and performance, including variance in airflow, refrigerant charge levels, ambient conditions, test labs, and test setup. (AHRI, No. 8 at p. 3; Ingersoll Rand, No. 9 at p. 14; Goodman, No. 14 at p. 3) Goodman commented that a 5-percent tolerance is too low because, due to a number of variables, the true uncertainty of the test is probably at least 8 percent. (Goodman, No. 14 at p. 3)

AHRI commented that in the event that a verification test for its certification program shows that the cooling capacity is less than 95 percent of its rated value, the manufacturer fails the test and is then subject to stiff penalties, which are, in its view, strong incentives to discourage manufacturers from over-rating cooling capacity and energy efficiency. AHRI recommended that DOE base the equipment classification on the rated capacity only. However, in the event that DOE feels compelled to move forward with its proposal, AHRI requested that the proposed requirement apply only when the tested cooling capacity is less than 95 percent of the certified value, and not when the tested cooling capacity is greater than 105 percent of the certified value. (AHRI, No. 7 at p. 3) Carrier agreed that any tolerance should be a one-sided tolerance, allowing manufacturers to choose to rate products conservatively. (Carrier, No. 11 at p.3)

Trane commented that, in common practice, a tolerance on capacity becomes an issue at 240,000 Btu/h, which is a break between equipment classes as well as a nominal equipment tonnage. However, manufacturers do not always hit this design point, which puts them on one side or the other of the equipment class dividing line. For this reason, they tend to rate conservatively to avoid risk. (Trane, NOPR public meeting transcript, No. 15 at pp. 54-55) Carrier added that the need to conservatively rate will increase with the change in refrigerants, and that the current AHRI statistics show that they exceed 105 percent on many tests. (Carrier, NOPR public meeting transcript, No. 15 at pp. 55-56)

DOE notes that the August 2015 NOPR proposed to add a provision that the represented value of cooling capacity must be the average of the capacities measured for the units in the sample selected for testing or the output of the AEDM when simulating results rounded according to the multiples in Table 4 in ANSI/AHRI 340/360-2007. DOE further proposed to add enforcement provisions for verifying the rated cooling capacity, as the rated cooling capacity determines both the equipment class and which testing conditions apply. See 80 FR at 46874 (discussing proposed clarification) and 46879 (presenting detailed regulatory text). Without reporting and enforcement provisions for cooling capacity, manufacturers may choose to over- or under-rate cooling capacity intentionally in order to achieve more favorable testing conditions or less stringent efficiency standards. DOE does not believe industry intended to suggest a regulatory approach where a manufacturer would self-declare its rating conditions and standards, as that approach could cause unintended consequences such as inequitable ratings due to differences in self-declarations. Many in industry, including commenters who participate in the AHRI Certification Program, saw the importance of including provisions surrounding cooling capacity since there is a verification tolerance reflected in that program, as AHRI noted. Consequently, in DOE's view, provisions regarding the determination of represented cooling capacity along the lines of the August 2015 proposal are needed.

While DOE acknowledges that multiple factors may affect the measurement of cooling capacity, DOE maintains that capacity-related provisions are necessary to ensure the reliability and consistency of the reported ratings because, as commenters pointed out, DOE expects there to be variation in the capacity measurement from different units being tested at different laboratories. Consequently, DOE is modifying its proposal for determining represented cooling capacity based on the comments received to allow for conservative rating declared according to the multiples in Table 4 in ANSI/AHRI 340/360-2007 but is not less than 95% of the mean values of the two or more units in the sample for certification testing or the output from the AEDM. DOE believes this is consistent with that currently used in the industry, including the certified ratings program approach developed by AHRI. In the industry program, this tolerance serves as the basis for penalizing manufacturers if the tested cooling capacity is lower than 95% of the rated cooling capacity of that equipment. This tolerance will help to ensure that equipment is capable of performing at the cooling capacity for which it is represented to consumers. At this time, DOE is declining to adopt specific capacity-related enforcement provisions and will evaluate compliance with standards based on the testing results from the enforcement sample. DOE believes it is important that products comply with the applicable standards based on actual tested performance rather than based on a manufacturer self-declaration.

In the August 2015 NOPR, DOE indicated that its proposal would be unlikely to alter the measured efficiency of CUACs and CUHPs. DOE proposed to require the reporting of IEER and indoor part-load airflow rates used in the IEER calculation when certifying compliance with the 2018 or 2023 standards. DOE also proposed to apply a +/−3-percent tolerance to each part-load test point for manufacturers to use when developing the IEER ratings for a given basic model. This clarification would be required when testing to determine EER for part-load rating points. See 80 FR at 46879-82.

DOE stated that its proposed amendments that were not specifically related to IEER would clarify how to test a given unit. The proposals, if adopted, would result in no procedural changes related to how testing would be performed. The proposed amendments, if adopted, would become effective 30 days after publication of the final rule in the Federal Register. Consistent with 42 U.S.C. 6314(d), DOE proposed that any representations of energy consumption or efficiency of CUACs and CUHPs must be based on any final amended test procedures 360 days after the publication of the test procedure final rule. 80 FR at 46874-46875.

Ingersoll Rand disagreed with DOE's assertion that the proposed clarifications and amendments would not result in any changes to the energy efficiency of current equipment. While Ingersoll Rand agreed that the proposed changes would likely not affect the measure of EER for air-cooled commercial package air conditioning equipment, the proposed changes would add the IEER metric, which, in Ingersoll Rand's view, is a significant change to the measure of energy efficiency of current equipment. Ingersoll Rand commented that the proposed amendments to the test procedures will change the measure of energy itself, and, as DOE's proposal would require re-rating units within 360 days of publication of the final rule, that this would be a “change in the representations of the energy efficiency of current equipment.” (Ingersoll Rand, No. 9 at p. 12)

Ingersoll Rand also noted that while many manufacturers, including itself, already include an IEER rating in the AHRI Directory of Certified Product Performance, that information is not based on testing units in accordance with the sampling plan contained in the proposed § 429.43, but is often based on testing a single unit. Therefore, to comply with the proposed rule, manufacturers would be required to perform a substantial amount of additional testing. Furthermore, since the testing requirements would go into effect before the compliance date of the energy conservation standards proposed by the ASRAC Commercial Package Air Conditioners and Commercial Warm Air Furnaces Working Group, those units currently offered for sale but not meeting the January 2018 standards proposed by the Working Group would still need to be tested in order for manufacturers to make IEER representations on which builders would rely for purposes of meeting the provisions contained in ASHRAE 90.1.2013. (That industry-based standard sets a minimum level of efficiency for CUAC and CUHP equipment and includes a minimum rating level based on IEER.) In its view, the proposal's impact will be far more than modest and must be addressed by DOE or accounted for in its estimates under the Paperwork Reduction Act. (Ingersoll Rand, No. 9 at pp. 10-11)

For these reasons, Ingersoll Rand recommended that the effective date of compliance with the test procedure amendments with respect to testing, representations, and reporting of IEER be made to coincide with the effective date of the amended standard setting the initial IEER standard. (Ingersoll Rand, No. 9 at p. 12)

DOE has carefully considered Ingersoll Rand's comments. DOE is adopting its proposal that reporting of IEER and indoor part-load airflow rates used in the IEER calculation will be required when certifying compliance with any amended standards and finds that this approach is consistent with Ingersoll Rand's comments. However, DOE also maintains that, consistent with 42 U.S.C. 6314(d), any representations of energy consumption or efficiency of CUACs and CUHPs must be based on any final amended test procedures 360 days after the publication of the test procedure final rule. See 80 FR at 46874-46875. Although Ingersoll Rand argued that this amendment would subject units that will not meet the recommended January 2018 standards to the testing requirements to demonstrate that the units meet the IEER levels of ASHRAE 90.1-2013 that many builders require, those units were already subject to those testing requirements. DOE recognizes that manufacturers currently do not need to certify their equipment to meet IEER. Manufacturers must, however, follow the applicable test procedure requirements when making representations of energy efficiency, including those aspects of the test procedure that apply to another metric should they decide to report the efficiency of their equipment using that metric. DOE's current test procedure for CUACs and CUHPs already includes a test method for measuring IEER. See 10 CFR 431.96(b)(2) (incorporating, through Table 2, various test procedures used for assessing compliance, including the procedures specified by AHRI 340/360-2007, which contains testing methods for measuring IEER). EPCA restricts representations of efficiency where DOE has prescribed a test method. Specifically, any representation of efficiency for a CUAC or CUHP must fairly disclose the results of testing in accordance with the DOE test procedure within 360 days of DOE having prescribed the test procedure. Therefore, all existing representations of IEER for this equipment would have already been made in accordance with DOE's regulations regarding test procedures and sampling plans, even though submission of a certification report for that metric is not required. As discussed in section III.A.5, DOE has determined that the amended requirements on part-load test points will produce only a de minimis change and not impact a model's ability to comply with an IEER standard or alter the measured and rated energy efficiency of the covered equipment. For these reasons, DOE does not anticipate that manufacturers will require additional time to comply with pre-existing requirements that they already must meet.

Furthermore, with respect to Ingersoll Rand's claim that significant additional testing will be required to meet the sampling requirements, based on manufacturer compliance certifications, most CUAC and CUHP manufacturers use alternative efficiency determination methods (“AEDMs”) to rate the majority of their equipment for EER. Ingersoll Rand states that manufacturers have been testing for IEER and have single tests of a wide variety of basic models, so manufacturers already have sufficient test data to develop and support an AEDM, even if they have not yet developed AEDMs to simulate IEER. Therefore, even if a manufacturer is not currently making representations in accordance with the DOE test procedure (as it is already required to do), DOE believes a 360-day compliance period provides sufficient time for such a manufacturer to do so, particularly if the manufacturer already has a collection of existing test data for its equipment.

Finally, DOE disagrees that the information collection approved by the Office of Management and Budget requires modification as a result of this rule. This rule does not change the test burden or record retention requirements that are reflected in the existing approval. Furthermore, although the metric reported to DOE will change from EER to IEER, there will be no increase in burden. DOE will revise its certification information collection to reflect the metric change prior to the reporting change in 2018.

The California IOUs encouraged DOE to initiate a more expansive test procedure rulemaking before January 1, 2016, as recommended by the ASRAC Working Group. (California IOUs, No. 10 at p. 1) The California IOUs commented that a new, more representative, metric is needed.

The California IOUs also suggested that DOE research the impact of fan energy on equipment ratings, specifically the external static pressure settings for equipment and whether it reflects field conditions. (California IOUs, No. 10 at p. 2) The IOUs further noted that the IEER test procedure proposed for inclusion by DOE in its regulations specified ESP ratings that are unrealistically low in the four test points, which results in measured fan energy consumption during testing conditions being lower than that found in actual operating conditions, which artificially inflates the IEER ratings. The California IOUs also encouraged DOE to create a test procedure that accounts for economizer energy consumption, as this aspect is omitted in the current proposed test procedure. See id.

The California IOUs suggested further that DOE should investigate the impact of requiring an additional higher temperature test point rating, such as 105 °F or 115 °F, to better reflect operating conditions experienced in hotter climates. (California IOUs, No. 10 at p. 2) The California IOUs noted that the current efficiency rating measures equipment at a maximum outside dry bulb air temperature of 95 °F. In their collective view, while this value is appropriate for much of the United States, it does not reflect peak values often experienced in parts of the desert southwest.

DOE notes that the Working Group recommended that a rulemaking to amend the test procedure shall be initiated no later than January 1, 2016, with the final rule issued no later than January 1, 2019. That rulemaking, based on the Working Group's recommendation, would be to focus on better representing the total fan energy use by considering (a) alternative external static pressures and (b) operation for other than mechanical cooling and heating. EERE-2013-BT-STD-0007-0093, ASRAC Working Group Term Sheet (recommending a series of actions for DOE to take with respect to CUAC and CUHP standards and testing). DOE plans to initiate an additional test procedure rulemaking focused on revising the IEER metric consistent with this recommendation. DOE may consider additional test procedure revisions at that time.

Ingersoll Rand asserted that the proposed IEER definition and the test procedure table (Table 1 to 10 CFR 431.96) are inconsistent with the terms of the ASRAC Working Group Term Sheet because they add IEER as a cooling metric but keep EER. Ingersoll Rand stated that the Working Group agreed that, subsequent to the effective date of the January 2018 energy conservation standard, IEER would be the sole DOE measure of cooling efficiency required to be reported to DOE. (Ingersoll Rand, No. 9 at pp. 1-2)

Ingersoll Rand added that it believed that DOE proposed amending 10 CFR 431.96 in order to make it easier for the user to follow, but without consideration of the Working Group recommendation to initiate a rulemaking to amend the test procedure for small, large, and very large air-cooled commercial package air conditioning and heating equipment. In its view, Table 1 to 10 CFR 431.96 could be confusing to the user if it included a distinction between the different measures of energy consumption and the two different test procedures before and after the expected effective date of the IEER standards. Ingersoll Rand commented that it would be clearer and simpler for DOE to return to the earlier format of section 431.96 and add the test procedure and energy descriptor updates in separate tables with their effective dates. It offered alternative tables for DOE to consider. (Ingersoll Rand, No. 9 at pp. 3-8)

DOE notes that that the primary purpose of the test procedure tables in 10 CFR 431.96 is to describe the test procedure relevant to each equipment category. The metrics required to be reported to DOE can be found in 10 CFR 429.43. As proposed (and amended by this rule), 10 CFR 429.43 will not require EER to be reported to DOE when certifying compliance with any IEER standards. However, consistent with DOE's incorporation of AHRI 340/360-2007, the test procedure itself will still include EER, which manufacturers are required to use when making EER-based representations when they choose to do so, independent of their representations required under DOE's compliance requirements.

Ingersoll Rand also criticized DOE's proposed reference to the “January 1, 2018 and January 1, 2023 standards” that would be added to 10 CFR 429.43(b)(2)(i)(B), as being vague, particularly in light of the changes made to the standards table in 10 CFR 431.97(b) by the July 17, 2015 final rule regarding energy conservation standards for small three-phase commercial air-cooled air conditioners. 80 FR 42614. Ingersoll Rand suggested that DOE consider the format of 10 CFR 429.43(b)(2)(i) and 10 CFR 431.97 that will result from both the test procedure and energy conservation standards rulemakings in completing this test procedure rulemaking, rather than waiting for the standards rulemaking. Ingersoll Rand suggested wording for 10 CFR 429.43(b)(2)(i) and recommended that DOE insert two new tables (as Tables 4 and 5) that would accommodate the 2018 and 2023 standards and would be reserved until DOE completes the energy conservation standards rulemakings. (Ingersoll Rand, No. 9 at pp. 9-10)

Ingersoll Rand also disagreed with the proposed language in § 429.43(b)(4) that lists certification report requirements (including the rated airflow for part-load operation which is needed for testing to measure IEER), and which refers to the “January 1, 2018 or the January 1, 2023 energy conservation standards.” Ingersoll Rand indicated that such references are vague and could lead to misinterpretations regarding DOE's regulations, recommending instead that DOE refer in these sections specifically to the appropriate standards listed in specific tables of § 431.97. (Ingersoll Rand, No. 9 at p. 12)

DOE acknowledges the potential for misinterpretation. Therefore, DOE has revised the language in § 429.43 to refer to compliance with EER standards or IEER standards rather than making a reference to future 2018 or 2023 standards that have not been finalized.

The Office of Management and Budget (OMB) has determined that test procedure rulemakings do not constitute “significant regulatory actions” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). Accordingly, this action was not subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB).

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an initial regulatory flexibility analysis (IFRA) for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the DOE rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General Counsel's Web site: http://energy.gov/gc/office-general-counsel.

DOE reviewed this final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. This final rule prescribes clarifications to DOE's already-existing test procedures that will be used to test compliance with energy conservation standards for the equipment that are the subject of this rulemaking. DOE has concluded that the final rule would not have a significant impact on a substantial number of small entities.

For manufacturers of small, large, and very large air-cooled CUAC and CUHP, the Small Business Administration (SBA) has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. The size standards are listed by North American Industry Classification System (NAICS) code and industry description and are available at http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/small-business-size-standards. Manufacturing of small, large, and very large air-cooled CUAC and CUHP is classified under NAICS 333415, “Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing.” The SBA sets a threshold of 750 employees or less for an entity to be considered as a small business for this category. DOE initially identified 13 potential manufacturers of commercial packaged air conditioners sold in the U.S. DOE then determined that 10 were large manufacturers, manufacturers that are foreign-owned and -operated, or manufacturers that do not produce equipment covered by this rulemaking. DOE was able to determine that the other three companies met the SBA's definition of a small business and sell CUAC/CUHP products.

The first small company specialized in manufacturing double-duct CUAC/CUHP products, which would not subject to the amended IEER standards recommended by the Working Group formed to negotiate the CUAC/CUHP standards.3 This manufacturer did not produce any equipment that would be covered under the recommended IEER standards. The second small company did not own any production assets for CUAC/CUHP equipment. This company outsourced the design and manufacture of equipment to a supplier. The third small company manufactured covered equipment that are subject to the amended test procedures. Based on DOE's research, this small manufacturer has three product platforms with 11 models that would potentially be subject to testing to determine IEER, and no IEER ratings have been published for these units. Based on literature reviews, this small manufacturer specializes in custom and semi-custom products.

