Federal Register Vol. 81, No.128,

Federal Register Volume 81, Issue 128 (July 5, 2016)

Page Range43463-43925
FR Document

81_FR_128
Current View
Page and SubjectPDF
81 FR 43642 - Notice of Chief Freedom of Information Act Officer Council MeetingPDF
81 FR 43699 - Sunshine Act Meetings; Unified Carrier Registration Plan Board of DirectorsPDF
81 FR 43661 - Sunshine Act Meeting NoticePDF
81 FR 43670 - Proposed Collection; Comment RequestPDF
81 FR 43613 - Nationwide Differential Global Positioning System (NDGPS)PDF
81 FR 43645 - Duke Energy Carolinas, LLC; McGuire Nuclear Station, Units 1 and 2; Alternative to the Physical Inventory Requirements for Movable In-Core DetectorsPDF
81 FR 43656 - Tennessee Valley Authority Watts Bar Nuclear Plant, Unit 1PDF
81 FR 43629 - Privacy Act of 1974; Notice of a Computer Matching Program Between the Department of Housing and Urban Development (HUD) and the Department of Justice (DOJ)PDF
81 FR 43601 - Agency Information Collection Activities; Proposed Renewal of an Existing Collection (EPA ICR No. 0794.16); Comment RequestPDF
81 FR 43599 - Notification of a Partially Closed Meeting of the Science Advisory Board's 2016-2018 Scientific and Technological Achievement Awards CommitteePDF
81 FR 43602 - Evaluating Urban Resilience to Climate Change: A Multi-Sector Approach; CorrectionPDF
81 FR 43600 - Meetings of the Local Government Advisory Committee and the Small Communities Advisory SubcommitteePDF
81 FR 43608 - Intent To Award a Sole Source Supplement to the Christopher and Dana Reeve FoundationPDF
81 FR 43608 - Notice of Intent To Award a Single Source Non-Competing Supplement to the Residential Information Systems Project, University of MinnesotaPDF
81 FR 43570 - Request for Nominations of Members for the National Agricultural Research, Extension, Education, and Economics Advisory Board and Specialty Crop CommitteePDF
81 FR 43591 - Elimination of Publication Requirement in the Collaborative Search Pilot Program Between the Japan Patent Office and the United States Patent and Trademark OfficePDF
81 FR 43602 - Public Safety and Homeland Security Bureau Launches EAS Test Reporting System (ETRS) and Seeks Comment on EAS Operating Handbook RecommendationsPDF
81 FR 43636 - Notice of Availability of a Final Supplemental Environmental Impact Statement for the Jamul Indian Village Proposed Gaming Management Agreement, San Diego County, CaliforniaPDF
81 FR 43605 - Proposed Agency Information Collection Activities: Comment RequestPDF
81 FR 43492 - Decision Not To Regulate Forest Road Discharges Under the Clean Water Act; Notice of DecisionPDF
81 FR 43637 - Notice of Intent To Repatriate Cultural Items: Field Museum of Natural History, Chicago, ILPDF
81 FR 43641 - Notice of Inventory Completion: Office of the State Archaeologist, University of Iowa, Iowa City, IAPDF
81 FR 43638 - Notice of Inventory Completion: University of Pennsylvania Museum of Archaeology and Anthropology, Philadelphia, PA; CorrectionPDF
81 FR 43639 - Notice of Inventory Completion: Stanford University Heritage Services, Palo Alto, CAPDF
81 FR 43640 - Notice of Intent To Repatriate Cultural Items: Stanford University Heritage Services, Palo Alto, CAPDF
81 FR 43577 - Truck and Bus Tires From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, in Part, and Alignment of Final Determination With Final Antidumping DeterminationPDF
81 FR 43582 - Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China: Final Results of Changed Circumstances ReviewPDF
81 FR 43587 - Stainless Steel Butt-Weld Pipe Fittings From Italy: Final Results of Antidumping Duty Administrative Review; 2014-2015PDF
81 FR 43631 - Final Supplementary Rules for the Cove Recreation Site, Owyhee County, IdahoPDF
81 FR 43696 - Imposition of Nonproliferation Measures Against Foreign Person, Including a Ban on U.S. Government ProcurementPDF
81 FR 43695 - Exchange Visitor Program-Use of Forms DS-2019 in the Summer Work Travel ProgramPDF
81 FR 43644 - Notice of Availability of Funds and Funding Opportunity Announcement for Disability Employment Initiative Cooperative AgreementsPDF
81 FR 43693 - Executive Order 13224 Designation of Asim Umar, aka Asim Umer, aka Maulana Asim Umar, aka Sanaul Haq, as a Specially Designated Global TerroristPDF
81 FR 43694 - Imposition of Nonproliferation Measures Against Foreign Persons, Including a Ban on U.S. Government ProcurementPDF
81 FR 43696 - 30-Day Notice of Proposed Information Collection: Statement of Exigent/Special Family Circumstances for Issuance of a U.S. Passport to a Minor Under Age 16PDF
81 FR 43693 - 30-Day Notice of Proposed Information Collection: Statement of Consent: Issuance of a U.S. Passport to a Minor Under Age 16PDF
81 FR 43622 - Agency Information Collection Activities: Proposed Collection; Comment Request; Residential Basement Floodproofing CertificationPDF
81 FR 43626 - West Virginia; Major Disaster and Related DeterminationsPDF
81 FR 43617 - West Virginia; Amendment No. 1 to Notice of a Major Disaster DeclarationPDF
81 FR 43642 - Certain Tissue Paper Products From ChinaPDF
81 FR 43627 - Texas; Amendment No. 13 to Notice of a Major Disaster DeclarationPDF
81 FR 43616 - Texas; Amendment No. 2 to Notice of a Major Disaster DeclarationPDF
81 FR 43523 - Updating Competitive Bidding RulesPDF
81 FR 43603 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated AuthorityPDF
81 FR 43604 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated AuthorityPDF
81 FR 43612 - Agency Information Collection Activities: Submission for OMB Review; Comment RequestPDF
81 FR 43611 - Center for Substance Abuse Prevention; Advisory Committee; Drug Testing Advisory Board; RenewalPDF
81 FR 43627 - Texas; Amendment No. 2 to Notice of a Major Disaster DeclarationPDF
81 FR 43622 - Georgia; Amendment No. 2 to Notice of a Major Disaster DeclarationPDF
81 FR 43617 - Texas; Amendment No. 4 to Notice of a Major Disaster DeclarationPDF
81 FR 43625 - Texas; Amendment No. 5 to Notice of a Major Disaster DeclarationPDF
81 FR 43626 - Texas; Amendment No. 4 to Notice of a Major Disaster DeclarationPDF
81 FR 43590 - Mid-Atlantic Fishery Management Council (MAFMC); Public MeetingPDF
81 FR 43591 - Mid-Atlantic Fishery Management Council (MAFMC); Public MeetingPDF
81 FR 43671 - Public Comment on an Annotated Outline for the Fourth National Climate AssessmentPDF
81 FR 43643 - Unmanned Aircraft Systems EvaluationPDF
81 FR 43642 - Certain Automated Teller Machines and Point of Sale Devices and Components Thereof; Termination of an Investigation on the Basis of Withdrawal of the ComplaintPDF
81 FR 43705 - Fourth Allocation of Public Transportation Emergency Relief Funds in Response to Hurricane SandyPDF
81 FR 43524 - Civil PenaltiesPDF
81 FR 43510 - World Trade Center Health Program; Addition of New-Onset Chronic Obstructive Pulmonary Disease and WTC-Related Acute Traumatic Injury to the List of WTC-Related Health ConditionsPDF
81 FR 43699 - Hours of Service of Drivers: Application for Renewal of Exemptions From the 14-Hour Rule During Independence Day Celebrations for Illumination Fireworks, LLC and ACE Pyro, LLCPDF
81 FR 43701 - Hours of Service (HOS) of Drivers; American Pyrotechnics Association (APA); Granting of Exemption From the 14-Hour RulePDF
81 FR 43596 - Notice of Schedule for Environmental Review of the Mountain Valley Pipeine Project and the Equitrans Expansion ProjectPDF
81 FR 43594 - Records Governing Off-the-Record Communications; Public NoticePDF
81 FR 43595 - NextEra Energy Resources, LLC PSEG Companies v. ISO New England Inc.; Notice of ComplaintPDF
81 FR 43598 - Pine Prairie Energy Center, LLC; Notice of Request Under Blanket AuthorizationPDF
81 FR 43593 - Implementation Issues Under the Public Utility Regulatory Policies Act of 1978; Supplemental Notice of Technical ConferencePDF
81 FR 43588 - Open Meeting of the Commission on Enhancing National CybersecurityPDF
81 FR 43604 - FDIC Advisory Committee on Community Banking; Notice of MeetingPDF
81 FR 43710 - Denial of Motor Vehicle Defect PetitionPDF
81 FR 43571 - Proposed Information Collection; Comment Request; 2017 Economic CensusPDF
81 FR 43573 - Proposed Information Collection; Comment Request; 2017 Economic Census of Island AreasPDF
81 FR 43615 - Agency Information Collection Activities: United States-Caribbean Basin Trade Partnership Act (CBTPA)PDF
81 FR 43471 - Special Conditions: JAMCO America, Inc., Boeing Model 777-300ER, Dynamic Test Requirements for Single-Occupant Oblique (Side-Facing) Seats With Inflatable RestraintsPDF
81 FR 43644 - Notice of Intent To Prepare an Environmental Impact Statement and Initiate Consultation for Proposed Changes to Sacramento Peak Observatory Operations, Sunspot, New Mexico; Notice of Public Scoping Meetings and Comment PeriodPDF
81 FR 43599 - Atlantic Energy MA LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 AuthorizationPDF
81 FR 43597 - Atlantic Energy MD, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 AuthorizationPDF
81 FR 43597 - Atlantic Energy LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 AuthorizationPDF
81 FR 43598 - River Bend Solar, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 AuthorizationPDF
81 FR 43594 - New York State Public Service Commission, New York Power Authority, Long Island Power Authority, New York State Energy Research & Development Authority, City of New York, Advanced Energy Management Alliance, Natural Resources Defense Council, v. New York Independent System Operator, Inc.PDF
81 FR 43595 - Combined Notice of Filings #1PDF
81 FR 43589 - Endangered Species; File Nos. 17304, 18238, 18926, 19496, 19528, 19621, 19637, and 19716PDF
81 FR 43591 - Marine Mammals; File No. 20324PDF
81 FR 43670 - Product Change-Priority Mail Express Negotiated Service AgreementPDF
81 FR 43670 - Product Change-Priority Mail Express, Priority Mail, & First-Class Package Service Negotiated Service AgreementPDF
81 FR 43670 - Product Change-Priority Mail Negotiated Service AgreementPDF
81 FR 43463 - Acceptance Criteria for Portable Oxygen Concentrators Used on Board Aircraft; CorrectionPDF
81 FR 43708 - Meeting Notice-U.S. Maritime Transportation System National Advisory CommitteePDF
81 FR 43589 - Mid-Atlantic Fishery Management Council (MAFMC); Public MeetingsPDF
81 FR 43628 - Proposed Flood Hazard DeterminationsPDF
81 FR 43698 - Notice of Request To Release Airport PropertyPDF
81 FR 43469 - Special Conditions: Kestrel Aircraft Company, Model K-350 Turboprop, Lithium BatteriesPDF
81 FR 43616 - Proposed Flood Hazard Determinations for Carroll County, Iowa and Incorporated Areas; WithdrawalPDF
81 FR 43691 - Agency Information Collection Activities: Proposed Request and Comment RequestPDF
81 FR 43697 - Membership in the National Parks Overflights Advisory Group Aviation Rulemaking CommitteePDF
81 FR 43678 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Listing and Trading of the Shares of the AdvisorShares Market Adaptive Unconstrained Income ETF of the AdvisorShares TrustPDF
81 FR 43681 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Professionals Order CountingPDF
81 FR 43687 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Content Outline for the Municipal Advisor Representative Qualification Examination (Series 50)PDF
81 FR 43690 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation of FINRA Rule 4240 (Margin Requirements for Credit Default Swaps)PDF
81 FR 43673 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Investors' Exchange LLCPDF
81 FR 43689 - Self-Regulatory Organization; BATS BYX-Exchange, Inc.; Order Granting an Extension to Limited Exemption From Rule 612(c) of Regulation NMS in Connection With the Exchange's Retail Price Improvement ProgramPDF
81 FR 43618 - Changes in Flood Hazard DeterminationsPDF
81 FR 43635 - Notice of Crude Helium Auction and Sale for Fiscal Year 2017 DeliveryPDF
81 FR 43627 - Texas; Major Disaster and Related DeterminationsPDF
81 FR 43622 - Texas; Amendment No. 3 to Notice of a Major Disaster DeclarationPDF
81 FR 43623 - Changes in Flood Hazard DeterminationsPDF
81 FR 43708 - Cooper Tire & Rubber Company, Grant of Petition for Decision of Inconsequential NoncompliancePDF
81 FR 43616 - Final Flood Hazard DeterminationsPDF
81 FR 43490 - Approval and Promulgation of Implementation Plans; Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone StandardPDF
81 FR 43568 - Proposed Flood Elevation Determinations for Will County, Illinois, and Incorporated Areas; WithdrawalPDF
81 FR 43625 - Texas; Amendment No. 1 to Notice of a Major Disaster DeclarationPDF
81 FR 43707 - U.S. Merchant Marine Academy Board of Visitors MeetingPDF
81 FR 43463 - Revisions to the Civil Penalty Inflation Adjustment TablesPDF
81 FR 43568 - Approval and Promulgation of Implementation Plans; Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone StandardPDF
81 FR 43575 - Submission for OMB Review; Comment RequestPDF
81 FR 43488 - Special Local Regulation; Cumberland River, Mile 190.0 to 191.5; Nashville, TNPDF
81 FR 43669 - New Postal ProductsPDF
81 FR 43488 - Self-Employment Tax Treatment of Partners in a Partnership That Owns a Disregarded Entity; CorrectionPDF
81 FR 43610 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 43609 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 43611 - National Center for Complementary & Integrative Health; Notice of Closed MeetingPDF
81 FR 43609 - National Heart, Lung, and Blood Institute; Notice of Closed MeetingPDF
81 FR 43611 - National Heart, Lung, and Blood Institute; Notice of MeetingPDF
81 FR 43610 - Eunice Kennedy Shriver National Institute of Child Health & Human Development; Notice of Closed MeetingPDF
81 FR 43579 - Countervailing Duty Investigation of Certain Amorphous Silica Fabric From the People's Republic of China: Preliminary Determination and Alignment of Final Determination With Final Antidumping Duty DeterminationPDF
81 FR 43584 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative ReviewPDF
81 FR 43583 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Advance Notification of Sunset ReviewsPDF
81 FR 43607 - Information Collection; PatentsPDF
81 FR 43567 - Deemed Distributions Under Section 305(c) of Stock and Rights To Acquire Stock; CorrectionPDF
81 FR 43698 - Notice of Final Federal Agency Actions on the Proposed I-395/Route 9 Transportation Study in Brewer, Holden, Eddington, and Clifton, MainePDF
81 FR 43530 - Adviser Business Continuity and Transition PlansPDF
81 FR 43646 - Biweekly Notice; Applications and Amendments to Facility Operating Licenses and Combined Licenses Involving No Significant Hazards ConsiderationsPDF
81 FR 43710 - Agency Information Collection RequestPDF
81 FR 43479 - Airworthiness Directives; Airbus HelicoptersPDF
81 FR 43530 - Incentive-Based Compensation ArrangementsPDF
81 FR 43713 - Medicare and Medicaid Programs; CY 2017 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; and Home Health Quality Reporting RequirementsPDF
81 FR 43481 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 43472 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 43475 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 43483 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 43789 - Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals ProceduresPDF
81 FR 43661 - Applications and Amendments to Facility Operating Licenses and Combined Licenses Involving Proposed No Significant Hazards Considerations and Containing Sensitive Unclassified Non-Safeguards Information and Order Imposing Procedures for Access to Sensitive Unclassified Non-Safeguards InformationPDF
81 FR 43557 - Regulations Implementing FAST Act Section 61003-Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure InformationPDF
81 FR 43893 - Approval, Disapproval and Promulgation of Air Quality Implementation Plans; Partial Approval and Partial Disapproval of Air Quality Implementation Plans and Federal Implementation Plan; Utah; Revisions to Regional Haze State Implementation Plan; Federal Implementation Plan for Regional HazePDF

Issue

81 128 Tuesday, July 5, 2016 Contents Agriculture Agriculture Department NOTICES Requests for Nominations: National Agricultural Research, Extension, Education, and Economics Advisory Board and Specialty Crop Committee, 43570-43571 2016-15851 Census Bureau Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: 2017 Economic Census, 43571-43573 2016-15787 2017 Economic Census of Island Areas, 43573-43575 2016-15786 Centers Medicare Centers for Medicare & Medicaid Services PROPOSED RULES Medicare and Medicaid Programs: CY 2017 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; and Home Health Quality Reporting Requirements, 43714-43788 2016-15448 Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures, 43790-43891 2016-15192 Coast Guard Coast Guard RULES Special Local Regulations: Cumberland River, Mile 190.0 to 191.5; Nashville, TN, 43488-43490 2016-15741 NOTICES Nationwide Differential Global Positioning System, 43613-43615 2016-15886 Commerce Commerce Department See

Census Bureau

See

International Trade Administration

See

National Institute of Standards and Technology

See

National Oceanic and Atmospheric Administration

See

Patent and Trademark Office

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43575-43577 2016-15742
Community Living Administration Community Living Administration NOTICES Single Source Non-Competing Supplements: Residential Information Systems Project, University of Minnesota, 43608 2016-15852 Sole Source Supplements: Christopher and Dana Reeve Foundation, 43608-43609 2016-15853 Comptroller Comptroller of the Currency NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43605-43607 2016-15846 Defense Department Defense Department See

Engineers Corps

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Patents, 43607-43608 2016-15723
Employment and Training Employment and Training Administration NOTICES Funds and Funding Opportunity Announcement for Disability Employment Initiative Cooperative Agreements; Availability, 43644 2016-15830 Energy Department Energy Department See

Federal Energy Regulatory Commission

Engineers Engineers Corps NOTICES Nationwide Differential Global Positioning System, 43613-43615 2016-15886 Environmental Protection Environmental Protection Agency RULES Air Quality State Implementation Plans; Approvals and Promulgations: Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone Standard, 43490-43492 2016-15748 Utah; Revisions to Regional Haze State Implementation Plan; Federal Implementation Plan for Regional Haze, 43894-43925 2016-14645 Decisions Not to Regulate Forest Road Discharges under the Clean Water Act, 43492-43510 2016-15844 PROPOSED RULES Air Quality State Implementation Plans; Approvals and Promulgations: Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone Standard, 43568 2016-15743 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43601-43602 2016-15857 Evaluating Urban Resilience to Climate Change: A Multi-Sector Approach; Correction, 43602 2016-15855 Meetings: Local Government Advisory Committee and the Small Communities Advisory Subcommittee, 43600-43601 2016-15854 Science Advisory Board's 2016-2018 Scientific and Technological Achievement Awards Committee, 43599-43600 2016-15856 Federal Aviation Federal Aviation Administration RULES Acceptance Criteria for Portable Oxygen Concentrators Used On Board Aircraft; Correction, 43463 2016-15770 Airworthiness Directives: Airbus Airplanes, 43472-43475 2016-15356 Airbus Helicopters, 43479-43481 2016-15624 Bombardier, Inc. Airplanes, 43481-43483 2016-15357 The Boeing Company Airplanes, 43475-43479, 43483-43488 2016-15291 2016-15355 Revisions to the Civil Penalty Inflation Adjustment Tables, 43463-43469 2016-15744 Special Conditions: JAMCO America, Inc., Boeing Model 777-300ER, Dynamic Test Requirements for Single-Occupant Oblique (Side-Facing) Seats with Inflatable Restraints; Correction, 43471-43472 2016-15784 Kestrel Aircraft Co., Model K-350 Turboprop, Lithium Batteries, 43469-43471 2016-15765 NOTICES Requests for Nominations: National Parks Overflights Advisory Group Aviation Rulemaking Committee, 43697 2016-15762 Requests to Release Airport Properties: Waterloo Regional Airport, Waterloo, IA, 43698 2016-15766 Federal Communications Federal Communications Commission RULES Updating Competitive Bidding Rules, 43523-43524 2016-15819 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43603-43604 2016-15817 2016-15818 Public Safety and Homeland Security Bureau Launches Emergency Alert System Test Reporting System and Seeks Comment on Emergency Alert System Operating Handbook Recommendations, 43602-43603 2016-15849 Federal Deposit Federal Deposit Insurance Corporation NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43605-43607 2016-15846 Meetings: Advisory Committee on Community Banking, 43604-43605 2016-15789 Federal Emergency Federal Emergency Management Agency PROPOSED RULES Proposed Flood Elevation Determinations: Will County, IL and Incorporated Areas, 43568-43569 2016-15747 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Residential Basement Floodproofing Certification, 43622-43623 2016-15825 Changes in Flood Hazard Determinations, 43618-43621, 43623-43625 2016-15751 2016-15755 Final Flood Hazard Determinations, 43616-43617 2016-15749 Major Disaster Declarations: Georgia; Amendment No. 2, 43622 2016-15813 Texas; Amendment No. 1, 43625 2016-15746 Texas; Amendment No. 13, 43627 2016-15821 Texas; Amendment No. 2, 43616, 43627 2016-15814 2016-15820 Texas; Amendment No. 3, 43622 2016-15752 Texas; Amendment No. 4, 43617, 43626 2016-15810 2016-15812 Texas; Amendment No. 5, 43625 2016-15811 West Virginia; Amendment No. 1, 43617-43618 2016-15823 Major Disasters and Related Determinations: Texas, 43627-43628 2016-15753 West Virginia, 43626 2016-15824 Proposed Flood Hazard Determinations, 43628-43629 2016-15767 Proposed Flood Hazard Determinations for Carroll County, Iowa and Incorporated Areas; Withdrawal, 43616 2016-15764 Federal Energy Federal Energy Regulatory Commission PROPOSED RULES Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information, 43557-43567 2016-14761 NOTICES Combined Filings, 43595-43596 2016-15777 Complaints: New York State Public Service Commission; New York Power Authority; Long Island Power Authority; et al. v. New York Independent System Operator, Inc., 43594-43595 2016-15778 NextEra Energy Resources, LLC and PSEG Companies v. ISO New England Inc., 43595 2016-15794 Environmental Impact Statements; Availability, etc.: Mountain Valley Pipeline, LLC; Equitrans, LP, 43596-43597 2016-15796 Initial Market-Based Rate Filings Including Requests for Blanket Section 204 Authorizations: Atlantic Energy MA, LLC, 43599 2016-15782 Atlantic Energy MD, LLC, 43597 2016-15781 Atlantic Energy, LLC, 43597-43598 2016-15780 River Bend Solar, LLC, 43598 2016-15779 Meetings: Implementation Issues under the Public Utility Regulatory Policies Act; Technical Conference, 43593 2016-15792 Records Governing Off-the-Record Communications, 43594 2016-15795 Requests under Blanket Authorizations: Pine Prairie Energy Center, LLC, 43598-43599 2016-15793 Federal Highway Federal Highway Administration NOTICES Final Federal Agency Actions on the Proposed I-395/Route 9 Transportation Study in Brewer, Holden, Eddington, and Clifton, ME, 43698-43699 2016-15685 Federal Housing Finance Agency Federal Housing Finance Agency PROPOSED RULES Incentive-Based Compensation Arrangements, 43530 2016-15596 Federal Motor Federal Motor Carrier Safety Administration NOTICES Hours of Service of Drivers: American Pyrotechnics Association; 14-Hour Rule Exemption, 43701-43705 2016-15797 Illumination Fireworks, LLC and ACE Pyro, LLC; 14-Hour Rule During Independence Day Celebrations, 43699-43701 2016-15798 Meetings; Sunshine Act, 43699 2016-15933 Federal Reserve Federal Reserve System NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43605-43607 2016-15846 Federal Transit Federal Transit Administration NOTICES Fourth Allocation of Public Transportation Emergency Relief Funds in Response to Hurricane Sandy, 43705-43707 2016-15801 General Services General Services Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Patents, 43607-43608 2016-15723 Health and Human Health and Human Services Department See

Centers for Medicare & Medicaid Services

See

Community Living Administration

See

National Institutes of Health

See

Substance Abuse and Mental Health Services Administration

RULES World Trade Center Health Program: Addition of New-Onset Chronic Obstructive Pulmonary Disease and WTC-Related Acute Traumatic Injury to the List of WTC-Related Health Conditions, 43510-43523 2016-15799
Homeland Homeland Security Department See

Coast Guard

See

Federal Emergency Management Agency

See

U.S. Customs and Border Protection

Housing Housing and Urban Development Department NOTICES Privacy Act; Computer Matching Program, 43629-43631 2016-15863 Interior Interior Department See

Land Management Bureau

See

National Indian Gaming Commission

See

National Park Service

Internal Revenue Internal Revenue Service RULES Self-Employment Tax Treatment of Partners in a Partnership That Owns a Disregarded Entity; Correction, 43488 2016-15739 PROPOSED RULES Deemed Distributions under Section 305(c) of Stock and Rights to Acquire Stock; Correction, 43567-43568 2016-15696 International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Advance Notification of Sunset Reviews, 43583-43584 2016-15724 Certain Amorphous Silica Fabric from the People's Republic of China, 43579-43582 2016-15729 Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, from the People's Republic of China, 43582-43583 2016-15836 Opportunity to Request Administrative Review, 43584-43586 2016-15726 Stainless Steel Butt-Weld Pipe Fittings from Italy, 43587-43588 2016-15835 Truck and Bus Tires from the People's Republic of China, 43577-43579 2016-15837 International Trade Com International Trade Commission NOTICES Investigations; Determinations, Modifications, and Rulings, etc.: Certain Tissue Paper Products from China, 43642 2016-15822 Terminations of Investigations on the Basis of Withdrawals of the Complaints: Certain Automated Teller Machines and Point of Sale Devices, 43642 2016-15803 Justice Department Justice Department See

Justice Programs Office

NOTICES Meetings: Chief Freedom of Information Act Officer Council, 43642-43643 2016-16000
Justice Programs Justice Programs Office NOTICES Requests for Information: Unmanned Aircraft Systems Evaluation, 43643-43644 2016-15804 Labor Department Labor Department See

Employment and Training Administration

Land Land Management Bureau NOTICES Crude Helium Auction and Sale for Fiscal Year 2017 Delivery, 43635-43636 2016-15754 Final Supplementary Rules for the Cove Recreation Site, Owyhee County, ID, 43631-43634 2016-15833 Maritime Maritime Administration NOTICES Meetings: U.S. Maritime Transportation System National Advisory Committee, 43708 2016-15769 U.S. Merchant Marine Academy Board of Visitors, 43707-43708 2016-15745 NASA National Aeronautics and Space Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Patents, 43607-43608 2016-15723 National Highway National Highway Traffic Safety Administration RULES Civil Penalties, 43524-43529 2016-15800 NOTICES Denial of Motor Vehicle Defect Petitions, 43710 2016-15788 Petitions for Inconsequential Noncompliance; Approvals: Cooper Tire and Rubber Co., 43708-43710 2016-15750 National Indian National Indian Gaming Commission NOTICES Environmental Impact Statements; Availability, etc.: Jamul Indian Village Proposed Gaming Management Agreement, San Diego County, CA, 43636-43637 2016-15847 National Institute National Institute of Standards and Technology NOTICES Meetings: Commission on Enhancing National Cybersecurity, 43588-43589 2016-15790 National Institute National Institutes of Health NOTICES Meetings: Center for Scientific Review, 43609-43610 2016-15735 2016-15736 Eunice Kennedy Shriver National Institute of Child Health and Human Development, 43610-43611 2016-15731 National Center for Complementary and Integrative Health, 43611 2016-15734 National Heart, Lung, and Blood Institute, 43609-43611 2016-15732 2016-15733 National Oceanic National Oceanic and Atmospheric Administration NOTICES Meetings: Mid-Atlantic Fishery Management Council, 43589-43591 2016-15768 2016-15808 2016-15809 Permits: Endangered Species, 43589-43590 2016-15776 Marine Mammals; File No. 20324, 43591 2016-15775 National Park National Park Service NOTICES Inventory Completions: Office of the State Archaeologist, University of Iowa, Iowa City, IA, 43641 2016-15841 Stanford University Heritage Services, Palo Alto, CA, 43639-43640 2016-15839 University of Pennsylvania Museum of Archaeology and Anthropology, Philadelphia, PA; Correction, 43638-43639 2016-15840 Repatriations of Cultural Items: Field Museum of Natural History, Chicago, IL, 43637-43638 2016-15843 Stanford University Heritage Services, Palo Alto, CA, 43640-43641 2016-15838 National Science National Science Foundation NOTICES Environmental Impact Statements; Availability, etc.: Sacramento Peak Observatory Operations, Sunspot, NM, 43644-43645 2016-15783 Nuclear Regulatory Nuclear Regulatory Commission NOTICES Environmental Assessments; Availability, etc.: Tennessee Valley Authority, Watts Bar Nuclear Plant, Unit 1, 43656-43661 2016-15867 Exemptions: Duke Energy Carolinas, LLC, McGuire Nuclear Station, Units 1 and 2—Alternative to the Physical Inventory Requirements for Movable In-Core Detectors, 43645-43646 2016-15868 Facility Operating Licenses and Combined Licenses: Applications and Amendments Involving Proposed No Significant Hazards Considerations, etc., 43646-43656, 43661-43669 2016-14999 2016-15659 Meetings; Sunshine Act, 43661 2016-15922 Patent Patent and Trademark Office NOTICES Elimination of Publication Requirement in the Collaborative Search Pilot Program between the Japan Patent Office and the United States Patent and Trademark Office, 43591-43592 2016-15850 Postal Regulatory Postal Regulatory Commission NOTICES New Postal Products, 43669-43670 2016-15740 Postal Service Postal Service NOTICES Product Changes: Priority Mail Express Negotiated Service Agreement, 43670 2016-15773 Priority Mail Express, Priority Mail, and First-Class Package Service Negotiated Service Agreement, 43670 2016-15772 Priority Mail Negotiated Service Agreement, 43670 2016-15771 Railroad Retirement Railroad Retirement Board NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43670-43671 2016-15887 Science Technology Science and Technology Policy Office NOTICES Annotated Outline for the Fourth National Climate Assessment; Public Comment, 43671-43673 2016-15807 Securities Securities and Exchange Commission PROPOSED RULES Adviser Business Continuity and Transition Plans, 43530-43556 2016-15675 NOTICES Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Investors' Exchange, LLC, 43673-43678 2016-15757 Self-Regulatory Organizations; Proposed Rule Changes: BATS BYX-Exchange, Inc., 43689-43690 2016-15756 C2 Options Exchange, Inc., 43681-43687 2016-15760 Financial Industry Regulatory Authority, Inc., 43690-43691 2016-15758 Municipal Securities Rulemaking Board, 43687-43689 2016-15759 Nasdaq Stock Market, LLC, 43678-43680 2016-15761 Social Social Security Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43691-43693 2016-15763 State Department State Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Statement of Consent: Issuance of a U.S. Passport to a Minor Under Age 16, 43693-43694 2016-15826 Statement of Exigent/Special Family Circumstances for Issuance of a U.S. Passport to a Minor under Age 16, 43696-43697 2016-15827 Exchange Visitor Program: Use of Forms DS-2019 in the Summer Work Travel Program, 43695-43696 2016-15831 Global Terrorist Designations: Asim Umar, aka Asim Umer, aka Maulana Asim Umar, aka Sanaul Haq, 43693 2016-15829 Impositions of Nonproliferation Measures Against Foreign Persons, Including Bans on U.S. Government Procurements, 43694-43696 2016-15828 2016-15832 Substance Substance Abuse and Mental Health Services Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43612-43613 2016-15816 Center for Substance Abuse Prevention, 43611 2016-15815 Transportation Department Transportation Department See

Federal Aviation Administration

See

Federal Highway Administration

See

Federal Motor Carrier Safety Administration

See

Federal Transit Administration

See

Maritime Administration

See

National Highway Traffic Safety Administration

RULES Acceptance Criteria for Portable Oxygen Concentrators Used On Board Aircraft; Correction, 43463 2016-15770 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 43710-43711 2016-15635 Nationwide Differential Global Positioning System, 43613-43615 2016-15886
Treasury Treasury Department See

Comptroller of the Currency

See

Internal Revenue Service

Customs U.S. Customs and Border Protection NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: United States-Caribbean Basin Trade Partnership Act, 43615 2016-15785 Separate Parts In This Issue Part II Health and Human Services Department, Centers for Medicare & Medicaid Services, 43714-43788 2016-15448 Part III Health and Human Services Department, Centers for Medicare & Medicaid Services, 43790-43891 2016-15192 Part IV Environmental Protection Agency, 43894-43925 2016-14645 Reader Aids

Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.

To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.thefederalregister.org and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions.

81 128 Tuesday, July 5, 2016 Rules and Regulations DEPARTMENT OF TRANSPORTATION Office of the Secretary 14 CFR Part 382 Federal Aviation Administration 14 CFR Parts 1, 11, 121, 125, and 135 [Docket No.: FAA-2014-0554; Amdt. Nos. 1-69; 11-60; 121-374, 125-65, 135-133] RIN 2120-AK32 Acceptance Criteria for Portable Oxygen Concentrators Used on Board Aircraft; Correction AGENCY:

Federal Aviation Administration (FAA) and the Office of the Secretary (OST), Department of Transportation (DOT).

ACTION:

Final rule; correction.

SUMMARY:

This document corrects a final rule which replaces the existing process by which the Federal Aviation Administration (Agency or FAA) approves portable oxygen concentrators (POC) for use on board aircraft in air carrier operations, commercial operations, and certain other operations using large aircraft. The FAA currently assesses each POC make and model on a case-by-case basis and if the FAA determines that a particular POC is safe for use on board an aircraft, the FAA conducts rulemaking to identify the specific POC model in an FAA regulation. The final rule replaces the current process and allows passengers to use a POC on board an aircraft if the POC satisfies certain acceptance criteria and bears a label indicating conformance with the acceptance criteria. The labeling requirement only affects POCs intended for use on board aircraft that were not previously approved for use on aircraft by the FAA. Additionally, the rulemaking will eliminate redundant operational requirements and paperwork requirements related to the physician's statement. As a result, the rulemaking will reduce burdens for POC manufacturers, passengers who use POCs while traveling, and affected aircraft operators. The final rule also made conforming amendments to the Department of Transportation's (Department or DOT) rule implementing the Air Carrier Access Act (ACAA) to require carriers to accept all POC models that meet FAA acceptance criteria as detailed in this rule.

DATES:

This correction will become effective on July 5, 2016.

FOR FURTHER INFORMATION CONTACT:

For technical questions concerning this action, contact DK Deaderick, 121 Air Carrier Operations Branch, Air Transportation Division, Flight Standards Service, Federal Aviation Administration, AFS-220, 800 Independence Avenue SW., Washington, DC 20591; telephone (202) 267-7480; email [email protected] For questions regarding the Department's disability regulation (14 CFR part 382), contact Clereece Kroha, Senior Attorney, Office of Aviation Enforcement and Proceedings, Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590; telephone (202) 366-9041; email [email protected]

SUPPLEMENTARY INFORMATION:

Background

On May 24, 2016, the FAA published a final rule entitled, “Acceptance Criteria for Portable Oxygen Concentrators Used On Board Aircraft” (81 FR 33098).

The final rule affects the use of POCs on board aircraft in operations conducted under title 14 of the Code of Federal Regulations (14 CFR) parts 121, 125, and 135, by replacing the existing FAA case-by-case approval process for each make and model of POC in Special Federal Aviation Regulation (SFAR) No. 106, with FAA acceptance criteria. Under SFAR No. 106, each time the FAA approves a specific model of POC for use on board aircraft, the agency updates the list of approved POCs in the SFAR.

The final rule removes SFAR No. 106 and replaces it with POC acceptance criteria and specific labeling requirements to identify POCs that conform to the acceptance criteria. POCs that conform to the final rule acceptance criteria will be allowed on board aircraft without additional FAA review and rulemaking.

As with existing requirements for FAA approval of POCs that may be used on aircraft, the final rule acceptance criteria and labeling requirement only apply to POCs intended for use on board aircraft.

However, the final rule was published with an incorrect references to AC 120-95B, when the new AC is actually AC 120-95A.

Correction

In FR Doc. 2016-11908, pages 33102, 33111, and 33113, in the Federal Register of May 24, 2016, make the following corrections:

1. On page 33102, third column, footnote 5, first line, correct “AC 120-95B” to “AC 120-95”;

2. On page 33111, in the first column, tenth line from the bottom, correct “AC 120-95B” to read as “AC 120-95A”;

3. On page 33113, in the first column, third line from the top in parenthesis, correct “AC 120-95B” to read as “AC 120-95A”;

4. On page 33113, in the second column, second paragraph, thirteenth line, correct “AC 120-95B” to read as “AC 120-95A”.

Issued under authority provided by 49 U.S.C. 106(f) in Washington, DC, on June 23, 2016. Dale A. Bouffiou, Acting Director, Office of Rulemaking.
[FR Doc. 2016-15770 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Parts 13 and 406 [Docket No. FAA-2016-7004; Amdt. Nos. 13-38, 406-10] RIN 2120-AK90 Revisions to the Civil Penalty Inflation Adjustment Tables AGENCY:

Federal Aviation Administration, DOT.

ACTION:

Interim final rule.

SUMMARY:

This interim final rule is the catch-up inflation adjustment to civil penalty amounts that may be imposed for violations of Federal Aviation Administration regulations, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

DATES:

These amendments become effective August 5, 2016.

FOR FURTHER INFORMATION CONTACT:

Cole R. Milliard, Attorney, Office of the Chief Counsel, Enforcement Division, AGC-300, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone (202) 267-3452; email [email protected]

SUPPLEMENTARY INFORMATION: Authority for This Rulemaking and Applicable Statutes

The Federal Aviation Administration (FAA's) authority to issue rules on 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. The Secretary of Transportation's authority to regulate the transportation of hazardous materials (“hazmat”) by air is in chapter 51 of title 49; civil penalty authority is in section 5123. The Secretary's authority to regulate commercial space transportation may be found at 51 U.S.C. subtitle V, sections 50901-50923 (chapter 509), which provides for the Department of Transportation (DOT), and, through delegation, the FAA to impose civil penalties on persons who violate chapter 509, a regulation issued under chapter 509, or any term or condition of a license or permit issued or transferred under chapter 509. 51 U.S.C. 50906(h)-(i), 50917.

This rule implements the Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIAA), Public Law (Pub. L.) 101-410, as amended by the Debt Collection Improvement Act (DCIA) of 1996, Public Law 104-134, and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act), Public Law 114-74, codified at 28 U.S.C. 2461 note.

The FCPIAA, DCIA, and the 2015 Act require Federal agencies to adjust minimum and maximum civil penalty amounts for inflation to preserve their deterrent impact. The 2015 Act amended the formula and frequency of inflation adjustments. It requires an initial catch-up adjustment in the form of an interim final rule, followed by annual adjustments of penalty amounts. The amount of the adjustment must be made using a strict statutory formula discussed in more detail below.

Background

The FCPIAA determines inflationary adjustments by increasing civil penalties by a cost-of-living adjustment (COLA). Under the FCPIAA, as amended by the 2015 Act, the COLA for each civil penalty is normally the percent change between the U.S. Department of Labor's Consumer Price Index for all-urban consumers (CPI-U) for the month of October of the calendar year preceding the adjustment and the CPI-U for the month of October of the previous calendar year.

However, under the 2015 Act, the FAA must first use a different “catch-up adjustment” formula. To determine the amount of the catch-up, it must use the percent change between the CPI-U from the October of the calendar year in which the penalty was last set or adjusted by statute or regulation other than by inflation adjustments under the FCPIAA and the CPI-U from the October preceding the adjustment. The increase must be rounded to the nearest $1, and can be no greater than 150% of the penalty levels in effect on the date of the 2015 Act's enactment, which was November 2, 2015.

Method of Calculation

The 2015 Act directed the Office of Management and Budget (OMB) to issue guidance on implementing the inflation adjustments required by the 2015 Act no later than February 29, 2016.1 On February 24, 2016, the OMB released this required guidance, which contains complete instructions on how to calculate the catch-up adjustment.2 An agency calculates the catch-up adjustment by multiplying the maximum or minimum penalty amount by a multiplier calculated based on the year the penalty was last set or adjusted by Congress or rulemaking (other than inflation adjustments under the FCPIAA). As examples, here are how the adjustments for 49 U.S.C. 5123(a)(1) (hazmat) and 51 U.S.C. 50917 (commercial space) were calculated:

1 28 U.S.C. 2461 note.

2 OMB Memorandum M-16-06.

(1) Find the multiplier listed in the OMB guidance for the year the penalty was last set or reset.

Section 5123 was last adjusted in 2012, so the multiplier is 1.02819.

Section 50917 was last set in 1984, so the multiplier is 2.25867.

(2) Multiply the penalty amount by the multiplier, and round to the nearest dollar.

$75,000 * 1.02819 = $77,114 $100,000 * 2.25867 = $225,867

(3) Multiply the 2015 penalty amount (including any prior adjustments under the Inflation Adjustment Act) by 2.5,3 and round to the nearest dollar to find the 150% cap for the catch-up adjustment.

$75,000 * 2.5 = $187,500 $120,000 * 2.5 = $300,000

3 It is 2.5 rather than 1.5 because the cap is described in terms of the amount of the increase; that is, the amount added to the penalty as a catch-up cannot be greater than 150% of the penalty, rather than being limited to 150% of the penalty itself. 28 U.S.C. 2461 note (“The amount of the increase in a civil monetary penalty . . . shall not exceed 150 percent of the amount of that civil monetary penalty on the date of enactment”). Thus, the cap is x + 1.5x = 2.5x, where x is the penalty amount.

(4) Compare the dollar amount from (3) to the dollar amount in (2). If (2) < (3), (2) is below the 150% cap and is the adjusted penalty. If (2) > (3), the 150% cap is applied and becomes the adjusted penalty.

$77,114 < $187,500. Therefore, $77,114 is the adjusted penalty.

$225,867 < $300,000. Therefore, $225,867 is the adjusted penalty.

The following chart shows the values used in the calculations and the rounded catch-up adjustment. All of the penalty adjustments fell below the 150% cap on the catch-up adjustment:

49 U.S.C. Statute Year last set/
  • adjusted
  • Penalty when last set/adjusted Multiplier from OMB Catch-up
  • adjustment
  • 5123(a)(1) 2012 $75,000 1.02819 $77,114 5123(a)(2) 2012 175,000 1.02819 179,933 5123(a)(3) 2005 * 450 1.19397 537 5123(a)(3) 2012 ** 75,000 1.02819 77,114 46301(a)(1) 2003 25,000 1.28561 32,140 46301(a)(1) 2003 1,100 1.28561 1,414 46301(a)(3) 4 N/A N/A N/A N/A 46301(a)(5) 2003 10,000 1.28561 12,856 46301(b) 1987 2,000 2.06278 4,126 46302 1984 10,000 2.25867 22,587 46318 2000 25,000 1.36689 34,172 46319 2003 10,000 1.28561 12,856 47531 5 N/A N/A N/A N/A 51 U.S.C. 50917 6 1984 100,000 2.25867 225,867 * Minimum. ** Maximum.
    Provision for Reduced Catch-Up Adjustment

    The 2015 Act allows an agency to request that a catch-up adjustment be lower than what is calculated using the 2015 Act's formula. This requires a determination by the head of the agency, following a notice of proposed rulemaking, opportunity for comment, and a final rule, that the catch-up adjustment will have a negative economic impact or has social costs that outweigh the benefits. In addition, the director of OMB must concur with the agency head's determination as the adjustment is an economic transfer. The Administrator of the FAA does not believe that any of the catch-up adjustments in this rule will have a negative economic impact or have social costs that outweigh their benefits.

    4 The penalty for 46301(a)(3) is an “increase[ ] above the otherwise applicable maximum amount under this section to an amount not to exceed 3 times the amount of revenues that are used in violation of such section.” As it depends on the other maximum penalties in 46301, there is no separate calculation needed for 46301(a)(3).

    5 Section 47531 explicitly states that the applicable civil penalties are “the same . . . as a person violating section 44701(a) or (b) or any of sections 44702-44716 of this title.” Sections 46301(a)(1)(A) and (a)(5) provide the civil penalty amounts for those violations, and no separate calculation is needed.

    6 Section 50917 was added by the Commercial Space Launch Act, Public Law 98-575, section 19, 98 Stat. 3055, 3062 (1984), and was codified as section 70115 of title 49 before being recodified in title 51.

    Amendments to Subpart H of 14 CFR Part 13

    The FAA codified the statutory formula for inflation adjustments under the FCPIAA and DCIA in subpart H of 14 CFR part 13. Rather than amending the subpart to match the 2015 Act, paragraphs (a)-(c) of § 13.305 containing the formula are being deleted as unnecessarily duplicative of the statute. Section 13.303 is also being deleted because it duplicates definitions of terms given in the statute. Section 13.301(a) is being amended to include a reference to the 2015 Act.

    Amendment to Section 406.9(a)

    The current version of 14 CFR 406.9(a) states the maximum civil penalty that can be imposed under its authority “as adjusted for inflation.” This clause is being deleted as redundant and unnecessary. The maximum penalty amount as amended by this rule will already be adjusted for inflation, as will the future annual adjustments required by the 2015 Act. Retaining this clause could also create a false impression that the penalty amount is adjusted for inflation other than by the 2015 Act. Therefore, the “as adjusted for inflation” clause is being removed.

    Good Cause for Not Having Notice and Comment

    Under the Administrative Procedure Act, 5 U.S.C. 553(b)(B), a final rule may be issued without public notice and comment if the agency finds good cause that notice and comment are impracticable, unnecessary, or contrary to public interest. Good cause exists in this case to dispense with public notice and comment because adjustments to civil penalties for inflation are required by Congress, as set forth in Section 5 of the FCPIAA, as amended, in order to maintain the deterrent effect of civil penalties and promote compliance with the law. As the Administrator of the FAA has determined that none of the catch-up adjustments should be lowered due to negative economic impact or social costs that outweigh benefits, there is no place where the FAA might apply discretion or policy judgments in calculating the adjustments. The formula for determining the adjustments is laid out by statute and cannot be amended by the FAA, even in response to public comment. Accordingly, public comment is unnecessary in this case.

    Regulatory Evaluation

    Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this final rule.

    Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it to be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this final rule. The reasoning for this determination follows.

    This rule adjusts for inflation to civil penalties for violations of aviation safety, hazmat, and commercial space provisions in accord with the Federal Civil Penalties Inflation Adjustment Act Improvement Act (the 2015 Act), Public Law 114-74, Section 701 (November 2, 2015). The Director of OMB provided guidance to agencies in a February 24, 2016 memorandum on how to calculate the initial adjustment required by the 2015 Act. The FAA must follow the direction of Congress and is using statutorily-mandated guidance provided by OMB in calculating the catch-up inflation adjustment. Applying Congress's directions and OMB's guidance, the FAA has determined that this rule imposes no additional social cost. Civil penalties are, like taxes, an economic transfer. OMB guidance A-4 states that transfers are monetary payments from one group to another and thus not a social cost. OMB further dictates that transfers should not be included in estimates of the benefits and costs due to regulation. As transfers do not add social cost, this is a minimal cost rule. OMB also directs that distributional effects of transfers should be considered. The term “distributional effect” refers to the impact of a regulatory action across the population and economy, divided up in various ways (e.g. income groups, race, sex, industrial sector, geography). Distributional effects may arise through transfer payments like civil penalties that stem from regulatory enforcement action. While persons paying civil penalties may experience distributional effects, these discrete effects are far outweighed by the positive effects of civil penalties. Compliance with FAA statutes and regulations is essential to safety. Civil penalties are a punishment for those who violate FAA statutes and regulations. They also deter future violations. As a result, they support the FAA's mission of aviation, hazmat, and commercial space safety, which benefits the public at large. Thus, the cost impact of this rulemaking is minimal, and a full regulatory evaluation is not required in accordance with DOT Order 2100.5.

    The FAA has determined that this final rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866 because it does not have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities for the following reasons:

    (i) Based on the FAA's review of civil penalties assessed in fiscal year 2015, the total amount assessed was about $18 million. Even if this total itself were increased to the catch-up adjustment cap of a 150% increase (which is not being done here), it would only result in an increase of $27 million, bringing the total amount assessed to $45 million, which is substantially less than $100 million. Thus, the amount of the statutorily mandated inflation adjustment in this rulemaking will not have an annual effect on the economy of $100 million or more; and

    (ii) The process of determining whether or not a civil penalty is imposed is not affected by this change as this rulemaking only impacts the minimum and maximum possible amount of the penalty.

    The FAA has further determined that this final rule is not a “significant regulatory action” because it does not (a) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency, (b) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (c) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866. Finally, the FAA has determined that this final rule is not “significant” as defined in DOT's Regulatory Policies and Procedures.

    Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.” To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.

    Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.

    However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.

    The FAA believes that this final rule does not have a significant economic impact on a substantial number of small entities for the following reasons. While this final rule is likely to impact a substantial number of small entities, it will impose only minimal costs. This final rule simply identifies the amount of the inflation adjustment to existing civil monetary penalty maximums and minimums for violations of the statutory and regulatory provisions the FAA enforces. The penalty amounts are those specified by statute or called for under the inflation adjustment statutes, and the information in this rule is required by the Debt Collection Improvement Act of 1996.7 As civil penalties are economic transfers, by OMB direction these are not included in the calculation of social costs.

    7 The 2015 Act, Public Law 114-74, codified at 28 U.S.C. 2461 note, specifies the method of calculating the inflation adjustment, and OMB Memorandum M-16-06 provides the guidance required by the 2015 Act for agencies in calculating the inflation adjustment.

    In addition, FAA has determined the RFA does not apply to this rulemaking. The 2015 Act requires FAA to publish an interim final rule and there is good cause for issuing this rule without notice and comment under 5 U.S.C. 553(b)(B). The Small Business Administration's A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act (2003), provides that:

    If, under the APA or any rule of general applicability governing federal grants to state and local governments, the agency is required to publish a general notice of proposed rulemaking (NPRM), the RFA must be considered [citing 5 U.S.C. 604(a)]. . . . If an NPRM is not required, the RFA does not apply.

    Because there is good cause for issuing this final rule without notice and comment (i.e., without an NPRM), the RFA does not apply. Therefore, as provided in section 605(b), the head of the FAA certifies that this rule will not result in a significant economic impact on a substantial number of small entities. International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards.

    The FAA has assessed the potential effect of this final rule and determined that it would impose identical inflation adjusted civil penalties on domestic and international entities that violate aviation safety, hazmat, and commercial space provisions in titles 49 and 51 of the U.S. Code and regulations issued under those provisions, and thus would have a neutral trade impact. Furthermore, the inflation adjustment is a legitimate domestic objective preserving the existing deterrent impact of aviation, hazmat, and commercial space safety statutes and regulations. Therefore, we have determined that this rule will result in a neutral impact on international trade.

    Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $155 million in lieu of $100 million. This final rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.

    Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the FAA consider the impact of paperwork and other information collection burdens imposed on the public. The FAA has determined that there are no current or new requirements for information collection associated with this rule.

    International Compatibility

    In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these regulations.

    Environmental Analysis

    FAA Order 1050.1F identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. 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 5-6.6.f, which covers regulations not expected to cause any potentially significant environmental impacts. The FAA has also determined that there are no extraordinary circumstances requiring an environmental assessment or environmental impact statement.

    Federalism

    The FAA has analyzed this final rule under the principles and criteria of Executive Order 13132, Federalism. The agency determined that this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have federalism implications.

    Regulations That Significantly Affect Energy Supply, Distribution, or Use

    The FAA has analyzed this final rule under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). The agency has determined that it is not a “significant energy action” under the executive order and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

    Availability of Rulemaking Documents

    You can get an electronic copy of rulemaking documents using the Internet by—

    1. Searching the Federal eRulemaking Portal (http://www.regulations.gov);

    2. Visiting the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies; or

    3. Accessing the Government Printing Office's Web page at http://www.thefederalregister.org/fdsys.

    You can also get a copy by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267-9680. Make sure to identify the amendment number or docket number of this rulemaking.

    List of Subjects 14 CFR Part 13

    Administrative practice and procedure, Air transportation, Hazardous materials transportation, Investigations, Law enforcement, Penalties.

    14 CFR Part 406

    Administrative procedure and review, Commercial space transportation, Enforcement, Investigations, Penalties, Rules of adjudication.

    The Amendment

    In consideration of the foregoing, the Federal Aviation Administration amends chapters I and III of title 14, Code of Federal Regulations as follows:

    CHAPTER I—FEDERAL AVIATION ADMINISTRATION, DEPARTMENT OF TRANSPORTATION PART 13—INVESTIGATIVE AND ENFORCEMENT PROCEDURES 1. The authority citation for part 13 continues to read as follows: Authority:

    18 U.S.C. 6002; 28 U.S.C. 2461 (note); 49 U.S.C. 106(g), 5121-5128, 40113-40114, 44103-44106, 44701-44703, 44709-44710, 44713, 46101-46111, 46301, 46302 (for a violation of 49 U.S.C. 46504), 46304-46316, 46318, 46501-46502, 46504-46507, 47106, 47107, 47111, 47122, 47306, 47531-47532; 49 CFR 1.47.

    2. Amend § 13.301 by revising paragraph (a) and adding paragraph (c) to read as follows:
    § 13.301 Scope and purpose.

    (a) This subpart sets out the current adjusted maximum civil monetary penalties or range of minimum and maximum civil monetary penalties for each statutory civil penalty subject to the FAA's jurisdiction under title 49 of the U.S. Code. These penalties have been adjusted for inflation in conformity with the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461 (note), as amended by the Debt Collection Improvement Act of 1996, Public Law 104-134, April 26, 1996, and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Public Law 114-74, November 2, 2015, in order to maintain the deterrent effect of civil monetary penalties and to promote compliance with the law.

    (c) Minimum and maximum civil monetary penalties within the jurisdiction of the FAA are as follows:

    Table of Minimum and Maximum Civil Monetary Penalty Amounts for Certain Violations Occurring on or After August 1, 2016 United States Code
  • citation
  • Civil monetary penalty
  • description
  • Minimum
  • penalty
  • amount
  • New or
  • adjusted
  • minimum
  • penalty
  • amount
  • Maximum penalty amount
  • when last set or
  • adjusted by Congress
  • New or
  • adjusted
  • maximum
  • penalty
  • amount
  • 49 U.S.C. 5123(a), subparagraph (1) Violation of hazardous materials transportation law Deleted 7/6/2012 N/A $75,000 per violation, adjusted 7/6/2012 $77,114. 49 U.S.C. 5123(a), subparagraph (2) Violation of hazardous materials transportation law resulting in death, serious illness, severe injury, or substantial property destruction Deleted 7/6/2012 N/A $175,000 per violation, adjusted 7/6/2012 $179,933. 49 U.S.C. 5123(a), subparagraph (3) Violation of hazardous materials transportation law relating to training $450 per violation, set 8/10/2005 $537 $75,000 per violation, adjusted 7/6/2012 $77,114. 49 U.S.C. 46301(a)(1) Violation by a person other than an individual or small business concern under 49 U.S.C. 46301(a)(1)(A) or (B) N/A N/A $25,000 per violation, set 12/12/2003 $32,140. 49 U.S.C. 46301(a)(1) Violation by an airman serving as an airman under 49 U.S.C. 46301(a)(1)(A) or (B) (but not covered by 46301(a)(5)(A) or (B) N/A N/A $1,100 per violation, adjusted 12/12/2003 $1,414. 49 U.S.C. 46301(a)(1) Violation by an individual or small business concern under 49 U.S.C. 46301(a)(1)(A) or (B) (but not covered in 49 U.S.C. 46301(a)(5)) N/A N/A $1,100 per violation, adjusted 12/12/2003 $1,414. 49 U.S.C. 46301(a)(3) Violation of 49 U.S.C. 47107(b) (or any assurance made under such section) or 49 U.S.C. 47133 N/A N/A Increase above otherwise applicable maximum amount not to exceed 3 times the amount of revenues that are used in violation of such section No change. 49 U.S.C. 46301(a)(5)(A) Violation by an individual or small business concern (except an airman serving as an airman) under 49 U.S.C. 46301(a)(5)(A)(i) or (ii) N/A N/A $10,000 per violation, set 12/12/2003 $12,856. 49 U.S.C. 46301(a)(5)(B)(i) Violation by an individual or small business concern related to the transportation of hazardous materials N/A N/A $10,000 per violation, set 12/12/2003 $12,856. 49 U.S.C. 46301(a)(5)(B)(ii) Violation by an individual or small business concern related to the registration or recordation under 49 U.S.C. chapter 441, of an aircraft not used to provide air transportation N/A N/A $10,000 per violation, set 12/12/2003 $12,856. 49 U.S.C. 46301(a)(5)(B)(iii) Violation by an individual or small business concern of 49 U.S.C. 44718(d), relating to limitation on construction or establishment of landfills N/A N/A $10,000 per violation, set 12/12/2003 $12,856. 49 U.S.C. 46301(a)(5)(B)(iv) Violation by an individual or small business concern of 49 U.S.C. 44725, relating to the safe disposal of life-limited aircraft parts N/A N/A $10,000 per violation, set 12/12/2003 $12,856. 49 U.S.C. 46301(b) Tampering with a smoke alarm device N/A N/A $2,000 per violation, set 12/22/1987 $4,126. 49 U.S.C. 46302 Knowingly providing false information about alleged violation involving the special aircraft jurisdiction of the United States N/A N/A $10,000 per violation, set 10/12/1984 $22,587. 49 U.S.C. 46318 Interference with cabin or flight crew N/A N/A $25,000, set 4/5/2000 $34,172. 49 U.S.C. 46319 Permanent closure of an airport without providing sufficient notice N/A N/A $10,000 per day, set 12/12/2003 $12,856. 49 U.S.C. 47531 Violation of 49 U.S.C. 47528-47530, relating to the prohibition of operating certain aircraft not complying with stage 3 noise levels N/A N/A See 49 U.S.C. 46301(a)(1)(A) and (a)(5), above No change.
    §§ 13.303 and 13.305 [Removed]
    3. Remove §§ 13.303 and 13.305.
    CHAPTER III—COMMERCIAL SPACE TRANSPORTATION, FEDERAL AVIATION ADMINISTRATION, DEPARTMENT OF TRANSPORTATION PART 406—INVESTIGATIONS, ENFORCEMENT, AND ADMINISTRATIVE REVIEW 4. The authority citation for part 406 continues to read as follows: Authority:

    51 U.S.C. 50901-50923.

    5. Revise § 406.9(a) to read as follows:
    § 406.9 Civil penalties.

    (a) Civil penalty liability. Under 51 U.S.C. 50917(c), a person found by the FAA to have violated a requirement of the Act, a regulation issued under the Act, or any term or condition of a license or permit issued or transferred under the Act, is liable to the United States for a civil penalty of not more than $225,867 for each violation. A separate violation occurs for each day the violation continues.

    Issued under authority provided by 28 U.S.C. 2461 and 49 U.S.C. 106(f), 44701(a), and 46301 in Washington, DC, on June 23, 2016. Michael P. Huerta, Administrator.
    [FR Doc. 2016-15744 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 23 [Docket No. FAA-2015-5034; Special Conditions No. 23-273-SC] Special Conditions: Kestrel Aircraft Company, Model K-350 Turboprop, Lithium Batteries AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final special conditions.

    SUMMARY:

    These special conditions are issued for the Kestrel Aircraft Company, Model K-350 Turboprop airplane. This airplane will have a novel or unusual design feature associated with the installation of a rechargeable lithium battery. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.

    DATES:

    These special conditions are effective July 5, 2016 and are applicable on June 23, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Ruth Hirt, Federal Aviation Administration, Small Airplane Directorate, Aircraft Certification Service, Programs and Procedures Branch, ACE-114, 901 Locust, Room 301, Kansas City, MO 64106; telephone (816) 329-4108, facsimile (816) 329-4090.

    SUPPLEMENTARY INFORMATION: Background

    On November 22, 2011, Kestrel Aircraft Company applied for a type certificate for their new Model K-350. The Kestrel Aircraft Company Model K-350 is a single-engine turboprop airplane with the primary structure constructed largely of carbon and epoxy composite material. The turboprop engine will be a Honeywell Model TPE331-14GR-801KT that is integrated with a Hartzell 4 bladed, 110-inch carbon composite propeller. The standard seating configuration offers a one plus five cabin (one pilot and five passengers). Alternate interior configurations will be available from two seats (cargo configuration) up to eight seats total. The K-350 will incorporate an integrated avionics system, retractable landing gear, and a conventional tail configuration.

    Specifications expected for the K-350 include the following:

    • Maximum altitude: 31,000 Feet • Maximum cruise speed: 320 Knots True Air Speed • Maximum takeoff weight: 8,900 Pounds • Maximum economy cruise: 1,200 Nautical Miles

    The K-350 will be certified for single-pilot operations under part 91 and part 135 operating rules. The following operating conditions will be included:

    • Day and Night Visual Flight Rules • Instrument Flight Rules • Flight Into Known Icing (Phase B certification)

    Kestrel Aircraft Company plans to utilize a rechargeable lithium main battery on their new Model K-350 turboprop airplane. The current regulatory requirements for part 23 airplanes do not contain adequate requirements for the application of rechargeable lithium batteries in airborne applications. This type of battery possesses certain failure and operational characteristics with maintenance requirements that differ significantly from that of the nickel-cadmium (Ni-Cd) and lead-acid rechargeable batteries currently approved in other normal, utility, acrobatic, and commuter category airplanes. Therefore, the FAA is issuing this special condition to require that (1) all characteristics of the rechargeable lithium batteries and their installation that could affect safe operation of the K-350 are addressed, and (2) appropriate Instructions for Continued Airworthiness that include maintenance requirements are established to ensure the availability of electrical power from the batteries when needed.

    Type Certification Basis

    Under the provisions of 14 CFR 21.17, Kestrel Aircraft Company must show that the K-350 meets the applicable provisions of part 23, as amended by amendments 23-1 through 23-62 thereto.

    If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 23) do not contain adequate or appropriate safety standards for the K-350 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

    Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.

    In addition to the applicable airworthiness regulations and special conditions, the K-350 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36, and the FAA must issue a finding of regulatory adequacy under § 611 of Public Law 92-574, the Noise Control Act of 1972.

    The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type-certification basis under § 21.17(a)(2).

    Novel or Unusual Design Features

    The K-350 will incorporate the following novel or unusual design feature:

    Installation of a rechargeable lithium battery as the main or engine start aircraft battery.

    Discussion

    The current regulatory requirements for part 23 airplanes do not contain adequate requirements for the application of rechargeable lithium batteries in electrical system design. This type of battery possesses certain failures with operational characteristics and maintenance requirements that differ significantly from that of the Ni-Cd and lead-acid rechargeable batteries currently approved in other normal, utility, acrobatic, and commuter category airplanes. Therefore, the FAA is issuing this special condition to require that (1) all characteristics of the rechargeable lithium batteries and their installation that could affect safe operation of the K-350 are addressed, and (2) appropriate Instructions for Continuous Airworthiness which include maintenance requirements are established to ensure the availability of electrical power from the batteries when needed.

    As previously mentioned, Kestrel Aircraft Company plans to utilize a rechargeable lithium main battery on their new Model K-350 turboprop airplane. At the Kestrel Preliminary Type Certification Board Meeting it was brought to the attention of the FAA that the lithium battery used in the K-350 will be qualified to RTCA standards DO-311, titled Minimum Operational Performance Standards for Rechargeable Lithium Battery Systems. Additionally, on July 18, 2013, Kestrel advised the Civil Aviation Contingency Operations (CACO) that the battery will have Technical Standard Order Authorization for TSO-C179a,1 titled Permanently Installed Rechargeable Lithium Cells, Batteries and Battery Systems. Finally, Kestrel plans to use the same manufacturer for both the lithium battery and the battery controller.

    1http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgTSO.nsf/0/A3B77A692AE3FF9386257885004B079C?OpenDocument.

    Presently, there is limited experience with use of rechargeable lithium batteries in applications involving commercial aviation. However, other users of this technology, ranging from wireless telephone manufacturers to the electric vehicle industry, have noted safety problems with lithium batteries. These problems include overcharging, over-discharging, and flammability of cell components, described in the following:

    1. Overcharging: In general, lithium batteries are significantly more susceptible to internal failures that can result in self-sustaining increases in temperature and pressure (i.e., thermal runaway) than the Ni-Cd or lead-acid counterparts. This is especially true for overcharging which causes heating and destabilization of the components of the cell, leading to the formation (by plating) of highly unstable metallic lithium. The metallic lithium may ignite, resulting in a fire or explosion. Finally, the severity of thermal runaway due to overcharging increases with increasing battery capacity and physical size.

    2. Over-discharging: Discharge of some types of lithium battery cells beyond a certain voltage (typically 2.4 volts) can cause corrosion of the electrodes of the cell, resulting in loss of battery capacity that cannot be reversed by recharging. This loss of capacity may not be detected by the simple voltage measurements commonly available to flight crews as a means of checking battery status, which is a problem shared with Ni-Cd batteries.

    3. Flammability of Cell Components: Unlike Ni-Cd and lead-acid batteries, some types of lithium batteries use liquid electrolytes that are flammable. The electrolyte may serve as a source of fuel for an external fire, if there is a breach of the battery container.

    These problems experienced by users of lithium batteries raise concern about the use of these batteries in commercial aviation. The intent of the special condition is to establish appropriate airworthiness standards for lithium battery installations in the K-350 and to ensure, as required by §§ 23.1309 and 23.601, that these battery installations are neither hazardous nor unreliable.

    In showing compliance with the special conditions herein, paragraphs (a)(1) through (a)(8), and the RTCA document, Minimum Operational Performance Standards for Rechargeable Lithium Battery Systems, DO-311, may be used. The list of planned DO-311 tests should be documented in the certification or compliance plan and agreed to by the CACO. Alternate methods of compliance other than DO-311 tests must be coordinated with the directorate and CACO.

    Discussion of Comments

    Notice of proposed special conditions No. 23-15-01-SC 2 for the Kestrel Aircraft Company Model K-350 Turboprop airplanes was published in the Federal Register on November 4, 2015 (80 FR 68281). No comments were received, and the special conditions are adopted as proposed.

    2https://www.regulations.gov/#!documentDetail;D=FAA-2015-5034-0001.

    Applicability

    These special conditions are not intended to replace § 23.1353(a)(b)(c)(d)(e) at amendment 23-62 in the certification basis of Model K-350 airplanes. These special conditions apply only to rechargeable lithium batteries and lithium battery systems and their installations. The requirements of § 23.1353 at amendment 23-62 remains in effect for batteries and battery installations on K-350 series that do not use newly technologically developed batteries.

    As previously discussed, these special conditions are applicable to the K-350. Should Kestrel Aircraft Company apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, the special conditions would apply to that model as well.

    Under standard practice, the effective date of final special conditions would be 30 days after the date of publication in the Federal Register; however, as the certification date for the Kestrel Aircraft Company Model K-350 Turboprop airplane is imminent, the FAA finds that good cause exists to make these special conditions effective upon issuance.

    Conclusion

    This action affects only certain novel or unusual design features on one model of airplane. It is not a rule of general applicability and it affects only the applicant who applied to the FAA for approval of these features on the airplane.

    List of Subjects in 14 CFR Part 23

    Aircraft, Aviation safety, Signs and symbols.

    Citation The authority citation for these special conditions is as follows: Authority:

    49 U.S.C. 106(g), 40113 and 44701; 14 CFR 21.16 and 21.17; and 14 CFR 11.38 and 11.19.

    The Special Conditions

    Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for Kestrel Aircraft Company, Model K-350 Turboprop airplanes.

    1. Kestrel Aircraft Company, Model K-350 Turboprop, Lithium Batteries.

    The FAA issues special conditions that adopt the following requirements that must be applied to all rechargeable lithium battery and lithium battery installations in lieu of the requirements of § 23.1353(a)(b)(c)(d)(e), amendment 23-62:

    (a) Rechargeable lithium batteries and battery installations must be designed and installed as follows:

    (1) Safe cell temperatures and pressures must be maintained during—

    i. normal operations;

    ii. any probable failure conditions of charging or discharging or battery monitoring system; or

    iii. any failure of the charging or battery monitoring system not shown to be extremely remote.

    (2) The rechargeable lithium battery installation must be designed to preclude explosion or fire in the event of (e)(1)(ii) and (e)(1)(iii) failures.

    (3) Design of the rechargeable lithium batteries must preclude the occurrence of self-sustaining, uncontrolled increases in temperature or pressure.

    (4) No explosive or toxic gasses emitted by any rechargeable lithium battery in normal operation or as the result of any failure of the battery charging system, monitoring system, or battery installation that is not shown to be extremely remote, may accumulate in hazardous quantities within the airplane.

    (5) Installations of rechargeable lithium batteries must meet the requirements of § 23.863(a) through (d) at amendment 23-34.

    (6) No corrosive fluids or gases that may escape from any rechargeable lithium battery may damage surrounding structure or any adjacent systems, equipment, electrical wiring, or the airplane in such a way as to cause a major or more severe failure condition, in accordance with § 23.1309(c) at amendment 23-62 and applicable regulatory guidance.

    (7) Each rechargeable lithium battery installation must have provisions to prevent any hazardous effect on structure or essential systems that may be caused by the maximum amount of heat the battery can generate during a short circuit of the battery or of its individual cells.

    (8) Rechargeable lithium battery installations must have—

    i. a system to automatically control the charging rate of the battery to prevent battery overheating and overcharging;

    ii. a battery temperature sensing and over-temperature warning system with a means of automatically disconnecting the battery from its charging source in the event of an over-temperature condition; and

    iii. a battery failure sensing and warning system with a means of automatically disconnecting the battery from its charging source in the event of battery failure.

    (b) Any rechargeable lithium battery installation functionally required for safe operation of the airplane must incorporate a monitoring and warning feature that will provide an indication to the appropriate flight crewmembers whenever the State of Charge (SOC) of the batteries has fallen below levels considered acceptable for dispatch of the airplane.