DOE expects the impact of the final rule on manufacturers, including small businesses, to be minimal. The final rule amends DOE's certification requirements to specify additional reporting requirements and add enforcement provisions for verifying cooling capacity. The final rule also clarifies or amends DOE's test procedures to amend ANSI/AHRI 340/360-2007, “2007 Standard for Performance Rating of Commercial and Industrial Unitary Air-Conditioning and Heat Pump Equipment,” to incorporate certain sections by reference, specify requirements for airflow adjustment and tolerance to meet other rating conditions, require units with condenser head pressure controls to be tested with those controls active, clarify the unit of measurement for airflow, and establish a tolerance on part-load rating points.

The amended energy conservation standards for CUAC/CUHP recommended by the Working Group would be based on IEER rather than EER. DOE expects the impact on test burden to be modest. AHRI ratings already include IEER, indicating that many manufacturers, representing a large portion of the market, already determine IEER for their units. ANSI/ASHRAE/IES Standard 90.1-2013, “Energy Standard for Buildings Except Low-Rise Residential Buildings” (ASHRAE 90.1-2013), has adopted an IEER requirement, which makes reporting of IEER necessary for shipment to those states and localities that will adopt that standard in building codes. Current procedures relating to alternative efficiency determination methods (AEDMs), including procedures for certifying IEER, require a limited amount of testing to be conducted when validating an AEDM for CUACs and CUHPs. 10 CFR 429.70(c)(2)(iv) (detailing the minimum number of distinct basic models required to be test for purposes of AEDM validation for different equipment types and classes). DOE expects that most CUAC and CUHP ratings will be based on results obtained from AEDMs. Although DOE recognizes that some ratings will be based on testing, DOE expects these ratings to comprise a small minority of products.

For these reasons, DOE certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE will transmit the certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the SBA for review under 5 U.S.C. 605(b).

Manufacturers of CUACs and CUHPs must certify to DOE that their equipment comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their equipment according to the DOE test procedures for CUACs and CUHPs, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including CUACs and CUHPs. 10 CFR part 429, subpart B. The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (PRA).

In the Certification of Commercial Equipment Final Rule published in May 2014, DOE amended existing regulations governing compliance certification for a variety of commercial equipment covered by EPCA, which affected CUAC and CUHP manufacturers. 79 FR 25486, 25502 (May 5, 2014). DOE amends its certification requirements to specify additional reporting requirements. DOE does not believe that these additions to the certification requirements constitute a significant additional burden upon respondents, as they require minimal additional information over what manufacturers must already report in their certification reports. DOE believes that the Certification of Commercial Equipment Final Rule provides an accurate estimate of the existing burden on respondents and would continue to apply to the relevant aspects of the proposed amendments. 79 FR 25496-25498 (detailing burden estimates and indicating an average burden of approximately 30 hours per company on an annual basis). OMB has approved the revised information collection for DOE's certification and recordkeeping requirements. 80 FR 5099 (January 30, 2015).

Notwithstanding any other provision of the law, no person is required to respond 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.

In this final rule, DOE amends its test procedure for CUACs and CUHPs. DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and DOE's implementing regulations at 10 CFR part 1021. Specifically, this rule amends an existing rule without affecting the amount, quality or distribution of energy usage, and, therefore, will not result in any environmental impacts. Thus, this rulemaking is covered by Categorical Exclusion A5 under 10 CFR part 1021, subpart D, which applies to any rulemaking that interprets or amends an existing rule without changing the environmental effect of that rule. Accordingly, neither an environmental assessment nor an environmental impact statement is required.

Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE examined this final rule and determined that it will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the equipment that are the subject of this final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.

Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final rule meets the relevant standards of Executive Order 12988.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. 2 U.S.C. 1531 For a regulatory action resulting in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at http://energy.gov/gc/office-general-counsel. DOE examined this final rule according to UMRA and its statement of policy and determined that the rule contains neither an intergovernmental mandate, nor a mandate that may result in the expenditure of $100 million or more in any year, so these requirements do not apply.

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This final rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), that this regulation will not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.

Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed this final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use if the regulation is implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.

This regulatory action is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.

Under section 301 of the Department of Energy Organization Act, 42 U.S.C. 7101, DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; FEAA) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (FTC) concerning the impact of the commercial or industry standards on competition.

While this final rule does not require use of any commercial standards not already incorporated by reference for the relevant section of the code of federal regulations, DOE consulted with both DOJ and FTC and received no comments.

In this final rule, DOE is incorporating by reference ANSI/AHRI Standard 340/360-2007, “2007 Standard for Performance Rating of Commercial and Industrial Unitary Air-Conditioning and Heat Pump Equipment” (including Addenda 1 and 2) into part 429 and appendix A to subpart F of part 431. This testing standard details various provisions regarding the testing and calculation of results for the equipment addressed by this rulemaking. The adoption of these provisions are necessary to ensure consistent and repeatable test results. Copies of this testing standard are readily available from the Air-Conditioning, Heating, and Refrigeration Institute, 2111 Wilson Blvd., Suite 500, Arlington, VA 22201, (703) 524-8800, or through its Web site at http://www.ahrinet.org.

DOE is also incorporating by reference ANSI/ASHRAE Standard 37-2009, “Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment” into appendix A to subpart F of part 431. This testing standard details test methods for the equipment addressed by this rulemaking. The adoption of these provisions are necessary to ensure consistent and repeatable test results. Copies of this testing standard are readily available from the American Society of Heating, Refrigerating, and Air-Conditioning Engineers, 1791 Tullie Circle NE., Atlanta, GA 30329, (800) 527-4723, or through its Web site at https://www.ashrae.org.

As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this rule before its effective date. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804(2).

The Secretary of Energy has approved publication of this final rule.

For the reasons stated in the preamble, DOE amends parts 429 and 431 of chapter II, subchapter D, of title 10 the Code of Federal Regulations as set forth below:

The Federal Reserve Banks make primary and secondary credit available to depository institutions as a backup source of funding on a short-term basis, usually overnight. The primary and secondary credit rates are the interest rates that the twelve Federal Reserve Banks charge for extensions of credit under these programs. In accordance with the Federal Reserve Act, the primary and secondary credit rates are established by the boards of directors of the Federal Reserve Banks, subject to the review and determination of the Board.

The Board approved requests by the Reserve Banks to increase by 1/4 percentage point the primary credit rate in effect at each of the twelve Federal Reserve Banks, thereby increasing from 0.75 percent to 1.00 percent the rate that each Reserve Bank charges for extensions of primary credit. In addition, the Board had previously approved requests by the Reserve Banks to renew the formula for the secondary credit rate, the primary credit rate plus 50 basis points. Under the formula, the secondary credit rate in effect at each of the twelve Federal Reserve Banks increased by 1/4 percentage point as a result of the Board's primary credit rate action, thereby increasing from 1.25 percent to 1.50 percent the rate that each Reserve Bank charges for extensions of secondary credit. The amendments to Regulation A reflect these rate changes.

The 1/4 percentage point increase in the primary credit rate was associated with an increase in the target range for the federal funds rate (from a target range of 0 to 1/4 percent to a target range of 1/4 to 1/2 percent) announced by the Federal Open Market Committee (“Committee”) on December 16, 2015. A press release announcing these actions indicated that:

The notice, public comment, and delayed effective date requirements of 5 U.S.C. 553 is inapplicable “to the extent that there is involved . . . a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.” 1 This rulemaking involves a matter relating to loans, as the Board is revising the interest rates that the twelve Federal Reserve Banks charge for extensions of credit under the primary and secondary credit programs.

Furthermore, the Board has determined that delaying implementation of the changes in the primary and secondary credit rates in order to allow notice and public comment would be unnecessary and contrary to the public interest. Therefore, the Board has found good cause to not follow the provisions of 5 U.S.C. 553(b) relating to notice and public participation. The Board's revisions to these rates were taken with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation of the country. Notice and public participation would prevent the Board's action from being effective as promptly as necessary in the public interest. Seeking notice and comment on the rate changes would not aid the persons affected and would otherwise serve no useful purpose. For these same reasons, the Board also has found good cause not to provide 30 days prior notice of the effective date of the rule under 5 U.S.C. 553(d).

The Regulatory Flexibility Act (“RFA”) does not apply to a rulemaking where a general notice of proposed rulemaking is not required.2 As noted previously, a general notice of proposed rulemaking is not required if the final rule involves a matter relating to loans. Furthermore, the Board has determined that it is unnecessary and contrary to the public interest to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

In accordance with the Paperwork Reduction Act (“PRA”) of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the final rule under the authority delegated to the Board by the Office of Management and Budget. The final rule contains no requirements subject to the PRA.

For the reasons set forth in the preamble, the Board is amending 12 CFR Chapter II as follows:

The Home Mortgage Disclosure Act of 1975 (HMDA) (12 U.S.C. 2801-2810) requires most mortgage lenders located in metropolitan areas to collect data about their housing-related lending activity. Annually, lenders must report that data to the appropriate Federal agencies and make the data available to the public. The Bureau's Regulation C (12 CFR part 1003) implements HMDA.

Prior to 1997, HMDA exempted certain depository institutions as defined in HMDA (i.e., banks, savings associations, and credit unions) with assets totaling $10 million or less as of the preceding year-end. In 1996, HMDA was amended to expand the asset-size exemption for these depository institutions. 12 U.S.C. 2808(b). The amendment increased the dollar amount of the asset-size exemption threshold by requiring a one-time adjustment of the $10 million figure based on the percentage by which the CPI-W for 1996 exceeded the CPI-W for 1975, and it provided for annual adjustments thereafter based on the annual percentage increase in the CPI-W, rounded to the nearest multiple of $1 million dollars.

The definition of “financial institution” in Regulation C provides that the Bureau will adjust the asset threshold based on the year-to-year change in the average of the CPI-W, not seasonally adjusted, for each 12-month period ending in November, rounded to the nearest million. 12 CFR 1003.2. For 2015, the threshold was $44 million. During the 12-month period ending in November 2015, the average of the CPI-W decreased by 0.4 percent. This results in a change of zero when rounded to the nearest million. Thus, the exemption threshold will remain at $44 million. Therefore, banks, savings associations, and credit unions with assets of $44 million or less as of December 31, 2015, are exempt from collecting data in 2016. An institution's exemption from collecting data in 2016 does not affect its responsibility to report data it was required to collect in 2015.

Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required if the Bureau finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this final rule, comment 1003.2 (Financial institution)-2 in Regulation C, supplement I is amended to update the exemption threshold. The amendment in this final rule is technical and non-discretionary, and it merely applies the formula established by Regulation C for determining any adjustments to the exemption threshold. For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendment is adopted in final form.

Section 553(d) of the APA generally requires publication of a final rule not less than 30 days before its effective date, except for (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretive rules and statements of policy; or (3) as otherwise provided by the agency for good cause found and published with the rule. 5 U.S.C. 553(d). At a minimum, the Bureau believes the amendments fall under the third exception to section 553(d). The Bureau finds that there is good cause to make the amendments effective on January 1, 2016. The amendment in this final rule is technical and non-discretionary, and it applies the method previously established in the agency's regulations for determining adjustments to the threshold.

Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320), the agency reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule.

For the reasons set forth in the preamble, the Bureau amends Regulation C, 12 CFR part 1003, as set forth below:

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended TILA section 129D(a) to contain a general requirement that an escrow account be established by a creditor to pay for property taxes and insurance premiums for certain first-lien higher-priced mortgage loan transactions. TILA section 129(D) also generally permits an exemption from the higher-priced mortgage loan escrow requirement for a creditor that meets certain requirements, including any asset-size threshold the Bureau may establish.

In the 2013 Escrows Final Rule,1 the Bureau established such an asset-size threshold of $2,000,000,000, which would adjust automatically each year, based on the year-to year change in the average of the CPI-W for each 12-month period ending in November, with rounding to the nearest million dollars.2 For 2015, the threshold was $2.060 billion. The Bureau recently revised the criteria for small creditors, and rural and underserved areas, for purposes of certain special provisions and exemptions from various requirements provided to certain small creditors under the Bureau's mortgage rules. As part of this revision the Bureau made certain changes that affect how the asset-size threshold applies. The Bureau revised the rule to include in the calculation of the asset-size threshold the assets of the creditor's affiliates that regularly extended covered transactions secured by first liens during the applicable period. The Bureau also added a grace period from calendar year to calendar year to allow an otherwise eligible creditor that exceeded the asset limit in the preceding calendar year (but not in the calendar year before the preceding year) to continue to operate as a small creditor with respect to transactions with applications received before April 1 of the current calendar year.3

During the 12-month period ending in November 2015, the average of theCPI-W decreased by 0.4 percent. As a result, the exemption threshold is decreased to $2.052 billion for 2016. Thus, if the creditor's assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2015 are less than $2.052 billion on December 31, 2015, and it meets the other requirements of § 1026.35(b)(2)(iii) it will be exempt in 2016 from the escrow-accounts requirement for higher-priced mortgage loans and will also be exempt from the escrow-accounts requirement for higher-priced mortgage loans for purposes of any loan consummated in 2017 for which the application was received before April 1, 2017. The adjustment to the escrows exemption asset-size threshold will also decrease the threshold for small-creditor portfolio and balloon-payment qualified mortgages under Regulation Z. The requirements for small-creditor portfolio qualified mortgages at § 1026.43(e)(5)(i)(D) reference the asset threshold in § 1026.35(b)(2)(iii)(C). Likewise, the requirements for balloon-payment qualified mortgages at § 1026.43(f)(1)(vi) reference the asset threshold in § 1026.35(b)(2)(iii)(C). Balloon-payment qualified mortgages that satisfy all applicable criteria in §§ 1026.43(f)(1)(i) through (vi) and 1026.43(f)(2), or the conditions set forth in § 1026.43(e)(6) for covered transactions for which the application is received before April 1, 2016,4 including being made by creditors that have (together with certain affiliates) total assets below the threshold in § 1026.35(b)(2)(iii)(C), are also excepted from the prohibition on balloon payments for high-cost mortgages in § 1026.32(d)(1)(ii)(C).

Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required if the Bureau finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this final rule, comment 35(b)(2)(iii)-1 in Regulation Z is amended to update the exemption threshold. The amendment in this final rule is technical, and merely applies the formula previously established in Regulation Z for determining any adjustments to the exemption threshold. For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendment is adopted in final form.

Section 553(d) of the APA generally requires publication of a final rule not less than 30 days before its effective date, except for (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretive rules and statements of policy; or (3) as otherwise provided by the agency for good cause found and published with the rule. 5 U.S.C. 553(d). At a minimum, the Bureau believes the amendments fall under the third exception to section 553(d). The Bureau finds that there is good cause to make the amendments effective on January 1, 2016. The amendment in this rule is technical, and applies the method previously established in the agency's regulations for automatic adjustments to the threshold.

Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320), the agency reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule.

For the reasons set forth in the preamble, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below:

I. Background

The Suspended Counterparty Program requires a regulated entity to submit a report to FHFA if it becomes aware that an individual or institution with which it does business has been found within the past three years to have committed fraud or other financial misconduct involving a mortgage transaction. FHFA may issue proposed and final suspension orders based on the reports it has received from the regulated entities or based on other information. FHFA offers the affected individual or institution and the regulated entities an opportunity to respond to any proposed suspension order. FHFA may issue a final suspension order if FHFA determines that the underlying misconduct is of a type that would be likely to cause significant financial or reputational harm to a regulated entity or otherwise threaten the safe and sound operation of a regulated entity. Final suspension orders direct the regulated entities to cease or refrain from doing business with the suspended individuals or institutions for a specified period of time, which may be permanent in appropriate cases.

FHFA established the Suspended Counterparty Program in June 2012 by letter to the regulated entities. The requirements and procedures for the Suspended Counterparty Program were generally codified by the interim final rule published on October 23, 2013. 78 FR 63007. FHFA received two comment letters on the interim final rule: one from Fannie Mae; and one from eleven of the then twelve Banks 1 (the Pittsburgh Bank did not join in the comment letter). The current regulation, the comments received, and the final rule are discussed below.

Current regulation. The current regulation requires a regulated entity to submit a report to FHFA when the regulated entity becomes aware that a person or affiliate thereof with which the regulated entity is engaging or has engaged in a covered transaction within the past three years has engaged in covered misconduct. A regulated entity is aware of covered misconduct when the regulated entity has reliable information that such misconduct has occurred. 12 CFR 1227.4(a). “Covered misconduct” is defined to include convictions or administrative sanctions based on fraud or similar misconduct in connection with the mortgage business. 12 CFR 1227.2. The Federal Register notice accompanying the interim final rule states that the regulated entities are not required to conduct any independent investigation of the underlying conduct. See 78 FR at 63009.

Comments received. The Banks supported the requirement in the current regulation for reporting to FHFA when they “become aware” of covered misconduct based on “reliable information.” However, the Banks asked that FHFA provide additional guidance on the scope of their reporting obligations with respect to “reliable information.” The Banks recommended that the rule language indicate that the regulated entities are not required to conduct any independent investigation of the conduct underlying covered misconduct. The Banks also asked that the rule language indicate that the regulated entities are not required to research possible affiliate relationships, stating that it would be difficult, if not impossible, to know the full extent of the affiliates of any given entity.

The Banks asked FHFA to state that the regulated entities would not be required to conduct any docket searches for convictions or to monitor federal agency notices of debarment. The Banks also recommended that the reporting requirements not apply where a regulated entity becomes aware of covered misconduct through national news reporting or by an announcement or action taken by a federal agency, stating that such information would be accessible to FHFA as well as the regulated entities and all regulated entities should not have to report on the same, widely known conduct. The Banks further recommended that the reporting requirements not apply to any information about covered misconduct that a regulated entity discovers in reviewing a member's examination report. The Banks stated that their review of such reports is subject to confidentiality agreements with federal financial regulators that limit their ability to disclose any information in the reports without the express written consent of the regulator.

Final rule. The final rule does not change the scope of the reporting requirements under the Suspended Counterparty Program. A regulated entity is required to submit a report to FHFA regarding only covered misconduct of which the regulated entity is aware. The extent of any regulated entity's efforts in evaluating counterparties or addressing potential mortgage fraud is a prudential matter for the regulated entity, subject to regular supervision by FHFA. The Suspended Counterparty Program is not intended to require additional review or investigation by a regulated entity, nor is it intended to take the place of any review or investigation that a regulated entity would otherwise engage in.

With respect to the comment regarding confidential examination information, the Suspended Counterparty Program is limited to convictions or administrative sanctions for fraud or other financial misconduct related to mortgage transactions. Records regarding any such actions would be publicly available, so it is not necessary to revise this rule to address confidential examination information.

Current regulation. The Federal Register notice accompanying the interim final rule states that the rule does not specify the internal procedures that each regulated entity must establish to ensure compliance with the reporting requirements under the rule. See 78 FR at 63009.

Comments received. The Banks indicated that they have existing procedures for screening against the U.S. Treasury Department's Office of Foreign Assets Control's list. The Banks requested that FHFA state that such procedures are sufficient for purposes of the Suspended Counterparty Program.

Fannie Mae commented that screening individual purchasers of Fannie Mae-owned real estate (REO) against the FHFA suspended counterparty list would present operational challenges. Fannie Mae requested FHFA to state that such screening is not required.

Final rule. The Suspended Counterparty Program is not intended to define the scope of a regulated entity's internal procedures to address risks presented by fraud or other financial misconduct. Each regulated entity must establish appropriate procedures to address such risks. The Suspended Counterparty Program supplements the efforts of the regulated entities; it does not replace those efforts. For example, the Suspended Counterparty Program does not by itself require a regulated entity to screen individual REO purchasers against the FHFA suspended counterparty list, but a regulated entity may still do so if the regulated entity determines that such screening would be a prudent business practice.

Current regulation. The current regulation provides that the regulated entities must submit reports to FHFA on covered misconduct no later than ten business days after the regulated entity becomes aware of such misconduct. 12 CFR 1227.4(c).

Comments received. Fannie Mae commented that ten business days is not sufficient to complete its usual due diligence and reasonable investigation to confirm whether there is in fact covered misconduct and whether or not Fannie Mae is engaged in a covered transaction with the reported party. Fannie Mae noted that such investigations typically rely on public information that may not be available within such timeframe. Fannie Mae asked FHFA to extend the time for submitting reports to 30 calendar days.

Final rule. FHFA recognizes that in some instances ten business days may not be sufficient to complete necessary investigation or other due diligence. Accordingly, the final rule revises the time for submitting reports to 30 calendar days.

Current regulation. The Suspended Counterparty Program covers situations where an individual or institution has engaged in a covered transaction with a regulated entity within the past three years. The current regulation requires a regulated entity to report to FHFA when it becomes aware that a person or affiliate thereof with which the regulated entity is engaging or has engaged in a covered transaction within the past three years has engaged in covered misconduct. 12 CFR 1227.4(a). The current regulation also provides that a proposed or final order of suspension may be issued if the suspending official determines that there is evidence that the regulated entity has engaged in a covered transaction with the person or affiliate thereof within the past three years and has engaged in covered misconduct. 12 CFR 1227.5(b)(1) and 1227.6(a)(1).

Comments received. Both Fannie Mae and the Banks asked that the rule be limited to current counterparties, not counterparties with which they have done business within the past three years. The Banks indicated that their current procedures for identifying covered misconduct under the Suspended Counterparty Program do not address persons that have ceased doing business with the Banks and stated that requiring reports on such persons would be unduly burdensome. Fannie Mae commented that requiring reports on covered misconduct involving persons or institutions with whom Fannie Mae no longer does business would be an inefficient use of resources. Fannie Mae noted that requiring a regulated entity to research whether a contract or agreement terminated two or three or four years ago would yield very little benefit and would not fulfill the purposes of the Suspended Counterparty Program.

Final rule. The final rule revises the standard for issuing a proposed or final suspension order to eliminate the requirement that FHFA demonstrate that the regulated entity has done business with the individual or institution within the past three years. However, the final rule maintains the requirement that a regulated entity submit reports regarding any parties with which it has done business within the past three years.

FHFA recognizes that it may be difficult for a regulated entity to determine the exact date it ceased doing business with a particular individual or institution. In addition, documenting the exact timing of the most recent covered transaction is not necessary to accomplish the purposes of the Suspended Counterparty Program. Suspension orders reflect a determination by FHFA that doing business with an individual or institution presents a safety and soundness risk to the regulated entities. This determination is forward-looking and does not depend on whether a regulated entity has recently engaged in a covered transaction. For those reasons, the final rule eliminates the requirements in §§ 1227.5(b)(1) and 1227.6(a)(1) that FHFA demonstrate that a regulated entity has done business with the individual or institution within the past three years.

Although the final rule revises the standard for whether FHFA may issue a proposed or final suspension order, the final rule maintains the requirement in § 1227.4(a) that the regulated entities submit reports in appropriate cases, even if they have already ceased doing business with the individual or institution. In many cases, a regulated entity may take action to terminate its relationship with a party before there has been any conviction or administrative sanction that would trigger the reporting requirement under the Suspended Counterparty Program. In some cases, a regulated entity may have stopped doing business with a counterparty that is currently doing business with another regulated entity that is not yet aware of the covered misconduct. Therefore, excluding those cases from the coverage of the rule would undermine the effectiveness of the program.

To the extent records are available, the regulated entities are encouraged to submit reports on any individual or institution that has engaged in covered misconduct regardless of when the most recent covered transaction took place. However, recognizing the practical and operational difficulty of determining when the most recent transaction may have occurred, the final rule only requires a regulated entity to submit reports regarding any parties with which it has done business within the past three years.

Current regulation. The current regulation defines “covered transaction” as “a contract, agreement, or financial or business relationship between a regulated entity and a person and any affiliates thereof.” 12 CFR 1227.2. The Federal Register notice accompanying the interim final rule invited comments on whether this definition should be revised to include more explicit standards. As an example, the notice asked whether the rule should cover “lower tier covered transactions” to address persons who may indirectly do business with a regulated entity, such as a subcontractor or other person providing services to a party that does business directly with a regulated entity. See 78 FR at 63009.

Comments received. The Banks commented that the regulation should not cover lower tier covered transactions. The Banks indicated that it would not be possible in all cases to require their counterparties to ensure that the counterparties did not do business with any suspended party in connection with a covered transaction and that the Banks would be unable to effectively monitor such a requirement in cases where a counterparty did agree to the requirement. The Banks commented that it would be possible for the Banks to encourage their counterparties not to do business with entities that have been suspended by FHFA.

Fannie Mae commented that the regulated entities should not be required to directly ensure that a suspended party does not do business indirectly with a regulated entity. Fannie Mae indicated that it would be operationally difficult for Fannie Mae to attempt to monitor such relationships between third parties. Fannie Mae commented that it could notify its counterparties of any limitations imposed by FHFA on such transactions, but it would not be able to directly ensure compliance.

Fannie Mae also recommended that the definition of “covered transaction” be limited to “contract or agreement” and not include other “financial or business relationships.” Fannie Mae stated that “financial or business relationships” is redundant with “contract or agreement,” and that if it was intended to capture something beyond a contract or agreement, it is too broad and ambiguous. Fannie Mae expressed concern that “financial or business relationships” could be interpreted to include relationships with service providers such as delivery services for which Fannie Mae may have an account but not necessarily a contract or agreement, which it stated would not advance the purposes of the Suspended Counterparty Program.

Final rule. The final rule does not revise the definition of “covered transaction.” In many cases involving mortgage fraud, a regulated entity that has purchased a mortgage loan may be directly affected by the fraud despite the fact that none of the parties that engaged in fraudulent conduct has a direct relationship with the regulated entity. However, FHFA recognizes that it would be operationally difficult at this time for the regulated entities to effectively monitor relationships between their counterparties and such lower tier service providers. For that reason, FHFA is not at this time requiring that the regulated entities report on transactions between their direct counterparties and lower tier parties, or that the regulated entities ensure that their direct counterparties cease doing business with any lower tier parties that have been suspended by FHFA.

FHFA expects the regulated entities to take all appropriate measures to address the risks presented by mortgage fraud. The scope of those measures may depend in part on the nature of the financial or business relationship between the party and the regulated entity. Limiting the definition of “covered transaction” to only a “contract or agreement,” as recommended by Fannie Mae, would be too restrictive and, thus, contrary to the intent of the Suspended Counterparty Program. FHFA intends the definition to be flexible enough to encompass any parties who present a particular risk to the regulated entities, while still excluding generic third party service providers that are only incidentally involved in mortgage-related transactions, such as mail and package delivery vendors.

While the final rule does not limit the general definition of “covered transaction” in response to the comments received, the final rule limits the scope of a final suspension order to exclude one category of what otherwise might be considered lower tier covered transactions. FHFA does not intend final suspension orders to prevent respondents or their households from obtaining mortgage financing for the respondent's own personal or household residence. The final rule adds a new paragraph (d) to § 1227.3 making clear that final suspension orders do not have any effect on any transaction involving a residential mortgage loan if the loan is secured by the respondent's own personal or household residence.

Current regulation. The current regulation defines “affiliate” as a party that controls or is controlled by another person, whether directly or indirectly, including situations where one or more persons are controlled by the same third person. 12 CFR 1227.2.

Comments received. The Banks requested clarification of the definition of “affiliate,” particularly on what constitutes “control” for purposes of the definition. The Banks indicated that parent and subsidiary companies would appear to be covered, but expressed uncertainty over whether the definition would include executive officers of a company. The Banks also suggested that the definition of “covered misconduct” should be revised to refer to imputed conduct “among persons” rather than “among affiliates.”

Final rule. The final rule does not change the definition of “affiliate,” and it does not replace the reference to “affiliates” in the definition of “covered misconduct.” FHFA intends the term “affiliate” to be interpreted broadly in light of the specific provisions regarding imputing conduct among affiliates in the definition of “covered misconduct.” 12 CFR 1227.2. The definition of “covered misconduct” makes clear that FHFA may impute conduct from an individual to an organization in appropriate circumstances. In those circumstances, FHFA would consider the individual and organization to be affiliates for purposes of the Suspended Counterparty Program.

Current regulation. The current regulation defines “covered misconduct” to include convictions or administrative sanctions within the past three years based on fraud or similar misconduct in connection with the mortgage business. The definition provides that FHFA may impute conduct among individuals and organizations in appropriate circumstances as provided in the rule. 12 CFR 1227.2.

Comments received. The Banks supported defining “covered misconduct” as limited to offenses in connection with the mortgage business. The Banks suggested restating the definition of “covered misconduct” as certain types of conduct resulting in conviction or administrative sanction rather than a conviction or administrative sanction based on certain types of conduct. The Banks suggested that this would make clear that the conduct being imputed is the conduct that gave rise to the conviction or administrative sanction and not the conviction or administrative sanction itself.

Final rule. The final rule does not change the definition of “covered misconduct.” FHFA does not engage in independent fact-finding regarding the conduct underlying a conviction or administrative sanction covered by the rule. The current regulation reflects this approach by defining “covered misconduct” explicitly in terms of convictions and administrative sanctions. Where FHFA proceeds with a proposed or final suspension with respect to an affiliate, FHFA is imputing not just the underlying conduct, but the “covered misconduct” as defined in the rule.

Current regulation. The current regulation defines “administrative sanction” as a debarment, suspension, or any similar administrative sanction imposed by a Federal agency that has the effect of limiting the ability of a person to do business with a Federal agency. 12 CFR 1227.2. The definition includes any settlements of a proposed administrative sanction if the settlement has the same effect. The Federal Register notice accompanying the interim final rule requested comment on whether the definition should include other types of administrative sanctions, such as enforcement actions by other financial institution regulators. See 78 FR at 63009.

Comments received. Fannie Mae commented that the definition in the current regulation is appropriate and sufficiently broad and, therefore, should not be expanded to include enforcement actions by other financial institution regulators.

Final rule. The final rule does not change the definition of “administrative sanction” to include other types of administrative sanctions, such as enforcement actions by other financial regulators. The Suspended Counterparty Program is a limited measure intended to reduce the risks to the regulated entities from fraud and other financial misconduct. Other kinds of administrative actions may or may not be related to the goals of the Suspended Counterparty Program. FHFA may consider expanding the definition of “administrative sanction” in the future, but only in appropriate circumstances related to the goals of the Suspended Counterparty Program.

Current regulation. The current regulation defines “conviction” as any judgment or other determination of guilt of a criminal offense by a court of competent jurisdiction, or any other functionally equivalent resolution. 12 CFR 1227.2. The definition includes judgments entered by verdict or based on a guilty plea. Other dispositions, such as probation before judgment or deferred prosecution, are also included if they include an admission of guilt.

Comments received. The Banks asked that FHFA state that “a court of competent jurisdiction” is limited to courts of the United States of America and does not include courts in foreign jurisdictions.

Final rule. The final rule does not change the definition of “conviction.” FHFA intends the definition of conviction to encompass both state and federal courts. FHFA has not received any reports to date based on a conviction from a court outside the United States. If FHFA receives any such report in the future, FHFA will further evaluate the report to determine whether any additional action is necessary or appropriate.

Current regulation. The current regulation provides that if the suspending official determines that there are grounds for a proposed suspension order, the suspending official “may” issue a written notice of proposed suspension. 12 CFR 1227.5(c).

Comments received. The Banks commented that a written notice of proposed suspension is necessary to enable affected parties to respond. The Banks, therefore, recommended that issuance of a written suspension notice should be mandatory where a suspending official finds grounds for such issuance.

Final rule. The final rule does not change this provision of the regulation. The use of the permissive “may” rather than the mandatory “shall” in this sentence is appropriate because the decision to propose suspension is a discretionary decision by FHFA. For example, the suspending official may determine that there are grounds for a proposed suspension order but that for other reasons a proposed suspension is not appropriate. The existing provision correctly expresses the discretionary nature of the decision to propose suspension. If the suspending official decides that a written notice of proposed suspension should be issued to the affected person, the suspending official must provide notice of the proposed suspension to each of the regulated entities as well.

While the final rule does not change the substance of this provision, the final rule clarifies the method of sending a notice of proposed suspension. Under the final rule, a notice of proposed suspension will be sent to an affiliate of a respondent only if the affiliate would be subject to the proposed suspension. The final rule also makes technical drafting changes to the language on the method of sending notices for greater clarity.

Current regulation. The current regulation provides that a final suspension order may be issued directing the regulated entities to cease or refrain from engaging in covered transactions “with a particular person and any affiliates thereof.” 12 CFR 1227.3(a).

Comments received. The Banks commented that this language should be revised to clarify that each suspended affiliate will be identified in the suspension order. The Banks noted that it is difficult, if not impossible, for the regulated entities to know the full extent of the affiliates of any given entity.

Final rule. The final rule does not change this provision of the regulation. Section 1227.6(f)(2)(ii) states that each final suspension order must identify “each person and any affiliates thereof to which the suspension applies.” It is not necessary to restate this requirement in § 1227.3(a).

Comments received. The Banks requested that, in order to eliminate potential conflicts of interpretation, FHFA state that any FHFA guidance issued prior to the interim final rule has been superseded by the interim final rule. The Banks also asked whether existing FHFA reporting forms should continue to be used for submitting reports.

Final rule. The Suspended Counterparty Program was established in June 2012 by letter to the regulated entities. Prior to publication of the interim final rule on October 23, 2013, FHFA adopted procedures for the regulated entities to submit reports and provided informal guidance on the scope of the reporting obligations. While the interim final rule generally codified the existing procedures for the Suspended Counterparty Program, to avoid unnecessary confusion, FHFA views any guidance issued prior to the effective date of the interim final rule as superseded. FHFA may respond to questions from the regulated entities about implementation and interpretation of the final rule, and FHFA may provide written guidance on specific issues as appropriate.

Section 1313(f) of the Federal Housing Enterprises Financial Safety and Soundness Act requires FHFA, when promulgating regulations relating to the Banks, to consider the differences between Fannie Mae and Freddie Mac (collectively, the Enterprises) and the Banks with respect to the Banks': cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; joint and several liability; and any other differences FHFA considers appropriate. See 12 U.S.C. 4513(f). In preparing this final rule, FHFA considered the differences between the Banks and the Enterprises as they relate to the above factors and determined that the Banks should not be treated differently from the Enterprises for purposes of the final rule.

The final rule does not contain any information collection requirement that requires the approval of the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). Therefore, FHFA has not submitted any information to OMB for review.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include a regulatory flexibility analysis describing the regulation's impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). FHFA has considered the impact of this final rule under the Regulatory Flexibility Act. FHFA certifies that the final rule will not have a significant economic impact on a substantial number of small entities because the regulation applies to Fannie Mae, Freddie Mac, and the Banks, which are not small entities for purposes of the Regulatory Flexibility Act.