    (c) The Instructions for Continued Airworthiness required by § 23.1529 at amendment 23-26 must contain maintenance requirements to assure that the battery has been sufficiently charged at appropriate intervals specified by the battery manufacturer and the equipment manufacturer that contain the rechargeable lithium battery or rechargeable lithium battery system. This is required to ensure that lithium rechargeable batteries and lithium rechargeable battery systems will not degrade below specified ampere-hour levels sufficient to power the aircraft system. The Instructions for Continued Airworthiness must also contain procedures for the maintenance of replacement batteries in spares storage to prevent the installation of batteries that have degraded charge retention ability or other damage due to prolonged storage at a low state of charge. Replacement batteries must be of the same manufacturer and part number as approved by the FAA.

    Issued in Kansas City, Missouri, on June 23, 2016. William Schinstock, Acting Manager, Small Airplane Directorate Aircraft Certification Service.
    [FR Doc. 2016-15765 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 25 [Docket No. FAA-2015-8298; Special Conditions No. 25-611-SC] Special Conditions: JAMCO America, Inc., Boeing Model 777-300ER, Dynamic Test Requirements for Single-Occupant Oblique (Side-Facing) Seats With Inflatable Restraints AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final special condition; request for comments; corrections.

    SUMMARY:

    This document corrects omissions in docket no. FAA-2015-8298, special conditions no. 25-611-SC, which was published in the Federal Register on March 16, 2016 (81 FR 13969). The special conditions in the published document are incomplete. This correction replaces the entire special conditions section from that which appeared in the original Federal Register publication.

    DATES:

    This action is effective on JAMCO America, Inc., on July 5, 2016. We must receive your comments August 19, 2016.

    FOR FURTHER INFORMATION CONTACT:

    John Shelden, FAA, Airframe and Cabin Safety Branch, ANM-115,Transport Airplane Directorate, Aircraft Certification Service, 1601 Lind Avenue SW., Renton, Washington 98057-3356; telephone (425) 227-2785; facsimile (425) 227-1320.

    SUPPLEMENTARY INFORMATION:

    On March 16, 2016, the Federal Register published a document designated as “Docket No. FAA-2015-8298; Special Conditions No. 25-611-SC,” (81 FR 13969). That document issued special conditions pertaining to dynamic test requirements for single-occupant oblique (side-facing) seats with inflatable restraints on Boeing Model 777-300ER airplanes. As published, the special conditions are incomplete. The applicant was aware of the complete set of conditions at the time of the original, incomplete publication.

    Correction

    The following special conditions replace the entire special conditions section of the final special conditions document [FR Doc. 2016-05995 Filed 3-15-16; 8:45 a.m.], published on March 16, 2016 (81 FR 13969). The introductory language was previously published and is not changed.

    The Special Conditions Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for Boeing Model 777-300ER airplanes modified by JAMCO. Oblique (Side-Facing) Seats Special Conditions

    In addition to the requirements of § 25.562:

    1. Head Injury Criteria (HIC)

    Compliance with § 25.562(c)(5) is required, except that, if the anthropomorphic test device (ATD) has no apparent contact with the seat and related structure but has contact with an airbag, a HIC unlimited score in excess of 1000 is acceptable, provided the HIC15 score (calculated in accordance with 49 CFR 571.208) for that contact is less than 700.

    2. Body-to-Wall/Furnishing Contact

    If a seat is installed aft of structure (e.g. interior wall or furnishings) that does not provide a homogenous contact surface for the expected range of occupants and yaw angles, then additional analysis and tests may be required to demonstrate that the injury criteria are met for the area that an occupant could contact. For example, if different yaw angles could result in different airbag device performance, then additional analysis or separate tests may be necessary to evaluate performance.

    3. Neck Injury Criteria

    a. The seating system must protect the occupant from experiencing serious neck injury. The assessment of neck injury must be conducted with the airbag device activated, unless there is reason to also consider that the neck-injury potential would be higher for impacts below the airbag-device deployment threshold.

    b. The Nij, calculated in accordance with 49 CFR 571.208, must be below 1.0, where Nij =Fz/Fzc + My/Myc, and Nij critical values are:

    i. Fzc = 1530 lb for tension ii. Fzc = 1385 lb for compression iii. Myc = 229 lb-ft in flexion iv. Myc = 100 lb-ft in extension

    c. In addition, peak upper neck Fz must be below 937 lb in tension and 899 lb in compression.

    d. Rotation of the head about its vertical axis relative to the torso is limited to 105 degrees in either direction from forward-facing.

    e. The neck must not impact any surface that would produce concentrated loading on the neck.

    4. Spine and Torso Injury Criteria

    a. The lumbar spine tension (Fz) cannot exceed 1200 lb.

    b. Significant concentrated loading on the occupant's spine, in the area between the pelvis and shoulders during impact, including rebound, is not acceptable. During this type of contact, the interval for any rearward (X-axis direction) acceleration exceeding 20g must be less than 3 milliseconds as measured by the thoracic instrumentation specified in 49 CFR part 572, subpart E, filtered in accordance with SAE recommended practice J211/1, “Instrumentation for Impact Test—Part 1—Electronic Instrumentation.”

    c. The occupant must not interact with the armrest or other seat components in any manner significantly different than would be expected for a forward-facing seat installation.

    5. Pelvis Criteria

    Any part of the load-bearing portion of the bottom of the ATD pelvis must not translate beyond the edges of the seat bottom seat-cushion supporting structure.

    6. Femur Criteria

    Axial rotation of the upper leg (about the Z-axis of the femur, per SAE J211/1) must be limited to 35 degrees in the strike direction from the normal seating position. Evaluation during rebound need not be considered.

    7. ATD and Test Conditions

    Longitudinal tests conducted to measure the injury criteria above must be performed with the FAA Hybrid III ATD, as described in SAE 1999-01-1609, “A Lumbar Spine Modification to the Hybrid III ATD For Aircraft Seat Tests.” The tests must be conducted with an undeformed floor, at the most-critical yaw cases for injury, and with all lateral structural supports (e.g. armrests or walls) installed.

    Inflatable Lapbelt Special Conditions

    The inflatable lapbelts must meet special conditions no. 25-187A-SC, “Boeing Model 777 Series Airplanes; Seats with Inflatable Lapbelts.”

    1. Because this type of protection system may or may not activate during various crash conditions, the applicant must demonstrate that the injury criteria listed in these special conditions are not exceeded in an event which is slightly below the activation level of the airbag system.

    2. Additionally, as indicated in special conditions no. 25-187A-SC, inflatable lapbelts must be shown to not affect emergency-egress capabilities in the main aisle, cross-aisle, and passageway.

    Issued in Renton, Washington, on June 17, 2016. Michael Kaszycki, Assistant Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15784 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-8134; Directorate Identifier 2014-NM-256-AD; Amendment 39-18572; AD 2016-13-08] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), Department of Transportation (DOT).

    ACTION:

    Final rule.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for all Airbus Model A300 series airplanes; and Model A300 B4-600, B4-600R, and F4-600R series airplanes, and Model A300 C4-605R Variant F airplanes (collectively called Model A300-600 series airplanes). This AD was prompted by a report of cracking of the lower tension bolt area at the rib one junction (both sides) of the lower wing. This AD requires repetitive inspections for cracking of the fasteners and of the fitting around the fastener holes at the frame (FR) 40 lower wing location, and corrective actions if necessary. We are issuing this AD to detect and correct crack initiation of the fittings of the FR40 lower wing locations, which could result in reduced structural integrity of the airplane.

    DATES:

    This AD becomes effective August 9, 2016.

    The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of August 9, 2016.

    ADDRESSES:

    For Airbus service information identified in this final rule, contact Airbus SAS, Airworthiness Office—EAW, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-8134.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-8134; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section.

    FOR FURTHER INFORMATION CONTACT:

    Dan Rodina, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-2125; fax 425-227-1149.

    SUPPLEMENTARY INFORMATION: Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus Model A300 series airplanes; and Model A300 B4-600, B4-600R, and F4-600R series airplanes, and Model A300 C4-605R Variant F airplanes (collectively called Model A300-600 series airplanes). The NPRM published in the Federal Register on December 31, 2015 (80 FR 81786) (“the NPRM”).

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2014-0272, dated December 12, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus Model A300 series airplanes; and Model A300 B4-600, B4-600R, and F4-600R series airplanes, and Model A300 C4-605R Variant F airplanes (collectively called Model A300-600 series airplanes). The MCAI states:

    Following the A300-600 Extended Service Goal (ESG2) exercise, specific inspections for cracks were performed in fittings of frame (FR) 40, in areas not covered by any existing task.

    Findings were identified on an A300-600 aeroplane withdrawn from service in the lower tension bolt area at rib one junction (both sides).

    This condition, if not detected and corrected, could lead to crack initiation, affecting the structural integrity of the aeroplane.

    To address this potential unsafe condition, an inspection programme was developed for the fitting around the fastener holes located at FR40 lower wing junction, left-hand (LH) and right-hand (RH) sides.

    For the reasons described above, this [EASA] AD requires repetitive High Frequency Eddy Current (HFEC) inspections and rototest inspections of the fitting around the fastener holes located at FR40 lower wing junction and, depending on findings, accomplishment of a repair.

    The corrective actions include a repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Airbus's EASA Design Organization Approval (DOA).

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-8134.

    Comments

    We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

    Request To Clarify Corrective Actions

    FedEx asked that the corrective actions identified in paragraph (i) of the proposed AD be clarified. FedEx stated that paragraph (h)(1) of the proposed AD specifies “If one or more of the hole diameters is outside the tolerance of the nominal diameter, and outside the tolerance of the first and second oversize: Do the applicable corrective actions required by paragraph (i) of this AD.” FedEx added that paragraph (i) of the proposed AD specifies “If, during any inspection required by this AD, any crack is found, or one or more of the hole diameters are outside the tolerance of the nominal diameter: Repair before further flight using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA).” FedEx noted that paragraph (i) should specify “one or more of the hole diameters are outside the tolerance of the nominal diameter and outside the tolerance of the first and second oversize” to match the language in paragraph (h)(1) of the proposed.

    We agree. We have confirmed that the language in paragraph (i) of this AD should match the language in paragraph (h)(1) of this AD. We have changed paragraph (i) of this AD accordingly.

    Request To Revise Compliance Time

    United Parcel Service (UPS) asked that we revise the compliance time for the rototest inspections specified by paragraph (h) of the proposed AD to a threshold based on total service time, rather than calendar time alone. UPS stated that, based on reported findings to date, the crack growth rate is so slow it will not affect the immediate airworthiness of the airplane. UPS suggested that we add a threshold of 11,900 total flight cycles.

    We do not agree with the commenter's request. The commenter provided no data to substantiate the proposed compliance time based on flight cycles. In developing an appropriate compliance time for this AD, we considered not only the urgency associated with the subject unsafe condition, but also the manufacturer's recommendations, EASA's recommendations, and the practical aspect of accomplishing the required inspections within a period of time that corresponds to the normal scheduled maintenance for most affected operators. After considering all the available information, we have determined that the compliance time, as proposed, represents an appropriate interval of time in which the required actions can be performed in a timely manner within the affected fleet, while still maintaining an adequate level of safety. However, affected operators may request an alternative method of compliance (AMOC) to request a change to the compliance time under the provisions of paragraph (j) of this AD by submitting data and analysis substantiating that the change would provide an acceptable level of safety. We have not changed this AD regarding this issue.

    Request To Remove High Frequency Eddy Current (HFEC) Inspections

    UPS asked that the HFEC inspections specified by paragraph (g) of the proposed AD be removed. UPS stated that the HFEC inspection requirement does not enhance airplane safety because only substantial damage can be detected by this method, due to a restricted inspection area. UPS also stated that the smallest crack detectable by an HFEC inspection method is calculated to be 7.5 mm in length, not taking into account the inspection surface radius and the limited access to the inspection area. UPS added that fastener location and potential obstacles affect consistent probe movement, which increases the chance for inconsistent inspection readings.

    We do not agree with the commenter's request. The HFEC inspection required by paragraph (g) of this AD is a necessary interim measure intended to find cracking before the required compliance time for the rototest inspection in paragraph (h) of this AD. As the commenter acknowledged, a 7.5-mm crack may be detected during an HFEC inspection within 1,000 flight hours. That same 7.5-mm crack, undetected for 3 years until the rototest inspection is done, could grow and result in reduced structural integrity of the airplane; therefore, the repetitive HFEC inspections must be retained in this AD. If no cracking is found, the HFEC inspection can be repeated, or terminated when the rototest inspection is accomplished. However, affected operators may request approval of an AMOC to do the rototest inspections only, under the provisions of paragraph (j) of this AD by submitting data and analysis, and a compliance schedule, substantiating that the change would provide an acceptable level of safety. We have not changed this AD regarding this issue.

    Request To Correct Typographical Errors in Service Information

    FedEx asked that the typographical errors for the structural repair manual (SRM) references in Airbus Service Bulletin A300-57-6115, dated April 4, 2014, be corrected so FedEx can use them to comply with the NPRM requirements. FedEx stated that Airbus was informed of and acknowledged these typographical errors, but currently no changes have been made to the service information. FedEx noted that the service information listed SRM 51-40-13 for the application of special coatings, but the correct reference is SRM 51-23-20. FedEx also noted that the service information listed SRM 51-40-12 for the application of paint coatings, but the correct reference is SRM 51-23-10.

    We agree with the commenter's concerns. We have changed paragraph (g) of this AD to clarify the correct SRM references to be used.

    Conclusion

    We reviewed the available data and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

    • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

    • Do not add any additional burden upon the public than was already proposed in the NPRM.

    Related Service Information Under 1 CFR Part 51

    We reviewed the following service information.

    • Airbus Service Bulletin A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014.

    • Airbus Service Bulletin A300-57-6115, dated April 4, 2014.

    The service information describes procedures for repetitive inspections for cracking of the fasteners and of the fitting around the fastener holes at the FR40 lower wing location. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. Costs of Compliance

    We estimate that this AD affects 166 airplanes of U.S. registry.

    We also estimate that it takes about 12 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD on U.S. operators to be $169,320, or $1,020 per product.

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

    Authority for This Rulemaking

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

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

    Regulatory Findings

    We determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

    For the reasons discussed above, I certify that this AD:

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

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

    3. Will not affect intrastate aviation in Alaska; and

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

    List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40113, 44701.

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-13-08 Airbus: Amendment 39-18572. Docket No. FAA-2015-8134; Directorate Identifier 2014-NM-256-AD. (a) Effective Date

    This AD becomes effective August 9, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to all Airbus airplanes identified in paragraphs (c)(1) and (c)(2) of this AD, certificated in any category.

    (1) Airbus Model A300 B2-1A, B2-1C, B2K-3C, B2-203, B4-2C, B4-103, and B4-203 airplanes.

    (2) Airbus Model A300 B4-601, B4-603, B4-620, B4-622, B4-605R, B4-622R, F4-605R, F4-622R, and C4-605R Variant F airplanes.

    (d) Subject

    Air Transport Association (ATA) of America Code 57, Wings.

    (e) Reason

    This AD was prompted by a report of cracking of the lower tension bolt area at rib one junction (both sides) of the lower wing. We are issuing this AD to detect and correct crack initiation of the fittings of the frame (FR) 40 lower wing locations, which could result in reduced structural integrity of the airplane.

    (f) Compliance

    Comply with this AD within the compliance times specified, unless already done.

    (g) Repetitive High Frequency Eddy Current (HFEC) Inspections

    Within 1,000 flight hours after the effective date of this AD: Do an HFEC inspection for cracking of fasteners 1 through 3 at the left-hand and right-hand sides of the FR40 lower junction, and of the fitting around the fastener holes, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014 (for Model A300 B2-1A, B2-1C, B2K-3C, B2-203, B4-2C, B4-103, and B4-203 airplanes); or Airbus Service Bulletin A300-57-6115, dated April 4, 2014 (for Model A300 B4-601, B4-603, B4-620, B4-622, B4-605R, B4-622R, F4-605R, F4-622R, and C4-605R Variant F airplanes). If no cracking is found, repeat the HFEC inspection at intervals not to exceed 1,000 flight hours until a rototest inspection required by paragraph (h)(2) of this AD has been done. Where Airbus Service Bulletin A300-57-6115, dated April 4, 2014, refers to Structural Repair Manual (SRM) 51-40-13 for applying special protection, the correct reference is SRM 51-23-20; and to SRM 51-40-12 for applying paint coatings, the correct reference is SRM 51-23-10.

    (h) Repetitive Rototest Inspections

    Within 36 months after the effective date of this AD: Remove the fasteners and measure the diameter of the fastener holes; and, before further flight, do the applicable actions required by paragraph (h)(1) or (h)(2) of this AD, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014 (for Model A300 B2-1A, B2-1C, B2K-3C, B2-203, B4-2C, B4-103, and B4-203 airplanes); or Airbus Service Bulletin A300-57-6115, dated April 4, 2014 (for Model A300 B4-601, B4-603, B4-620, B4-622, B4-605R, B4-622R, F4-605R, F4-622R, and C4-605R Variant F airplanes).

    (1) If one or more of the hole diameters is outside the tolerance of the nominal diameter, and outside the tolerance of the first and second oversize: Do the applicable corrective actions required by paragraph (i) of this AD.

    (2) If all of the hole diameters are within the tolerance of the nominal diameter or the first or second oversize: Do detailed and rototest inspections for cracking of the fastener holes at the left-hand and right-hand sides of the FR40 lower junction, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014 (for Model A300 B2-1A, B2-1C, B2K-3C, B2-203, B4-2C, B4-103, and B4-203 airplanes); or Airbus Service Bulletin A300-57-6115, dated April 4, 2014 (for Model A300 B4-601, B4-603, B4-620, B4-622, B4-605R, B4-622R, F4-605R, F4-622R, and C4-605R Variant F airplanes). If no cracking is found, before further flight, install new fasteners of the same diameter in special clearance fit for fasteners 1 through 3 of the FR40 lower junction, in accordance with the Accomplishment Instructions of Airbus Service Bulletins A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014; or Airbus Service Bulletin A300-57-6115, dated April 4, 2014. Repeat the rototest inspection thereafter at intervals not to exceed 7,000 flight cycles. Accomplishment of a rototest inspection required by this paragraph terminates the repetitive HFEC inspections required by paragraph (g) of this AD.

    (i) Corrective Actions

    If, during any inspection required by this AD, any crack is found, or one or more of the hole diameters is outside the tolerance of the nominal diameter, and outside the tolerance of the first and second oversize: Repair before further flight in accordance with a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA).

    (j) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the International Branch, send it to ATTN: Dan Rodina, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-2125; fax 425-227-1149. Information may be emailed to: [email protected] Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office. The AMOC approval letter must specifically reference this AD.

    (2) Contacting the Manufacturer: For any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Airbus's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (3) Required for Compliance (RC): Except as required by paragraph (i) of this AD: If any service information contains procedures or tests that are identified as RC, those procedures and tests must be done to comply with this AD; any procedures or tests that are not identified as RC are recommended. Those procedures and tests that are not identified as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the procedures and tests identified as RC can be done and the airplane can be put back in an airworthy condition. Any substitutions or changes to procedures or tests identified as RC require approval of an AMOC.

    (k) Related Information

    Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2014-0272, dated December 12, 2014, for related information. This MCAI may be found in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-8134.

    (l) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (i) Airbus Service Bulletin A300-57-0257, excluding Appendix 01 and including Appendix 02, dated April 4, 2014.

    (ii) Airbus Service Bulletin A300-57-6115, dated April 4, 2014.

    (3) For Airbus service information identified in this final rule, contact Airbus SAS, Airworthiness Office—EAW, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com.

    (4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on June 21, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15356 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-8131; Directorate Identifier 2015-NM-073-AD; Amendment 39-18575; AD 2016-13-11] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    We are superseding Airworthiness Directive (AD) 2008-05-06 for certain The Boeing Company Model 737-100, -200, -300, -400, and -500 series airplanes. AD 2008-05-06 required repetitive inspections for fatigue cracking in the longitudinal floor beam web, upper chord, and lower chord located at certain body stations, and repair if necessary. This new AD requires, for certain airplanes, an inspection to determine if tapered fillers are installed, and related investigative and corrective actions if necessary. This AD was prompted by reports of cracks in the center wing box longitudinal floor beams, upper chord, and lower chord. We are issuing this AD to detect and correct fatigue cracking of the upper and lower chords and web of the longitudinal floor beams, which could result in rapid loss of cabin pressure.

    DATES:

    This AD is effective August 9, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of August 9, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain other publication listed in this AD as of April 8, 2008 (73 FR 11538, March 4, 2008).

    ADDRESSES:

    For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-8131.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov. by searching for and locating Docket No. FAA-2015-8131; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Docket Management Facility, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

    FOR FURTHER INFORMATION CONTACT:

    Galib Abumeri, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles Aircraft Certification Office (ACO), 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5324; fax: 562-627-5210; email: [email protected]

    SUPPLEMENTARY INFORMATION: Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2008-05-06, Amendment 39-15400 (73 FR 11538, March 4, 2008) (“AD 2008-05-06”). AD 2008-05-06 applied to certain The Boeing Company Model 737-100, -200, -300, -400, and -500 series airplanes. The NPRM published in the Federal Register on January 12, 2016 (81 FR 1345) (“the NPRM”). The NPRM was prompted by reports of cracks in the center wing box longitudinal floor beams, upper chord, and lower chord. The NPRM proposed to continue to require repetitive inspections for fatigue cracking in the longitudinal floor beam web, upper chord, and lower chord located at certain body stations, and repair if necessary. The NPRM also proposed to require, for certain airplanes, an inspection to determine if tapered fillers are installed, and related investigative and corrective actions if necessary. We are issuing this AD to detect and correct fatigue cracking of the upper and lower chords and web of the longitudinal floor beams, which could result in rapid loss of cabin pressure.

    Comments

    We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

    Support for the NPRM

    Boeing stated that it has reviewed the NPRM and concurs with the contents.

    Ms. Kathleen Whitworth stated that the NPRM is a good idea because the safety of airline passengers outweighs the extra cost of the added inspection and that she is in full support of the NPRM.

    Effect of Winglets on Accomplishment of the Proposed Actions

    Aviation Partners Boeing stated that accomplishing the Supplemental Type Certificate (STC) ST01219SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/ebd1cec7b301293e86257cb30045557a/$FILE/ST01219SE.pdf) does not affect accomplishment of the actions specified in the NPRM.

    We concur with the commenter. We have redesignated paragraph (c) of the proposed AD as paragraph (c)(1) and added a new paragraph (c)(2) to this AD to state that installation of STC ST01219SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/ebd1cec7b301293e86257cb30045557a/$FILE/ST01219SE.pdf) does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST01219SE is installed, a “change in product” alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17.

    Conclusion

    We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously, and minor editorial changes. We have determined that these minor changes:

    • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

    • Do not add any additional burden upon the public than was already proposed in the NPRM.

    We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015. The service information describes procedures for various inspections for fatigue cracks in the longitudinal floor beam web, upper chord, and lower chord, located at the applicable body stations, repairs (including related investigative and corrective actions), and preventive modifications (including related investigative and corrective actions) that terminate the repetitive inspections. The service information also describes procedures for an inspection to determine if tapered fillers are installed, and related investigative and corrective actions. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    Costs of Compliance

    We estimate that this AD affects 652 airplanes of U.S. registry.

    We estimate the following costs to comply with this AD:

    Estimated Costs Action Labor cost Parts cost Cost per product Cost on U.S.
  • operators
  • Inspections [retained actions from AD 2008-05-06] Up to 25 work-hours × $85 per hour = $2,125 per inspection cycle $0 $2,125 per inspection cycle $1,385,500 per inspection cycle. Tapered filler inspection [new action] 4 work-hours × $85 per hour = $340 $0 $340 $221,680.

    We estimate the following costs to do any necessary repairs that would be required based on the results of the inspection. We have no way of determining the number of aircraft that might need these repairs:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Floor beam repair and optional preventative modification Up to 198 work-hours × $85 per hour = $16,830 (1) Up to $16,830 Tapered filler repair 174 work-hours × $85 per hour = $14,790 (1) $14,790 1 We have received no definitive data that would enable us to provide parts cost estimates for the actions specified in this AD.
    Authority for This Rulemaking

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

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

    Regulatory Findings

    We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

    For the reasons discussed above, I certify that this AD:

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

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

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

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

    List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40113, 44701.

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing Airworthiness Directive (AD) 2008-05-06, Amendment 39-15400 (73 FR 11538, March 4, 2008), and adding the following new AD: 2016-13-11 The Boeing Company: Amendment 39-18575; Docket No. FAA-2015-8131; Directorate Identifier 2015-NM-073-AD. (a) Effective Date

    This AD is effective August 9, 2016.

    (b) Affected ADs

    This AD replaces AD 2008-05-06, Amendment 39-15400 (73 FR 11538, March 4, 2008) (“AD 2008-05-06”).

    (c) Applicability

    (1) This AD applies to The Boeing Company Model 737-100, -200, -300, -400, and -500 series airplanes; certificated in any category; as identified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015.

    (2) Installation of Supplemental Type Certificate (STC) ST01219SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/ebd1cec7b301293e86257cb30045557a/$FILE/ST01219SE.pdf) does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST01219SE is installed, a ”change in product” alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17.

    (d) Subject

    Air Transport Association (ATA) of America Code 57, Wings.

    (e) Unsafe Condition

    This AD was prompted by reports of cracks in the center wing box longitudinal floor beams, upper chord, and lower chord. We are issuing this AD to detect and correct fatigue cracking of the upper and lower chords and web of the longitudinal floor beams, which could result in rapid loss of cabin pressure.

    (f) Compliance

    Comply with this AD within the compliance times specified, unless already done.

    (g) Retained Inspections, With Revised Service Information and Revised Affected Airplanes

    This paragraph restates the requirements of paragraph (f) of AD 2008-05-06, with revised service information and revised affected airplanes. For Groups 1 through 4 airplanes identified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, do the various inspections for fatigue cracks in the longitudinal floor beam web, upper chord, and lower chord, located at the applicable body stations specified in the Accomplishment Instructions of Boeing Service Bulletin 737-57-1296, dated June 13, 2007; or Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; by doing all the actions in accordance with the Accomplishment Instructions of Boeing Service Bulletin 737-57A1296, dated June 13, 2007; or Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; except as provided by paragraph (h) of this AD. Do the inspections at the time specified in paragraph (g)(1) or (g)(2) of this AD, as applicable. As of the effective date of this AD, only use Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, for accomplishing the actions required by this paragraph.

    Note 1 to paragraphs (g) and (h) of this AD:

    The airplane groups identified in Boeing Service Bulletin 737-57-1296, dated June 13, 2007, do not, in all cases, match the airplane groups identified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015 (Group 4 airplanes in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, coincide with certain Group 2 airplanes in Boeing Service Bulletin 737-57-1296, dated June 13, 2007).

    (1) For Groups 1 and 2 airplanes, except for line numbers 1 through 291, identified in Boeing Service Bulletin 737-57-1296, dated June 13, 2007: Do the inspections at the applicable initial compliance time listed in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 737-57-1296, dated June 13, 2007, except where Boeing Service Bulletin 737-57-1296, dated June 13, 2007, specifies a compliance time after the date on the service bulletin, this AD requires compliance within the specified compliance time after April 8, 2008 (the effective date of AD 2008-05-06). Repeat the inspections thereafter at the intervals specified in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 737-57-1296, dated June 13, 2007.

    (2) For Group 3 airplanes identified in Boeing Service Bulletin 737-57-1296, dated June 13, 2007: Do the inspections at the applicable initial compliance time listed in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 737-57-1296, dated June 13, 2007, except where Boeing Service Bulletin 737-57-1296, dated June 13, 2007, specifies a compliance time after the date on the service bulletin, this AD requires compliance within the specified compliance time after April 8, 2008 (the effective date of AD 2008-05-06). Repeat the inspections thereafter at the intervals specified in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 737-57-1296, dated June 13, 2007.

    (h) Retained Repair Instructions, With Revised Service Information That Contains New Repair Actions

    This paragraph restates the requirements of paragraph (g) of AD 2008-05-06, with revised service information that contains new repair actions. If any crack is found during any inspection required by paragraph (g) of this AD, do the applicable actions specified in paragraph (h)(1) or (h)(2) of this AD.

    (1) For inspections done using Boeing Service Bulletin 737-57-1296, dated June 13, 2007: If any crack is found during any inspection required by paragraph (g) of this AD, and Boeing Service Bulletin 737-57-1296, dated June 13, 2007, specifies contacting Boeing for repair instructions, before further flight, repair using a method approved in accordance with the procedures specified in paragraph (n) of this AD.

    (2) For inspections done using Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015: If any crack is found during any inspection required by paragraph (g) of this AD, before further flight, repair, including doing all applicable related investigative actions and corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; except where Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, specifies contacting Boeing for repair instructions, before further flight, repair using a method approved in accordance with the procedures specified in paragraph (n) of this AD. Accomplishing a repair specified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, terminates the repetitive inspections required by paragraph (g) of this AD for the repaired area only.

    (i) New Requirement of This AD: Inspection for Tapered Fillers for Certain Airplanes, Related Investigative Actions, and Corrective Actions

    For Groups 1 through 4, Configuration 1 airplanes identified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015: Except as provided by paragraph (k) of this AD, at the applicable time specified in table 5 of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, do an inspection to determine if tapered fillers are installed; and do all applicable related investigative and corrective actions; in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; except where Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, specifies contacting Boeing for repair instructions, before further flight, repair using a method approved in accordance with the procedures specified in paragraph (n) of this AD. Do all applicable related investigative and corrective actions before further flight. A review of the maintenance records is acceptable in lieu of this inspection if the installation of tapered fillers can be conclusively determined from that review.

    (j) New Requirement of This AD: Inspections and Corrective Actions for Group 5 Airplanes

    For Group 5 airplanes identified in Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015: Except as provided by paragraph (k) of this AD, at the applicable time specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; accomplish inspections and applicable corrective actions using a method approved in accordance with the procedures specified in paragraph (n) of this AD.

    (k) Exception to Service Information

    Where paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, specifies a compliance time “after the Revision 2 date of this service bulletin,” this AD requires compliance within the specified compliance time “after the effective date of this AD.”

    (l) Optional Terminating Action

    Accomplishing the applicable preventative modification specified in paragraph 3.B.4., “Preventive Modification” of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, terminates the applicable repetitive inspection required by paragraph (g) of this AD. The preventative modification, including related investigative and corrective actions, must be done in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015; except where Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015, specifies contacting Boeing for repair instructions, before further flight, repair using a method approved in accordance with the procedures specified in paragraph (n) of this AD.

    (m) Credit for Previous Actions

    This paragraph provides credit for actions required by paragraphs (g) and (h)(2) of this AD, if those actions were performed before the effective date of this AD using Boeing Service Bulletin 737-57-1296, Revision 1, dated September 26, 2012. This document is not incorporated by reference in this AD.

    (n) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Los Angeles Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (o)(1) of this AD. Information may be emailed to: [email protected]

    (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.

    (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Los Angeles ACO, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane and the approval must specifically refer to this AD.

    (4) AMOCs approved as specified in the fourth paragraph (related to AD 2008-05-06) of Section 1.F., Approval, of Boeing Service Bulletin 737-57-1296, Revision 1, dated September 26, 2012, for repairs and modifications are not approved for any provision of this AD. All other AMOCs approved for AD 2008-05-06 are approved as AMOCs for the corresponding provisions of this AD.

    (o) Related Information

    (1) For more information about this AD, contact Galib Abumeri, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles Aircraft Certification Office (ACO), 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5324; fax: 562-627-5210; email: [email protected]

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (p)(5) and (p)(6) of this AD.

    (p) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.

    (3) The following service information was approved for IBR on August 9, 2016.

    (i) Boeing Alert Service Bulletin 737-57A1296, Revision 2, dated April 1, 2015.

    (ii) Reserved.

    (4) The following service information was approved for IBR on April 8, 2008 (73 FR 11538, March 4, 2008).

    (i) Boeing Service Bulletin 737-57-1296, dated June 13, 2007.

    (ii) Reserved.

    (5) For Boeing service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com.

    (6) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    (7) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on June 21, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15355 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-8032; Directorate Identifier 2016-SW-037-AD; Amendment 39-18578; AD 2016-12-51] RIN 2120-AA64 Airworthiness Directives; Airbus Helicopters AGENCY:

    Federal Aviation Administration (FAA), Department of Transportation (DOT).

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are publishing a new airworthiness directive (AD) for Airbus Helicopters Model AS332L2 and Model EC225LP helicopters, which was sent previously to all known U.S. owners and operators of these helicopters. This AD immediately prohibits flight of all Model AS332L2 and EC225LP helicopters. This AD is prompted by an accident involving an EC225LP helicopter in which the main rotor hub (MRH) detached from the main gearbox (MGB). These actions are intended to prevent failure of the main rotor system and subsequent loss of control of the helicopter.

    DATES:

    This AD becomes effective July 20, 2016 to all persons except those persons to whom it was made immediately effective by Emergency AD 2016-12-51, issued on June 3, 2016, which contains the requirements of this AD.

    We must receive comments on this AD by September 6, 2016.

    ADDRESSES:

    You may send comments by any of the following methods:

    Federal eRulemaking Docket: Go to http://www.regulations.gov. Follow the online instructions for sending your comments electronically.

    Fax: 202-493-2251.

    Mail: Send comments to the U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590-0001.

    Hand Delivery: Deliver to the “Mail” address between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-8032; or in person at the Docket Operations Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the European Aviation Safety Agency (EASA) AD, the economic evaluation, any comments received, and other information. The street address for the Docket Operations Office (telephone 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Gary Roach, Aviation Safety Engineer, Regulations and Policy Group, Rotorcraft Directorate, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110, email [email protected]

    SUPPLEMENTARY INFORMATION: Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.

    Discussion

    On June 3, 2016, we issued Emergency AD 2016-12-51 to correct an unsafe condition for Model AS332L2 and EC225LP helicopters. Emergency AD 2016-12-51 immediately prohibits further flight of Model AS332L2 and EC225LP helicopters. The emergency AD was sent previously to all known U.S. owners and operators of these helicopters.

    Emergency AD 2016-12-51 was prompted by Emergency AD No. 2016-0104-E, dated June 2, 2016, issued by EASA, which is the Technical Agent for the Member States of the European Union, to correct an unsafe condition for Airbus Helicopters Model EC 225 LP helicopters. Following a fatal accident in Norway in which the MRH detached from the MGB in-flight, EASA issued Emergency AD No. 2016-0089-E, dated May 3, 2016, to require a one-time inspection of the MGB and to report findings to EASA and Airbus Helicopters. Review of the findings from the inspections prompted Airbus Helicopters to provide further inspections and replacement instructions for correctly installing the MGB suspension bars and attachment fittings. EASA subsequently issued Emergency AD No. 2016-0103-E, dated June 1, 2016, which superseded Emergency AD No. 2016-0089-E, and required inspecting the MGB suspension bar fittings and related base plate assemblies and replacing the attachment hardware. Soon after Emergency AD No. 2016-0103-E was issued, a preliminary report from the Accident Investigation Board Norway indicated metallurgical findings of fatigue and surface degradation in the outer race of a second stage planet gear of the MGB epi-cyclic module. EASA advises that it could not be determined if the fatigue and surface degradation is a contributing factor or if it resulted from another initiating factor. Therefore, pending further investigation to determine the root cause of the reported damage and pending development of mitigating measures by Airbus Helicopters, EASA decided to temporarily ground the fleet as a precautionary measure and issued Emergency AD No. 2016-0104-E on June 2, 2016. EASA included Model AS 332 L2 helicopters to the applicability due to similarities in design that make it subject to the same unsafe condition.

    FAA's Determination

    These helicopters have been approved by the aviation authority of France and are approved for operation in the United States. Pursuant to our bilateral agreement with France, EASA, its technical representative, has notified us of the unsafe condition described in the EASA AD. We are issuing this AD because we evaluated all information provided by EASA and determined the unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs.

    AD Requirements

    This AD immediately prohibits flight of all Airbus Helicopters Model AS332L2 and EC225LP helicopters.

    Interim Action

    We consider this AD to be an interim action. Once the design approval holder develops a modification that addresses the unsafe condition identified in this AD, we might consider additional rulemaking.

    Costs of Compliance

    We estimate that this AD affects five helicopters of U.S. Registry. There are no costs of compliance with this AD because there are no required maintenance actions.

    FAA's Justification and Determination of the Effective Date

    Providing an opportunity for public comments prior to adopting these AD requirements would delay implementing the safety actions needed to address this known unsafe condition. Therefore, we find the risk to the flying public justifies waiving notice and comment prior to the adoption of this rule because the previously described unsafe condition can adversely affect the airworthiness of the helicopter and the prohibition of all flights must begin immediately.

    Since it was found that immediate action was required, notice and opportunity for prior public comment before issuing this AD were impracticable and contrary to the public interest and good cause existed for making Emergency AD 2016-12-51 effective immediately on June 3, 2016, to all known U.S. operators of the specified Airbus helicopters. These conditions still exist and the Emergency AD is hereby published in the Federal Register as an amendment to § 39.13 of the Federal Aviation Regulations (14 CFR 39.13) to make it effective to all persons.

    Authority for This Rulemaking

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

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

    Regulatory Findings

    We determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

    For the reasons discussed, I certify that this AD:

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

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

    3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

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

    List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40113, 44701.

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-12-51 Airbus Helicopters: Amendment 39-18578; Docket No. FAA-2016-8032; Directorate Identifier 2016-SW-037-AD. (a) Applicability

    This AD applies to Airbus Helicopters Model AS332L2 and Model EC225LP helicopters, certificated in any category.

    (b) Unsafe Condition

    This AD defines the unsafe condition as failure of the main rotor system, which will result in loss of control of the helicopter.

    (c) Effective Date

    This AD becomes effective July 20, 2016 to all persons except those persons to whom it was made immediately effective by Emergency AD 2016-12-51 issued on June 3, 2016, which contains the requirements of this AD.

    (d) Compliance

    You are responsible for performing each action required by this AD within the specified compliance time unless it has already been accomplished prior to that time.

    (e) Required Action

    Further flight is prohibited.

    (f) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Safety Management Group, FAA, may approve AMOCs for this AD. Send your proposal to: Gary Roach, Aviation Safety Engineer, Regulations and Policy Group, Rotorcraft Directorate, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email [email protected]

    (2) For operations conducted under a 14 CFR part 119 operating certificate or under 14 CFR part 91, subpart K, we suggest that you notify your principal inspector, or lacking a principal inspector, the manager of the local flight standards district office or certificate holding district office, before operating any aircraft complying with this AD through an AMOC.

    (g) Additional Information

    The subject of this AD is addressed in European Aviation Safety Agency (EASA) Emergency AD 2016-0104-E, dated June 2, 2016. You may view the EASA AD on the Internet at http://www.regulations.gov by searching for and locating it in Docket No. FAA-2016-8032.

    (h) Subject

    Joint Aircraft Service Component (JASC) Code: Main Rotor Gearbox: 6320.

    Issued in Fort Worth, Texas, on June 23, 2016. James A. Grigg, Acting Manager, Rotorcraft Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15624 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-7422; Directorate Identifier 2016-NM-079-AD; Amendment 39-18579; AD 2016-13-14] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. Airplanes AGENCY:

    Federal Aviation Administration (FAA), Department of Transportation (DOT).

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model DHC-8-400 series airplanes. This AD requires an inspection to determine if certain left and right main landing gear (MLG) retract actuator rod ends are installed and repetitive liquid penetrant inspections (LPIs) of affected left and right MLG retract actuator rod ends, and corrective actions if necessary. This AD also provides optional terminating action for the inspections. This AD was prompted by a report of cracked MLG retract actuator rod ends. We are issuing this AD to detect and correct fatigue cracking of the left and right MLG retract actuator rod ends, which could lead to left or right MLG collapse.

    DATES:

    This AD becomes effective July 20, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of July 20, 2016.

    We must receive comments on this AD by August 19, 2016.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

    Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

    Hand Delivery: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this final rule, contact Bombardier, Inc., Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone: 416-375-4000; fax: 416-375-4539; email: [email protected]; Internet: http://www.bombardier.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-7422.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-7422; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone: 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Aziz Ahmed, Aerospace Engineer, Airframe and Mechanical Systems Branch, ANE-171, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 516-228-7329; fax: 516-794-5531.

    SUPPLEMENTARY INFORMATION:

    Discussion

    Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2016-16, dated May 20, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model DHC-8-400 series airplanes. The MCAI states:

    There has been a single reported case of a cracked MLG retract actuator rod end in service. A supplier disclosure letter and subsequent Bombardier analysis indicate that the MLG retract actuator rod end P/N [part number] P3A2750 and P3A2750-1 may develop fatigue cracking. This condition, if not corrected, could lead to left hand (LH) or right hand (RH) MLG collapse.

    This [Canadian] AD mandates the inspection [to determine if certain left and right main landing gear MLG retract actuator rod ends are installed, repetitive LPIs of affected left and right MLG retract actuator rod ends, and corrective actions if necessary], and replacement of the LH and RH MLG retract actuator rod ends P/N P3A2750 and P3A2750-1 [which is terminating action for the repetitive LPIs].

    Corrective actions includes replacing cracked MLG retract actuator rod ends. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-7422.

    Related Service Information Under 1 CFR Part 51

    Bombardier, Inc. has issued Service Bulletin 84-32-142, dated May 4, 2016. The service information describes procedures for an inspection to determine if certain left and right MLG retract actuator rod ends are installed, repetitive LPIs of the left and right MLG retract actuator rod ends, and replacement of left and right MLG retract actuator rod ends. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination and Requirements of This AD

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

    FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because fatigue cracking of the left and right MLG retract actuator rod ends could lead to left or right MLG collapse. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.

    Interim Action

    We consider this AD interim action. We are currently considering requiring the replacement of affected left and right MLG retract actuator rod ends with P/N P3A6460, which will constitute terminating action for the inspections required by this AD. However, the planned compliance time for the replacement would allow enough time to provide notice and opportunity for prior public comment on the merits of the replacement.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-7422; Directorate Identifier 2016-NM-079-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD based on those comments.

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

    Costs of Compliance

    We estimate that this AD affects 52 airplanes of U.S. registry.

    We also estimate that it will take about 1 work-hour per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD on U.S. operators to be $4,420, or $85 per product.

    In addition, we estimate that any necessary follow-on actions will take about 3 work-hours and require parts costing $2,019, for a cost of $2,274 per product. We have no way of determining the number of aircraft that might need these actions.

    According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

    Authority for This Rulemaking

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

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

    Regulatory Findings

    We determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

    For the reasons discussed above, I certify that this AD:

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

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

    3. Will not affect intrastate aviation in Alaska; and

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

    List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40113, 44701.

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-13-14 Bombardier, Inc.: Amendment 39-18579. Docket No. FAA-2016-7422; Directorate Identifier 2016-NM-079-AD. (a) Effective Date

    This AD becomes effective July 20, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Bombardier, Inc. Model DHC-8-400, -401 and -402 airplanes, certificated in any category, serial numbers 4001, and 4003 through 4325 inclusive.

    (d) Subject

    Air Transport Association (ATA) of America Code 32, Landing gear.

    (e) Reason

    This AD was prompted by a report of cracked main landing gear (MLG) retract actuator rod ends. We are issuing this AD to detect and correct fatigue cracking of the left and right MLG retract actuator rod ends, which could lead to left or right MLG collapse.

    (f) Compliance

    Comply with this AD within the compliance times specified, unless already done.

    (g) Part Number Inspection

    Within 100 flight cycles after the effective date of this AD, inspect the left and right MLG retract actuator rod ends to determine if part number (P/N) P3A2750 or P3A2750-1 is installed. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number can be conclusively determined from that review.

    (h) Repetitive Liquid Penetrant Inspections (LPIs)

    For each left or right MLG retract actuator rod end having P/N P3A2750 or P3A2750-1: At the applicable time specified in paragraph (h)(1) or (h)(2) of this AD, do an LPI to detect cracks of the MLG retract actuator rod end, in accordance with the Accomplishment Instructions of Bombardier Service Bulletin 84-32-142, dated May 4, 2016, except as required by paragraph (k) of this AD. Thereafter, repeat the LPI at intervals not to exceed 600 flight cycles.

    (1) If the MLG retract actuator rod end has accumulated more than 6,000 flight cycles as of the effective date of this AD: Inspect within 100 flight cycles after the effective date of this AD.

    (2) If the MLG retract actuator rod end has accumulated 6,000 flight cycles or fewer as of the effective date of this AD: Inspect within 600 flight cycles after the effective date of this AD.

    (i) Corrective Action

    If any crack is found during any inspection required by paragraph (h) of this AD, before further flight replace the cracked MLG retract actuator rod end, P/N P3A2750 or P3A2750-1, with a MLG retract actuator rod end, P/N P3A6460 in accordance with the Accomplishment Instructions of Bombardier Service Bulletin 84-32-142, dated May 4, 2016, except as required by paragraph (k) of this AD.

    (j) Optional Replacement

    Replacement of the left and right side MLG retract actuator rod ends, P/N P3A2750 or P3A2750-1, with left and right MLG retract actuator rod ends, P/N P3A6460, in accordance with the Accomplishment Instructions of Bombardier Service Bulletin 84-32-142, dated May 4, 2016, except as required by paragraph (k) of this AD, constitutes terminating action for the actions required by paragraphs (g) and (h) of this AD for that airplane.

    (k) Exception to Paragraphs (h), (i), and (j) of This AD

    If it is not possible to complete all the instructions in Bombardier Service Bulletin 84-32-142, dated May 4, 2016 because of the configuration of the airplane: Before further flight, repair using a method approved by the Manager, New York ACO, ANE-170, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier, Inc.'s TCCA Design Approval Organization (DAO).

    (l) Parts Installation Prohibition

    As of the effective date of this AD, no person may install a left or right MLG retract actuator rod end, P/N P3A2750 or P3A2750-1, on any airplane.

    (m) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, New York ACO, ANE-170, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the ACO, send it to ATTN: Program Manager, Continuing Operational Safety, FAA, New York ACO, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; fax 516-794-5531. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office. The AMOC approval letter must specifically reference this AD.

    (2) Contacting the Manufacturer: As of the effective date of this AD, for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, New York ACO, ANE-170, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier, Inc.'s TCCA Design Approval Organization (DAO). If approved by the DAO, the approval must include the DAO-authorized signature.

    (n) Related Information

    Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian AD CF-2016-16, dated May 20, 2016, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-7422.

    (o) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (i) Bombardier Service Bulletin 84-32-142, dated May 4, 2016.

    (ii) Reserved.

    (3) For service information identified in this AD, contact Bombardier, Inc., Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone: 416-375-4000; fax: 416-375-4539; email: [email protected]; Internet: http://www.bombardier.com.

    (4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on June 22, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15357 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-3628; Directorate Identifier 2015-NM-025-AD; Amendment 39-18574; AD 2016-13-10] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    We are superseding Airworthiness Directive (AD) 2012-12-04, for certain The Boeing Company Model 737-300, -400, and -500 series airplanes. AD 2012-12-04 required repetitive external detailed inspections and nondestructive inspections to detect cracks in the fuselage skin along the chem-mill steps at stringers S-1 and S-2R, between station (STA) 400 and STA 460, and repair if necessary. This new AD requires a preventive modification of the fuselage skin at crown stringers S-1 and S-2R. This new AD also reduces the inspection threshold for certain airplanes. This AD was prompted by a determination that, for certain airplanes, the skin pockets adjacent to the Air Traffic Control (ATC) antenna are susceptible to widespread fatigue damage. We are issuing this AD to detect and correct fatigue cracking of the fuselage skin panels at the chem-mill steps, which could result in sudden fracture and failure of the fuselage skin panels, and consequent rapid decompression of the airplane.

    DATES:

    This AD is effective August 9, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of August 9, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain other publication listed in this AD as of July 23, 2012 (77 FR 36134, June 18, 2012).

    ADDRESSES:

    For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2015-3628.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov. by searching for and locating Docket No. FAA-2015-3628; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Docket Management Facility, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

    FOR FURTHER INFORMATION CONTACT:

    Jennifer Tsakoumakis, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles Aircraft Certification Office (ACO), 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5264; fax: 562-627-5210; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2012-12-04, Amendment 39-17083 (77 FR 36134, June 18, 2012) (“AD 2012-12-04”). AD 2012-12-04 applied to certain The Boeing Company Model 737-300, -400, and -500 series airplanes. The NPRM published in the Federal Register on September 14, 2015 (80 FR 55045) (“the NPRM”). The NPRM was prompted by a determination that, for certain airplanes, the skin pockets adjacent to the ATC antenna are susceptible to widespread fatigue damage. The NPRM proposed to continue to require repetitive external detailed inspections and nondestructive inspections to detect cracks in the fuselage skin along the chem-mill steps at stringers S-1 and S-2R, between STA 400 and STA 460, and repair if necessary. The NPRM also proposed to require a preventive modification of the fuselage skin at crown stringers S-1 and S-2R. In addition, the NPRM proposed to revise certain compliance times. We are issuing this AD to detect and correct fatigue cracking of the fuselage skin panels at the chem-mill steps, which could result in sudden fracture and failure of the fuselage skin panels, and consequent rapid decompression of the airplane.

    Comments

    We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

    Requests To Clarify Compliance Time Changes

    Boeing asked that we change the NPRM preamble, which stated that the proposed AD would reduce the inspection thresholds “and repetitive intervals” for certain airplanes. Boeing stated that the repetitive inspection intervals specified in Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, remain unchanged from the previous version of the service information, which was mandated by AD 2012-12-04. Boeing added that Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, reduced only the inspection threshold for those airplanes.

    We agree with the commenter's request for the reason provided. We have changed the language in the SUMMARY of this final rule accordingly.

    Request To Clarify Acceptable Previous Alternative Methods of Compliance (AMOCs)

    Boeing and Southwest Airlines (SWA) asked that we revise paragraph (l)(4) of the proposed AD. Boeing requested that we state that AMOCs approved for AD 2012-12-04 are approved as AMOCs for “all corresponding requirements”—instead of just the requirements of paragraph (g)—of the proposed AD. Boeing stated that this proposed change matches the wording in paragraph (l)(4) of AD 2012-12-04. SWA added that paragraph (l)(4) of the proposed AD does not provide credit for AMOCs approved for the actions specified in paragraphs (f) and (g) of AD 2008-19-03, Amendment 39-15670 (73 FR 56958, October 1, 2008) (“AD 2008-19-03”). (AD 2008-19-03 was superseded by AD 2012-12-04.)

    We agree to revise paragraph (n)(4) of this AD (paragraph (l)(4) of the proposed AD) to specify that AMOCs approved for AD 2012-12-04 are approved as AMOCs for all the corresponding provisions of this AD.

    It is not necessary, however, to state that AMOCs approved for AD 2008-19-03 are approved for the requirements of this AD. When AD 2008-19-03 was superseded, the corresponding provisions of AD 2008-19-03 were retained in AD 2012-12-04. Therefore, no change to this final rule is necessary in this regard.

    Request To Separate Certain Actions for Clarification

    Boeing, ASL Airlines France, and SWA asked that we clarify the requirements of paragraph (h) of the proposed AD by separating the actions into two core paragraphs: One paragraph for “Repairs” and one paragraph for the “Preventive Modification.” Boeing stated that tables 1, 2, and 3 of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, address the repair and preventive modification instructions for Group 1 airplanes, and table 5 addresses repair instructions for Group 2 airplanes; therefore table 5 should not be included in paragraph (h)(2) of the proposed AD. Boeing also stated that Note (e) of tables 1, 2, and 3 of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, provides a terminating action provision for the repetitive inspections under the installed preventive modification doubler; therefore a terminating action should be added to paragraph (h)(2) of the proposed AD. ASL Airlines France stated that, as written, paragraph (h) of the proposed AD is confusing because it would require the preventive modification specified in paragraph (h)(2) of the proposed AD to be installed only if cracking is found. SWA stated that Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, does not provide repair instructions for cracks found in four or more tear strap bays and certain other conditions, as specified in figure 6 or figure 8 of the Accomplishment Instructions. SWA asked that a provision be added to paragraph (h)(2) of the proposed AD to allow for both new and existing repairs to remain on the airplane if the repair covers all eight chem-mill step inspection areas between STA 410 and STA 450, if approved by the FAA or a Boeing-approved representative.

    We agree with the commenters' requests for the reasons provided. We have separated paragraph (h) of the proposed AD into paragraphs (h) and (i) of this AD to clarify the actions identified by the commenters (and have redesignated subsequent paragraphs accordingly).

    Request To Add Exception for the Preventive Modification

    Boeing asked that we add a new exception to address the preventive modification. Boeing stated that paragraph (j)(3) of the proposed AD addresses repairs, and a similar paragraph needs to be added to address the preventive modification specified in Part 9 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015; Part 9 specifies contacting Boeing for preventive modification instructions. Boeing added that the new exception should be done using a method approved by the FAA or a Boeing approved representative.

    We agree with the commenter's request. Part 9 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specifies contacting Boeing for modification instructions if an existing repair is installed that was not accomplished in accordance with Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015. We have revised paragraph (l)(3) of this AD (paragraph (j)(3) of the proposed AD) to include the exception to account for the preventive modification.

    Effect of Winglets on Accomplishment of the Proposed Actions

    Aviation Partners Boeing stated that accomplishing the supplemental type certificate (STC) ST01219SE does not affect the actions specified in the NPRM.

    We agree with the commenter. We have redesignated paragraph (c) of the proposed AD as (c)(1) and added new paragraph (c)(2) to this AD to state that installation of STC ST01219SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/BE866B732F6CF31086257B9700692796?OpenDocument&Highlight=st01219se) does not affect the ability to accomplish the actions required by this final rule. Therefore, for airplanes on which STC ST01219SE is installed, a “change in product” AMOC approval request is not necessary to comply with the requirements of 14 CFR 39.17.

    Request To Restate the Optional Modification in AD 2012-12-04

    Boeing and Al Nippon Airways (ANA) asked that the optional modification specified in paragraph (i) of AD 2012-12-04 be restated in this AD. The commenters stated that Section 1.F., “Approval” of Boeing Alert Service Bulletin 737-53A1305, Revision 1, dated September 19, 2012, includes approval of the accomplishment of the inspections and modifications, in accordance with that service information for the modified area only, as a method of compliance with the modification specified in paragraph (i) of AD 2012-12-04. The commenters added that since the optional modification is not restated in the proposed AD, this approval is now eliminated.

    We agree with the commenters for the reasons provided. We have restated the optional modification in new paragraph (j) of this AD (paragraph (i) of AD 2012-12-04), and redesignated subsequent paragraphs accordingly.

    Request To Clarify the Extent of AMOC Approvals

    Boeing asked whether AMOCs would be considered for “preventive modifications,” in addition to repairs, in paragraph (l)(3) of the proposed AD. Boeing stated that adding this would address the AMOC requirement for the mandatory preventive modification.

    We agree with the commenter's request because deviations to the mandated preventive modification are possible. Therefore, we have added “modification” (as well as “alteration”) to paragraph (n)(3) of this AD (paragraph (l)(3) of the proposed AD).

    Request To Clarify Exception

    ASL Airlines France asked that we clarify the reference in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specified in the “Condition” columns. The commenter stated that the flight-cycle compliance time referred to in these columns specifies “at the Revision 3 date of this service bulletin” instead of “as of the effective date of this AD.” The commenter asked that we include a new paragraph to clarify that “as of the effective date of this AD” should be used for compliance throughout the proposed AD.

    We acknowledge the commenter's concern; however, paragraph (l)(1) of the proposed AD already addressed this difference; paragraph (j)(2) of this AD retains this provision. Therefore, no change to this AD is necessary in this regard.

    Request To Correct Typographical Errors

    Boeing and ASL Airlines France asked that we correct the paragraph reference in Note 1 to paragraph (i) of the proposed AD and in paragraph (j)(3) of the proposed AD. The commenters stated that these are typographical errors.

    The information in Note 1 to paragraph (i) of the proposed AD has been included in paragraph (j) of this final rule (paragraph (i) of the proposed AD), therefore “Note 1” no longer exists. In light of this, the requested correction is not necessary in this regard. We have corrected the reference in paragraph (j)(3) of the proposed AD (paragraph (l)(3) of this AD) accordingly.

    Change to Paragraph (k) of This AD

    We have revised the language in paragraph (k) of this AD (paragraph (i) in the proposed AD) to clarify that the post-repair/post-modification inspections are airworthiness limitations that are required by maintenance and operational rules; therefore, these inspections are not required by this AD.

    Conclusion

    We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

    • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

    • Do not add any additional burden upon the public than was already proposed in the NPRM.

    We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015. The service information describes procedures for repetitive external detailed inspections and non-destructive inspections to detect cracks in the fuselage skin along the chem-mill steps at stringers S-1 and S-2R, between STA 400 and STA 460, and repair of any cracking. The service information also describes procedures for a modification of the chem-mill steps at the locations identified, including related investigative actions and corrective actions, and repetitive post-mod inspections. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    Costs of Compliance

    We estimate that this AD affects 186 airplanes of U.S. registry.

    We estimate the following costs to comply with this AD:

    Estimated Costs Action Labor cost Parts cost Cost per product Cost on U.S. operators Retained inspections from AD 2012-12-04 Between 7 and 15 work-hours × $85 per hour, depending on airplane configuration = between $595 and $1,275 per inspection cycle $0 Between $595 and $1,275 per inspection cycle Between $110,670 and $237,150 per inspection cycle. New modification 236 work-hours × $85 per hour = $20,060 1 $20,060 $3,731,160. 1 We currently have no specific cost estimates associated with the parts necessary for the modification. We cannot determine the cost of the materials because the modification parts must be sized at the time the modification is installed, taking into account any existing repairs in the area.

    We have received no definitive data that enables us to provide a cost estimate for the on-condition actions specified in this AD.

    Authority for This Rulemaking

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

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

    Regulatory Findings

    We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

    For the reasons discussed above, I certify that this AD:

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

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

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

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

    List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40113, 44701.

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing Airworthiness Directive (AD) 2012-12-04, Amendment 39-17083 (77 FR 36134, June 18, 2012), and adding the following new AD: 2016-13-10 The Boeing Company: Amendment 39-18574; Docket No. FAA-2015-3628; Directorate Identifier 2015-NM-025-AD. (a) Effective Date

    This AD is effective August 9, 2016.

    (b) Affected ADs

    This AD replaces AD 2012-12-04, Amendment 39-17083 (77 FR 36134, June 18, 2012) (“AD 2012-12-04”).

    (c) Applicability

    (1) This AD applies to The Boeing Company Model 737-300, -400, and -500 series airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015.

    (2) Installation of Supplemental Type Certificate (STC) ST01219SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/BE866B732F6CF31086257B9700692796?OpenDocument&Highlight=st01219se) does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST01219SE is installed, a “change in product” alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17.

    (d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

    (e) Unsafe Condition

    This AD was prompted by reports of cracks found on the fuselage skin at the chem-mill steps, and the determination that, for certain airplanes, the skin pockets adjacent to the Air Traffic Control antenna are susceptible to widespread fatigue damage. We are issuing this AD to detect and correct fatigue cracking of the fuselage skin panels at the chem-mill steps, which could result in sudden fracture and failure of the fuselage skin panels, and consequent rapid decompression of the airplane.

    (f) Compliance

    Comply with this AD within the compliance times specified, unless already done.

    (g) Inspections

    At the applicable time specified in tables 1, 2, 3, and 5 of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, except as required by paragraphs (l)(1) and (l)(2) of this AD: Do the actions specified in paragraphs (g)(1) and (g)(2) of this AD, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, except as required by paragraph (l)(3) of this AD. Repeat the applicable inspections thereafter at the applicable times specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015.

    (1) Do an external detailed inspection for cracking of the fuselage skin chem-mill steps.

    (2) Do an external non-destructive (medium frequency eddy current, magneto optical imaging, C-Scan, or ultrasonic phased array) inspection for cracking of the fuselage skin chem-mill steps.

    (h) Repair

    If any cracking is found during any inspection required by paragraph (g) of this AD, do the applicable actions specified in paragraph (h)(1), (h)(2), or (h)(3) of this AD.

    (1) Repair before further flight in accordance with Part 2 (for Group 1 airplanes) or Part 7 (for Group 2 airplanes) of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015; except as required by paragraph (l)(3) of this AD. Installation of a repair that meets the conditions specified in Note (a) of table 1, 2, 3, or 5 of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, terminates the repetitive inspections required by paragraph (g) of this AD for the area covered by that repair only.

    (2) For Group 1 airplanes: Accomplishing the modification specified in paragraph (i) of this AD is a method of compliance with paragraph (h)(1) of this AD.

    (3) If any cracking is found in any area not covered by the preventive modification doubler during any inspection required by paragraph (g) of this AD: Repair before further flight, in accordance with Part 3 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, except as provided by paragraph (n)(4) of this AD. Both new and existing repairs are allowed if the repair covers all eight chem-mill step inspection areas between STA 410 and STA 450, and the repairs were done using a method approved in accordance with the procedures specified in paragraph (n)(1) of this AD.

    (i) Preventive Modification

    For Group 1 airplanes: At the applicable time specified in tables 1, 2 and 3 of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, except as required by paragraphs (l)(1) and (l)(2) of this AD, do a preventive modification of the fuselage skin at crown stringers S-1 and S-2R, including all applicable related investigative actions in accordance with Part 9 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, except as provided by paragraph (n)(4) of this AD. Do all applicable related investigative actions concurrently with the modification. Installation of a preventive modification terminates the repetitive inspections required by paragraph (g) of this AD for the modified area only. Thereafter, repeat the inspections specified in Part 3 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015.

    (j) Optional Modification

    Accomplishing a modification of the chem-mill steps at any location identified in Boeing Service Bulletin 737-53A1293, Revision 2, dated August 10, 2011, using a method approved in accordance with the procedures specified in paragraph (n)(1) of this AD, terminates the repetitive inspections required by paragraph (g) of this AD for the modified area only.

    (k) Post-Repair/Post-Modification Inspections

    Tables 4 and 6 of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specify post-repair/post-modification airworthiness limitation inspections in compliance with 14 CFR 25.571(a)(3) at the modified locations, which support compliance with 14 CFR 121.1109(c)(2) or 129.109(b)(2). As airworthiness limitations, these inspections are required by maintenance and operational rules. It is therefore unnecessary to mandate them in this AD. Deviations from these inspections require FAA approval, but do not require an alternative method of compliance.

    (l) Exceptions to Service Bulletin Specifications

    (1) Where Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specifies a compliance time “after the Revision 3 date of this service bulletin,” this AD requires compliance within the specified compliance time after the effective date of this AD.

    (2) Where the Condition column of paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specifies a condition based on when an airplane has or has not been inspected, this AD bases the condition on whether an airplane has or has not been inspected on the effective date of this AD.

    (3) Where Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015, specifies to contact Boeing for repair or preventive modification instructions: Before further flight, do the repair or preventive modification, as applicable, using a method approved in accordance with the procedures specified in paragraph (n)(1) of this AD.

    (m) Credit for Previous Actions

    (1) This paragraph provides credit for actions required by paragraphs (g) and (h) of this AD, if those actions were performed before July 23, 2012 (the effective date of AD 2012-12-04), using Boeing Alert Service Bulletin 737-53A1293, Revision 1, dated July 7, 2010, which is not incorporated by reference in this AD.

    (2) This paragraph provides credit for actions required by paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Boeing Alert Service Bulletin 737-53A1293, Revision 2, dated August 10, 2011, which was incorporated by reference in AD 2012-12-04.

    (n) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Los Angeles Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (o)(1) of this AD. Information may be emailed to: [email protected]

    (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.

    (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Los Angeles ACO, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation method must meet the certification basis of the airplane, and the approval must specifically refer to this AD.

    (4) AMOCs approved for AD 2012-12-04 are approved as AMOCs for the corresponding provisions of this AD.

    (o) Related Information

    (1) For more information about this AD, contact Jennifer Tsakoumakis, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles ACO, 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5264; fax: 562-627-5210; email: [email protected]

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (p)(5) and (p)(6) of this AD.

    (p) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.

    (3) The following service information was approved for IBR on August 9, 2016.

    (i) Boeing Alert Service Bulletin 737-53A1293, Revision 3, dated January 23, 2015.

    (ii) Reserved.

    (4) The following service information was approved for IBR on July 23, 2012 (77 FR 36134, June 18, 2012).

    (i) Boeing Service Bulletin 737-53A1293, Revision 2, dated August 10, 2011.

    (ii) Reserved.

    (5) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com.

    (6) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    (7) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on June 21, 2016. Dorr Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-15291 Filed 7-1-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301 [TD 9766] RIN 1545-BM87 Self-Employment Tax Treatment of Partners in a Partnership That Owns a Disregarded Entity; Correction AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Final and temporary regulations; correcting amendment.

    SUMMARY:

    This document contains a correction to final and temporary regulations (TD 9766) that were published in the Federal Register on May 4, 2016 (81 FR 26693). The final and temporary regulations clarify the employment tax treatment of partners in a partnership that owns a disregarded entity.

    DATES:

    This correction is effective on July 5, 2016 and applicable on May 4, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Andrew Holubeck at (202) 317-4774 (not a toll free number).

    SUPPLEMENTARY INFORMATION:

    Background

    The final and temporary regulations (TD 9766) that are the subject of this correction are under section 7701 of the Internal Revenue Code.

    Need for Correction

    As published, the final and temporary regulations (TD 9766) contains an error that may prove to be misleading and is in need of clarification.

    List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

    Correction of Publication

    Accordingly, 26 CFR part 301 is corrected by making the following correcting amendment:

    PART 301—PROCEDURE AND ADMINISTRATION Paragraph 1. The authority citation for part 301 continues to read in part as follows: Authority:

    26 U.S.C. 7805 * * *

    Par. 2. Section 301.7701-2T is amended by revising paragraph (e)(8)(ii) to read as follows:
    § 301.7701-2T Business entities; definitions (temporary).

    (e) * * *

    (8) * * *

    (ii) Expiration date. The applicability of paragraph (c)(2)(iv)(C)(2) of this section expires on or before May 3, 2019, or such earlier date as may be determined under amendments to the regulations issued after May 3, 2016.

    Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).
    [FR Doc. 2016-15739 Filed 7-1-16; 8:45 am] BILLING CODE 4830-01-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 100 [Docket Number USCG-2016-0169] RIN 1625-AA08 Special Local Regulation; Cumberland River, Mile 190.0 to 191.5; Nashville, TN AGENCY:

    Coast Guard, DHS.

    ACTION:

    Temporary final rule.

    SUMMARY:

    The Coast Guard is establishing a special local regulation for all waters of the Cumberland River beginning at mile marker 190.0 and ending at mile marker 191.5 from 9 a.m. until noon on July 30, 2016. This special regulation is necessary to provide safety for the participants in the “Music City SUP Race” marine event. This rulemaking prohibits persons and vessels from being in the special local regulated area unless authorized by the Captain of the Port Ohio Valley or a designated representative.

    DATES:

    This rule is effective from 9 a.m. until noon on July 30, 2016.

    ADDRESSES:

    To view documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, type USCG-2016-0169 in the “SEARCH” box and click “SEARCH.” Click on Open Docket Folder on the line associated with this rule.

    FOR FURTHER INFORMATION CONTACT:

    If you have questions on this rule, call or email Petty Officer Ashley Schad, MSD Nashville, Nashville, TN, at 615-736-5421 or at [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Table of Abbreviations CFR  Code of Federal Regulations DHS  Department of Homeland Security FR  Federal Register NPRM  Notice of proposed rulemaking § Section U.S.C.  United States Code II. Background Information and Regulatory History

    On January 28, 2016, the Nashville Paddle Company notified the Coast Guard that it will be conducting a rowing race from 9 a.m. to noon on July 30, 2016. The event will consist of at least 75 participants on various sized stand up paddle boards and kayaks on the Cumberland River. The Captain of the Port Ohio Valley (COTP) determined that additional safety measures are necessary to protect participants, spectators, and waterway users during this event. In response, on June 10, 2016, the Coast Guard published a notice of proposed rulemaking (NPRM) Special Local Regulation; Cumberland River, Mile 190.0 to 191.5; Nashville, TN (81 FR 37562).

    There we stated why we issued the NPRM, and invited comments on our proposed regulatory action related to this marine event. During the comment period that ended June 27, 2016 we received no comments.

    III. Legal Authority and Need for Rule

    The Coast Guard is issuing this rule under authority in 33 U.S.C. 1233. The Captain of the Port Ohio Valley (COTP) has determined that potential hazards associated with the marine event in this July 30, 2016, event will be a safety concern for the participants of the event. The purpose of this rule is to ensure safety of vessels and participants and the navigable waters in the special local regulation area before, during, and after the scheduled event.

    IV. Discussion of Comments, Changes, and the Rule

    As noted above, we received no comments on our NPRM published May 15, 2016. There are no changes in the regulatory text of this rule from the proposed rule in the NPRM other than providing the final enforcement times and date.

    This rule establishes a special local regulation for all waters of the Cumberland River beginning at mile marker 190.0 and ending at mile marker 191.5 from 9 a.m. until noon on July 30, 2016. The duration of the regulated area is intended to ensure the safety of vessels and participants and these navigable waters before, during, and after the scheduled 9 a.m. to noon marine event. No vessel or person will be permitted to enter the regulated area without obtaining permission from the COTP or a designated representative.

    V. Regulatory Analyses

    We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

    A. Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, it has not been reviewed by the Office of Management and Budget.

    This regulatory action determination is based on the size, location, duration, and time-of-day of the special local regulation. This rule restricts transit on the Cumberland River from mile 190.0 to 191.5, for a short duration of 3 hours on one day; Broadcast Notice to Mariners and Local Notices to Mariners will also inform the community of this special local regulation so that they may plan accordingly for this short restriction on transit. Vessel traffic may request permission from the COTP Ohio Valley or a designated representative to enter the restricted area.

    B. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard received no comments from the Small Business Administration on this rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

    While some owners or operators of vessels intending to transit the special local regulated area may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

    Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

    Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

    C. Collection of Information

    This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

    D. Federalism and Indian Tribal Governments

    A rule has implications for federalism under Executive Order 13132, Federalism, if it has 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. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

    Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

    E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

    F. Environment

    We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969(42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a special local regulated area lasting 3 hours that will prohibit entry within the regulated area. It is categorically excluded from further review under paragraph 34(h) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES.

    G. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

    List of Subjects in 33 CFR Part 100

    Marine safety, Navigation (water), Reporting and recordkeeping requirements, and Waterways.

    For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 100 as follows:

    PART 100—SAFETY OF LIFE ON NAVIGABLE WATERWAYS 1. The authority citation for part 100 continues to read as follows: Authority:

    33 U.S.C. 1233.

    2. Add § 100.35T08-0169 to read as follows:
    § 100.35T08-0169 Special Local Regulation; Cumberland River Mile 190.0 to Mile 191.5; Nashville, TN.