Accordingly, for the reasons stated in the SUPPLEMENTARY INFORMATION, under the authority of 12 U.S.C. 4513, 4513b, 4514, and 4526, FHFA is adopting as final the interim final rule published at 78 FR 63007 (October 23, 2013) with the following changes:

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 the 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 modifies the air traffic service route structure in the northwest United States to maintain the efficient flow of air traffic.

In 1990, the FAA published in the Federal Register a rule that established J-576 in 14 CFR 75, from the Glasgow, MT, VOR navigation aid (NAVAID) to the Medicine Hat, Alberta, Canada, VOR NAVAID (55 FR 42364, October 19, 1990, FR Doc. 90-24786). This was corrected to J-477 (55 FR 46940, November 8, 1990, FR Doc. 90-26388) and finally, in 1991, part 75 was transferred to subpart M of 14 CFR 71 (56 FR 65638, December 17, 1991, FR Doc. 91-29869). The route, extending through a small portion of airspace over the northwestern United States, was established in response to a request from the Canadian Department of Transportation to support airway changes in the Canadian airspace structure.

On September 30, 2015, the FAA was notified that Canada was decommissioning the Medicine Hat VOR and removing the portion of J-477 within Canada. Since the basis for which J-477 was originally established no longer exists, the FAA is removing the route.

Jet routes are published in paragraph 2004 of FAA Order 7400.9Z dated August 6, 2015, and effective September 15, 2015, which is incorporated by reference in 14 CFR 71.1. The jet route listed in this document will be subsequently removed in the Order.

This document amends FAA Order 7400.9Z, Airspace Designations and Reporting Points, dated August 6, 2015, and effective September 15, 2015. FAA Order 7400.9Z is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.9Z lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is amending Title 14 of the Code of Federal Regulations (14 CFR) part 71 by removing jet route J-477. This action reflects and accommodates the route changes made in Canadian airspace due to the decommissioning of the Medicine Hat VOR. Therefore, notice and public procedures under 5 U.S.C. 553(b) are unnecessary.

The FAA has determined that this 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 Department of Transportation (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 only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exists that warrant preparation of an environmental assessment.

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

On September 5, 2014, NOAA issued final regulations expanding the boundary of Thunder Bay National Marine Sanctuary (TBNMS) (79 FR 52960). At that time, NOAA published incorrect coordinates for Point 7 in the description of the new boundary for TBNMS, which inadvertently placed the point a few hundred feet into Canadian waters. NOAA does not have the authority to include any foreign waters into a national marine sanctuary, and did not intend to do so. This error was discovered when NOAA began to revise the nautical charts corresponding to that area. The new coordinates for Point 7 now correspond with the textual description of the boundary in the preamble and the regulations for TBNMS at 15 CFR 922.190. This change corrects the coordinates for Point 7 in appendix A to subpart R of 15 CFR part 922. This is a technical change and makes no substantive change to the regulations.

On July 26, 2012, NOAA issued final regulations expanding the boundary of National Marine Sanctuary of American Samoa (NMSAS) (77 FR 43942), with three technical errors in the boundary descriptions. This correcting amendment addresses the three technical errors, and also updates the format of the tables of coordinates for NMSAS, as follows:

1. In the NMSAS regulations describing the boundary of the sanctuary (15 CFR 922.101), the description of the boundaries of the various units that comprise NMSAS used the term “mean high high water.” However, the correct term should have been “mean higher high water line”. This term is defined by NOAA as “the average of the higher high water height of each tidal day observed over the National Tidal Datum Epoch. For stations with shorter series, comparison of simultaneous observations with a control tide station is made in order to derive the equivalent datum of the National Tidal Datum Epoch,” as described online at http://tidesandcurrents.noaa.gov/datum_options.html. There is no such term as “mean high high water” in the list of definitions of various tidal datums commonly used by NOAA. Accordingly, this rule replaces the phrase used in the regulation, “mean high high water,” with the correct phrase, “mean higher high water.” This change corrects an error and does not make a substantive change to the location or scope of the sanctuary boundary.

2. For two of the five units that comprise NMSAS, an error was made in the tables of coordinates in the appendix to subpart J. The textual descriptions of the boundary for Zone B of the Aunu'u Unit (§ 922.101(c)(2)) and for the Muliāva Unit (§ 922.101(e)) state that the last point is identical to the first point. However, in the tables of coordinates the longitude for the last points referenced in the textual descriptions—Point 6 in Table 2 and Point 9 in Table 4—are incorrect. As a result, the points in the tables of coordinates in the appendix do not match the textual descriptions in § 922.101(c)(2) and (e). To correct these errors in the tables, NOAA is inserting the correct coordinates. Specifically, NOAA is replacing the figure “170.551 W” with “-170.496” for Point 6 in Table 2, and replacing the figure “169.12” with “-169.012” for Point 9 in Table 4. These are technical corrections and do not make substantive changes to the regulations.

3. NOAA found that the textual description of the boundary for the Swains Island Unit (15 CFR 922.101(d)) was unclear in describing the two discrete excluded areas in the Swains Island Unit. Therefore, NOAA is correcting that description to ensure that the sanctuary boundary is clearly described. In doing so, NOAA is using a different method of laying out the coordinates, which resulted in a larger number of boundary coordinates in Table 3 in the appendix for subpart J, and a need for a new textual description of the boundaries. The new textual description and new coordinates do not change the location or size of the unit or of the two discrete excluded areas. This is a technical correction, as the area included in the sanctuary remains the same as the one promulgated in the 2012 final rule.

4. Lastly, NOAA is also revising the format of all of the tables of coordinates in the appendix to subpart J in order to update and conform them to the latest standards for presenting boundary coordinates for national marine sanctuaries. Previously, latitude coordinates were listed followed by “S” for “south”, and longitude coordinates were listed followed by “W” for “west”. Under the new standard, latitude coordinates are preceded by “-” for “south”, and longitude coordinates are preceded by “-” for “west”. These revisions to the format of the tables are consistent with NOAA's current efforts to standardize the format for coordinates across the National Marine Sanctuary System. The revisions would lessen confusion arising from the current use of different standards across the various sites and make the geographic coordinates easier for navigators to write, plot, and read. This is a technical correction, as the shape, size, and location of each of the units of NMSAS described in the tables are not changed by these revisions and remain the same as when they were promulgated in the 2012 final rule.

Accordingly, NOAA is publishing this correcting amendment without notice and comment. This rule amends: Appendix A to subpart R for TBNMS; Tables 1, 2, 3, 4 and 5 in the appendix to subpart J for NMSAS; and 15 CFR 922.101.

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

The Assistant Administrator of NOS finds good cause pursuant to 5 U.S.C. 553(b)(B) to waive the notice and comment requirements of the Administrative Procedure Act because this amendment is technical in nature, having no substantive impact. This rule corrects errors in the description of sanctuary boundaries for two national marine sanctuaries in rules previously submitted to notice and comment review. The substance of the underlying regulations remains unchanged. Therefore, providing notice and opportunity for public comment under the Administrative Procedure Act would serve no useful purpose. The clarification provided by this correction will also enable NOAA to fully implement its statutory responsibilities under the NMSA to protect resources of a national marine sanctuary. It would be contrary to the public interest to delay implementation of the technical corrections because they will reduce any confusion that may exist regarding the exact coordinates. For the reasons above, the Assistant Administrator also finds good cause under 5 U.S.C. 553(d) to waive the 30-day delay in effectiveness and make this rule effective immediately upon publication.

This correcting amendment contains only non-substantive, technical corrections to national marine sanctuary regulations. NOAA previously conducted environmental analyses under NEPA as part of the rulemaking process leading to the regulations being corrected by this action. Since this correcting amendment is technical in nature, and will not have a significant effect on the human environment, NOAA has determined that the requirements for an environmental analysis under NEPA do not apply to this action.

Accordingly, for the reasons set out in the preamble, 15 CFR part 922 is corrected by making the following correcting amendments:

This document contains amendments to the Income Tax Regulations (26 CFR part 1) regarding organizations described in section 509(a)(3) of the Internal Revenue Code (Code). An organization described in section 501(c)(3) is classified as either a private foundation or a public charity. To be classified as a public charity, an organization must be described in section 509(a)(1), (2), or (3). Organizations described in section 509(a)(3) are known as “supporting organizations.” Supporting organizations achieve their public charity status by supporting one or more organizations described in section 509(a)(1) or (2), which in this context are referred to as “supported organizations.”

To be described in section 509(a)(3), an organization must satisfy (1) an organizational test, (2) an operational test, (3) a relationship test, and (4) a disqualified person control test. The organizational and operational tests require that a supporting organization be organized and at all times thereafter operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more supported organizations. The relationship test requires a supporting organization to establish one of three types of relationships with one or more supported organizations. Finally, the disqualified person control test requires that a supporting organization not be controlled directly or indirectly by certain disqualified persons.

Each of the described tests is a necessary requirement for an organization to establish that it qualifies as a supporting organization. These final regulations, however, focus primarily on the relationship test for supporting organizations that are “operated in connection with” their supporting organization(s), otherwise known as “Type III” supporting organizations. Specifically, the final regulations reflect statutory changes enacted by the Pension Protection Act of 2006, Public Law 109-280 (120 Stat. 780 (2006) (PPA)). Section 1241(d)(1) of the PPA directed the Secretary of the Treasury to promulgate regulations under section 509 that establish a new distribution requirement for Type III supporting organizations that are not “functionally integrated” to ensure that a “significant amount” is paid to supported organizations. For this purpose, the term “functionally integrated” means a Type III supporting organization that is not required under Treasury regulations to make payments to supported organizations because the supporting organization engages in activities that relate to performing the functions of, or carrying out the purposes of, its supported organization(s). These final regulations address the amount that a Type III supporting organization that is not functionally integrated (a non-functionally integrated (NFI) Type III supporting organization) must annually distribute to its supported organization(s).

On August 2, 2007, the Treasury Department and the IRS published in the Federal Register (72 FR 42335) an advance notice of proposed rulemaking (ANPRM) (REG-155929-06) in response to the PPA. The ANPRM described proposed rules to implement the changes made by the PPA to the Type III supporting organization requirements and solicited comments regarding those proposed rules.

On September 24, 2009, the Treasury Department and the IRS published in the Federal Register (74 FR 48672) a notice of proposed rulemaking (the 2009 NPRM) (REG-155929-06). The 2009 NPRM contained proposed regulations (the 2009 proposed regulations) setting forth the requirements to qualify as a Type III supporting organization under the PPA.

On December 28, 2012, the Treasury Department and the IRS published in the Federal Register (77 FR 76382) a Treasury decision (TD 9605) containing final and temporary regulations (the 2012 TD) regarding the requirements to qualify as a Type III supporting organization. Based on the comments received, the 2012 TD made certain changes to the rules proposed in the 2009 NPRM, included in the temporary regulations significant changes to the distribution requirement, and reserved certain topics for further consideration. The 2012 TD was effective and applicable on December 28, 2012. The applicability of the temporary regulations expires on or before December 21, 2015. On December 28, 2012, the Treasury Department and the IRS also published in the Federal Register (77 FR 76426) a notice of proposed rulemaking (the 2012 NPRM) (REG-155929-06) that incorporated the text of the temporary regulations in the 2012 TD by cross-reference. The IRS received five comments on the 2012 NPRM. The comments were considered in developing these final regulations and are available for public inspection at www.regulations.gov or upon request. No public hearing was requested.

Under the 2012 TD, an NFI Type III supporting organization must annually distribute to or for the use of one or more supported organizations an amount equaling or exceeding the supporting organization's “distributable amount” for the taxable year. See § 1.509(a)-4(i)(5)(ii). The temporary regulations contained in the 2012 TD defined an NFI Type III supporting organization's “distributable amount” as equal to the greater of (1) 85 percent of the supporting organization's adjusted net income or (2) its “minimum asset amount,” in each case for the immediately preceding taxable year. The temporary regulations defined “minimum asset amount” as 3.5 percent of the excess of the aggregate fair market value of the supporting organization's non-exempt-use assets over the acquisition indebtedness with respect to such nonexempt use assets. Additionally, the temporary regulations provided that the determination of the aggregate fair market value of an NFI Type III supporting organization's non-exempt-use assets would be made using the valuation methods generally applicable to private foundations under § 53.4942(a)-2(c). The temporary regulations also provided that, consistent with the private foundation rules, the “non-exempt use” assets of a supporting organization do not include certain investment assets described in § 53.4942(a)-2(c)(2) or assets used (or held for use) to carry out the exempt purposes of the supported organization(s) (as determined by applying the principles described in § 53.4942(a)-2(c)(3)).

After consideration of all the comments received in response to the 2012 NPRM, this Treasury decision adopts the 2012 NPRM without change, except to (1) conform the provision regarding the valuation of non-exempt-use assets to the section 4942 regulation provision that it cross-references (§ 53.4942(a)-2(c)(2)), and (2) replace references in § 1.509(a)-4 to the temporary regulations with references to these final regulations. Thus, other than the change conforming the provision in the final regulations regarding the valuation of non-exempt-use assets to the provision in the section 4942 regulations, these final regulations are the same as the temporary regulations that have been applicable to Type III supporting organizations since December 28, 2012. Additionally, this Treasury decision removes the temporary regulations.

The Treasury Department and the IRS intend to publish a notice of proposed rulemaking for Type III supporting organizations in the near future. Among other proposals, the new proposed regulations would make one change to these final regulations. Specifically, the new proposed regulations will propose removal of the provision in these final regulations that reduces the distributable amount by the amount of taxes subtitle A of the Code imposes on a supporting organization during the immediately preceding taxable year. In addition, the new proposed regulations will propose specific rules regarding the requirements for Type III supporting organizations that support governmental supported organizations to be treated as functionally integrated Type III supporting organizations. In addition, the new proposed regulations would provide transition relief beyond the period provided in Notice 2014-4, 2014-2 IRB 274. Supporting organizations may continue to rely on the transitional rule described in Section 3.01 of Notice 2014-4 until the date that the notice of proposed rulemaking prescribing the new proposed regulations under § 1.509(a)-4(i)(4)(iv) is published in the Federal Register. In the notice of proposed rulemaking publishing the new proposed regulations, the Treasury Department and the IRS will request comments on all proposed changes.

This section discusses the comments received in response to the 2012 NPRM.

The PPA directed the promulgation of Treasury regulations requiring NFI Type III supporting organizations to make distributions of a percentage of either income or assets to their supported organizations to ensure that a significant amount is paid to those supported organizations. Under the Treasury regulations in effect when PPA was enacted, certain Type III supporting organizations were required to distribute “substantially all” of their income to one or more publicly supported organizations. For this purpose, “substantially all” had the same meaning of 85 percent or more that it had in § 53.4942(b)-1(c) (defining “substantially all” for purposes of the income test for private operating foundations). See Rev. Rul. 76-208, 1976-1 C.B. 161.

The 2009 NPRM had proposed to replace the income-based distribution requirement with an asset-based distribution requirement of 5 percent of the fair market value of an organization's non-exempt-use assets. In response to comments, the 2012 NPRM instead proposed to keep the historic income-based distribution requirement, and proposed to combine it with a reduced percentage-of-assets distribution requirement. Therefore, the temporary and proposed distributable amount for NFI Type III supporting organizations was the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of non-exempt-use assets, in each case as determined for the immediately preceding taxable year.

One commenter stated that a distribution requirement based on 3.5 percent of assets is sufficient to achieve the goals of Congress and that the distribution requirement based on 85 percent of income should be removed. The commenter stated that a distribution requirement based on income would prevent a supporting organization from smoothing its returns in high-earning years with low-earning years, and could result in organizations shifting investments away from income-producing assets toward appreciating assets to avoid erosion of an endowment even if that investment strategy results in forgoing higher returns. The commenter also said that having two tests increases administrative costs for a supporting organization by requiring it to make two calculations rather than one to determine its distributable amount, thus reducing the amount distributed for true charitable purposes. Another commenter suggested that organizations that were not previously identified as avoiding the prior substantially-all-of-income distribution requirement should be exempted from the asset-based distribution requirement because it potentially harms entities that are invested primarily in non-liquid assets.

The Treasury Department and the IRS believe that a distribution requirement equal to the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of an organization's non-exempt-use assets strikes an appropriate balance. It ensures that NFI Type III supporting organizations distribute significant amounts to their supported organizations, as Congress directed in the PPA. Further, the 85 percent of income test will make it more likely that supported organizations will timely benefit from higher returns received by their supporting organizations. Conversely, in years with lower returns or for organizations that invest in assets that produce largely appreciation rather than income, a 3.5-percent of assets distribution requirement will apply, which is less than the 5-percent of assets distribution requirement that applies to private non-operating foundations. With respect to the suggestion that certain organizations be permitted to comply only with the income-based distribution requirement, the Treasury Department and the IRS believe it would be inequitable and administratively difficult to apply one requirement to some NFI Type III supporting organizations but another requirement to others.

Therefore, the final regulations adopt the annual distributable amount rule of the 2012 NPRM without changes.

The 2012 NPRM provided that, for purposes of the calculation of the annual distributable amount, a supporting organization's adjusted net income would be determined using the principles of section 4942(f) and § 53.4942(a)-2(d). These provisions apply the principles of subtitle A of the Code.

One commenter requested that the definition of adjusted net income exclude dividend income resulting from a distribution of long-term capital gain property to a supporting organization by a corporate subsidiary. The commenter noted that without this exclusion, the receipt of distributed property could result in a much higher distribution requirement for that one year, but without producing any liquid assets to satisfy the higher distribution requirement.

The 2012 NPRM provided that adjusted net income be determined by applying the principles that apply in calculating the adjusted net income of private operating foundations under sections 4942(d) and 4942(j)(3) and are generally based on long-standing principles under subtitle A of the Code. The Treasury Department and the IRS believe that the rules for calculating adjusted net income should be applied consistently for all taxpayers and do not believe that there is a justification for the rules to be altered solely for supporting organizations. Therefore, the final regulations do not adopt this comment.

The 2012 NPRM provided that for purposes of determining the distributable amount for a taxable year, non-exempt-use assets would be valued using the principles generally applicable to private foundations under § 53.4942(a)-2(c). One commenter suggested allowing the use of state property tax valuations for purposes of valuing real property under § 53.4942(a)-2(c).

Section 53.4942(a)-2(c) applies the principles of regulations under section 2031, which generally apply for estate tax purposes, to the valuation of real property. Section 20.2031-1(b) provides that the value at which property is assessed for local tax purposes may be considered only if that value represents the fair market value as of the valuation date. Section 20.2031-3 further provides that if real property is leased or otherwise used in a business, special valuation rules may apply. The Treasury Department and the IRS continue to believe that the same valuation principles that apply to private foundations should apply to NFI Type III supporting organizations. Therefore, the final regulations do not adopt this comment.

These regulations are effective on December 21, 2015.

The IRS Notice 2014-4 cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http://www.irs.gov.

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 these regulations do not impose a collection of information on small entities, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the temporary and proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business, and no comments were received.

The principal authors of these regulations are Mike Repass and Jonathan Carter, Office of Associate Chief Counsel (Tax-Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

Executive Summary Purpose of the Regulatory Action

This final rule makes minor changes to part 4233 of PBGC's regulations, which was added by PBGC's interim final rule on Partitions of Eligible Multiemployer Plans (80 FR 35220, June 19, 2015). Many of the changes respond to public comments.1

PBGC's legal authority for this action comes from section 4002(b)(3) of ERISA, which authorizes PBGC to issue regulations to carry out the purposes of title IV of ERISA, and section 4233 of ERISA, as amended by MPRA, which requires that the partition process be conducted in accordance with regulations prescribed by PBGC.

Part 4233 prescribes the statutory conditions and the information and notice requirements that must be met before PBGC may partition an eligible multiemployer plan under section 4233 of ERISA. This final rule makes minor revisions to part 4233 with respect to information requirements, the time period for PBGC's initial review of an application for partition, and the coordinated application process for partition and benefit suspension.

In December 2014, Congress enacted and the President signed the Consolidated and Further Continuing Appropriations Act, 2015, Public Law 113-235 (128 Stat. 2130 (2014)), of which MPRA is a part. MPRA contains a number of statutory reforms intended to help financially troubled multiemployer plans and to improve the financial condition of PBGC's multiemployer insurance program. In addition to increasing PBGC premiums, sections 121 and 122 of MPRA provide PBGC with new statutory authority to assist financially troubled multiemployer plans under certain conditions if doing so would reduce potential future costs to PBGC and PBGC can certify that its ability to meet existing financial assistance to other plans will not be impaired.2

Section 122 of MPRA replaced the existing partition rules with a new framework of rules. As amended by MPRA, section 4233(a)(1) of ERISA provides that, upon application by the plan sponsor of an eligible multiemployer plan, PBGC may order a partition of the plan in accordance with that section. As under prior law, PBGC's decision to order a partition is discretionary.3 Unlike prior law, however, MPRA requires PBGC to make a determination on a partition application not later than 270 days after the date such application was filed (or, if later, the date such application was completed), in accordance with regulations promulgated by PBGC.

In addition, section 4233(a)(2) states that not later than 30 days after submitting an application for partition, the plan sponsor shall notify the participants and beneficiaries of such application in the form and manner prescribed by regulations issued by PBGC.

Section 4233(b) of ERISA contains five statutory conditions that must be satisfied before PBGC may order a partition:

Critical and declining status. In accordance with section 4233(b)(1), the plan must be in critical and declining status as defined in section 305(b)(6) of ERISA.4

PBGC determination on reasonable measures. Under section 4233(b)(2) of ERISA, PBGC must determine, after consultation with the Participant and Plan Sponsor Advocate (Advocate), that the plan sponsor has taken (or is taking concurrently with an application for partition) all reasonable measures to avoid insolvency, including maximum benefit suspensions under section 305(e)(9) of ERISA, if applicable.

Long-term loss and plan solvency. In accordance with section 4233(b)(3) of ERISA, PBGC must reasonably expect that—

• Partition will reduce PBGC's expected long-term loss with respect to the plan; and

• Partition is necessary for the plan to remain solvent.

Certification to Congress. In accordance with section 4233(b)(4) of ERISA, PBGC must certify to Congress that its ability to meet existing financial assistance obligations to other plans (including any liabilities associated with multiemployer plans that are insolvent or that are projected to become insolvent within 10 years) will not be impaired by the partition.

Source of funding. In accordance with section 4233(b)(5) of ERISA, the cost to PBGC arising from the partition must be paid exclusively from the PBGC fund for basic benefits guaranteed for multiemployer plans.

Upon PBGC's approval of an application for partition, section 4233(c) of ERISA provides that PBGC's partition order shall provide for a transfer to the plan created by the partition order (the successor plan) the minimum amount of the original plan's liabilities necessary for the original plan to remain solvent.

Sections 4233(d)(1) and (2) of ERISA describe the nature of the successor plan, and assign responsibility for its management. Specifically, section 4233(d)(1) provides that the plan created by the partition order is a successor plan to which section 4022A applies. Section 4233(d)(2) provides that the plan sponsor of the original plan and the administrator of such plan shall be the plan sponsor and administrator, respectively, of the successor plan.

Section 4233(d)(3) of ERISA prescribes a new withdrawal liability rule that applies for 10 years following the date of the partition order. Under the new rule, if an employer withdraws from the original plan within 10 years following the date of the partition, withdrawal liability is computed under section 4201 with respect to the original plan and the successor plan. If, however, the withdrawal occurs more than 10 years after the date of the partition order, withdrawal liability is computed under section 4201 only with respect to the original plan (and not with respect to the successor plan). In either case, withdrawal liability is payable to the original plan (and not the successor plan).

Section 4233(e)(1) imposes an ongoing benefit payment obligation on the original plan with respect to each participant or beneficiary of the original plan whose guarantee amount was transferred to the successor plan pursuant to a partition order. With respect to these individuals, the original plan must pay a monthly benefit for each month in which such benefit is in pay status following the effective date of the partition in an amount equal to the excess of—

• The monthly benefit that would be paid to such participant or beneficiary for such month under the terms of the plan (taking into account benefit suspensions under section 305(e)(9) and any plan amendments following the effective date of such partition) if the partition had not occurred, over

• The monthly benefit for such participant or beneficiary that is guaranteed under section 4022A.5

Section 4233(e)(2) of ERISA provides that in any case in which a plan provides a benefit improvement, as defined in section 305(e)(9)(E)(vi), that takes effect after the effective date of the partition, the original plan shall pay to PBGC for each year during the 10-year period following the partition effective date, an annual amount equal to the lesser of—

• The total value of the increase in benefit payments for such [plan] year that is attributable to the benefit improvement, or

• The total benefit payments from the successor plan for such [plan] year.

Section 4233(e)(3) of ERISA imposes a special premium rule on the original plan, which requires it to pay the premiums for participants whose guarantee amounts were transferred to the successor plan for each year during the 10-year period following the partition effective date.

In addition to the initial notice requirement under section 4233(a)(2) of ERISA, which applies to the plan sponsor, section 4233(f) imposes a notice requirement on PBGC. It states that not later than 14 days after the issuance of a partition order, PBGC must provide notice of the order to the Committee on Education and the Workforce of the House of Representatives; the Committee on Ways and Means of the House of Representatives; the Committee on Finance of the Senate; the Committee on Health, Education, Labor, and Pensions of the Senate; and any affected participants or beneficiaries.

As noted above, on June 19, 2015, PBGC published an interim final rule on Partitions of Eligible Multiemployer Plans. PBGC had earlier published a Request for Information (RFI) to solicit information on issues PBGC should consider in the rulemaking; PBGC received 20 comments in response to the RFI.7

The regulatory provisions in the interim final rule were effective upon publication. PBGC provided a 60-day comment period and received nine comments, four from organizations (Pension Rights Center, U.S. Chamber of Commerce, National Coordinating Committee for Multiemployer Plans, and AARP), and five from individuals. The comments, PBGC's responses to the comments, and a summary of changes made to the interim final rule are discussed below. For a summary of the rules that remain unchanged, see the preamble to the interim final rule.

Section 4233.4 of the interim final rule provides guidance on the information needed to determine whether an application for partition is complete, and states that an application will not be considered complete unless the application includes the information specified in §§ 4233.5 (plan information), 4233.6 (partition information), 4233.7 (actuarial and financial information), 4233.8 (participant census data), 4233.9 (financial assistance information).

One commenter stated that the rule on completeness in § 4233.4 is “inappropriately strict,” and that “[t]here may be instances where not every document listed is required for PBGC to make a determination.” The commenter noted, as an example, the requirement under § 4233.5(g) for the most recent IRS determination letter for the plan. The commenter expressed the view that determination letters may become increasingly difficult to obtain due to recently announced changes to the IRS determination letter program for qualified plans,8 and that “the lack of a determination letter would undo the entire application even though it has little direct impact on the partition itself.” The same commenter suggested that rather than stating that an application for partition will not be considered complete if the information required under §§ 4233.5-4233.9 is not included with the application, § 4233.4(a) should instead provide that an application with missing information may require additional time for PBGC to determine if the application is complete.

PBGC believes that the regulation's information requirements are reasonable, necessary, and, in most instances, based on information that plans are already required to prepare and retain under ERISA and the Internal Revenue Code (“Code”). Turning to the commenter's concern about IRS determination letters, PBGC notes that to be covered under title IV of ERISA, a plan must either have received a favorable determination letter from the IRS, or have otherwise met the tax-qualification requirements under the Code. Because the requirement in § 4233.5(g) is limited to the plan's most recent IRS determination letter (regardless of the date), IRS Announcement 2015-19 should not impact this requirement.

In the case of a multiemployer plan that had never in its history obtained a determination letter (which is rare in PBGC's experience) but, in practice, operated in accordance with the qualification rules under the Code, the failure to submit a determination letter under § 4233.5(g) would not, as the commenter suggested, “undo the entire partition application.” Under that scenario, the inability to submit the plan's most recent determination letter is not due to an oversight or a refusal to provide the information. Rather, the document simply does not exist. In that case, nothing in the regulation would constrain PBGC from exercising its discretion to determine that the application was nevertheless complete.

PBGC is amending § 4233.4(a) to clarify this point by substituting the word “may” in place of “will.” Therefore, as revised, § 4233.4(a) will provide that if any of the information required under part 4233 is not included with an application for partition, “the application may not be considered complete.”

Section 4233.5 of the regulation identifies plan-related information items that must be submitted for an application to be complete, including a requirement under § 4233.5(i) to provide a current listing of contributing employers to the plan and the approximate number of participants for whom each employer is required to contribute.

One commenter suggested that in addition to the information required under § 4233.5(i), plan sponsors should be required to submit information on the specific dollar amount contributed by each employer, whether the employer is current or delinquent in making its contributions to the plan, and if delinquent, the specific dollar amount of the delinquency. Finally, the commenter suggested that PBGC should “look back at least ten years, especially given that the economic crisis from 2008 through 2013 may not be an accurate measure, and sufficient pre- and post-crisis data is needed to fairly evaluate a plan and its funding capabilities.”

For a number of reasons, PBGC did not adopt the commenter's suggestions. First, based on its partition experience under prior law, PBGC decided that § 4233.5(i) already provides PBGC with all of the employer contribution information it needs to make a determination on an application for partition.

Second, if, based on the facts of a particular case, PBGC determines that additional information relating to a plan's contribution base is needed to make a determination on partition, PBGC retains the discretion to request such information under § 4233.4(b).9

Third, in addition to the employer contribution information already required under the interim final rule, § 4233.5(h) requires a copy of the most recent Form 5500 and schedules for the plan. Schedule R of the Form 5500 requires, among other things, information on any employer that contributed more than five percent of the plan's total contributions for the plan year. In addition, § 4233.7(a)(1) requires a plan sponsor to submit the most recent actuarial report for the plan and those for the two preceding plan years. These actuarial reports generally include information on actual contributions received for the plan year, and expected contributions for the following plan year.

In sum, PBGC has determined that the existing information requirements under the regulation provide PBGC with the information it needs relating to employer contributions to make a determination on an application for partition. Furthermore, as previously stated, if additional information relating to employer contributions is needed to make a determination in a particular case, PBGC retains the discretion to request that information under § 4233.4(b). Accordingly, for the reasons stated above, PBGC did not make any changes to § 4233.5(i).

Under section 4233(b)(2) of ERISA, PBGC must determine, after consultation with the Advocate, that the plan sponsor has taken (or is taking concurrently with an application for partition) all reasonable measures to avoid insolvency, including maximum benefit suspensions under section 305(e)(9) of ERISA, if applicable.

Consistent with this requirement, § 4233.6(e) requires a detailed description of all measures the plan sponsor has taken (or is taking) to avoid insolvency, as well as those measures the plan sponsor considered but did not take. The regulation also requires the plan sponsor to identify the factor(s) it considered in making those determinations, and to submit all relevant documentation relating to the determinations.

One commenter expressed concern that the interim final rule did not require “objective factual evidence” and predicted that PBGC (and plan participants) would be “treated to self-serving platitudes.” The commenter suggested that plan sponsors should be required to “document the efforts they have taken, and should likewise document why they have not taken other steps . . . to remedy the plan's financial situation.”

As a preliminary matter, PBGC agrees that unsupported assertions concerning the measures a plan sponsor has taken (or is taking) to avoid insolvency would not provide a sufficient basis for PBGC, in consultation with the Advocate, to make a determination under section 4233(b)(2) of ERISA. PBGC disagrees, however, that unsupported assertions would satisfy the requirements of § 4233.6(e).

In addition to requiring a detailed description of the measures taken to avoid insolvency, including the measures the plan sponsor considered but did not take, § 4233.6(e) requires the plan sponsor to submit “all relevant documentation” relating to those determinations. Furthermore, to the extent the information and documentation provided under § 4233.6(e) is not sufficient to reach a determination, PBGC has the authority under § 4233.4(b) to require a plan sponsor to submit any additional information necessary to make a determination under section 4233 of ERISA.

Finally, it is also important to note that § 4233.3(b) requires that an application for partition must be signed and dated by an authorized trustee and must include a statement under penalties of perjury that the “application contains all the relevant facts relating to the application, and such facts are true, correct, and complete.”

Based on the foregoing, PBGC believes that the existing information and certification requirements under the regulation address the concerns raised by the commenter relating to unsupported assertions, and that no additional changes are required.

Section 4233.7 of the interim final rule identifies the actuarial and financial information requirements for an application for partition. Although there were no comments from the public on § 4233.7, PBGC is amending the regulation to clarify that the benefit payment information required under §§ 4233.7(a)(3)(iii), (a)(5)(iii), and (a)(8) must be organized by participant status (e.g., active, retiree, terminated vested, beneficiary). PBGC determined that organizing benefit payment information in this manner is necessary to determine the aggregate amount of benefits subject to transfer under section 4233(c) of ERISA. PBGC is also amending the information requirements under § 4233.7 to require long-term projections of pre-partition benefit disbursements at the PBGC-guarantee level and, if applicable, maximum benefit suspensions under section 305(e)(9) of ERISA.

Section 4233.8 of the interim final rule identifies the types of participant census data to include with an application for partition. PBGC has determined that information about gender is needed to accurately determine the present value of plan liabilities and is, therefore, amending the regulation to clarify that gender must be included in the census data elements under § 4233.8.

Section 4233.10 of the interim final rule prescribes an initial review process for the purpose of determining whether an application is complete under section 4233(a)(1) of ERISA.10 PBGC received two comments expressing concern that the interim final rule does not impose a time limit on PBGC for making an initial determination on whether an application is complete. One commenter stated that while it understood PBGC may need time to ensure it has the necessary information to make a determination, it was concerned that the 270-day review period could be unreasonably extended if there were no time limit for making a determination on completeness. Expressing a similar view, another commenter stated that the regulation “provides no time frame for this initial determination which could go on indefinitely.” Both commenters suggested that PBGC include a time limit on its completeness review, with one commenter suggesting that PBGC adopt the two business day limit that applies to Treasury for benefit suspensions under Treas. Temp. Reg. § 1.432(e)(9)-1T(g)(1)(ii).

PBGC notes that although the partition rule under section 4233 of ERISA and the suspension of benefits rule under section 305(e)(9) work in tandem, there are important differences. One difference relates to the commencement of the review period. Unlike the suspension of benefit rule, which requires Treasury, in consultation with PBGC and the Department of Labor, to approve or deny an application for suspension of benefits within 225 days after the submission of such application, section 4233(a)(1) requires PBGC to issue a determination on partition not later than 270 days after the date such application was filed (or, if later, the date such application was completed). Thus, section 4233 provides that the 270-day review period does not begin on the date of submission, but rather on the date the application for partition was filed or, if later, the date such application was completed.