    (a) Location. All waters of the Cumberland River beginning at mile marker 190.0 and ending at mile marker 191.5 at Nashville, TN.

    (b) Enforcement period. This special local regulation will be enforced from 9 a.m. until noon on July 30, 2016.

    (c) Regulations. (1) In accordance with the general regulations in § 100.801 of this part, entry into this area is prohibited unless authorized by the Captain of the Port Ohio Valley or a designated representative.

    (2) Persons or vessels requiring entry into or passage through the area must request permission from the Captain of the Port Ohio Valley or a designated representative. U. S. Coast Guard Sector Ohio Valley may be contacted on VHF Channel 13 or 16, or at 1-800-253-7465.

    Dated: June 28, 2016. R. V. Timme, Captain, U.S. Coast Guard, Captain of the Port Ohio Valley.
    [FR Doc. 2016-15741 Filed 7-1-16; 8:45 am] BILLING CODE 9110-04-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R06-OAR-2016-0278 FRL-9948-60-Region 6] Approval and Promulgation of Implementation Plans; Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone Standard AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Direct final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is proposing to approve a revision to the State Implementation Plan (SIP) submitted by the Louisiana Department of Environmental Quality (LDEQ) to address the emissions inventory (EI) requirement for the Baton Rouge ozone nonattainment area (BRNA) for the 2008 8-hour ozone National Ambient Air Quality Standards (NAAQS). The Clean Air Act (CAA) requires an EI for all ozone nonattainment areas. The inventory includes emission data for Nitrogen Oxides (NOX) and Volatile Organic Compounds (VOCs). EPA is approving the revisions pursuant to section 110 and part D of the CAA and EPA's regulations.

    DATES:

    This rule is effective on September 6, 2016 without further notice, unless the EPA receives relevant adverse comment by August 4, 2016. If the EPA receives such comment, the EPA will publish a timely withdrawal in the Federal Register informing the public that this rule will not take effect.

    ADDRESSES:

    Submit your comments, identified by Docket No. EPA-R06-OAR-2016-0278, at http://www.regulations.gov or via email to [email protected] Follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. The EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (i.e. on the web, cloud, or other file sharing system). For additional submission methods, please contact Ms. Nevine Salem, 214-665-7222, [email protected] For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

    Docket: The index to the docket for this action is available electronically at www.regulations.gov and in hard copy at EPA Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (e.g., copyrighted material), and some may not be publicly available at either location (e.g., CBI).

    FOR FURTHER INFORMATION CONTACT:

    Ms. Nevine Salem, 214-665-7222, [email protected] To inspect the hard copy materials, please schedule an appointment with Ms. Salem or Mr. Bill Deese at 214-665-7253.

    SUPPLEMENTARY INFORMATION:

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

    I. Background A. The 2008 Ozone National Ambient Air Quality Standards (NAAQS) and Emissions Inventory Requirements

    On March 12, 2008 EPA revised the eight-hour ozone NAAQS from 0.08 part per million (ppm) to 0.075 ppm. (73 FR 16436, March 27, 2008). In 2012, EPA designated nonattainment areas for the 2008 ozone NAAQS (2008 ozone nonattainment areas) (77 FR 30088, May 21, 2012).1 The Baton Rouge area was designated as nonattainment areas for the 2008 ozone NAAQS. The BRNA consists of five parishes: Ascension, East Baton Rouge, Iberville, Livingston, and West Baton Rouge.

    1 On October 1, 2015, the EPA strengthened the ozone standard to 0.070 ppm (80 FR 65292, October 26, 2015). The EPA has not made area designations under this new standard and the emissions inventory under evaluation in this rulemaking does not address that standard.

    CAA sections 172(c)(3) and 182(a)(1), require states to develop and submit, as a SIP revision, an EI for all areas designated as nonattainment for the ozone NAAQS. An EI is an estimation of actual emissions of air pollutants in an area. Ground-level ozone, O3, is a gas that is formed by the reaction of volatile organic compounds (VOCs) and oxides of nitrogen (NOX) in the atmosphere in the presence of sunlight. (VOCs and NOX are referred to as ozone precursors). Therefore, an EI for ozone covers the emissions of VOC and NOX. These precursor emissions are emitted by many types of pollution sources, including power plants and industrial emissions sources, on-road and off-road motor vehicles and engines, smaller stationary sources, collectively referred to as nonpoint sources, and biogenic sources.2 The EI provides emissions data for a variety of air quality planning tasks including establishing baseline emission levels, calculating federally required emission reduction targets needed to attain the NAAQS, determining emission inputs for ozone air quality simulation models, and tracking emissions over time to determine progress toward achieving air quality and emission reduction goals.

    2 Biogenic emissions are produced by living organisms and are typically not included in the base year emission inventories, but are considered in ozone modeling analyses, which must consider all emissions in a modeled area.

    As stated above, the CAA requires the states to submit EIs for areas designated as nonattainment for ozone. For the 2008 ozone NAAQS, EPA has recommended that states use 2011 as a base year for the emission estimates (78 FR 34178, 34190, June 6, 2013). However, EPA also allows states to submit base year emissions for other years during a recent ozone standard violation period. States are required to submit estimates of VOC and NOX emissions for four general classes of anthropogenic sources: stationary point sources; nonpoint sources; on-road mobile sources; and off-road mobile sources in their EIs.

    B. Louisiana's Submittal

    In a letter dated May 2, 2016, the LDEQ submitted the 2011 base year inventory to the EPA as part of the BRNA designation and maintenance plan. The EPA reviewed the 2011 base year inventory and determined that it was developed in accordance with EPA guidelines. Table 1 summarizes the 2011 VOC and NOX base year emission for the BRNA area for a typical summer day (reflective of the summer period, when the highest ozone concentrations are expected in these ozone nonattainment areas).

    Table 1—Baton Rouge Nonattainment Area 2011 VOC and NOX Baseline Emissions Inventory [Tons/Day] Source type NOX VOC Point 74.2 33.6 Nonpoint 17.1 82.6 Onroad Mobile 38.4 19.2 Nonroad Mobile 27.3 8.7 Total 157.0 144.0 C. CAA Requirements for the SIP Revision

    The primary CAA requirements pertaining to the SIP revision submitted by LDEQ are found in CAA sections 110(l), 172(c)(3) and 182(a)(1). CAA section 110(l) requires that a SIP revision submitted to EPA be adopted by the State after reasonable notice and public hearing. Section 110(l) also prevents us from approving a SIP revision if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress, or any other applicable requirement of the CAA. CAA sections 172(c)(3) and 182(a) requires a SIP revision that is a comprehensive, accurate, current inventory of actual emissions from all sources.

    II. EPA's Evaluation

    EPA has reviewed the revision for the consistency with the requirements of EPA regulations. A summary of EPA's analysis is provided below. For a full discussion of our evaluation, please see our TSD.

    CAA sections 172 (c)(3) and 182(a)(1) require an inventory of actual emissions from all sources of relevant pollutants in the nonattainment areas. EPA specified in the 2008 ozone standard SIP requirements rule that the states should use 2011 as a base year for EI SIPs to address the EI requirements. LDEQ has developed a 2011 base year emissions inventory for the Baton Rouge nonattainment areas. The 2011 base year emissions includes all point, nonpoint, non-road mobile, and on-road mobile source emissions in BRNA. LDEQ utilized data from the US EPA 2011 National Emissions Inventory (NEI), Version 2 as the baseline emissions inventory to identify the level of emissions in the area during the period of monitored attainment and satisfy the requirement of section 182(a)(1).

    EPA reviewed the emission inventory and determined that it is approvable because it was developed in accordance with EPA guidance on emission inventory preparation. The inventory is a comprehensive, accurate, and current inventory of actual emissions for all relevant sources in accordance with CAA sections 172(c)(3) and 182(a)(1). Additionally we found that (1) LDEQ adopted after reasonable notice and public hearing and (2) approval would not interfere with any applicable requirement concerning attainment and reasonable further progress or any other applicable requirement of the CAA. A technical support document (TSD) was prepared which details our evaluation. Our TSD may be accessed online at www.regulations.gov, Docket No. EPA-R06-OAR-2016-0278.

    III. Final Action

    We are approving a Louisiana SIP revision submitted to address the emissions inventory requirement for the Baton Rouge 2008 ozone NAAQS nonattainment area. The inventory we are proposing to approve is listed in table 1 above.

    We are publishing this rule without prior proposal because we view this as a non-controversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the SIP revision if relevant adverse comments are received. This rule will be effective on September 6, 2016 without further notice unless we receive relevant adverse comment by August 4, 2016. If we receive relevant adverse comments, we will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. We will address all public comments in a subsequent final rule based on the proposed rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so now. Please note that if we receive relevant adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, we may adopt as final those provisions of the rule that are not the subject of an adverse comment.

    IV. Statutory and Executive Order Reviews

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

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

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

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

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

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

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

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

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

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

    In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.

    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. The 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. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 6, 2016. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).

    List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by reference, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.

    Authority:

    42 U.S.C. 7401 et seq.

    Dated: June 22, 2016. Ron Curry, Regional Administrator, Region 6.

    40 CFR part 52 is amended as follows:

    PART 52—APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS 1. The authority citation for part 52 continues to read as follows: Authority:

    42 U.S.C. 7401 et seq.

    Subpart T—Louisiana 2. In § 52.970, the second table in paragraph (e) is amended by adding the entry “2011 Emissions Inventory for the 2008 Ozone NAAQS” at the end of the table to read as follows:
    § 52.970 Identification of plan.

    (e) * * *

    EPA Approved Louisiana Non-Regulatory Provisions and Quasi-Regulatory Measures Name of SIP provision Applicable geographic or nonattainment area State
  • submittal
  • date/effective
  • date
  • EPA Approval date Explanation
    *         *         *         *         *         *         * 2011 Emissions Inventory for the 2008 Ozone NAAQS Baton Rouge Ozone Nonattainment Area 5/2/16 7/5/16 [Insert Federal Register citation]
    [FR Doc. 2016-15748 Filed 7-1-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Chapter I [EPA-HQ-OW-2015-0668; FRL-9948-62-OW] Decision Not To Regulate Forest Road Discharges Under the Clean Water Act; Notice of Decision AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Decision.

    SUMMARY:

    The Environmental Protection Agency (EPA) is providing notice of the Agency's decision that no additional regulations are needed to address stormwater discharges from forest roads under Section 402(p)(6) of the Clean Water Act (CWA) at this time. This document responds to the remand in Environmental Defense Center, Inc. v. U.S. EPA, 344 F.2d 832 (9th Cir. 2003) that requires EPA to consider whether the CWA requires the Agency to regulate stormwater discharges from forest roads.

    DATES:

    This decision shall be considered issued for purposes of judicial review at 1 p.m. Eastern time on July 11, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Prasad Chumble, EPA Headquarters, Office of Water, Office of Wastewater Management via email at [email protected] or telephone at 202-564-0021.

    SUPPLEMENTARY INFORMATION:

    I. General Information A. Applicability

    This document does not impose requirements on any entity.

    B. Obtaining Copies of This Document and Related Information 1. Docket

    EPA has established a docket for this action under Docket ID No. [EPA-HQ-OW-2015-0668; FRL-9948-62-OW]. Publicly available docket materials are available either electronically through www.regulations.gov or in hard copy at the EPA Docket Center, (EPA/DC) EPA West, Room 3334, 1301 Constitution Ave. NW., Washington, DC. The EPA Docket Center Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room and the Docket Center is (202) 566-1744.

    2. Electronic Access

    You may access this Federal Register document electronically from the Government Printing Office under the “Federal Register” listings at FDSys (http://www.thefederalregister.org/fdsys/browse/collection.action?collectionCode=FR).

    3. Dates

    In accordance with 40 CFR part 23, this decision shall be considered issued for purposes of judicial review at 1 p.m. Eastern time on July 11, 2016. Under Section 509(b)(1) of the CWA, judicial review of this decision can be had only by filing a petition for review in the U.S. Court of Appeals within 120 days after the decision is considered issued for purposes of judicial review.

    II. Executive Summary

    EPA has determined not to designate stormwater discharges from forest roads for regulation under Section 402(p)(6) of the Clean Water Act (CWA) at this time. EPA's decision is based on several interrelated factors. First, state, federal, regional, tribal government, and private sector programs already exist nationwide to address water quality problems caused by discharges from forest roads. Many of these programs have been improved and updated in recent years. Program implementation rates are generally high and have been shown to be effective in protecting water quality when properly implemented. These programs employ a variety of approaches, based in part on variations in regional topography and climate. While EPA recognizes that existing programs vary in their degree of rigor, the Agency has concluded that efforts to help strengthen existing programs would be more effective in further addressing forest road discharges than superimposing an additional federal regulatory layer over them.

    Some commenters have asserted that federal regulatory requirements could, in theory, promote national consistency and improvements in less effective programs. In practice, however, federal forest roads regulation presents a number of challenges that make achievement of that result unlikely. Wide variations in topography, climate, ownership, management, and use across the nation's network of forest roads make the establishment of any nationwide regulatory program a complex and difficult endeavor. Mechanisms for implementation and enforcement of any federal regulatory requirements are limited, as recent amendments to CWA Section 402(l) preclude both the use of National Pollutant Discharge Elimination System (NPDES) permits to regulate most discharges from forest roads and citizen suit enforcement of any Section 402(p)(6) requirements. Some commenters discussed the failings of existing best management practices (BMP) programs, including insufficient compliance rates and compliance monitoring, but a federal EPA-administered program would not necessarily be able to address these challenges more effectively than entities with regional expertise overseeing existing forestry management practice programs, especially without the accountability mechanisms afforded by a permitting program or third-party enforcement.

    For these reasons, elaborated upon below, EPA is exercising the “broad discretion the CWA gives the EPA in the realm of stormwater runoff,” in deciding not to regulate stormwater discharges from forest roads. See Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct 1326, 1338 (2013) (affirming EPA's determination not to regulate stormwater discharges from logging roads in its industrial stormwater rule). Instead, EPA intends to work in consultation with state and local officials, as well as other federal agencies and interested stakeholders, to help strengthen their existing programs and improve awareness and implementation of forestry best management practices. In reaching this conclusion, the Agency is cognizant that the CWA reserves for states “the primary responsibilities and rights . . . to prevent, reduce, and eliminate pollution [and] to plan the development and use (including restoration, preservation, and enhancement) of land and water resources . . .” 33. U.S.C. 1251(b).

    III. Legal Background

    The objective of the CWA is to restore and maintain the chemical, physical, and biological integrity of the nation's waters. 33 U.S.C. 1251(a). To that end, the CWA provides that the discharge of any pollutant by any person shall be unlawful, except in compliance with other provisions of the statute. The CWA provides for a permit program, in general, for the discharge of a pollutant from a “point source,” which is defined in Section 502 of the CWA as “any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged.” 33 U.S.C. 1362(14). In 1987 Congress added Section 402(p) to the CWA, which required NPDES permits for certain specified stormwater discharges and provided EPA with discretion to determine whether and how discharges from other stormwater sources should be addressed “to protect water quality.” See Northwest Environmental Advocates v. EPA, 640 F.3d 1063, 1083 (9th Cir. 2011) (“[i]t is within the discretion of EPA to promulgate Phase II regulations requiring, or not requiring, permits for such discharges”).

    For the initial phase of stormwater regulation, Section 402(p)(1) created a temporary moratorium on NPDES permits for point sources except for those listed in Section 402(p)(2). Section 402(p)(2) includes discharges already required to have a permit; discharges from municipal separate storm sewer systems serving a population of 100,000 or more; and stormwater discharges “associated with industrial activity.” Congress did not define discharges associated with industrial activity, allowing EPA to interpret the term. For other stormwater discharges, Section 402(p)(5) directs EPA to conduct studies, in consultation with the states, for “identifying those stormwater discharges or classes of stormwater discharges for which permits are not required”; “determining to the maximum extent practicable, the nature and extent of pollutants in such discharges”; and “establishing procedures and methods to control stormwater discharges to the extent necessary to mitigate impacts on water quality.”

    Section 402(p)(6) authorizes the Administrator to issue regulations, in consultation with state and local officials, based on the studies prescribed by Section 402(p)(5). It provides EPA discretion in selecting which discharge sources to regulate and how to regulate them; it does not require the use of NPDES permits. Specifically, the section states that the regulations “shall establish priorities, establish requirements for state stormwater management programs, and establish expeditious deadlines” and may include “performance standards, guidelines, guidance, and management practices and treatment requirements, as appropriate.” 33 U.S.C. 1342(p)(6). This flexibility is unique to stormwater discharges regulated under Section 402(p)(6) and differs from the requirement for NPDES permits for stormwater discharges listed in Section 402(p)(2) of the Act.

    In 1990, EPA promulgated the Phase I stormwater regulations (55 FR 47990, November 16, 1990) (“Phase I Rule”), following the 1987 CWA amendments which directed the Agency to develop regulations requiring permits for large and medium municipal separate storm sewer systems and stormwater “discharges associated with industrial activity.” In March 1995, EPA submitted to Congress a report on the results of the Section 402(p)(5) study that evaluated the nature of stormwater discharges from municipal and industrial facilities not already regulated under the Phase I regulations (EPA, 1995). On December 8, 1999, EPA promulgated the Phase II stormwater regulations to address stormwater discharges from small municipal separate storm sewer systems and construction sites that disturb one to five acres. 64 FR 68722. Under CWA Sections 402(p)(2)(E) and 402(p)(6), EPA retains the discretionary authority to designate additional stormwater discharges for regulation.

    The Phase II stormwater regulations were challenged in Environmental Defense Center v. US EPA, 344 F.3d 832 (9th Cir. 2003) (EDC v. EPA). In that case, petitioners contended that EPA arbitrarily failed to regulate discharges from forest roads under the Phase II rule. The court held that EPA failed to consider petitioners' comments and remanded the issue to EPA “so that it may consider in an appropriate proceeding Petitioner's contention that Section 402(p)(6) requires the EPA to regulate forest roads. The EPA may then either accept Petitioners' arguments in whole or in part, or reject them on the basis of valid reasons that are adequately set forth to permit judicial review.” Id. at 863.

    In the years following the decision in EDC v. EPA, EPA undertook research to improve the Agency's knowledge of the water quality impacts of forest road stormwater discharges and the programs that exist to reduce those impacts. During that period, the Northwest Environmental Defense Center initiated litigation concerning logging road stormwater discharges. In 2011, the U.S. Court of Appeals for the Ninth Circuit issued a decision in Northwest Environmental Defense Center v. Brown, 640 F.3d 1063 (9th Cir. 2011) (“NEDC”), a citizen suit alleging violations of the CWA for unpermitted discharges of stormwater from ditches alongside two logging roads in state forests. The court held that because the stormwater runoff from the two roads in question is collected by a system of ditches, culverts, and channels and then discharged into waters of the U.S., there was a point source discharge of stormwater associated with industrial activity for which an NPDES permit is required.

    On May 23, 2012, EPA published a Notice in the Federal Register summarizing known water quality impacts related to forest roads and discussing existing state, tribal, and voluntary programs designed to address those impacts. (77 FR 30473). The Notice expressed EPA's intent to specify that only stormwater discharges associated with rock crushing, gravel washing, log sorting, and log storage are discharges associated with silvicultural activity that are subject to permitting under the stormwater regulations pertaining to industrial activity. The Notice also discussed the Agency's consideration of non-permitting approaches to address other stormwater discharges from forest roads. On December 7, 2012, EPA promulgated a rule (77 FR 72970) clarifying that discharges of stormwater from silviculture activities other than rock crushing, gravel washing, log sorting, and log storage do not require an NPDES permit. On March 20, 2013, the Supreme Court reversed the Ninth Circuit's ruling in NEDC, holding that discharges of stormwater that ran off logging roads into ditches, culverts, and channels did not require an NPDES permit as stormwater from industrial activity. See Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct 1326 (2013).

    In January 2014, Congress amended CWA Section 402(l) to effectively prohibit the requirement of NPDES permits for the discharge of runoff “resulting from the conduct of the following silviculture activities conducted in accordance with standard industry practice: nursery operations, site preparation, reforestation and subsequent cultural treatment, thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance.” 33 U.S.C. 1342(l). In addition, the amendment prohibits third-party lawsuits (“citizen suits”) authorized by CWA Section 505(a) for any requirements established under Section 402(p)(6) for the silviculture activities listed above.

    In December 2014, EDC and the Natural Resources Defense Council filed a petition with the Ninth Circuit to compel EPA to respond, within six months, to the question remanded in the 2003 EDC v. EPA decision of whether Section 402(p)(6) requires federal regulation of stormwater discharges from forest roads. Following execution of a settlement agreement filed with the court on August 26, 2015, the court entered an order establishing a schedule requiring EPA to issue a final determination by May 26, 2016. The parties subsequently extended the deadline by joint stipulation to June 27, 2016.

    IV. Background on Forest Roads and Their Water Quality Impacts

    Forests cover about one-third of the continental U.S. (approximately 816 million acres). Over half are privately owned (58% or approximately 475 million acres) (USFS, 2016). Of private forest land, 63% is owned by families and individuals and is commonly referred to as “family forests.” Most of the family forest owners (around 62%) own fewer than 10 acres of forest land. Owners of the remaining private forest land include corporations, Real Estate Investment Trusts (REITs), conservation organizations, clubs, and Native American tribes (USFS, 2016). Over 300 Native American reservations are significantly forested, and Native American tribal lands include 18.6 million acres of forest land, including 1.5 million acres of productive timberland (Bureau of Indian Affairs, 2009). Private forest land owners invest considerable resources in forest road construction and maintenance, as they are critical assets that enhance property values, maintain economic viability, and facilitate sustainable forestry.

    Forty-two percent of forest land, or approximately 341 million acres, is publicly-owned. The federal government administers an estimated 74% of the public forest land. State forestry, park, and wildlife agencies account for most of the 22% of state-owned public forest land. The remaining 4% of public forest land is owned by local governments, such as counties and towns (USFS, 2016). Within the U.S., the distribution of public versus private forests differs greatly among the various regions of the country. For example, forest ownership in the Northwest is dominated by public ownership, primarily by the U.S. Forest Service (USFS) and the Bureau of Land Management (BLM). Private ownership is more prevalent in the Southeast and Northeast (Id.).

    Forests are connected by a vast network of forest roads built over the course of more than a century. Roads exist in forests for all land ownership categories, enabling activities as varied as timber operations, recreation, fire protection and general transportation. Originally some were built to allow mining or agriculture. The network of forest roads includes both active and inactive roads that vary in age and condition, and which often serve multiple purposes by multiple users at the same time. Because of the nature of timber growing, timber roads are often used just once every fifteen or twenty years. Endicott (2008) noted that:

    [e]ach forest road network commonly contains a collection of older and newer roads, designed to different standards, for various purposes, and crossing terrain of differing sensitivities. This mosaic of road segments has implications for how the forest road network will interact with the forest watershed, streams, and other downstream aquatic resources.

    A single road may be subject to different owners and managers and used for different activities at different points. Often the owner of the road is not the owner of the forest land over which the road travels. For example, a BLM-owned road may pass through private property or a timber company-owned road may pass through a state-owned public forest. The purpose of a road may also change at different points; for example, most of a road may be used for recreation but a small part of it may service a timber operation. Legacy roads pose particular concerns for water quality. Built prior to the adoption of modern BMPs, they may be poorly sited or designed and frequently no owner or operator assumes responsibility for those roads.

    As previously discussed in 80 FR 69655-69656 (November 10, 2015) and 77 FR 30476 (May 23, 2012), the Agency's research indicates that improperly designed, constructed, maintained, or decommissioned forest roads can impact water quality. These impacts are variable and may include increased sediment load and changes in stream network hydrology, which can cause physical, biological, and ecological impacts to water quality and aquatic organisms.

    Erosion from many forest roads does not affect water quality. First, roads that are not hydrologically connected to a stream do not deliver sediment to water bodies. For example, Dube et al. (2010), found that in an inventory of forest roads in 60 random four-square-mile sections of forests in the Washington State, only 11% were connected to streams; Skaugset and Allen (1998) surveyed 287 miles of forest roads in 5 regions of Oregon and determined that 25% of forest roads drained directly to streams while another 6% were rated “possible” for sediment delivery. Second, a variety of factors play a role in how water quality is impacted by forest roads, including road design, road surfaces, construction, maintenance, rate of use, topography, soil characteristics, precipitation patterns, and proximity of roads to surface water. The source of water quality impacts tends to be localized.

    Available data suggest that the number of surface waters impacted by silvicultural operations, including forest roads, is a small percentage of Section 303(d) listed impaired waters. EPA's analysis of the data shows that this trend has been consistent over time, indicating that water quality impacts appear to have persisted over time, but comprise only a small percentage of all sources of impairment. Specifically, results of nationwide waterbody assessments from the EPA's Assessment and Total Maximum Daily Loads (TMDL) Tracking and Implementation System (ATTAINS),1 which contains the most currently available data reported by states to the EPA under Sections 305(b) and 303(d) of the CWA, found silviculture, which includes a broad spectrum of forestry activities including regulated activities,2 contributed to impairment of 40,637 miles of rivers and streams (7% of the total of 614,153 miles impaired) and 159,920 acres of lakes, reservoirs and ponds (1% of the total of 13,009,273 acres of impaired) (ATTAINS 2016). “Forest roads (road construction and use)” or “logging roads” are listed as the “probable source” of impairment for 31,076 miles of rivers and streams (5% of total impaired) and 7,627 acres of lakes, reservoirs and ponds (less than 1% of total impaired).

    1https://iaspub.epa.gov/waters10/attains_index.home

    2 Non-point source silvicultural activities include nursery operations, site preparation, reforestation and subsequent cultural treatment, thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage in addition to road construction and maintenance from which there is natural runoff at issue here.

    The extent of the impacts of silvicultural activities on water quality varies by region. Impairment data from states that report probable sources of impairments suggest that forest roads constitute a relatively low percentage of impairments. Examples of states where silviculture (a broader category that includes forest roads) is identified as a probable source of impairment and that document a percentage of the total river and stream miles impaired by `forest roads' or `logging roads' include: Idaho (0.62%; forest roads); Kentucky (0.04%; forest roads); Montana (5.71%); New Mexico (1.97%); and Pennsylvania (0.01%) (ATTAINS 2016). Road-related pollutant loading and impairments, however, may represent a higher percentage of impairments within specific regions. For example, within federal lands in the interior Columbia Basin, roads were identified as the largest source of sediment from any land management activity.3

    3http://www.fs.fed.us/pnw/publications/icbemp.shtml

    EPA recognizes that the national water quality data discussed above have certain limitations. One limitation is that some states, when compiling their Section 305(b) reports, may not report the probable source of an impairment or may list probable impairment sources as unspecified, unknown, or in some other category, which may lead to underreporting of the source of the impairment. Additionally, some states may not assess all of their waters or may use different methodologies to collect or report water quality data, limiting the ability of drawing national-scale conclusions.

    ATTAINS data indicating the effect of discharges from forest roads on water quality impairments may therefore not be fully representative due to reporting differences among states. For example, of the 40,637 miles of rivers and streams that ATTAINS indicates are impaired by silviculture, the database shows that California accounts for 34,443, or 85%, nationally (ATTAINS, 2016). Some regions in California use a particular approach toward classifying impairments that increases the reported percentage of impaired miles. Unlike other states, if a given reach of river is identified as impaired for a particular pollutant, some California regions categorize all of the river miles in the entire watershed as impaired.

    It is also important to recognize that EPA's data collection methods have changed over time. While ATTAINS compiles state-level data, it relies on the states for this information. The National Water Quality Initiative (NWQI), conducted by EPA, provides very specific information on impairments and sources, but EPA no longer collects these data. EPA currently uses probabilistic approaches (such as the Wadeable Streams Assessment and the National Rivers and Streams Assessment) to collect national-scale data on water quality. While these assessment approaches are sound, they do not reveal specific impairments and causes and therefore are less informative for purposes of this analysis.

    Estimating sedimentation specifically related to forest road discharges is also difficult as a practical matter. Unlike industrial and wastewater facilities, which typically have water quality monitoring to provide background data for assessing compliance with water quality standards, there is little to no regular monitoring of water quality in waters affected by forest road discharges. Endicott (2008) noted that “[e]ven a well-designed erosion experiment frequently results in variations from the mean of up to 50%.” Investigators may also be unable to differentiate among sediment generated from forest roads and sediment generated from other silvicultural activities, background erosion rates, or other sources. Endicott (2008) further explains that: “Numerous studies have demonstrated that the biotic and chemical “noise” in larger streams renders the water quality effects of forestry activities using BMPs undetectable.” Finally, Endicott (2008) recognizes that quantitative data can be difficult to obtain because “impairments can be difficult to detect and/or measure” and “[e]rosion only usually occurs during wet weather.”

    V. Role and Effectiveness of Forestry Best Management Practices

    The U.S. Forest Service defines Best Management Practices (BMPs) as the following:

    A practice or a combination of practices, that is determined by a State (or designated area-wide planning agency) after problem assessment, examination of alternative practices and appropriate public participation to be the most effective, practical (including technological, economic, and institutional considerations) means of preventing or reducing the amount of pollution generated by nonpoint sources to a level compatible with water quality goals (USFS, 1988).

    In the context of forest roads, BMPs focus on preventing and mitigating water quality impacts that may stem from the construction, maintenance and use of forest roads. Forest road BMPs are on the ground activities and structures that, in most cases, aim to prevent discharges of sediment from roads to streams. BMPs may also target other suspended solids, spills and residues, changes in water temperature, and alterations to flow regimes. In some cases they are designed to protect stream geomorphology and habitat for certain species.

    BMPs for forest roads generally fall into three categories: BMPs addressing road planning and design, road construction and reconstruction, and road management (e.g., Endicott 2008). Over the past several decades BMPs have been developed, evaluated, and improved based on ongoing research and technical innovation. BMPs are now widely implemented as standard elements of most private, state, and federal forestry programs (Ice et al., 2010). State-specific BMP programs and guidelines are available in most states (NCASI, 2009). Although the primary purpose of BMPs is to reduce environmental impacts, they must also be feasible and practical (Ice, 2004).

    BMPs are generally selected based on site-specific needs and conditions, which vary tremendously. Proximity of the road to the stream, size of the road, local geology and climate all influence the occurrence and magnitude of erosion and consequently the types of BMPs that will be most effective. For example, use of gravel to cover a road surface can be a highly effective erosion control BMP in steep terrain. In flat terrain, that same BMP would be less effective and much more expensive than a properly maintained continuous roadside berm (Appelboom et al., 2002).

    While BMP design is site-specific, many documents describe the most common BMPs (e.g., NCASI, 2001; EPA, 2005; NCASI, 2009; USFS, 2012; NCASI, 2012). This document does not provide a detailed discussion of the BMPs themselves; a number of comprehensive sources regarding different types of BMPs are available and included in the record for this decision (e.g., NCASI, 2009; Endicott, 2008; North Carolina Forestry BMP Manual; Montana Forestry BMP Manual). Most BMPs are based on relatively few guiding principles (Megahan and King, 2004; Olszewski and Jackson, 2006). These include:

    • Use existing roads when practicable;

    • Inventory road and stream conditions;

    • Identify and avoid high-erosion hazard areas;

    • Minimize the total land area disturbed;

    • Minimize road crossings and other incursions into waterbodies;

    • Engineer stable road surfaces, drainage features and stream crossings to reduce erosion;

    • Separate bare ground from surface waters and minimize delivery of road-derived sediments to streams;

    • Provide a forested buffer around streams;

    • Design and install stream crossings to allow passage of fish, other aquatic biota, and large wood;

    • Anticipate and mitigate erosion from precipitation events, including especially large ones;

    • Regularly inspect all BMPs and erosion-prone areas, including during and/or immediately following precipitation and snowmelt events that may generate runoff; and

    • Maintain forest roads and all BMPs.

    EPA notes that BMPs currently play and historically have played a significant role in wet weather 4 and non-point source control programs. The scientific literature increasingly demonstrates the effectiveness of BMPs in preventing, minimizing, and mitigating discharges affecting water quality and aquatic habitats (Ice, 2004; Anderson and Lockaby, 2011; NCASI, 2012; Cristan et al., 2016; Endicott (2008)). Although existing research has significantly improved the effectiveness of forest road BMPs, reducing water quality impacts from road construction and other practices, many discharges still occur (Anderson and Lockaby, 2011). Further research would help to optimize operation and maintenance and provide guidelines for adapting BMP implementation to site-specific needs.

    4 40 CFR 122.44(k).

    Several commenters cited a report by Cristan et al. (2016) —“Effectiveness of Forestry Best Management Practices in the United States: Literature Review”—which summarized 81 BMP effectiveness studies: 30 studies of southern states, 20 studies of northern states, and 31 studies of western states.

    The review concluded generally that:

    • Forestry BMPs minimize water quality effects of forest operations when implemented as recommended by state forestry and water quality agencies.

    • Forest roads, skid trails, and stream crossings warrant considerable attention because they have the greatest potential for erosion and sediment delivery.

    • Many studies across the U.S. have shown BMPs to be effective and reduce sediment delivery to streams.

    Several of the studies in the review assessed BMP performance and effectiveness in tandem and individually, including:

    • Appelboom et al. (2002) sampled runoff from seven road practices in North Carolina and found that roads with continuous berm treatment had a 99% reduction in sediment loss compared to roads that did not have a continuous berm.

    • Aust et al. (2011) evaluated four types of operational forest stream crossings at 23 crossings and approaches for total dissolved solids, pH, conductivity, temperature, and sediment concentration in the Piedmont region of Virginia during initial, installation, harvest, and closure stages. The authors found that bridge crossings had the least impact on water quality, that the installation and harvest phases had the greatest impact on water quality, and that BMPs should be followed during all phases.

    • Wisconsin DNR (2006) published a BMP manual in 1995 and assessed the first ten years of their water quality program. The average BMP compliance rate was 83% and BMP effectiveness was 99% when the appropriate BMPs were applied and maintained. When BMPs were not applied, water quality was affected 71% of the time.

    • Pannill et al. (2000) evaluated Maryland BMPs in a paired watershed study and, based on TSS, stormflow, stream temperature, and macroinvertebrate data, found no significant water quality differences between pre-harvest and post-harvest, i.e., proper BMPs will help protect water quality, biology, and habitat.

    • Vowel (2001) conducted stream bioassessments using a stream condition index (SCI) for sites before and after silvicultural treatments incorporating Florida BMPs and found no significant differences in the SCI. The study concluded that Florida BMPs were effective in protecting water quality.

    Cristan et al. (2016) also indicated that, in certain conditions, water quality effects can occur even when BMPs are used.

    • Maryland DNR (2009) evaluated state BMPs from 2004-2005 on 75 forest harvested sites using a Maryland-specific BMP implementation checklist. Maryland found that 81% of those sites were in compliance with state BMPs standards. Maryland also found that BMPs were 77% effective in protecting water quality; however, they found that 19% of the sites evaluated delivered measurable sediment to waterways.

    • Rice (1999) estimated the mean erosion rate from older logging roads (installed in the 1950s, maintained to standards of the 1980s) in the Redwood Creek watershed (northern California) to be 177 m3 km−1 from 1980 to 1997, mainly from the road cut banks, but noted that changes in forest practice rules (especially proper placement of culverts and sizing of culverts) reduced erosion on logging roads.

    • Bilby et al. (1989) assessed road surface sediment production from five roads in two southwestern Washington watersheds including two heavily trafficked roads built in the 1950s and three haul roads built between 1968 and 1974 and found that sediment entered first and second order streams 34% of the time.

    • Nolan et al. (2015) examined the effectiveness of BMPs at a number of stream crossings in Virginia. The study conducted an audit of BMP implementation rates, which it found can often function as surrogates for BMP effectiveness. In general, the study found that the majority of stream crossings were performing properly, but that performance varied. The study also cited Edwards and Williard (2010), which “found only three studies that provided BMP efficiencies with regard to sediment loading reductions and reported BMP efficiencies ranging from 53%-94%.”

    • The USFS evaluated its Pacific Southwest Region BMP program from 2008-2010, conducting 2,237 BMP inspections, and found that BMP implementation was 91% and effectiveness was 80%, with stream water quality impacts at 12% of the sites (USFS, 2013). BMPs for timber harvesting, fuels treatments, and vegetation management were effective; BMPs for roads, range management, recreation, and mining were not as effective, although effectiveness could be increased by imposing erosion control plans and wet weather standards.

    EPA also considered other recently-published literature. Below are some of the major findings:

    • The literature review Assessing the Effectiveness of Contemporary Forestry Best Management Practices (BMPs): Focus on Roads (NCASI, 2012) reviewed hundreds of studies and found that “implementing a suite of contemporary BMPs reduces sediment loads to streams by 80% or more relative to uncontrolled forestry operations.” The document further concluded that “Specific BMPs for roads have been tested in controlled studies and proven effective by road inventories conducted by forestry agencies in several states. Those inventories show that road BMPs are being implemented at high rates and are effective in reducing risks to water quality; road drainage structures are being disconnected from streams; poor road/stream crossings are being identified and corrected; and landslides from forest roads are being reduced.”

    • The USFS (2012) National Best Management Practices for Water Quality Management on National Forest System Lands (Volume 1: National Core BMP Technical Guide), provides highly detailed guidance on silvicultural BMPs, including those for forest roads. BMP effectiveness ratings were 93% (Pacific Southwest Region) and 98% (Montana), with North Carolina effectiveness rates showing an increase from 73% to 93% between 1992 and 2010. Guidance to standardize BMP monitoring protocols is under development.

    • Ice et al. (2010) estimated national BMP implementation rates at 89%.

    • Sugden et al. (2012) found that BMP implementation rates in Montana have increased over time, corresponding with a significant drop in the number of observed water quality impacts.

    Below are findings from national-scale studies:

    • Cristan et al. (2016) concluded that BMPs implementation rates and quality are critical to BMP effectiveness for reduction of erosion and sediment yield. Important BMP practices for forest roads include proper drainage structures, surfacing, erosion control of cut and fill slopes, traffic control, and closure. Sediment control structures applied to stream crossing approaches can significantly reduce runoff and sediment delivery.

    • Ice et al. (2010) concluded that the combination of effective BMPs and a high rate of BMP implementation helps protect the water quality and beneficial uses of streams, lakes, and wetlands in forested environments.

    VI. Existing BMP-Based Programs and Other EPA Tools

    A broad array of BMP-based programs—including state and federal programs and private third-party certification programs—has been established to address forest roads in every state with significant forestry operations in the country. The following sections outline the nation's current landscape of state, federal, and third-party BMP based programs designed to control discharges from forest roads, and discuss the role of existing EPA tools in addressing stormwater discharges from forest roads. As highlighted below, available information indicates that these programs are tailored to address regional and local differences, that implementation rates are generally high, and that meaningful improvements have been and continue to be made in these programs over time. EPA did not obtain significant data about tribal programs addressing discharges from forest roads, so does not report on tribal programs in this section. EPA will seek to learn more about efforts to address stormwater discharges from forest roads on tribal lands as part of its continuing efforts to gather best practices data going forward.

    A. State BMP-Based Programs

    Data EPA obtained during the comment period indicates that all states with significant forestry operations have developed BMP manuals and most states have established forest management programs tailored to state-specific conditions (e.g., topography, climate, and industry activity) that address runoff from forest roads. The data also indicates that BMPs are being implemented at increasing rates across the nation. A team of researchers from Virginia Polytechnic Institute and State University (Virginia Tech), in consultation with the National Association of State Foresters (NASF), surveyed all 50 states in 2013 to identify silvicultural activities addressed by BMPs, characterize the approaches to BMP implementation adopted by each state, determine the extent to which states are implementing BMP effectiveness monitoring, and summarize BMP implementation rates (NASF, 2015). The survey showed that most states have established forestry BMPs designed to protect water quality. According to the survey, these programs are a mix of regulatory (11 states), quasi-regulatory (19 states), and non-regulatory (20 states) programs. Those states with regulatory programs generally have some form of forest practices law or silvicultural BMP legislation. In states with quasi-regulatory programs, state law specifies desired outcomes but does not require specific BMPs to achieve that outcome.5

    5 Such programs can include states where BMPs are not mandatory but enforcement actions can be taken against polluters.

    Existing state programs vary because they are designed to address state and site-specific factors. Prior assessments of state forestry BMP programs have found similar, generally consistent information.67 The following number of states have established forest road specific BMPs (Table 1).

    6 See 80 FR 69657-69658 (Nov. 10, 2015). Characterizations of state forestry BMP programs differ in some ways because of the way reviewers categorize the programs, aspects of the programs they review, different interpretations of program elements, and the fact that state forestry BMP programs have evolved and continue to evolve over time.

    7 Endicott, 2008. See Section 4 and Tables 4-1 and 4-2.

    Table 1—States With Forest Road BMP Programs Based on Endicott (2008) Category of forest road BMP Number
  • of states
  • Construction 44 Drainage 41 Location/Spacing 38 Maintenance 40 Road Closure 24 Stabilization/Soils/Slope 32 Stream Crossings 40 SMZs/Bank Stabilization/Buffer Strips 36 Wet Weather Use 10 Winter Operations 10 Training/Technical Assistance 23 Implementation/Effectiveness Monitoring 32 Compliance/Enforcement 30
    1. Existing State Programs Are Tailored To Address State and Site-Specific Factors

    One of the primary mechanisms for addressing water quality impacts of forest roads is individual states' forest practices polices, which generally establish standards for the design, operation and maintenance of forest roads applicable to conditions in their state. State forest road programs vary to some degree in their structure, requirements, and administration. Differences are based on legal, and socioeconomic factors as well as variations in climate, soils, topography, and aquatic biota. State programs generally establish both guiding principles and specific management practices that must be applied and adapted to a broad range of settings and conditions. Site-specific flexibility is important because no single set of requirements will be effective across the country. As EPA stated in its November 10, 2015 notice, “[t]he diversity of the forest road networks, the different classes of roads, the different local physical conditions, and the broad range of road conditions and uses indicate the importance of site specific BMP selection and implementation to protect water quality” (80 FR 69656). For example, commenters correctly pointed out that Florida's forest road BMPs need not recommend or discuss full-bench road construction and end hauling techniques, as Oregon's rules do, because Florida does not have landslide-prone terrain, while Oregon has steep terrain with the potential for landslides, where such construction and end hauling techniques would be appropriate (EPA-HQ-OW-2015-0668-0089).

    2. State Programs Show High Implementation Rates

    Data from the 2013 NASF survey indicated that both forestry and forest road BMPs are implemented broadly. BMP implementation surveys in 32 states (i.e., those with significant forest management activity) between 2005 and 2013 showed an average forestry BMP implementation rate of 91% (NASF, 2015). Nationally, the survey suggests that implementation rates for forest road BMPs averaged 91.5% and stream crossing BMPs averaged 86.7% (NASF, 2015). The 2012 Southern Region Report published by the Southern Group of State Foresters (SGSF) found forest road BMP implementation rates for 11 states 8 range from 78-99%, with an average of 88%. In the SGSF report, stream crossing BMP implementation rates ranged from 72-98% and averaged 89% (SGSF BMP Report, 2012).

    8 Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia.

    The NASF survey also indicated that forest road BMP implementation rates do not vary significantly regardless of whether the state program is regulatory, quasi-regulatory, or non-regulatory. The NASF survey indicated that implementation of forest roads BMPs in 8 regulatory reporting states averages 93.9%, while the implementation rates in the 11 quasi-regulatory reporting states and 13 non-regulatory reporting states averages 90.6% and 90.5%, respectively (NASF, 2015).

    Plus, BMP implementation rates have improved and continue to improve over time. For example, from 2008—2012, the implementation rates for all forestry BMPs (including forest road and stream crossing BMPs) trended upward in the SGSF report. This included forest road BMP implementation rates and stream crossings BMP implementation rates, which increased from 87 to 90%, and from 85 to 89%, respectively (SGSF BMP Report, 2012).

    In addition to state forest road BMP programs, several efforts have emerged over the past 10 years to improve monitoring of BMP programs. Regional groups have undertaken efforts to promote consistent and comparable forestry BMP program monitoring data. The SGSF and the Northeastern Area Association of State Foresters (NAASF) have developed regional BMP monitoring protocols that states in those regions are using.

    SGSF developed Silviculture Best Management Practices Implementation Monitoring, A Framework for State Forestry Agencies (2007) to improve and maximize the integrity of BMP implementation monitoring in southern states (SGSF Regional BMP Framework Protocol, 2007). The framework, which is implemented by 13 southern states, Puerto Rico, and the U.S. Virgin Islands, is designed to provide guidance for monitoring forestry BMP implementation that results in data that are statistically sound, objective, and promote analytical consistency among states. The framework addresses monitoring frequency, site selection, practices to be evaluated, the basis for practice evaluation and reporting, scoring methodology, risk assessment, and follow-up actions.

    Similar to the SGSF BMP monitoring framework, the USFS Northeastern Area State and Private Forestry and the Northeastern Area Association of State Foresters—Water Resources Committee have developed the Forestry BMP Protocol Project. The BMP Protocol is a standard method for monitoring the use and effectiveness of BMPs commonly used in timber harvesting. The BMP Protocol, which is available to 20 states, serves three functions: (1) Data collection, (2) data analysis, and (3) report generation. It collects data using a branched question set designed to address those areas of the timber harvest with the greatest potential to impact water resources (including haul roads and water crossings). The protocol was developed to document the use and effectiveness of BMPs in protecting water resources during forest harvesting operations; document the degree of compliance with the CWA, as well as the Coastal Zone Management Act and various state laws and regulations; assess water resource protection based on the effectiveness of a collective set of BMPs; increase credibility through the measurement of results; respond to public concerns regarding the potential effects of timber harvesting based on measured evidence; and identify opportunities for improvement in water resource protection by identifying causes of BMP failure. Both a Desk Reference and Field Guide have been developed for the monitoring protocol (BMP Manual Desk Reference, 2007; BMP Field Guide, 2007).

    Other factors are also facilitating the increasing rate of BMP implementation. For example, third-party certification programs, as discussed in detail in section VI.C of this document, all require BMP implementation and third-party audits to verify that timber companies conform to state standards. Forest certification programs have made important contributions to improved BMP implementation through logger training, landowner outreach, and water quality requirements. Other examples are the logger training and certification programs established by states and third-party programs, such as the SFI Logger Training and Education (2015) program, to ensure loggers are educated about the use and maintenance of appropriate forest road BMPs. Training is particularly important given the site-specific customization BMPs require. The best way to ensure optimal BMP selection and installation is through localized knowledge of climate, soils, forestry operations, and other factors, in combination with state-specific BMPs. Some commenters noted that the Forest Resources Association reports having trained more than 150,000 logging professionals since the inception of the forest certification program (EPA-HQ-OW-2015-0668-0089). For fiscal year 2015, West Virginia noted that 1,454 loggers received certification to supervise logging operations and assure BMPs were applied (EPA-HQ-OW-2015-0668-0075). Also, as one commenter noted, effective outreach and training programs have served to foster a culture of high BMP implementation rates such that BMPs have largely been institutionalized in the forestry community.

    3. State Programs Continue To Evolve and Improve

    States frequently revise their forest roads management guidance/regulations. States with significant forestry operations have mechanisms in place to evaluate the effectiveness of forestry BMPs and use monitoring and research results to revise these practices when necessary (typically by government appointed forestry boards, forestry commissions, or a mix of agencies, councils, or departments). For example, California Department of Forestry and Fire Protection revised its Forest Practice Rules in 2015 to better manage drainage and erosion from logging roads (EPA-HQ-OW-2015-0668-0055); Wisconsin DNR-Division of Forestry revised its Forest Management Guidelines in 2011,9 including updating forestry BMPs for water quality; and the Oregon Board of Forestry increased the riparian zone buffer width for fish-bearing streams in 2015 (Oregon Riparian Rule, 2015). States, federal agencies and various stakeholder groups continue to enhance BMP prescriptions and identify the site-specific factors that influence their effectiveness. For example, industry commenters identified 36 states that have revised their forest road BMPs within the last ten years (EPA-HQ-OW-2015-0668-0089), and according to a recent state survey conducted by the National Association of State Foresters, 31 states (62%) have updated their forest roads management guidance/regulations since 2006.10 EPA's own analysis also indicates that many states have revised their programs, with some being revised as recently as 2016 (State Program Summary, 2016).

    9http://dnr.wi.gov/topic/forestmanagement/guidelines.html.

    10http://www.stateforesters.org/action-issues-and-policy/state-forestry-BMPs-map-o-o.

    B. Federal BMP-Based Programs

    At the federal level, the USFS and the BLM have established programs to manage stormwater discharges from forest roads on federal lands. These agencies manage large tracts of forested lands, including lands that are actively being used for road building, road maintenance, logging operations, public and recreational use or other activities, and generally demonstrate sound environmental stewardship in managing these lands.

    1. Summary of U.S. Forest Service Programs

    The 193 million acres (780,000 km2) of public land that are managed as national forests and grasslands are collectively known as the National Forest System. These lands are located in 44 states, Puerto Rico, and the Virgin Islands and comprise about 9% of the total land area in the U.S. The USFS manages approximately 20% of the Nation's forested area and nearly 10% of the Nation's rangelands (USFS Strategic Plan FY: 2015-2020). The lands are organized into 154 National Forests and 20 National Grasslands. The mission of the National Forest System is to manage the national forests and grasslands to meet the Agency's sustainable multiple-use mandate.

    The USFS uses several tools and strategies, such as the Legacy Roads and Trails program, Watershed Condition Framework, and the National Best Management Practices Program, in addition to local programs, to maintain and improve watershed health and manage discharges from forest roads.

    The Legacy Roads and Trails program assists the USFS in identifying legacy roads in national forests and grasslands. USFS targets projects that will minimize the discharge of stormwater by decommissioning, maintaining, or upgrading various roads. From 2009-2015, the USFS decommissioned 5,504 miles of National Forest System Roads and an additional 6,714 miles of unauthorized roads; reconstructed 13,413 miles of roads; and maintained 57,333 miles of roads per year during that period.

    The USFS Watershed Condition Framework helps the USFS to assess watershed health in national forests and grasslands, identify and implement protective measures, and conduct ongoing watershed monitoring. Watershed conditions are categorized into three discrete categories or classes that reflect the health of the watershed. One primary emphasis of the watershed assessment is indicators that directly or indirectly impact soil and hydrologic functions as well as riparian and aquatic ecosystems. Initial watershed condition framework assessments for all watersheds on USFS lands were completed in 2011.11

    11http://www.fs.fed.us/biology/watershed/condition_framework.html.

    In 2012 the USFS also initiated and began to implement a National BMP program integrating water resource protection into landscape management activities. The National BMP program is designed to improve agency performance, accountability, consistency, and efficiency in protecting water quality. The program consists of National Core BMPs, standardized monitoring protocols to evaluate BMP implementation and effectiveness of the National Core BMPs, and a data management system to store and analyze the resulting monitoring data. National Core BMPs address 11 subject areas affecting water quality. One of those subject areas is road management activity, which includes BMPs for travel management planning and analysis, road location and design, road construction, and stream crossings (USFS, 2012). The National BMP based program enables the USFS to document compliance with the management of nonpoint source pollution at local, regional, and national scales as well as address the 2012 land management planning rule requirement for national BMPs at 36 CFR 219.8(a)(4).

    The USFS monitors road management BMP implementation and its effectiveness at protecting water, aquatic, or riparian resources through nine evaluation categories and/or time periods, some of which include: Construction and reconstruction of USFS system roads and/or waterbody crossings; after construction or reconstruction has been completed; long-term management and maintenance of USFS system roads; decommissioned roads after decommissioning activities have been completed; and roads, parking areas, and snow storage areas during snow removal and storage activities.

    The USFS has also developed a National Core BMP Technical Guide intended to improve USFS accountability and performance in managing water quality programs. Many of the core BMPs in the National Core BMP Technical Guide address water quality. The Technical Guide also provides administrative directives to allow for the use of state, tribal, and local requirements and information to develop site-specific BMPs where needed (USFS, 2012). The USFS is currently developing a second volume of the National Core BMP Technical Guide that will provide standardized protocols for monitoring BMP implementation and effectiveness across all USFS lands.

    Further, USFS has developed a suite of tools to identify and prioritize road segments at risk of impacting water quality. These tools operate at scales of detail ranging from using corporate road databases and digital elevation data to using detailed GPS surveys. These tools apply in watershed sediment load reduction plans for waters listed as impaired under the CWA and in forest restoration projects under the Collaborative Forest Landscape Restoration Program in the states of Idaho, Montana, and California. For example, the Geomorphic Road Analysis and Inventory Package (GRAIP) tool includes methods to inventory roads and analyze the inventory for surface erosion, and risks for gullies, landslides, and stream crossing failures. This tool can be used in combination with other field observations to assess forest roads.

    As an example of implementation of the USFS's BMP programs, the USFS evaluated its Pacific Southwest Region BMP program from 2008-2010 through 2,237 BMP inspections. It found that BMP implementation was 91% and effectiveness was 80%, with water quality affected at streams on 12% of sites. The USFS is continually improving and updating its programs and tools as accomplishments are monitored and verified. In 2013, the USFS completed an interim National BMP monitoring database for the National BMP program. The USFS expects to integrate this interim database into an enterprise data management system in the future which will extend reporting and analysis capabilities of the database.

    In fiscal year 2014, 97 USFS administrative units completed a total of 600 BMP evaluations as part of implementing in the National BMP monitoring program. As discussed above, the USFS national core BMPs address 11 subject areas that potentially could affect water quality, including “road management activities.” Nine monitoring protocols have been developed for the road management activity BMPs. At least 1 BMP evaluation was completed on 87% of the USFS administrative units; over 100 evaluations were conducted for road management activity BMPs. Of the 600 total evaluations, 94% included implementation assessments, 90% included effectiveness assessments, and 85% included both implementation and effectiveness assessments.

    Overall, 61% of the BMP implementation evaluations were rated as “fully implemented” or “mostly implemented.” In addition, 65% of the BMP effectiveness evaluations were rated as “effective” or “mostly effective.” For sites where BMP implementation and effectiveness were both evaluated, 56% had composite ratings of “excellent” or “good.” For road management activities, approximately 70% of the evaluations identified BMPs that were fully or mostly implemented. With regard to road management BMP effectiveness, approximately 50% of the completed evaluations were found to be effective or mostly effective. In the study the USFS acknowledges that these data show room for improvement in BMP implementation and effectiveness but observes that prior to development of the National BMP Program, it was impossible to report on BMP implementation and effectiveness on a national scale in a coherent, understandable, and useful way.

    In December 2015, the USFS published the National Best Management Practices Monitoring Summary Report for the two-year BMP phase-in period of fiscal years 2013 and 2014 following the launch of the 2012 National Best Management Practices program. That report summarizes the national results of the two year phase-in period of national BMP monitoring. The report demonstrates the capabilities of a consistent nationwide monitoring program to document BMP performance (USFS, 2015). In addition, as part of the Watershed Condition Framework, the USFS is currently undertaking a five year re-assessment to assess changed conditions of USFS watersheds.

    For example, USFS is using outputs from the GRAIP tool, mentioned previously, in combination with associated field observations to assess the effectiveness of road decommissioning in Idaho, Montana (Cissel et al., 2014a), Oregon, Utah, and Washington. BMPs implemented as part of the decommissioning efforts resulted in a 79% reduction in fine sediment delivery to streams (Cissel et al., 2014b).

    The USFS implements best practices to control stormwater from forest roads on a program-wide scale in a number of ways, as well as ensuring that specific projects are implemented properly. Where a USFS road crew is in place, the agency performs maintenance and construction/reconstruction to the extent the law allows. BMPs are followed according to USFS policy, incorporating any national, regional, and local level BMPs. Crews work closely with local resource specialists to ensure work is being performed according to BMPs. When a project is awarded under a contract, clauses, provisions, mitigation measures, and BMPs are incorporated into the plans, specifications, and contract documents. For example, some contract provisions require the contractor to preserve, protect, and minimize the impacts from soil erosion to streams, lakes, and reservoirs.12 A Contracting Officer or their certified designees monitor work performed by the contractor to ensure work compliance with the terms and conditions set forth in the contract.

    12 See BLM. (2011). Contract for the Sale of Timber and Other Wood Products Lump Sum Sale.

    The USFS is a recognized leader in establishing road crossing techniques that provide for aquatic organism passage, or the ability for fish and other aquatic life to move up or downstream under roads. In 2005, the USFS created the National Inventory and Assessment Procedure to evaluate the effectiveness of current and remediated fish passages (USFS, 2005). Over 1,600 miles of habitat were restored in fiscal years 2011-2013 by aquatic organism passage projects funded through the USFS Legacy Roads and Trails Restoration program among others (USFS, 2014).

    2. Summary of Bureau of Land Management Programs

    BLM manages approximately 246 million acres of public lands (BLM, 2015). Most BLM lands are concentrated in 11 western states with scattered tracts in the various eastern states. Of the 246 million acres, approximately 50 million acres are forest or woodlands where approximately 6-7 million acres are managed for sustainable timber harvests. These areas are generally mesic sites with annual average precipitation that usually exceeds 15 inches per year. Traditional timber harvesting on BLM property occurs primarily in northern California, Colorado, Idaho, Montana, Oregon, and Wyoming, with minimal harvest occurring in Alaska, Arizona, Nevada, New Mexico, and Utah. BLM uses several tools including land use plans, Memoranda of Understanding (“MOU”) with states and other federal agencies, timber sale contracts, and training to ensure protection of water resources.

    Most BLM lands are managed pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA), at 43. U.S.C. 1712, which requires public lands to be managed under the principles of multiple-use and sustained yield. BLM's land use planning regulations at 43 CFR part 1600 establish a land use planning system for BLM-managed public lands. Similar to the USFS, a full suite of activities are authorized and managed on BLM forests and woodlands, including timber harvesting, hazardous fuel reduction treatments, recreation, fish and wildlife conservation, oil and gas activities, and grazing. Authorized uses in forests and woodlands such as timber harvesting often include road construction and maintenance 13 which are broadly governed by policies, standards, and right-of-way agreements that ensure proper design and upkeep.14

    13 Bureau of Land Management estimates that as of 2014 there were approximately 72,300 miles of roads on Bureau of Land Management lands (Public Land Statistics Table 6.2, pg. 246). Only a subset of these roads are located in forested environments that would have the potential to contribute to stormwater runoff (Bureau of Land Management Supplemental Response 3/29/16).

    14http://www.blm.gov/wo/st/en/prog/more/forests_and_woodland.html.

    One source of guidance for proper development of BLM land use plans is BLM's Land Use Planning Handbook. The Handbook provides broad agency direction for BLM to use BMPs to meet the standards and goals of the CWA and address various protection measures to mitigate impacts to human health concerns, ecosystem health, riparian areas, and overall watershed conditions, and to meet state and local water quality requirements (BLM, 2005).

    BLM state offices enter into interagency MOUs with state and other federal agencies designed to ensure that they cooperatively meet state and federal BMPs and water quality rules and regulations related to point and nonpoint source water pollution from BLM managed lands.15 These MOUs clarify such issues as jurisdictional and statutory authorities, monitoring responsibilities, implementing effective BMPs, prioritizing restoration activities, and developing strategies to meet water quality standards. The Idaho Nonpoint Source Management Plan provides one example of such an MOU (Idaho DEQ, 2015). In addition, several components of BLM state and national level manuals apply to ground-disturbing activities and provide for consistent implementation of BMPs.16

    15 An example of an interagency MOU between Bureau of Land Management, other federal agencies and the Idaho Department of Environmental Quality, can be found at http://www.deq.idaho.gov/media/1041346-nps_program_implementation_mou_2013.pdf.

    16 Bureau of Land Management Manual 9113 (Roads), 9115 (Primitive Roads including BMPs from the Surface Operating Standards and Guidelines for Oil and Gas Exploration and Development), 7240 (Water Quality), Manual 5000 Forest Management (pertaining to timber sale contracts and specific contract provisions to apply to forest roads to address water quality protection).

    Finally, all BLM timber sales contracts contain standard contract requirements that expressly require that the purchaser must comply with all applicable state and federal laws and regulations pertaining to water quality. Often, they include special provisions deemed necessary (e.g., restrictions on wet weather operations, conditions addressing Endangered Species Act requirements, soil and aquatic protection requirements, etc.).17 Individual BLM offices consistently add special provisions to timber sales as well as other ground disturbing activity contracts to ensure effective BMP implementation. Appropriate BMPs are identified at the Resource Management Plan level, analyzed during site-specific NEPA review process, and implemented in various ways such as direct performance by BLM crews or through a timber sale contract.

    17 “Bureau of Land Management Standard Timber Sale Contract Language,” Bureau of Land Management Form 5450-004, Sections 26, 27, & 28.

    BLM also provides training for their specialists in all aspects of resource management including engineering (to include roads and facilities), forest management, fish and wildlife management, and hydrology. Training curricula include: Review of existing and new state and federal regulations, manuals, handbooks, and policies including compliance with BMPs; preparing and administering contracts; review of interagency agreements or MOUs; review of updates on monitoring, evaluating, and reporting protocols and agency monitoring databases; review of Resource Management Plans and amendments; and conducting National Environmental Policy Act reviews.

    BLM incorporates BMPs into land use plans that include management of forest roads. The recently released western Oregon Proposed Resource Management Plan/Final Environmental Impact Statement, Appendix J provides one example of such a plan (BLM RMPWO Vol. 3 Appendix J, 2016). The BMPs for the western Oregon Proposed Resource Management Plan address various anticipated resource management actions including: Road and landing maintenance and construction, timber harvest activities, silviculture activities, surface source water for drinking water, and recreation management. These BMPs were developed in coordination with Oregon Department of Environmental Quality to cooperatively meet state and federal water quality regulations. Additional BMPs could be required for a particular project depending on site-specific needs and subsequent implementation and effectiveness monitoring. BLM field offices review the land use plan BMPs and select and apply the appropriate and applicable BMPs for a particular project. Those BMPs are incorporated into on-the-ground operations like timber sales, road maintenance, road construction, and riparian restoration projects.

    Although the BLM does not have a national BMP monitoring database like the USFS, it works closely with a number of state and federal agencies to annually monitor, evaluate, and report BMP compliance and effectiveness. One example demonstrating the success of resource management plans to protect water quality is the Northwest Forest Plan (NWFP). Approximately 2.5 million acres of forested BLM land falls within the area covered by the NWFP and those acres have been managed consistent with the NWFP standards and guidelines. All of those standards and guidelines were incorporated into the 1995 western Oregon resource management plans.

    The Aquatic Conservation Strategy is an important element of the NWFP, which incorporates into the resource management plans the implementation of a riparian reserve system (e.g., buffers) along streams as well as reducing road densities. Since 1995, western Oregon BLM Districts have decommissioned or obliterated over 883 miles of roads.

    As mentioned above, BLM has released a proposed resource management plan and a final environmental impact statement for western Oregon BLM Districts to revise the 1995 resource management plans. Under the proposed resource management plan, the riparian reserve system, along with a late successional forest reserve system, would increase from 57% following the 1995 resource management plan to 64% following new guidelines. BLM has worked closely with over 20 cooperating agencies including U.S. Fish and Wildlife Service, National Marine Fisheries Service, and EPA to continue a comprehensive and regional strategy to maintain and improve aquatic resources in alignment with the overarching ecosystem principles and intent of the Aquatic Conservation Strategy of the NWFP under the new RMP.

    The recently released “Northwest Forest Plan Interagency Regional Monitoring: 20 Year Report, Status and Trends of Watershed Condition” report summarizes the results of the twenty year interagency effort to implement an array of water quality protective measures in the Aquatic Conservation Strategy to maintain watershed health in that region (Northwest Forest Plan, 2015). The NWFP Aquatic Conservation Strategy consists of four components: Riparian reserves, key watersheds, watershed analysis, and watershed restoration. Once watershed conditions were evaluated and resource needs were identified, multiple agencies, as well as public stakeholders, partnered to complete millions-of-dollars' worth of watershed restoration work include: Providing fish passages through culvert removals, replacements, or bridge construction; obliterating, closing, or relocating streamside roads; vegetating disturbed areas; reducing hazardous fuel loads; upgrading road surfaces to reduce sediment runoff; and removing dams. Implementation of these four components has resulted in improved watershed conditions in many watersheds.

    The recently released monitoring report's objective was to evaluate whether the NWFP Aquatic Conservation Strategy is achieving the goal of maintaining and restoring the condition of watersheds throughout the region covered by the NWFP. The report evaluated two subject areas: Upslope riparian areas for all watersheds with at least 5% federal ownership, and in-channel stream data (e.g., temperature, sediment, and macroinvertebrates). The report compares the effectiveness of management practices under the aquatic conservation strategy direction for two periods: 1993 and 2012 for upslope riparian assessment, and rotational sampling between 2002-2009 and 2010-2013 for in-channel stream assessment. These monitoring data were used to detect trends and evaluate stream and upslope riparian conditions for 1,974 watersheds in the Pacific Northwest.

    The report signified that there has been a slight positive shift in upslope riparian condition. Sediment scores were generally very high, indicating a low risk of roads delivering sediment to streams. Sharp declines in assessment scores were mainly driven by large wildfires, and were offset by moderate, broad-scale improvements in vegetation, and focused improvements related to road decommissioning.

    BLM also uses technical tools for evaluation, planning, and assessment of water quality. BLM is applying the USFS GRAIP tool, as well as others, in western Oregon watersheds to assess the effectiveness of road decommissioning and in sediment load reduction plans for waters listed as impaired under the CWA. These tools will also be used to prioritize the backlog of deferred maintenance needs that are later identified in the western Oregon Final Environmental Impact Statement, Chapter 3, Trails and Travel Management.

    Outside of western Oregon, BLM is involved with various state, regional, and national water quality monitoring efforts to assess management effectiveness including indirect effectiveness of BMPs related to forest management and roads. For example, BLM cooperates with the Montana State Environmental Quality Council to monitor how forest practices are affecting watersheds in Montana. Montana conducts BMP field reviews on state, federal, and private industrial and non-industrial forest lands to monitor BMP implementation and effectiveness. Montana's 2014 BMP review concluded that 96% of BMP practices were effective on federal lands (Montana DNRC, 2014).

    BLM has conducted a number of successful watershed restoration efforts to improve water quality on BLM lands. One example is the BLM Headwaters Forest Reserve Road Restoration Project in California. Since 2000, BLM has worked with the Pacific Coast Fish, Wildlife and Wetlands Restoration Association to decommission and restore 26 miles of old logging roads throughout headwaters. An additional 5 miles of decommissioning is planned for the next several years.18

    18http://blm.gov/ca/st/en/prog/nlcs/Headwaters_ForestReserve/restoration.html.

    3. Federal Programs Are Evolving and Improving

    Both the USFS and BLM have improved their programs that address water quality and stormwater from forest roads over the last several years. As noted above, the USFS launched a new National BMP program in 2012 and is currently monitoring the program for results. In addition, the USFS has enhanced its Road Preconstruction Handbook on Design 19 as well as the Transportation Structures Handbook on Hydraulics and Watershed Protection 20 to include design considerations for the construction and reconstruction of forest roads which minimize road and drainage impacts to the watershed. USFS Technology and Development Centers have created a number of publications to assist designers when addressing road/water interactions.21 BLM has taken extensive efforts to improve its protection and restoration efforts of watersheds by addressing key resource areas and improving resource management plans. Even with limited resources, federal programs are using new technology to target highest priority problems in watersheds to mitigate water quality impacts and monitor watershed health and project effectiveness. Improved resource management plans and technology will likely continue to evolve and lead to greater improvements.

    19 See FSH 7709.56 Chapter 40 at http://www.fs.fed.us/dirindexhome/dughtml/fsh_1.html.

    20 See FSH 7709.56b Chapter 60 at http://www.fs.fed.us/dirindexhome/dughtml/fsh_1.html.

    21http://www.fs.fed.us/eng/pubs/.

    C. Third-Party Certification BMP-Based Programs

    In addition to state and federal forest road BMP programs, participation in third party forest certification programs has been increasing rapidly in the U.S. Forest management certification arose to foster an improved stewardship of working forestlands. Programs such as certifications, which provide information and disclosure to consumers, can generate significant beneficial impacts on the environment while imposing fewer costs on industries and producers than direct regulatory programs.22 Requirements to disclose information to citizens and consumers can lead to beneficial change without specific behavioral mandates. Certification provides a market incentive to encourage landowner commitment to sustainable forest management. It also offers a stamp of approval for forest management practices that meet standards considered to be environmentally appropriate, socially beneficial, and economically viable.

    22 From Thaler, R., & Sustein, C. (2009). Nudge.

    The three largest forestry certification programs in the U.S. are the Forest Stewardship Council (FSC), the Sustainable Forestry Initiative (SFI), and the American Tree Farm System (ATFS). These programs promote higher rates of BMP implementation by mandating compliance with applicable state and local laws and applicable BMPs, whether regulatory or voluntary. They promote training/education (including continuing education) and the use of trained loggers, promote monitoring of forestry BMP implementation, and include mechanisms for addressing instances where BMP nonconformance is observed. FSC requires expanded protection for waterbodies where it deems state programs or existing guidelines insufficient to protect water quality.

    EPA received comments from state forestry agencies highlighting the large areas of state forested land under one of the third-party certifications identified above. For example, the Idaho Department of Lands notes that over 1.5 million acres of forest lands in Idaho are privately held or owned and managed by industries that maintain third-party certification through SFI, FSC or ATFS (EPA-HQ-OW-2015-0668-0072). Maine has almost 8 million acres of forest land which is third-party certified (EPA-HQ-OW-2015-0668-0058); and in Mississippi almost 470,000 acres of public forest land is certified through the ATFS and audited annually to ensure proper BMP implementation (EPA-HQ-OW-2015-0668-0081).

    The discussion below provides a brief description of the three major programs in the U.S., focusing on how they promote management practices for mitigating water quality impacts resulting from stormwater discharges from forest roads.

    1. Forest Stewardship Council (FSC)

    FSC is an independent group with open membership that first convened in 1993 to improve forest practices internationally through a voluntary, market-based approach. FSC's program places an emphasis on whole-forest conservation, including protecting water resources from effects of stormwater discharges from forest roads. FSC is the only standard that prohibits the use of certain pesticides and herbicides in the timber industry and prohibits large clearcuts where they threaten the ecological integrity of the forest.

    FSC's program includes a series of overarching principles and more specific performance criteria. An example forest management certification criterion is Forest Management Standard Criterion C6.5, which states, “[w]ritten guidelines shall be prepared and implemented to: control erosion; minimize forest damage during harvesting, road construction, and all other mechanical disturbances; and protect water resources.” One “indicator” of this criterion provides that “[f]orest operations meet or exceed BMPs that address components of the Criterion where the operation takes place.” Another provides,

    [t]he transportation system, including design and placement of permanent and temporary haul roads, skid trails, recreational trails, water crossings and landings, is designed, constructed, maintained, and/or reconstructed to reduce short and long-term environmental impacts, habitat fragmentation, soil and water disturbance and cumulative adverse effects, while allowing for customary uses and use rights. This includes: access to all roads and trails (temporary and permanent), including recreational trails, and off-road travel, is controlled, as possible, to minimize ecological impacts; road density is minimized; erosion is minimized; sediment discharge to streams is minimized; there is free upstream and downstream passage for aquatic organisms; impacts of transportation systems on wildlife habitat and migration corridors are minimized; area converted to roads, landings and skid trails is minimized; habitat fragmentation is minimized; unneeded roads are closed and rehabilitated.

    Yet another indicator requires that, “[a] monitoring program is in place to assess the condition and environmental impacts of the forest-road system.” Certifiers are independent of FSC itself and the companies they audit.

    2. Sustainable Forestry Initiative (SFI)

    SFI is an independent, nonprofit organization that is responsible for maintaining, overseeing, and improving the SFI certification program. Across the U.S. and Canada, more than 280 million acres are certified to the SFI Forest Management Standard and additional acres are influenced by SFI Fiber Sourcing. SFI administers standards that address forest sustainability broadly and water quality specifically. The SFI 2015-2019 Forest Management Standard applies to any participating organization in the U.S. or Canada that owns or has management authority for forestlands and consists of measures designed to protect water quality, biodiversity, wildlife habitat, species at risk, and forests with exceptional conservation value. The measures require developing a program for certification and compliance that include monitoring BMPs during all phases of forestry activities, mapping of water resources, and recordkeeping. For example, Objective 3 in the Standard addresses “Protection and Maintenance of Water Resources—To protect the water quality of rivers, streams, lakes, wetlands, and other water bodies through meeting or exceeding best management practices.” Under Objective 3, Performance Measure 3.1 provides that “Program Participants shall meet or exceed all applicable federal, provincial, state and local water quality laws, and meet or exceed best management practices developed under Canadian or EPA-approved water quality programs.” Performance Measure 3.2 further provides, “Program Participants shall implement water, wetland, and riparian protection measures based on soil type, terrain, vegetation, ecological function, harvesting system, state (BMPs), provincial guidelines and other applicable factors.” Objective 11 addresses “Training and Education” and Performance Measure 11.1 provides that “Program Participants shall require appropriate training of personnel and contractors so that they are competent to fulfill their responsibilities under the SFI 2015-2019 Forest Management Standard.”

    SFI noted in its comments that 95% of the fiber delivered to SFI Program Participant mills is delivered by harvesting professionals who have been trained in sustainable forestry practices (EPA-HQ-OW-2015-0668-0099). Additional Forest Management Standard Objectives address Forest Management Planning (Objective 1) and Legal and Regulatory Compliance (Objective 9).

    3. American Tree Farm System (ATFS)

    ATFS is a program of the American Forest Foundation, and has a forest certification standard that applies to small landowners in the U.S. In 2009, ATFS had certified more than 25 million acres of privately owned forestland managed by over 90,000 family forest landowners. To become certified, ATFS landowners must own at least 10 acres of forestland and implement a written forest management plan; and follow ATFS and AFF's 2015-2020 Standards of Sustainability for Forest Certification for Private Forestlands. Tree farms are inspected and certified to assure proper forest management that includes the conservation of soil, water and wildlife. Standard 4: Air, Water, and Soil Protection provides that “[f]orest-management practices maintain or enhance the environment and ecosystems, including air, water, soil, and site quality.” Performance Measure 4.1 provides that each “[l]andowner shall meet or exceed practices prescribed by state forestry BMPs that are applicable to the property.”

    4. Third-Party Certification Programs Are Regularly Updated

    All three certification programs described above continue to update standards on a regular basis. FSC has continually revised its Principles and Criteria since 1994, with the most recent revision in 2012. FSC also developed a U.S. Forest Management Standard in July 2010, which was updated in September 2012. SFI revises its standards every five years, and has most recently updated them in January, 2015. ATFS is required to review its standards every five years as part of its conditions for endorsement by the Programme for Endorsement of Forest Certification, an umbrella organization that works with national certification programs to promote sustainable forest management.23 All programs include opportunities for public and other stakeholder input through public comment periods, webinars, and surveys.

    23http://www.pefc.org/.

    D. Existing EPA Tools That Address Stormwater Discharges From Forest Roads

    In addition to the state, federal, and third-party BMP-based programs described above, EPA administers other programs under the CWA that address forest road discharges. Stormwater point source discharges from forest roads have traditionally been treated similarly to nonpoint sources of pollution under the CWA. EPA has addressed these discharges under Sections 303, 305, and 319 of the CWA, and for the coastal areas, under Section 6217 of the Coastal Nonpoint Source Pollution Control Program under the Coastal Zone Act and Reauthorization Amendments (CZARA).24

    24 16 U.S.C. 1455b.

    1. Section 319 of the CWA

    Under Section 319 of the CWA, EPA provides technical and financial support to states in their administration of programs that address pollution from nonpoint sources and activities that are not required to be regulated by NPDES permits. Many state nonpoint source management programs, which include components for the implementation of forestry-related BMPs, were initiated and continue to be supported, in part, through the use of Section 319 grant funds. According to EPA's 2011 National Evaluation of the Section 319 Program of the CWA, at least 15 state programs (AL, AR, CA, GA, KY, LA, MT, NC, OK, OR, SC, TX, VA, WV, WY) administer state-wide forestry nonpoint source management programs aimed at addressing problems associated with forest harvesting operations. At least ten of these states (AL, AR, GA, KY, LA, NC, OK, SC, VA, WV) rely on Section 319 grant funding through the relevant state forestry agency to support water pollution controls associated with forestry activities. In many of these states, the state nonpoint source management control agency has a formal relationship with the state forestry commission (or agency or department) to jointly implement the forestry program. EPA guidance provides that states are expected to revise and update their programs every 5 years as part of ensuring eligibility for continued funding. (Nonpoint Source Program and Grants Guidelines for States and Territories, 2013).

    States have flexibility under the Section 319 program to address problems not addressed by the NPDES program. State Section 319 programs may encompass watershed or water quality-based approaches aimed at meeting water quality standards directly; iterative, technology-based approaches based on best management practices or measures, applied on either a categorical or site-specific basis; or a mix of these approaches. State forestry BMP-based programs apply these approaches using forestry BMP prescriptions and monitoring to address water quality impairments including forest road runoff, and EPA approves these programs as part of the Agency's review of state nonpoint source programs.

    EPA has developed a Grants Reporting and Tracking System (GRTS) to track projects that receive Section 319 grant funding. It also enables EPA and the states to characterize the types of projects funded with the use of Section 319(h) grant funds. A sample GRTS query of projects shows that a number of Section 319(h) grants have been provided to address forest roads, such as road construction and maintenance projects, across the country. (Grants Reporting and Tracking System Forestry Data Pull, 2016). Section 319 funding remains available to address forest roads impacts in those states which have prioritized this as an issue in their nonpoint source management plans.

    EPA has published various guidance documents to assist forest owners in protecting waters from forestry related runoff, and to help states to implement their Section 319 control program. For example, EPA published the National Management Measures to Control Nonpoint Source Pollution from Forestry (EPA, 2005) which includes BMPs for road construction, reconstruction, and management. In 2007, EPA also provided funding assistance to the Pennsylvania Department of Transportation to develop a manual which provides national guidance on effective and efficient practices to apply on dirt and gravel roads to reduce erosion, sediment, and dust pollution.25

    25https://www.epa.gov/polluted-runoff-nonpoint-source-pollution/environmentally-sensitive-maintenance-dirt-and-gravel.

    2. Section 6217 of CZARA

    Section 6217 of CZARA addresses enhancements to state Coastal Zone Management Act (CZMA) programs through development and implementation of management measures for nonpoint source pollution control to restore and protect coastal waters. This program, which is administered jointly by EPA and the National Oceanic and Atmospheric Administration (NOAA), directs states and territories with approved CZMA programs to provide for implementation of management measures for controlling runoff from activities within six categories of nonpoint source activities, including forestry. Each coastal state or territory administering a CZMA program (approved by NOAA) is required to describe its program to implement nonpoint source pollution controls, known as management measures, in conformity with a guidance published by EPA under CZARA Section 6217(g). The guidance describes ten management measures for forestry, including management measures for planning, road construction/reconstruction, and road management. As implemented under a state's CZMA program, CZARA requires enforceable policies and mechanisms, as well as monitoring and tracking of management measure implementation. NOAA and EPA are required to review and approve coastal nonpoint programs of state and territorial CZMA programs, and state authorities are responsible for implementing these programs. In all, EPA and NOAA have reviewed the programs submitted by 33 states and territories and, in many cases, approved such submissions with conditions. Over time, affected states and territories took action to address the program conditions incrementally. Since the federal agencies' initial approvals with conditions, all but 10 states have now met all of the outstanding conditions.26

    26https://coast.noaa.gov/czm/pollutioncontrol/.

    3. Sections 305(b) and 303(b) of the CWA

    Under Section 305(b) of the CWA, states are required to assess the quality of their surface waters and report this information to EPA. In addition, every 2 years Section 303(d) requires states to identify on their Section 303(d) lists, which they submit to EPA for approval, those waters that are not attaining water quality standards, referred to as “impaired waters,” and waters not expected to attain water quality standards by the next two-year listing cycle, referred to as “threatened waters.” 33 U.S.C. 1313(d)(1)(A); 40 CFR 130.7(b). States must also establish a priority ranking for establishing total maximum daily loads (TMDLs) of pollutants for those waters. Id. TMDLs are “pollution budgets” that calculate how much of a given pollutant a waterbody can assimilate, including a margin of safety, without exceeding its applicable water quality standards. 33 U.S.C. 1313(d)(1)(C). TMDLs also allocate shares of the waterbody's assimilative capacity for that pollutant to all of its point and nonpoint sources. 40 CFR 130.2(i). Pollutant allocations may be assigned to individual sources or aggregated to sectors such as forest roads. Like Section 303(d) lists, states submit TMDLs to EPA for approval.

    Impaired waters lists and TMDLs established for those impaired waters are “informational tools,” Pronsolino v. Nastri, 291 F.3d 1123, 1129 (9th Cir. 2002), that help states evaluate the significance of pollutant sources like forest roads in contributing to water quality impairments in the U.S and guide implementation of measures to address those impairments. Nationally, pathogens, mercury, other metals, sediment, nutrients, and organic enrichment/oxygen depletion are identified as the leading causes of impairment of all assessed water bodies, based on state electronic data submissions from 2004 through 2010.

    While TMDLs at their core are pollutant loading calculations and allocations, they also can provide a “comprehensive framework” for pollution reduction in a body of water that fails to meet state water quality standards. Amer. Farm Bureau Fed'n v. EPA, 792 F.3d 281, 287-288 (3rd Cir. 2015). While approving or establishing a TMDL, EPA requires “reasonable assurance” from the states that their TMDL implementation plans will meet their stated goals, i.e., achieve the TMDL's allocations and implement the applicable water quality standards. Id. at 300. In support of EPA's recently revised TMDL for Lake Champlain, for example, Vermont detailed specific actions it would take to reduce the flow of sediment into Lake Champlain, including enhancing its forest roads forest management practices to reduce erosion (EPA Region 1, 2016).

    EPA considered national TMDL data to determine whether forest roads have been identified as sources of water quality impairment and addressed in TMDL load allocations designed to help meet water quality standards.27 For example, Endicott (2008) indicates that in California TMDLs were required for 10 river basins where silviculture was identified as a potential source. EPA reviewed three of these TMDLs (Upper Main Eel River and Tributaries TMDL, 2004; Mad River TMDL, 2007; Redwood Creek TMDL, 2011) and found that roads and road related landslides were the leading anthropogenic cause of sediment loading in these watersheds. While EPA is unable to develop national-level summary data to describe the degree of impairments from forest roads, EPA notes that these and other TMDLs serve as existing CWA planning tools that guide silviculture-related pollutant reduction activities on a watershed-specific basis. See also Pronsolino v. Nastri supra at 1129, where the Ninth Circuit upheld an EPA-established TMDL addressing sediment pollution to the Garcia River caused by roads, timber-harvesting, road surfaces, and road and skid trail crossings.

    27 Unfortunately, EPA's national-level TMDL data does not contain detailed information on specific impairment sources such as forest roads. See, for example, the state report “2012 Pennsylvania Integrated Water Quality Monitoring and Assessment Report,” which identifies silviculture as responsible for 19 miles of impairments on state waters. Even with state-level data such as this report (which still does not make an explicit connection between forest roads and impairments), EPA found it exceedingly difficult to gather and assess this type of data.

    VII. Rationale for EPA's Determination Not To Establish New Regulatory Requirements for Forest Roads Discharges

    As discussed above, many rigorous programs exist at every level of government as well as in the private sector to address stormwater discharges from forest roads in the United States. The programs are regularly updated to reflect new technology and research findings, are specifically tailored for the locations in which they are implemented, and have high implementation rates. While these programs have limitations and may vary in their effectiveness, EPA has concluded that providing support for further improvement to these programs will be more effective in further addressing discharges from forest roads than would the establishment of a new federal regulatory program under CWA Section 402(p)(6).

    A number of practical considerations also militate against the establishment of a new federal regulatory program for forest roads. These include the site-specific nature of the environmental problem, the complex ownership arrangements of forest roads, and the limited financial resources and legal tools for addressing these roads, all discussed further below. A new program could require the expenditure of substantial resources while duplicating or displacing existing programs, with limited incremental environmental results. EPA has determined that the theoretical benefits of creating a “federal floor” do not outweigh its certain implementation problems, high costs, and potential duplication or displacement of longstanding and maturing federal, state, and private initiatives to address stormwater discharges from forest roads.

    A primary difficulty in establishing a new, nationwide regulatory regime is the variability in water quality impacts from forest roads across the country. Many factors affect the extent to which BMPs are needed and those best suited to particular locations, including physical and meteorological factors (e.g., climate, topography, soil type), which affect the nature of erosion and sedimentation; the intensity of timber operations; and localized scientific research and water quality data. A national regulation addressing such site-specific issues would likely be either too general or too complicated to be successful. The current multi-faceted, multi-layered landscape best supports the site-and region-specific nature of effective BMPs.

    The options laid out in Section 402(p)(6) of the CWA, the authority pursuant to which EPA could have designated stormwater discharges from forest roads for regulation, resemble the existing universe of forest roads control programs in the U.S. The types of regulatory actions that EPA could hypothetically take under Section 402(p)(6) are similar to the types of requirements and programs that states and other entities across the U.S. have already established, as described above. Section 402(p)(6) authorizes EPA to: “establish priorities, establish requirements for state stormwater management programs, and establish expeditious deadlines” which may include “performance standards, guidelines, guidance, and management practices and treatment requirements, as appropriate.” 33 U.S.C. § 1342(p)(6). Many “state stormwater management programs” already exist and address discharges from forest roads in a manner specifically tailored to conditions in each state. See Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct 1326, 1338 (2013) (“Indeed, Congress has given express instructions to the EPA to work `in consultation with State and local officials' to alleviate stormwater pollution by developing the precise kind of best management practices Oregon has established here. 33 U. S. C. § 1342(p)(6)”). In addition, states, agencies and organizations, including the USFS and EPA, have published “guidelines” and “guidance” discussing “management practices.” Every state and state organization that submitted comments to inform EPA's determination strongly opposed additional federal regulations. EPA has decided to help states strengthen their programs rather than supplant them, consistent with the CWA's policy to “recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution” and to plan the “use . . . of land and water resources.” 33 U.S.C. 1251(b).

    Supporting rather than duplicating state programs is also consistent with the CWA's policy of fostering governmental efficiency: to “encourage the drastic minimization of paperwork and interagency decision procedures, and the best use of available manpower and funds, so as to prevent needless duplication and unnecessary delays at all levels of government.” 33 U.S.C. 1251(f). An EPA program would add another layer of bureaucracy for both regulators and the private sector, sow confusion about program requirements and responsibilities, and lead to an inefficient use of already thin management resources, all for potentially limited environmental benefit.

    While Section 402(p)(6) could otherwise generally allow for regulation through some sort of permitting, Congress has specifically foreclosed that option for discharges “resulting from the conduct of the following silviculture activities conducted in accordance with standard industry practice: nursery operations, site preparation, reforestation and subsequent cultural treatment, thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance.” 33 U.S.C. 1342(l). Congress has also precluded third-party citizen suits to enforce any non-permitting program established under Section 402(p)(6) or any other limitations applied to silviculture activities. In the absence of these implementation and enforcement mechanisms, it would be difficult to provide for effective federal implementation and compliance assurance for a new set of national forest road discharges.

    Some commenters urged EPA to establish mandatory requirements pursuant to Section 402(p)(6), including prioritization of forest management areas, requiring road inventories, and monitoring for water quality standards. Many of these elements are part of state programs already. Requiring all forest landowners in the country to submit data to EPA about roads on their properties would necessitate a resource-intensive outreach operation. The large number of private family forest owners in the U.S. and Internet broadband limitations in rural areas, among many other factors, would make it difficult to ensure that forest road owners and operators are aware of and comply with such this requirements; legacy roads with no apparent owner would present even greater challenges. Additionally, as one commenter pointed out, many programs are targeted at certain impacted watersheds or aquatic species. An inventory of all forest roads, many of which do not cause water quality problems, does not necessarily provide information needed to address these particular impacts. Obtaining forest roads inventory information would likely be easier where large areas of forest are managed by a single entity, such as the USFS, but those entities are the ones most likely to already be engaging in inventory efforts (as described in section VI.B.1 of this document). Given these challenges, EPA does not believe that creating a new federal inventory of forest roads is a cost-effective use of EPA's limited resources.

    Requiring water quality monitoring poses another distinct set of problems. Water quality monitoring is in-situ (ambient water) sampling for one or a selected set of environmental indicators. These metrics can be biological (e.g., macroinvertebrates or fish community health), chemical (e.g., pollutant concentrations), or physical (e.g., geomorphology). This approach is not typically used to assess one or a few BMPs because in-situ water quality is influenced by multiple local and upstream factors/sources, and statistical distinctions between these factors and determining relative contributions may be impossible. Endicott (2008) reported findings “that the biotic and chemical `noise' in larger streams renders the water quality effects of forestry activities using BMPs undetectable.”

    EPA recognizes that existing forest road BMP programs have limitations, including limited funding. Resource constraints are a primary difficulty facing both state and federal programs, limiting their abilities to implement and monitor BMPs. Yet a new set of requirements from EPA would not address the funding gap. Indeed, another federal program could divert resources from on-the-ground stream protection efforts to bureaucratic reshuffling. EPA has decided not to expend resources on creating, implementing, and enforcing a new national program that may not tangibly improve water quality.

    VIII. Facilitating Continuous Improvement of Forest Road Programs

    As discussed above, programs at the state, federal, and local levels, as well as within the private sector, have demonstrated positive momentum in strengthening efforts to address stormwater discharges from forest roads. EPA seeks to further facilitate continuing improvements in working to address water quality impacts from forest roads. Thus, rather than superimposing additional EPA-regulatory programs over existing programs, EPA plans to help strengthen these existing programs by forming an ongoing dialogue with all relevant stakeholders (including industry, environmental groups, academics, and government agencies at the federal, state, tribal, and local levels) on program improvements, technical and policy issues, research results, state of the art technologies, success stories, and solutions to problem areas. This forum could provide an opportunity for stakeholders to exchange information and expertise. EPA envisions that a major part of these discussions will focus on specific problems and solutions to forest roads, such as existing/legacy roads or stream crossings as well as particularly effective forest road programs and best practices. Working with stakeholders collaboratively, the forum could develop a national compendium of highly effective components of private or governmental forest roads programs to serve as a resource for states, tribes, federal agencies, local government, and industry. The compendium could serve as an indicator of expectations for development, implementation, and/or revisions of forest road programs by highlighting existing robust efforts and the latest developments of evolving strong programs.

    IX. Response to Key Comments on Existing BMP-Based Programs

    The discussion below responds to significant issues commenters raised with regard to the effectiveness of existing BMP-based programs.

    Some commenters expressed concerns about the effectiveness of BMPs. In response, EPA makes an important distinction between the well documented ability of properly implemented BMPs to adequately control the discharge of pollutants, and situations where BMPs are improperly implemented or maintained (see multiple studies discussed in Part V). As these studies generally conclude, most BMPs are highly effective when appropriately designed and implemented; this includes choosing the right practice for particular situations and ensuring proper operation and maintenance. BMPs are ineffective or perform sub-optimally when not properly sited, installed, or maintained. These paradigms hold true for all water quality control technologies, not just BMPs, and underscore the importance of vigilant operation and maintenance rather than a conclusion that BMPs are not effective at protecting water quality. For example, Wisconsin DNR (2013) found that when BMPs were applied correctly no adverse impacts to water quality were found 99% of the time, and Montana DNRC (2014) reported that Montana's forestry BMPs were effective in protecting soil and water resources 98% of the time. In addition, as with most technologies, it is important to note that BMP science continues to evolve and improve.

    One commenter mentioned a study of two watersheds in the U.S. Pacific Northwest region, which found that 44% of 80 sediment debris slides were associated with roads, even though roads comprised only 3.1% of the area. However, the authors of the study concluded that standard BMPs were the best approach to reducing erosion and sediment delivery rates. This is the approach that states and others are already pursuing in that region.

    Another commenter pointed to low BMP efficiency data in Edwards and Williard (2010, as cited in Nolan et al., 2015) but the cited article examined the efficiency of forest harvesting BMPs in reducing sediment, not BMPs related to forest roads in particular. EPA also recognizes that state BMP-based programs have limitations, including that they may not be fully implemented, that their effectiveness differs based on numerous variables, and the difficulty in measuring quantitative results.28 A new federal regulatory program under CWA Section 402(p)(6), however, would not necessarily improve implementation rates, especially given the new limitations in CWA Section 402(l), which preclude the use of permits to implement any such program or of citizen suits to enforce any new federal requirements.

    28 For example, Virginia has an implementation rate of 78% for forest road BMPs (SGSF BMP Report, 2012). In addition, the following states report lower than the national average of 86.7% for BMP implementation rates of stream crossing BMPs: Vermont, 68%; North Carolina, 72%, Ohio, 78%, Maryland, 67%, and Oregon, 71%. (NASF, 2015).

    A few commenters discussed specific state forest road programs, such as Oregon's and Washington's. One commenter stated that Oregon's forest roads program is too flexible and is not adequately enforced. The commenter specifically identified the approval/rejection process for written plans as not being sufficiently stringent because there is no requirement to approve or deny a plan. With regard to Oregon (and other states), given the nature and scope of the concerns posed by forest road runoff, a reasonable degree of flexibility is valuable, as it allows for a tailored approach to addressing forest road discharges. See Decker v. NEDC, (“Oregon has invested substantial time and money in establishing these practices. In addition, the development, siting, maintenance, and regulation of roads—and in particular of state forest roads—are areas in which Oregon has considerable expertise”).

    Another commenter stated that, in addition to requiring BMPs, Washington State also requires water quality-based numeric criteria for turbidity and has rules for antidegradation, and that this should be required of all states. With regard to Washington State, EPA recognizes that states currently have various approaches to addressing sedimentation concerns (e.g., numeric and narrative turbidity standards, dissolved oxygen standards, temperature standards, etc.) as part of their water quality standards programs. EPA agrees that applying numeric standards can be extremely effective in protecting water quality. However, states are well situated to understand the scope and nature of environmental concerns posed by forest road runoff in their states and apply state water program requirements to those concerns accordingly.

    Some commenters, urged EPA to implement a national water quality-based monitoring program for forest roads. Requiring water quality monitoring for stormwater discharges from forest roads is infeasible for the reasons discussed in Section VII. Examining forest road BMP implementation on existing roads indicates whether existing programs are taking available and reasonable steps to address water quality concerns. EPA recognizes that most evaluations and determinations of BMP implementation are qualitative, but nonetheless, that information constitutes the best available information for EPA to make its decision. Extreme storms can pose challenges to the use and performance of BMPs, but BMPs can be tailored to some degree in areas subject to such events. A federal regulation would not alleviate risks posed by extreme storms because it would not be fair or reasonable to impose BMPs in all extreme storm events.29

    29 NPDES Bypass and Upset provisions at 40 CFR Sections 122.41(m) and (n) providing relief in certain circumstances to NPDES dischargers.

    One commenter stated that forest road BMP programs tend to focus on construction of new roads and fail to address older roads, often built before BMPs were in place (i.e., they are either “grandfathered in” or subject to requirements only when brought back into use, reconstructed, or at risk of significant failure). The commenter observed that older roads can be significant sources of sediment since they may be poorly located and built with few if any features to control erosion (citing Endicott 2008, which includes some studies that identify legacy roads as sources but do not provide data regarding sediment discharged by legacy roads). EPA recognizes that legacy roads present a challenge and a potential source of sediment. Legacy roads are also the most challenging types of roads to address through regulation, however. Legacy roads are often no longer in use, so there may not be an ongoing silvicultural operation to fund BMPs. They may have non-forest uses, also complicating responsibility and liability assignment, or they may not be used for a period of time while timber is growing and then they may be placed back into use when it is ready for harvest. Legacy roads may also be so overgrown with vegetation that their presence is no longer detectable.

    Nonetheless, several state programs require older roads to be upgraded to current BMP standards if they are brought back into service. Endicott (2008) indicates that 24 states had forest road BMPs that address road closure. A more recent review indicates that 34 states have BMPs that address forest road retirement (State Program Summary, 2016). Comments indicate that California, Washington, and Oregon are among those states having programs addressing legacy road issues.

    A few commenters stated that stream crossings for forest roads are especially vulnerable locations that can lead to significant erosion. One commenter stated that 5% of truck road stream crossings in the southern Piedmont region of Virginia were not meeting the relevant stream crossing BMPs (Nolan et al., 2015) and that failure to meet BMPs in these areas will have a disproportionately negative impact on water quality as compared to upland BMP violations. Another layer of regulations from EPA, however, would not guarantee that the remaining 5% of stream crossings would incorporate appropriate BMPs. While stream crossings are indeed a high risk area for forest road runoff, a recent EPA analysis of state programs showed that 46 states (92%) have developed BMPs for stream crossings. (State Program Summary, 2016). Additionally, BMP guidance documents addressing road placement make clear that roads should avoid or minimize stream crossings and riparian areas. Thus, a BMP based approach reduces the incidence of road-stream crossings and, when deemed unavoidable, BMPs have been developed to install stream crossings while minimizing erosion.

    A commenter also stated that some states do not consider the effects of diversion and natural disturbances when designing BMPs for stream crossings. These are important factors to consider. They are not, however, the only variables considered in a stream crossing design; stream flow and volume, soil type, volume and type of vehicle traffic, climate, and many other factors also play a role in determining the optimal design for a stream crossing. Effective stream crossing BMPs depend on site-specific conditions, reflecting the difficulty of setting one-size-fits-all federal requirements. In one study, researchers examined the effects of upgrading poorly designed stream crossings and concluded that the enhanced stream crossings produced little sediment and that improved stream crossings could significantly reduce sediment contributions from forest roads (Nolan et al., 2015). One commenter spoke favorably of several BMPs developed by the USFS for use at stream crossings and recommended that EPA adopt them nationally. EPA encourages state programs to consider USFS stream crossing BMPs for their menus of BMPs.

    EPA also received several comments regarding the compliance and monitoring aspects of state programs. One commenter stated that BMP effectiveness rates are overstated and suggested that the appropriate baseline for comparison should be forests in their natural conditions with no roads, whereas most studies compare forest roads with BMPs to forest roads with no BMPs. The commenter also asserted that, based on three studies, the actual efficiency of forest road BMPs is 53-94%. EPA notes in response that forest roads play a critical role in silviculture, recreation, fire suppression, and other uses. EPA does not expect forest roads to be absent from the landscape and therefore does not think that virgin forest must always necessarily serve as the baseline for measuring BMP effectiveness.

    A commenter also pointed out that most BMP monitoring 30 is conducted during dry periods, when effectiveness at preventing stormwater runoff may be more difficult to discern. The commenter noted that variability in BMP performance monitoring can be as high as 50-100%, which would require frequent sampling to distinguish sediment derived from forest roads versus other sources. A number of BMP performance studies are conducted under wet weather conditions, including most of those cited in Section V of this document. However, BMP effectiveness also can be assessed to a large extent in dry weather, as evidence of soil movement is often visible for a significant time period after rainfall events. For example, gullying or landslides will be clearly visible while sediment deposition in low areas or waterbodies will also be visible.

    30 BMP monitoring refers in this case to assessment of BMP performance effectiveness, which includes verifying that the structure/measures are in place and functioning. BMP monitoring is different from water quality monitoring, which involves monitoring a waterbody for particular environmental indicators.

    Another commenter stated that standardizing BMP compliance assessments and reporting protocols is necessary. They add that most monitoring focuses on whether a BMP has been implemented, rather than monitoring water quality for compliance with water quality standards. The commenter cited data from Virginia that noted a 32% non-compliance rate for stream crossing BMPs. EPA recognizes that states have used a variety of monitoring and reporting mechanisms over time and that this can inhibit broader analyses about BMP compliance. However, as discussed in Section VI.A.2 of this document, two large groups of states have adopted regional standardized monitoring protocols to promote consistency in compliance assessment and reporting.

    First, the SGSF has been implementing a broad monitoring program in 13 southeastern states for nearly a decade. Second, the joint effort between USFS and NAASF developed a similar standardized protocol for evaluating BMP implementation and effectiveness. These two protocols have spread a standardized monitoring process to a significant number of states with active forestry programs. Such standardization efforts are examples of the type of intra-state consistency that a federal EPA program could theoretically institute; their spread in the absence of EPA regulations provides an example in which a new EPA program would be duplicative.

    Some commenters stated the lack of a national BMP program leads to inconsistent BMP application and insufficient water quality protections. EPA sees the range of designs in BMP programs as an appropriate response to the diversity of conditions these programs are intended to address. State or regional timber operations vary in intensity, as do the types of forest management programs states or other oversight agencies implement. BMPs used at a site will differ depending on the factors above, as well as others, such as localized scientific research that determines the most effective approaches to managing stormwater. Within different state frameworks, certain aspects of BMP programs are largely consistent. For example, state BMP categories typically encompass forest road location/design/construction; road maintenance; stream crossings; stream management zones/bank stabilization/buffer strips; and many states address forest road retirement and wet weather/winter use.

    Many states are taking the lead in enhancing their programs to encompass newly developed methods to reduce water quality impacts from forest roads. For example, CA's “Road Rules, 2013”, which was first implemented in January 2015, requires that all forest roads used as part of an approved plan be hydrologically disconnected from waters (EPA-HQ-OW-2015-0668-0055). In the Southern region, the Southern Group of State Foresters Silviculture Best Management Practices Implementation Monitoring framework requires all southern states to include in their implementation monitoring reports counts of water quality risks. Finally, while “traditionally a problem area within all states, compliance with stream crossing BMPs continues to improve as a result of increased education of landowners and managers as well as increased acreage of certified forestland in the region (Schilling et al., 2009).” [Ice et al., 2010.]

    One commenter stated, “Congress has failed to adequately invest in the National Forest System roads budget. Annual spending has declined from over $236 million to less than $159 million in the last six fiscal years, when adjusted for inflation.” This has helped to contribute to the development of a more than $5 billion deferred maintenance backlog on the National Forest System. This commenter also suggested that, “[r]egulating stormwater discharges from USFS roads will do nothing to address either the forest health crisis or the disinvestment in maintaining the existing Forest Road system” (Id.). EPA acknowledges that both the USFS and BLM face resource constraints, often must address higher priority issues such as fire suppression to protect lives, and confront other challenges that limit the ability to fully address all issues arising from forest road activity when it comes to maintaining their transportation networks. Another layer of EPA regulations, in addition to existing federal programs addressing water resources protection and restoration, would not address these resources constraints and would likely do little to enhance water quality.

    In conclusion, none of these comments alters EPA's determination not to establish a new regulatory program for discharges from forest roads under CWA Section 402(p)(6). While EPA recognizes that discharges from forest roads have significant impacts on water quality in many parts of the country, the Agency has concluded that the most effective way to make further progress in addressing these issues is to support existing state, tribal, federal, and third-party programs. Given the diversity of forest roads programs in this country, some programs will necessarily be more rigorous than others. EPA has considered this variability, but concluded that any consistency that a national regulation could theoretically achieve is far outweighed by the challenges of its implementation.

    X. References Anderson, C.J., & Lockaby, B.G. (2011). The effectiveness of forestry best management practices for sediment control in the southeastern United States: A literature review. Southern Journal of Applied Forestry, 35(4), 170-177. Appelboom, T.W., Chescheir, G.M., Skaggs, R.W., & Hesterberg, D.L. (2002). Management practices for sediment reduction from forest roads in the coastal plains. Transactions of the ASAE, 45(2), 337. BLM. (2005). Land Use Planning Handbook; BLM Handbook H-1601-1. BLM. (2011). Contract for the Sale of Timber and Other Wood Products Lump Sum Sale. BLM. (2015). Public Land Statistics 2014. Volume 199. BLM. (2016). Appendix J—Best Management Practices. BLM RMPWO Vol. 3. Bureau of Indian Affairs. (2009). FY2009: Quarter 4 Catalog of Forest Acres. Butler, B., Hewes, J.H., Dickinson, B.J., Andrejczyk, K., Butler, S.M., & Markowski-Lindsay, M. (2016). USDA Forest Service National Woodland Owner Survey: A technical document supporting the Forest Service update of the 2010 RPA assessment. USFS. Cissel, R., Black, T.A., Nelson, N., & Luce, C.H. (2014). Monitoring the Hydrologic and Geomorphic Effects of Forest Road Decommissioning and Road Improvements. USFS. Cissel, R., Black, T.A., Nelson, N., & Luce, C.H. (2014). Southwest Crown of the Continent GRAIP roads assessment. US Department of Agriculture, Forest Service, Rocky Mountain Research Station, Fort Collins, Colorado. Clarkin, K., Conner, A., Furniss, M.J., Gibernick, B., Love, M., Moynan, K., & Wilson, S. (2005). National inventory and assessment procedure for identifying barriers to aquatic organism passage at road-stream crossings. USFS. Cristan, R., Aust, W.M., Bolding, M.C., Barrett, S.M., Munsell, J.F., & Schilling, E. (2016). Effectiveness of forestry best management practices in the United States: Literature review. Forest Ecology and Management, 360, 133-151. Decker v. Northwest Environmental Defense Center, 133 S. Ct. 1326, 568 U.S., 185 L. Ed. 2d 447 (2013). Dubé, K., Shelly, A., Black, J., & Kuzis, K. (2010). Washington Road Sub-Basin Scale Effectiveness Monitoring First Sampling Event (2006-2008) Report. Department of Natural Resources, State of Washington, 102. Edwards, P.J., & Williard, K.W. (2010). Efficiencies of forestry best management practices for reducing sediment and nutrient losses in the eastern United States. Journal of Forestry, 108(5), 245-249. EPA. (2004). Upper Main Eel River and Tributaries (including Tomki Creek, Outlet Creek and Lake Pillsbury) Total Maximum Daily Loads for Temperature and Sediment. EPA. (2005). National Management Measures to Control Nonpoint Source Pollution from Forestry. EPA. (2007). Mad River Total Maximum Daily Loads for Sediment and Turbidity. EPA. (2013). Nonpoint Source Program and Grants Guidelines for States and Territories. EPA. (2016). Grants Reporting and Tracking System Forestry Data Pull. EPA Region 1. (2016). Phosphorus TMDLs for Vermont Segments of Lake Champlain. Great Lakes Environmental Center, & Endicott, D. (2008). National Level Assessment of Water Quality Impairments Related to Forest Roads and Their Prevention by Best Management Practices. Final Report. Report prepared for US Environmental Protection Agency, Office of Water. Contract No. EP-C-05-066, Task Order, 2, 250. Ice, G. (2004). History of innovative best management practice development and its role in addressing water quality limited waterbodies. Journal of Environmental Engineering, 130(6), 684-689. Ice, G. & Schilling, E. (2012). Assessing the effectiveness of contemporary forestry best management practices (BMPs): Focus on roads. NCASI. Special report No. 12-01. Ice, G.G., Schilling, E., & Vowell, J. (2010). Trends for forestry best management practices implementation. Journal of Forestry, 108(6), 267-273. Idaho Department of Environmental Quality. (2015). Idaho Nonpoint Source Management Plan. Megahan, W.F., & King, J.G. (2004). Erosion, sedimentation, and cumulative effects in the northern Rocky Mountains. Miller, S.A., Gordon, S.N., Eldred, P., Beloin, R.M., Wilcox, S., Raggon, M., . . . & Muldoon, A. (2015). Northwest Forest Plan the First 20 Years (1994-2013): Watershed Condition Status and Trend. Montana Dept. of Natural Resources & Conservation. (2014). Forestry Best Management Practice (BMP) 2014 Monitoring Report Executive Summary. Montana Dept. of Natural Resources & Conservation. (2015). Montana Forestry Best Management Practices. NASF. (2015). Protecting Water Quality through State Forestry Best Management Practices. NCASI Forest Watershed Task Group. (2001). Forest roads and aquatic ecosystems: a review of causes, effects, and management practices. Nolan, L., Aust, W.M., Barrett, S.M., Bolding, M.C., Brown, K., & McGuire, K. (2015). Estimating costs and effectiveness of upgrades in forestry best management practices for stream crossings. Water, 7(12), 6946-6966. North Carolina Forest Service. (2006). North Carolina Forestry Best Management Practices Manual to Protect Water Quality. Northwest Environmental Defense Center v. Brown, 640 F.3d 1063 (9th Cir. 2011). Olszewski and Jackson. (2006). A Primer on the Top Ten Forest Environmental and Sustainability Issues in the Southern United States. NCASI. Special report No. 06-06. Oregon Department of Forestry. (2015). Board of Forestry Streamside Buffer (Riparian) Rule Analysis Decision. Redwood National and State Parks. (2011). Redwood Creek—Progress Report on Erosion Control Work and Sediment TMDL. Schilling, E. (2009). Compendium of forestry best management practices for controlling nonpoint source pollution in North America. NCASI. Technical bulletin No. 966. SFI. (2015). Report on the Status of Logger Training and Education (LT&E) Programs in 34 Forested U.S. States & 6 Canadian Provinces. SGSF. (2012). Implementation of Forestry Best Management Practices: 2012 Southern Region Report. SGSF. (2007). Silviculture Best Management Practices Implementation Monitoring: A Framework for State Forestry Agencies. Skaugset, A., & Allen, M.M. (1998). Forest Road Sediment and Drainage Monitoring Project Report for Private and State Lands in Western Oregon. Sugden, B.D., Ethridge, R., Mathieus, G., Heffernan, P.E., Frank, G., & Sanders, G. (2012). Montana's forestry Best Management Practices Program: 20 years of continuous improvement. Journal of Forestry, 110(6), 328-336. Tetra Tech Inc. (2016). Updated Summary of State Forest Road BMP Program Information. USFS. (1988). Soil and water conservation practices handbook. USFS. (2007). Best Management Practices (BMP) Manual-Desk Reference: Implementation and Effectiveness for Protection of Water Resources. USFS. (2007). Best Management Practices (BMP) Monitoring Manual-Field Guide: Implementation and Effectiveness for Protection of Water Resources. USFS. (2012). National Best Management Practices for Water Quality Management on National Forest System Lands Volume 1: National Core BMP Technical Guide. USFS. (2014). USDA Forest Service Update March 2014 Subject: Aquatic Organism Passage. USFS. (2015). National Best Management Practices Monitoring Summary Report Program Phase-In Period Fiscal Years 2013-2014. USFS. (2015). USDA Forest Service Strategic Plan: FY 2015-2020. Wisconsin DNR. (2013). Wisconsin's Forestry Best Management Practices (BMPs) for Water Quality 2013 BMP Monitoring Report. Dated: June 27, 2016. Joel Beauvais, Deputy Assistant Administrator, Office of Water.
    [FR Doc. 2016-15844 Filed 7-1-16; 8:45 am] BILLING CODE 6560-50-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES 42 CFR Part 88 [Docket No. CDC-2015-0063, NIOSH-287] RIN 0920-AA61 World Trade Center Health Program; Addition of New-Onset Chronic Obstructive Pulmonary Disease and WTC-Related Acute Traumatic Injury to the List of WTC-Related Health Conditions AGENCY:

    Centers for Disease Control and Prevention, HHS.

    ACTION:

    Final rule.

    SUMMARY:

    The World Trade Center (WTC) Health Program conducted a review of published, peer-reviewed epidemiologic studies regarding potential evidence of chronic obstructive pulmonary disease (COPD) and acute traumatic injury among individuals who were responders to or survivors of the September 11, 2001, terrorist attacks. The Administrator of the WTC Health Program (Administrator) found that these studies provide substantial evidence to support a causal association between each of these health conditions and 9/11 exposures. As a result, the Administrator is publishing a final rule to add both new-onset COPD and WTC-related acute traumatic injury to the List of WTC-Related Health Conditions eligible for treatment coverage in the WTC Health Program.

    DATES:

    This rule is effective on August 4, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Rachel Weiss, Program Analyst, 1090 Tusculum Ave, MS: C-46, Cincinnati, OH 45226; telephone (855)818-1629 (this is a toll-free number); email [email protected]

    SUPPLEMENTARY INFORMATION:

    Table of Contents I. Executive Summary A. Purpose of Regulatory Action B. Summary of Major Provisions C. Costs and Benefits II. Public Participation III. Background A. WTC Health Program Statutory Authority B. Evidence Supporting the Addition of New-Onset COPD and WTC-Related Acute Traumatic Injury to the List of WTC-Related Health Conditions IV. Effects of Rulemaking on Federal Agencies V. Summary of Peer Reviews and Public Comments—New-Onset COPD A. Peer Review B. Public Comment VI. Summary of Peer Reviews and Public Comments—WTC-Related Acute Traumatic Injury A. Peer Review B. Public Comment VII. How To Get Help for WTC-Related Health Conditions VIII. Summary of Final Rule IX. Regulatory Assessment Requirements A. Executive Order 12866 and Executive Order 13563 B. Regulatory Flexibility Act C. Paperwork Reduction Act D. Small Business Regulatory Enforcement Fairness Act E. Unfunded Mandates Reform Act of 1995 F. Executive Order 12988 (Civil Justice) G. Executive Order 13132 (Federalism) H. Executive Order 13045 (Protection of Children From Environmental Health Risks and Safety Risks) I. Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use) J. Plain Writing Act of 2010 I. Executive Summary A. Purpose of Regulatory Action

    This rulemaking is being conducted in order to add new-onset COPD and WTC-related acute traumatic injury 1 to the List of WTC-Related Health Conditions (List). Following the receipt of letters from the directors of the WTC Health Program Clinical Centers of Excellence (CCEs) and Data Centers to the WTC Health Program supporting coverage of all cases of COPD (including new-onset COPD) and significant traumatic injuries within the Program,2 the Administrator decided to conduct literature reviews regarding COPD and acute traumatic injuries among 9/11 responders and survivors. Based on the findings of those reviews, he determined that the evidence for causal associations between 9/11 exposures and new-onset COPD and acute traumatic injury, respectively, provides sufficient bases for the addition of both health conditions to the List. The Administrator published a proposed rule to add new-onset COPD and acute traumatic injury to the List on September 11, 2015,3 and finalizes the rule in this action.

    1 The term “WTC-related” was not included in the proposed definition of acute traumatic injury in the notice of proposed rulemaking, 80 FR 54746 (Sept. 11, 2015), but has been added in the final rule to clarify specific usage in the WTC Health Program and better parallel “WTC-related musculoskeletal disorder” on the List. The Administrator finds that revising the term results in no substantive change from the proposed rule. See discussion infra Section VIII.

    2 Michael Crane, Roberto Lucchini, Jacqueline Moline, et al., Letter from CCE and Data Center Directors to Dori Reissman and John Halpin, WTC Health Program Regarding “Musculoskeletal Conditions,” May 11, 2014; and Michael Crane, Roberto Lucchini, Jacqueline Moline, et al., Letter from CCE and Data Center Directors to Dori Reissman and John Halpin, WTC Health Program Regarding “Rationale for the Continued Certification of COPD as a World Trade Center Related and Covered Condition,” Apr. 22, 2014. These letters are included in the docket for this rulemaking.

    3 80 FR 54746.

    B. Summary of Major Provisions

    This final rule adds new-onset COPD and WTC-related acute traumatic injury to the List of WTC-Related Health Conditions in 42 CFR 88.1. As of the effective date of this rule, these conditions will be eligible for treatment by the WTC Health Program.

    C. Costs and Benefits

    The addition of new-onset COPD and WTC-related acute traumatic injury to the List of WTC-Related Health Conditions through this rulemaking is estimated to cost the WTC Health Program from $4,602,162 to $5,666,713 annually, between 2016 and 2019. All of the costs to the WTC Health Program are transfers. Benefits to current and future WTC Health Program members may include improved access to care and better treatment outcomes than in the absence of Program coverage.

    II. Public Participation

    On September 11, 2015, the Administrator published a notice of proposed rulemaking (NPRM) to propose the addition of new-onset COPD and acute traumatic injury to the List in 42 CFR 88.1.4 The Administrator asked peer reviewers to evaluate the scientific literature review and Administrator's determination and invited interested members of the public or organizations to participate in the rulemaking by submitting written views, opinions, recommendations, and/or data. This final rule describes feedback received from both peer reviewers and public commenters.

    4Id.

    A total of six peer reviewers were charged with reviewing the Administrator's evaluation of the evidence for adding the two conditions to the List. Three pulmonary disease experts reviewed the evidence for the addition of new-onset COPD and three injury experts reviewed the evidence for the addition of acute traumatic injury. Specifically, the peer reviewers were asked to answer the following questions:

    1. Are you aware of any other studies which should be considered? If so, please identify them.

    2. Have the requirements of the Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions5 appropriately been fulfilled? If not, please explain which elements are missing or deficient.

    5 John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised Oct. 21, 2014, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancers_21_Oct_2014.pdf.

    3. Is the interpretation of the available data appropriate, and does it support the conclusion? If not, please explain why.

    Public comments were invited on any topic related to the proposed rule, and specifically on the following questions:

    1. Is September 11, 2003 an appropriate deadline by which an individual must have received initial medical treatment for an acute traumatic injury?

    2. Is there evidence of acute traumatic injuries that occurred as a result of the September 11, 2001, terrorist attacks that would not be covered by the proposed definition? What are the types of long-term consequences or medically associated health conditions that result from the treatment or progression of acute traumatic injuries like those sustained on or after September 11, 2001?

    3. Are data available on the chronic care needs of individuals who suffered acute traumatic injuries during the September 11, 2001, terrorist attacks, and its aftermath that the Administrator can use to estimate the number of current and future WTC Health Program members who may seek certification of WTC-related acute traumatic injury as well as treatment costs?

    4. Are data available on the prevalence and cost estimates for new-onset COPD?

    The Administrator received 16 submissions to the rulemaking docket from the public, including the following individuals and organizations: 10 unaffiliated commenters; one individual who is a responder or survivor; two self-identified responders; sister non-profit organizations dedicated to preventing and curing alpha-1 antitrypsin deficiency and COPD; a labor union; and the WTC Health Program Survivors and Responders Steering Committees.

    The peer reviews and public comments are found in the docket for this rulemaking. Summaries of all peer reviews and public comments, as well as the Administrator's responses, are found below.

    III. Background A. WTC Health Program Statutory Authority

    Title I of the James Zadroga 9/11 Health and Compensation Act of 2010 (Zadroga Act), Public Law 111-347, as amended by Public Law 114-113, added Title XXXIII to the Public Health Service Act (PHS Act),6 establishing the WTC Health Program within the Department of Health and Human Services (HHS). The WTC Health Program provides medical monitoring and treatment benefits to eligible firefighters and related personnel, law enforcement officers, and rescue, recovery, and cleanup workers who responded to the September 11, 2001, terrorist attacks in New York City, at the Pentagon, and in Shanksville, Pennsylvania (responders), and to eligible persons who were present in the dust or dust cloud on September 11, 2001 or who worked, resided, or attended school, childcare, or adult daycare in the New York City disaster area (survivors).

    6 Title XXXIII of the PHS Act is codified at 42 U.S.C. 300mm to 300mm-61. Those portions of the Zadroga Act found in Titles II and III of Pub. L. 111-347 do not pertain to the WTC Health Program and are codified elsewhere.

    All references to the Administrator of the WTC Health Program (Administrator) in this document mean the Director of the National Institute for Occupational Safety and Health (NIOSH) or his or her designee. Section 3312(a)(6) of the PHS Act requires the Administrator to conduct rulemaking to propose the addition of a health condition to the List codified in 42 CFR 88.1.

    B. Evidence Supporting the Addition of New-Onset COPD and WTC-Related Acute Traumatic Injury to the List of WTC-Related Health Conditions

    Consideration of an addition to the List may be initiated at the Administrator's discretion 7 or following receipt of a petition by an interested party.8 Under 42 CFR 88.17, the Administrator has established a process by which health conditions may be considered for addition to the List of WTC-Related Health Conditions in § 88.1. Pursuant to section 3312(a)(6)(D) of the PHS Act, whenever the Administrator determines that a condition should be proposed for addition to the List, he is required to publish an NPRM and allow interested parties to comment on the proposed rule.

    7 PHS Act, sec. 3312(a)(6)(A); 42 CFR 88.17(b).

    8 PHS Act, sec. 3312(a)(6)(B); 42 CFR 88.17(a).

    The Administrator also follows the WTC Health Program's policy and procedures for evaluating whether to add non-cancer health conditions to the List of WTC-Related Health Conditions, published online in the Policies and Procedures section of the WTC Health Program Web site.9 The Administrator amended the policy since it was used to conduct the analysis of COPD and acute traumatic injury studies for the NPRM;10 changes to the policy are not substantive and are intended to clarify terminology and specific procedures. The policy's descriptions of what studies will be evaluated in the literature evidence review and analyzed in the scientific and medical assessment have been revised to clarify the types of studies considered peer-reviewed, published, epidemiologic studies.11 The Administrator has also revised an existing footnote regarding distinct criteria for assessing certain conditions with immediate and observable cause and effect.12 These criteria were already included in the assessment conducted for the analysis of acute traumatic injury studies published in the NPRM.13 In accordance with the policy, the Administrator directed the WTC Health Program Associate Director for Science (ADS) to conduct a review of the scientific literature to determine if the available scientific information on COPD and acute traumatic injury, respectively, had the potential to provide a basis for a decision on whether to add the conditions to the List. The literature review included published, peer-reviewed epidemiologic studies, including direct observational studies,14 about each health condition among 9/11-exposed populations. The studies were reviewed for their relevance, quantity, and quality to determine whether they had the potential to provide a sufficient basis for the Administrator's decision to propose adding each health condition to the List.

    9 John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised May 11, 2016, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancer_Conditions_Revision_11_May_2016.pdf.

    10 An October 2014 version of the policy was used to conduct the review in the September 2015 NPRM. See John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised Oct. 21, 2014, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancers_21_Oct_2014.pdf.

    11 The clarification of the description of the studies was made in response to peer review comments on the WTC-related acute traumatic injury analysis. See discussion of these comments infra Section VI.A.

    12 The footnote to the policy explains that injury studies are assessed for relevance, quantity, quality, known causation, and onsite occurrence and that information in the studies about injuries recorded in contemporaneous medical records and studies, combined with known hazards and known connections between those hazards and injury, may be useful to the Administrator's evaluation of any support for a causal association between those exposures and the injury. See footnote 12, John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised May 11, 2016, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancer_Conditions_Revision_11_May_2016.pdf.

    13 80 FR 54746, 54754.

    14See discussion of these terms infra Section IV.A.

    After finding that the available evidence had the potential to provide bases for the decisions, the ADS further assessed the scientific and medical evidence to determine whether causal associations between 9/11 exposures and new-onset COPD and acute traumatic injury, respectively, were supported. A health condition may be added to the List if published, peer-reviewed epidemiologic studies provide substantial support 15 for a causal association between 9/11 exposures and the health condition in 9/11-exposed populations.

    15 The substantial evidence standard is met when the Program assesses all of the available, relevant information and determines with high confidence that the evidence supports its findings regarding a causal association between the 9/11 exposure(s) and the health condition.

    In this case, the Administrator finds there is substantial evidence in published, peer-reviewed epidemiologic studies that 9/11 exposures produced chronic airway inflammation manifested by persistent lower respiratory symptomatology and decline in pulmonary function, which progressed to new-onset COPD in a proportion of exposed subjects in the period since exposure, independently from any cigarette smoking among the cohort. This evidence provides substantial support for a causal association between 9/11 exposures and new-onset COPD.

    The Administrator also finds that evidence in the published, peer-reviewed epidemiologic studies evaluated by the ADS provides substantial support for a causal association between 9/11 exposures and acute traumatic injuries among responders and survivors to the September 11, 2001, terrorist attacks.

    The reviews of evidence and Administrator's determinations concerning the addition of new-onset COPD 16 and WTC-related acute traumatic injury 17 are found, in full, in the NPRM.

    16See 80 FR 54746 at 54748.

    17Id. at 54752-54754.

    IV. Effects of Rulemaking on Federal Agencies

    Title II of the Zadroga Act reactivated the September 11th Victim Compensation Fund (VCF). Administered by the U.S. Department of Justice (DOJ), the VCF provides compensation to any individual or representative of a deceased individual who was physically injured or killed as a result of the September 11, 2001, terrorist attacks or during the debris removal. Eligibility criteria for compensation by the VCF include a list of presumptively covered health conditions, which are physical injuries determined to be WTC-related health conditions by the WTC Health Program. Pursuant to DOJ regulations, the VCF Special Master is required to update the list of presumptively covered conditions when the List of WTC-Related Health Conditions in 42 CFR 88.1 is updated.18

    18 28 CFR 104.21(b).

    V. Summary of Peer Reviews and Public Comments—New-Onset COPD

    As discussed above in the Public Participation section, the Administrator solicited reviews of the NPRM by three experts in the field of pulmonary disease who provided peer review of the evidence supporting the addition of new-onset COPD. In addition to the peer reviews, the Administrator received submissions from public commenters. The COPD-related peer reviews and public comments are summarized below, and each is followed by a response from the Administrator.

    A. Peer Review

    First, peer reviewers were asked whether they were aware of any other studies which should have been considered in the NPRM, with regard to new-onset COPD. Second, the peer reviewers were asked whether the requirements of the Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, described above, had been fulfilled. Third, the peer reviewers were asked whether the Administrator's interpretation of the evidence for new-onset COPD was appropriate and whether it supported the decision to propose adding new-onset COPD to the List.

    Identification of Other Studies To Support the Administrator's Determination

    One new-onset COPD peer reviewer indicated that no additional articles concerning 9/11 exposures and new-onset COPD were identified. Two reviewers suggested additional studies that the Administrator should have considered.

    One reviewer suggested three additional studies for the Administrator's consideration, two of which referenced 9/11 exposures among WTC responders with lower respiratory symptoms. The first study, Mauer et al., 19 did not include spirometry, and the second study, Niles et al., 20 did not specifically address the occurrence of COPD among the 9/11-exposed population but examined the extent to which early post-disaster symptoms and diagnoses accurately anticipate future healthcare needs. The third study, Lange et al., 21 was not an epidemiologic study of 9/11-exposed populations, and thus was not further considered. As stated in the NPRM preamble, only epidemiologic studies that reported compatible new-onset, “post-9/11 lower respiratory symptomatology and objective measurements of airways obstruction, such as pre- and post-9/11 spirometry with bronchodilator administrator or IOS [impulse oscillometry] were found to exhibit potential support” 22 for a recommendation to add the health condition to the List and selected for further quality review. Since the Mauer and Niles studies did not meet this standard, they were not further reviewed.

    19 Matthew Mauer, Karen Cummings, Rebecca Hoen, Long-Term Respiratory Symptoms in World Trade Center Responders, Occup Med (Lond) 2010;60(2):145-51.

    20 Justin Niles, Mayris Webber, Hillel Cohen, et al., The Respiratory Pyramid: From Symptoms to Disease in World Trade Center Exposed Firefighters, Am J Ind Med 2013;56(8):870-80.

    21 Peter Lange, Bartolome Celli, Alvar Agustí, et al., Lung-Function Trajectories Leading to Chronic Obstructive Pulmonary Disease, N Engl J Med 2015;373:111-122.

    22 80 FR 54746 at 54749.

    The other reviewer suggested a review of the literature on non-smoking inhalational exposures, which are responsible for 15 percent of COPD cases, and noted that COPD can present years after relevant exposures. The Administrator agrees that COPD attributed to occupational and environmental exposures may present several years after cessation of exposures; however, the matter of maximum time intervals for the diagnosis of new-onset COPD is outside the scope of this rulemaking and will be addressed through Program policy and procedures.

    One general comment recommended that the full search string be included in future assessments so that reviewers can replicate the literature search. The Administrator agrees; future assessments will include full search strings so that reviewers may replicate the ADS's literature review.23

    23 In the case of COPD, the full search string consisted of the following: (“chronic obstructive pulmonary disease” OR “chronic bronchitis” OR “pulmonary emphysema” OR “pulmonary function decline” OR “respiratory insufficiency” OR “airways obstruction” OR “airflow limitation”) AND (“September 11 Terrorist Attacks” OR “World Trade Center” OR WTC OR “September 11” OR 9/11).

    Administrator's Compliance With Established Policy and Procedures To Add Non-Cancer Health Conditions to the List of WTC-Related Health Conditions

    All three of the new-onset COPD peer reviewers agreed that the requirements of the policy had been fulfilled.

    Administrator's Interpretation of Evidence for the Addition of New-Onset COPD

    All three new-onset COPD reviewers found that the interpretation of the available literature was appropriate and supported the Administrator's conclusion. One reviewer identified challenges with establishing an operational definition of COPD and how the definition would be applied to WTC Health Program members. The reviewer asked whether an individual with potentially relevant symptoms (such as lower respiratory symptoms or symptoms of chronic bronchitis) and normal spirometry has COPD. The commenter noted that “obstructive chronic bronchitis,” included in the description of COPD in the NPRM preamble, does not appear in the Global Initiative for Chronic Obstructive Lung Disease (GOLD) recommendations, and its inclusion in the NPRM preamble implies that the WTC Health Program member would not be considered to have COPD if diagnosed with chronic bronchitis in the absence of demonstrated airflow obstruction. The reviewer also asked whether impulse oscillometry alone can support a COPD diagnosis, and pointed out that GOLD does not include impulse oscillometry as a diagnostic test for COPD. Finally, the reviewer asked whether the WTC Health Program will require identification of emphysema, included under the COPD category, by computerized tomography (CT) scan imaging even in the absence of demonstrated spirometric airflow obstruction.

    The reviewer accurately notes the difficulties in choosing a single definition of COPD for the purpose of this rulemaking. As discussed in the NPRM, COPD is an umbrella term and encompasses a variety of pulmonary conditions; various definitions exist, making the interpretation of evidence for adding new-onset COPD to the List a challenge. The GOLD definition of COPD, which requires spirometric evidence of airflow limitation, was used to provide an objective parameter to evaluate the occurrence of COPD among the 9/11-exposed populations identified in the surveillance literature reviewed by the ADS. Chronic obstructive bronchitis is a subtype of chronic bronchitis associated with airflow limitation, as recognized by the National Heart, Lung, and Blood Institute.24 Relying on the Merck Manual, the NPRM preamble utilized a definition of “obstructive chronic bronchitis” that emphasizes the need for spirometric evidence of airflow obstruction.

    24See NIH, National Heart, Lung, and Blood Institute, Executive Summary, http://www.nhlbi.nih.gov/research/reports/2011-bronchitis.

    Diagnosis of COPD requires confirmation, using spirometry, of airflow limitation that is not fully reversible, as well as a history of potentially causative exposure among symptomatic individuals. In some circumstances, in addition to spirometry, impulse oscillometry may be presented to support the COPD diagnosis by detecting subtle changes in a patient's airways function earlier than with conventional spirometry.25

    25 Christopher Cooper, Assessment of Pulmonary Function in COPD, Semin Respir Crit Care Med 2005;26(2):246-52.

    The WTC Health Program will provide specific instruction to physicians regarding diagnostic standards for new-onset COPD. Certification of cases of new-onset COPD in individual WTC Health Program members will be decided by the Program on a case-by-case basis, in accordance with section 3312(b)(2)(B) of the PHS Act and 42 CFR 88.13.

    B. Public Comment Support for New-Onset COPD

    Many commenters expressed support for the addition of new-onset COPD to the List. One commenter found that the Administrator presented quality evidence that establishes a causal association between 9/11 exposures and new-onset COPD. Although some submissions only addressed the addition of acute traumatic injury, no commenters opposed the addition of new-onset COPD.

    Additional Studies To Support the Addition of New-Onset COPD to the List

    One commenter suggested the consideration of a 2010 study by Banauch et al. 26 to support the addition of COPD to the List. Another commenter offered a list of additional articles that should have been reviewed.

    26 Gisela Banauch, Mark Brantley, Gabriel Izbicki, et al., Accelerated Spirometric Decline in New York City Firefighters with α1 -Antitrypsin Deficiency, CHEST 2010;138(5):1116-1124.

    The Banauch study was reviewed and found to be relevant; however, it was not selected to undergo further evidence review due to its small number of study participants (n = 90). The papers cited by the second commenter were reviewed during the literature review process; however, only epidemiologic studies that reported compatible post-9/11 lower respiratory symptomatology and objective measurements of airways obstruction, such as pre- and post-9/11 spirometry with bronchodilator administration or impulse oscillometry were found to exhibit potential for a recommendation and selected for review. Two of the references offered by the commenter, Aldrich et al. and Weakley et al., were included in the ADS's review published in the NPRM.

    VI. Summary of Peer Reviews and Public Comments—WTC-Related Acute Traumatic Injury

    As discussed above in the Public Participation section, the Administrator solicited reviews of the NPRM by three injury experts who provided peer review of the evidence supporting the addition of acute traumatic injury. In addition to the peer reviews, the Administrator received submissions from public commenters. All of the acute traumatic injury-related peer reviews and public comments are summarized below, and each is followed by a response from the Administrator.

    A. Peer Review

    First, with regard to acute traumatic injury, peer reviewers were asked whether they were aware of any other studies which should have been considered in the NPRM. Second, the peer reviewers were asked whether the requirements of the Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, described above, had been fulfilled. Third, the peer reviewers were asked whether the Administrator's interpretation of the evidence for the addition of acute traumatic injury was appropriate and whether it supported the decision to propose adding acute traumatic injury to the List.

    Identification of Other Studies To Support the Administrator's Determination

    All three acute traumatic injury peer reviewers indicated that they were unaware of any additional studies concerning acute traumatic injury that should have been considered by the Administrator. One reviewer suggested that a complete list of citations that were excluded from the ADS's review as not relevant should have been provided to reviewers. The Administrator agrees to make the full list of citations identified in the literature review as well as excluded scientific papers available to reviewers in future rule-related peer reviews.27

    27 The table below provides the search strings used to conduct the literature search; the full list of citations identified by the literature search conducted by the ADS is not provided here. The NPRM incorrectly identified search terms used in the literature review (80 FR 54746 at 54752); the terms identified in the NPRM were instead terms used to develop cost estimates for the Executive Order 12866 and Executive Order 13563 analysis in Section VIII.A.

    Administrator's Compliance With Established Policy and Procedures To Add Non-Cancer Health Conditions to the List of WTC-Related Health Conditions

    Two of the acute traumatic injury peer reviewers found that the requirements of the policy had been fulfilled. One reviewer asked about the intent of describing the studies discussed in the assessment as “direct observational studies rather than epidemiologic studies,” further asking whether it meant that causation is in question or that rates could not be computed.

    Database Search terms Results PubMed (“September 11 Terrorist Attacks” [Mesh] OR “World Trade Center” [TIAB] OR WTC [TIAB] OR “September 11” [TIAB]) AND (“Wounds and Injuries” [Mesh] OR “Occupational Injuries” [Mesh] OR “Cumultative Trauma Disorders” [Mesh] OR Injuries [TIAB]) From 2001/09/01 to 2014/12/31 114 CINAHL (“MH Wounds and Injuries+”) AND (“World Trade Center” OR “September 11”) 36 Web of Science (“World Trade Center” OR “September 11”) AND (Injury or injuries) 147 EMBASE World Trade Center.mp. OR September 11.mp. AND exp injury/ (english language and embase and yr = “2001-Current”) 191 Health & Safety Science Abstracts (“World Trade Center” OR “September 11”) AND (injuries OR injury) 31 NIOSHTIC-2 World Trade Center (Title) AND Injury or Injuries (All Fields) 22

    The October 2014 version of the WTC Health Program's policy and procedures on adding non-cancers to the List used to evaluate acute traumatic injury studies for the NPRM distinguished between those types of epidemiologic studies that can be used to identify causal associations between exposures and health outcomes such as diseases, and those studies that can be used to identify causal associations between exposures and health outcomes such as cases of injury.28 The terminology “direct observational studies” was an attempt to use plain language to describe the types of studies that could provide relevant evidence of a causal association between 9/11 exposures and a health outcome, such as an injury. However, rather than making the intent clear, it appears that the term may be confusing. By describing the studies used to identify certain health outcomes as “direct observational studies,” the WTC Health Program intended to describe studies which are more often referred to as “descriptive epidemiologic studies” within the scientific community. As discussed above, recent amendments to the policy clarify the terminology to mitigate confusion regarding the types of information sources the WTC Health Program uses to support the addition of certain health conditions to the List.29

    28See John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised Oct. 21, 2014, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancers_21_Oct_2014.pdf.

    29 John Howard, Administrator of the WTC Health Program, Policy and Procedures for Adding Non-Cancer Conditions to the List of WTC-Related Health Conditions, revised May 11, 2016, http://www.cdc.gov/wtc/pdfs/WTCHP_PP_Adding_NonCancer_Conditions_Revision_11_May_2016.pdf.

    In accordance with both the previous and current policy and procedures on adding non-cancers to the List used to develop this rulemaking, the ADS searched published, peer-reviewed epidemiologic studies of acute traumatic injuries in the 9/11-exposed population, including studies referred to in the October 2014 policy as “direct observational studies.” The epidemiologic studies reviewed for this rulemaking to support the addition of WTC-related acute traumatic injury to the List document that outcomes occurred because of the 9/11 exposures and, thus, can be used to establish a causal association between the 9/11-related event, such as being struck by falling debris, and the injury, such as a broken arm. The studies reviewed allow the Administrator to conclude that certain types of acute traumatic injury suffered by WTC responders and survivors were sustained during or in the aftermath of the September 11, 2001, terrorist attacks and find that the evidence provides substantial support for a causal association between acute traumatic injury and 9/11 exposures.

    The reviewer also found it difficult to assess adherence to the policy because of a perceived lack of clarity with regard to the scope of the Administrator's inquiry and suggested that injuries should be identified as “acute,” “subacute,” and “chronic.” The reviewer further questioned the distinction between a broad understanding of injuries which are musculoskeletal in nature and the Administrator's definition of “acute traumatic injury” and suggested the removal of a statement found in the NPRM characterizing musculoskeletal disorders as distinct from acute traumatic injuries, pointing out that many of the types of acute traumatic injury identified by the Administrator are musculoskeletal in nature. The reviewer suggested that the Administrator should have better clarified the distinction between acute and chronic traumatic injury (injuries caused by multiple exposures over time) and recommends that such a discussion be added to the analysis in the NPRM. Without this more robust discussion, the reviewer questioned how the definition of acute traumatic injury will be applied, particularly with regard to the timing of initial medical care post-injury, diagnosis of head trauma, treatment of chronic pain, medically associated health conditions, and pre-existing injuries.

    The term “WTC-related musculoskeletal disorder” is defined in the PHS Act and statements in the NPRM regarding “musculoskeletal disorders” are based on, and are consistent with, the statutory definition which sets out a clear standard for identifying chronic or recurrent disorders of the musculoskeletal system, caused by heavy lifting or repetitive strain.30 In contrast to the term “chronic traumatic injury,” used by the reviewer, the Administrator defines a “WTC-related acute traumatic injury” as an injury that occurred suddenly during one incident involving exposure to an external event. The new definition of “WTC-related acute traumatic injury” may capture musculoskeletal injuries which do not meet the statutory definition of “WTC-related musculoskeletal disorder.” The purpose of this action is to provide Program coverage for those injuries that do not meet the existing definition of WTC-related musculoskeletal disorder, such as, for example, those not caused by heavy lifting or repetitive strain.

    30 Pursuant to sec. 3312(a)(4) of the PHS Act, “WTC-related musculoskeletal disorder” means a chronic or recurrent disorder of the musculoskeletal system caused by heavy lifting or repetitive strain on the joints or musculoskeletal system occurring during rescue or recovery efforts in the New York City disaster area in the aftermath of the September 11, 2001, terrorist attacks. For a WTC responder who received any treatment for a WTC-related musculoskeletal disorder on or before September 11, 2003, eligible musculoskeletal disorders include: (i) Low back pain; (ii) Carpal tunnel syndrome [CTS]; (iii) Other musculoskeletal disorders. See also 42 CFR 88.1.

    The reviewer's detailed questions regarding how the definition of WTC-related acute traumatic injury will be operationalized will be answered in forthcoming guidance to CCE and NPN physicians. Each WTC Health Program member's health condition will be evaluated in accordance with the Program's published policies and procedures.

    Administrator's Interpretation of Evidence for the Addition of Acute Traumatic Injuries

    Two of the acute traumatic injury peer reviewers found the Administrator's interpretation of the available data to be appropriate.

    One reviewer found the presentation of data to be confusing and the Administrator's final determination concerning the addition of acute traumatic injury to the List unclear with regard to its scope. The reviewer acknowledged that the ADS may have encountered difficulties obtaining evidence of injury severity and outcomes, which the reviewer felt were crucial to a true understanding of the chronicity or level of injury severity, and disagreed with the Administrator's conclusion regarding the types of acute traumatic injuries identified by the literature. According to the reviewer, the documentation of extreme injuries in the surveillance literature should not lead to conclusions regarding the types of injuries and their outcomes. The reviewer suggested various edits to the Administrator's assessment of the data, published in the NPRM, to either omit the word “severe” in reference to burns, or define it in terms of total body surface area and burn depth, and to clarify that the severity of injury could not be ascertained from the studies reviewed. The reviewer disagreed with the Administrator's conclusion that an eye injury, such as corneal abrasion, could be caused by an exposure to energy. Ultimately, the reviewer disagreed with the Administrator's proposed definition of acute traumatic injury and instead suggested that the Administrator define trauma as a cause of injury. Such injuries would include all types of traumatic events regardless of the body area or organ system injured. Examples include, but are not limited to head injury, burns, ocular injury, fractures, and tendon and other soft-tissue injuries.