Another important difference is that under section 305(e)(9), notice of the proposed suspension must be given concurrently with the submission of an application for suspension of benefits.11 In contrast, under section 4233(a)(2) of ERISA, the plan sponsor must provide notice not later than 30 days after submitting an application for partition.12

Given these differences, PBGC is not adopting the two-business-day review period under Treas. Temp. Reg. § 1.432(e)(9)-1T(g)(1)(ii). However, having considered the concerns raised by commenters relating to the lack of a specified time limit on PBGC's initial review process, PBGC believes that a 14 calendar day review period provides sufficient time to complete the initial review of an application under § 4233.10. Importantly, this addition will provide plan sponsors, participants, and beneficiaries with more certainty on when the 270-day statutory review period under section 4233(a)(1) of ERISA, and the 30-day notice period under section 4233(a)(2) will begin.13

Section 4233.11 of the interim final rule describes the notice requirements for an application for partition, and provides optional model notices. Section 4233.11(d) of the regulation states that the purpose of the model notices is to assist plan sponsors in discharging their notice obligations under section 4233(a)(2) of ERISA. The regulation does not require use of the model notices, but states that a properly completed model notice will be deemed to satisfy the notice requirements under the regulation.

One commenter expressed concern that plan sponsors would be free to alter, amend, or even discard the text in the model notices in favor of their own, which, in the commenter's view, would provide “too much latitude to plan trustees and professionals who may well have steered the plan into `critical and declining' status in the first place.” The commenter suggested that PBGC require a plan sponsor to “highlight” and explain any deviations from the model notice text. The same commenter also suggested that deviations from the model notices should require advance approval from PBGC and the Advocate.

PBGC considered the commenter's suggestions but did not incorporate them into the final regulation. In PBGC's view, requiring plan sponsors to highlight and explain any deviations from the model notice (which is not required under section 4233(a)(2)) 14 would be inconsistent with the purpose of the notice—to assist plan sponsors in meeting their notice obligations under section 4233(a)(2) of ERISA. Furthermore, PBGC believes that § 4233.6(g) addresses the commenter's concern about incorrect or misleading notices by requiring the plan sponsor to include a copy of the draft notice at the same time it submits its application for partition to PBGC. Submission of a notice that fails to satisfy the content requirements set forth in § 4233.11(c) may result in a determination that the application is incomplete under § 4233.4(a). For these reasons, PBGC did not make any changes to § 4233.11.

Section 4233.13 of the interim final rule describes a conditional approval process for plan sponsors who file applications for partition and suspension of benefits. Under the special rule, PBGC may, in its discretion, approve an application for partition conditioned on Treasury's final authorization to suspend benefits under section 305(e)(9) of ERISA. As noted in § 4233.12(c), however, a partition will only become effective upon satisfaction of the required conditions and the issuance of a partition order.

PBGC received one comment on the conditional approval process. The commenter stated that it was not clear if a conditional approval under § 4233.12(c) would satisfy the requirement in Temp. Treas. Reg. § 1.432(e)(9)-1T(d)(7), which states that in order to satisfy the requirement that a suspension of benefits not take effect prior to the effective date of a partition, the partition order must be provided to the Secretary of Treasury by the last day of the 225-day period described in Temp. Treas. Reg. § 1.432(e)(9)-1T(g)(3)(i). The commenter suggested that PBGC and Treasury clarify this point in the agencies' respective regulations.

Having consulted with Treasury on this comment, PBGC agrees that additional clarification relating to the effect of a conditional approval of partition under the agencies' regulations is needed. First, with respect to part 4233, PBGC is amending §§ 4233.6 and 4233.13 to clarify that in any case in which an application for partition is made in combination with a suspension of benefits, the effective date of the proposed partition must satisfy the requirements of ERISA section 305(e)(9)(D)(v).15 Second, with respect to the effect of a conditional approval of a partition under the Treasury rule, PBGC has been advised by Treasury that PBGC's issuance of a conditional approval within the 225-day period under section 305(e)(9)(G) will be deemed to satisfy the requirement set forth in Temp. Treas. Reg. § 1.432(e)(9)-1T(d)(7).

PBGC received one comment on § 4233.15, which describes the nature and operation of the successor plan created by the partition order. The commenter asked whether certain legal requirements under title I and the Code would apply to a successor plan in a partition.

While a discussion of the legal requirements under title I and the Code is not within PBGC's jurisdiction and, therefore, beyond the scope of this rulemaking, all title I and Code requirements that would otherwise apply to a terminated, insolvent multiemployer plan apply to a successor plan in a partition absent a statutory, regulatory, or administrative exemption.

Section 4233.17 of the interim final rule describes PBGC's continuing jurisdiction over the original plan and the successor plan. In the preamble to the interim final rule, PBGC explained that although commenters on the RFI expressed differing views on the need for additional post-partition oversight, PBGC determined that additional oversight is necessary to ensure compliance with the post-partition requirements under MPRA and proper stewardship of PBGC financial assistance.

PBGC received one comment that did not specifically refer to § 4233.17 but did relate to post-partition oversight. The commenter suggested that when a plan is insolvent, regulating and assessing administrative costs (including salaries and professional fees) should be the first priority, and that in some cases it may be appropriate to appoint an independent legal representative and trustee to administer the plan. Finally, the commenter suggested that the trustees, employees, and service providers of an insolvent plan should be required to disclose sources of income and conflicts of interest.

The commenter did not suggest any changes to § 4233.17, and PBGC determined that none are necessary. Nevertheless, in response to the comment, PBGC notes that it will retain continuing jurisdiction over the original plan and successor plan in a partition to ensure compliance with the post-partition requirements under MPRA and proper stewardship of PBGC financial assistance.

In addition, although section 4233(d)(2) of ERISA assigns responsibility for the management of the successor plan to the plan sponsor and administrator of the original plan, PBGC continues to have authority under sections 4041A and 4281 to prescribe such rules and standards for the administration of terminated multiemployer plans (and authority under section 4042 to institute proceedings for the appointment of a new trustee to administer the plan) that PBGC considers appropriate to protect the interests of plan participants and beneficiaries, or to prevent unreasonable loss to PBGC.

Finally, as noted above, absent a statutory, regulatory, or administrative exemption, all of the title I requirements that would otherwise apply to a terminated, insolvent multiemployer plan (e.g., the fiduciary rules under section 404 and the prohibited transaction rules under section 406) would also apply to the successor plan in a partition under section 4233 of ERISA.

In addition to comments on specific sections of the interim final rule, PBGC received two comments objecting to PBGC's interpretation of the term “maximum benefit suspensions” in section 4233(b)(2) of ERISA.16 As noted in the preamble to the interim final rule, the term “maximum benefit suspensions” is not defined in sections 305(e)(9) and 4233 of ERISA. The statute, however, limits the maximum amount of a suspension so that a post-suspension benefit can be no less than 110 percent of the PBGC guarantee under section 4022A, limits or exempts suspensions for certain categories of individuals based on their age, and exempts pension benefits based on disability from any reductions. Based on the structure and operation of these provisions, PBGC interprets the term “maximum benefit suspensions” in section 4233(b)(2) to mean the maximum benefit suspensions permissible under section 305(e)(9).

One commenter stated that it “does not believe plans should have to apply for maximum benefit suspensions to be eligible for partition” and that “[i]f PBGC believes it has no flexibility on the level of retiree cuts, it should ask Congress to modify this element of MPRA.” Expressing a similar view, the other commenter stated that PBGC's interpretation is “not consistent with the full text of section 4233” and that “the statute does not require trustees to impose unreasonable cutbacks, and absolutely disallows some categories of benefits (e.g., disability) even if the cutback would be otherwise reasonable.” That same commenter asked a number of hypothetical questions relating to the maximum benefit suspension requirement, such as whether the requirement would apply to a plan that had only a few participants with suspendable benefits, or a plan in which maximum benefit suspensions were rejected by a vote of participants and beneficiaries under section 432(e)(9)(H). The commenter suggested that if maximum benefit cuts are required, “partition would only be available in situations in which maximum benefit suspensions were sufficient to meet the plan's long-term solvency.”

As a preliminary matter, PBGC disagrees that a partition would only be available in situations in which maximum benefit suspensions were sufficient to meet the plan's long-term solvency. In fact, if maximum benefit suspensions were sufficient to meet a plan's long-term solvency, partition would not be available because it would not be necessary for the plan to remain solvent, which is a statutory requirement under section 4233(b)(3)(B). In other words, partition is only an option when maximum benefit suspensions are not sufficient to ensure long-term solvency.

In those situations where partition would be needed, PBGC's interpretation of maximum benefit suspension reflects the statutory and regulatory limitations on suspensions under section 305(e)(9)(D). For example, as explained in the preamble to the interim final rule, the maximum benefit suspension permissible for an individual with a plan benefit based on disability would be zero, because benefits based on disability may not be suspended under section 305(e)(9)(iii). The same would be true for a participant older than age 80.

The commenter's hypothetical questions regarding a plan with a de minimis number of participants whose benefits would be subject to suspension under 305(e)(9)(D) and a plan in which participants and beneficiaries vote to reject benefit suspensions are beyond the scope of this rulemaking. However, PBGC notes that each application for partition will be decided on a case-by-case basis in accordance with the statutory criteria in section 4233(b).

PBGC's interpretation of section 4233(b)(2) of ERISA is also consistent with the other conditions for partition under section 4233, which show Congress's intent to balance the need to protect multiemployer plans from insolvency with the need to improve the financial health of the title IV multiemployer insurance program. Section 4233(b)(3)(A) of ERISA, for example, provides that PBGC must reasonably expect that a partition of the plan will reduce PBGC's expected long-term loss with respect to the plan, and under section 4233(b)(4), PBGC must certify to Congress that its ability to meet existing financial assistance obligations to other plans (including any liabilities associated with multiemployer plans that are insolvent or that are projected to become insolvent within 10 years) will not be impaired by a partition. Finally, because a partition results in the creation of a newly insolvent successor plan that will require financial assistance under section 4261 of ERISA, the amount of liabilities that can be transferred to the successor plan is limited under section 4233(c) to the minimum amount of liabilities necessary for the original plan to remain solvent.

As previously discussed, under section 4233(b)(2) of ERISA, PBGC must determine, after consultation with the Advocate, that the plan sponsor has taken (or is taking concurrently with an application for partition) all reasonable measures to avoid insolvency, including maximum benefit suspensions under section 305(e)(9) of ERISA, if applicable. In the preamble to the interim final rule, PBGC stated that it would not define by regulation the Advocate's consultative role under section 4233(b)(2); rather, the Advocate's role under the new law would be allowed to develop on a case-by-case basis.

PBGC received one comment on the Advocate's role under section 4233(b)(2). The commenter asserted that plan sponsors and PBGC suffer from conflicts of interest—plan sponsors due to the composition of boards of trustees, and PBGC because it will only approve a partition if, among other things, it reduces PBGC's expected long-term loss—and that the Advocate “is the only party who reaps no financial advantage from imposing benefit cuts on retirees.” Based on this view, the commenter stated that the final rule should clarify that the Advocate is “responsible solely for representing the plan's retirees and deferred vested participants,” and that the Advocate should be “offered the opportunity to participate in all meetings between the plan sponsor and PBGC.” The commenter also suggested that the rule should require PBGC to provide the Advocate with adequate accounting, actuarial, and legal resources, and that the Advocate should have unfettered access to all plan records, actuarial worksheets, and databases.

PBGC disagrees with the commenter's assertion relating to conflicts of interest. With respect to multiemployer plan sponsors, the Taft-Hartley Act, 29 U.S.C. 141 et seq., requires that employer and employees be equally represented in the administration of such plans. With respect to PBGC, MPRA requires, among other things, that PBGC analyze the impact of partition on PBGC's long term loss, and certify to Congress that its ability to meet existing financial assistance obligations to other plans will not be impaired by a partition. These requirements are imposed by statute.

Although PBGC carefully considered the commenter's suggestions about defining the Advocate's consultative role, it decided not to make any changes in response. Given that the Advocate's consultative role in a partition is new, PBGC continues to believe that the better approach is to allow that role to evolve on a case-by-case basis. Finally, it is important to note that the role of the Advocate is defined by statute in section 4004(b) of ERISA, and while MPRA created additional duties, it did not change or modify the Advocate's existing duties under the statute.

The amendments in this final rule will apply to applications for partition submitted to PBGC on or after January 22, 2016.

Having determined that this rulemaking is a “significant regulatory action” under Executive Order 12866, the Office of Management and Budget has reviewed this final rule under Executive Order 12866.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Orders 12866 and 13563 require a comprehensive regulatory impact analysis be performed for any economically significant regulatory action, defined as an action that would result in an annual effect of $100 million or more on the national economy or which would have other substantial impacts.

Pursuant to section 1(b)(1) of Executive Order 12866 (as amended by Executive Order 13422), PBGC has determined that regulatory action is required in this area. Principally, this regulatory action is necessary to implement the application and notice requirements under section 4233 of ERISA as amended and restated by MPRA. In accordance with OMB Circular A-4, PBGC also has examined the economic and policy implications of this final rule and has concluded that the action's benefits justify its costs.

Under Section 3(f)(1) of Executive Order 12866, a regulatory action is economically significant if “it is likely to result in a rule that may * * * [h]ave an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” OMB has determined that this final rule does not cross the $100 million threshold for economic significance and is not otherwise economically significant. Most of the economic effect relating to partitions will be attributable to benefit suspensions.

Based on a review of financial resources available for partition, PBGC expects that fewer than 20 plans would be approved for partition over the next three years (about six plans per year), and that the total financial assistance PBGC will provide to those plans will be less than $60 million per year.

Because PBGC did not publish a general notice of proposed rulemaking under 5 U.S.C. 553, the regulatory flexibility analysis requirements of the Regulatory Flexibility Act do not apply.

The information requirements under this final regulation—information to be reported to PBGC and information to be disclosed to participants—are being submitted to OMB under the Paperwork Reduction Act (OMB control number 1212-0068, expires December 31, 2015). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

PBGC estimates that over the next three years about six plans per year will apply for partition and that the total annual burden of this information collection will be about 78 hours and $58,800.

For the reasons given above, the interim rule amending 29 CFR part 4233 published at 80 FR 35220 on June 19, 2015, is adopted as a final rule with the following changes:

Nassau County Department of Public Works requested this temporary deviation from the normal operating schedule to perform electrical and mechanical upgrades.

The Bayville Bridge, mile 0.1, across the Mill Neck Creek has a vertical clearance in the closed position of 9 feet at mean high water and 16 feet at mean low water. The existing bridge operating regulations are found at 33 CFR 117.800.

The waterway is transited by one commercial user and recreation vessel traffic.

Under this temporary deviation, the Bayville Bridge may remain in the closed position from 7:00 a.m. on January 11, 2016 to 3:30 p.m. on January 15, 2016.

Vessels able to pass through the bridge in the closed position may do so at any time. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass.

The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The SIP is a living document which a state revises as necessary to address its unique air pollution problems. Therefore, the EPA, from time to time, must take action on SIP revisions containing new and/or revised regulations as being part of the SIP. On May 22, 1997 (62 FR 27968), the EPA revised the procedures for incorporating by reference Federally-approved SIPs, as a result of consultation between the EPA and the Office of the Federal Register (OFR). The description of the revised SIP document, IBR procedures and “Identification of Plan” format are discussed in further detail in the May 22, 1997, Federal Register document. On March 8, 2005 (70 FR 11125) the EPA published the revised format of the IBR material for South Dakota as of November 15, 2004. Today's action is an update to the March 8, 2005 document.

In this action, the EPA is announcing the update to the IBR material as of October 1, 2015. The EPA is also correcting typographical errors, including omission and other minor errors in subsection 52.2170, paragraphs (c), (d), and (e).

In this action, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of the South Dakota regulations described in the amendments to 40 CFR part 52 set forth below. EPA has made, and will continue to make, these documents generally available electronically through www.regulations.gov and/or in hard copy at the appropriate EPA office (see the ADDRESSES section of this preamble for more information).

EPA has determined that today's action falls under the “good cause” exemption in section 553(b)(3)(B) of the Administrative Procedure Act (APA) which, upon a finding of “good cause” authorizes agencies to dispense with public participation, and section 553(d)(3), which allows an agency to make a rule effective immediately (thereby avoiding the 30-day delayed effective date otherwise provided for in the APA). Today's action simply updates the codification of provisions which are already in effect as a matter of law.

Under section 553 of the APA, an agency may find good cause where procedures are “impractical, unnecessary, or contrary to the public interest.” Public comment is “unnecessary” and “contrary to the public interest” since the codification only reflects existing law. Likewise, there is no purpose served by delaying the effective date of this action.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and is therefore not subject to review by the Office of Management and Budget. This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12866. Because the agency has made a “good cause” finding that this action is not subject to notice-and-comment requirements under the Administrative Procedure Act or any other statute as indicated in the SUPPLEMENTARY INFORMATION section, it is not subject to the regulatory flexibility provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), or to sections 202 and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4). In addition, this action does not significantly or uniquely affect small governments or impose a significant intergovernmental mandate, as described in sections 203 and 204 of UMRA. This rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the federal government and Indian tribes, or on the distribution of power and responsibilities between the federal government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant. This rule does not involve technical standards; thus the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. The rule also does not involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994). This rule does not impose an information collection burden under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). EPA's compliance with these statutes and Executive Orders for the underlying rules are discussed in previous actions taken on the state's rules.