    In his evaluation of the data quality, the Administrator acknowledged that some information was not captured by the studies, and although he agrees that a full understanding of the severity of injuries suffered on or after September 11, 2001 may not be gleaned from the studies reviewed, he found that the data were sufficient to corroborate the findings of the CCEs and Data Centers and to develop a broad definition of “acute traumatic injury.” The use of the word “severe” to describe burns was intended to reflect the request made by the CCE and Data Center directors, which referred to the types of injuries they were seeing as “significant” and “severe.” As discussed in the NPRM preamble, the types of injuries described by the CCE and Data Center directors are those that are most likely to result in the need for the services provided by the WTC Health Program and thus are those that the Administrator intended to capture by adding this health condition to the List. However, the Administrator agrees that the word “severe” is not defined, either in the surveillance literature or by the Administrator in the NPRM preamble. The word “severe,” as used to describe burns in the proposed definition of “acute traumatic injury,” is stricken from the final regulatory text in response to this review.

    The Administrator's intent is to add coverage of acute traumatic injury caused by 9/11 exposures. The reviewer's proposal incorporates all types of trauma, including chronic or recurrent disorders of the musculoskeletal system, caused by heavy lifting or repetitive strain, which are already covered for responders by the Program under the PHS Act's definition of “WTC-related musculoskeletal disorder.” The edits proposed by the reviewer would not substantively alter the evaluation of the available literature or the Administrator's determination that the available scientific evidence supports adding WTC-related acute traumatic injury to the List.

    The Administrator based the regulatory definition of WTC-related acute traumatic injury on several established definitions, including the definition used by the NIOSH Traumatic Injury Program which was accepted by the National Academy of Sciences in 2008.31 The regulatory definition is intended to address the etiology of the injury—that is, that it occurred as the result of a single incident. The incident, characterized by an “exposure to energy,” could include the movement of dust particles across the surface of the cornea, and result in an eye injury, such as a corneal abrasion. Because subacute and chronic conditions describe further stages after the injury has occurred, adding these additional categorizations to the regulatory definition is unnecessary. The regulatory definition includes all acute injuries that meet the definition.

    31 Committee to Review the NIOSH Traumatic Injury Research Program, Institute of Medicine and National Research Council, Traumatic Injury Research at NIOSH, 2009, http://www.nap.edu/catalog/12459/traumatic-injury-research-at-niosh.

    The reviewer also asserted that the September 11, 2003 treatment cut-off “seems excessively long for most types of acute trauma but too short for others,” and is not supported by evidence. According to the reviewer, the data presented in the NPRM demonstrated that most acute traumatic injuries were treated within hours of being sustained, although traumatic brain injuries may not have been identified for years after the event.

    The Administrator agrees that the evidence reviewed in the NPRM demonstrates that most acute traumatic injuries were treated soon after they were sustained. The end date for initial treatment is well beyond the response and recovery period for the three sites and generously allows for delays in seeking treatment. The Administrator acknowledges that most responders and survivors who sustained acute traumatic injuries would have received medical treatment long before September 11, 2003. The reviewer also accurately points out that numerous cases of traumatic brain injury (TBI) identified in the Rutland-Brown paper, included in the ADS's review published in the NPRM,32 were not diagnosed as TBI within 3 years of the exposure. However, each of these persons was admitted to a hospital for injuries/illnesses related to the September 11, 2001, terrorist attacks and treated for head injury or major trauma, but was not diagnosed with TBI at the time they initially received medical care. The regulatory text does not require the member to have been diagnosed with a TBI on or before September 11, 2003, only that he or she received medical attention for an acute traumatic injury by that date. When operationalizing the addition of WTC-related acute traumatic injury, the Program will ensure that this is clearly explained to the CCEs and the NPN. The Administrator finds that the September 11, 2003 deadline is consistent with the evidence presented in the NPRM and is neither too long nor too short for its intended purpose of offering a reasonable amount of time in which to expect that an injury sustained on or after September 11, 2001 was treated. As discussed in the NPRM preamble, the decision was made to set the end-date because this was the date used to identify traumatic injuries eligible for treatment in the WTC Medical Monitoring and Treatment Program that preceded the WTC Health Program; moreover, the PHS Act uses this date as the treatment cut-off date to identify musculoskeletal disorders eligible for certification in responders.

    32See 80 FR 54746 at 54753.

    Finally, the reviewer found that the examples of acute traumatic injuries identified in the NPRM Summary of Proposed Rule were unnecessary and confusing, appearing to attribute “causality to non-causal events.” With regard to the examples of acute traumatic injury offered in the Summary of Proposed Rule, the Administrator agrees; the sentence could be construed as not differentiating between causes and outcomes. This language was used in the Summary of Proposed Rule section of the NPRM preamble not to attribute causation, but to illustrate the types of injuries that the Program would find “acute” and “traumatic.” This language is removed from the final rule and the Administrator will provide Program guidance to CCE and NPN physicians on the identification of acute traumatic injuries that could be considered WTC-related.

    B. Public Comment Support for Acute Traumatic Injuries

    Nearly all commenters expressed support for the addition of acute traumatic injury to the List. Although some submissions only addressed the addition of new-onset COPD, no commenters opposed the addition of acute traumatic injury.

    Acute Traumatic Injury Medical Care Cut-off Date

    One commenter offered support for the September 11, 2003 cut-off date. Three commenters expressed concern about the proposal to require responders or survivors who seek certification for an acute traumatic injury to have received medical care prior to September 11, 2003. Commenters suggested that the time period should be replaced with a simple requirement that the injury had to have been documented in medical records, even if the member did not receive treatment for the acute traumatic injury. Alternatively, commenters suggested that the September 11, 2003 date should be pushed back to 2004 to accommodate those responders or survivors who may not have recognized the extent of their injuries and, therefore, did not seek treatment prior to September 11, 2003, or those who either lost their medical records or can no longer obtain them from emergency rooms or private physicians.

    Requiring only that the acute traumatic injury appear in the WTC Health Program member's medical record, regardless of treatment, would not accomplish the Administrator's intent to ensure, to the extent possible, that the member's acute traumatic injury was sustained during or in the aftermath of the September 11, 2001, terrorist attacks. By requiring that members demonstrate that they received timely treatment for acute traumatic injuries, the Administrator will better be able to establish a medical history linking the member's current chronic injury or medically associated health condition to an acute traumatic injury that resulted from that individual's 9/11 exposure. As discussed above, the Administrator has determined that the September 11, 2003 cut-off date for medical treatment is supported, and has not identified any evidence to support extending the cut-off date for another year.

    Medically Associated Health Conditions

    Two submissions addressed the matter of health conditions medically associated with WTC-related acute traumatic injury. One commenter offered a first-hand account of the health conditions he incurred as a result of the September 11, 2001, terrorist attacks, suggesting that he still suffers from medically associated conditions. The other commenter expressed concern that health conditions medically associated with WTC-related health conditions were not specifically addressed in the NPRM, particularly with regard to acute traumatic injury.

    Health conditions medically associated with WTC-related health conditions were briefly addressed in the NPRM.33 The Administrator expects that many Program members who experienced an acute traumatic injury may no longer be dealing with the primary injury, but are in need of ongoing medical care for chronic conditions stemming from the original injury. For example, a WTC responder may have suffered a head trauma during response activities which was resolved years ago, but may still be coping with the long-term effects of TBI. Once WTC-related acute traumatic injury is added to the List, the WTC responder's TBI may be eligible for certification as a condition medically associated with the WTC-related acute traumatic injury, head trauma. Health conditions medically associated with a WTC-related health condition are determined by the Program on a case-by-case basis, in accordance with published Program regulations and policies and procedures.

    33See 80 FR 54746 at 54756.

    VII. How To Get Help for WTC-Related Health Conditions

    One commenter described suffering from untreated, chronic health issues that may stem from work at Ground Zero. Although this comment was not directly related to the rulemaking, the Administrator wants to remind individuals who may have responded to or survived the September 11, 2001, terrorist attacks, that the WTC Health Program provides medical monitoring and treatment for WTC-related health conditions. An individual may apply to become a WTC Health Program member by filling out the appropriate application, available on the Program's Web site here: http://www.cdc.gov/wtc/apply.html (call 1-888-982-4748 to discuss the application process).

    VIII. Summary of Final Rule

    For the reasons discussed above and in the NPRM, the Administrator amends 42 CFR 88.1, “List of WTC-related health conditions,” paragraph (1)(v), to add “new-onset” COPD to the existing “WTC-exacerbated chronic obstructive pulmonary disease (COPD).” This will permit the WTC Health Program to certify cases of COPD determined to have been caused or contributed to by 9/11 exposures (considered “new-onset” cases), in addition to those cases of COPD which were exacerbated by 9/11 exposures and which are already included on the List.

    For the reasons discussed above, the Administrator also adds “WTC-related acute traumatic injury” to the List for WTC responders and screening- and certified-eligible survivors who received medical treatment for such an injury on or before September 11, 2003. The term “WTC-related acute traumatic injury” is defined as a type of injury characterized by physical damage to a person's body that must have been caused by and occurred immediately after exposure to hazards or adverse conditions characterized by a one-time exposure to energy resulting from the terrorist attacks or their aftermath. This requirement is intended to distinguish these types of injuries from musculoskeletal disorders, which are already included on the List of WTC-Related Health Conditions. As required by statute, WTC-related musculoskeletal disorders are considered to be caused by repetitive motion or heavy lifting; the health condition “WTC-related acute traumatic injury” requires a demonstration of causation by a specific event or incident. Symptoms of acute traumatic injuries may not immediately manifest after the specific event or incident. The Administrator will issue guidance to CCE and NPN physicians on the identification of WTC-related acute traumatic injury. WTC-related acute traumatic injury includes, but is not limited to the following: Eye injury; burn; head trauma; fracture; tendon tear; complex sprain; and other similar injuries. The term “WTC-related” was not included in the term proposed in the NPRM; however, the Administrator finds that adding it would result in no substantive change from the proposed rule. It would be in keeping with the existing definition of “WTC-related musculoskeletal disorder” and would also signal that this language was developed specifically for the purposes of the WTC Health Program. Finally, to clarify the Administrator's intent, the regulatory text is reorganized slightly from that which was proposed. The reorganization has no substantive effect.

    IX. Regulatory Assessment Requirements A. Executive Order 12866 and Executive Order 13563

    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, reducing costs, harmonizing rules, and promoting flexibility.

    This rulemaking has been determined not to be a “significant regulatory action” under section 3(f) of Executive Order 12866. This rule adds new-onset COPD 34 and WTC-related acute traumatic injury to the List of WTC-Related Health Conditions established in 42 CFR 88.1. This rulemaking is estimated to cost the WTC Health Program from $4,602,162 to $5,666,713 annually, between 2016 and 2019.35 All of the costs to the WTC Health Program will be transfers due to the implementation of provisions of the Patient Protection and Affordable Care Act (ACA) (Pub. L. 111-148) on January 1, 2014. This rulemaking has not been reviewed by the Office of Management and Budget (OMB). The rule would not interfere with State, local, and Tribal governments in the exercise of their governmental functions.

    34 WTC-exacerbated COPD is a statutorily covered condition pursuant to PHS Act, sec. 3312(a)(3)(A)(v); this NPRM proposes to add new-onset COPD occurring after 9/11 exposures.

    35 The low cost estimate reflects the 2016 undiscounted new-onset COPD treatment cost estimate using WTC Health Program data from Table 5 and the 2016 undiscounted WTC-related acute traumatic injury treatment cost estimate from Table 6. The high cost estimate reflects the high new-onset COPD treatment cost estimate for 2019, discounted at 3 percent, using data from Leigh et al. from Table 5 and the WTC-related acute traumatic injury treatment cost estimate for 2019, discounted at 3 percent, from Table 6. Future cost and prevalence estimates are discounted at 3% and 7% in accordance with OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs. The estimates are discounted in order to compute net present value.

    Population Estimates

    As of December 1, 2015, the WTC Health Program had enrolled 64,384 responders and 9,358 survivors (73,742 total). Of that total population, 56,207 responders and 4,772 survivors (60,979 total) were participants in previous WTC medical programs and were `grandfathered' into the WTC Health Program established by Title XXXIII of the PHS Act.36 From July 1, 2011 to December 1, 2015, 8,177 new responders and 4,586 new survivors (12,763 total) enrolled in the WTC Health Program. For the purpose of calculating a baseline estimate of new-onset COPD and WTC-related acute traumatic injury prevalence, the Administrator projected that new enrollment would be approximately 4,000 per year (2,800 new responders and 1,200 new survivors), based on the trend in enrollees through December 1, 2015.

    36 These grandfathered members were enrolled without having to complete a new member application when the WTC Health Program started on July 1, 2011 and are referred to in the WTC Health Program regulations in 42 CFR part 88 as “currently identified responders” and “currently identified survivors.”

    CCE or NPN physicians will conduct medical assessments for patients as appropriate and make a determination, which the Administrator will then use to certify or not certify the health condition (in this case, new-onset COPD or a type of WTC-related acute traumatic injury) for treatment by the WTC Health Program. However, for the purpose of this analysis, the Administrator has assumed that all diagnosed cases of new-onset COPD and acute traumatic injury will be certified for treatment by the WTC Health Program. Finally, because there are no existing data on new-onset COPD rates related to 9/11 exposures at either the Pentagon or Shanksville, Pennsylvania sites, and only limited data on acute traumatic injuries at the Pentagon, the Administrator has used only data from studies of individuals who were responders or survivors in the New York City area.

    Prevalence of New-Onset COPD

    To estimate the number of potential cases of WTC-related new-onset COPD to be certified for treatment by the WTC Health Program, we first subtracted the number of current members certified for an obstructive airways disease (OAD), including WTC-exacerbated COPD, from the total number of members.37 We then reviewed the surveillance literature to determine a prevalence rate for new-onset COPD among the non-OAD certified members. In studies of FDNY members with known pre-9/11 health status and high WTC exposure, Aldrich et al. reported that 2 percent of FDNY firefighters had an FEV1% below 70 percent of predicted 38 at year 1 after September 11, 2001 (a proportion that doubled 6.5 years later), and Webber et al. 39 reported an approximate 4 percent prevalence of new-onset, self-reported, physician-diagnosed COPD/emphysema nearly ten years after rescue/recovery efforts at the WTC site. Because pre-9/11 health records were not available in studies of WTC survivors, the Administrator has determined that the 4 percent prevalence of new-onset COPD will be applied to survivor estimates as well.40 We applied the 4 percent prevalence to the number of remaining members and also to the projected annual enrollment of 4,000 new members to estimate the number of potential WTC-related new-onset COPD cases in 2016. (See Table 1, below)

    37 Cases of COPD diagnosed prior to September 11, 2001, are presumed to be eligible for coverage as WTC-exacerbated COPD and therefore would not need coverage under new-onset COPD. Members already certified for an obstructive airway disease are also removed from the analysis because any progression to COPD (i.e., airflow limitation not fully reversible with bronchodilator) from their current certified WTC-related OAD condition could be considered a health condition medically-associated with the certified WTC-related OAD condition. See John Howard, Administrator of the WTC Health Program, Health Conditions Medically Associated with World Trade Center-Related Health Conditions, revised Nov. 7, 2014, http://www.cdc.gov/wtc/pdfs/WTCHPMedically%20AssociatedHealthConditions7November2014.pdf.

    38 The term of art “percent of predicted” means that the proportion of the patient's vital capacity expired in 1 second of forced expiration (FEV1%) is less than the predicted average FEV1% in the population for a person of similar age, sex, and body composition. FEV1% predicted is a marker for severity of airway obstruction. In the setting of post-bronchodilator FEV1/FVC ≤0.7, FEV1% predicted ≥80 indicates mild COPD; 50-80, moderate; 30-50, severe, and <30, very severe. See American Thoracic Society COPD Guidelines, Spirometric Classification, 2015, http://www.thoracic.org/copd-guidelines/for-health-professionals/definition-diagnosis-and-staging/spirometric-classification.php.

    39 Mayris Webber, Michelle Glaser, Jessica Weakley, et al., Physician-Diagnosed Respiratory Conditions and Mental Health Symptoms 7-9 Years Following the World Trade Center Disaster, AJIM 2011;54:661-671.

    40 The 4 percent prevalence of new-onset COPD that was observed among firefighters was used to estimate the number of expected cases of new-onset COPD in the entire exposed cohort and may result in an overestimation because of the differences in initial exposure intensity between responders and survivors.

    Table 1—Estimated Prevalence of 2016-2019 New-Onset COPD Cases 2016 2017 2018 2019 Responders 2,106 2,218 2,330 2,442 Survivors 306 354 402 450 Total 2,412 2,572 2,732 2,892 Prevalence of WTC-Related Acute Traumatic Injury

    While this rulemaking would make acute traumatic injury eligible for certification, the Administrator assumes that the conditions most likely to receive treatment within the WTC Health Program will be those medically associated conditions which are the long-term consequences of the certified WTC-related acute traumatic injury. Health conditions medically associated with WTC-related health conditions are determined on a case-by-case basis in accordance with WTC Health Program regulations and policies and procedures.41 Examples of such health conditions medically associated with a WTC-related acute traumatic injury may include chronic back pain caused by vertebrae fractures, chronic peripheral neuropathy due to severe burns, and problems with executive brain function due to closed head injuries.

    41 John Howard, Administrator of the WTC Health Program, Health Conditions Medically Associated with World Trade Center-Related Health Conditions, revised Nov. 7, 2014, http://www.cdc.gov/wtc/pdfs/WTCHPMedically%20AssociatedHealthConditions7November2014.pdf.

    Although we were able to estimate from the surveillance literature the number of responders and survivors who received medical treatment for acute traumatic injuries on or in the aftermath of September 11, 2001, we do not know the number of individuals who still experience health problems because of those traumatic injuries and are in need of chronic care. To project this, we estimated the number of persons in the responder and survivor populations with WTC-related acute traumatic injury by deriving estimates from the Berrios-Torres et al., 42 Banauch et al., 43 Perritt et al., 44 and NYCDOH studies.45 Using the estimated prevalence for injury types, we then calculated the prevalence for these injuries among the responder 46 and survivor 47 populations. We applied that prevalence to the number of current and expected WTC Health Program members to find the number of individuals who may have suffered a WTC-related acute traumatic injury. Next, in order to estimate the proportion of those in the responder and survivor populations who suffered WTC-related acute traumatic injuries that require chronic care, we assumed that all patients with permanent partial and permanent total impairment caused by acute traumatic injuries will require chronic medical care and will enroll in the WTC Health Program. The National Safety Council estimated that 3.8 percent of non-fatal disabling injuries 48 are associated with permanent partial or permanent total impairment.49 We applied that estimate to the estimated number of current and expected WTC Health Program members who may have suffered a WTC-related acute traumatic injury to determine the number of individuals with WTC-related acute traumatic injury who are in need of chronic care. (See Table 2, below.)

    42 Sandra Berrios-Torres, Jane Greenko, Michael Philips, et al., World Trade Center Rescue Worker Injury and Illness Surveillance, New York, 2001, Am J Prev Med 2003;25(2):79-87.

    43 G Banauch, M McLaughlin, R Hirschhorn, et al., Injuries and Illnesses among New York City Fire Department Rescue Workers after Responding to the World Trade Center Attacks, MMWR Sept. 11, 2002;51(Special Issue):1-5.

    44 Kara Perritt, Winifred Boal, The Helix Group Inc., Injuries and Illnesses Treated at the World Trade Center, 14 September-20 November 2001, Prehosp Disaster Med 2005;20(3).

    45 New York City Department of Health, Rapid Assessment of Injuries Among Survivors of the Terrorist Attack on the World Trade Center—New York City, September 2001, MMWR Jan. 11, 2002;51(01);1-5.

    46 The responder estimate is subject to two main assumptions. First, Banauch et al. reported on FDNY members from September 11 to December 10, 2001, and we assume no additional injuries from December 11, 2001 until the site was closed in July 2002. The time period reported on by Banauch et al. likely encompasses a large majority of the injuries suffered by FDNY members. Second, Perritt et al. did not report directly on closed head injuries; therefore the number of closed head injuries reported by Berrios-Torres et al. for responders is used.

    47 We estimate the survivor prevalence from the NYCDOH study reports on survivors during the period from September 11-13, 2001. Although we understand that this reporting period likely encompasses a majority of the survivors who were injured, because the number of cases is based on those survivors who were treated for injuries only within the first 48 hours after the terrorist attacks, the reported number of cases likely underestimates the total number of survivors who sustained acute traumatic injuries as a result of the September 11, 2001, terrorist attacks.

    48 In 2011, the National Safety Council replaced the term “disabling injury” with “medically consulted injury.” See National Safety Council, Injury Facts, 2014.

    49 A non-fatal disabling injury is one which results in some degree of permanent impairment or renders the injured person unable to effectively perform his regular duties or activities for a full day beyond the day of the injury. National Safety Council, Injury Facts, 1986.

    Table 2—Estimated Prevalence of 2016-2019 WTC-Related Acute Traumatic Injury Cases 2016 2017 2018 2019 Responders 80 83 86 89 Survivors 10 12 13 14 Total 90 95 99 103 Costs of COPD Treatment

    The Administrator estimated the medical treatment costs associated with new-onset COPD in this rulemaking, using the methods described below, to be between $1,665 and $1,930 per case in 2014.

    The low estimate, $1,665 per case, was based on WTC Health Program costs associated with the treatment of WTC-exacerbated COPD for the period October 1, 2013 through September 30, 2014. These medical costs include both medical services and pharmaceuticals.50

    50 Pharmaceutical costs are estimated to be approximately 38 percent of total treatment costs.

    The high estimate, $1,930 per case, was based on a study by Leigh et al. 51 The authors estimated the cost of occupational COPD by aggregating and analyzing national data sets collected by the National Center for Health Statistics, the Health Care Financing Administration, and other government agencies and private firms. They concluded that there were an estimated 2,395,650 occupational cases of COPD in 1996 that resulted in medical costs estimated at $2.425 billion. Medical costs included payments to hospitals, physicians, nursing homes, and vendors of medical supplies, including oxygen, and also included the cost of pharmaceuticals.52 The medical cost per case was about $1,012 in 1996 dollars or about $1,930 in 2014 dollars, after adjusting for inflation using the Medical Consumer Price Index for all urban consumers.53

    51 J. Paul Leigh, Patrick Romano, Marc Schenker, Kathleen Kreiss, Costs of Occupational COPD and Asthma, CHEST 2002;121(1):264-272.

    52 Screening costs are not included because the U.S. Preventive Services Task Force does not recommend screening for COPD. See Screening for Chronic Obstructive Pulmonary Disease Using Spirometry, http://www.uspreventiveservicestaskforce.org/uspstf/uspscopd.htm.

    53 Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Medical Care, https://research.stlouisfed.org/fred2/series/CPIMEDSL/downloaddata?cid=32419.

    Table 3 below shows medical treatment cost estimates per COPD case in 2016-2019:

    Table 3—Estimated Medical Treatment Costs per New-Onset COPD Case During 2016-2019 in 2014 Dollars Source Year Undiscounted Discounted 3% Discounted 7% WTC Health Program 2016 $1,665 2017 1,665 $1,617 $1,556 2018 1,665 1,569 1,454 2019 1,665 1,524 1,359 Leigh et al. 2016 1,930 2017 1,930 1,874 1,804 2018 1,930 1,819 1,686 2019 1,930 1,766 1,575 Costs of WTC-Related Acute Traumatic Injury Treatment

    The Administrator estimated the medical treatment costs associated with WTC-related acute traumatic injury in this rulemaking using the methods described below. Because it is not possible to identify all possible types of acute traumatic injury for which a WTC responder or survivor might seek certification, we have identified several types of acute traumatic injury that may be representative of those types of acute traumatic injuries that might be certified by the WTC Health Program. Representative examples of types of WTC-related acute traumatic injury include closed head injuries, burns, fractures, strains and sprains, orthopedic injuries (e.g., meniscus tear), ocular injuries, and crush injuries. The WTC Health Program estimates the cost of providing medical treatment for WTC-related acute traumatic injury to be around $11,216 per case in 2014 dollars.

    This cost figure was based on a study by the National Council on Compensation Insurance (NCCI).54 The data source used in this study was NCCI's Medical Data Call (MDC). The MDC captures transaction-level detail on workers' compensation medical bills processed on or after July 1, 2010, including dates of service, charges, payments, procedure codes, and diagnosis codes; pharmaceutical costs are also included. The data used in this study were evaluated as of March 2013 for:

    54 David Colón, The Impact of Claimant Age on Late-Term Medical Costs, NCCI Research brief, Oct. 2014, https://www.ncci.com/documents/Impact-Claimant-Age-Late-Term-Med-Costs.pdf.

    • Long-term medical services provided in 2011 and 2012 (i.e., 20 to 30 years post injury) • Injuries occurring between 1983 and 1990 • Claimants with dates of birth between 1920 and 1970 • States for which NCCI collects MDC 55

    55 AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, MO, MS, MT, NC, NE, NH, NJ, NM, NV, NY, OK, OR, RI, SC, SD, TN, UT, VA, VT, WI, and WV.

    For individuals born during 1951-1970, the medical cost per case was about $11,216 in 2014 dollars, after adjusting for inflation using the Medical Consumer Price Index for all urban consumers.56

    56 Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Medical Care, https://research.stlouisfed.org/fred2/series/CPIMEDSL/downloaddata?cid=32419.

    Table 4 below shows medical treatment cost estimates per acute traumatic injury case in 2016-2019:

    Table 4—Estimated Medical Treatment Costs per WTC-Related Acute Traumatic Injury Case During 2016-2019 in 2014 Dollars Source Year Undiscounted Discounted 3% Discounted 7% NCCI 2016 $11,216 2017 11,216 $10,890 $10,482 2018 11,216 10,572 9,796 2019 11,216 10,264 9,156 Summary of Costs

    This rulemaking is estimated to cost the WTC Health Program from $4,602,162 to $5,666,713 annually, between 2016 and 2019.57 The analysis above offers an assumption about the number of individuals who might enroll in the WTC Health Program and estimates the number of new-onset COPD and WTC-related acute traumatic injury cases and the resulting estimated treatment costs to the WTC Health Program. For the purpose of computing the treatment costs for new-onset COPD and WTC-related acute traumatic injury, the Administrator assumed that all of the individuals who are diagnosed with either condition will be certified by the WTC Health Program for treatment services. In the calculations found in Tables 5 and 6, below, estimated treatment costs were applied to the estimated number of cases of new-onset COPD and WTC-related acute traumatic injury. We assumed that 9 percent of new-onset COPD costs and 12 percent of WTC-related acute traumatic injury costs for responders may be covered by workers' compensation each year; accordingly, we adjusted only the responder estimates to clarify that 91 percent of COPD costs and 88 percent of WTC-related acute traumatic injury costs will be paid by the WTC Health Program.58 This analysis does not include administrative costs associated with certifying additional diagnoses of new-onset COPD or WTC-related acute traumatic injury that are WTC-related health conditions that might result from this action. Those costs were addressed in the interim final rule that established regulations for the WTC Health Program.59

    57 The low cost estimate reflects the 2016 undiscounted new-onset COPD treatment cost estimate using WTC Health Program data from Table 5 and the 2016 undiscounted WTC-related acute traumatic injury treatment cost estimate from Table 6. The high cost estimate reflects the high new-onset COPD treatment cost estimate for 2019, discounted at 3 percent, using data from Leigh et al. from Table 5 and the WTC-related acute traumatic injury treatment cost estimate for 2019, discounted at 3 percent, from Table 6. NB: The cost estimate provided in the NPRM included only the years 2015 and 2016, and costs were provided in the aggregate.

    58 Workers' compensation rates are derived from WTC Health Program data. See WTC Health Program, Policy and Procedures for Recoupment and Coordination of Benefits: Workers' Compensation Payment, revised Dec. 16, 2013, http://www.cdc.gov/wtc/pdfs/WTCHP-PP-Recoupment-WComp-16-Dec-13.pdf.

    59 76 FR 38914 (July 1, 2011).

    Since the implementation of provisions of the ACA on January 1, 2014, all of the members and future members are assumed to have or have access to medical insurance coverage other than through the WTC Health Program. Therefore, all treatment costs to be paid by the WTC Health Program through 2019 are considered transfers. Tables 5 and 6 describe the estimated allocation of WTC Health Program transfer payments.

    Table 5—Medical Treatment Cost for New-Onset COPD Cases During 2016-2019 in 2014 Dollars Source
  • (costs)
  • Year Undiscounted Discounted 3% Discounted 7%
    WTC Health Program Responders 2016 $1,665 * 2,106 * .91 = $3,190,906 2017 $1,665 * 2,218 * .91 = $3,360,603 $1,617 * 2,218 * .91 = $3,263,720 $1,556 * 2,218 * .91 = $3,140,599 2018 $1,665 * 2,330 * .91 = $3,530,300 $1,569 * 2,330 * .91 = $3,326,751 $1,454 * 2,330 * .91 = $3,082,916 2019 $1,665 * 2,442 * .91 = $3,699,996 $1,524 * 2,442 * .91 = $3,386,663 $1,359 * 2,442 * .91 = $3,019,997 Survivors 2016 $1,665 * 306 = $509,490 2017 $1,665 * 354 = $589,410 $1,874 * 354 = $663,396 $1,804 * 354 = $638,616 2018 $1,665 * 402 = $669,330 $1,819 * 402 = $731,238 $1,686 * 402 = $677,772 2019 $1,665 * 450 = $749,250 $1,766 * 450 = $794,700 $1,575 * 450 = $708,750 Total (low estimates) 2016 $3,700,396 2017 $3,950,013 $3,927,116 $3,779,215 2018 $4,199,630 $4,057,989 $3,760,688 2019 $4,449,246 $4,181,363 $3,728,747 Leigh et al. Responders 2016 $1,930 * 2,106 * .91 = $3,698,768 2017 $1,930 * 2,218 * .91 = $3,895,473 $1,874 * 2,218 * .91 = $3,782,444 $1,804 * 2,218 * .91 = $3,641,158 2018 $1,930 * 2,330 * .91 = $4,092,179 $1,819 * 2,330 * .91 = $3,856,826 $1,686 * 2,330 * .91 = $3,574,826 2019 $1,930 * 2,442 * .91 = $4,288,885 $1,766 * 2,442 * .91 = $3,924,441 $1,575 * 2,442 * .91 = $3,499,997 Survivors 2016 $1,930 * 306 = $590,580 2017 $1,930 * 354 = $683,220 $1,874 * 354 = $663,396 $1,804 * 354 = $638,616 2018 $1,930 * 402 = $775,860 $1,819 * 402 = $731,238 $1,686 * 402 = $677,772 2019 $1,930 * 450 = $868,500 $1,766 * 450 = $794,700 $1,575 * 450 = $708,750 Total (high estimates) 2016 $4,289,348 2017 $4,578,693 $4,445,840 $4,279,774 2018 $4,868,039 $4,588,064 $4,252,598 2019 $5,157,385 $4,719,141 $4,208,747
    Table 6—Medical Treatment Cost for WTC-Related Acute Traumatic Injury Cases During 2016-2019 in 2014 Dollars Source
  • (costs)
  • Year Undiscounted Discounted 3% Discounted 7%
    NCCI Responders 2016 $11,216 * 80 * .88 = $789,606 2017 $11,216 * 83 * .88 = $819,217 $10,890 * 83 * .88 = $795,406 $10,482 * 83 * .88 = $765,605 2018 $11,216 * 86 * .88 = $848,827 $10,572 * 86 * .88 = $800,089 $9,796 * 86 * .88 = $741,361 2019 $11,216 * 89 * .88 = $878,437 $10,264 * 89 * .88 = $803,876 $9,156 * 89 * .88 = $717,098 Survivors 2016 $11,216 * 10 = $112,160 2017 $11,216 * 12 = $134,592 $10,890 * 12 = $130,680 $10,482 * 12 = $125,784 2018 $11,216 * 13 = $145,808 $10,572 * 13 = $137,436 $9,796 * 13 = $127,348 2019 $11,216 * 14 = $157,024 $10,264 * 14 = $143,696 $9,156 * 14 = $128,184 Total 2016 $901,766 2017 $953,809 $926,086 $891,389 2018 $994,635 $937,525 $868,709 2019 $1,035,461 $947,572 $845,282
    Examination of Benefits (Health Impact)

    This section describes qualitatively the potential benefits of the rule in terms of the expected improvements in the health and health-related quality of life of potential new-onset COPD or WTC-related acute traumatic injury patients treated through the WTC Health Program, compared to no treatment by the Program.

    The Administrator does not have information on the health of the population that may have experienced 9/11 exposures and is not currently enrolled in the WTC Health Program. However, the Administrator assumes that all unenrolled responders and survivors are now covered by health insurance (due to the ACA) and may be receiving treatment outside the WTC Health Program.

    Although the Administrator cannot quantify the benefits associated with the WTC Health Program, members with new-onset COPD or WTC-related acute traumatic injury would have improved access to care and, thereby, the Program should produce better treatment outcomes than in its absence. Under other insurance plans, patients may have deductibles, coinsurance, and copays, which impact access to care and timeliness of care. WTC Health Program members who are certified for these conditions would have first-dollar coverage and, therefore, are likely to seek care sooner when indicated, resulting in improved treatment outcomes.

    Limitations

    The analysis presented above was limited by the dearth of verifiable data on the new-onset COPD and acute traumatic injury status of responders and survivors who have yet to apply for enrollment in the WTC Health Program. Because of the limited data, the Administrator was not able to estimate benefits in terms of averted healthcare costs. Nor was the Administrator able to estimate indirect costs such as averted absenteeism, short and long-term disability, and productivity losses averted due to premature mortality.

    B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., requires each agency to consider the potential impact of its regulations on small entities including small businesses, small governmental units, and small not-for-profit organizations. The Administrator believes that this rule has “no significant economic impact upon a substantial number of small entities” within the meaning of the RFA.

    C. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., requires an agency to invite public comment on, and to obtain OMB approval of, any regulation that requires 10 or more people to report information to the agency or to keep certain records. This rule does not contain any information collection requirements; thus, HHS has determined that the PRA does not apply to this rule.

    D. Small Business Regulatory Enforcement Fairness Act

    As required by Congress under the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801 et seq., HHS will report the promulgation of this rule to Congress prior to its effective date.

    E. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531 et seq., directs agencies to assess the effects of Federal regulatory actions on State, local, and Tribal governments, and the private sector “other than to the extent that such regulations incorporate requirements specifically set forth in law.” For purposes of the Unfunded Mandates Reform Act, this rule does not include any Federal mandate that may result in increased annual expenditures in excess of $100 million in 1995 dollars by State, local, or Tribal governments in the aggregate, or by the private sector. However, the rule may result in an increase in the contribution made by New York City for treatment and monitoring, as required under the PHS Act, section 3331(d)(2).

    F. Executive Order 12988 (Civil Justice)

    This rule has been drafted and reviewed in accordance with Executive Order 12988, “Civil Justice Reform,” and will not unduly burden the Federal court system. This rule has been reviewed carefully to eliminate drafting errors and ambiguities.

    G. Executive Order 13132 (Federalism)

    The Administrator has reviewed this rule in accordance with Executive Order 13132 regarding Federalism, and has determined that it does not have “Federalism implications.” The rule does not “have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

    H. Executive Order 13045 (Protection of Children From Environmental Health Risks and Safety Risks)

    In accordance with Executive Order 13045, the Administrator has evaluated the environmental health and safety effects of this rule on children. The Administrator has determined that the rule would have no environmental health and safety effect on children.

    I. Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use)

    In accordance with Executive Order 13211, the Administrator has evaluated the effects of this rule on energy supply, distribution or use, and has determined that the rule will not have a significant adverse effect.

    J. Plain Writing Act of 2010

    Under Public Law 111-274 (October 13, 2010), executive Departments and Agencies are required to use plain language in documents that explain to the public how to comply with a requirement the Federal government administers or enforces. The Administrator has attempted to use plain language in promulgating this rule consistent with the Federal Plain Writing Act guidelines.

    List of Subjects in 42 CFR Part 88

    Administrative practice and procedure, Health care, Lung diseases, Mental health programs.

    Final Rule

    For the reasons discussed in the preamble, the Department of Health and Human Services amends 42 CFR part 88 as follows:

    PART 88—WORLD TRADE CENTER HEALTH PROGRAM 1. The authority citation for part 88 is revised to read as follows: Authority:

    42 U.S.C. 300mm to 300mm-61, Pub. L. 111-347, 124 Stat. 3623, as amended by Pub. L. 114-113, 129 Stat. 2242.

    2. In § 88.1, under the definition “List of WTC-related health conditions,” revise paragraph (1)(v) and add paragraph (5) to read as follows:
    § 88.1 Definitions. List of WTC-Related Health Conditions

    (1) * * *

    (v) WTC-exacerbated and new-onset chronic obstructive pulmonary disease (COPD).

    (5) Acute traumatic injuries:

    (i) WTC-related acute traumatic injury: physical damage to the body caused by and occurring immediately after a one-time exposure to energy, such as heat, electricity, or impact from a crash or fall, resulting from a specific event or incident. For a WTC responder or screening-eligible or certified-eligible survivors who received any medical treatment for a WTC-related acute traumatic injury on or before September 11, 2003, such health condition includes:

    (A) Eye injury.

    (B) Burn.

    (C) Head trauma.

    (D) Fracture.

    (E) Tendon tear.

    (F) Complex sprain.

    (G) Other similar acute traumatic injuries.

    (ii) [Reserved]

    Dated: June 27, 2016. John Howard, Administrator, World Trade Center Health Program and Director, National Institute for Occupational Safety and Health, Centers for Disease Control and Prevention, Department of Health and Human Services. Sylvia M. Burwell, Secretary, Department of Health and Human Services.
    [FR Doc. 2016-15799 Filed 7-1-16; 8:45 am] BILLING CODE 4163-18-P
    FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 1 [GN Docket No. 12-268, WT Docket Nos. 14-70, 05-211, RM-11395; FCC 15-80] Updating Competitive Bidding Rules AGENCY:

    Federal Communications Commission.

    ACTION:

    Final rule; announcement of effective date.

    SUMMARY:

    In this document, the Commission announces that the Office of Management and Budget (OMB) approved on June 22, 2016, a revision to an approved information collection to implement modified collection requirements on FCC Form 601, Application for Radio Service Authorization, contained in the Part 1 Report and Order, Updating Competitive Bidding Rules, FCC 15-80. This document is consistent with the Report and Order, which stated that the Commission would publish a document in the Federal Register announcing OMB approval and the effective date of the requirements.

    DATES:

    47 CFR 1.2110(j), published at 80 FR 56764 on September 18, 2015 and revised FCC Form 601, are effective on July 5, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Cathy Williams, [email protected], (202) 418-2918.

    SUPPLEMENTARY INFORMATION:

    This document announces that, on June 22, 2016, OMB approved the information collection requirements for FCC Form 601, FCC Application for Radio Service Authorization and 47 CFR 1.2110(j), which was contained in Report and Order, FCC 15-80. The OMB Control Number is 3060-0798. The Commission publishes this document as an announcement of the effective date of the requirements. If you have any comments on the burden estimates listed below, or how the Commission can improve the collections and reduce any burdens caused thereby, please contact Cathy Williams, Federal Communications Commission, Room 1-C823, 445 12th Street SW., Washington, DC 20554. Please include the OMB Control Number, 3060-0798, in your correspondence. The Commission will also accept your comments via the Internet if you send them to [email protected] To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to [email protected] or call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

    Synopsis

    As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received OMB approval on June 22, 2016, for the information collection requirements contained in information collection 3060-0798. Under 5 CFR 1320, an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display a current, valid OMB Control Number. The OMB Control Number is 3060-0798. The foregoing document is required by the Paperwork Reduction Act of 1995, Pub. L. 104-13, October 1, 1995, and 44 U.S.C. 3507.

    The total annual reporting burdens and costs for the respondents are as follows:

    OMB Control Number: 3060-0798.

    OMB Approval Date: June 22, 2016.

    OMB Expiration Date: June 30, 2019.

    Title: FCC Application for Radio Service Authorization: Wireless Telecommunications Bureau

    Public Safety and Homeland Security Bureau.

    Form Number: FCC Form 601.

    Respondents: Individuals and households; Business or other for profit entities; Not for profit institutions; and State, local or tribal government.

    Number of Respondents and Responses: 253,320 respondents and 253,320 responses.

    Estimated Hours per Response: 0.5-1.25 hours.

    Frequency of Response: Recordkeeping requirement, third party disclosure requirement, On occasion reporting requirement and periodic reporting requirement.

    Total Annual Burden: 222,055 hours.

    Total Annual Costs: $71,306,250.

    Obligation to Respond: Required to obtain or retain benefits. The statutory authority for this collection of information is contained in 47 U.S.C. 151, 152, 154, 154(i), 155(c), 157, 201, 202, 208, 214, 301, 302a, 303, 307, 308, 309, 310, 311, 314, 316, 319, 324, 331, 332, 333, 336, 534, 535 and 554.

    Nature and Extent of Confidentiality: There is no need for confidentiality required with this collection of information.

    Privacy Impact Assessment: Yes.

    Needs and Uses: On July 20, 2015, the Commission released the Part 1 R&O in which it updated many of its Part 1 competitive bidding rules (See Updating Part 1 Competitive Bidding Rules; Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions; Petition of DIRECTV Group, Inc. and EchoStar LLC for Expedited Rulemaking to Amend Section 1.2105(a)(2)(xi) and 1.2106(a) of the Commission's Rules and/or for Interim Conditional Waiver; Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedures, Report and Order, Order on Reconsideration of the First Report and Order, Third Order on Reconsideration of the Second Report and Order, and Third Report and Order, FCC 15-80, 30 FCC Rcd 7493 (2015), modified by Erratum, 30 FCC Rcd 8518 (2015) (Part 1 R&O)). Of relevance to the information collection at issue here, the Commission: (1) Implemented a new general prohibition on the filing of auction applications by entities controlled by the same individual or set of individuals (but with a limited exception for qualifying rural wireless partnerships); (2) modified the eligibility requirements for small business benefits, and updated the standardized schedule of small business sizes, including the gross revenues thresholds used to determine eligibility; (3) established a new bidding credit for eligible rural service providers; (4) adopted targeted attribution rules to prevent the unjust enrichment of ineligible entities; and (5) adopted rules prohibiting joint bidding arrangements with limited exceptions. The updated Part 1 rules apply to applicants seeking licenses and permits.

    Additionally, on June 2, 2014, the Commission released the Mobile Spectrum Holdings R&O, in which the Commission updated its spectrum screen and established rules for its upcoming auctions of low-band spectrum. Of relevance to the information collection at issue here, the Commission stated that it could reserve spectrum in order to ensure against excessive concentration in holdings of below-1-GHz spectrum (In the Matter of Policies Regarding Mobile Spectrum Holdings, Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions, FCC 14-63, Report and Order, 29 FCC Rcd 6133, 6190, para. 135 (2014) (Mobile Spectrum Holdings R&O). See also Application Procedures for Broadcast Incentive Auction Scheduled to Begin on March 29, 2016; Technical Formulas for Competitive Bidding, Public Notice, 30 FCC Rcd 11034, Appendix 3 (WTB 2015); Wireless Telecommunications Bureau Releases Updated List of Reserve-Eligible Nationwide Service Providers in each PEA for the Broadcast Incentive Auction, Public Notice, AU No. 14-252 (WTB 2016).

    The Commission also revised the currently approved collection of information under OMB Control Number 3060-0798 to permit the collection of the additional information for Commission licenses and permits, pursuant to the rules and information collection requirements adopted by the Commission in the Part 1 R&O and the Mobile Spectrum Holdings R&O. As part of the collection, the Commission is now approved for the information collection and recordkeeping requirements associated with 47 CFR 1.2110(j), 1.2112(b)(2)(iii), 1.2112(b)(2)(v), 1.2112(b)(2)(vii), and 1.2112(b)(2)(viii). Also, in certain circumstances, the Commission requires the applicant to provide copies of their agreements and/or submit exhibits.

    In addition, the Commission is now approved for various other, non-substantive editorial/consistency edits and updates to FCC Form 601 that correct inconsistent capitalization of words and other typographical errors, and better align the text on the form with the text in the Commission rules both generally and in connection with recent non-substantive, organizational amendments to the Commission's rules.

    Federal Communications Commission. Gloria J. Miles, Federal Register Liaison Officer, Office of the Secretary.
    [FR Doc. 2016-15819 Filed 7-1-16; 8:45 am] BILLING CODE 6712-01-P
    DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 578 [Docket No. NHTSA-2016-0075] RIN 2127-AL73 Civil Penalties AGENCY:

    National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).

    ACTION:

    Interim final rule.

    SUMMARY:

    This interim final rule updates the maximum civil penalty amounts for violations of statutes and regulations administered by NHTSA pursuant the Federal Civil Penalties Inflation Adjustment Act Improvement Act of 2015. This final rule also amends our regulations to reflect the new civil penalty amounts for violations of the National Traffic and Motor Vehicle Safety (the Safety Act) Act authorized by the Fixing America's Surface Transportation Act (FAST Act).

    DATES:

    Effective date: This rule is effective August 4, 2016.

    Petitions for reconsideration: Petitions for reconsideration of this final rule must be received not later than August 19, 2016.

    ADDRESSES:

    Any petitions for reconsideration should refer to the docket number of this document and be submitted to: Administrator, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE., West Building, Fourth Floor, Washington, DC 20590.

    FOR FURTHER INFORMATION CONTACT:

    Thomas Healy, Office of Chief

    Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 1200 New Jersey Ave SE., Washington, DC 20590.

    SUPPLEMENTARY INFORMATION:

    I. Background

    On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvement Act (the 2015 Act), Pub. L. 114-74, Section 701, was signed into law. The purpose of the 2015 Act is to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. The 2015 Act requires agencies to make an initial catch up adjustment to the civil monetary penalties they administer through an interim final rule and then to make subsequent annual adjustments for inflation. The amount of increase of any adjustment to a civil penalty pursuant to the 2015 Act is limited to 150 percent of the current penalty. Agencies are required to issue the interim final rule with the initial catch up adjustment by July 1, 2016.

    The method of calculating inflationary adjustments in the 2015 Act differs substantially from the methods used in past inflationary adjustment rulemakings conducted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (the Inflation Adjustment Act), Pub. L. 101-410. Previously, adjustments to civil penalties were conducted under rules that required significant rounding of figures. For example, a penalty increase that was greater than $1,000, but less than or equal to $10,000, would be rounded to the nearest multiple of $1,000. While this allowed penalties to be kept at round numbers, it meant that penalties would often not be increased at all if the inflation factor was not large enough. Furthermore, increases to penalties were capped at 10 percent. Over time, this formula caused penalties to lose value relative to total inflation.

    The 2015 Act has removed these rounding rules; now, penalties are simply rounded to the nearest $1. While this creates penalty values that are no longer round numbers, it does ensure that penalties will be increased each year to a figure commensurate with the actual calculated inflation. Furthermore, the 2015 Act “resets” the inflation calculations by excluding prior inflationary adjustments under the Inflation Adjustment Act, which contributed to a decline in the real value of penalty levels. To do this, the 2015 Act requires agencies to identify, for each penalty, the year and corresponding amount(s) for which the maximum penalty level or range of minimum and maximum penalties was established (i.e., originally enacted by Congress) or last adjusted other than pursuant to the Inflation Adjustment Act.

    The Director of the Office of Management and Budget (OMB) provided guidance to agencies in a February 24, 2016 memorandum on how to calculate the initial adjustment required by the 2015 Act.1 The initial catch up adjustment is based on the change between the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October in the year the penalty amount was established or last adjusted by Congress and the October 2015 CPI-U. The February 24, 2016 memorandum contains a table with a multiplier for the change in CPI-U from the year the penalty was established or last adjusted to 2015. To arrive at the adjusted penalty the agency must multiply the penalty amount when it was established or last adjusted by Congress, excluding adjustments under the Inflation Adjustment Act, by the multiplier for the increase in CPI-U from the year the penalty was established or adjusted provided in the February 24, 2016 memorandum. The 2015 Act limits the initial inflationary adjustment to 150 percent of the current penalty. To determine whether the increase in the adjusted penalty is less than 150 percent, the agency must multiply the current penalty by 250 percent. The adjusted penalty is the lesser of either the adjusted penalty based on the multiplier for CPI-U in Table A of the February 24, 2016 memorandum or an amount equal to 250% of the current penalty. This interim final rule adjusts the civil penalties for violations of statutes and regulations that NHTSA administers consistent with the February 24, 2016 memorandum.

    1 Memorandum from the Director of OMB to Heads of Executive Departments and Agencies, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 24, 2016), available at www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-06.pdf.

    II. Inflationary Adjustments to Penalty Amounts in 49 CFR Part 578 Changes to Civil Penalties for School Bus Related Violations of the Safety Act (49 CFR 578.6(a)(2))

    The maximum civil penalty for a single violation of 30112(a)(1) of Title 49 of the United States Code involving school buses or school bus equipment, or of the prohibition on school system purchases and leases of 15 passenger vans as specified in 30112(a)(2) of Title 49 of the United States Code was set at $10,000 when the penalty was established by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), Pub. L. 109-59, 119 Stat. 1942, enacted in 2005. Applying the multiplier for the increase in CPI-U for 2005 in Table A of the February 24, 2016 memorandum (1.19397) results in an adjusted civil penalty of $11,940. The maximum civil penalty for a related series of violations of 30112(a)(1) and 30112(a)(2) was $15,000,000 when the penalty was established by SAFETEA-LU in 2005. Applying the multiplier for the increase in CPI-U for 2005 results in an adjusted maximum civil penalty of $17,909,550.

    Changes to Civil Penalties for Filing False or Misleading Reports Under 49 U.S.C. 30165(a)(4)

    The Moving Ahead for Progress in the 21st Century Act (MAP-21) of 2012, Pub. L. 112-141, established a maximum civil penalty for persons knowingly or willfully submitting materially false or misleading information to NHTSA after certifying that the information was accurate pursuant to 49 U.S.C. 30166(o) of $5,000 per day. Applying the multiplier for the increase in CPI-U for 2012 in Table A of the February 24, 2016 memorandum (1.02819) results in an adjusted civil penalty of $5,141. MAP-21 established a maximum civil penalty for a related series of daily violations of 49 U.S.C. 30166(o) of $1,000,000. Applying the multiplier for the increase in CPI-U for 2012 results in an adjusted civil penalty of $1,028,190 for a related series of daily violations of 49 U.S.C. 30166(o).

    Change to Penalty for Violation of 49 U.S.C. Chapter 305 (49 CFR 578.6(b))

    The Anti Car Theft Act of 1992, Pub. L. 102-519, 204, 106 Stat. 3393 (1992) established a civil penalty of $1,000 for each violation of the reporting requirements related to maintaining the Nation Motor Vehicle Title Information System. Applying the multiplier for the increase in CPI-U for 1992 in Table A of the February 24, 2016 memorandum (1.67728) results in an adjusted civil penalty of $1,677.

    Change to Maximum Penalty Under 49 U.S.C. 32506(a) (49 CFR 578.6(c))

    The Motor Vehicle Information and Cost Savings Act (Cost Savings Act), Pub. L. 92-513, 86 Stat. 953, (1972), established a civil penalty of $1,000 for each violation of a bumper standard established pursuant to the Cost Savings Act. Applying the multiplier for the increase in CPI-U for 1972 in Table A of the February 24, 2016 memorandum (5.62265) results in an adjusted civil penalty of $5,623. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $2,750 (Current penalty $1,100 × 2.5).

    The Cost Savings Act also established a maximum civil penalty of $800,000 for a related series of violations of the bumper standards established pursuant to the Act. Applying the multiplier for the increase in CPI-U for 1972 in Table A of the February 24, 2016 memorandum (5.62265) results in an adjusted civil penalty of $4,498,120. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $3,062,500 (Current penalty $1,225,000 × 2.5).

    Change to Penalties Under the Consumer Information Provisions (49 CFR 578.6(d)(1))

    The Cost Savings Act established a civil penalty of $1,000 for each violation of 49 U.S.C. 32308(a) related to providing information on crashworthiness and damage susceptibility. Applying the multiplier for the increase in CPI-U for 1972 in Table A of the February 24, 2016 memorandum (5.62265) results in an adjusted civil penalty of $5,623. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $2,750 (Current penalty $1,100 × 2.5). The Cost Savings established a maximum civil penalty of $400,000 for a series of related violations of 49 U.S.C. 32308(a). Applying the multiplier for the increase in CPI-U for 1972 in Table A of the February 24, 2016 memorandum (5.62265) results in an adjusted civil penalty of $2,249,060. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $1,500,000 (Current penalty $600,000 × 2.5).

    Change to Penalties Under the Tire Consumer Information Provisions (49 CFR 578.6(d)(2))

    The Energy Independence and Security Act of 2007, Pub. L. 110-140, 121 Stat. 1507 (2007) established a civil penalty of $50,000 for each violation related to the tire information fuel efficiency information program under 49 U.S.C. 32304A. Applying the multiplier for the increase in CPI-U for 2007 in Table A of the February 24, 2016 memorandum (1.13833) results in an adjusted civil penalty of $56,917.

    Change to Penalties Under the Country of Origin Content Labeling Provisions (49 CFR 578.6(d)(2))

    The American Automobile Labeling Act, Pub L. 102-388, § 210, 106 Stat. 1556 (1992), established a civil penalty of $1,000 for willfully failing to affix, or failing to maintain, the label required by the Act. Applying the multiplier for the increase in CPI-U for 1992 in Table A of the February 24, 2016 memorandum (1.67728) results in an adjusted civil penalty of $1,677.

    Change to Penalties Under the Odometer Tampering and Disclosure Provisions (49 CFR 578.6(f))

    MAP-21 adjusted the civil penalty for each violation of 49 U.S.C. Chapter 327 or a regulation issued thereunder related to odometer tampering and disclosure to $10,000 per violation. Applying the multiplier for the increase in CPI-U for 2012 in Table A of the February 24, 2016 memorandum (1.02819) results in an adjusted civil penalty of $10,282. MAP-21 established a maximum civil penalty of $1,000,000 for a related series of violations of 49 U.S.C. Chapter 327 or a regulation issued thereunder. Applying the multiplier for the increase in CPI-U for 2012 results in an adjusted civil penalty of $1,028,190 for a related series of violations.

    MAP-21 also adjusted the civil penalty for violations of 49 U.S.C. Chapter 327 or a regulation issued thereunder with intent to defraud to $10,000 per violation. Applying the multiplier for the increase in CPI-U for 2012 results in an adjusted civil penalty of $10,282.

    Change to Penalties Under the Vehicle Theft Protection Provisions (49 CFR 578.6(g))

    The Motor Vehicle Theft Law Enforcement Act of 1984 (Vehicle Theft Act), Public Law 98-547, § 608, 98 Stat. 2762 (1984), established a civil penalty of $1,000 for each violation of 49 U.S.C. 33114(a)(1)-(4). Applying the multiplier for the increase in CPI-U for 1984 in Table A of the February 24, 2016 memorandum (2.25867) results in an adjusted civil penalty of $2,259. The Vehicle Theft Act also established a maximum penalty of $250,000 for a related series of violations of 49 U.S.C. 33114(a)(1)-(4). Applying the multiplier for the increase in CPI-U for 1984 results in an adjusted civil penalty of $564,668.

    The Anti Car Theft Act of 1992 established a civil penalty of $100,000 per day for violations of the Anti Car Theft Act related to operation of a chop shop. Applying the multiplier for the increase in CPI-U for 1992 in Table A of the February 24, 2016 memorandum (1.67728) results in an adjusted civil penalty of $167,728.

    Change to Penalties Under the Automobile Fuel Economy Provisions (49 CFR 578.6(g))

    The Energy Policy and Conservation Act (EPCA) of 1975, Public Law 94-163, § 508, 89 Stat. 912 (1975), established a civil penalty of $10,000 for each violation of 49 U.S.C. 32911(a). Applying the multiplier for the increase in CPI-U for 1975 in Table A of the February 24, 2016 memorandum (4.3322) results in an adjusted civil penalty of $43,322. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $40,000 (Current penalty $16,000 × 2.5).

    EPCA also established a civil penalty of $5 multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy for automobiles to which the standard applies manufactured by the manufacturer during the model year, multiplied by the number of those automobile and reduced by the credits available to the manufacturer. Applying the multiplier for the increase in CPI-U for 1975 results in an adjusted civil penalty of $22. Since this would result in an increase to the current civil penalty of greater than 150 percent, the adjusted civil penalty is $14 (Current penalty $5.50 × 2.5).

    In 1978 Congress amended EPCA, Public Law 95-619, 402, 92 Stat. 3255 (Nov. 9, 1978) to allow the Secretary of Transportation to establish a new civil penalty for each .1 of a mile a gallon by which the applicable average fuel economy standard under EPCA exceeds the average fuel economy for automobiles to which the standard applies manufactured by the manufacturer during the model year. These amendments, which are codified in 49 U.S.C. 32912(c), state that the new civil penalty cannot be more than $10. Applying the multiplier for the increase in CPI-U for 1978 in Table A of the February 24, 2016 memorandum (3.54453) to the $10 maximum penalty the Secretary is permitted to establish under 49 U.S.C. 32912(c) results in an adjusted civil penalty of $35. Since this would result in an increase of greater than 150 percent, the adjusted maximum civil penalty that the Secretary is permitted to establish under 49 U.S.C. 32912(c) is $25 (Current maximum penalty $10 × 2.5). Because the new maximum penalty that the Secretary is permitted to establish under 49 U.S.C. 32912(c) is $25, the new adjusted civil penalty in 49 CFR 578.6(h)(2) of $14 does not exceed the maximum penalty that the Secretary is permitted to impose.

    Change to Penalties Under the Medium and Heavy Duty Vehicle Fuel Efficiency Program (49 CFR 578.6(i))

    In 2011, the agency established a maximum penalty of $37,500 per vehicle or engine for violations of 49 CFR 535. Applying the multiplier for the increase in CPI-U for 2011 in Table A of the February 24, 2016 memorandum (1.05042) results in an adjusted civil penalty of $39,391.

    III. Codification of Increases to NHTSA's Civil Penalty Authority in the FAST Act

    On December 4, 2015, the FAST Act, Public Law 114-94, was signed into law. Section 24110 of the FAST Act increased the maximum civil penalty that NHTSA may collect for each violation of the Safety Act under 49 U.S.C. 30165(a)(1) and 49 U.S.C. 30165(a)(3) to $21,000 per violation (previously $7,000) and the maximum amount of civil penalties that NHTSA can collect for a related series of violations to $105 million (previously $35 million). In order for these increases to become effective, the Secretary of Transportation was required to certify to Congress that NHTSA has issued the final rule required by Section 31203 of MAP-21. Section 31203 required NHTSA to provide an interpretation of civil penalty factors in 49 U.S.C. 30165 for NHTSA to consider in determining the amount of penalty or compromise for violations of the Safety Act. Pub. L. 112-141, § 31203, 126 Stat. 758 (2012). The increases in maximum civil penalties in Section 24110 of the FAST Act became effective the date of the Secretary's certification.

    NHTSA issued the final rule required by Section 31203 of MAP-21 on February 24, 2016. On March 17, 2016, the Secretary certified to Congress by letter to the Chairman and Ranking Member of the Senate Committee on Commerce, Science, and Transportation, and to the Chairman and Ranking Member of the House Committee on Energy and Commerce that NHTSA had issued the Final Rule. On March 22, 2016, the Office of the Secretary of Transportation published a notice in the Federal Register notifying the public that the increase was in effect.2 NHTSA is codifying these increases in this interm final rule.

    2 81 FR 15413.

    IV. Public Comment

    NHTSA is promulgating this interim final rule to ensure that the amount of civil penalties contained in 49 CFR 578.6 reflect the statutorily mandated ranges as adjusted for inflation. Pursuant to the 2015 Act, NHTSA is required to promulgate a “catch-up adjustment” through an interim final rule. Pursuant to the 2015 Act and 5 U.S.C. 553(b)(3)(B), NHTSA finds that good cause exists for immediate implementation of this interim final rule without prior notice and comment because it would be impracticable to delay publication of this rule for notice and comment and because public comment is unnecessary. By operation of the Act, NHTSA must publish the catch-up adjustment by July 1, 2016. Additionally, the 2015 Act provides a clear formula for adjustment of the civil penalties, leaving the agency little room for discretion. Furthermore, the increases in NHTSA's civil penalty authority authorized by the FAST Act are already in effect and the amendments merely update 49 CFR 578.6 to reflect the new statutory civil penalty. For these reasons, NHTSA finds that notice and comment would be impracticable and is unnecessary in this situation.

    V. Rulemaking Analyses and Notices Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures

    NHTSA has considered the impact of this rulemaking action under Executive Order 12866, Executive Order 13563, and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed under Executive Order 12866 or Executive Order 13563. This action is limited to the adoption of adjustments of civil penalties under statutes that the agency enforces, and has been determined to be not “significant” under the Department of Transportation's regulatory policies and procedures and the policies of the Office of Management and Budget. Because this rulemaking does not change the number of entities that are subject to civil penalties, the impacts are limited. Furthermore, excluding the penalties in 49 CFR 578.6(h)(2) for violations of Corporate Average Fuel Economy standards, this final rule does not establish civil penalty amounts that NHTSA is required to seek.

    We also do not expect the increase in the civil penalty amount in 49 CFR 578.6(h)(2) to be economically significant. Over the last five model years, NHTSA has collected an average of $20 million per model year in civil penalties under 49 CFR 578.6(h)(2). Therefore, increasing the current civil penalty amount by 150 percent would not result in an annual effect on the economy of $100 million or more.

    Furthermore, NHTSA contends that the economic effects of increasing the civil penalty in 49 CFR 578.6(h)(2) are not directly proportional to the increase in the amount of civil penalty. Manufacturers could pursue several strategies to avoid liability for civil penalties under 49 CFR 578.6(h)(2), including purchasing offset credits from other manufacturers, production and marketing changes to influence the average fuel economy of vehicles produced by the manufacturer, and vehicle design changes intended to increase the vehicle's fuel economy. NHTSA contends that manufacturers will pursue the strategy, or mix on strategies, that results in the lowest overall cost to the manufacturer. For this reason the expected economic impacts of this rule can be expected to be lower than the amount of the increase to the civil penalty amount in 49 CFR 578.6(h)(2).

    Regulatory Flexibility Act

    We have also considered the impacts of this rule under the Regulatory Flexibility Act. I certify that this rule will not have a significant economic impact on a substantial number of small entities. The following provides the factual basis for this certification under 5 U.S.C. 605(b). The amendments almost entirely potentially affect manufacturers of motor vehicles and motor vehicle equipment.

    The Small Business Administration's regulations define a small business in part as a business entity “which operates primarily within the United States.” 13 CFR 121.105(a). SBA's size standards were previously organized according to Standard Industrial Classification (“SIC”) Codes. SIC Code 336211 “Motor Vehicle Body Manufacturing” applied a small business size standard of 1,000 employees or fewer. SBA now uses size standards based on the North American Industry Classification System (“NAICS”), Subsector 336—Transportation Equipment Manufacturing, which provides a small business size standard of 1,000 employees or fewer for automobile manufacturing businesses. Other motor vehicle-related industries have lower size requirements that range between 500 and 750 employees.

    For example, according to the SBA coding system, businesses that manufacture truck trailers, travel trailers/campers, carburetors, pistons, piston rings, valves, vehicular lighting equipment, motor vehicle seating/interior trim, and motor vehicle stamping qualify as small businesses if they employ 500 or fewer employees. Similarly, businesses that manufacture gasoline engines, engine parts, electrical and electronic equipment (non-vehicle lighting), motor vehicle steering/suspension components (excluding springs), motor vehicle brake systems, transmissions/power train parts, motor vehicle air-conditioning, and all other motor vehicle parts qualify as small businesses if they employ 750 or fewer employees. See http://www.sba.gov/size/sizetable.pdf for further details.

    Many small businesses are subject to the penalty provisions of 49 U.S.C. Chapter 301 (Safety Act) and therefore may be affected by the adjustments made in this rulemaking. For example, based on comprehensive reporting pursuant to the early warning reporting (EWR) rule under the Safety Act, 49 CFR part 579, of the more than 60 light vehicle manufacturers reporting, over half are small businesses. Also, there are other, relatively low production vehicle manufacturers that are not subject to comprehensive EWR reporting. Furthermore, there are about 70 registered importers. Equipment manufacturers (including importers), entities selling motor vehicles and motor vehicle equipment, and motor vehicle repair businesses are also subject to penalties under 49 U.S.C. 30165.

    As noted throughout this preamble, this rule will only increase the penalty amounts that the agency could obtain for violations covered by 49 CFR 578.6. Under the Safety Act, the penalty provision requires the agency to take into account the size of a business when determining the appropriate penalty in an individual case. See 49 U.S.C. 30165(b). The agency would also consider the size of a business under its civil penalty policy when determining the appropriate civil penalty amount. See 62 FR 37115 (July 10, 1997) (NHTSA's civil penalty policy under the Small Business Regulatory Enforcement Fairness Act (“SBREFA”)). The penalty adjustments would not affect our civil penalty policy under SBREFA.

    Since, this regulation does not establish a penalty amount that NHTSA is required to seek, except for civil penalties under 49 CFR 578.6(h)(2), this rule will not have a significant economic impact on small businesses. Furthermore, low volume manufacturers can petition for an exemption from the Corporate Average Fuel Economy standards under 49 CFR part 525. This will lessen the impacts of this rulemaking on small business by allowing them to avoid liability for penalties under 49 CFR 578.6(h)(2). Small organizations and governmental jurisdictions will not be significantly affected as the price of motor vehicles and equipment ought not change as the result of this rule.

    Executive Order 13132 (Federalism)

    Executive Order 13132 requires NHTSA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, the agency may not issue a regulation with Federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, the agency consults with State and local governments, or the agency consults with State and local officials early in the process of developing the proposed regulation.

    This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The reason is that this rule will generally apply to motor vehicle and motor vehicle equipment manufacturers (including importers), entities that sell motor vehicles and equipment and motor vehicle repair businesses. Thus, the requirements of Section 6 of the Executive Order do not apply.

    Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, requires agencies to prepare a written assessment of the cost, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually. Because this rule will not have a $100 million effect, no Unfunded Mandates assessment will be prepared.

    Executive Order 12778 (Civil Justice Reform)

    This rule does not have a retroactive or preemptive effect. Judicial review of this rule may be obtained pursuant to 5 U.S.C. 702. That section does not require that a petition for reconsideration be filed prior to seeking judicial review.

    Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980, we state that there are no requirements for information collection associated with this rulemaking action.

    Privacy Act

    Please note that anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78), or you may visit http://dms.dot.gov.

    List of Subjects in 49 CFR Part 578

    Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber products, Tires, Penalties.

    In consideration of the foregoing, 49 CFR part 578 is amended as set forth below.

    PART 578—CIVIL AND CRIMINAL PENALTIES 1. The authority citation for 49 CFR part 578 is revised to read as follows: Authority:

    Pub. L. 101-410, Pub. L. 104-134, Pub. L. 109-59, Pub. L. 114-74, Pub. L. 114-94, 49 U.S.C. 30165, 30170, 30505, 32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115; delegation of authority at 49 CFR 1.81, 1.95.

    2. Section 578.6 is revised to read as follows:
    § 578.6 Civil penalties for violations of specified provisions of Title 49 of the United States Code.

    (a) Motor vehicle safety—(1) In general. A person who violates any of sections 30112, 30115, 30117 through 30122, 30123(a), 30125(c), 30127, or 30141 through 30147 of Title 49 of the United States Code or a regulation prescribed under any of those sections is liable to the United States Government for a civil penalty of not more than $21,000 for each violation. A separate violation occurs for each motor vehicle or item of motor vehicle equipment and for each failure or refusal to allow or perform an act required by any of those sections. The maximum civil penalty under this paragraph for a related series of violations is $105,000,000.

    (2) School buses. Notwithstanding paragraph (a)(1) of this section, a person who:

    (i) Violates section 30112(a)(1) of Title 49 United States Code by the manufacture, sale, offer for sale, introduction or delivery for introduction into interstate commerce, or importation of a school bus or school bus equipment (as those terms are defined in 49 U.S.C. 30125(a)); or

    (ii) Violates section 30112(a)(2) of Title 49 United States Code, shall be subject to a civil penalty of not more than $11,940 for each violation. A separate violation occurs for each motor vehicle or item of motor vehicle equipment and for each failure or refusal to allow or perform an act required by this section. The maximum penalty under this paragraph for a related series of violations is $17,909,550.

    (3) Section 30166. A person who violates section 30166 of Title 49 of the United States Code or a regulation prescribed under that section is liable to the United States Government for a civil penalty for failing or refusing to allow or perform an act required under that section or regulation. The maximum penalty under this paragraph is $21,000 per violation per day. The maximum penalty under this paragraph for a related series of daily violations is $105,000,000.

    (4) False and misleading reports. A person who knowingly and willfully submits materially false or misleading information to the Secretary, after certifying the same information as accurate under the certification process established pursuant to section 30166(o), shall be subject to a civil penalty of not more than $5,141 per day. The maximum penalty under this paragraph for a related series of daily violations is $1,028,190.

    (b) National Automobile Title Information System. An individual or entity violating 49 U.S.C. Chapter 305 is liable to the United States Government for a civil penalty of not more than $1,677 for each violation.

    (c) Bumper standards. (1) A person that violates 49 U.S.C. 32506(a) is liable to the United States Government for a civil penalty of not more than $2,750 for each violation. A separate violation occurs for each passenger motor vehicle or item of passenger motor vehicle equipment involved in a violation of 49 U.S.C. 32506(a)(1) or (4)—

    (i) That does not comply with a standard prescribed under 49 U.S.C. 32502, or

    (ii) For which a certificate is not provided, or for which a false or misleading certificate is provided, under 49 U.S.C. 32504.

    (2) The maximum civil penalty under this paragraph (c) for a related series of violations is $3,062,500.

    (d) Consumer information—(1) Crash-worthiness and damage susceptibility. A person who violates 49 U.S.C. 32308(a), regarding crashworthiness and damage susceptibility, is liable to the United States Government for a civil penalty of not more than $2,750 for each violation. Each failure to provide information or comply with a regulation in violation of 49 U.S.C. 32308(a) is a separate violation. The maximum penalty under this paragraph for a related series of violations is $1,500,000.

    (2) Consumer tire information. Any person who fails to comply with the national tire fuel efficiency program under 49 U.S.C. 32304A is liable to the United States Government for a civil penalty of not more than $56,917 for each violation.

    (e) Country of origin content labeling. A manufacturer of a passenger motor vehicle distributed in commerce for sale in the United States that willfully fails to attach the label required under 49 U.S.C. 32304 to a new passenger motor vehicle that the manufacturer manufactures or imports, or a dealer that fails to maintain that label as required under 49 U.S.C. 32304, is liable to the United States Government for a civil penalty of not more than $1,677 for each violation. Each failure to attach or maintain that label for each vehicle is a separate violation.

    (f) Odometer tampering and disclosure. (1) A person that violates 49 U.S.C. Chapter 327 or a regulation prescribed or order issued thereunder is liable to the United States Government for a civil penalty of not more than $10,281 for each violation. A separate violation occurs for each motor vehicle or device involved in the violation. The maximum civil penalty under this paragraph for a related series of violations is $1,028,190.

    (2) A person that violates 49 U.S.C. Chapter 327 or a regulation prescribed or order issued thereunder, with intent to defraud, is liable for three times the actual damages or $10,281, whichever is greater.

    (g) Vehicle theft protection. (1) A person that violates 49 U.S.C. 33114(a)(1)-(4) is liable to the United States Government for a civil penalty of not more than $2,259 for each violation. The failure of more than one part of a single motor vehicle to conform to an applicable standard under 49 U.S.C. 33102 or 33103 is only a single violation. The maximum penalty under this paragraph for a related series of violations is $564,668.

    (2) A person that violates 49 U.S.C. 33114(a)(5) is liable to the United States Government for a civil penalty of not more than $167,728 a day for each violation.

    (h) Automobile fuel economy. (1) A person that violates 49 U.S.C. 32911(a) is liable to the United States Government for a civil penalty of not more than $40,000 for each violation. A separate violation occurs for each day the violation continues.

    (2) Except as provided in 49 U.S.C. 32912(c), a manufacturer that violates a standard prescribed for a model year under 49 U.S.C. 32902 is liable to the United States Government for a civil penalty of $14 multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy—

    (i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for automobiles to which the standard applies manufactured by the manufacturer during the model year;

    (ii) Multiplied by the number of those automobiles; and

    (iii) Reduced by the credits available to the manufacturer under 49 U.S.C. 32903 for the model year.

    (i) Medium- and heavy-duty vehicle fuel efficiency. The maximum civil penalty for a violation of the fuel consumption standards of 49 CFR part 535 is not more than $39,391 per vehicle or engine. The maximum civil penalty for a related series of violations shall be determined by multiplying $39,391 times the vehicle or engine production volume for the model year in question within the regulatory averaging set.

    Issued on: June 22, 2016. Mark R. Rosekind, Administrator.
    [FR Doc. 2016-15800 Filed 7-1-16; 8:45 am] BILLING CODE 4910-59-P
    81 128 Tuesday, July 5, 2016 Proposed Rules FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1232 RIN 2590-AA42 Incentive-Based Compensation Arrangements AGENCY:

    Federal Housing Finance Agency.

    ACTION:

    Notice of Proposed Rulemaking and Request for Comment; Correction.

    SUMMARY:

    This document corrects a typographical error to the “Dated:” line of the Federal Housing Finance Agency's (FHFA) signatory block of the Notice of Proposed Rulemaking and Request for Comment (Proposed Rule) issued jointly by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Corporation, National Credit Union Administration, FHFA, and the U.S. Securities Exchange Commission. The Proposed Rule was published in the Federal Register on Friday, June 10, 2016 (FR Doc. 2016-11788; 81 FR 37669), and concerned Incentive-based Compensation Arrangements.

    FOR FURTHER INFORMATION CONTACT:

    Mary Pat Fox, Manager, Executive Compensation Branch, (202) 649-3215; or Lindsay Simmons, Assistant General Counsel, (202) 649-3066, Federal Housing Finance Agency, 400 7th Street SW., Washington, DC 20219. The telephone number for the Telecommunications Device for the Hearing Impaired is (800) 877-8339.

    Need for Correction

    In the Federal Register of Friday, June 10, 2016, FR Doc. 2016-11788, on page 37838, in the third column, the “Dated:” line of the Federal Housing Finance Agency signatory block is corrected to read as “April 26, 2016.”

    Dated: June 22, 2016. Melvin L. Watt, Director, Federal Housing Finance Agency.
    [FR Doc. 2016-15596 Filed 7-1-16; 8:45 am] BILLING CODE 8070-01-P
    SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 275 [Release No. IA-4439; File No. S7-13-16] RIN 3235-AL62 Adviser Business Continuity and Transition Plans AGENCY:

    Securities and Exchange Commission.

    ACTION:

    Proposed rule.

    SUMMARY:

    The Securities and Exchange Commission (“Commission” or “SEC”) is proposing a new rule and rule amendments under the Investment Advisers Act of 1940 (“Advisers Act”). The proposed rule would require SEC-registered investment advisers to adopt and implement written business continuity and transition plans reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations. The proposal would also amend rule 204-2 under the Advisers Act to require SEC-registered investment advisers to make and keep all business continuity and transition plans that are currently in effect or at any time within the past five years were in effect.

    DATES:

    Comments should be received on or before September 6, 2016.

    ADDRESSES:

    Comments may be submitted by any of the following methods:

    Electronic Comments

    • Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or

    • Send an email to [email protected]. Please include File Number S7-13-16 on the subject line; or

    • Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

    Paper Comments

    • Send paper comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number S7-13-16. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments are also available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.

    Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission's Web site. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at www.sec.gov to receive notifications by email.

    FOR FURTHER INFORMATION CONTACT:

    Andrea Ottomanelli Magovern, Senior Counsel, Zeena Abdul-Rahman, Senior Counsel, John Foley, Senior Counsel, or Alpa Patel, Branch Chief, at (202) 551- 6787 or [email protected], Investment Adviser Rulemaking Office, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-8549.

    SUPPLEMENTARY INFORMATION:

    The Commission is proposing for public comment new rule 206(4)-4 [17 CFR 275. 206(4)-4] and amendments to rule 204-2 [17 CFR 275.204-2] under the Advisers Act [15 U.S.C. 80b].

    Table of Contents I. Adviser Business Continuity and Transition Plans A. Introduction B. Background 1. Business Continuity Planning 2. Transition Planning C. Discussion 1. Adopt and Implement Business Continuity and Transition Plans 2. Annual Review 3. Recordkeeping II. Economic Analysis A. Introduction B. Economic Baseline C. Benefits and Costs and Effects on Efficiency, Competition, and Capital Formation 1. Benefits 2. Costs 3. Effects on Efficiency, Competition, and Capital Formation D. Reasonable Alternatives 1. Require Public Availability of Business Continuity and Transition Plans 2. Require Business Continuity Plans and/or Transition Plans, but Do Not Specify Required Components 3. Require Specific Mechanisms for Addressing Certain Risks in Every Plan 4. Vary the Requirements of the Proposed Rule for Different Subsets of Registered Advisers E. Request for Comment III. Paperwork Reduction Act A. The Proposed Rules 1. Rule 206(4)-4 2. Rule 204-2 B. Request for Comment IV. Initial Regulatory Flexibility Analysis A. Reasons for and Objectives of the Proposed Actions B. Legal Basis C. Small Entities Subject to the Rule and Rule Amendments D. Projected Reporting, Recordkeeping and Other Compliance Requirements 1. Rule 206(4)-4 2. Rule 204-2 E. Duplicative, Overlapping, or Conflicting Federal Rules F. Significant Alternatives G. Solicitation of Comments V. Consideration of Impact on the Economy VI. Statutory Authority I. Adviser Business Continuity and Transition Plans A. Introduction

    Today, there are approximately 12,000 investment advisers registered with the Commission that collectively manage over $67 trillion in assets, an increase of over 140% in the past 10 years.1 Advisers manage assets for, and provide investment advice to, a wide variety of clients, including individuals, charitable organizations, endowments, retirement plans, and various pooled investment vehicles such as mutual funds and private funds. Investors turn to advisers for a variety of services such as helping them to identify financial goals (including investing for a child's education or preparing for retirement), analyzing an existing financial portfolio, determining an appropriate asset allocation, and providing portfolio management or investment recommendations to help achieve financial goals. Advisers also play an important role in counseling and advising clients on complex financial instruments and investments, and in providing advice and guidance on weathering changing market conditions. The range of services provided by advisers, and the continued growth in the number of advisers and assets under management, reflect the critical role investment advisers play in our capital markets and the importance of the services they provide to approximately 30 million clients.2

    1 Based on data from the Commission's Investment Adviser Registration Depository (“IARD”) as of January 4, 2016.

    2Id.

    Investment advisers today also participate in and are part of an increasingly complex financial services industry. Advisers are relying on technology to a greater extent, managing more complicated portfolios and strategies that often include complex investments, and are increasingly relying on the services of third parties such as custodians, brokers and dealers, pricing services, and technology vendors 3 that support their operations.4

    3 We use the terms “vendor” and “service provider” interchangeably throughout this release.

    4 There has been an increase in the diversity of investment portfolios, strategies, and securities types, the complexity of portfolio management and operations, and the interconnectedness and interdependencies of the financial industry. See generally, Global Association of Risk Professionals (GARP), Risk Principles for Asset Managers, Prepared by the GARP Buy Side Risk Managers Forum (Sept. 2015) (“Risk Principles for Asset Managers”) at Section 5: Operational Risk Principles, available at http://go.garp.org/l/39542/2015-09-30/315zdc/39542/90066/BSRMF_Risk_Principles_2015.pdf.

    Although the types of registered investment advisers and their business models may vary significantly, they generally share certain fundamental operational risks. Of particular concern to the Commission are those risks that may impact the ability of an adviser and its personnel to continue operations, provide services to clients and investors, or, in certain circumstances, transition the management of accounts to another adviser. Such operational risks include, but are not limited to, technological failures with respect to systems and processes (whether proprietary or provided by third-party vendors supporting the adviser's activities), and the loss of adviser or client data, personnel, or access to the adviser's physical location(s) and facilities.

    Operational risks can arise from internal and external business continuity events. An internal event, such as a facility problem at an adviser's primary office location, or an external event, such as a weather-related emergency or cyber-attack, could impact an adviser's ongoing operations and its ability to provide client services. For example, both types of events could prevent advisory personnel from accessing the adviser's office or its systems or documents at a particular office location. Under these circumstances, an adviser and its personnel may be unable to provide services to the adviser's clients and continue its operations while affected by the disruption, which could result in client harm.5 Similarly, operational risks can arise in the context of a transition event. If, for example, an adviser is winding down or ceasing operations during a time of stress, then an adviser's ability to safeguard client assets could be impacted.

    5 As discussed in Section I.B.1. of this release, if an adviser is unable to provide services to its clients, its clients' interests may be at risk. This risk could include the risk of loss if, for example, an adviser lacks the ability to make trades in a portfolio, is unable to receive or implement directions from clients, or if clients are unable to access their assets or accounts.

    We understand that many investment advisers, like other financial services firms, already have taken critical steps to address and mitigate the risks of business disruptions, regardless of the source, as a prudent business measure.6 Industry participants have also stated that the highly competitive environment in which advisers operate encourages proper risk management and contributes to advisers' attentiveness to operational risks.7 Advisers may recognize the potential for significant reputational damage and other costs associated with such risks.8 For many advisers, the management of operational risks is part of the normal course of business to mitigate issues that could negatively impact client relationships and the management of client assets (including potential losses).9 Deterioration in client relationships or financial losses could cause clients to move their accounts to another adviser or other financial services firm, and if done on a large scale, prompt the adviser to transition its business through a sale or other means or to wind down its operations and exit the market.

    6See infra notes 26-27 and accompanying text (discussing compliance policies and procedures required by rule 206(4)-7 under the Advisers Act); see also Comment Letter of BlackRock, Inc. to the Financial Stability Oversight Council's (“FSOC”) Notice Seeking Comment on Asset Management Products and Activities (“FSOC Notice”) (Mar. 25, 2015) (“BlackRock FSOC Comment Letter”) at 10 (“In the normal course of business, asset managers implement measures to mitigate the impact of potentially disruptive events through operational risk management programs, including maintaining business continuity plans . . . and technology disaster recovery plans . . . .”); Comment Letter of Investment Company Institute to FSOC Notice (Mar. 25, 2015) (“ICI FSOC Comment Letter”) at 69 (noting that “funds and key service providers to the industry have robust plans and strategies in place to facilitate the continuation or resumption of business operations in the event of an emergency, regardless of the cause”); Comment Letter of Vanguard to FSOC Notice (Mar. 25, 2015) (“Vanguard FSOC Comment Letter”) at 23 (“The purpose of business continuity plans is to develop alternative ways to carry out normal business functions without access to facilities, systems, and/or key third-party providers of goods or services to the funds or its adviser.”).

    7See, e.g., Comment Letter of Fidelity Investments to FSOC Notice (Mar. 25, 2015) (“Fidelity FSOC Comment Letter”) at 22 (“It is not correct to imply that competitive pressures push managers toward less risk management; in fact those pressures push funds to improve their risk management practices.”); BlackRock FSOC Comment Letter at 63 (“The asset management industry is highly competitive and there are numerous competitors across asset classes and investment strategies.”); ICI FSOC Comment Letter at 61 (“Regulated fund investors have considerable choice. The industry is highly competitive, with up to several hundred funds available within each investment category. Along with investment performance, the quality of shareholder services is a highly important factor in attracting and retaining fund investors.”).

    8See, e.g., BlackRock FSOC Comment Letter at 55 (“Issues related to operational and business continuity risk can be costly and/or harm an asset manager's reputation with its clients.”); Comment Letter of Managed Funds Association to FSOC Notice (Mar. 25, 2015) (“MFA FSOC Comment Letter”) at 45 (“It is in every manager's self-interest to have appropriate plans in place to handle emergencies.”).

    9See, e.g., BlackRock FSOC Comment Letter at 10 (“In the normal course of business, asset managers implement measures to mitigate the impact of potentially disruptive events through operational risk management programs, including maintaining business continuity plans . . . .”); Fidelity FSOC Comment Letter at 32 (“Fidelity devotes significant time and resources to ensuring that we can provide the services our clients expect even in exigent circumstances.”).

    While we understand that many investment advisers already have taken steps to address and mitigate the risks of business disruptions,10 our staff has observed a wide range of practices by advisers in addressing operational risk management. The staff frequently observes advisers managing operational and other risks through internal practices, procedures, and controls that are typically assessed by the adviser's legal, compliance, or audit staff, and often sees independent third-party assessments performed by audit or compliance firms.11 However, the staff also has observed advisers with less robust planning, causing them to experience interruptions in their key business operations and inconsistently maintain communications with clients and employees during periods of stress.12 As discussed further below, our staff has noted weaknesses in some adviser BCPs with respect to consideration of widespread disruptions, alternate locations, vendor relationships, telecommunications and technology, communications plans, and review and testing.13 Although disparate practices may exist in light of the varying size and complexity of registrants, to effectively mitigate such risks we are proposing to require all SEC-registered investment advisers to have plans that are reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations.

    10See, e.g., Comment Letter of Securities Industry and Financial Markets Association and the Investment Adviser Association to FSOC Notice (Mar. 25, 2015) (“SIMFA/IAA FSOC Comment Letter”) at 43 (“Of potentially more significant interest, asset managers are keenly focused on business continuity planning, disaster recovery, data protection, and cybersecurity issues—not just because of regulatory requirements . . . but also as a business imperative.”).

    11 We recognize that some asset management firms have well-established sophisticated enterprise risk management (“ERM”) practices built upon widely followed frameworks. See, e.g., SIMFA/IAA FSOC Comment Letter at 42-43. The letter notes that in larger more sophisticated asset managers, operational risks can be addressed by an ERM framework such as the Committee of Sponsoring Organizations (“COSO”) framework that works to identify key risk elements within the firm and how those elements are monitored and risks mitigated. See COSO, Enterprise Risk Management—Integrated Framework (Sept. 2004), available at http://www.coso.org/Publications/ERM/COSO_ERM_ExecutiveSummary.pdf. We understand that investment advisers with ERM programs typically consider business continuity as part of their broader management of operational risks. Accordingly, we believe that an adviser's business continuity and transition plan under the proposed rule could be a part of the adviser's existing ERM program.

    12See NEP Risk Alert, infra note 30, at 3.

    13See NEP Risk Alert, infra note 30; see also infra notes 31-35 and accompanying text.

    As described in more detail below, we are concerned about the adequacy of some advisers' plans to address operational and other risks associated with business resiliency. Our experience indicates that clients of advisers who do not have robust plans in place to address the operational and other risks related to significant disruptions in their operations are at greater risk of harm during such a disruption than the clients of advisers who do have such plans in place. As fiduciaries, investment advisers owe their clients a duty of care and a duty of loyalty, requiring them to put their clients' interests above their own.14 As part of their fiduciary duty, advisers are obligated to take steps to protect client interests from being placed at risk as a result of the adviser's inability to provide advisory services.15

    14See SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191, 194 (1963) (noting that the Advisers Act “reflects a congressional recognition `of the delicate fiduciary nature of an investment advisory relationship'” and stating that “[c]ourts have imposed on a fiduciary an affirmative duty of `utmost good faith, and full and fair disclosure of all material facts,' as well as an affirmative obligation `to employ reasonable care to avoid misleading' his clients” (citations omitted)); Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 17 (1979) (noting that the Advisers Act's “legislative history leaves no doubt that Congress intended to impose enforceable fiduciary obligations”).

    15See Compliance Programs of Investment Companies and Investment Advisers, Advisers Act Rel. No. 2204 (Dec. 17, 2003) [68 FR 74714 (Dec. 24, 2003)] (“Compliance Program Adopting Release”) at n.22 (noting this fiduciary obligation in the context of BCPs).

    Section 206(4) of the Advisers Act authorizes the Commission to adopt rules and regulations that “define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.” Because an adviser's fiduciary duty obligates it to take steps to protect client interests from being placed at risk as a result of the adviser's inability to provide advisory services, clients are entitled to assume that advisers have taken the steps necessary to protect those interests in times of stress, whether that stress is specific to the adviser or the result of broader market and industry events. We believe it would be fraudulent and deceptive for an adviser to hold itself out as providing advisory services unless it has taken steps to protect clients' interests from being placed at risk as a result of the adviser's inability (whether temporary or permanent) to provide those services.

    Accordingly, we believe advisers should be required to establish strong operational policies and procedures that manage the risks associated with business continuity and transitions. These policies and procedures should increase the likelihood that advisers are as prepared as possible to continue operations during times of stress and that they have taken steps to minimize risks that could lead to disruptions in their operations. These policies and procedures also should increase the likelihood that clients are not harmed in the event of a significant disruption in their adviser's operations. Therefore, today we are proposing to require SEC-registered advisers to adopt and implement written business continuity and transition plans that include certain specific components, and to maintain relevant records of those plans, in order to facilitate robust business continuity and transition planning across all SEC-registered advisers.

    B. Background 1. Business Continuity Planning

    The rapid recovery and resumption of the financial markets and the activities that support them underpins the resiliency of the U.S. financial system.16 Business continuity planning is a critical activity that supports resiliency and one that financial services firms, including investment advisers, generally should engage in to address the inherent risks they face in serving their clients' needs. Federal and state financial market and services regulators, including the Commission, have sought to highlight and address operational risks and the tools necessary to manage them, including fulsome business continuity planning for many financial industry participants.17

    16See Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System, Securities Exchange Act Rel. No. 47638 (Apr. 7, 2003) [68 FR 17809 (Apr. 11, 2003)] (“Interagency Paper”); cf. infra note 21 and accompanying text.

    17See Regulation Systems Compliance and Integrity, Securities Exchange Act Rel. No. 73639 (Nov. 19, 2014) [79 FR 72251 (Dec. 5, 2014)] (“Regulation SCI Adopting Release”); see also Policy Statement: Business Continuity Planning for Trading Markets, Securities Exchange Act Rel. No. 48545 (Sept. 25, 2003). In addition, we note that banks are subject to the Federal Financial Institutions Examination Council's (“FFIEC”) business continuity guidelines, which state that financial institutions should develop comprehensive BCPs and that “[t]he goal of the BCP should be to minimize financial losses to the institution, serve customers and financial markets with minimal disruptions, and mitigate the negative effects of disruptions on business operations.” See FFIEC, IT Examination Handbook, Business Continuity Planning (Feb. 2015) (“FFIEC Handbook”), available at http://ithandbook.ffiec.gov/ITBooklets/FFIEC_ITBooklet_BusinessContinuityPlanning.pdf; see also Board of Governors of the Federal Reserve System, Supervisory Letter SR 15-3 (Feb. 6, 2015), available at http://www.federalreserve.gov/bankinforeg/srletters/sr1503.htm. The FFIEC is an “interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB).” See FFIEC, available at https://www.ffiec.gov.

    For example, the Financial Industry Regulatory Authority (“FINRA”) requires broker-dealers to establish business continuity plans (“BCPs”) reasonably designed to meet existing customer obligations and address relationships with other broker-dealers and counterparties.18 Additionally, the Commodity Futures Trading Commission (“CFTC”) has adopted regulations that require swap dealers and major swap participants to establish and maintain BCPs that are designed to enable the regulated entity “to continue or to resume any operations by the next business day with minimal disturbance to its counterparties and the market.” 19 The North American Securities Administrator Association (“NASAA”) also recently adopted a model rule that, if adopted in a particular state, would require investment advisers registered in that state to have business continuity and succession plans in place that minimize “service disruptions and client harm that could result from a sudden significant business disruption.” 20

    18See FINRA Rule 4370 (requiring that member BCPs address certain elements, including data backup and recovery, all mission critical systems, alternate communications, alternate physical location of employees, and critical business constituent (i.e., a business with which a member firm has an ongoing commercial relationship in support of the member's operating activities), bank and counter-party impact); see also NASD, Notice to Members 04-37: Business Continuity Plans (May 2004), available at https://www.finra.org/sites/default/files/NoticeDocument/p003095.pdf. We note that investment advisers that are also registered as broker-dealers would have to comply with FINRA's rule as well as the proposed rule. However, as noted herein, we have modeled much of the proposed rule, including the required components of a business continuity and transition plan, on BCP requirements for other financial services firms that we believe share similar vulnerabilities as investment advisers. See infra notes 61-62 and accompanying text.

    19See 17 CFR 23.603(a). Relevant BCPs must be designed to recover all documentation and data required to be maintained by applicable law and regulation, and are required to include certain required components that are related to, among other things, data backup, systems maintenance, communications, geographic diversity, and third parties. See infra notes 62, 71, 79, and 86.

    20See NASAA Model Rule 203(a)-1A (stating that all plans should provide for backup of books and records, alternate means of communication, office relocations, assignment of duties to qualified persons in the event of death or unavailability of key personnel, and otherwise minimizing service disruption and client harm); see also Mark Schoeff Jr., State Regulators to Require Continuity Plans, Investment News, (Apr. 22, 2015), available at http://www.investmentnews.com/article/20150422/FREE/150429965/state-regulators-to-require-continuity-plans.

    In addition, we recently adopted rules to strengthen the technology infrastructure of the U.S. securities markets by adopting Regulation Systems Compliance and Integrity, or Regulation SCI, which applies to, among other things, self-regulatory organizations, certain alternative trading systems, and certain exempt clearing agencies.21 Specifically, Regulation SCI is designed to reduce the occurrence of systems issues and improve resiliency for key market participants when these problems do occur, and requires, among other things, relevant entities to have and test business continuity and disaster recovery plans. While these regulations and those of other regulatory bodies address different entities, they generally highlight similar principles of business continuity planning, including the need to address critical systems, data backup, communications, alternate and/or geographically diverse locations, and third-party relationships.

    21See Regulation SCI Adopting Release, supra note 17. Among other things, Regulation SCI requires SCI entities to establish and test business continuity and disaster recovery plans that include maintaining backup and recovery capabilities sufficiently resilient and geographically diverse and that are reasonably designed to achieve next business day resumption of trading and two-hour resumption of critical systems in the event of a wide-scale disruption. See 17 CFR 242.1001(a)(2)(v). Further, Regulation SCI sets forth business continuity and disaster recovery plan testing requirements for SCI entities. See 17 CFR 242.1004.

    Regulatory authorities have also acted collectively and in consultation with each other to address operational risks in light of the interconnectedness and interdependency of financial market participants. For example, the Commission, along with the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency, issued the Interagency Paper on Sound Practices to Strengthen the Resilience of the Financial System, which sets forth business continuity objectives for all financial firms and the U.S. financial system as a whole.22 More recently, FSOC issued a request for public comment on, among other things, operational risks and transition planning as it relates to the asset management industry.23

    22See Interagency Paper, supra note 16. The objectives discussed in the paper include (i) rapid recovery and timely resumption of critical operations following a wide-scale disruption; (ii) rapid recovery and timely resumption of critical operations following the loss or inaccessibility of staff in at least one major operating location; and (iii) a high level of confidence, through ongoing use or robust testing, that critical internal and external continuity arrangements are effective and compatible. The paper also sets forth four sound practices for core clearing and settlement organizations and firms that play significant roles in critical financial markets, including (i) identifying clearing and settlement activities in support of critical financial markets, (ii) determining appropriate recovery and resumption objectives, (iii) maintaining sufficient geographically dispersed resources to meet such objectives, and (iv) routinely using or testing recovery and resumption arrangements. See id. In addition, in 2012-2013, the Commission's Office of Compliance Inspections and Examinations (“OCIE”), along with FINRA and the CFTC, jointly reviewed a number of firms' business continuity and disaster recovery planning and published their joint observations on best practices and lessons learned. See Joint Review of Business Continuity and Disaster Recovery of Firms by the Commission's National Examination Program, CFTC's Division of Swap Dealers and Intermediary Oversight and FINRA (Aug. 16, 2013) (“Joint Review of Business Continuity”), available at https://www.sec.gov/about/offices/ocie/jointobservations-bcps08072013.pdf.

    Financial services industry participants have also been pro-active in addressing resiliency issues. See, e.g., Financial Services Sector Coordinating Council (established to coordinate infrastructure and homeland security activities within the financial services industry comprised on financial trade associations, financial utilities and financial firms), available at https://www.fsscc.org.

    23See FSOC Notice (Dec. 24, 2014) [79 FR 77488 (Dec. 24, 2014)], available at http://www.treasury.gov/initiatives/fsoc/rulemaking/Documents/Notice%20Seeking%20Comment%20on%20Asset%20Management%20Products%20and%20Activities.pdf; see also FSOC, Update on Review of Asset Management Products and Activities (Apr. 18, 2016), available at https://www.treasury.gov/initiatives/fsoc/news/Documents/FSOC%20Update%20on%20Review%20of%20Asset%20Management%20Products%20and%20Activities.pdf. Although our rulemaking proposal is independent of FSOC, several commenters responding to the FSOC Notice discussed operational risks and transition issues related to investment advisers, and we have considered and discussed relevant comments throughout this release. Comments submitted in response to the FSOC Notice are available at https://www.regulations.gov/#!docketBrowser;rpp=25;po=0;dct=PS;D=FSOC-2014-0001.

    The Commission addressed business continuity planning with respect to investment advisers in a general way when it adopted rule 206(4)-7 under the Advisers Act (“Compliance Program Rule”). Under the rule, advisers are required to consider their fiduciary and regulatory obligations under the Advisers Act, and adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act.24 At the time it adopted the rule, the Commission was concerned that not all advisers had adopted adequate compliance programs and as a result, clients and investors were being harmed.25 In the release adopting the Compliance Program Rule, the Commission stated that an adviser's compliance policies and procedures should address BCPs to the extent that they are relevant to an adviser.26 The Commission did not, however, identify critical components of a BCP or discuss specific issues or areas that advisers should consider in developing such plans.

    24See rule 206(4)-7; Compliance Program Adopting Release, supra note 15, at section II.A.1. Rule 206(4)-7 makes it unlawful for advisers to provide investment advice unless they adopt and implement written compliance policies and procedures reasonably designed to prevent violations by the adviser and its supervised persons of the Advisers Act and rules thereunder.

    25 The Commission noted that it and state securities authorities had recently discovered unlawful conduct involving a number of advisers, broker-dealers, and other service providers where personnel of these entities engaged in, or actively assisted others in engaging in, inappropriate market timing, late trading of fund shares, and the misuse of material, nonpublic information about fund portfolios. The Commission noted that these personnel had breached their fiduciary obligations to the funds involved and their shareholders by placing their own interests or the interests of the fund adviser ahead of the interests of fund shareholders. See Compliance Program Adopting Release, supra note 15, at section I.

    26Id. The Commission identified ten areas adviser compliance programs should address, including BCPs.

    As discussed above, an adviser's fiduciary obligations require it to take steps to protect its clients' interests from being placed at risk as a result of the adviser's inability to provide advisory services.27 This fiduciary duty fosters trust between the client and its adviser, such that the client relies on the adviser to act in its best interests and safeguard its assets as appropriate, even during times of stress.28 If an adviser is unable to provide advisory services after, for example, a natural disaster, a cyber-attack, an act of terrorism, technology failures, or the departure of key personnel, its temporary inability to continue operations may put clients' interests at risk and prevent it from meeting its fiduciary duty to clients. This risk could include the risk of loss if, for example, an adviser lacks the ability to make trades in a portfolio, is unable to receive or implement directions from clients, or if clients are unable to access their assets or accounts. As part of its fiduciary duty to protect client interests, an adviser also should take steps to minimize operational and other risks that could lead to a significant business disruption like, for example, a systems failure. In order to do so, advisers should generally assess and inventory the components of their business and minimize the scope of its vulnerability to a significant business disruption. While we recognize that an adviser may not be able to prevent significant business disruptions (e.g., a natural disaster, terrorist attack, loss of service from a third-party), we believe robust planning for significant business disruptions can help to mitigate their effects and, in some cases, minimize the likelihood of their occurrence.

    27See id. at n.22. The Commission also has stated that “clients of an adviser that is engaged in the active management of their assets would ordinarily be placed at risk if the adviser ceased operations.” Id.

    28See generally SEC v. Capital Gains Research Bureau, Inc., supra note 14 at 191 (“A fiduciary owes its clients more than mere honesty and good faith alone. ”); Investment Adviser Association, What is an Investment Adviser?, available at http://www.investmentadviser.org/eweb/dynamicpage.aspx?webcode=whatisia (noting that because advisers owe a fiduciary duty to their clients, they “[stand] in a special relationship of trust and confidence with [their] clients” and that such fiduciary duty generally includes the duty to place the clients' interests first “at all times”).

    Various weather-related events have tested, on a large scale, the effectiveness of existing BCP components of advisers' compliance programs.29 In addition, these events provided our examination staff the opportunity to review, observe, and assess the operations and resiliency of BCPs across many advisers. The examination staff followed these reviews by issuing public reports of their findings and effective practices.30

    29 For example, Hurricane Katrina in 2005 and, as discussed in this release, Hurricane Sandy in 2012 presented challenges to advisers affected by those storms.

    30See National Exam Program Risk Alert, SEC Examinations of Business Continuity Plans of Certain Advisers Following Operational Disruptions Caused by Weather-Related Events Last Year (Aug. 27, 2013) (“NEP Risk Alert”), available at https://www.sec.gov/about/offices/ocie/business-continuity-plans-risk-alert.pdf. The examination was part of a joint review by the SEC's OCIE, FINRA and the CFTC of relevant firms' business continuity and disaster recovery planning in the wake of Hurricane Sandy. Together, these entities issued a joint statement setting forth best practices and lessons learned as a result of their review. See Joint Review of Business Continuity, supra note 22; see also SEC Compliance Alert (June 2007) (“Compliance Alert”), available at https://www.sec.gov/about/offices/ocie/complialert.htm.

    Hurricane Sandy broadly impacted the industry and its operations because of the duration and point of impact of the storm, which affected parts of New York, New Jersey, and the surrounding areas, where numerous financial services providers (both markets and participants) are concentrated. In the aftermath of the hurricane, examiners observed that the degree of specificity of advisers' written BCPs varied and that some advisers' BCPs did not “adequately address and anticipate widespread events.” 31 In addition, with respect to alternative locations, examination staff noted that some advisers did not have geographically diverse office locations, even when they recognized that diversification would be appropriate.32 Additionally, they observed with respect to vendor relationships and telecommunications/technology, that certain advisers did not evaluate the BCPs of their service providers or engage service providers to ensure their backup servers worked properly, and that some advisers reported that they did not keep updated lists of their vendors and respective contacts.33 Moreover, with respect to communications plans, the examination staff observed that some advisers inconsistently planned how to contact and deploy employees during a crisis, inconsistently maintained communications with clients and employees, and did not identify which personnel were responsible for executing and implementing the various portions of the BCP.34 Finally, with respect to review and testing, our examination staff reported that some advisers “inadequately tested their BCPs relative to their advisory businesses.” 35 These observations illustrate our experience that business continuity planning among investment advisers can be uneven and, in some instances, may not be sufficiently robust to mitigate the potential adverse effects of a significant business disruption on clients.

    31See NEP Risk Alert, supra note 30, at 3.

    32See NEP Risk Alert, supra note 30, at 4.

    33See NEP Risk Alert, supra note 30, at 4-5.

    34See NEP Risk Alert, supra note 30, at 6.

    35See NEP Risk Alert, supra note 30, at 7.

    Additionally, the operational complexity of advisers has increased over the years and many advisers' operations are highly dependent on technology, including investment processes (e.g., trading, risk management operations) and client services.36 It is critical for investment advisers to focus on resiliency so that they can continue to provide services to their clients when events impact the availability of systems, facilities, and staff. The ability to recover such systems, including third-party vendor provided platforms and services, and business operations in a timeframe that meets business requirements is important to mitigating the consequences of disruptive events.37

    36See, e.g., Blackrock, The Role of Technology Within Asset Management (Aug. 2014), at 1, available at http://www.blackrock.com/corporate/en-us/literature/whitepaper/viewpoint-asset-management-technology-aug-2014.pdf (“Asset managers require systems to facilitate the maintenance of data and flow of information in the investment process, such as trading counterparties and custodians. Technology provides the unseen `plumbing' that ensures information flows smoothly throughout the ecosystem.”). The paper also notes that a robust asset management process requires both experienced professionals and technology, and that integrated investment technology enhances the quality of large volumes of data, supports consistent investment workflows and enables timely communications for both internal functions and with external parties.

    37See, e.g., infra note 90.

    Based on the staff's observations from examinations, and the ever-growing complexity of, and risks to, operations, we are concerned that some advisers may not have robust BCPs. When a client entrusts an adviser to manage its assets, the client does so with the expectation that the adviser will act in its best interests and safeguard its assets as appropriate, even in times of stress. We believe that without robust business continuity planning, an adviser's clients may be placed at risk in times of stress. Accordingly, to facilitate such robust planning across all SEC-registered advisers, we are proposing to require that these advisers address certain components in their business continuity and transition plans.

    2. Transition Planning

    Operational risks are not limited to affecting the day-to-day operations of an adviser, but can lead to a financial services firm having to cease or wind-down operations while also considering how to safeguard client or investor assets. The 2008 financial crisis demonstrated that providers of financial services are at risk of having to exit the market unexpectedly and having to do so quickly.38 As with traditional business continuity planning, regardless of whether the risk is internal or external to the firm, a reasonably designed plan assessing various risks related to a business transition (e.g., operational and other risks related to transitioning client assets) and how to react to transition events should ameliorate the impact of transitions on clients.39 After the financial crisis, Congress addressed the need for this type of advance planning for certain institutions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandated regulations that require certain financial institutions to plan for “rapid and orderly resolution in the event of material financial distress or failure.”40

    38See Financial Crisis Inquiry Commission, Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (Jan. 2011) at 22-23, available at https://www.thefederalregister.org/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf (“In January 2008, Bank of America announced it would acquire the ailing lender Countrywide. . . . Bear Stearns . . . was bought by JP Morgan with government assistance in the spring. Before the summer was over, Fannie Mae and Freddie Mac would be put into conservatorship. Then, in September, Lehman Brothers failed and the remaining investment banks, Merrill Lynch, Goldman Sachs, and Morgan Stanley, struggled as they lost the market's confidence. AIG . . . was rescued by the government. Finally, many commercial banks and thrifts . . . teetered. IndyMac had already failed over the summer; in September, Washington Mutual became the largest bank failure in U.S. history. In October, Wachovia struck a deal to be acquired by Wells Fargo.”). Several of the financial services firms mentioned in this report included asset management subsidiaries.

    39 Both transition planning and business continuity planning relate to instances where an adviser may be unable to provide advisory services and where advance planning for those instances would benefit advisers and their clients. We note that in the Compliance Program Adopting Release, the Commission noted the risks to advisory clients if an adviser ceased operations. See Compliance Program Adopting Release, supra note 15.

    40See section 165(d) of the Dodd-Frank Act [12 U.S.C. 5365]; see also Resolution Plans Required, 76 FR 67323 (Nov. 1, 2011) (“Resolution Plans”). We are not proposing that advisers adopt resolution plans or “living wills” similar to that which certain financial institutions must now adopt under FDIC and Federal Reserve rules because investment advisers do not interact with the government in the same way as banks. For example, advisers do not accept insured “deposits,” do not have access to the Federal Reserve discount window, and do not use their own balance sheets when trading client assets.

    In the normal course of business, it is our understanding that advisers routinely transition client accounts without a significant impact to themselves, their clients, or the financial markets.41 We believe that much of this is largely attributable to the agency relationship of advisers managing the assets on behalf of their clients and the regulatory framework supporting this relationship whereby advisory client assets for which the adviser has custody are required to be held at a qualified custodian, such as a bank or broker-dealer.42 Because client assets custodied by an adviser must be held at a qualified custodian and segregated from the adviser's assets, we have observed that transitioning accounts from one adviser to another can largely be a streamlined process that in many cases may not involve the physical movement or sale of assets.43 Pooled investment vehicle clients generally have the ability to terminate the advisory contract of the adviser or remove the governing body that may provide advisory services (e.g., general partner or managing member) and appoint a new adviser or governing body if they so desire, while separate account clients can generally terminate the advisory contract and appoint a new adviser to manage their assets, all while their assets are typically maintained at a qualified custodian.44

    41See, e.g., BlackRock FSOC Comment Letter (noting that “[t]ransitioning the management of client assets from one manager to another regularly occurs in the normal course of business” and listing 19 previous examples of advisers or funds exiting the market without great market impact); SIMFA/IAA FSOC Comment Letter (noting that “managers and funds routinely enter and exit the asset management industry” and citing an Investment Company Institute paper to note that, in 2013, “48 mutual fund sponsors left the business without any impact or distress”); Comment Letter of PIMCO to FSOC Notice (Mar. 25, 2015); Vanguard FSOC Comment Letter. In addition, we understand that specialized transition managers exist to manage assets during a transition from one adviser to another. See, e.g., BlackRock FSOC Comment Letter at 66.

    42See rule 206(4)-2 under the Advisers Act. The use of custodians that traditionally provide those services provide protection for client assets from the adverse effects of stress at an adviser. We also note that approximately 96.7% of SEC-registered advisers are not related to the custodians that hold client assets. Based on data from the Commission's IARD as of January 4, 2016.

    43 Client assets are not part of the adviser's balance sheet. Client assets are not subject to the liquidation or potential bankruptcy process of an asset manager and are not subject to the adviser's creditors.

    44 We note that to the extent a new adviser does not have a relationship with the same custodian used by the previous adviser, assets may need to be transferred to a different custodian. Additionally, we note that complications could arise with respect to the transfer of shareholder records when transitioning client accounts to another adviser.

    In addition, we are aware of instances of non-routine disruptions at large advisory businesses that have resulted in transitions to new advisers or new ownership without appearing to have a significant adverse impact on clients, fund investors, or the financial markets.45 Advisers routinely enter and exit the market and are capable of transferring client assets to another adviser or distributing such assets back to the client without negatively impacting the client.46 Cases of advisory firms experiencing transition events are often caused by a rapid decrease in assets under management, which can occur for a variety of reasons, including poor performance or an event causing reputational harm.47 To help ensure that a transition is as seamless as possible, an adviser must be aware of the impediments that should be addressed to minimize potential client impact.

    45 For example, although a unique situation, advisory firm Neuberger Berman spun out of Lehman Brothers during the 2008 financial crisis into a private company. See also infra note 52 (discussing the circumstances of the Neuberger Berman sale).

    46See supra note 41.

    47See, e.g., Trevor Hunnicutt, F-Squared Files for Bankruptcy, Investment News (July 8, 2015) (“F-Squared Article”), available at http://www.investmentnews.com/article/20150708/FREE/150709926/f-squared-files-for-bankruptcy (noting that after settling charges with the SEC for false performance claims, F-squared started losing assets under management); Christine Dugas & Sandra Block Strong, Strong Capital, Founder to Pay $140M in Settlement, USA Today (May 20, 2004), available at http://usatoday30.usatoday.com/money/perfi/funds/2004-05-20-strong-settle_x.htm (noting that after Strong Capital Management (“Strong”) and its founder settled charges with the SEC for allowing and engaging in undisclosed frequent trading in Strong mutual funds, Strong funds had a “net outflow of investor assets totaling $4.9 billion”); see also In the Matter of F-Squared Investments, Inc., Advisers Act Rel. No. 3988 (Dec. 22, 2014) (settled enforcement action); In the Matter of Strong Capital Management, et al., Securities Exchange Act Rel. No. 49741 (May 20, 2004) (settled enforcement action); infra note 60.

    We are also aware of transitions involving funds under stress that have not been seamless or without problem.48 For example, in one instance, an adviser's proprietary system used on behalf of a fund client had limitations on the pricing of fund shares that could not be efficiently modified to accommodate certain events, which in turn impeded the processing of fund redemption transactions and the reconciliation, liquidation, and transfer of investor accounts on a timely basis.49 In addition, while maintaining assets with a custodian may ease the transfer of those assets, the adviser may have important or private information concerning its clients or their strategies and goals that would need to be transitioned securely and efficiently.50

    48See, e.g., BlackRock FSOC Comment Letter (citing to the wind-down of Long-Term Capital Management in 2000 and Reserve Primary Fund in 2008 and noting that regulatory intervention was necessary for the funds involved).

    49See In the Matter of The Reserve Fund, et al., Investment Company Act Rel. No. 28386 (Sept. 22, 2008) (finding that the temporary suspension of the right of redemption and postponement of payment for shares which had been submitted for redemption but for which payment had not been made was necessary for the protection of shareholders); see also The Reserve Delays Primary Fund Distributions, MFWire.com (Oct. 14, 2008), available at http://www.mfwire.com/article.asp?storyID=19638&bhcp=1 (“The process of determining accurately the number of shares each investor held in the Primary Fund has proven to be extremely complex and could not be completed in the originally anticipated time frame.”); The Reserve Furnishes More Details On Primary Fund Redemptions, MFWire.com (Oct. 16, 2008), available at http://www.mfwire.com/article.asp?storyID=19656&bhcp=1 (“[W]e have been working diligently to enhance our existing software and add new programs to hasten the distribution process.”).

    50See generally Regulation S-P, 17 CFR 248 (establishing general requirements and restrictions on a financial institutions' ability to disclose nonpublic personal information about consumers, including clients, to nonaffiliated third parties and exceptions associated therewith).

    Moreover, the 2008 financial crisis illustrated that one firm's distress may at times have a broader impact on the financial markets and overall economy.51 Advisers could be impacted by broader market events in a number of ways that could affect an adviser's ability to continue operations and possibly lead to a transition event. For example, advisers are often owned by or affiliated with other financial services firms who themselves may be in distress. An adviser may be affected by such distress to the extent the distress negatively impacts the adviser's reputation, if it relies on a distressed affiliate for certain systems or services, or if it is an asset that a distressed parent sells.52 Under circumstances such as these, we are concerned about the adviser's ability to continue to act in the clients' best interests.

    51See generally Joint Report, infra note 72.

    52See, e.g., Lehman Brothers selling its asset management arm after declaring bankruptcy. Sam Mamudi, Neuberger Berman Sold to Private Equity, Market Watch (Sept. 29, 2008), available at http://www.marketwatch.com/story/neuberger-berman-sold-to-private-equity-for-215-billion.

    Proper planning and preparation for possible distress and other significant disruptions in an adviser's operations is essential so that, if an entity has to exit the market, it can do so in an orderly manner, with minimal or no impact on its clients. As discussed above, an adviser's fiduciary duty obligates it to take steps to protect client interests from being placed at risk as a result of the adviser's inability to provide advisory services and, thus, it would be fraudulent and deceptive for an adviser to hold itself out as providing advisory services unless it has taken such steps.53 Such advance planning and preparation may minimize an adviser's exposure to operational and other risks and, therefore, lessen the possibility of a significant disruption in its operations, and also may lessen any potential impact on the broader financial markets. Accordingly, and as discussed in more detail below, we believe that SEC-registered advisers should be required to adopt and implement a written business continuity and transition plan that is tailored to the risks associated with the adviser's operations and includes certain components, reflecting its critical role as an agent for its clients.

    53See supra section I.A; see also section 206(4) of the Advisers Act.

    C. Discussion

    We believe it is appropriate at this time to propose a rule requiring SEC-registered advisers to adopt and implement a business continuity and transition plan54 that is reasonably designed to address operational and other risks related to a significant disruption in an adviser's operations and that addresses certain specified components.55 We recognize that, pursuant to the Compliance Program Rule, most SEC-registered investment advisers may already have BCPs in place as part of their compliance policies and procedures 56 and that those plans (or other plans) may also address transition planning.57 However, it has been our staff's experience that the robustness of these BCPs is inconsistent across investment advisers. We believe that requiring a business continuity and transition plan that addresses operational and other risks by rule and specifying certain components of such a plan will facilitate the adoption and implementation of robust plans by all SEC-registered investment advisers that address critical areas and that should be effective and workable during a significant disruption in an adviser's operations. Moreover, we believe requiring such plans will benefit advisory clients because advisers will likely be better prepared to deal with business continuity and transition events if and when they occur and will better mitigate risks attendant with their operations and business practices, thereby reducing the likelihood of client harm as the result of a significant disruption in an adviser's operations.

    54 We recognize that business continuity planning and transition planning address different circumstances (i.e. one addresses the continuation of a business while the other addresses the winding down of a business). See infra note 60 and accompanying text. However, both business continuity planning and transition planning pertain to instances where an adviser may be unable to provide advisory services and where advance planning for those instances would benefit advisers and their clients. In this release and in proposed rule 206(4)-4, we refer to an adviser adopting “a” business continuity and transition plan. The proposed rule would not require an adviser to consolidate all of the components described in proposed rule 206(4)-4 into one document. An adviser may maintain separate plans that address the components identified in proposed rule 206(4)-4.

    55 We note that the Commission has explicitly required BCPs in other contexts, and that FINRA has adopted specific rules on BCPs for broker-dealers. See Regulation SCI Adopting Release, supra note 17; FINRA Rule 4370. Further, NASAA has also issued a model rule for states to apply to state-registered advisers, which tend to be smaller in scale and size than advisers registered with the Commission. See NASAA Model Rule 203(a)-1A.

    56See, e.g., BlackRock FSOC Comment Letter at 10 (noting that asset managers maintain BCPs); Fidelity FSOC Comment Letter at 32-33 (discussing BCPs).

    57 We understand that in practice, adviser BCPs focus on risks from events that would limit or impact normal operations, such as natural disasters or systems failures, but also can address transition planning. See supra note 39 (discussing the Compliance Program Adopting Release and language therein regarding risks to clients if an adviser ceases operations).

    We are proposing new rule 206(4)-4 under the Advisers Act and amendments to rule 204-2 under the Advisers Act. Under rule 206(4)-4, it would be unlawful for an SEC-registered investment adviser to provide investment advice unless the adviser adopts and implements a written business continuity and transition plan and reviews that plan at least annually. The proposed amendments to rule 204-2 would require those advisers to make and keep copies of all written business continuity and transition plans that are in effect or were in effect at any time during the last five years, as well as any records documenting the adviser's annual review of its business continuity and transition plan.

    1. Adopt and Implement Business Continuity and Transition Plans

    The proposed rule would require SEC-registered advisers to adopt and implement written business continuity and transition plans reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations.58 These plans would include policies and procedures concerning (1) business continuity after a significant business disruption, and (2) business transition in the event the investment adviser is unable to continue providing investment advisory services to clients. Business continuity situations generally include natural disasters, acts of terrorism, cyber-attacks, equipment or system failures, or unexpected loss of a service provider, facilities, or key personnel. Business transitions generally include situations where the adviser exits the market and thus is no longer able to serve its clients, including when it merges with another adviser, sells its business or a portion thereof,59 or in unusual situations, enters bankruptcy proceedings.60

    58See proposed rule 206(4)-4. We note that adviser BCPs are also often referred to as business continuity and disaster recovery plans; however, we have chosen to use the term “business continuity and transition plan” to refer to plans required under the proposed rule. We believe, however, that such plans would encompass disaster recovery planning because any robust BCP would need to plan for the recovery of its business operations and systems in order to be able to continue providing services to clients. See proposed rule 206(4)-4(b)(2)(i) (requiring business continuity and transition plans to include maintenance of critical operations and systems, and the protection, backup, and recovery of data).

    59See proposed rule 206(4)-4(b). We note with respect to business transitions that there may be circumstances where an adviser is unable to provide advisory services for only a portion of its business, but is able to continue providing services with respect to another portion of its business, and thus, only exits a particular market. An adviser's business continuity and transition plan generally should address the possibility of such a partial transition. Cf. infra note 60 and accompanying text (discussing business transitions generally).

    60 For example, in 2015, F-Squared Investments, Inc. filed for bankruptcy and arranged for its investment strategies to be managed by another adviser. See F-Squared Article, supra note 47. In addition, in 2005, funds managed by Strong were acquired by Wells Fargo & Company and the “legal entities comprising the Strong . . . complex were subsequently liquidated.” See BlackRock FSOC Comment Letter at 62-63 (discussing the Strong transition); see also Press Release, Wells Fargo Agrees to Acquire $34 Billion in Assets Under Management From Strong Financial Corporation, Wells Fargo (May 26, 2004), available at http://www.wellscap.com/docs/press_releases/5.26.04.pdf.

    The proposed rule is intended to help ensure that an adviser's policies and procedures minimize material service disruptions and any potential client harm from such disruptions. Advisers should keep this focus at the forefront when reviewing their business operations and developing their policies and procedures. Accordingly, the proposed rule would require an SEC-registered adviser's business continuity and transition plan to include policies and procedures designed to minimize material service disruptions, including policies and procedures that address certain specific components. We recognize that advisers' business models and operations vary, but we believe that every business continuity and transition plan must generally address operational and other risks related to a significant disruption in the adviser's operations and must address certain key components to plan and prepare for such disruptions.61 While we believe advisers should generally assess and inventory all of the components of their businesses in order to develop their business continuity and transition plans and tailor their plans to the specific risks their businesses face, we also believe that identifying these key components should facilitate the adoption and implementation of robust BCPs by all SEC-registered investment advisers.

    61See supra notes 30-35 and accompanying text (discussing certain key elements of BCPs). Other regulatory bodies and organizations also have recognized key elements of business continuity plans. See 17 CFR 23.603 (setting forth essential components of BCPs for swap dealers and major swap participants); FINRA Rule 4370 (setting forth minimum elements that a business continuity plan should address); NASAA Model Rule 203(a)-1A (stating certain elements the plan should address); FFIEC Handbook, supra note 17, at G-1 (discussing components of effective BCPs).

    Under the proposed rule, the content of an SEC-registered adviser's business continuity and transition plan would be based upon risks associated with the adviser's operations and would include policies and procedures designed to minimize material service disruptions, including policies and procedures that address the following: 62 (1) Maintenance of critical operations and systems, and the protection, backup, and recovery of data; 63 (2) pre-arranged alternate physical location(s) of the adviser's office(s) and/or employees; 64 (3) communications with clients, employees, service providers, and regulators; 65 (4) identification and assessment of third-party services critical to the operation of the adviser; 66 and (5) plan of transition that accounts for the possible winding down of the adviser's business or the transition of the adviser's business to others in the event the adviser is unable to continue providing advisory services.67

    62 We have modeled the proposed rule on BCP requirements for other financial services firms that we believe share similar vulnerabilities as investment advisers, as well as our staff's examinations experiences, which have highlighted a number of best practices as well as a number of areas for improvement specific to investment advisers. For example, to assist advisers in considering their own business continuity issues, the examination staff previously identified a number of “lessons learned” from its examinations of advisers that were affected by Hurricane Katrina. See Compliance Alert, supra note 30. The staff noted certain provisions in disaster recovery plans that appeared to be effective in allowing an adviser to provide “uninterrupted advisory services to clients in a compliant manner after a disaster” including (i) a pre-arranged remote location for short-term and possible long-term use; (ii) alternate communication protocols to contact staff and clients; (iii) remote access to business records and client data through appropriately secured means; (iv) temporary lodging for key staff where necessary and effective training of staff on how to fulfill essential duties in the event of a disaster; (v) maintaining accurate and up-to-date contact information for all third-party service providers and familiarity with the BCPs of those providers; (vi) contingency arrangements for loss of key personnel; (vii) periodic testing, evaluation and revision of the plan; and (viii) maintaining sufficient insurance and financial liquidity to prevent any interruption of the performance of compliant advisory services.

    63See proposed rule 206(4)-4(b)(2)(i).

    64See proposed rule 206(4)-4(b)(2)(ii).

    65See proposed rule 206(4)-4(b)(2)(iii).

    66See proposed rule 206(4)-4(b)(2)(iv).

    67 As discussed more below, the plan of transition would have to include (1) policies and procedures intended to safeguard, transfer and/or distribute client assets during transition; (2) information regarding the corporate governance of the adviser; (3) the identification of any material financial resources available to the adviser; (4) policies and procedures facilitating the prompt generation of any client-specific information necessary to transition each client account; and (5) an assessment of the applicable law and contractual obligations governing the adviser and its clients, including pooled investment vehicles, implicated by the adviser's transition. See proposed rule 206(4)-4(b)(2)(v).

    While each SEC-registered adviser's business continuity and transition plan must address the components set forth in the proposed rule, we recognize that the degree to which an adviser's plan addresses a required component will depend upon the nature of each particular adviser's business. We also recognize that business models and operations vary significantly among advisers.68 The proposed rule thus would require that the plan be reasonably designed to address the operational and other risks of an adviser and thus advisers need only take into account the risks associated with its particular operations, including the nature and complexity of the adviser's business, its clients, and its key personnel.69 For example, we believe that the business continuity and transition plan of a large adviser with multiple locations, offices, or business lines likely would differ significantly from that of a small adviser with a single office or only a few investment professionals and employees. Additionally, we believe that the business continuity and transition plan of an adviser with a complex internal technology infrastructure likely would differ from that of an adviser that primarily uses an outsourced model.70 The complexity and risks associated with these diverse business models could be substantially different, and our proposed rule is designed to give advisers the flexibility to create business continuity and transition plans that accommodate such differences.

    68See Comment Letter of Wellington Management Group LLP to FSOC Notice (Mar. 25, 2015) at 2 (“The unique characteristics of today's asset management industry (agency and advice based: Low barriers to entry: High substitutability among managers: And highly competitive) result in a large number of asset management firms that are organized in a variety of models.”).

    69See, e.g., BlackRock FSOC Comment Letter at 9 (noting that “understanding the differences in operating models is crucial” in assessing the potential operational risk of an asset manager).

    70Id. at 71. A larger adviser may conduct (insource) some or all middle and back office functions (e.g., securities administration, accounting, and recordkeeping) internally. Whereas in an outsourced model, the asset management firm hires third-party providers to perform various middle and back office functions.

    a. Maintenance of Critical Operations and Systems, and the Protection, Backup, and Recovery of Data, Including Client Records

    The proposed rule would require advisers' business continuity and transition plans to include policies and procedures on the maintenance of critical operations and systems, and the protection, backup, and recovery of data, including client records.71 With respect to maintaining critical operations/systems, an adviser's plan generally should identify and prioritize critical functions, operations, and systems and consider alternatives and redundancies to help maintain the continuation of operations in the event of a significant business disruption.72 When evaluating which operations and systems are critical, advisers generally should consider those that are utilized for prompt and accurate processing of portfolio securities transactions on behalf of clients, including the management, trading, allocation, clearance and settlement of such transactions. Advisers generally should also consider operations and systems that are critical to the valuation and maintenance of client accounts, access to client accounts, and the delivery of funds and securities. This typically will include identification and assessment of third-party services that support certain functions, as activities conducted may involve systems and processes that the adviser controls and others that may be wholly or partially dependent on third-party vendors, which we address below. Advisers generally also should identify which key personnel either provide critical functions to the adviser or support critical operations or systems of the adviser such that the temporary or permanent loss of those individuals would disrupt the adviser's ability to provide services to its clients.

    71 We note that Regulation SCI also includes requirements regarding the maintenance of systems. Rule 1001(a) requires each SCI entity to establish, maintain, and enforce policies and procedures that are reasonably designed to ensure that its “SCI systems” have levels of capacity, integrity, resiliency, availability, and security, adequate to maintain the SCI entity's operational capability and promote the maintenance of fair and orderly markets. Moreover, rule 1001(a)(2)(v) also requires that these policies and procedures include business continuity and disaster recovery plans that are reasonably designed to achieve two-hour resumption of “critical SCI systems” following a wide-scale disruption. 17 CFR 242.1001. We note that in the Regulation SCI Adopting Release, the Commission stated that it would monitor and evaluate the implementation of Regulation SCI, the risks posed by systems of other market participants, and the continued evolution of the securities markets, and in the future may consider extending the types of requirements in Regulation SCI to other market participants, including investment advisers. See Regulation SCI Adopting Release, supra note 17, at 72259. We note that the proposed rule would not apply Regulation SCI to investment advisers. Rather, the Commission is proposing this rule in light of the specific operations and businesses of investment advisers and the risks they present.

    In addition to Regulation SCI, we note, as discussed above, that our staff has previously highlighted the importance of access to business records and client data as well as backup servers and other telecommunications services in the context of business continuity planning. See supra notes 30 and 33, and accompanying text. We also note that other regulatory bodies and organizations have stressed the importance of critical systems and data protection in the context of BCPs. See, e.g., 17 CFR 23.603(b)(1), (4) and (6) (requiring BCPs to include identification of documents, data, facilities and infrastructure, as well as backup or copying of documents and data, essential to operations, and procedures for and the maintenance of backup facilities, systems and infrastructure); FINRA Rule 4370(c)(1) and (2) (requiring BCPs to address data backup and recovery (both hard copy and electronic) as well as mission critical systems); NASAA Model Rule 203(a)-1A(1) (stating that BCPs should provide for “protection, backup and recovery of books and records”); SIFMA, Business Continuity Planning Expanded Practices Guidelines (Apr. 2011) (“SIFMA Guidelines”) at 27 and 32, available at http://www.sifma.org/uploadedfiles/services/bcp/sifma-bc-practices-guidelines2011-04.pdf (noting that businesses should ensure “the functionality and availability of critical business applications” and “that redundant copies of vital records” are securely stored and available during an emergency).

    72 Following the publication of the Interagency Paper, the Commission, together with the Federal Reserve and the Office of the Comptroller of the Currency, issued a joint report that discussed the industry's efforts to implement the recommendations contained in the Interagency Paper (“Joint Report”). The Joint Report notes that the Interagency Paper addresses reasonable recovery time objectives and identifies specific risk-based recovery standards in order “to assure that there will be a relatively consistent degree of preparedness across” the industry. See Joint Report on Efforts of the Private Sector to Implement the Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System (Apr. 2006) at 3, available at https://www.sec.gov/news/press/studies/2006/soundpractices.pdf; see also MFA FSOC Comment Letter at 45 (citing to the MFA's recommendations to hedge fund managers that they design and implement business continuity/disaster recovery plans “reasonably designed to: (1) Identify and prioritize critical business functions. . .”).

    We believe that by considering alternatives and redundancies for critical operations and systems in advance of significant business disruptions, an adviser will be able to prioritize, recover, and resume key aspects of its business in a timely manner and consequently be better able to act in its clients' best interests and continue providing services to its clients during such a disruption.73 For example, if most securities operations functions (post-trade processing, corporate actions, reconciliation, etc.) are handled internally by the adviser,74 then the adviser's plans should address the backup systems or other alternative processes or procedures that will be used or followed in the event of a business disruption where standard operations may not be available. Additionally, we believe that contingency plans with respect to key personnel generally should address both the temporary or permanent loss of such personnel. For example, loss of key personnel could result from an employee's sudden departure from the adviser or could be due to a weather related event that renders the employee temporarily unavailable. Accordingly, an adviser's business continuity and transition plan generally should include short-term arrangements, such as which specific individuals would satisfy the role(s) of key personnel when unavailable, and long-term arrangements regarding succession planning and how an adviser will replace key personnel.75

    73 Investment advisers should also generally consider in their business continuity planning circumstances in which a service provider (including another investment adviser that provides operations or systems to the adviser) is permanently unable to provide the adviser with critical operations or systems. See, e.g, Financial Conduct Authority, Outsourcing in the Asset Management Industry: Thematic Project Findings Report (Nov. 2013) (“FCA Paper”), available at http://www.fca.org.uk/static/documents/thematic-reviews/tr13-10.pdf (“Based on our initial assessment of asset managers last year, we concluded that firms in the sample were unprepared for a failure of their service provider.”). The FCA Paper suggested that asset managers should review their own outsourcing arrangements and where appropriate (i) “enhance their contingency plans for the failure of a service provider providing critical activities, taking into account industry-led guiding principles where applicable” and (ii) “assess the effectiveness of their oversight arrangements to oversee critical activities outsourced to a service provider, making sure the required expertise is in place.”

    74 As discussed above, investment advisers that are also registered broker-dealers will be subject to both the proposed rule and FINRA's rule 4370 regarding BCPs. While we believe the two rules are largely complementary, we note that SEC-registered advisers would have to comply with the requirements of proposed rule 206(4)-4 with respect to their advisory functions. See supra note 18.

    75 An adviser should also consider whether the departure of key personnel may trigger contractual obligations with clients, investors, or counterparties. For example, private funds clients may contain redemption rights for its investors upon the departure of specified investment personnel.

    With respect to data protection, backup, and recovery, a business continuity and transition plan generally should address both hard copy and electronic backup, as appropriate.76 A reasonably designed business continuity and transition plan generally should recognize that significant business disruptions may prevent access to electronic copies of data (e.g., power or internet outage) and hard copies of data (e.g., cannot access building where data is located). Such a plan should also recognize the important role electronic records can play in carrying out the adviser's plan of transition in a timely manner.

    76 This proposed requirement would be consistent with the existing requirement for SEC-registered investment advisers to maintain specific books and records relating to its investment advisory business. See rule 204-2(a) and (g). The “books and record” rule requires advisers to have procedures: to reasonably protect electronic records from loss, alteration, or destruction; to limit access to electronic records; and to assure that electronic records that are created from hard copy are complete, true, and legible. See rule 204-2(g)(3).

    Additionally, in connection with data backup and recovery, a business continuity and transition plan generally should include an inventory of key documents (e.g., organizational documents, contracts, policies and procedures), including the location and description of the item, and a list of the adviser's service providers relationships that are necessary to maintaining functional operations. This documentation generally should include details of the adviser's management structure, risk management processes, and financial and regulatory reporting requirements. We believe such documentation would make it easier for an adviser and its employees to access important operations/systems, documents, and relationships during a significant business disruption.

    Finally, we note with respect to data protection, backup and recovery, one type of potentially significant business disruption is a cyber-attack. An adviser generally should consider and address as relevant the operational and other risks related to cyber-attacks.77 We believe exposure to compliance and operational risks that may be caused by cybersecurity incidents can be mitigated by addressing such risks in the context of business continuity planning.78

    77 Our staff recently highlighted a number of measures for advisers to consider in the context of cybersecurity and noted that “advisers should identify their . . . compliance obligations under the federal securities laws and take into account these obligations when assessing their ability to prevent, detect and respond to cyber attacks.” See Cybersecurity Guidance, IM Guidance Update (Apr. 2015), available at http://www.sec.gov/investment/im-guidance-2015-02.pdf . In March 2014, the Commission hosted a roundtable on cybersecurity, which highlighted the Commission's focus on cybersecurity-related issues and a number of Commission actions relating to cybersecurity. The Commission is also focused on cybersecurity risk issues related to investment advisers, including data protection and identity theft vulnerabilities. See Chair Mary Jo White, Opening Statement at SEC Roundtable on Cybersecurity (Mar. 26, 2014), available at http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541286468; see also Identity Theft Red Flags Rules, Securities Exchange Act Rel. No. 69359 (Apr. 10, 2013); see also Cybersecurity Roundtable, SEC, available at http://www.sec.gov/spotlight/cybersecurity-roundtable.shtml (providing information on the roundtable). We also note that the National Institute of Standards and Technology (“NIST”) has issued a framework for improving cybersecurity and that it recently sought comment on this framework. See NIST, Framework for Improving Critical Infrastructure Cybersecurity (Feb. 12, 2014), available at http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214.pdf; NIST, Cybersecurity Framework—Overview, available at http://www.nist.gov/cyberframework/# (discussing requests for comment on the cybersecurity framework).

    78 We recognize that advisers also may have additional policies and procedures to address compliance and operational risks related to cybersecurity incidents.

    b. Pre-Arranged Alternate Physical Location(s)

    The proposed new rule would also require an adviser's business continuity and transition plan to include pre-arranged alternate physical location(s) of its office(s) and/or employees. As our staff has indicated a number of times, alternate or remote locations are essential for an adviser to continue providing services during a significant business disruption.79 Accordingly, when developing business continuity and transition plans, advisers generally should consider the geographic diversity of their offices or remote sites and employees, as well as access to the systems, technology, and resources necessary to continue operations at different locations in the event of a disruption.80 For example, an adviser may recognize that a significant business disruption could limit access to its primary or only office for an extended period of time and, therefore, establish a satellite office or plan to use a remote site in another location or geographic region and may also allow remote access by employees so the adviser could continue to have access to the facilities, systems, and personnel necessary to carry on its business.81

    79See supra notes 30 and 32, and accompanying text; see also Regulation SCI Adopting Release, supra note 17 (requiring an SCI entity's business continuity and disaster recovery plan to include “geographically diverse” backup and recovery capabilities). We note that other regulatory bodies and organizations have also recognized the importance of alternate sites and geographic diversity in business continuity planning. See, e.g., 17 CFR 23.603(b)(5) (requiring backup facilities, infrastructure and alternative staffing in geographically separate areas); FINRA Rule 4370(c)(6) (requiring BCPs to address “alternate physical location of employees”); NASAA Model Rule 203(a)-1A(3) (stating that BCPs should provide for “office relocation in the event of temporary or permanent loss of a principal place of business”); FFIEC Handbook, supra note 17, at G14 (stating that a “BCP should address site relocation for short-, medium-, and long-term disaster and disruption scenarios”); Interagency Paper, supra note 16 (noting that backup sites should not rely on the same infrastructure components used by the primary site, should not be impaired by a wide-scale evacuation at or the inaccessibility of staff that service the primary site, and should consider staffing needs at the backup site if the firm relies on the same labor pool for both its primary and back up sites).

    80 We are not proposing to require that an adviser's business continuity and transition plan include an alternative location at a specified distance away from its primary location because we believe, as discussed above, that an adviser's plan should be tailored to its particular operations and that, while a specified distance may be appropriate for one adviser's alternate location, it may not be appropriate for all advisers. Nonetheless, we believe advisers generally should consider whether their alternative locations are in such close proximity to each other or to its primary location that they may be sharing common infrastructure providers and thus, that the alternative locations would be similarly affected by an external event.

    81 An adviser should consider the technology, systems, and resources necessary for employees working remotely to continue to securely conduct the adviser's business.

    c. Communications With Clients, Employees, Service Providers, and Regulators

    Under the proposed rule, a business continuity and transition plan would also need to address communications with clients, employees, service providers, and regulators. We believe that communication plans are an essential element of effective business continuity and transition plans and generally should cover communications with parties involved in the critical aspects of the adviser's operations.82 For example, if an adviser's employees are unaware that a disruption has occurred and the adviser's business continuity and transition plan has been activated, the plan will likely fail. An adviser's communication plan generally should cover, among other things, the methods, systems, backup systems, and protocols that will be used for communications, how employees are informed of a significant business disruption, how employees should communicate during such a disruption, and contingency arrangements communicating who would be responsible for taking on other responsibilities in the event of loss of key personnel.83 Adviser business continuity and transition plans generally should also address employee training, so that in the event of a significant business disruption employees understand their specific roles and responsibilities and are able to carry out the adviser's plan.

    82 As discussed above, our staff has previously noted the important role that communication plans can play in business continuity planning. See supra notes 30 and 34 and accompanying text. Additionally, we note that other regulatory bodies and organizations have focused on communications in the context of BCPs. See, e.g., 17 CFR 23.603(b)(3) (requiring BCPs to include communication plans with respect to employees, vendors, and regulatory authorities); FINRA Rule 4370(c)(4), (5), and (9) (requiring BCPs to address communications with customers, employees and regulators); NASAA Model Rule 203(a)-1A(2) (stating that BCPs should provide for alternate communications with “customers, key personnel, employees, vendors, service provides. . .and regulators. . . .”); FFIEC Handbook, supra note 17, at G-4 (stating that “[c]ommunication is a critical aspect of a BCP and should include communication with employees, . . . regulators, vendors/suppliers (detailed contact information), [and] customers (notification procedures) . . . .”).

    83See supra section I.C.1.a.

    Moreover, advisers should consider when and how it is in their clients' best interests to be informed of a significant business disruption and/or its impact. Accordingly, with respect to clients, a business continuity and transition plan generally should include the process by which the adviser would have prompt access to client records that include the name and relevant contact and account information for each client as well as investors in private funds sponsored by the investment adviser.84 These plans generally should include how clients will be made aware of and updated about a significant business disruption that materially impacts ongoing client services (e.g., periodic updates to Web sites and customer service lines) and, when applicable, how clients will be contacted and advised if account access is impacted during such a disruption.

    84 For a private fund to qualify for the exclusion from the definition of “investment company” in either section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 (“Investment Company Act”) or rely on various offering exemptions under the Securities Act of 1933, the private fund is already required to have a reasonable belief regarding certain qualification information with regard to its beneficial owners that are U.S. persons. See, e.g., 17 CFR 270.2a51-1(h), 17 CFR 230.501(a). While the private fund may not be required to have such detailed information about non-U.S. person beneficial owners, we understand it generally has contact information readily available.