The Congressional Review Act (5 U.S.C. 801 et seq.), as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 808 allows the issuing agency to make a rule effective sooner than otherwise provided by the CRA if the agency makes a good cause finding that notice and public procedure is impracticable, unnecessary or contrary to the public interest. This action simply codifies provisions which are already in effect as a matter of law in federal and approved state programs. 5 U.S.C. 808(2). As stated previously, EPA has made such a good cause finding and established an effective date of December 23, 2015. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This change to the identification of plan for South Dakota is not a “major rule” as defined by 5 U.S.C. 804(2).

In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of the South Dakota regulations described in the amendments to 40 CFR part 52 set forth below. EPA has made, and will continue to make, these documents generally available electronically through www.regulations.gov and/or in hard copy at the appropriate EPA office (see the ADDRESSES section of this preamble for more information).

EPA has also determined that the provisions of section 307(b)(1) of the Clean Air Act pertaining to petitions for judicial review are not applicable to this action. Prior EPA rulemaking actions for each individual component of the South Dakota SIP compilation had previously afforded interested parties the opportunity to file a petition for judicial review in the United States Court of Appeals for the appropriate circuit within 60 days of such rulemaking action. Thus, EPA sees no need in this action to reopen the 60-day period for filing such petitions for judicial review for this “Identification of plan” update action for South Dakota.

40 CFR part 52 is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2013-0700 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before February 22, 2016. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2013-0700, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html. Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at http://www.epa.gov/dockets.

In the Federal Register of December 30, 2013 (78 FR79359) (FRL-9903-69), EPA issued a document pursuant to FFDCA section 408, 21 U.S.C. 346a, announcing the filing of a pesticide petition (PP IN-10604) by Exponent Inc., 1150 Connecticut Ave., Suite 1100, Washington, DC 20036, on behalf of the Gowan Company LLC., 370 South Main Street, Yuma, AZ 85364. The petition requested that 40 CFR 180.920 be amended by establishing an exemption from the requirement of a tolerance for residues of ammonium acetate (CAS No. 631-61-8) when used as an inert ingredient in pesticide formulations applied to crops pre-harvest and limited to 15% in pesticide formulations. That document referenced a summary of the petition prepared by Exponent Inc., on behalf of the Gowan Company LLC, the petitioner, which is available in the docket, http://www.regulations.gov. No comments were received on the notice of filing. EPA's response to these comments is discussed in Unit V.C.

Inert ingredients are all ingredients that are not active ingredients as defined in 40 CFR 153.125 and include, but are not limited to, the following types of ingredients (except when they have a pesticidal efficacy of their own): Solvents such as alcohols and hydrocarbons; surfactants such as polyoxyethylene polymers and fatty acids; carriers such as clay and diatomaceous earth; thickeners such as carrageenan and modified cellulose; wetting, spreading, and dispersing agents; propellants in aerosol dispensers; microencapsulating agents; and emulsifiers. The term “inert” is not intended to imply nontoxicity; the ingredient may or may not be chemically active. Generally, EPA has exempted inert ingredients from the requirement of a tolerance based on the low toxicity of the individual inert ingredients.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”

EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be clearly demonstrated that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.

Consistent with FFDCA section 408(c)(2)(A), and the factors specified in FFDCA section 408(c)(2)(B), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for ammonium acetate including exposure resulting from the exemption established by this action. EPA's assessment of exposures and risks associated with ammonium acetate follows.

EPA has evaluated the available toxicity data and considered their validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Specific information on the studies received and the nature of the adverse effects caused by ammonium acetate as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies.

Ammonium acetate is an ammonium salt of acetic acid. In aqueous solutions acetic acid and its salt ammonium acetate dissociate into the acetate anion (CH3COO-) and the respective cations (H+ and NH4+). The cations and ammonia (also a human metabolite) are physiological components of the human body. The chemical structures, physical-chemical properties, environmental fate behavior, and aquatic and mammalian toxicity of ammonium acetate and acetic acid are similar. Since limited data are available on ammonium acetate, toxicity data on acetic acid were used to represent toxicity due to exposure to ammonium acetate.

Acetic acid is of low acute dermal and inhalation toxicity in rats. It causes dermal irritation in mice and is corrosive in rabbits. It was also irritating in the eyes of rabbits. Although reduced body weight was observed at 390 mg/kg/day in a 90-day oral toxicity study in the rat, the reduction in weight gain was likely attributed to reduced appetite and food consumption observed in the study. Therefore, this is not considered an adverse effect. Although increased spleen weight was observed at 23-31 ppm (equivalent to 15-19 mg/kg/day) of acetic acid in a toxicity study in rats via the inhalation route of exposure, there is no concern for potential immunotoxicity. The Agency considers that this effect is due to red blood cell destruction rather than an immunotoxic response. Fetal susceptibility was not observed in several developmental studies in rats, mice and rabbits. Neither maternal nor developmental toxicity was not observed up to 1,600 mg/kg/day. It is not mutagenic in an Ames test nor is it clastogenic in a cytogenetic assay with Chinese hamster ovary K1 cells. It is not carcinogenic. In an eight month cancer study, tumors were not observed in rats at 60 mg/kg/day. While evidence of potential neurotoxicity was observed in a literature study in rats conducted by Sapute et al.1 , a second study in rats showed no indication of systemic toxicity, neurotoxicity, neuropathological or histological lesions at the same dose that was previously tested, 100 mg/kg/day. Since the second study (MRID 49703201) 2 was conducted according to the Organization for Economic Co-operation and Development (OECD) and good laboratory practice (GLP) guidelines, it was considered to accurately represent the neurotoxic potential for ammonium acetate.

As noted above, acetic acid undergoes dissociation to the acetate anion and the H+ cations in aqueous media at pHs commonly found in the environment. Also, it is a naturally-occurring substance in plants and animals. In aerobic metabolism, acetic acid (as acetate) is a metabolite that combines with Co-enzyme A to form acetyl Co-A which subsequently enters into the Citric Acid Cycle, a common metabolic pathway in which food molecules are broken down to form energy. A major function of the Citric Acid Cycle is the oxidation of acetate. In animals, acetate is obtained from the breakdown of glucose molecules.

Specific information on the studies received and the nature of the adverse effects caused by acetic acid as well as the no observed adverse effect level (NOAEL) and the lowest observed adverse effect level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in the document “Ammonium Acetate; Human Health Risk Assessment and Ecological Effects Assessment to Support Proposed Exemption from the Requirement of a Tolerance When Used as Inert Ingredients in Pesticide Formulations” in docket ID number EPA-HQ-OPP-2013-0700.

In an aqueous environment, ammonium acetate dissociates to acetic acid and its salt. Therefore, it is appropriate to expect toxicity due to exposure to ammonium acetate to be similar to that of acetic acid. Therefore, based on the absence of a toxicological endpoint of concern via dietary route of exposure for acetic acid, its regulatory history, and no new toxicological data to indicate concern regarding previous decisions, a qualitative assessment was appropriate for ammonium acetate for all pathways of human exposure (food, drinking water, and residential). A potential endpoint of concern for the inhalation route of exposure was identified in a toxicity study. Increased spleen weight due to red blood cell destruction was observed at 23-31 ppm (equivalent to 15-19 mg/kg/day) of acetic acid in rats. However, according to the American Conference of Governmental Industrial Hygenists, Inc. (ACGIH), the threshold limit value (TLV) for occupational exposure to acetic acid is 10 ppm via inhalation. Residential exposure to the proposed use of ammonium acetate via inhalation is not expected to exceed the TLV limit of 10 ppm because the residential use pattern would result in drastically lower opportunities for inhalation exposure than allowed occupational use patterns, which are limited to 10 ppm. In addition, residential exposure will be much lower because exposure is expected to occur for shorter periods to diluted acetic acid as compared to workers who are exposed for 8 hours continuously, to more concentrated acetic acid. Therefore, a qualitative assessment was conducted with regard to inhalation exposure.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to ammonium acetate, EPA considered exposure under the proposed exemption from the requirement of a tolerance. EPA assessed dietary exposures from ammonium acetate in food as follows:

Under this exemption from the requirement of a tolerance, residues of this ammonium acetate may be found on foods from crops that were treated with pesticide formulations containing ammonium acetate. However, a quantitative dietary exposure assessment was not conducted since an endpoint for risk assessment was not identified.

2. Dietary exposure from drinking water. Since a hazard endpoint of concern was not identified for the acute and chronic dietary assessment, a quantitative dietary exposure risk assessment for drinking water was not conducted, although exposures may be expected from use on food crops.

3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., textiles (clothing and diapers), carpets, swimming pools, and hard surface disinfection on walls, floors, tables).

Ammonium acetate may be used in pesticide products and non-pesticide products that may be used around the home. Based on the discussion in Unit IV.B., a quantitative residential exposure assessment for ammonium acetate was not conducted.

4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA has not found ammonium acetate to share a common mechanism of toxicity with any other substances, and ammonium acetate does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that ammonium acetate does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA Safety Factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

As part of its qualitative assessment, the Agency did not use safety factors for assessing risk, and no additional safety factor is needed for assessing risk to infants and children. Based on an assessment of ammonium acetate and its chemical properties, EPA has concluded that there are no toxicological endpoints of concern for the U.S. population, including infants and children.

Because no toxicological endpoints of concern were identified, EPA concludes that aggregate exposure to residues of ammonium acetate will not pose a risk to the U.S. population, including infants and children, and that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to ammonium acetate residues.

An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance. EPA is establishing a limitation on the amount of ammonium acetate that may be used in pesticide formulations. The limitation will be enforced through the pesticide registration process under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7 U.S.C. 136 et seq. EPA will not register any pesticide formulation used on crops for sale or distribution containing ammonium acetate at ready for use end-use concentrations exceeding 15%.

Therefore, an exemption from the requirement of a tolerance is established under 40 CFR 180.920 for ammonium acetate (CAS No. 631-61-8) when used as an inert ingredient (buffering agent) in pesticide formulations applied to crops pre-harvest and limited to 15% in the end use formulation.

This action establishes a tolerance exemption under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance exemption in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq.).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows:

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of 40 CFR part 180 through the Government Publishing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2015-0630 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before February 22, 2016. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2015-0630, by one of the following methods.

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html.

In the Federal Register of October 21, 2015 (80 FR 63731) (FRL-9934-29), EPA issued a document pursuant to FFDCA section 408, 21 U.S.C. 346a, announcing the receipt of a pesticide petition (PP IN-10836) filed by Spring Trading Company, 203 Dogwood Trail, Magnolia, Texas 77354-5201 on behalf of Lamberti USA, Inc., 14622 Exxon Road, Conroe, Texas 77302. The petition requested that 40 CFR 180.960 be amended by establishing an exemption from the requirement of a tolerance for residues of 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] (CAS Reg. No. 1477613-46-9). That document included a summary of the petition prepared by the petitioner and solicited comments on the petitioner's request. The Agency did not receive any comments in response to the notice of filing.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and use in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing an exemption from the requirement of a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . .” and specifies factors EPA is to consider in establishing an exemption.

EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be shown that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.

Consistent with FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action and considered its validity, completeness and reliability and the relationship of this information to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. In the case of certain chemical substances that are defined as polymers, the Agency has established a set of criteria to identify categories of polymers expected to present minimal or no risk. The definition of a polymer is given in 40 CFR 723.250(b) and the exclusion criteria for identifying these low-risk polymers are described in 40 CFR 723.250(d). 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] conforms to the definition of a polymer given in 40 CFR 723.250(b) and meets the following criteria that are used to identify low-risk polymers.

1. The polymer is not a cationic polymer nor is it reasonably anticipated to become a cationic polymer in a natural aquatic environment.

2. The polymer does contain as an integral part of its composition the atomic elements carbon, hydrogen, and oxygen.

3. The polymer does not contain as an integral part of its composition, except as impurities, any element other than those listed in 40 CFR 723.250(d)(2)(ii).

4. The polymer is neither designed nor can it be reasonably anticipated to substantially degrade, decompose, or depolymerize.

5. The polymer is manufactured or imported from monomers and/or reactants that are already included on the TSCA Chemical Substance Inventory or manufactured under an applicable TSCA section 5 exemption.

6. The polymer is not a water absorbing polymer with a number average molecular weight (MW) greater than or equal to 10,000 daltons.

7. The polymer does not contain certain perfluoroalkyl moieties consisting of a CF3- or longer chain length as specified in 40 CFR 723.250(d)(6).

Additionally, the polymer also meets as required the following exemption criteria specified in 40 CFR 723.250(e).

8. The polymer's minimum number average MW is greater than or equal to 10,000 daltons. The polymer contains less than 2% oligomeric material below MW 500 and less than 5% oligomeric material below MW 1,000.

Thus, 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] meets the criteria for a polymer to be considered low risk under 40 CFR 723.250. Based on its conformance to the criteria in this unit, no mammalian toxicity is anticipated from dietary, inhalation, or dermal exposure to 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol].

For the purposes of assessing potential exposure under this exemption, EPA considered that 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] could be present in all raw and processed agricultural commodities and drinking water, and that non-occupational non-dietary exposure was possible. The number average MW of 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] is 10,000 daltons. Generally, a polymer of this size would be poorly absorbed through the intact gastrointestinal tract or through intact human skin. Since 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] conform to the criteria that identify a low-risk polymer, there are no concerns for risks associated with any potential exposure scenarios that are reasonably foreseeable. The Agency has determined that a tolerance is not necessary to protect the public health.

Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA has not found 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] to share a common mechanism of toxicity with any other substances, and 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the data base unless EPA concludes that a different margin of safety will be safe for infants and children. Due to the expected low toxicity of 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol], EPA has not used a safety factor analysis to assess the risk. For the same reasons the additional tenfold safety factor is unnecessary.

Based on the conformance to the criteria used to identify a low-risk polymer, EPA concludes that there is a reasonable certainty of no harm to the U.S. population, including infants and children, from aggregate exposure to residues of 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol].

There are no existing tolerance exemptions 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol]).

An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

The Codex has not established a MRL for 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol].

Accordingly, EPA finds that exempting residues of 2-propenoic acid, homopolymer, ester with α-[2,4,6-tris(1-phenylethyl)phenyl]-ω-hydroxypoly(oxy-1,2-ethanediyl), compd. with 2,2′,2″-nitrilotris[ethanol] from the requirement of a tolerance will be safe.

This action establishes a tolerance under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq.).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2014-0788 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before February 22, 2016. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2014-0788, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html.

In the Federal Register of October 21, 2015 (80 FR 63731) (FRL-9935-29), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 4E8321) by IR-4, IR-4 Project Headquarters, Rutgers, The State University of New Jersey, 500 College Road East, Suite 201 W, Princeton, NJ 08540. The petition requested that 40 CFR 180.434 be amended by establishing tolerances for residues of the fungicide, propiconazole, 1-[[2-(2,4-dichlorophenyl)-4-propyl-1,3-dioxolan-2-yl] methyl]-1H-1,2,4-triazole and its metabolites determined as 2,4,-dichlorobenzoic acid (2,4-DCBA), expressed as the stoichiometric equivalent of propiconazole, in or on the following raw agricultural commodities: Dill, dried at 80 parts per million (ppm); dill, fresh at 30 ppm; dill, seed at 15 ppm; fruit, stone, group 12-12, except plum at 4 ppm and nut, tree, group 14-12 at 0.1 ppm; leafy Brassica greens, subgroup 5B at 20 ppm; quinoa, grain, at 3.0 ppm; radish, roots at 0.04 ppm; radish, tops at 0.2 ppm; ti palm, leaves at 10 ppm; ti palm, roots at 0.3 ppm, and watercress at 6 ppm. IR-4 also requested that upon establishment of the above tolerances, that the existing tolerances for “fruit, stone, group 12, except plum” and “nut, tree, group 14” be removed. That document referenced a summary of the petition prepared by Syngenta, the registrant, which is available in the docket, http://www.regulations.gov. The October 21, 2015 notice supersedes a notice of filing published in the Federal Register on February 11, 2015 (80 FR 7559) (FRL-9921-94). The October 21, 2015 notice includes the commodity “quinoa, grain” as well as the other commodities that were originally requested in the February 11, 2015 notice. Two comments were received in response to the October 21, 2015 notice of filing. EPA's response to these comments is discussed in Unit IV.C.

Based upon review of the data supporting the petition, EPA has modified some of the commodity vocabulary and rounded the significant figures of some of the tolerances. The reason for these changes are explained in Unit IV.D.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”

Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for propiconazole including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with propiconazole follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.

The primary target organ for propiconazole toxicity in animals is the liver. Increased liver weights were seen in mice after subchronic or chronic oral exposures to propiconazole. Liver lesions such as vacuolation of hepatocytes, ballooned liver cells, foci of enlarged hepatocytes, hypertrophy, and necrosis are characteristic of propiconazole toxicity in rats and mice. Decreased body weight gain was also seen in subchronic, chronic, developmental and reproductive studies in animal studies. Dogs appeared to be more sensitive to the localized toxicity of propiconazole as manifested by stomach irritations at 6 milligram/kilogram/day (mg/kg/day) and above.

In rabbits, developmental toxicity occurred at a higher dose than the maternally toxic dose, while in rats, developmental toxicity occurred at lower doses than maternal toxic doses. Increased incidences of rudimentary ribs occurred in rat and rabbit fetuses. Increased cleft palate malformations were noted in two studies in rats. In one published study in rats, developmental effects (malformations of the lung and kidneys, incomplete ossification of the skull, caudal vertebrae and digits, extra rib (14th rib) and missing sternbrae) were reported at doses that were not maternally toxic. In the two generation reproduction study in rats, offspring toxicity occurred at a higher dose than the parental toxic dose suggesting lower susceptibility of the offspring to the toxic doses of propiconazole.