    Similarly, an adviser's communication plan with its service providers generally should include, among other things, how the service provider will be notified of a significant business disruption at the adviser as well as how the adviser will be notified of a significant business disruption at a service provider, and how the entities will communicate with one another and clients or investors (where applicable) 85 during a disruption. With respect to communications with the adviser's regulators, the adviser's business continuity and transition plan generally should include the contact information for relevant regulator(s), and identify the personnel responsible for notifying, as well as under what circumstances it would notify, such regulator(s) of a significant business disruption.

    85 For example, pooled investment vehicles generally rely on their investment advisers to arrange for and interact with fund service providers. If an adviser to an investment company, for example, outsources certain back office functions, such as transfer agency to a third-party vendor, its business continuity and transition plan should address coordination of communications with the transfer agent to investors in the fund, as well as with intermediaries servicing investors who also are beneficial owners of the fund.

    d. Identification and Assessment of Third-Party Services Critical to the Operation of the Adviser

    The proposed rule would require an adviser's business continuity and transition plan to include the identification and assessment of third-party services critical to the operation of the adviser.86 We understand advisers frequently outsource certain functions or aspects of their operations or use third-parties' systems or vendors for their middle and back office functions in order to permit the adviser to focus on front office core functions, such as portfolio management and trading.87 To the extent critical services are outsourced to third-parties, we believe that an adviser generally should be prepared for significant business disruptions that could impair its ability to act in its clients' best interests by having a business continuity and transition plan that addresses the critical services provided to it by such third parties.88

    86 We note that Regulation SCI includes specific requirements with respect to the resumption of “critical SCI systems,” differentiating these systems from other systems covered by the regulation. See 17 CFR 242.1000 and 242.1001(a)(2)(v) of Regulation SCI. In addition, as discussed above, our staff has previously noted the importance of addressing third-party relationships in the context of BCPs. See supra notes 30 and 33, and accompanying text. Additionally, we note that other regulatory bodies and organizations have noted that BCPs should address third-party relationships. See, e.g., 17 CFR 23.603(b)(7) (requiring “identification of potential business interruptions encountered by third parties that are necessary to continued operations” and “a plan to minimize the impact”); FINRA Rule 4370(c)(7) (requiring BCPs to address “critical business constituent, bank, and counterparty impact”); SIFMA Guidelines, supra note 71, at 30 (stating that BCPs should include internal and external business partners and that firms should be familiar with the BCPs and risks of those partners).

    87 For example, we frequently see middle office functions such as administration of the front office and trades and related transactions, including securities operations and processing (confirmation, routing, matching, and settlement trades), pricing/valuation, reconciliation (both cash and positions), and post trade compliance and reporting, outsourced to third parties.

    88 The nature of advisory business is such that advisers typically depend on a number of third-party service providers and systems vendors (e.g., broker-dealers, custodians, etc.) in providing services to their clients.

    In this regard, an adviser's business continuity and transition plan should identify critical functions and services provided by the adviser to its clients, and third-party vendors supporting or conducting critical functions or services for the adviser and/or on the adviser's behalf.89 An adviser generally should consider a variety of factors when identifying and prioritizing which service providers should be deemed critical, such as the day-to-day operational reliance on the service provider and the existence of a backup process or multiple providers, whether or not the service provided includes direct contact with clients or investors, and whether the service provider is maintaining critical records or able to access personally identifiable information, among other things. We would generally consider critical service providers to at least include those providing services related to portfolio management, the custody of client assets, trade execution and related processing, pricing, client servicing and/or recordkeeping, and financial and regulatory reporting.

    89 The Joint Report noted that, notwithstanding the use of a service provider to perform various activities, a firm “cannot shift responsibility for compliance and risk management to the service provider. . . . Should a service provider not have the appropriate level of resilience, a financial institution would be required to move to a provider that can demonstrate an appropriate level of resilience.” See Joint Report, supra note 72 at 6.

    We also encourage advisers to be familiar with the terms of their contracts with critical service providers, including any provisions regarding the termination or assignment of the contract and any notice requirements related to those provisions.

    Once an adviser identifies its critical service providers, it should review and assess how these service providers plan to maintain business continuity when faced with significant business disruptions and consider how this planning will affect the adviser's operations.90 For example, if an adviser's business continuity and transition plan contemplates that it will rely on a particular service provider for a critical service, the adviser generally should be aware of whether the service provider has a BCP and if that BCP provides alternatives, including backup plans, to allow it to continue providing critical services during a significant business disruption. If the service provider does not have a BCP or if its BCP does not provide for such alternatives, the adviser generally should consider alternatives for such critical services, which may include other service providers or internal functions or processes that can serve as a backup or contingency for such critical services.91

    90 In late August 2015, Bank of New York Mellon (“BNY Mellon”), a service provider that provides custodial and administrative services to mutual funds, closed-end funds, and exchange-traded funds, experienced a breakdown in one of its third-party systems (SunGard's InvestOne) used to calculate numerous client funds' net asset values (“NAVs”). As a result of this breakdown, BNY Mellon was unable to deliver timely system-generated NAVs to certain clients for several days, which resulted in certain clients pricing their shares using stale or manually calculated NAVs and certain ETFs using stale baskets. Once the automated system was restored, ETF baskets were updated and certain funds had to review the NAVs used while the automated system was down and make any necessary corrections. See, e.g., Stephen Foley, BNY Mellon Close to Resolving Software Glitch, Financial Times (Aug. 31, 2015), available at http://www.ft.com/intl/cms/s/0/47d5860a-4f2b-11e5-b029-b9d50a74fd14.html; Jessica Toonkel & Tim McLaughlin, BNY Mellon Pricing Glitch Affects Billions of Dollars of Funds, Reuters (Aug. 26, 2015), available at http://www.reuters.com/article/bnymellon-funds-nav-idUSL1N1111QY20150826; Barrington Partners White Paper, An Extraordinary Week: Shared Experiences from Inside the Fund Accounting System Failure of 2015 (Nov. 2015), available at http://www.mfdf.org/images/uploads/blog_files/SharedExperiencefromFASystemFailure2015.pdf; Transcript of the BNY Mellon Teleconference Hosted by Gerald Hassell on the Sungard Issue, available at https://www.bnymellon.com/_global-assets/pdf/events/transcript-of-bny-mellon-teleconference-on-sungard-issue.pdf .

    91 We recognize that it may not be feasible or may be cost prohibitive for an adviser to retain backup service providers, vendors, and/or systems for all critical services. In such cases, an adviser should consider backup plans, functions and/or processes to address how it will manage the loss of a critical service.

    We also recognize that advisers often play a key role in identifying, arranging for, and overseeing other service providers for certain of their clients as part of their sponsoring roles. For example, an adviser may arrange for a particular administrator or pricing vendor for a registered investment company client or private fund client.92 Accordingly, we believe an adviser should generally review and assess how the critical service providers it arranges and/or oversees for its clients plan to maintain business continuity when faced with significant business disruptions and consider how this planning will affect its clients' operations.93

    92See supra note 85.

    93See, e.g., supra note 89.

    We understand that many advisers currently take a variety of steps to understand the operational and other risks of their service providers and those of certain clients' critical service providers,94 such as reviewing a summary of a service provider's BCP, due diligence questionnaires, an assurance report on controls by an independent party,95 certifications or other information regarding a provider's operational resiliency or implementation of compliance policies, procedures, and controls relating to its systems, results of any testing, and conducting onsite visits. Factors such as the significance of the service provider to advisory operations, the type of service provided, and the adviser's ability to require or request actions of its service providers will impact the steps that advisers should consider taking.

    94See, e.g., BlackRock FSOC Comment Letter; see also Risk Principles for Asset Managers, supra note 4, at 19 (“The increased level of outsourcing to third party service providers has changed not only their outsourcing risk profile but such significant changes to an organization's business model can lead to many process and control changes and could therefore increase the exposure to other (operational) risk areas (e.g., country risk and service provider oversight)”); cf. rule 38a-1(a)(2) (requiring registered investment company boards to approve policies and procedures that provide for the oversight of compliance by the fund's investment adviser and certain other named service providers). Such approval must be based on a finding that the policies and procedures are reasonably designed to prevent violations of the federal securities laws by the fund, the investment adviser and the other named service providers. See id.

    95See Investment Company Institute, Financial Intermediary Controls and Compliance Assessment Engagements (Dec. 2015) at 8, available at https://www.ici.org/pdf/ppr_15_ficca.pdf (identifying a financial intermediary's “Business Continuity/Disaster Recovery Program” as one of 17 areas of focus that “should be addressed on an annual basis as part of the financial intermediary's controls and compliance engagements.”); see also AICPA, Reporting on Controls at a Service Organization (2015), available at http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AT-00801.pdf. Many advisers review SSAE 16 reports that are prepared by an independent public accountant in accordance with the American Institute of CPAs' Auditing Standards Boards' Statement on Standards for Attestation Engagements No. 16, Reporting on Controls at a Service Organization. These reports provide assurances that the service provider has established a system of internal controls, that the internal controls are suitably designed to achieve specified objectives, and that the internal controls are operating effectively.

    e. Transition Plan

    Under the proposed rule, an adviser's business continuity and transition plan would have to include a plan of transition that accounts for the possible winding down of the adviser's business or the transition of the adviser's business to others in the event the adviser is unable to continue providing advisory services.96 Advisers facing the decision to exit the market commonly do so by: (1) Selling the adviser or substantially all of the assets and liabilities of the adviser, including the existing advisory contracts with its clients, to a new owner; (2) selling certain business lines or operations to another adviser; 97 or (3) the orderly liquidation of fund clients or termination of separately managed account relationships.98 Regardless of the method an adviser chooses to effect a transition, we believe that assessing and planning for potential impediments associated with that method should help an adviser act in its clients' best interests by seeking to mitigate potentially negative effects on its clients and investors.99

    96Cf. FINRA Rule 4370(c)(10) (requiring BCPs to address “[h]ow the member will assure customers' prompt access to their funds and securities in the event that the member determines that it is unable to continue its business”); NASAA Model Rule 203(a)-1A(4) (stating that BCPs should provide for the “[a]ssignment of duties to qualified responsible persons in the event of the death or unavailability of key personnel”). Transition of an adviser's business to others generally would, for example, include a situation where the adviser is a sole proprietor who is no longer able to provide advisory services and is, therefore, transferring its business to another person/firm or winding down operations entirely. Such succession/transition planning generally should be accounted for in the context of an adviser's plan of transition.

    97See supra note 59 (discussing partial transitions of an adviser's business).

    98See, e.g., Prudential Financial Inc. 2014 Resolution Plan: Public Section (June 30, 2014), available at http://www.federalreserve.gov/bankinforeg/resolution-plans/prudential-fin-1g-20140701.pdf; American International Group, Inc. Resolution Plan Section 1: Public Section (July 1, 2014), available at http://www.federalreserve.gov/bankinforeg/resolution-plans/aig-1g-20140701.pdf. These two nonbank financial companies have been designated “systemically” important by FSOC and also have investment adviser subsidiaries. The publicly-available summaries of their resolution plans filed with the Federal Reserve indicate that they would seek to either sell their advisory businesses or seek Chapter 11 bankruptcy proceedings for their advisory entities.

    99 An adviser may also wish to consider in the context of its transition plan, if and when it would be appropriate to use a transition manager. A transition manager facilitates and coordinates “the transition of asset management from one manager to another, or from one asset class or investment strategy to another.” See supra note 41.

    We believe that a plan of transition generally should account for transitions in both normal and stressed market conditions,100 and generally should consider each type of advisory client, the adviser's contractual obligations to clients, counterparties, and service providers, and the relevant regulatory regimes under which the adviser operates.101 Under the proposed rule, the transition components of a business continuity and transition plan would have to include (1) policies and procedures intended to safeguard, transfer and/or distribute client assets during transition; (2) policies and procedures facilitating the prompt generation of any client-specific information necessary to transition each client account; (3) information regarding the corporate governance structure of the adviser; (4) the identification of any material financial resources available to the adviser; and (5) an assessment of the applicable law and contractual obligations governing the adviser and its clients, including pooled investment vehicles, implicated by the adviser's transition. Each of the proposed required components of an adviser's transition plan is designed to help an adviser be well prepared for a transition so that it can act quickly and in its clients' best interests if and when a transition occurs.

    100See supra notes 38-39 and accompanying text (discussing the 2008 financial crisis and transition planning generally).

    101 In addition to contractual obligations to its clients and vendors, an adviser that provides other services to entities, such as to another adviser, generally should consider its contractual obligations as a service provider to those other entities as it plans for a transition event.

    We believe that preserving the safety of client assets and the ability to promptly produce and transfer the information necessary for the ongoing management of client assets is fundamental to an adviser acting in the best interests of its clients. The adviser's policies and procedures addressing how the adviser intends to safeguard, transfer and/or distribute client assets in the event of a transition generally should consider the unique attributes of each type of the adviser's clients (e.g., registered investment companies, private funds, separately managed accounts) and how the adviser plans to transfer accurate client information to other advisers or their service providers. For example, the transfer of client information with respect to registered investment companies and private funds may be more complex than that of separately managed accounts because registered investment companies and private funds typically have multiple investors, whereas separately managed accounts typically have only one investor.

    It is our understanding that the methods for safeguarding, transferring, and/or distributing client assets may vary by client type and that the best method for one client might not be the best method for another.102 Thus, we believe an adviser's policies and procedures should appropriately account for the different methods in which it plans to safeguard, transfer, and/or distribute assets of its different types of clients. Additionally, if a client account holds assets that would require special instruction or treatment in the event of transition, an adviser's policies and procedures generally should address such instruction or treatment.103

    102 For example, if the adviser manages registered investment companies, the investment companies' board(s) may determine that the best method for transferring the assets of these funds is to reorganize them into funds managed by a new adviser. Separately managed accounts, however, would not be reorganized, but may have other considerations unique to them, such as whether a new custodian would be necessary for a new adviser.

    103 For example, it is our understanding that when transitioning accounts from one adviser to another, derivatives positions require special treatment in that they are typically unwound rather than transferred to the new adviser and that the terms of the derivatives instrument may dictate whether and how such unwinding takes place.

    Further, the transition plan should also contain policies and procedures that would facilitate the prompt generation of any client-specific information necessary to transition a client account, such as the identity of custodians, positions, counterparties, collateral, and related records of each client. Similar to the need to have accurate and accessible client information in the event of a business continuity scenario, we believe that this information is necessary to effect a smooth transition of the management of client accounts.

    We believe senior executives at an investment adviser generally, and especially in times of stress, should be able to quickly identify the important decision-makers within the organization and understand the inter-relationships between the adviser and any affiliated entities to be able to assess whether and how issues at an affiliate may affect the advisory entity. For example, an adviser that uses an affiliate as a qualified custodian may face additional issues if the transition event is related to that affiliate's operations. We believe that this information is necessary if the adviser needs to assess the manner in which it can exit the market with minimal adverse effect on its clients or to take steps necessary to protect itself from issues that may stem from an affiliated entity. Accordingly, with respect to the adviser's corporate governance structure, the transition component of a business continuity and transition plan generally should include an organizational chart and other information about the adviser's ownership and management structure, including the identity and contact information for key personnel, and the identity of affiliates (both foreign and domestic) whose dissolution or distress could lead to a change in or material impact to the adviser's business operations.104

    104 An advisory entity may be adversely affected by an affiliate's distress if, for example, the adviser and distressed affiliate share systems, personnel, sources of financing, or similar names.

    Registered investment advisers manage a variety of products and security types, with investments in and investors from various jurisdictions and are subject to a variety of contractual and legal obligations and regulatory regimes. An adviser's ability to seamlessly transition advisory services could be impacted by its or its clients' contractual obligations or the various regulatory regimes under which the adviser or its advisory client may be subject. For example, an adviser's insolvency or termination may trigger a termination clause in a client's derivative contract.105 Also, the board and shareholders of a registered investment company must approve an advisory contract with any new adviser 106 and the Advisers Act requires advisory contracts to include a provision that a contract cannot be assigned without client consent.107 Other regulatory regimes may require regulatory approval for certain acts,108 which may be further complicated by the need for cross-border cooperation if the adviser operates in multiple jurisdictions 109 or the adviser's pooled investment vehicle clients are domiciled in different jurisdictions.110 Accordingly, we are proposing that an adviser's transition plan include an assessment of the applicable law and contractual obligations governing the adviser and its clients, including pooled investment vehicles, implicated by the adviser's transition.

    105 Some ISDA contracts include the default provision allowing for the counterparty to terminate a contract upon the change of advisers.

    106 Section 15(a) of the Investment Company Act states that “[i]t shall be unlawful for any person to serve or act as investment adviser of a registered investment company except pursuant to a written contact, which . . . has been approved by the vote of a majority of the outstanding securities of such registered company . . . .” Additionally, section 15(c) of the Investment Company Act states that “it shall be unlawful for any registered investment company having a board of directors to enter into . . . any contract or agreement, written or oral, whereby a person undertakes regularly to serve or act as investment adviser of . . . such company, unless the terms of such contract or agreement and any renewal thereof have been approved by the vote of a majority of directors, who are not parties to such contract or agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval.” But see, e.g., rule 15a-4 under the Investment Company Act (allowing funds, in certain circumstances, to enter into interim advisory agreements without an in-person board meeting and without the fund's shareholders first approving the agreement); see generally JP Morgan Chase/Bear Stearns Asset Management, SEC Staff No-Action Letter (July 14, 2008) (providing staff no-action relief following the US-government-brokered emergency sale of Bear Stearns Companies Inc. to JP Morgan Chase & Co., to allow Bear Stearns Asset Management to continue to serve as investment adviser to its funds without prior in-person approval by the funds' board of directors due to the extraordinary circumstances surrounding the sale of its parent company).

    107 Section 205(a)(2) of the Advisers Act requires any investment advisory contract to contain a provision indicating “that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract.” Section 202(a)(1) of the Advisers Act defines “assignment,” for purposes of the Advisers Act, to include “any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor. . . .”

    108See, e.g., Third Avenue Trust and Third Avenue Management LLC, Investment Company Act Rel. No. 31943 (Dec. 16, 2015) (Notice and Temporary Order) (permitting the suspension of the right of redemption of Third Avenue Trust's outstanding redeemable securities).

    109 For example, as of January 4, 2016, the number of foreign registrations of SEC-registered investment advisers was 2,279, representing 1,051 SEC-registered investment advisers, some of which were registered in multiple foreign jurisdictions. Additionally, there were 780 foreign investment advisers registered with the Commission as of that same date. Based on data from IARD.

    110 When evaluating options for Long-Term Capital Management, L.P. during its collapse, the effects of the fund filing for bankruptcy were not clear because the fund was managed by an advisory entity domiciled in Delaware and located in Connecticut, while the fund itself was domiciled in the Cayman Islands, where the rights of its counterparties to liquidate collateral under the U.S. Bankruptcy Code would have been delayed because the fund would have likely had to seek bankruptcy protection in the Cayman Islands courts, under Cayman law. See Report of The President's Working Group on Financial Markets, Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management (Apr. 28, 1999), available at https://www.treasury.gov/resource-center/fin-mkts/Documents/hedgfund.pdf.

    Finally, we believe it is important for an adviser to have considered in advance its strategy for either avoiding or facilitating a transition of its business and client accounts in the event the adviser is in material financial distress such that its ability to continue providing advisory services to its clients or otherwise acting in its clients' best interests could be impacted or undermined.111 Accordingly, the proposed rule requires that the adviser's plan of transition consider any material financial resources available to the adviser. For example, the adviser could identify any material sources of funding, liquidity, or capital it would seek in times of stress in order to continue operating 112 or consider how it would implement a reduction of expenses or other alternatives.

    111 We note that, in certain circumstances, an adviser is required to “disclose any financial condition that is reasonably likely to impair [the adviser's] ability to meet contractual commitments to clients.” See Form ADV, Part 2, Item 18.

    112 When considering any material financial resources available to it, the adviser also could identify any insurance coverage.

    f. Request for Comment

    We seek comment on the proposed requirement to adopt and implement a business continuity and transition plan, and the proposed components of that plan.

    • Should we require all SEC-registered advisers to adopt and implement business continuity and transition plans? Or should we identify only a subset of SEC-registered advisers that must implement such plans? Which advisers should be in such a subset (e.g., large advisers with assets under management over a specific threshold, advisers affiliated with financial institutions, etc.) and why?

    • Rather than adopting the proposed rule, should the Commission issue guidance under rule 206(4)-7 under the Advisers Act addressing business continuity and transition plans? If so, should that guidance set forth possible elements of such a plan?

    • What, if any, implications will the proposed rule have for investment advisers that are also subject to other regulatory requirements as to business continuity and/or transition planning (e.g., FINRA or CFTC rules on BCPs)? For example, would the proposed rule be inconsistent with an adviser's obligations under other regulatory requirements?

    • Should we require business continuity and transition plans to include each of the proposed components? Alternatively, should the rule require advisers to have a business continuity and transition plan, and specify certain components of a plan in the form of a safe harbor provision? Or, should the rule not specify required components of a plan and instead allow advisers to determine the appropriate components of their plans? Are there any components we should remove from the proposed list of required components? Are there any components we should add or expand upon? For example, with respect to a pre-arranged alternate physical location(s) of the adviser's office(s) and/or employees, should we require that an adviser's business continuity and transition plan include an alternate location at a specified distance away from its primary location? Should we require an adviser's communication plan to extend to investors in certain types of pooled investment vehicles? If so, which specific types of pooled investment vehicles and how should the term “investors” be defined for each type of pooled investment vehicle? Should we require an adviser to have policies and procedures that address the identification, assessment, and review of critical third-party vendors that the adviser arranges or oversees for its clients?

    • Are there any components of the NASAA model rule or guidance, or other rules or guidance addressing BCPs, that we have not addressed in the proposed rule that we should address? Should advisers with certain types of clients, including for example advisers to registered investment companies or sponsors of wrap programs, be required to undergo additional obligations with regard to adopting and implementing a business continuity and transition plan? What additional steps should such advisers be required to take with respect to such clients and/or such clients' service providers?

    • Are each of the proposed components of a business continuity and transition plan clear or should we provide additional information and/or definitions for any of the components? If so, what additional information or definitions are needed? For example, should we provide a definition of “significant business disruption,” “unable to continue providing investment advisory services,” or “pooled investment vehicle”? Alternatively, should we require investment advisers to define certain terms, like “significant business disruption” or “unable to continue providing investment advisory services,” within their plans?

    • Should all advisers be required to include each of the proposed components in a business continuity and transition plan or should certain advisers be exempt from including certain components? If certain advisers should be exempt, why? For example, should only certain advisers be required to adopt and implement the transition plan component of the proposed rule or is there a subset of investment advisers with operations so limited that the adoption and implementation of a transition plan (or certain components of the transition plan requirement) would not be beneficial? If so, what criteria could be used to identify this subset of advisers? Are there alternative or streamlined measures that these advisers could take to facilitate an orderly transition in the event of a significant disruption to the adviser's operations? If these advisers did not have transition plans, should they be required to disclose the absence of such plan?

    • With respect to each of the proposed components of a business continuity and transition plan, we have provided information as to the items and/or actions that we believe generally should be encompassed within a particular component. Is there additional information that we should provide, or any information that we should exclude or modify, regarding any of the proposed components of a plan? Alternatively, instead of permitting advisers the flexibility to draft their plans based on the complexity of their businesses, should we require advisers to address each component in a prescriptive manner by requiring specific mechanisms for addressing particular risks?

    • Should we adopt a more prescriptive rule that calls for a more specific transition plan similar to the “Living Wills” required by the Federal Reserve Board and the FDIC for large banks and systemically important non-bank entities? 113 If so why, and what specifically should the rule require?

    113 These resolution plans require, among other things: (1) Information regarding the manner and extent to which any insured depository institution affiliated with the company is adequately protected from risks arising from the activities of any nonbank subsidiaries of the company; (2) full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the company; and (3) identification of the cross-guarantees tied to different securities, identification of the major counterparties, and a process for determining to whom the collateral of the company is pledged. See Resolution Plans, supra note 40.

    • As part of the proposed rule, should we require advisers to provide disclosure to their clients about their business continuity and transition plans? If so, what should be the format of such disclosure (e.g., summary of plan, copy of plan)? When or how frequently should this disclosure be provided? Should we require advisers to disclose to their clients incidents where they relied on or activated their business continuity and transition plans? If so, what should be the format of such disclosure? What types of incidents should be disclosed or not disclosed?

    • As part of the proposed rule, should we require advisers to report to the Commission incidents where they rely on their business continuity and transition plans? If so, under what circumstances should advisers be required to report to the Commission and how should advisers report this information? When should the required reporting occur?

    • Should we require advisers to file their business continuity and transition plans, or a summary thereof, with the Commission? Should these filings be made available to the public? Why or why not? Are business continuity and transition plans considered proprietary to an adviser such that disclosing its plan to the public (either through a Commission filing or through disclosure to a client) creates additional risk exposure to the adviser?

    2. Annual Review

    Under the proposed rule, each adviser would be required to review the adequacy of its business continuity and transition plan and the effectiveness of its implementation at least annually. The review generally should consider any changes to the adviser's products, services, operations, critical third-party service providers, structure, business activities, client types, location, and any regulatory changes that might suggest a need to revise the plan.

    The annual review provision is designed to require advisers to evaluate periodically whether their business continuity and transition plans continue to, or would, work as designed and whether changes are needed for continued adequacy and effectiveness. For example, the review generally should include an analysis of whether a business continuity and transition plan adequately protects client interests from being placed at risk and to mitigate such risks in the event the adviser experiences a significant disruption in its operations. In addition, annual reviews generally should address weaknesses an adviser may have identified in any testing it has done or assessments that have been performed to address the adequacy and effectiveness of its business continuity and transition plan, as well as any lessons learned if an event required the plan to be carried out during the previous year, including any changes made or contemplated as a result of the event.

    • Should we require that business continuity and transition plans be reviewed at least annually, as proposed? Should we expressly require reviews of business continuity and transition plans to be documented in writing? Should we require more frequent or less frequent review of business continuity and transition plans? In addition to annual review, should we require that advisers review their plans when specific events occur? For example, should we require plans be reviewed when an adviser has an event that causes it to rely on its plan? Should we require plans be reviewed based on changes to the adviser's operations or processes, changes in the ownership or business structure of the adviser, compliance or audit recommendations, lessons learned from testing or disruption events, and/or regulatory developments?

    • Should we require advisers to report to the Commission regarding the annual review of their business continuity and transition plans? If so, what should be the format of the report?

    • Should we explicitly require advisers to annually review the business continuity and transition plans of their third-party service providers that provide critical services to the adviser and its clients? If so, how should these reviews be conducted? What types of documentation could be requested to perform these reviews?

    • Should we specifically require advisers to periodically test their business continuity and transition plans or certain material components thereof to assess whether the plans are adequate and effective? If so, how should such testing be conducted? What should be included in the scope of such review? How often should such testing be required?

    3. Recordkeeping

    The proposed amendments would require SEC-registered advisers to maintain copies of all written business continuity and transition plans that are in effect or were in effect at any time during the last five years after the compliance date. We are requiring an adviser to maintain a copy of the plan currently in effect because we believe that it is important that advisers have easy access to necessary information during periods of stress. The proposed rule would also require that advisers keep any records documenting their annual review.114 Our rules permit advisers to maintain these records electronically.115 These proposed new recordkeeping requirements will assist our examination staff in evaluating an adviser's compliance with the new rule, including evaluating whether the adviser's business continuity and transition plan includes all required components. These proposed requirements track the recordkeeping requirements under rule 204-2 regarding an adviser's compliance policies and procedures.

    114 Pursuant to rule 204-2(e)(1) of the Advisers Act, advisers would have to maintain any records documenting their annual review in an easily accessible place for at least five years after the end of the fiscal year in which the review was conducted, the first two years in an appropriate office of the investment adviser.

    115See rule 204-2(g) under the Advisers Act.

    We request comment on the proposed recordkeeping requirements.

    • Should we require advisers to maintain copies of their business continuity and transition plans that are in effect or were in effect at any time during the last five years, as proposed? If not, what, if any, recordkeeping requirements should we adopt with respect to business continuity and transition plans? Is five years an appropriate retention period? Should it be longer or shorter? Why?

    • Should we require advisers to keep any records documenting their annual review of their business continuity and transition plans, as proposed?

    II. Economic Analysis A. Introduction

    The Commission is sensitive to the potential economic effects of proposed rule 206(4)-4 and the proposed amendments to rule 204-2. These effects include benefits and costs to SEC-registered advisers, clients, and fund investors as well as broader implications for market efficiency, competition, and capital formation.116 The economic effects of the proposed rule are discussed below in the context of the primary goals of the proposed regulation.

    116 The Commission recognizes that there are other entities that could be affected by the proposed rule. For example, vendors might have to adapt to meet the new demands of their clients under the proposed rule and that could change the nature of those product/service markets, which in turn could have further economic effects on advisers and their clients and investors. However, the effects of the rulemaking on such entities are uncertain and difficult to predict given they are not direct effects of the proposed rule.

    We have sought, where possible, to quantify the costs, benefits, and effects on efficiency, competition, and capital formation expected to result from the proposed regulations. However, as discussed below, in certain cases, we were unable to quantify the economic effects because we lack the information necessary to provide reasonable estimates, such as the extent to which some advisers already have business continuity or transition plans that would satisfy some or all of the requirements of the proposed rule, the likelihood of business disruptions, and the share of costs arising from the proposed rule that advisers will pass through to its clients. Therefore, some of the discussions below are qualitative in nature.

    Under the proposed rule, the content of an SEC-registered adviser's business continuity and transition plan shall be based upon risks associated with the adviser's operations and shall include policies and procedures designed to minimize material service disruptions, including policies and procedures that address the following: (1) Maintenance of critical operations and systems, and the protection, backup, and recovery of data; (2) pre-arranged alternate physical location(s) of the adviser's office(s) and/or employees; (3) communications with clients, employees, service providers, and regulators; (4) identification and assessment of third-party services critical to the operation of the adviser; and (5) plan of transition that accounts for the possible winding down of the adviser's business or the transition of the adviser's business to others in the event the adviser is unable to continue providing advisory services. The proposed rule also requires that each SEC-registered adviser review, no less frequently than annually, the adequacy of its business continuity and transition plan and the effectiveness of its implementation. In addition, the proposed amendments to rule 204-2 under the Advisers Act requires these advisers to make and keep records of all business continuity and transition plans that are in effect or were in effect at any time within the past five years.

    The goal of these proposals is to require that all advisers have sufficiently robust plans to mitigate the potential adverse effects of significant business disruptions or transition events. Specifically, the proposed rule requires SEC-registered advisers to adopt plans reasonably designed to protect clients and fund investors from the risk that, in the wake of a significant business disruption or transition event, advisers are unable to provide services and continue operations. Such disruptions may put clients' and investors' interests at risk if, for example, an adviser lacks the ability to make trades in a portfolio, is unable to receive or implement directions from clients, or its clients are unable to access their assets or accounts.

    Because clients and investors should be averse to these outcomes, one might expect all advisers to already have plans in place to minimize the risks posed by significant business disruptions or business transitions without being legally required to do so. It appears, however, that, in the context of business continuity and transition plans, market pressures do not fully align the interests of all advisers with those of their clients and fund investors, as staff has observed that some advisers have adopted plans that may not be sufficiently robust in light of the operational and other risks specific to their businesses. Our staff's observations that business continuity and transition plans are not uniformly robust suggest that both advisers and their clients may not fully take into account, or internalize, the potential benefits of comprehensive business continuity and transition plans as well as the potential costs of operating without them.

    There are several possible reasons for this misalignment. As an initial matter, the types of business disruptions addressed by this proposal are infrequent, and are not necessarily publicly observable when they do occur; this may make it difficult for market participants to fully internalize the ramifications of those events. For example, an adviser that underestimates the likelihood of a significant disruption or the harm it could cause to the viability of its business may not believe the cost of a more robust business continuity plan is justified. Furthermore, because many advisers may have never experienced a significant business disruption, they might not properly assess whether their existing plans are sufficiently robust. And while some clients and investors may recognize the benefits of business continuity planning and demand it of their advisers, others may not fully understand these benefits due to the rarity of significant disruptions.

    In addition, staff observations resulting from specific SEC examinations are generally not made public, so any examination findings identified with respect to one adviser's plan will generally provide no guidance to other advisers, or to their clients and investors, as to what robust plans might contain. Although Commission staff has published alerts identifying overall observed weaknesses in advisers' business continuity plans, those alerts provide aggregated, non-specific information that may not inform advisers or their clients and investors of the expected content of robust plans.117 Moreover, it is possible that some advisers may not review those alerts and therefore do not adjust their business continuity plans in response to the identified strengths and weaknesses; similarly, many clients and investors, particularly smaller or retail investors, may not review the alerts and thus do not exert pressure on their advisers to address in their own plans the general weaknesses identified by the Commission.118

    117See, e.g., NEP Risk Alert, supra note 30.

    118 We note that, based on staff experience, large institutional clients often have rigorous due diligence processes that evaluate an adviser's operational and other risks, while smaller retail clients may not engage in such a thorough review of operational and other risks.

    Furthermore, advisers generally do not make their business continuity plans (or transition plans) public, though based on Commission staff's experience, we understand that most will provide a summary of those plans or other information related to their operational and other risks to clients and investors upon request. Clients and investors that request, review, and comment on these plans are more likely to exert some degree of pressure on their advisers regarding the content of their plans, thereby leading to more robust plans. Thus, the composition of an adviser's client base may impact the current state of its business continuity and transition plans and may lead to the heterogeneity in the quality of such plans that our staff has observed across advisers. The Commission believes, based on staff experience, that larger institutional clients and investors, compared to smaller or retail clients and investors, are more likely to engage in extensive due diligence processes that involve such review of existing plans. The content of business continuity and transition plans for advisers with larger institutional clients and investors may therefore be more likely to reflect such client or investor input than plans of advisers with only smaller, retail clients or investors. In addition, because plans are not generally public, advisers cannot compare their own plans with those of other advisers to assess the relative strengths and weaknesses of their plans and therefore do not have the opportunity to craft or revise their own plans with the knowledge of how others in the industry are addressing the same issues. These factors, combined with the absence of any specified requirements for components of business continuity plans (or transition plans) in existing regulation, may have contributed to staff's observations that such plans are not uniformly robust.

    Advisers also may not fully internalize the benefits of transition planning. For example, it is possible that advisers do not necessarily have adequate incentives to ensure that a business transition takes into account all of the various components of a robust plan set forth in the proposed rule, given that an adviser no longer receives fees after that transition. In addition, transition events, like business disruptions, are relatively rare; accordingly, advisers may not properly assess the likelihood of such events, the potential consequences of failing to adequately prepare, or the benefits of ensuring a smooth transition.

    To address the issues identified above, the proposed rule requires advisers to assess the operational and other risks associated with its business operations and identifies components that must be addressed in business continuity and transition plans. The rule aims to address the lack of uniformly robust plans previously observed by staff and requires each SEC-registered investment adviser to adopt and implement a written business continuity and transition plan based upon the risks associated with the adviser's operations.

    B. Economic Baseline

    The investment adviser regulatory regime currently in effect serves as the economic baseline against which the benefits and costs, as well as the impact on efficiency, competition, and capital formation of the proposed rule are discussed. As of January 4, 2016, there were 11,956 SEC-registered investment advisers with approximately $67 trillion in regulatory assets under management. In this market, which has been described as being highly competitive,119 advisers are likely to compete on, among other things, fees charged to clients, returns or performance, and the level of services provided to meet client needs.

    119See supra section I.A and note 7.

    The proposed rule would affect all SEC-registered investment advisers, as well as each adviser's clients (including registered funds, private funds, and individual separately managed accounts) and the investors in fund clients. Currently, Commission guidance indicates that an SEC-registered adviser's compliance policies and procedures should include business continuity planning to the extent it is relevant to the adviser's business. The content of those BCPs, however, is not addressed by current Commission rules, and may not specifically include policies and procedures regarding business transitions.

    As noted previously, our staff has noticed variation in the business continuity and/or transition plans that they have seen during examinations. Some advisers, pursuant to the Compliance Program Rule or as a prudent business practice, have adopted plans which may be consistent with the new requirements being proposed, while others have not. Accordingly, the benefits and costs to a given adviser, client, or fund investor will depend on the current state of the adviser's business continuity and transition plan.

    C. Benefits and Costs and Effects on Efficiency, Competition, and Capital Formation

    Taking into account the goals of the proposed rule and the economic baseline, as discussed above, this section explores the benefits and costs of the proposed rule, as well as the potential effects of the proposed rule on efficiency, competition, and capital formation.

    1. Benefits

    Clients and investors in funds managed by SEC-registered advisers, advisers themselves, and the financial markets as a whole may benefit from the proposed rule. In general, we cannot quantify the total benefits to the affected parties because we lack data on certain factors relevant to such an analysis, such as investor preferences and the likelihood of business disruptions. For example, without knowing how risk averse clients are to investing via advisers without robust BCPs, we cannot quantify the benefits they might derive from improvements in those BCPs. Similarly, it is difficult to estimate the probability of the types of business disruptions addressed by the proposed rule, which precludes precisely estimating the ex-ante costs of inadequate plans under the economic baseline. However, we discuss the expected benefits qualitatively below.

    We anticipate that clients and investors in funds managed by registered advisers will benefit from the proposed rule. Requiring SEC-registered advisers to adopt and implement business continuity and transition plans will likely reduce the risk that investors and advisory clients will be harmed or affected in the event a business continuity or transition issue actually occurs. For example, advanced planning to address issues in the event of a disruption may reduce the risk that advisory accounts might be left unmanaged or that clients do not have access to their funds during an adviser's business interruption or transition, or at least shortens the time of such a disruption. As discussed above, whether it is due to prudent business practices or adherence to the Commission guidance in the Compliance Program Rule, some advisers may already have robust business continuity and transition plans in place that are consistent with the new requirements being proposed. The incremental benefits of the proposed rule to those advisers' clients and investors would likely be less than the benefit to the clients and investors of an adviser without such strong operational controls.

    The proposed rule will also benefit registered advisers by requiring their business continuity and transition plans to include policies and procedures that address certain specific components, which should help the advisers better prepare for significant disruptions in their operations. While Commission guidance indicates that an SEC-registered adviser's compliance policies and procedures should address BCPs to the extent that they are relevant to an adviser, the Commission has not previously specified what such a BCP should address. To the extent registered advisers have not already adopted and implemented robust BCPs that are consistent with the new requirements being proposed, requiring them to review the risks associated with their operations and plan for significant business disruptions or transitions should encourage them to enhance their ongoing efforts to mitigate risks attendant with their operations and business practices and may help them be better prepared to address business continuity and transition events if and when they occur.

    Finally, the proposed rule and the planning it requires of advisers could have ancillary benefits for the broader financial markets. For example, consider an adviser with significant assets under management who trades actively enough to be considered a liquidity provider in a particular market. If this adviser were to suffer a significant business disruption event that prevented it from participating in that market for several days, then the liquidity of the market could be negatively affected.120 While a business continuity and transition plan would not be able to completely prevent such a disruption, it may decrease the adviser's recovery time and hence the disruption's impact on the market.

    120See, e.g., George O. Aragon & Philip E. Strahan, Hedge funds as liquidity providers: Evidence from the Lehman bankruptcy, J. Financ. Econ., Vol. 103, Issue 3 (Mar. 2012) at 570-587 (concluding that “the market liquidity of stocks held by Lehman's hedge-fund clients fell more during the [2008 financial] crises than otherwise similar stocks not held by these funds.”)

    2. Costs

    As with the benefits, costs of the proposed rule will be shared by advisers and their clients and fund investors. Generally, advisers will incur the direct costs associated with developing and maintaining robust business continuity and transition plans, though some of those costs may ultimately be passed through to their clients and fund investors. These costs are discussed in more detail below.

    a. Costs to Advisers

    Proposed rule 206(4)-4 likely will result in an SEC-registered adviser incurring one-time and ongoing operational costs, described in detail below, to adopt and implement a business continuity and transition plan that is reasonably designed to address the operational and other risks related to a significant disruption in the adviser's operations. As an initial matter, it is difficult to determine the estimated costs for advisers with precision because of the variation in existing BCPs and the extent to which such plans will need to be revised to be compliant with the proposed rule. Because Commission guidance indicates that SEC-registered advisers' compliance policies and procedures should address BCPs to the extent that they are relevant to an adviser, the nature of an adviser's existing BCP will also greatly affect the initial costs the adviser would expend to comply with the proposed rule. Advisers whose current BCPs are closely aligned with the requirements of the proposed rule would likely incur lower initial compliance costs relative to advisers whose current BCPs are not closely aligned with the rule's requirements, while all advisers would incur ongoing costs pertaining to the annual review and recordkeeping components of the proposed rule. 121

    121 The costs estimates provided in this section include total costs for developing and maintaining both business continuity plans and transition plans. We recognize, however, that the portion of these costs attributable to business continuity plans will likely be greater than that attributable to the transition plans, as business continuity plans generally contemplate acquiring and maintaining, for example, more infrastructure, such as secondary storage capabilities, than transition plans and is more likely to involve retaining third-party vendors to assist with the development or maintaining of that infrastructure. Accordingly, the current state of an adviser's business continuity plans may have more effect on the costs to individual advisers than the current state of the adviser's transition plans.

    In addition, because the proposed rule requires an SEC-registered adviser's plan to be based on the particular risks attendant to that adviser's operations, the initial and ongoing costs imposed by the rule would vary significantly among firms depending on the complexity of the adviser's operations. A number of factors pertaining to an adviser's business model can affect the complexity of the adviser's operations. Those factors include the adviser's assets under management, number of employees, number of offices, number and types of clients (e.g., high net worth individuals, private funds, or registered investment companies), types of advisory activities, other business activities or lines of business which may affect the adviser's advisory business, types of investment strategies pursued, and the extent of reliance on service providers (in-sourced vs. out-sourced models). The flexibility of the proposed rule should allow advisers to tailor their business continuity and transition plans to the specific risks their businesses face at the minimum possible cost.

    The Commission believes that certain of the above factors may be correlated with the adviser's amount of assets under management. For example, an adviser with a large amount of assets under management is more likely to have more employees, multiple locations, offices, numbers and types of clients, and types of business activities than an adviser with fewer assets under management.122 Accordingly, we believe that advisers with larger amounts of assets under management are generally more likely to have more complex business operations and may therefore need to expend more resources on adopting, implementing, and maintaining a business continuity and transition plan than advisers with fewer assets under management.123

    122 With regard to employee size, SEC-registered advisers with less than $100 million in assets under management have an average of 28 employees and a median of 4 employees, while SEC-registered advisers with over $1 billion in assets under management have an average of 180 employees and a median of 31 employees. Based on data from IARD as of January 4, 2016. With regard to the number of offices maintained by advisers, only 23% of SEC-registered advisers with less than $100 million in assets under management maintain more than one office, while 47% of SEC-registered advisers with over $1 billion in assets maintain one or more offices and 11% of these larger advisers maintain 5 or more offices. Based on data from IARD as of January 4, 2016.

    123 There are notable exceptions: for example, a small adviser with a technology intensive investment strategy may nevertheless have a complex operational risk profile, which could require a more complex business continuity and transition plan.

    i. One-time Costs

    As noted above, the one-time costs associated with developing and implementing the policies and procedures associated with a business continuity and transition plan will vary significantly among firms depending on the nature and complexity of the adviser's operations and the current state of their systems and processes. Under the proposed rule, SEC-registered advisers need only take into account the risks associated with their particular operations. For example, smaller advisers that do not have a large number or different types of clients or do not maintain numerous offices with numerous employees may not need complex systems if their operations result in risks that are easy to address. On the other hand, a larger adviser with a large number and diverse set of clients, including large registered investment companies, with global offices and thousands of employees may need more complicated and expensive systems and technology. To the extent that adviser size does correlate with operational complexity, SEC examination staff has observed that larger advisers have typically already devoted significant resources to establish systems or technological solutions that address operational and other risks related to business continuity.

    Based on our staff's experience, we generally estimate that the one-time costs necessary to adopt and implement a business continuity and transition plan would range from approximately $30,000 to $1.5 million 124 per SEC-registered adviser, depending on the facts and circumstances of a particular adviser's operations and the adequacy of its existing plan. These estimated costs include internal and external costs, explained in more detail below, attributable to the following activities: (1) Mostly internal costs associated with developing policies and procedures related to each required component of the business continuity and transition plan; and (2) external costs associated with integrating and implementing the policies and procedures as described above (including establishing or upgrading current systems and processes to comply with the proposed rule).

    124 These estimates are based on the aggregated low-end of the range and the high-end of the range, respectively, of mostly internal costs detailed in the PRA section below and the external costs associated with integrating and implementing the plan. Specifically, these estimates are based on the following calculations, which are described in greater detail in notes 125 through 129:

    $12,515 low-end estimated internal cost to adviser for developing policies and procedures + $4,000 low-end estimated cost to adviser for external professional fees for developing policies and procedures + $1,000 low-end estimated cost to adviser for maintenance of critical operations and systems and the protection, backup and recovery of data + $5,000 low-end estimated cost to adviser for a prearranged alternative physical location + $0 low-end estimated cost to adviser for a plan of communication + $5,000 low-end estimated cost for third-party oversight = $27,515.

    $147,310 high-end estimated internal cost to adviser for developing policies and procedures + $20,000 high-end estimated cost to adviser for external professional fees for developing policies and procedures + $750,000 high-end estimated cost to adviser for maintenance of critical operations and systems and the protection, backup and recovery of data + $500,000 high-end estimated cost to adviser for a prearranged alternative physical location + $5,000 high-end estimated cost to adviser for a plan of communication + $50,000 high-end estimated cost for third-party oversight = $1,472,310.

    See infra, notes 125 through 129.

    We anticipate that developing policies and procedures designed to minimize material service disruptions, including those related to each required component of the business continuity and transition plan will largely be done internally because it will require an evaluation of the adviser's business operations most suited to be conducted by in-house employees familiar with the intricacies of the business operations. These costs are quantified and discussed in more detail in the PRA section below, but in summary, we estimate that this initial one-time cost will range from approximately $17,000 to $170,000, depending on the facts and circumstances of a particular adviser's operations and the comprehensiveness of their existing plan.125

    125See infra section III.A.1. This estimate is based on the following calculations: $12,515 internal cost to representative smaller adviser + $4,000 in external professional fees for representative smaller adviser = $16,515. $147,310 internal cost to representative larger adviser + $20,000 in external professional fees for representative larger adviser = $167,310.

    With respect to integration and implementation of the policies and procedures described above, an adviser may incur external costs to upgrade systems and processes. The external costs incurred by an adviser to meet the required components of the proposed rule would be directly affected by the current state of the adviser's existing systems and processes. For example, the proposed rule specifies that an adviser must address the maintenance of critical operations and systems and the protection, backup, and recovery of data. While our staff observes that most advisers already have systems in place to address the protection, backup, and recovery of data, an adviser that does not already have a system in place would incur the costs associated with implementing an operational solution to protecting its data.126 Also, the proposed rule specifies that an adviser's plan include a pre-arranged alternative physical location of its office(s) and/or employees. While many advisers already have back-up locations identified as a co-location in times of business disruptions and equipped their employees to telework if they are unable to travel to the primary office location, an adviser that has not adequately addressed this component of the proposed rule would incur costs to do so in light of the proposed rule.127

    126 We estimate an adviser could spend between $1,000 and $750,000 to address the maintenance of critical operations and systems, and the protection, backup and recovery of data. The wide range is attributable to the varying methods in which advisers may address this component of the proposed rule. For example, smaller advisers may address data backup and recovery by outsourcing storage to a service provider through cloud software, while a large adviser dealing with large amounts of data may find it more cost effective to purchase data servers dedicated to the adviser.

    127 We estimate that an adviser could spend between $5,000 and $500,000 to address having a prearranged alternative physical location. The wide range is attributable to the varying methods in which advisers may address this component of the proposed rule. For example, a smaller adviser with minimal employees may be able to function by enabling its employees to telework and access the adviser's systems remotely instead of requiring formal meeting space. Larger advisers with many employees, on the other hand, may need to rent office space on a temporary basis or establish co-locations where employees necessary to the operations of an adviser may congregate.

    The proposed rule also requires that the adviser address how it will communicate with clients, employees, service providers, and regulators in the event of a business disruption. While advisers have communication tools as part of its general business operations that enable it to communicate to its stakeholders (i.e., email, phone, etc.), some advisers may have formal, more sophisticated communication infrastructure already in place.128 The proposed rule further requires advisers to engage in an assessment of critical third-party vendors, including assessing how service providers will maintain business continuity when faced with significant business disruption. While some advisers currently have robust vendor management programs that take steps to evaluate the resiliency of vendors, including reviewing information regarding their BCPs, due diligence questionnaires or assurance control reports from an independent party, and onsite visits, some advisers do not and will need to incur costs to enhance their review of critical third-party vendors.129

    128 We estimate that an adviser could spend between almost nothing to up to $5,000 to address having a plan of communication with its stakeholders. The wide range is attributable to the varying methods in which advisers may address this component of the proposed rule. For example, a small adviser with minimal employees could manually email or telephone its stakeholders, whereas a large adviser with many employees or clients could choose to use an automated system to trigger a pre-programmed communication plan.

    129 We estimate that an adviser could spend between $5,000 and $50,000 to address the requirement for third-party oversight. The wide range is attributable to the varying methods in which advisers may address this component of the proposed rule. As discussed in section I, many advisers may choose to use in-house personnel to conduct due diligence of critical service providers, while others may choose to pay others to conduct such due diligence on their behalf.

    Aggregating our estimates for the various components of the rule, we estimate that SEC-registered advisers may spend between approximately $11,000 and $1.3 million in additional, initial costs to upgrade systems and processes to comply with the proposed rule depending on the complexity of their operations and the current state of their systems and processes, as described above.130

    130 These estimates are based on the aggregated low-end of the range and the high-end of the range, respectively, of mostly internal costs detailed in the PRA section below and the external costs associated with integrating and implementing the plan. Specifically, these estimates are based on the following calculations:

    $1,000 low-end estimated cost to adviser for maintenance of critical operations and systems and the protection, backup and recovery of data + $5,000 low-end estimated cost to adviser for a prearranged alternative physical location + $0 low-end estimated cost to adviser for a plan of communication + $5,000 low-end estimated cost for third-party oversight = $11,000.

    $750,000 high-end estimated cost to adviser for maintenance of critical operations and systems and the protection, backup and recovery of data + $500,000 high-end estimated cost to adviser for a prearranged alternative physical location + $5,000 high-end estimated cost to adviser for a plan of communication + $50,000 high-end estimated cost for third-party oversight = $1,305,000.

    See supra, notes 125 through 129.

    These estimates include the assumption that large advisers will incur more costs than smaller advisers based on their operational risk profile. Because these estimates do not take into account our staff observations that larger advisers generally already have more robust business continuity plans in place compared to smaller advisers, we believe our estimates may overstate the costs to be incurred by advisers.

    ii. Ongoing Costs

    In addition to the one-time initial costs described above, each registered adviser would also incur ongoing costs as a result of the proposed rule related to the adviser's review of the adequacy of its business continuity and transition plan and the effectiveness of its implementation. This would involve internal costs associated with updating policies and procedures to reflect changes in an adviser's operational risk profile and costs of compliance and reporting associated with maintaining the plan, but would also include external costs associated with maintaining and upgrading systems, maintaining alternate work locations, and responding to regulatory changes that require revision of the adviser's business continuity and transition plan.131 As discussed in the PRA section below, based on staff experience, we estimate that each adviser, in addition to the initial costs described above, would incur ongoing plan-related cost of approximately 25% of the adviser's initial costs in adopting and implementing a business continuity and transition plan. Accordingly, we estimate that an SEC-registered adviser would incur ongoing annual costs associated with the proposed rule that would range from $7,500 to $375,000.132

    131See supra section I.C.2 for more details on annual review requirements.

    132 This estimate is based on the following calculations: .25 × $30,000 = $7,500 and .25 × $1.5 million = $375,000. See supra note 124 and accompanying text (discussing total initial costs ranging from approximately $30,000 to $1.5 million).

    In addition, the proposed amendments to rule 204-2 would require registered advisers to maintain records related to the current plan and any plan in effect in the previous five years, as well as any records documenting the annual review of the plan required by the rule. As described in more detail in the PRA section below, we estimate that such advisers will spend approximately $150 each year on an ongoing basis to meet this requirement.

    b. Costs to Clients and Investors

    Some of the costs incurred by advisers as a result of the proposed rule may ultimately be passed on from advisers to clients and fund investors through higher fees. The extent to which costs are transferred to clients and investors depends on several factors, including the supply and demand for adviser services. On the demand side, the extent to which clients and investors respond to fee changes is a function of how highly they value a given adviser's services; the proposed rule may increase this valuation if investors value business continuity and transition plans and hence increase the demand for adviser services at a given fee, but the exact nature of this potential shift and its impact on fees is unknown.133 On the supply side, if advisers take investor fee sensitivity into account, under many plausible competition scenarios in an adviser's market segment, it is likely at least some of the cost increases of the proposed rule will be passed on to clients and investors. However, if advisers incur costs associated with changing fees, advisers may not pass on the costs of the proposed rules until they cross some significant threshold. Since we do not have data or other information concerning individual investor fee sensitivities, how advisers take these into account, or the extent to which advisers prefer to keep fees constant, the potential shift in the supply of advisory service and its impact on fees is unknown.

    133See, e.g., John Haslem, Mutual Fund Heterogeneity and Fee Dispersion, J. Wealth. Manag., Vol. 18, No. 1 (Summer 2015) at 41-48, who argues that because preferences differ across investors, fee sensitivity also varies across investors.

    3. Effects on Efficiency, Competition, and Capital Formation

    The Commission has also considered the effects of the proposed rules on efficiency, competition, and capital formation. With respect to efficiency, to the extent that a disruption were to prevent an adviser from executing trades for several days, investors would be unable to make any changes in their investment choices, leading to a potentially inefficient allocation of their capital during this period. To the extent that the proposed rules decrease the recovery time of a disruption for an adviser that many market participants are relying on when conducting their business, they could promote efficient pricing of risk and thus efficient capital allocation during such an event.

    The proposed rule also could affect competition in the advisory industry. As discussed above, the costs of adopting plans that meet the requirements of the proposed rule will vary depending on an adviser's operations and the extent to which they have already implemented business continuity and transition plans consistent with the rule. To the extent that, in a given market segment, advisers with high adoption costs compete for clients and investors against advisers with low adoption costs, the proposed rule will disproportionally affect the high adoption cost advisers. If some of these advisers are only marginally profitable, they may exit that market segment. Similarly, the proposed rule could, on the margin, raise the barrier to entry for an adviser that otherwise would have entered a given market segment. If the rule results in either adviser exits or increased barriers to entry, reduced competitive pressures could result in increased fees for clients and investors.

    Finally, the proposed rule may have a small but positive impact on capital formation. Ex-ante, reducing risks to clients and investors associated with business disruptions and transition events could increase such clients' and investors' willingness to invest via advisers, which could be beneficial to capital formation if advisers are more skilled than those clients or investors at identifying sound investment opportunities. In addition, to the extent that the rules reduce any risk premium in assets associated with business disruptions and transition events as discussed above, more robust business continuity and transition plans could promote capital formation.

    D. Reasonable Alternatives

    In formulating our proposal, we have considered various reasonable alternatives to certain individual elements of proposed new rule 206(4)-4 and the proposed amendments to rule 204-2. Those alternatives are discussed below. We have also requested comments relating to certain specific aspects of these alternatives, as noted above.

    1. Require Public Availability of Business Continuity and Transition Plans

    First, the Commission could require that SEC-registered advisers publicly disclose a summary of the plans required by the proposed rule in their Form ADVs, and either additionally or as an alternative, provide their business continuity and transition plans to clients upon request. In addition, as an alternative to the recordkeeping requirement, we could require registered advisers to file their business continuity and transition plans (or a portion or summary thereof) with the Commission.

    Disclosing the plans or a summary of those plans, and the operational and other risks addressed by such plans, could help investors evaluate and compare the operational and other risks associated with particular advisers. If investors could choose among advisers in part based on the level of operational and other risk advisers were willing to bear, advisers might be further incentivized to plan for business disruption events. However, we understand that such information could be considered proprietary by some advisers and the public disclosure of business continuity and transition plans may make advisers more vulnerable to attacks from third parties, such as cybersecurity attacks that target the contingency plans laid out in an adviser's business continuity and transition plan. Furthermore, advisers would incur additional monetary costs associated with the disclosure of the plans. Such costs associated would vary depending on the type of disclosure required (e.g., filing with the Commission, publication on the adviser's Web site, making the plans available upon request, etc.) and whether the adviser currently makes its plans available to clients.

    In addition, instead of requiring certain components for business continuity plans for all advisers, as in the proposed rule, the Commission could continue imposing only the obligation generally set forth as guidance under the Compliance Program Rule but require public disclosure of any business continuity plans adopted pursuant to that rule. As noted above, the proposed rule's enhanced requirements for business continuity plans impose costs compared to the existing baseline, depending on an adviser's current business continuity plans, so this alternative would avoid the costs associated with complying with the proposed rule. Still, advisers would incur other costs related to disclosure of the existing business continuity plans, as noted above, including the direct monetary costs of publishing or providing the plans, as well as indirect costs such as those associated with revealing the proprietary or sensitive business information identified above.

    Further, as discussed above, the non-public nature of existing business continuity plans may be a contributing factor to the lack of uniformly robust plans observed by Commission examiners. However, given the other factors discussed above that may also contribute to the lack of sufficiently robust plans among all advisers, the Commission preliminarily believes that only requiring public disclosure of existing business continuity plans without specifying certain components that plans must contain may not fully address its concerns that all advisers have not established sufficiently robust business continuity plans. At the same time, the Commission preliminarily believes that requiring business plans to address the components identified in the proposed rule while not mandating that such plans also be publicly disclosed will result in more uniformly robust plans that address the Commission's concerns.

    2. Require Business Continuity Plans and/or Transition Plans, But Do Not Specify Required Components

    The Commission could also specifically require advisers to adopt business continuity plans and/or transition plans but be silent as to the required components that such plans must contain to address business disruptions and/or transition events.134 The proposed rule requires advisers to adopt and implement a business continuity and transition plan with policies and procedures reasonably designed to address operational and other risks related to a significant disruption in an adviser's operations (including policies and procedures concerning business transition), while also identifying specific components that such a plan must address. If, as an alternative, the Commission required business continuity and transition plans but did not identify any specific components the plans must address, registered advisers would have complete flexibility in determining how to best prepare for and respond to business disruptions and transition events. For example, it is possible that certain required components for business continuity and transition plans identified in the proposed rule are less relevant to some advisers, but all advisers would be required to address each of the components under the proposed rule. In contrast, an alternative that did not require specific components be addressed would enable advisers to tailor the plans to their specific business needs, which could potentially result in cost and time-savings compared to the proposed approach.

    134 The Commission could take different approaches for business disruptions and transition events. For example, the Commission could either retain the currently proposed approach of specifying certain components for addressing business disruptions or impose more specific mechanisms for addressing certain risks associated with business disruptions, as explained below, while not specifying either the components or the specific mechanisms for addressing transition events.

    However, based on the Commission's experience with not providing specific components a plan should address in the context of business disruptions, under rule 206(4)-7, the Commission is concerned that some registered advisers may not implement sufficiently robust plans to best protect the interests of their clients and investors during a business disruption or transition event if the Commission does not specify certain components. In contrast, the Commission preliminarily believes that the current proposed approach strikes an appropriate balance between specifying certain components of business continuity and transition planning that must be addressed while still providing advisers with flexibility in how to address each of those components and any other operational and other risks that may be relevant to the adviser's operations. In addition, the Commission preliminarily believes that advisers will achieve certain efficiencies in simultaneously addressing both business disruptions and transition events under the proposed approach, which may mitigate additional costs imposed by the proposed approach.

    3. Require Specific Mechanisms for Addressing Certain Risks in Every Plan

    As discussed above, we are proposing a rule that requires SEC-registered advisers to address certain general components, but permits them the flexibility to draft their business continuity and transition plans based on the risks associated with their particular operations. We could alternatively include in the rule prescriptive requirements mandating precisely how registered advisers must address certain specified risks related to either business disruptions or transition events, or both.135

    135 As noted above, the Commission could vary its approach for business continuity and transition plans. Specifically, for both business continuity plans and transition plans, the Commission could either (1) retain the more flexible component-based approach currently proposed, (2) mandate specific requirements for addressing business disruptions/transition events, or (3) only require “reasonably designed” plans without specifying particular components.

    Specific, mandatory requirements could potentially reduce confusion as to exactly how these advisers are expected to address business disruptions and/or transition events. However, as discussed above, we recognize that advisers' business models and operations vary and that the manner in which each adviser's business continuity and transition plan addresses a required element will depend upon the nature and complexity of the adviser's business. Therefore, a prescriptive one-size-fits-all rule mandating how all advisers must address certain specified risks, including risks a particular business model and operation would not be exposed to, could be inefficient and cause some advisers to incur unnecessary costs by requiring them to address requirements that are not relevant to their specific business. In addition, a prescriptive rule provides less flexibility for registered advisers to address new issues as they arise, particularly concerning changes in technology, again potentially leading to inefficient constraints on how registered advisers prepare for and address various risks. Therefore, we preliminarily believe our proposed approach strikes an appropriate balance between requiring that each adviser have a business continuity and transition plan that addresses certain required components we believe will help SEC-registered advisers to appropriately plan for significant business disruptions and transition events while, at the same time, allowing each adviser the necessary flexibility in creating a business continuity and transition plan to take into account the adviser's own unique operations, the nature and complexity of its business, its clients, and its key personnel.

    4. Vary the Requirements of the Proposed Rule for Different Subsets of Registered Advisers

    Additionally, instead of requiring that all SEC-registered advisers adopt and implement the business continuity and transition plans with the same exact components, we could vary those requirements by adviser. For example, the Commission could provide that various requirements of the rule only apply to a subset of registered advisers (e.g., advisers over a certain asset threshold, advisers that are engaged in activities that the Commission deems to be risky, advisers that are affiliated with other financial industry participants, such as broker-dealers or banks, etc.), or it could provide that certain advisers (such as smaller advisers) are exempted from the rule entirely. As we have discussed above, different types of advisers have different types of operational and other risks and it is possible that requiring every adviser to address each of the risks identified in the proposed rule, even those that may be less likely for certain advisers, could result in unnecessary costs for those advisers.

    However, the overall purpose of the proposed rule is to provide enhanced protection to clients and investors by requiring all registered advisers to establish sufficiently robust plans, and tailoring the rule to require different components for different types of advisers may result in the interests of some clients and investors not being adequately protected. Specifically, it is possible that, when distinguishing different “types” of advisers, any boundaries drawn would be imperfect and any groups of advisers identified by such a rule would themselves not be homogenous, resulting in under or over-inclusive groups. This could result in some clients and investors not receiving adequate protections, while still imposing unnecessary costs on others. In contrast, the proposed rule allows advisers the flexibility to address each required component to the degree that reflects the nature of each particular adviser's business. Accordingly, the Commission believes that the proposed rule strikes an appropriate balance in providing that protection while minimizing the costs of compliance to advisers in ways that would not undermine the Commission's regulatory goals.

    E. Request for Comment

    We request comment on our assumptions regarding the costs and benefits of the proposed rule. We request comment on whether the proposed rule, if adopted, would impose a burden on competition. We also request comment on whether the proposed rule, if adopted, would promote efficiency, competition, and capital formation. Commenters are requested to provide empirical data to support their views. In addition to our general request for comment on the costs and benefits of the proposed amendments, we request the following specific comment on certain aspects of our economic analysis.

    • To what extent would advisers and their clients and investors benefit from business continuity and transition plans that are required to contain certain specific components? Please explain.

    • Would advisers, and their clients and investors, benefit more from requiring plans to address certain risks in a specified manner, rather than providing for flexibility as in the proposed rule?

    • Do commenters expect that advisers would incur costs in addition to, or that differ from, the costs we outlined above for both one-time and ongoing costs? Please explain.

    • Would any of the effects and costs of the proposed rule be large enough to affect the behavior of investment advisers or their clients? For example:

    ○ Do commenters expect that some advisers may choose to exit the market rather than incur the costs associated with compliance? If so, what segment of the investment adviser market is this mostly likely to be seen in and how many exiting advisers should we expect? Please explain.

    ○ Will the costs to clients, in the form of increased fees, result in some clients no longer employing the services of advisers? If so, what types of clients would be most likely to take such actions? Please explain.

    • Do commenters believe that the alternatives the Commission considered are appropriate? Are there other reasonable alternatives that the Commission should consider? If so, please provide additional alternatives and how their costs and benefits would compare to the proposal.

    • Do commenters believe that the analysis of the associated costs and benefits of the alternatives is accurate? If not, please provide more accurate costs and benefits, including any data or statistics that supports those costs and benefits.

    III. Paperwork Reduction Act

    The proposed rule and rule amendments under the Advisers Act contain “collections of information” within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).136 The title for the new collection of information is “Rule 206(4)-4.” In addition, the proposed amendments to rule 204-2 would impact the currently approved collection of information titled “Rule 204-2,” under OMB control number 3235-0278. These collections of information are mandatory for all investment advisers registered with the Commission. The Commission is submitting these collections of information to the OMB for review in accordance with 44 U.S.C. 3507 (d) and 5 CFR 1320.11. 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 control number.

    136 44 U.S.C. 3501 through 3521.

    The collection of information under rule 206(4)-4 is designed to increase the likelihood that advisers are as prepared as possible to continue operations on an ongoing basis and to meet client expectations and legal obligations in the event of a significant disruption to their operations. The respondents are investment advisers registered with the Commission. Responses provided to the Commission in the context of its examination and oversight program are generally kept confidential.137

    137See section 210(b) of the Advisers Act.

    The collection of information under rule 204-2 is necessary for the Commission staff to use in its examination and oversight program. The respondents are investment advisers registered with us. Responses provided to the Commission in the context of its examination and oversight program are generally kept confidential.138 The records that an adviser must keep in accordance with the proposed rule must be retained for at least five years.139

    138See section 210(b) of the Advisers Act.

    139See proposed rule 204-2(a)(20).

    A. The Proposed Rules 1. Rule 206(4)-4

    As discussed in section II, we estimate that each adviser would include one-time initial costs to adopt and implement a written business continuity and transition plan, as well as ongoing plan-related costs. There are currently approximately 11,956 investment advisers registered with us.140 We estimate that advisers will spend between 50 to 500 hours to initially adopt and implement a business continuity and transition plan depending on the nature of an adviser's current business continuity plan and the complexity of its operations. This range is comprised of our estimates that a representative smaller adviser (defined in this PRA as advisers with less than $100 million in assets under management) would spend 50 hours on this initial effort at a cost of $12,515,141 a representative mid-sized adviser (defined in this PRA as advisers with at least $100 million in assets under management but less than $1 billion) would spend 250 hours on this initial effort at a cost of $70,045,142 and a representative larger adviser (defined in this PRA as advisers with at least $1 billion in assets under management) would spend 500 hours on this initial effort at a cost of $147,310.143 As discussed in section II, exact costs for any given adviser would depend on the facts and circumstances of the adviser's operations and the comprehensiveness of its existing plan. Aggregating the estimates above for all advisers, however, yields a total industry-wide initial hourly burden of 3,404,600 144 (as monetized, is equivalent to a one-time aggregate burden of approximately $974.6 million).145 Amortized over a three-year period, this would be an annual hourly burden of 95 per adviser146 (as monetized, is equivalent to an annual amortized burden per adviser of $27,172).147

    140 This is the number of investment advisers registered with us on our IARD System as of January 4, 2016.

    141 This estimate is based on the following calculations: 25 hours × $288 (hourly rate for a compliance manager) = $7,200; 20 hours × $127 (hourly rate for an operations specialist) = $2,540; 5 hours × $555 (hourly rate for a deputy general counsel) = $2,775. $7,200 + $2,540 + 2,775 = $12,515. The hourly wages used are from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.

    142 This estimate is based on the following calculations: 75 hours × $288 (hourly rate for a compliance manager) = $21,600; 60 hours × $127 (hourly rate for an operations specialist) = $7,620; 15 hours × $555 (hourly rate for a deputy general counsel) = $8,325; 50 hours × $264 (hourly rate for a senior systems analyst) = $13,200; 50 hours × $386 (hourly rate for an attorney) = $19,300. $21,600 + $7,620 + $8,325 + $13,200 + $19,300 = $70,045. The hourly wages used are from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.

    143 This estimate is based on the following calculations: 100 hours × $288 (hourly rate for a compliance manager) = $28,800; 80 hours × $127 (hourly rate for an operations specialist) = $10,160; 20 hours × $555 (hourly rate for a deputy general counsel) = $11,100; 65 hours × $264 (hourly rate for a senior systems analyst) = $17,160; 65 hours × $386 (hourly rate for an attorney) = $25,090; 30 hours × $410 (hourly rate for a computer operations department manager) = $12,300; 30 hours × $271 (hourly rate for a financial reporting manager) = $8,130; 40 hours × $340 (hourly rate for a senior operations manager) = $13,600; 30 hours × $255 (hourly rate for a senior business analyst) = $7,650; 40 hours × $333 (hourly rate for a senior risk management specialist) = $13,320. $28,800 + $10,160 + $11,100 + $17,160 + $25,090 + $12,300 + $8,130 + $13,600 + $7,650 + $13,320 = $147,310. The hourly wages used are from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.

    144 This estimate is based on the following calculations: (2,032 smaller advisers × 50 hours) + (6,636 mid-sized advisers × 250 hours) + (3,288 larger advisers × 500 hours) = 3,404,600 hours.

    145 This estimate is based on the following calculation: (2,032 smaller advisers × $12,515) + (6,636 mid-sized advisers × $70,045) + (3,288 larger advisers × $147,310) = $974.6 million.

    146 This estimate is based on the following calculations: 3,404,600 hours/3 years = 1,134,867 hours per year. 1,134,867 hours/11,956 advisers = 95 hours per year per adviser.

    147 This estimate is based on the following calculations: $974.6 million/3 years = $324.87 million per year. $324.87 million/11,956 advisers = $27,172 per year per adviser.