The acute neurotoxicity study produced severe clinical signs of toxicity (decreased activity, cold, pale, decreased motor activity, etc.) in rats at the high dose of 300 milligram/kilogram (mg/kg). Limited clinical signs (piloerection, diarrhea, tip toe gait) were observed in the mid-dose animals (100 mg/kg), while no treatment related signs were observed at 30 mg/kg. The current acute dietary assessment for the general population is based on the NOAEL of 30 mg/kg from the acute neurotoxicity study. A subchronic neurotoxicity study in rats did not produce neurotoxic signs at the highest dose tested that was associated with decreased body weight.

Propiconazole was negative for mutagenicity in the in vitro BALB/3T3 cell transformation assay, bacterial reverse mutation assay, Chinese hamster bone marrow chromosomal aberration assay, unscheduled DNA synthesis studies in human fibroblasts and primary rat hepatocytes, mitotic gene conversion assay, and the dominant lethal assay in mice. It caused proliferative changes in the rat liver with or without pretreatment with an initiator, like phenobarbital, a known liver tumor promoter. Liver enzyme induction studies with propiconazole in mice demonstrated that propiconazole is a strong phenobarbital type inducer of xenobiotic metabolizing enzymes. Hepatocellular proliferation studies in mice suggest that propiconazole induces cell proliferation followed by treatment-related hypertrophy in a manner similar to the known hypertrophic agent phenobarbital.

Propiconazole was carcinogenic to male mice but was not carcinogenic to rats or to female mice. The Agency classified propiconazole as a possible human carcinogen and recommended that, for the purpose of risk characterization, the reference dose (RfD) approach be used for quantification of human risk. Propiconazole is not genotoxic and this fact, together with special mechanistic studies, indicates that propiconazole is a threshold carcinogen. Propiconazole produced liver tumors in male mice only at a high dose that was toxic to the liver. At doses below the RfD, liver toxicity is not expected; therefore, tumors are also not expected.

Specific information on the studies received and the nature of the adverse effects caused by propiconazole as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in the document titled, “Propiconazole Human Health Risk Assessment for the New Uses of Propiconazole on dill, leafy brassicas crop subgroup 5B, ti palm, watercress, and quinoa, along with expansion to fruit, stone, group 12-12; except plum, and nut, tree, group 14-12” on pp. 37 in docket ID number EPA-HQ-OPP-2014-0788.

Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which the NOAEL and the LOAEL are identified. Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a RfD—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/assessing-human-health-risk-pesticides.

A summary of the toxicological endpoints for propiconazole used for human risk assessment is shown in Table 1 of this unit.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to propiconazole, EPA considered exposure under the petitioned-for tolerances as well as all existing propiconazole tolerances in 40 CFR 180.434. EPA assessed dietary exposures from propiconazole in food as follows:

i. Acute exposure. Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure.

Such effects were identified for propiconazole. In estimating acute dietary exposure, EPA used food consumption information from the United States Department of Agriculture (USDA) National Health and Nutrition Examination Survey, What We Eat in America, (NHANES/WWEIA). This dietary survey was conducted from 2003 to 2008. As to residue levels in food, EPA conducted an acute dietary analysis for propiconazole residues of concern using tolerance levels and 100 percent crop treated (PCT) for all existing and proposed uses.

ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA's NHANES/WWEIA. This dietary survey was conducted from 2003 to 2008. As to residue levels in food, EPA conducted a chronic dietary analysis for propiconazole residues of concern using tolerance levels for some commodities, average field trial residues for the remaining commodities, and 100 PCT for all existing and proposed uses.

iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that a nonlinear RfD approach is appropriate for assessing cancer risk to propiconazole. Cancer risk was assessed using the same exposure estimates as discussed in Unit III.C.1.ii., chronic exposure.

iv. Anticipated residue information. Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must require pursuant to FFDCA section 408(f)(1) that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such data call-ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of these tolerances.

2. Dietary exposure from drinking water. The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for propiconazole in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of propiconazole. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/about-water-exposure-models-used-pesticide.

Based on the Surface Water Concentration Calculator (SWCC) and Pesticide Root Zone Model—Ground Water (PRZM-GW) models, the estimated drinking water concentrations (EDWCs) of propiconazole for acute exposures are estimated to be 35.2 parts per billion (ppb) for surface water and 37.9 ppb for ground water, and for chronic exposures are estimated to be 18.6 ppb for surface water and 35.1 ppb for ground water.

Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For acute dietary risk assessment, the water concentration value of 37.9 ppb was used to assess the contribution to drinking water. For chronic dietary risk assessment, the water concentration of value 35.1 ppb was used to assess the contribution to drinking water.

3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets).

Propiconazole is currently registered for the following uses that could result in residential exposures: Turf, ornamentals, and in paint. The highest incidental oral and dermal exposure scenarios are expected from residential use on turf. EPA assessed short-term risk to toddlers from incidental oral and dermal exposure and short-term risk to adults from dermal and inhalation residential handler exposure as well as from post-application dermal exposure. The highest post-application exposure from residential use on turf was used to assess risk to short-term aggregate exposures.

The only residential use scenario that will result in potential intermediate term exposure to propiconazole is wood treatment, which the Agency assumes may result in dermal and incidental oral post-application exposures to children. No chronic exposures are expected. Further information regarding EPA standard assumptions and generic inputs for residential exposures may be found at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/standard-operating-procedures-residential-pesticide.

4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

Propiconazole is a member of the triazole-containing class of pesticides. Although conazoles act similarly in plants (fungi) by inhibiting ergosterol biosynthesis, there is not necessarily a relationship between their pesticidal activity and their mechanism of toxicity in mammals. Structural similarities do not constitute a common mechanism of toxicity. Evidence is needed to establish that the chemicals operate by the same, or essentially the same, sequence of major biochemical events (EPA, 2002). In conazoles, however, a variable pattern of toxicological responses is found; some are hepatotoxic and hepatocarcinogenic in mice. Some induce thyroid tumors in rats. Some induce developmental, reproductive, and neurological effects in rodents. Furthermore, the conazoles produce a diverse range of biochemical events including altered cholesterol levels, stress responses, and altered DNA methylation. It is not clearly understood whether these biochemical events are directly connected to their toxicological outcomes. Thus, there is currently no evidence to indicate that conazoles share common mechanisms of toxicity and EPA is not following a cumulative risk approach based on a common mechanism of toxicity for the conazoles. For information regarding EPA's procedures for cumulating effects from substances found to have a common mechanism of toxicity, see EPA's Web site at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/cumulative-assessment-risk-pesticides.

Propiconazole is a triazole-derived pesticide. This class of compounds can form the common metabolite 1,2,4-triazole and two triazole conjugates (triazolylalanine and triazolylacetic acid). To support existing tolerances and to establish new tolerances for triazole-derivative pesticides, including propiconazole, EPA conducted a human health risk assessment for exposure to 1,2,4-triazole, triazolylalanine, and triazolylacetic acid resulting from the use of all current and pending uses of any triazole-derived fungicide. The risk assessment is a highly conservative, screening-level evaluation in terms of hazards associated with common metabolites (e.g., use of a maximum combination of uncertainty factors) and potential dietary and non-dietary exposures (i.e., high end estimates of both dietary and non-dietary exposures). The Agency retained a 3X for the LOAEL to NOAEL safety factor when the reproduction study was used. In addition, the Agency retained a 10X for the lack of studies including a DNT. The assessment includes evaluations of risks for various subgroups, including those comprised of infants and children. The Agency's complete risk assessment is found in the propiconazole reregistration docket at http://www.regulations.gov, Docket ID Number EPA-HQ-OPP-2005-0497.

An updated dietary exposure and risk analysis for the common triazole metabolites 1,2,4-triazole (T), triazolylalanine (TA), triazolylacetic acid (TAA), and triazolylpyruvic acid (TP) was completed on April 9, 2015, in association with registration requests for several triazole fungicides, propiconazole, difenoconazole, and flutriafol. That analysis concluded that risk estimates were below the Agency's level of concern for all population groups. This assessment may be found on http://www.regulations.gov by searching for the following title and docket number: “Common Triazole Metabolites: Updated Aggregate Human Health Risk Assessment to Address The New Section 3 Registrations For Use of Propiconazole on Tea, Dill, Mustard Greens, Radish, and Watercress; Use of Difenoconazole on Globe Artichoke, Ginseng and Greenhouse Grown Cucumbers and Conversion of the Established Foliar Uses/Tolerances for Stone Fruit and Tree Nut Crop Groups to Fruit, Stone, Group 12-12 and the Nut, Tree, Group 14-12.; and Use of Flutriafol on Hops” (located in docket ID number EPA-HQ-OPP-2014-0788).

1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the Food Quality Protection Act Safety Factor (FQPA SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

2. Prenatal and postnatal sensitivity. In the developmental toxicity study in rats, fetal effects observed in this study at a dose lower than that evoking maternal toxicity are considered to be quantitative evidence of increased susceptibility of fetuses to in utero exposure to propiconazole. Neither quantitative nor qualitative evidence of increased susceptibility was observed in utero or postnatally in either the rabbit developmental or 2-generation reproduction rat study. There is no evidence of neuropathology or abnormalities in the development of the fetal nervous system from the available toxicity studies conducted with propiconazole. In the rat acute neurotoxicity study, there was evidence of clinical toxicity at the high dose of 300 mg/kg, but no evidence of neuropathology from propiconazole administration.

Although there was quantitative evidence of increased susceptibility of the young following exposure to propiconazole in the developmental rat study, the Agency determined there is a low degree of concern for this finding and no residual uncertainties because the increased susceptibility was based on minimal toxicity at high doses of administration, clear NOAELs and LOAELs have been identified for all effects of concern, and a clear dose-response has been well defined.

3. Conclusion. EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1x. That decision is based on the following findings:

i. The toxicity database for propiconazole is complete.

ii. Other than the mild effects seen at 300 mg/kg in the acute neurotoxicity study, neurotoxicity and neurobehavioral effects were not seen in the propiconazole toxicity database. The liver, not the nervous system, is the primary target organ of propiconazole toxicity.

iii. Although an apparent increased quantitative susceptibility was observed in fetuses and offspring, for the reasons noted in this Unit residual uncertainties or concerns for prenatal and/or postnatal toxicity are minimal.

iv. There are no residual uncertainties identified in the exposure databases. The acute dietary food exposure assessments were performed based on 100 PCT and tolerance-level residues, while the chronic used a combination of tolerance-level residues and reliable data on average field trial residues and 100 PCT. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to propiconazole in drinking water. EPA used similarly conservative assumptions to assess post-application exposure of children as well as incidental oral exposure of toddlers. A turf transferable residue study is unavailable but being requested from the registrant for registration review of propiconazole. In all probability this study will reduce exposure estimates for both the incidental oral and post-application exposure to children. These assessments will not underestimate the exposure and risks posed by propiconazole.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.

1. Acute risk. Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to propiconazole will occupy 84% of the aPAD for children 1-2 years old, the population group receiving the greatest exposure.

2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to propiconazole from food and water will utilize 25% of the cPAD for children 1-2 years old, the population group receiving the greatest exposure. Based on the explanation in Unit III.C.3., regarding residential use patterns, chronic residential exposure to residues of propiconazole is not expected.

3. Short-term risk. Short-term aggregate exposure takes into account short-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Propiconazole is currently registered for uses that could result in short-term residential exposure, and the Agency has determined that it is appropriate to aggregate chronic exposure through food and water with short-term residential exposures to propiconazole.

Using the exposure assumptions described in this unit for short-term exposures, EPA has concluded the combined short-term food, water, and residential exposures result in aggregate MOEs from post-application activities (the highest exposure scenario) of 200 for adults and 96 for children 1-2 years old. Although the MOE for children 1-2 years old is slightly below the target MOE of 100, the Agency does not believe that propiconazole poses short-term risks of concern because the difference is small and more than offset by the use of conservative endpoints and conservative exposure assumptions. This assessment is considered conservative since the short-term endpoints are based on a conservative LOAEL that is 3x higher than the NOAEL. Therefore, the true NOAEL is likely higher and would result in MOEs greater than 100. Further, the assessment combines conservative assumptions by using tolerance-level residues and reliable data on average field-trial residues and 100 PCT, conservative assumptions in the ground and surface water modeling, and conservative assumptions to assess post-application exposure of children as well as incidental oral exposure of toddlers. Refining any one of these conservatisms would result in MOEs for this age group that are not of concern. Although dietary (food and water) is not the aggregate exposure driver, incorporating PCT would likely increase the aggregate MOE further above 100. For example, using the Agency's highest average PCT reported for propiconazole residues on crops (i.e., 55%), which is approximately half the currently assumed dietary exposure, the MOE for this age group would exceed the target MOE of 100 and not be of concern. Therefore, the Agency has determined that there is no short-term risk of concern from exposure to propiconazole.

4. Intermediate-term risk. Intermediate-term aggregate exposure takes into account intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

Propiconazole is currently registered for use as a wood treatment that could result in intermediate-term residential exposure, and the Agency has determined that it is appropriate to aggregate chronic exposure through food and water with intermediate-term residential exposures to propiconazole.

Using the exposure assumptions described in this unit for intermediate-term exposures, EPA has concluded that the combined intermediate-term food, water, and residential exposures result in an aggregate MOE of 110 for children 1-2 years old. Because EPA's level of concern for propiconazole is a MOE of 100 or below, this MOE is not of concern.

5. Aggregate cancer risk for U.S. population. Based on the discussion in Unit III.A., EPA considers the chronic aggregate risk assessment to be protective of any aggregate cancer risk. As there is no chronic risk of concern, EPA does not expect any cancer risk to the U.S. population from aggregate exposure to propiconazole.

6. Determination of safety. Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to propiconazole residues.

Adequate enforcement methodology, a high performance liquid chromatography with ultraviolet detection method (HPLC/UV Method AG-671A) is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; email address: [email protected].

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

There are no Codex MRLs for dillweed (fresh or dried), dill seed, the brassica leafy greens subgroup 5B, ti palm, watercress, quinoa or radish.

Codex does have MRLs in place for peach and plums (part of the U.S. stone fruit group), and pecans (part of the U.S. tree nut group) that are different than the U.S. tolerances. The U.S. tolerance expression is not harmonized with the Codex expression, which is expressed in terms of propiconazole per se, and therefore, the U.S. tolerance level for stone fruit and tree nuts cannot be harmonized with the Codex MRLs that are currently established.

Two comments were received in response to the October 21, 2015 notice of filing. The first comment asserted that no residues should be allowed and that the pesticide should not be approved for sale or use. The Agency understands the commenter's concerns and recognizes that some individuals believe that pesticides should be banned on agricultural crops. However, the existing legal framework provided by section 408 of the FFDCA states that tolerances may be set when persons seeking such tolerances or exemptions have demonstrated that the pesticide meets the safety standard imposed by that statute. The comment appears to be directed at the underlying statute and not EPA's implementation of it; the citizen has made no contention that EPA has acted in violation of the statutory framework.

The second comment was from the Center for Biological Diversity and concerned endangered species; specifically stating that EPA cannot approve this new use prior to completion of consultations with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service (“the Services”). This comment is not relevant to the Agency's evaluation of safety of the propiconazole tolerances; section 408 of the FFDCA focuses on potential harms to human health and does not permit consideration of effects on the environment.

The Agency is revising the petitioned-for tolerance requests for “dill, fresh” and “dill, dried” to “dillweed, fresh leaves” and “dillweed, dried leaves”, respectively, for consistency with the Agency's commodity vocabulary for those commodities. For the same reason, the Agency is revising the petitioned-for tolerance request for “leafy Brassica greens, subgroup 5B” to “Brassica leafy greens, subgroup 5B”. In addition, EPA is revising the tolerance values for radish, tops; ti palm, roots; and watercress to be consistent with EPA's policy on significant figures for tolerances.

Therefore, tolerances are established for residues of propiconazole, 1-[[2-(2,4-dichlorophenyl)-4-propyl-1,3-dioxolan-2-yl] methyl]-1H-1,2,4-triazole and its metabolites determined as 2,4,-dichlorobenzoic acid (2,4-DCBA), expressed as the stoichiometric equivalent of propiconazole, in or on brassica leafy greens, subgroup 5B at 20 ppm; dill seed at 15 ppm; dillweed, dried leaves at 80 ppm; dillweed, fresh leaves at 30 ppm; quinoa, grain at 3.0 ppm; radish, roots at 0.04 ppm; radish, tops at 0.20 ppm; ti palm, leaves at 10 ppm; ti palm, roots at 0.30 ppm; and watercress at 6.0 ppm. In addition, the existing fruit, stone, group 12, except plum and nut, tree, group 14 tolerances are modified to read “fruit, stone, group 12-12, except plum” and “nut, tree, group 14-12,” respectively.

This action establishes tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq.).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows:

As NHTSA received no comments on its interim final rule published on September 2, 2015 (80 FR 53011), the agency is making no changes to the rule and its effective date is September 2, 2015. For regulatory analyses and notices associated with this action, please see the interim final rule published at 80 FR 53011.

Accordingly, the interim rule amending 49 CFR parts 591 and 592, published at 80 FR 53011 on September 2, 2015, is adopted as final without change.