    We also anticipate that some advisers may consult with outside legal counsel and/or other outside professionals to assist in drafting policies and procedures and/or to assist in evaluating particular components of a plan. We estimate that the costs associated with such an engagement would include fees for approximately 10 hours for smaller firms, 30 hours for a mid-sized firm, and 50 hours for a larger firm, at an average rate of $400 per hour (estimated hourly rate for outside legal services).148 Consequently, for a smaller firm we estimate a total of $4,000 in outside fees for each smaller firm,149 $12,000 for each medium firm,150 and $20,000 for each larger firm.151 Aggregating these estimates for all advisers, yields a total industry wide initial cost burden of $153.5 million attributable to engaging outside legal services for assistance in initially drafting and implementing the BCP.152 Amortized over a three-year period, this would be an initial annual cost burden per adviser of $4,282.153

    148 We recognize that the costs of retaining outside professionals may vary depending on the nature of the professional services, but for purposes of this PRA analysis we estimate that such costs would be similar to the costs of outside legal services.

    149 This estimate is based on the following calculation: 10 hours × $400 = $4,000.

    150 This estimate is based on the following calculation: 30 hours × $400 = $12,000.

    151 This estimate is based on the following calculation: 50 hours × $400 = $20,000.

    152 This estimate is based on the following calculation: ($4,000 per smaller adviser × 2,032 smaller advisers) + ($12,000 per mid-sized adviser × 6,636 mid-sized advisers) + ($20,000 per larger adviser × 3,288 larger advisers) = $153.5 million.

    153 This estimate is based on the following calculations: $153.5 million/3 years = $51.2 million per year. $51.2 million/11,956 advisers = $4,282 per adviser.

    In addition to the initial burden, an adviser would incur ongoing, annual costs associated with its business continuity and transition plan, including the adviser annually reviewing the adequacy of its business continuity and transition plan and the effectiveness of its implementation. Based on staff experience, we estimate these ongoing costs would total approximately 25% of an adviser's initial costs. Accordingly, we estimate that a representative smaller adviser would spend 12.5 hours annually on this effort internally (as monetized, is equivalent to an annual burden of $3,129) while incurring outside costs of $1,000,154 a representative mid-sized adviser would spend 62.5 hours annually on this effort internally (as monetized, is equivalent to an annual burden of $17,511) while incurring outside costs of $3,000,155 and a representative larger adviser would spend 125 hours annually on this effort internally (as monetized, is equivalent to an annual burden of $36,828) while incurring outside costs of $5,000.156 Aggregating the estimates above for all advisers yields a total industry-wide ongoing annual burden of approximately 851,150 hours (as monetized, is equivalent to an annual burden of $243.65 million) 157 plus outside costs of $38.4 million.158 This translates to an annual burden per adviser of 71.2 hours (as monetized, is equivalent to an annual burden of $20,379) and $3,212.159

    154 This estimate is based on the following calculations: 0.25 × 50 hours = 12.5 hours. 0.25 × $12,515 = $3,129. 0.25 × $4,000 = $1,000.

    155 This estimate is based on the following calculations: 0.25 × 250 hours = 62.5 hours. 0.25 × $70,045 = $17,511. 0.25 × $12,000 = $3,000.

    156 This estimate is based on the following calculations: 0.25 × 500 hours = 125 hours. 0.25 × $147,310 = $36,828. 0.25 × $20,000 = $5,000.

    157 This estimate is based on the following calculations: (2,032 smaller advisers × 12.5 hours) + (6,636 mid-sized advisers × 62.5 hours) + (3,288 larger advisers × 125 hours) = 851,150 hours. (2,032 smaller advisers × $3,129) + (6,636 mid-sized advisers × $17,511) + (3,288 larger advisers × $36,828) = $243.65 million.

    158 This estimate is based on the following calculation: (2,032 smaller advisers × $1,000) + (6,636 mid-sized advisers × $3,000) + (3,288 larger advisers × $5,000) = $38.4 million.

    159 This estimate is based on the following calculations: 851,150 hours/11,956 advisers = 71.2 hours per adviser. $243.65 million/11,956 advisers = $20,379 per adviser. $38.4 million/11,956 advisers = $3,212 per adviser.

    2. Rule 204-2

    The currently-approved total annual burden estimate for rule 204-2 is 1,986,152 hours. This burden estimate was based on estimates that 10,946 advisers were subject to the rule, and each of these advisers spends an average of 181.45 hours preparing and preserving records in accordance with the rule. Based on updated data as of January 4, 2016, there are 11,956 registered investment advisers.160 This increase in the number of registered investment advisers increases the total burden hours of current rule 204-2 from 1,986,152 to 2,169,417, an increase of 183,265 hours.161

    160See supra note 140 and accompanying text.

    161 This estimate is based on the following calculations: (11,956 advisers − 10,946 advisers) * 181.45 hours = 183,265 hours; 183,265 hours + 1,986,152 hours = 2,169,417 hours.

    The proposed amendments to rule 204-2 would require a registered investment adviser to maintain copies of the written business continuity and transition plans drafted under proposed rule 206(4)-4. In addition, the proposed amendments would require a registered investment adviser to retain copies of any records documenting the adviser's annual review of its policies and procedures under proposed rule 206(4)-4.

    Based on staff experience, we estimate that the proposed amendments to rule 204-2 would increase each registered investment adviser's average annual collection burden under rule 204-2 by 2 hours, from 181.45 hours to 183.45 hours,162 and would thus increase the annual aggregate burden for rule 204-2 by 23,912 hours,163 from 2,169,417 hours to 2,193,328 hours.164 As monetized, the estimated burden for each registered investment adviser's average annual burden under rule 204-2 would increase by approximately $150,165 which would increase the estimated monetized aggregate annual burden for rule 204-2 by $1,793,325, from $162,706,275 to $164,499,600.166 We estimate that there are no external costs associated with this collection of information under the proposed amendments to rule 204-2.

    162 This estimate is based on the following calculation: 181.45 existing hours + 2 new hours = 183.45 hours.

    163 This estimate is based on the following calculation: 11,956 advisers × 2 hours = 23,912 hours.

    164 This estimate is based on the following calculation: 11,956 advisers × 183.45 hours = 2,193,328 hours.

    165 This estimate is based on the following calculation: 2 hours × $75 (hourly rate for an administrative assistant) = $150. The hourly wage used is from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.

    166 This estimate is based on the following calculations: 2,169,417 hours × $75 = $162,706,275. 2,193,328 hours × $75 = $164,499,600. $164,499,600−$162,706,275 = $1,793,325.

    B. Request for Comment

    We request comment on whether our estimates for burden hours and any external costs as described above are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments in order to: (1) Evaluate whether the proposed collections of information are necessary for the proper performance of the function of the Commission, including whether the information will have practical utility; (2) evaluate the accuracy of the Commission's estimate of the burden of the proposed collections of information; (3) determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and (4) determine whether there are ways to minimize the burden of the collections of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology.

    The agency has submitted the proposed collection of information to OMB for approval. Persons wishing to submit comments on the collection of information requirements of the proposed amendments should direct them to the Office of Management and Budget, Attention Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should send a copy to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090, with reference to File No. S7-13-16. OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication of this release; therefore, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days after publication of this release. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-13-16, and be submitted to the Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549-2736.

    IV. Initial Regulatory Flexibility Analysis

    The Commission has prepared the following Initial Regulatory Flexibility Analysis (“IRFA”) in accordance with section 3(a) of the Regulatory Flexibility Act 167 regarding our proposed rule 206(4)-4 and proposed amendments to rule 204-2.

    167 5 U.S.C. 603(a).

    A. Reasons for and Objectives of the Proposed Actions

    Based on staff observations, we are concerned about the adequacy of some advisers' plans to address operational and other risks associated with business resiliency. Establishing strong operational controls that manage these risks, including the risks associated with business continuity and transition, are important practices and should increase the likelihood that advisers are as prepared as possible to continue operations on an ongoing basis and to meet client expectations and legal obligations in the event of a significant disruption in their operations. Accordingly, proposed rule 206(4)-4 would require SEC-registered advisers to adopt and implement written business continuity and transition plans reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations.

    We also are proposing specific components be included in such plans in order to address certain disparate practices the staff has previously observed during examinations and to facilitate robust business continuity and transition planning across all SEC-registered advisers. In addition, the proposed rule would require advisers to review their business continuity and transition plans at least annually in order to ensure that advisers are examining the continued adequacy and effectiveness of their plans on an ongoing basis.

    The proposed amendments to rule 204-2 would require advisers to make and keep all business continuity and transition plans that are in effect or were in effect at any time within the past five years. The proposed amendments would help advisers have easy access to necessary information during periods of stress.

    B. Legal Basis

    Proposed rule 206(4)-4 is designed to address certain disparate practices our staff has previously observed during its examinations and to facilitate robust business continuity and transition planning across all SEC-registered advisers.

    The Commission is proposing new rule 206(4)-4 and amendments to rule 204-2 under the rulemaking authority set forth in sections 204, 206(4) and 211(a) of the Advisers Act [15 U.S.C. 80b-4(b), 80b-6(4), and 80b-11(a)].

    C. Small Entities Subject to the Rule and Rule Amendments

    In developing these proposals, we have considered their potential impact on small entities that would be subject to proposed new rule 206(4)-4 and the proposed amendments to rule 204-2. The proposed new rule and the proposed amendments would affect all advisers registered with the Commission, including certain small entities. Under Commission rules, for the purposes of the Advisers Act and the Regulatory Flexibility Act, an investment adviser generally is a small entity if it: (1) Has assets under management having a total value of less than $25 million; (2) did not have total assets of $5 million or more on the last day of the most recent fiscal year; and (3) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year.168

    168 Rule 0-7(a) under the Advisers Act.

    The proposed new rule and the proposed amendments would not apply to most advisers that are small entities (“small advisers”) because small advisers are generally registered with one or more state securities authorities instead of with the Commission.169 Based on IARD data, however, we estimate that as of January 4, 2016, approximately 515 small advisers are registered with the Commission.170 Because these small advisers are registered, they, like all SEC-registered investment advisers, would all be subject to proposed new rule 206(4)-4 and the proposed amendments to rule 204-2.

    169See section 203A of the Advisers Act, prohibiting most small advisers from registering with the Commission.

    170 Based on SEC-registered investment adviser responses to Form ADV, Item 5.F and Item 12.

    D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    Proposed new rule 206(4)-4 and the proposed amendments to rule 204-2 would impose certain recordkeeping and other compliance requirements on all Commission-registered advisers, including Commission-registered small advisers. Proposed rule 206(4)-4 would require advisers to adopt and implement written business continuity and transition plans reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations. The proposed amendments to rule 204-2 would require advisers to make and keep all business continuity and transition plans that are in effect or were in effect at any time within the past five years.

    1. Rule 206(4)-4

    As discussed in section II, we estimated that each adviser would incur one-time costs to adopt and implement a written business continuity and transition plan, as well as ongoing plan-related costs. As noted above, there are currently approximately 515 small advisers registered with the Commission. We estimate that each small adviser would incur an average initial burden of 50 hours associated with adopting and implementing a written business continuity and transition plan at a cost of $12,515.171 Aggregating the estimated burden for all small advisers yields a total initial hourly burden of 25,750 172 (as monetized, is equivalent to a one-time aggregate burden of approximately $6,445,225).173 Amortized over a three-year period, this would be an annual hourly burden of 16.7 per small adviser 174 (as monetized, is equivalent to an annual amortized burden per small adviser of $4,172).175

    171See supra note 141 (discussing the estimated initial cost burden associated with a representative smaller adviser).

    172 This estimate is based on the following calculation: 515 small advisers × 50 hours = 25,750 hours.

    173 This estimate is based on the following calculation: 515 small advisers × $12,515 = $6,445,225.

    174 This estimate is based on the following calculation: 50 hours/3 years = 16.7 hours per year.

    175 This estimate is based on the following calculations: $12,515/3 years = $4,172 per year.

    Our staff also anticipates that some small advisers may consult with outside legal counsel and/or other outside professionals to assist in drafting policies and procedures and/or to provide assistance in evaluating particular components of a plan. We estimate that the costs associated with such an engagement would include fees for approximately 10 hours for small firms at a rate of $400 per hour.176 Consequently, for a representative smaller firm we estimate a total of $4,000 in outside fees.177 Amortized over a three-year period, this would be an annual burden per small adviser of $1,333.178 Accordingly, we estimate that the total annual initial burden on 515 small advisers for adopting and implementing a written business continuity and transition plan would be $686,495.179

    176See supra note 148 and accompanying text.

    177 This estimate is based on the following calculation: 10 hours × $400 per hour = $4,000.

    178 This estimate is based on the following calculation: $4,000/3 years = $1,333 per year.

    179 This estimate is based on the following calculations: 515 small advisers × $1,333 = $686,495.

    In addition to the initial burden, a small adviser would incur ongoing, annual costs associated with its business continuity and transition plan, including the adviser annually reviewing the adequacy of its business continuity plan and the effectiveness of its implementation. Based on staff experience, we estimate that these ongoing costs would total approximately 25% of a small adviser's initial costs. Accordingly, we estimate that each small adviser would spend 12.5 hours annually on this effort internally while incurring outside costs of $1,000.180 Aggregating the estimates above for 515 small advisers yields a total ongoing annual burden on small advisers of approximately 6,438 hours 181 plus outside costs of $515,000.182

    180 This estimate is based on the following calculations: 0.25 × 50 hours = 12.5 hours. 0.25 × $4,000 = $1,000.

    181 This estimate is based on the following calculation: 12.5 hours × 515 advisers = 6,438 hours.

    182 This estimate is based on the following calculation: $1,000 × 515 advisers—$515,000.

    2. Rule 204-2

    The currently-approved annual aggregate information collection burden under rule 204-2 is 1,986,152 hours. This approved annual aggregate burden was based on estimates that 10,946 advisers were subject to the rule, of which 478 were small advisers, and each of these advisers spends an average of 181.45 hours preparing and preserving records in accordance with the rule. Based upon updated data as of January 4, 2016, there are 11,956 registered investment advisers,183 of which 515 are small advisers.184 The increase in the number of registered small advisers increases the total burden hours of current rule 204-2 on small advisers from 86,733 hours to 93,447 hours, an increase of 6,714 hours.185

    183See supra note 140 and accompanying text.

    184See supra note 170 and accompanying text.

    185 This estimate is based on the following calculations: 515 small advisers × 181.45 hours = 93,447 hours. 478 small advisers × 181.45 hours = 86,733 hours. 93,447 − 86,733 = 6,714.

    The proposed amendments to rule 204-2 would require a registered investment adviser to maintain copies of the written business continuity and transition plans drafted under proposed rule 206(4)-4. In addition, the proposed amendments would require a registered investment adviser to retain copies of any records documenting the adviser's annual review of its policies and procedures under proposed rule 206(4)-4.

    Based on staff experience, we estimate that the proposed amendments to rule 204-2 would increase each registered investment adviser's average annual collection burden under rule 204-2 by 2 hours, from 181.45 hours to 183.45 hours,186 and would thus increase the annual aggregate burden for rule 204-2 by 1,030 hours,187 from 93,447 hours to 94,477 hours.188 As monetized, the estimated burden for each registered investment adviser's average annual burden under rule 204-2 would increase by approximately $150,189 which would increase the estimated monetized aggregate annual burden for rule 204-2 by $77,250, from $7,008,525 to $7,085,775.190 We estimate that there are no external costs associated with this collection of information under the proposed amendments to rule 204-2.

    186 This estimate is based on the following calculation: 181.45 existing hours + 2 new hours = 183.45 hours.

    187 This estimate is based on the following calculation: 515 small advisers × 2 hours = 1,030 hours.

    188 This estimate is based on the following calculation: 515 small advisers × 183.45 hours = 94,477 hours.

    189 This estimate is based on the following calculation: 2 hours × $75 (hourly rate for an administrative assistant) = $150. The hourly wage used is from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.

    190 This estimate is based on the following calculations: 93,447 hours × $75 = $7,008,525. 94,477 hours × $75 = $7,085,775. $7,085,775 − $7,008,525 = $77,250.

    E. Duplicative, Overlapping, or Conflicting Federal Rules

    We believe there are no federal rules that duplicate, overlap, or conflict with proposed new rule 206(4)-4 and the proposed amendments to rule 204-2. The written business continuity and transition plans that would be required by the proposed new rule would include certain policies and procedures already generally required by other rules under the federal securities laws, but the proposed new rule would not require these policies and procedures to be duplicated. Some of the records an adviser would be required to maintain under the proposed amendments to rule 204-2 also may be required records under the general recordkeeping provisions of rule 204-2 of the Advisers Act, but such overlap would be limited and the Commission would not require the adviser to maintain duplicate copies.

    F. Significant Alternatives

    In formulating our proposal, we have considered various reasonable alternatives to the individual elements of proposed new rule 206(4)-4 and the proposed amendments to rule 204-2, specifically as they relate to accomplishing our stated objectives while minimizing any significant economic impact on small entities. The alternatives most relevant to small advisers are discussed below. We have also requested comment relating to certain specific aspects of these and other alternatives above.191

    191See supra section I.C.1.f.

    The Commission considered exempting small advisers from the proposal entirely. The Commission also considered setting forth different business continuity and transition plan requirements for small advisers. However, because small advisers generally face the same types of transition and business continuity issues as larger advisers, although on a smaller scale, we believe small advisers should be subject to the proposed rule to the same extent as larger advisers and be allowed to tailor their business continuity and transition plans to the scope of their business. The proposed rule allows each adviser the necessary flexibility in creating a business continuity and transition plan to take into account the adviser's own unique operations, the nature and complexity of its business, its clients, and its key personnel, and we believe that such flexibility may result in small advisers incurring less costs to comply.192

    192See supra section III.A.1, discussing the lower estimated cost burdens, both initial and ongoing, associated with smaller advisers as compared to larger advisers.

    G. Solicitation of Comments

    We encourage written comments on matters discussed in this IRFA. We solicit comment on the number of small entities subject to the proposed rule and whether the proposed rule discussed in this release could have an effect on small entities that has not been considered. We request that commenters describe the nature of any impact on small entities and provide empirical data to support the extent of such impact.

    V. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or “SBREFA,” 193 we must advise OMB whether a proposed regulation constitutes a “major” rule. Under SBREFA, a rule is considered “major” where, if adopted, it results in or is likely to result in (1) an annual effect on the economy of $100 million or more; (2) a major increase in costs or prices for consumers or individual industries; or (3) significant adverse effects on competition, investment or innovation.

    193 Public Law 104-121, Title II, 110 Stat. 857 (1996) (codified in various sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C. 601).

    We request comment on the potential impact of the proposed rule on the economy on an annual basis. Commenters are requested to provide empirical data and other factual support for their views to the extent possible.

    VI. Statutory Authority

    The Commission is proposing new rule 206(4)-4 and amendments to rule 204-2 under the rulemaking authority set forth in sections 204, 206(4) and 211(a) of the Advisers Act [15 U.S.C. 80b-4, 80b-6(4), and 80b-11(a)].

    List of Subjects in 17 CFR Part 275

    Investment advisers, Reporting and recordkeeping requirements.

    Text of Proposed Rule Amendments

    For reasons set out in the preamble, title 17, chapter II of the Code of Federal Regulations is proposed to be amended as follows:

    PART 275—RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940 1. The authority citation for part 275 continues to read, in part, as follows: Authority:

    15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted.

    Section 275.204-2 is also issued under 15 U.S.C. 80b-6.

    2. Section 275.204-2 is amended by: a. Reserving paragraph (a)(19); b. Adding paragraph (a)(20); and c. Revising paragraph (e)(1).

    The addition and revision read as follows:

    § 275.204-2 Books and records to be maintained by investment advisers.

    (a) * * *

    (20)(i) A copy of the investment adviser's business continuity and transition plan formulated pursuant to § 275.206(4)-4 that is in effect, or at any time within the past five years was in effect;

    (ii) Any records documenting the investment adviser's annual review of the business continuity and transition plan conducted pursuant to § 275.206(4)-4(b).

    (e)(1) All books and records required to be made under the provisions of paragraphs (a) through (c)(1)(i), and (c)(2) of this section (except for books and records required to be made under the provisions of paragraphs (a)(11), (a)(12)(i), (a)(12)(iii), (a)(13)(ii), (a)(13)(iii), (a)(16), (a)(17)(i), and (a)(20)(i) of this section), shall be maintained and preserved in an easily accessible place for a period of not less than five years, from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the investment adviser.

    3. Section 275.206(4)-4 is added to read as follows:
    § 275.206(4)-4 Investment adviser business continuity and transition plan.

    (a) Prohibition. If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), it shall be unlawful within the meaning of section 206 of the Act (15. U.S.C. 80b-6) for you to provide investment advice to your clients unless you:

    (1) Business continuity and transition plan. Adopt and implement a written business continuity and transition plan; and

    (2) Annual review. Review, no less frequently than annually, the adequacy of the business continuity and transition plan and the effectiveness of its implementation.

    (b) Content of business continuity and transition plan. (1) For purposes of this section, the term business continuity and transition plan means policies and procedures reasonably designed to address operational and other risks related to a significant disruption in the investment adviser's operations, including policies and procedures concerning:

    (i) Business continuity after a significant business disruption; and

    (ii) Business transition in the event the investment adviser is unable to continue providing investment advisory services to clients.

    (2) The content of a business continuity and transition plan shall be based upon risks associated with the adviser's operations and shall include policies and procedures designed to minimize material service disruptions, including policies and procedures that address the following:

    (i) Maintenance of critical operations and systems, and the protection, backup, and recovery of data, including client records;

    (ii) Pre-arranged alternate physical location(s) of the adviser's office(s) and/or employees;

    (iii) Communications with clients, employees, service providers, and regulators;

    (iv) Identification and assessment of third-party services critical to the operation of the adviser; and

    (v) Plan of transition that accounts for the possible winding down of the investment adviser's business or the transition of the investment adviser's business to others in the event the investment adviser is unable to continue providing investment advisory services, that includes the following:

    (A) Policies and procedures intended to safeguard, transfer, and/or distribute client assets during transition;

    (B) Policies and procedures facilitating the prompt generation of any client-specific information necessary to transition each client account;

    (C) Information regarding the corporate governance structure of the adviser;

    (D) Identification of any material financial resources available to the adviser; and

    (E) An assessment of the applicable law and contractual obligations governing the adviser and its clients, including pooled investment vehicles, implicated by the adviser's transition.

    By the Commission.

    Dated: June 28, 2016. Brent J. Fields, Secretary.
    [FR Doc. 2016-15675 Filed 7-1-16; 8:45 am] BILLING CODE 8011-01-P
    DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Parts 375 and 388 [Docket No. RM16-15-000] Regulations Implementing FAST Act Section 61003—Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information AGENCY:

    Federal Energy Regulatory Commission.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The Federal Energy Regulatory Commission (Commission) proposes to amend the Commission's regulations to implement provisions of the Fixing America's Surface Transportation Act that pertain to the designation, protection and sharing of Critical Electric Infrastructure Information. Separately, the Commission proposes to amend its regulations that pertain to Critical Energy Infrastructure Information.

    DATES:

    Comments are due August 19, 2016.

    ADDRESSES:

    Comments, identified by docket number, may be filed in the following ways:

    • Electronic Filing through http://www.ferc.gov. Documents created electronically using word processing software should be filed in native applications or print-to-PDF format and not in a scanned format.

    Mail/Hand Delivery: Those unable to file electronically may mail or hand-deliver comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE., Washington, DC 20426.

    Instructions: For detailed instructions on submitting comments and additional information on the rulemaking process, see the Comment Procedures Section of this document.

    FOR FURTHER INFORMATION CONTACT:

    Nneka Frye, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, (202) 502-6029, [email protected].

    Marcos Araus, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, (202) 502-8472, [email protected].

    Mark Hershfield, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, (202) 502-8597, [email protected].

    SUPPLEMENTARY INFORMATION: I. Introduction

    1. On December 4, 2015, the President signed into law the Fixing America's Surface Transportation (FAST) Act.1 The FAST Act, inter alia, added section 215A to the Federal Power Act (FPA) to improve the security and resilience of energy infrastructure in the face of emergencies.2 The FAST Act directs the Commission to issue regulations aimed at securing and sharing sensitive infrastructure information. Specifically, FPA section 215A(d)(2) (Designation and Sharing of Critical Electric Infrastructure Information) requires the Commission to “promulgate such regulations as necessary to”:

    1See Fixing America's Surface Transportation, Public Law 114-94, 129 Stat. 1312 (2015) (to be codified at 16 U.S.C. 824 et seq.) (FAST Act).

    2Id. 61,003.

    (A) establish criteria and procedures to designate information as critical electric infrastructure information;

    (B) prohibit the unauthorized disclosure of critical electric infrastructure information;

    (C) ensure there are appropriate sanctions in place for Commissioners, officers, employees, or agents of the Commission or the Department of Energy [DOE] who knowingly and willfully disclose critical electric infrastructure information in a manner that is not authorized under this section; and

    (D) taking into account standards of the Electric Reliability Organization, facilitate voluntary sharing of critical electric infrastructure information with, between, and by—(i) Federal, State, political subdivision, and tribal authorities; (ii) the Electric Reliability Organization; (iii) regional entities; (iv) information sharing and analysis centers established pursuant to Presidential Decision Directive 63; (v) owners, operators, and users of critical electric infrastructure in the United States; and (vi) other entities determined appropriate by the Commission.

    2. The Commission proposes to revise 18 CFR 375.313, 388.112, and 388.113 of the Commission's regulations to implement the requirements identified in section 215A(d)(2) of the FPA, as well as other provisions included in the FAST Act. The Commission also proposes modifications to its existing Critical Energy Infrastructure Information process, in part, to comply with the FAST Act. The amended process will be referred to as the Critical Energy/Electric Infrastructure Information (CEII) process. Thus, these changes are intended to comply with the FAST Act as well as improve the overall efficiency of the CEII process for information that is submitted to or is generated by the Commission.

    II. Background

    3. Shortly after the terrorist attacks on September 11, 2001, the Commission took steps to protect information that it considered Critical Energy Infrastructure Information.3 As a preliminary step, the Commission removed from its public files and eLibrary document retrieval system documents that were likely to contain detailed specifications of facilities, and directed the public to use the Freedom of Information Act (FOIA) request process to obtain such information.4 In 2003, the Commission established its Critical Energy Infrastructure Information procedures for entities outside of the Commission to obtain access to Critical Energy Infrastructure Information, stating that such information would typically be exempt from disclosure pursuant to FOIA.5 In particular, the Commission determined that it was important to have a process for individuals with a valid or legitimate need to access certain sensitive energy infrastructure information.

    3See Statement of Policy on Treatment of Previously Public Documents, 66 FR 52,917 (Oct. 18, 2001), 97 FERC ¶ 61,030 (2001). A large component of what is currently Critical Energy Infrastructure Information was previously publicly available prior to September 11, 2001.

    4 The FOIA process is specified in 5 U.S.C. 552 and the Commission's regulations at 18 CFR 388.108.

    5Critical Energy Infrastructure Information, Order No. 630, 68 FR 9,857 (Mar. 3, 2003), FERC Stats. & Regs. ¶ 31,140 (2003), order on reh'g, Order No. 630-A, 68 FR 46,456 (Aug. 6, 2003), FERC Stats. & Regs. ¶ 31,147 (2003).

    4. The Commission last revised its Critical Energy Infrastructure Information rules over eight years ago.6 However, the Commission indicated that it will revise the Critical Energy Infrastructure Information rules based on a continuing review of its application and effectiveness.7

    6See Critical Energy Infrastructure Information, Order No. 702, 72 FR 63,980 (Nov. 14, 2007), FERC Stats. & Regs. ¶ 31,258 (2007).

    7 For example, in 2014, the Department of Energy Inspector General initiated a review of the Commission's controls for protecting non-public information. In a report dated January 30, 2015, the DOE Inspector General recommended, among other things, that the Commission take steps to ensure that the Critical Energy Infrastructure Information processes to protect and control non-public information are current and that such policies are disseminated and properly implemented. DOE Inspector General, Inspection Report: Review of Controls for Protecting Nonpublic Information at the Federal Energy Regulatory Commission (Jan. 2015), http://energy.gov/sites/prod/files/2015/02/f19/DOE-IG-0933.pdf (DOE IG Report).

    5. Over 7,000 documents are submitted to the Commission's eLibrary system as Critical Energy Infrastructure Information each year. The vast majority of submissions and Commission-generated information relates to hydroelectric projects but also includes information regarding natural gas pipeline and electric infrastructure.

    6. The Commission receives approximately 200 requests for Critical Energy Infrastructure Information a year. Requests are typically submitted by public utilities, gas pipelines, Liquefied Natural Gas (LNG) facilities, hydroelectric developers, academics, landowners, public interest groups, researchers, renewable energy organizations, consultants, and Federal agencies.

    7. The Commission's current Critical Energy Infrastructure Information rules provide a means for entities to obtain Critical Energy Infrastructure Information while ensuring that it is handled in an appropriate and secure manner. The new requirements in section 215A(d) also ensure that Critical Electric Infrastructure Information, which as described below includes Critical Energy Infrastructure Information, can be appropriately shared while also being adequately protected. Thus, the Commission proposes to augment its existing Critical Energy Infrastructure Information process to comply with section 215A(d)(2) and to make other changes described in this NOPR. The Commission proposes to have a single process that would address submitting, designating, handling, sharing, and disseminating CEII that is submitted to or generated by the Commission. The proposed regulations will govern how the Commission and its employees implement the provisions of the FAST Act.

    III. Revisions To Implement the FAST Act A. Relocating References to CEII From Section 388.112 to Section 388.113

    8. The Commission proposes to transfer provisions contained in section 388.112 that are applicable to Critical Energy Infrastructure Information to amended section 388.113. This transfer would include notice and filing requirements. As a result of this change, amended section 388.112 would apply only to information designated as privileged and all of the Commission's CEII procedures will be in section 388.113.

    B. Scope, Purpose, and Definitions

    9. The Commission's current Critical Energy Infrastructure Information process is designed to limit the distribution of sensitive infrastructure information to those individuals with a need to know in order to avoid having sensitive information fall into the hands of those who may use it to attack the nation's infrastructure. Section 388.113(c) of the Commission's regulations defines Critical Energy Infrastructure Information as:

    specific engineering, vulnerability, or detailed design information about proposed or existing critical infrastructure that: (i) Relates details about the production, generation, transportation, transmission, or distribution of energy; (ii) Could be useful to a person in planning an attack on critical infrastructure; (iii) Is exempt from mandatory disclosure under the Freedom of Information Act, 5 U.S.C. 552; and (iv) Does not simply give the general location of the critical infrastructure.

    10. To augment the current Critical Energy Infrastructure Information process to comply with FPA section 215A(d), the Commission proposes that the scope and purpose of its regulations be changed to reflect the requirements of the FAST Act. Specifically, the Commission proposes to amend section 388.113(a) to indicate that the section governs the procedures for submitting, designating, handling, sharing, and disseminating CEII submitted to or generated by the Commission. Moreover, the Commission proposes to amend section 388.113(b) to indicate that the purpose of section 388.113 is to provide an overview of the Commission's CEII procedures.

    11. Section 215A(a)(3) of the FPA introduces the new term “Critical Electric Infrastructure Information:”

    information related to critical electric infrastructure, or proposed critical electrical infrastructure, generated by or provided to the Commission or other Federal agency, other than classified national security information . . . Such term includes information that qualifies as critical energy infrastructure information under the Commission's regulations. As indicated above, the Commission's current procedures for Critical Energy Infrastructure Information apply to information “about the production, generation, transportation, transmission, or distribution of energy.” Thus, the FAST Act defines “Critical Electric Infrastructure Information” to include not only information regarding the Bulk-Power System but also information regarding other energy infrastructure (i.e., gas pipelines, LNG, oil, and hydroelectric infrastructure) to the extent such information qualifies as Critical Energy Infrastructure Information under the Commission's current regulations.

    12. Accordingly, the Commission proposes to revise section 388.113(c) (Definitions) of the Commission's regulations to add the new statutory term Critical Electric Infrastructure Information, as referenced above. The Commission also proposes to add to the regulations the term Critical Electric Infrastructure, which is defined in FPA section 215A(a)(3) as “a system or asset of the bulk-power system, whether physical or virtual, the incapacity or destruction of which would negatively affect national security, economic security, public health or safety, or any combination of such matters.”

    13. The Commission proposes to refer to the information under the new regulations as Critical Energy/Electric Infrastructure Information, and to use the abbreviation “CEII” for this term.8 By referring to the information only as Critical Electric Infrastructure Information, the public, especially those that do not interact with the Commission on a regular basis, may assume that the revised CEII regulations only cover information regarding electric infrastructure and not also information about other energy infrastructure. By using the term Critical Energy/Electric Infrastructure Information, the Commission clearly conveys to the public that the Commission's revised CEII procedures cover more than just electric infrastructure.

    8 The abbreviation will be used except where appropriate to address any distinction between the Commission's current regulations and the terms of the FAST Act.

    14. The Commission complies with section 215A(d) by incorporating the term Critical Electric Infrastructure Information into its regulations as set forth in the statute and treating it as Congress intended. In addition, subsuming Critical Energy Infrastructure Information into the term Critical Electric Infrastructure Information will allow the Commission to have a unitary process for handling CEII and, thereby, avoid any confusion that could result from multiple processes for different types of critical infrastructure information. Avoiding such confusion should better facilitate sharing of CEII as well as help prevent unauthorized disclosures of CEII, which we see as the principal goals of section 215A(d).

    15. Section 215A(d)(1)(A) of the FPA states that Critical Electric Infrastructure Information “shall be exempt from disclosure under [(FOIA)] section 552(b)(3).” 9 Accordingly, the Commission proposes to amend its regulations to specify that CEII is exempt from disclosure under FOIA pursuant to section 215A(d)(1)(A).10

    9See 5 U.S.C. 552(b)(3) (protects information “specifically exempted from disclosure by statute”).

    10 The Commission has relied upon FOIA Exemption 7(F) to protect this type of information from disclosure. See 5 U.S.C. 552(b)(7)(F) (protecting law enforcement information that could reasonably be expected to endanger the life or physical safety of any individual). The Commission will continue to rely on this exemption, as appropriate.

    C. Criteria and Procedures for Determining What Constitutes CEII

    16. Section 215A(d)(2)(A) requires the Commission to “establish criteria and procedures to designate information as critical electric infrastructure information.” 11 The proposed processes and procedures are intended to apply to the manner in which the Commission handles CEII that is submitted to or generated by the Commission.12

    11 Section 215A(d)(3) gives the Commission and DOE the authority to designate Critical Electric Infrastructure Information.

    12 Section 215A(d)(3) provides that information “may be designated” by the Commission or Secretary of Energy as “critical electric infrastructure information.” These proposed regulations would only apply to information submitted to or generated by the Commission. Nothing in the preamble or proposed regulations would limit DOE's ability to designate information as it deems appropriate under the FAST Act.

    17. Accordingly, the Commission proposes to amend section 388.113(d) of its regulations to provide that information submitted to or generated by the Commission is CEII if it meets the definition, and the criteria provided below.13 The Commission therefore proposes to merge its existing criteria with the statutory directives in the FAST Act. The Commission further proposes to amend its procedures, as explained below.

    13 Information downloaded by Commission staff from private databases that are accessed pursuant to Commission order or regulation will be maintained as non-public information consistent with the Commission's internal controls. See, e.g., Availability of Certain North American Electric Reliability Corporation Databases to the Commission, 155 FERC ¶ 61,275 (2016). If the Commission receives a request for access to downloaded information, the Commission will evaluate whether the information meets the definition of CEII or is proprietary information or otherwise privileged or non-public and will provide the owner of the database or information (as appropriate) with an opportunity to comment on the request consistent with proposed section 388.113(d)(1)(vi) or sections 388.112(d) and (e).

    1. Designation of Submissions to the Commission

    18. Existing section 388.112(b) requires that a submitter of Critical Energy Infrastructure Information clearly mark the information as CEII and provide a justification for the designation. The Commission will maintain these requirements in section 388.113(d) for CEII. However, in addition to this information, the Commission proposes to include in section 388.113(d) a requirement that each submitter include on the information submitted a clear statement of the date the information was submitted to the Commission, and how long the submitter believes the CEII designation should apply to the information.14 The referenced justification that the submitter submits must include an explanation for the period proposed. Such information will assist the Commission in making a determination as to the length of time the information should be designated as CEII. Failure to follow these submission requirements, including failure to provide an adequate justification, could result in denial of the designation and public release of the information.

    14 The submitter must clearly indicate this information on the submission in a clear and durable manner. For example, in addition to an appropriate cover sheet, each page should be clearly labeled. The date of submission will start the period for CEII designation. Commission-generated information should also have clear markings.

    19. Under its current practice, the Commission deems the designation on a submission accepted as submitted, unless the submitter is otherwise notified by the Commission.15 The Commission intends to follow that same practice under the new CEII regulations. However, the Commission maintains the discretion to check a submission at the time of submission to ensure that it includes adequate designation information and is properly designated. In sum, the burden will be on the submitting entity to ensure that the information it submits is properly labeled and contains adequate designation information. Although unmarked information may be eligible for CEII treatment, the Commission intends to treat information as CEII only if it is properly designated as CEII pursuant to our regulations.

    15 Section 18 CFR 375.313 delegates authority to the Critical Energy Infrastructure Information Coordinator (Coordinator), who is the Director of the Office of External Affairs. As explained below, the Commission proposes to modify this section to reflect the new authority in the FAST Act.

    20. To ensure that all the requirements concerning CEII are in a single section of the Commission's regulations, the Commission proposes to move the requirements in current section 388.112(b) regarding CEII to section 388.113(d). The Commission believes that it will better protect CEII from unauthorized disclosure as well as facilitate the voluntary sharing of CEII to have a single process to address CEII and for that process to be located in a single section of our regulations. Locating our CEII regulations in the same section of the Commission's regulations will relieve the public from having to review multiple sections of our regulations to find our rules addressing CEII, which may cause confusion.

    2. Designation of Commission-Generated Information

    21. The Commission proposes to revise section 388.113(d) to specify that, for Commission-generated information, the Office Director for the Commission office in which the Commission-generated information was created, or the Office Director's designee, must consult with the Coordinator to determine whether the information meets the definition of CEII, how long the designation of CEII should last and, as appropriate, any re-designation. The Coordinator will then make the designation determination.16 Any CEII that the Commission generates must also be clearly marked as CEII and indicate the date that the information was designated as CEII. This coordination will help ensure that Commission-generated information is handled in an appropriate and consistent manner.

    16 Pursuant to section 375.313(d) of the Commission's regulations, the Coordinator is responsible for establishing “reasonable conditions” on the release of CEII.

    3. Segregable Information

    22. In many cases, information submitted to the Commission may contain information that is CEII along with information that is not CEII. Section 215A(d)(8) requires the Commission to:

    segregate critical electric infrastructure information or information that reasonably could be expected to lead to the disclosure of the critical electric infrastructure information within documents and electronic communications, wherever feasible, to facilitate disclosure of information that is not designated as critical electric infrastructure information.

    Accordingly, the Commission proposes to add a provision to section 388.113(d) that would require the submitter to segregate CEII (or information that reasonably could be expected to lead to the disclosure of the CEII) from non-CEII at the time of submission wherever feasible. The burden would be on the submitter to clearly mark in the submission what is CEII and what is not CEII. The requirement also would apply to Commission-generated CEII.17

    17See proposed 18 CFR 388.113(d)(2) and (3).

    4. Duration of Designation

    23. Section 215A(d)(9) of the FPA states that information “may not be designated as critical electric infrastructure information for longer than 5 years, unless specifically re-designated by the Commission or the Secretary, as appropriate.” The Commission proposes to add this statement to proposed section 388.113(e).

    24. The Commission plans to use the following process to implement the duration of designation provision. At the present time there are almost 200,000 documents labeled as Critical Energy Infrastructure Information in the Commission's eLibrary system. The Commission does not plan to move designated information from its non-public files to its public files after the designation period has passed (i.e., up to five years from date of designation), unless the Commission determines in a particular instance that it is appropriate to do so. The passing of the CEII designation period would not necessarily render designated information suitable for inclusion in the Commission's public files. The Commission plans to determine whether information should be re-designated or alternatively placed in the Commission's public files when an entity requests the information, when staff determines a need to remove the designation, or when a submitter requests that information no longer be treated as CEII.18

    18 In the event the Commission re-designates information as CEII, the Commission will re-designate the information as CEII for another five years or a shorter time period, as appropriate.

    25. The proposed approach is consistent with the FAST Act. Section 215A(d)(9) of the FPA does not require automatic public disclosure of CEII at the end of the initial CEII designation period. Indeed, the FAST Act contemplates that there may be information that warrants continued protection after the initial designation period. Given the volume of CEII in the Commission's files and the expectation that the Commission will continue to receive a substantial amount of CEII each year, this proposed approach strikes a reasonable balance in meeting the designation requirements of the FAST Act.

    26. Consistent with the above practice, the Commission proposes that the non-disclosure agreement (NDA) will require any recipient of CEII from the Commission to continue to protect the information past the expiration of the CEII designation marked on the information. Further, the recipient must receive prior authorization from the Commission before making any disclosure of such information. These requirements will enable the Commission to comply with section 215A(d)(10) and determine whether information must be “specifically re-designated” as CEII.

    27. Section 215A(d)(10) of the FPA provides that when “the Commission or the [DOE] Secretary, as appropriate, determines that the unauthorized disclosure of such information could no longer be used to impair the security or reliability of the bulk-power system or distribution facilities” the designation shall be removed. The Commission proposes to revise section 388.113(e) of the Commission's regulations to provide for removal of the CEII designation when it no longer could impair the security or reliability of not only the Bulk-Power System and distribution facilities but also other forms of energy infrastructure. The Commission will provide notice to the submitter in the instance where the Commission takes the affirmative step to rescind the designation.

    5. Judicial Review of Designation

    28. Section 215A(d)(11) of the FPA provides that:

    any determination by the Commission or the [DOE] Secretary concerning the designation of critical electric infrastructure information . . . shall be subject to review . . . in the district court of the United States in the district in which the complainant resides, or has his principal place of business, or in the District of Columbia.

    The Commission proposes to incorporate this provision into proposed section 388.113(e) of its regulations. In addition, the Commission proposes to require an entity or individual that intends to challenge a Commission designation determination in federal district court to first appeal the decision to the Commission's General Counsel. We believe that requiring an administrative appeal prior to seeking judicial review is appropriate because it would ensure consistency in how the Commission addresses CEII determinations, and is consistent with the current practice for responding to CEII and FOIA requests.19

    19 Such a determination is subject to review by an applicable district court and would not be an order subject to rehearing and review under 16 U.S.C. 825l.

    D. Duty To Protect CEII

    29. Whether CEII is created by Commission staff or submitted to the Commission by an outside party or a member of the public, section 215A(d)(2)(B) of the FPA requires the Commission to “prohibit the unauthorized disclosure of critical electric infrastructure information.” This requirement applies to Commission employees as well as to all individuals to whom the Commission provides CEII. Thus, the Commission proposes to make the following changes to its regulations in proposed section 388.113(h) to ensure CEII is adequately protected.

    1. Internal Controls for Commission Employees

    30. To ensure that Commission employees appropriately handle CEII, Commission staff is developing an information governance policy and guidelines, which is intended to address how sensitive information, including CEII, should be handled, marked, and kept secure.20 Consistent with these guidelines, the Commission proposes to add a provision in proposed section 388.113(h) that would require the Commissioners, Commission staff, and Commission contractors to comply with the Commission's internal controls. The internal controls will address how the Commission and its personnel, including contractors and agents, handle CEII.

    20 The DOE IG Report raised concerns with how Commission staff handled, labeled, and tracked Critical Energy Infrastructure Information. DOE IG Report at 2-5, 12.

    2. Controls for Recipients of CEII

    31. Currently, section 388.113(d) requires external recipients of Critical Energy Infrastructure Information to sign an NDA, which imposes conditions on how the information may be used.21 The current regulation does not specify the minimum required content of an NDA.

    21See, e.g., General Non-Disclosure Agreement, http://www.ferc.gov/legal/ceii-foia/ceii/gen-nda.pdf.

    32. The Commission proposes to strengthen the NDA requirements for all the different forms of NDAs the Commission uses to share CEII.22 Including these provisions in each type of NDA form that the Commission uses will better protect CEII from unauthorized disclosure. Specifically, the Commission proposes revising its regulations to state in section 388.113(h)(2) that an NDA must minimally require that CEII: (1) Will only be used for the purpose it was requested; (2) may only be discussed with authorized recipients; (3) must be kept in a secure place in a manner that would prevent unauthorized access; (4) must be destroyed or returned to the Commission upon request; and (5) that the Commission may audit compliance with the NDA. These changes would codify and strengthen current NDA terms consistent with FPA section 215A(d).

    22 Separate NDAs exist for general users, the media, state agencies, and consultants, and are available at http://www.ferc.gov/legal/ceii-foia/ceii.asp. Federal Agency requesters, as noted below, receive an Agency Acknowledgment and Agreement, which has different terms than the NDAs.

    33. Moreover, another means to prevent unauthorized disclosure of CEII is to ensure that the CEII is only shared with those who need it. The Commission, therefore, proposes to amend section 388.113(g)(5) to require a person seeking CEII to demonstrate a legitimate need for the information. Thus, the Commission proposes to require a requestor to demonstrate: (1) The extent to which a particular function is dependent upon access to the information; (2) why the function cannot be achieved or performed without access to the information; (3) whether other information is available to the requester that could facilitate the same objective; (4) how long the information will be needed; (5) whether or not the information is needed to participate in a specific proceeding (with that proceeding identified); and (6) whether the information is needed expeditiously. This information will assist the Commission's CEII Coordinator in “balance[ing] the requestor's need for the information against the sensitivity of the information.” 23 A conclusory statement will not satisfy this requirement.

    23See 18 CFR 388.113(d)(4)(iii) and (iv).

    34. Finally, to ensure that CEII is only disclosed to appropriate individuals, the Commission proposes to amend section 388.113(g)(5)(i)(D) to require the requestor to include a signed statement attesting to the accuracy of the information provided in any request for CEII submitted to the Commission.

    E. Sanctions

    35. Section 215A(d)(2)(C) of the FPA requires the Commission to “ensure there are appropriate sanctions in place for Commissioners, officers, employees, or agents of the Commission or the Department of Energy who knowingly and willfully disclose critical electric infrastructure information in a manner that is not authorized under this section.” The Commission proposes to add proposed section 388.113(i) to implement this requirement.

    36. The Commission proposes that it take responsibility for addressing unauthorized disclosures of CEII in the Commission's possession by Commission personnel.24 The Commission may initiate an adverse personnel action, such as a suspension or a removal action, against a Commission employee who makes an unauthorized disclosure of CEII or any other non-public information.25 While the Commission may not sanction the Chairman or Commissioners,26 it can refer any misconduct by the Chairman or Commissioners to the DOE Inspector General.

    24 The Commission anticipates that DOE will take responsibility for sanctions for unauthorized disclosures by its officers, employees, staff, and agents with regard to information in DOE's possession.

    25See, e.g., 5 U.S.C. Chapter 75 (Adverse Actions).

    26 The Chairman and Commissioners are appointed by the President and may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office. 42 U.S.C. 7171.

    F. Voluntary Sharing of CEII

    37. Section 215A(d)(2)(D) of the FPA requires that the Commission:

    taking into account standards of the Electric Reliability Organization, facilitate voluntary sharing of critical electric infrastructure information with, between, and by—(i) Federal, State, political subdivision, and tribal authorities; (ii) the Electric Reliability Organization; (iii) regional entities; (iv) information sharing and analysis centers established pursuant to Presidential Decision Directive 63; (v) owners, operators, and users of critical electric infrastructure in the United States; and (vi) other entities determined appropriate by the Commission.

    Under this provision, the Commission has authority to share CEII with individuals and organizations that the Commission has determined need the information to ensure that energy infrastructure is protected.27 Voluntary sharing applies to both Commission-generated CEII and CEII submitted to the Commission.

    27 Section 215A(d)(6) of the FPA makes clear that nothing in the FAST Act “require[s] a person or entity in possession of critical electric infrastructure information to share such information” with other individuals and entities; see also Cybersecurity Information Sharing Act of 2015, Public Law 114-113, 129 Stat. 2936 (2015).

    38. Under this provision, the Commission may share CEII without first receiving a request for the CEII. Section 388.112(c)(i) already provides the Commission with “the discretion to release information as necessary to carry out its jurisdictional responsibilities.” The Commission proposes to move this language to section 388.113(f)(2) in the regulations and also note that the Commission retains the discretion to release information as necessary for other federal agencies to carry out their jurisdictional responsibilities.

    39. The Commission also proposes to add section 388.113(f)(1) to its regulations to require an Office Director or his designee to consult with the Coordinator prior to the Office Director or his designee making a determination to voluntarily share CEII. The Coordinator will determine whether the information has been appropriately designated as CEII and whether appropriate protective measures are in place to secure its transfer and treatment by the recipient.

    40. When the Commission voluntarily shares information, the CEII will be shared subject to an appropriate NDA or Acknowledgement and Agreement.28 Thus, the Commission proposes to add language to its regulations in proposed section 388.113(f) to make clear that, after a determination by the Coordinator, the Office Director will provide the proposed recipients of the CEII with the appropriate NDA or Agency Acknowledgement and Agreement for execution and return. The Commission proposes to amend its regulations to require a signed copy of each agreement be maintained by the Office Director with a copy to the Coordinator.

    28 As noted below, to obtain CEII Federal Agencies execute an Acknowledgement and Agreement, as opposed to an NDA. See Federal Agency Acknowledgement and Agreement, http://www.ferc.gov/legal/ceii-foia/ceii/fed-agen-acknow-agree.pdf.

    41. The Commission proposes to add to section 388.113(f) of its regulations a statement indicating that the Commission may impose additional restrictions on how the CEII the Commission voluntarily shares may be used and maintained. Given that the Commission anticipates that it will voluntarily share CEII when the Commission believes that the recipients need the information to protect critical infrastructure, the recipients may otherwise have no other legitimate need for the information but to address that event. Thus, it is appropriate to impose additional conditions on use and handling of CEII that the Commission voluntarily shares.

    42. Where practicable, when the Commission is considering voluntarily sharing CEII, the Commission will provide notice to the submitter of that information. However, it may not be practicable for the Commission to provide notice to the submitter in instances where voluntary sharing is necessary to maintain infrastructure security, to address a potential threat, or in other exigent circumstances. In such instances, a requirement to give notice to the submitter may be detrimental to the ability of the Commission to timely share CEII with entities that may urgently need the information and could compromise law enforcement operations.29 Thus, under these limited circumstances, the Commission will not give the submitter notice of sharing the CEII with others. However, to be clear, any CEII that the Commission voluntarily shares under these circumstances will be handled as CEII subject to an NDA or an Acknowledgement and Agreement and, as explained above, may be subject to additional controls as appropriate.

    29 For example, FPA section 215A(e) requires the Commission to share “timely actionable information regarding grid security with appropriate key personnel of owners, operators, and users of the critical electric infrastructure.” This information may include classified information as well as CEII. Providing notice and seeking a response from a submitter prior to disclosure of this CEII may hinder the Commission's ability to share “timely actionable information.”

    IV. Other Proposed Revisions A. Request for Access to CEII 1. Owner-Operator Requests

    43. Existing sections 388.113(d)(1) and (2) permit Critical Energy Infrastructure Information to be released directly to owner/operators outside of the Critical Energy Infrastructure Information process. The DOE IG Report raised concerns that the Commission might not be aware of information released outside of the Critical Energy Infrastructure Information process.30 The Commission proposes to maintain this practice but proposes to amend existing sections 388.113(d)(1) and (2), re-designated as proposed sections 388.113(g)(1) and (2), to require Commission staff to inform the Coordinator of such requests prior to the release of any information.

    30See DOE IG Report at 4-5.

    44. Additionally, the Commission proposes to amend existing section 388.113(d)(1), which allows an owner or operator of a facility to obtain certain CEII concerning its facilities without signing an NDA, to exclude Commission-generated information except inspection reports/operation reports and any information directed to the owner-operators. Thus, the owners and operators of a facility will be able to obtain inspection reports/operation reports and any information directed to the owner-operators concerning their facilities without going through the CEII process.

    45. In Order No. 630, the Commission relieved owners/operators from signing an NDA for Critical Energy Infrastructure Information regarding their own facilities on the basis that “they have at least as great an incentive to protect this information as the Commission has.” 31 We believe that owners/operators will have the same incentive to protect inspection reports/operation reports and any information regarding their own facilities that may contain Commission-generated CEII.

    31Critical Energy Infrastructure Information, Order No. 630, 68 FR 9857 (Mar. 3, 2003), FERC Stats. & Regs. ¶ 31,140 (2003); order on reh'g, Order No. 630-A, 68 FR 46,456 (Aug. 6, 2003), FERC Stats. & Regs. ¶ 31,147, at P 57 (2003).

    2. Federal Agency Requests

    46. Existing section 388.113(d)(2) allows any employee of a Federal agency acting within the scope of his or her federal employment to obtain Critical Energy Infrastructure Information without going through the process outlined in existing section 388.113(d)(5), as long as the request is approved by a Commission Division Director or higher.

    47. The Commission's practice has been for an employee of another agency to sign an Acknowledgement and Agreement, which states that the agency will protect the Critical Energy Infrastructure Information in the same manner as the Commission and will refer any requests for the information to the Commission. The Commission proposes to maintain and codify this practice in the revised CEII regulations in section 388.113(g)(2).

    3. Intervenor Requests

    48. Individuals in a complaint proceeding or other proceeding to which a right to intervention exists may need CEII to participate in the proceeding. Where a submitter has provided CEII or other non-public information with its filing, existing section 388.112(b)(2)(i) requires a submitter in the context of a proceeding before the Commission to “include a proposed form of a protective agreement with the filing” to facilitate an intervenor's access to information without going through the Critical Energy Infrastructure Information process. Under this provision four categories of information need not be provided subject to such a protective agreement: (1) Landowner lists; (2) privileged information filed under section 380.12(f) or section 380.16(f), which pertain to cultural resources; (3) privileged information filed under section 380.12(m), which pertains to reliability and safety information that must be filed by liquefied natural gas (LNG) facilities; and (4) privileged information filed under section 380.12(o), which pertains to engineering and design material information that must be filed by LNG facilities.

    49. However, in Dominion Cove Point LNG, LP, 32 the Commission directed a party to release pursuant to a protective agreement LNG safety and engineering information not otherwise available under section 388.112(b)(2)(i). Consistent with that decision, the Commission proposes to amend its regulations to eliminate the current exemptions for LNG information identified under section 388.112(b)(2)(i). This change would leave in place the right of any filer or any person to oppose the disclosure. The Commission proposes to move these requirements to section 388.113(g)(4).

    32See Dominion Cove Point LNG, LP, 147 FERC ¶ 61,202 (2014) (concluding that the protective agreement outlined in section 388.112(b)(2)(i), as opposed to the Critical Energy Infrastructure Information process, was the appropriate mechanism to obtain fourteen identified LNG safety and engineering documents).

    B. Other Considerations for Access to CEII 1. Organizational Requests

    50. Existing section 388.113(d)(4)(vi) permits an organization to request CEII for its employees who sign an NDA. With notice to the Commission, the regulation allows the organization to give additional employees access to this CEII, subject to their signing an NDA. The Commission proposes to place a one-year time limit on an organization's ability to add additional employees. After one year from the date of its original request, an organization would have to submit a new CEII request and NDAs pursuant to proposed section 388.113(g)(5)(ii).

    2. Timing Requirement

    51. An earlier version of the Commission's regulations stated that Critical Energy Infrastructure Information requests would be processed, if possible, within the statutory timeframe for FOIA. The Commission proposes to amend section 388.113(g)(vii) of its regulations to reestablish this requirement for CEII, as the Commission never intended to remove it from the regulations.33

    33 This language appears in the April 2007 edition of the Commission's regulations, but does not appear in the April 2008 edition. The preamble to the 2008 regulations does not provide an explanation for the elimination of this provision from the Commission's regulations. Thus, the Commission believes it appropriate to reinstate the requirement.

    3. CEII Combined With Other Protected Information

    52. If CEII and proprietary or other protected information are inextricably intertwined, the Commission has historically withheld from disclosure the intertwined information under FOIA. Consistent with this practice, the Commission proposes to add section 388.113(g)(5)(ix) to clarify that the Commission's CEII regulations should not be construed to require the release of proprietary information, personal information, cultural resource information and other comparable data protected by statute or regulation, or any privileged or otherwise non-public information, including information protected by the deliberative process.

    4. CEII Coordinator

    53. Under section 375.313, the Commission has delegated to the Coordinator certain authority to address CEII matters. The Commission proposes to amend subsection 375.313(b) to make clear that the Coordinator has designation authority consistent with the FAST Act, and to add a subsection to make clear that the Coordinator has the authority to designate and release information to the public. Moreover, the Commission proposes to change all references in section 375.313 from Critical Energy Infrastructure Information to the acronym CEII.

    V. Information Collection Statement

    54. The Paperwork Reduction Act and Office of Management and Budget's (OMB) implementing regulations require OMB to review and approve certain information collection requirements imposed by agency rule.34 This Notice of Proposed Rulemaking does not impose any additional information collection requirements.35 Therefore, the information collection regulations do not apply to this Notice of Proposed Rulemaking.

    34 5 CFR 1320.

    35 The current information collection requirements related to requesting access to CEII material are approved by OMB under FERC-603 (OMB Control No. 1902-0197).

    VI. Environmental Analysis

    55. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a significant adverse effect on the human environment.36

    36Regulations Implementing the National Environmental Policy Act of 1969, Order No. 486, FERC Stats. & Regs. ¶ 30,783 (1987).

    56. The Commission has categorically excluded certain actions from this requirement as not having a significant effect on the human environment. Included in the exclusion are rules that are clarifying, corrective, or procedural, or that do not substantially change the effect of the regulations being amended.37 The actions here fall within this categorical exclusion in the Commission's regulations.

    37 18 CFR 380.4(a)(2)(ii).

    VII. Regulatory Flexibility Act Certification

    57. The Regulatory Flexibility Act of 1980 (RFA) requires rulemakings to contain either a description and analysis of the effect that the rule will have on small entities or a certification that the rule will not have a significant economic impact on a substantial number of small entities.38 Rules that are exempt from the notice and comment requirements of section 553(b) of the Administrative Procedure Act are exempt from the RFA requirements. This Notice of Proposed Rulemaking concerns rules of agency procedure and, therefore, an analysis under the RFA is not required.39

    38 5 U.S.C. 603 (2012).

    39 5 U.S.C. 553(b).

    VIII. Public Comments

    58. The Commission invites interested persons to submit comments on the matters and issues proposed in this notice to be adopted, including any related matters or alternative proposals that commenters may wish to discuss. Comments are due August 19, 2016. Comments must refer to Docket No. RM16-15-000, and must include the commenter's name, the organization they represent, if applicable, and their address in their comments.

    59. The Commission encourages comments to be filed electronically via the eFiling link on the Commission's Web site at http://www.ferc.gov. The Commission accepts most standard word processing formats. Information created electronically using word processing software should be filed in native applications or print-to-PDF format and not in a scanned format. Commenters filing electronically do not need to make a paper filing.

    60. Commenters that are not able to file comments electronically must send an original of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE., Washington, DC 20426.

    61. All comments will be placed in the Commission's public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters.

    IX. Document Availability

    62. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through the Commission's Home Page (http://www.ferc.gov) and in the Commission's Public Reference Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, Washington, DC 20426.

    63. From the Commission's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number of this document, excluding the last three digits, in the docket number field.

    64. User assistance is available for eLibrary and the Commission's Web site during normal business hours from the Commission's Online Support at 202-502-6652 (toll free at 1-866-208-3676) or email at [email protected], or the Public Reference Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference Room at [email protected].

    List of Subjects 18 CFR Part 375

    Authority delegations (Government agencies); Seals and insignia; Sunshine Act.

    18 CFR Part 388

    Confidential business information; Freedom of information.

    By direction of the Commission.

    Dated: June 16, 2016. Kimberly D. Bose, Secretary.

    In consideration of the foregoing, the Commission proposes to amend Parts 375 and 388, Chapter I, Title 18, Code of Federal Regulations, as follows:

    PART 375—THE COMMISSION 1. The authority citation for part 375 continues to read as follows: Authority:

    5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.

    2. Amend § 375.313 by: a. Revising the section heading and paragraphs (a) and (b); b. Redesignating paragraphs (c) through (e) as paragraphs (d) through (f) and revising newly redesignated paragraphs (d) through (f); and c. Adding a new paragraph (c).

    The revisions and addition read as follows:

    § 375.313 Delegations to the Critical Energy/Electric Infrastructure Information (CEII) Coordinator.

    (a) Receive and review all requests for CEII as defined in § 388.113(c) of this chapter.

    (b) Make determinations as to whether particular information fits within the definition of CEII found at § 388.113(c) of this chapter, including designating information, as appropriate.

    (c) Make a determination that information designated as CEII should no longer be so designated when the unauthorized disclosure of the information could no longer be used to impair the security or reliability of the bulk-power system or distribution facilities or any other infrastructure.

    (d) Make determinations as to whether a particular requester's need for and ability and willingness to protect CEII warrants limited disclosure of the information to the requester.

    (e) Establish reasonable conditions on the release of CEII.

    (f) Release CEII to requesters who satisfy the requirements in paragraph (d) of this section and agree in writing to abide by any conditions set forth by the Coordinator pursuant to paragraph (e) of this section.

    PART 388—INFORMATION AND REQUESTS 3. The authority citation for part 388 is changed to read as follows: Authority:

    5 U.S.C. 301-305, 551, 552 (as amended), 553-557; 42 U.S.C. 7101-7352; 16 U.S.C. 824(o-l).

    4. Amend § 388.112 by revising the section heading and paragraphs (a), (b)(1), (b)(2)(i), (b)(2)(vi), (c)(1), and (d)-(e) to read as follows:
    § 388.112 Requests for privileged treatment for documents submitted to the Commission.

    (a) Scope. By following the procedures specified in this section, any person submitting a document to the Commission may request privileged treatment for some or all of the information contained in a particular document that it claims is exempt from the mandatory public disclosure requirements of the Freedom of Information Act, 5 U.S.C. 552 (FOIA), and should be withheld from public disclosure. For the purposes of the Commission's filing requirements, non-CEII subject to an outstanding claim of exemption from disclosure under FOIA will be referred to as privileged material. The rules governing CEII are contained in 18 CFR 388.113.

    (b) Procedures for filing and obtaining privileged material. (1) General Procedures. A person requesting that material be treated as privileged information must include in its filing a justification for such treatment in accordance with the filing procedures posted on the Commission's Web site at http://www.ferc.gov. A person requesting that a document filed with the Commission be treated as privileged in whole or in part must designate the document as privileged in making an electronic filing or clearly indicate a request for such treatment on a paper filing. The cover page and pages or portions of the document containing material for which privileged treatment is claimed should be clearly labeled in bold, capital lettering, indicating that it contains privileged or confidential information, as appropriate, and marked “DO NOT RELEASE.” The filer also must submit to the Commission a public version with the information that is claimed to be privileged material redacted, to the extent practicable.

    (2) Procedures for Proceedings with a Right to Intervene. * * *

    (i) If a person files material as privileged material in a complaint proceeding or other proceeding to which a right to intervention exists, that person must include a proposed form of protective agreement with the filing, or identify a protective agreement that has already been filed in the proceeding that applies to the filed material. This requirement does not apply to material submitted in hearing or settlement proceedings, or if the only material for which privileged treatment is claimed consists of landowner lists or privileged information filed under sections 380.12(f) and 380.16(f) of this chapter.

    (vi) For landowner lists, information filed as privileged under sections 380.12(f) and 380.16(f), forms filed with the Commission, and other documents not covered above, access to this material can be sought pursuant to a FOIA request under section 388.108 of this chapter. Applicants are not required under paragraph (b)(2)(iv) of this section to provide intervenors with landowner lists and the other materials identified in the previous sentence.

    (c) Effect of privilege claim. (1) For documents filed with the Commission:

    (i) The documents for which privileged treatment is claimed will be maintained in the Commission's document repositories as non-public until such time as the Commission may determine that the document is not entitled to the treatment sought and is subject to disclosure consistent with section 388.108 of this chapter. By treating the documents as nonpublic, the Commission is not making a determination on any claim of privilege status. The Commission retains the right to make determinations with regard to any claim of privilege status, and the discretion to release information as necessary to carry out its jurisdictional responsibilities.

    (ii) The request for privileged treatment and the public version of the document will be made available while the request is pending.

    (d) Notification of request and opportunity to comment. When a FOIA requester seeks a document for which privilege status has been claimed, or when the Commission itself is considering release of such information, the Commission official who will decide whether to release the information or any other appropriate Commission official will notify the person who submitted the document and give the person an opportunity (at least five calendar days) in which to comment in writing on the request. A copy of this notice will be sent to the requester.

    (e) Notification before release. Notice of a decision by the Commission, the Chairman of the Commission, the Director, Office of External Affairs, the General Counsel or General Counsel's designee, a presiding officer in a proceeding under part 385 of this chapter, or any other appropriate official to deny a claim of privilege, in whole or in part, will be given to any person claiming that the information is privileged no less than 5 calendar days before disclosure. The notice will briefly explain why the person's objections to disclosure are not sustained by the Commission. A copy of this notice will be sent to the FOIA requester.

    5. Revise § 388.113 to read as follows:
    § 388.113 Critical Energy/Electric Infrastructure Information (CEII)

    (a) Scope. This section governs the procedures for submitting, designating, handling, sharing, and disseminating Critical Energy/Electric Infrastructure Information (CEII) submitted to or generated by the Commission. The Commission reserves the right to restrict access to previously filed information as well as Commission-generated information containing CEII.

    (b) Purpose. The procedures in this section implement section 215A of the Federal Power Act, and provide a comprehensive overview of the manner in which the Commission will implement the CEII program.

    (c) Definitions. For purposes of this section: (1) Critical electric infrastructure information means information related to critical electric infrastructure, or proposed critical electrical infrastructure, generated by or provided to the Commission or other Federal agency other than classified national security information, that is designated as critical electric infrastructure information by the Commission or the Secretary of the Department of Energy pursuant to section 215A(d) of the Federal Power Act. Such term includes information that qualifies as critical energy infrastructure information under the Commission's regulations. Critical Electric Infrastructure Information is exempt from mandatory disclosure under the Freedom of Information Act, 5 U.S.C. 552, pursuant to section 215A(d)(1)(A) of the Federal Power Act.

    (2) Critical energy infrastructure information means specific engineering, vulnerability, or detailed design information about proposed or existing critical infrastructure that:

    (i) Relates details about the production, generation, transportation, transmission, or distribution of energy;

    (ii) Could be useful to a person in planning an attack on critical infrastructure;

    (iii) Is exempt from mandatory disclosure under the Freedom of Information Act, 5 U.S.C. 552, pursuant to section 215A(d)(1)(A) of the Federal Power Act; and

    (iv) Does not simply give the general location of the critical infrastructure.

    (3) Critical electric infrastructure means a system or asset of the bulk-power system, whether physical or virtual, the incapacity or destruction of which would negatively affect national security, economic security, public health or safety, or any combination of such matters.

    (4) Critical infrastructure means existing and proposed systems and assets, whether physical or virtual, the incapacity or destruction of which would negatively affect security, economic security, public health or safety, or any combination of those matters.

    (d) Criteria and Procedures for determining what constitutes CEII. The following criteria and procedures apply to information labeled as CEII:

    (1) For information submitted to the Commission:

    (i) A person requesting that information submitted to the Commission be treated as CEII must include with its submission a justification for such treatment in accordance with the filing procedures posted on the Commission's Web site at http://www.ferc.gov. The justification must provide how the information, or any portion of the information, qualifies as CEII, as the terms are defined in paragraphs (c)(1) and (2) of this section. The submission must also include a clear statement of the date the information was submitted to the Commission, how long the CEII designation should apply to the information and support for the period proposed. Failure to provide the justification or other required information could result in denial of the designation and release of the information to the public.

    (ii) In addition to the justification required by paragraph (d)(1)(i) of this section, a person requesting that information submitted to the Commission be treated as CEII must clearly label the cover page and pages or portions of the information for which CEII treatment is claimed in bold, capital lettering, indicating that it contains CEII, as appropriate, and marked “DO NOT RELEASE.” The submitter must also segregate those portions of the information that contain CEII (or information that reasonably could be expected to lead to the disclosure of the CEII) wherever feasible. The submitter must also submit to the Commission a public version with the information where CEII is redacted, to the extent practicable.

    (iii) If a person files material as CEII in a complaint proceeding or other proceeding to which a right to intervention exists, that person must include a proposed form of protective agreement with the filing, or identify a protective agreement that has already been filed in the proceeding that applies to the filed material.

    (iv) The information for which CEII treatment is claimed will be maintained in the Commission's files as non-public until such time as the Commission may determine that the information is not entitled to the treatment sought. By treating the information as non-public, the Commission is not making a determination on any claim of CEII status. The Commission retains the right to make determinations with regard to any claim of CEII status, and the discretion to release information as necessary to carry out its jurisdictional responsibilities. Although unmarked information may be eligible for CEII treatment, the Commission intends to treat information as CEII only if it is properly designated as CEII pursuant to Commission regulations.

    (v) The Commission will evaluate whether the submitted information or portions of the information are covered by the definitions in paragraphs (c)(1) and (2) of this section prior to making a designation as CEII.

    (vi) Subject to the exceptions set forth in section 388.113(f)(5), when a CEII requester seeks information for which CEII status has been claimed, or when the Commission itself is considering release of such information, the Commission official who will decide whether to release the information or any other appropriate Commission official will notify the person who submitted the information and give the person an opportunity (at least five calendar days) in which to comment in writing on the request. A copy of this notice will be sent to the requester. Notice of a decision by the Commission, or the CEII Coordinator to make a limited release of CEII, will be given to any person claiming that the information is CEII no less than five calendar days before disclosure. The notice will briefly explain why the submitter's objections to disclosure are not sustained by the Commission. Where applicable, a copy of this notice will be sent to the CEII requester.

    (2) For Commission-generated information, after consultation with the Office Director for the office that created the information, or the Office Director's designee, the Coordinator will designate the material as CEII after determining that the information or portions of the information are covered by the definitions in paragraphs (c)(1) and (2) of this section. Commission-generated CEII shall include clear markings to indicate the information is CEII and the date of the designation.

    (3) For Commission-generated information, the Commission will segregate non-CEII from CEII or information that reasonably could be expected to lead to the disclosure of CEII wherever feasible.

    (e) Duration of the CEII designation. All CEII designations will be subject to the following conditions:

    (1) A designation may last for up to a five-year period, unless re-designated. In making a determination as to whether the designation should be extended, the CEII Coordinator will take into account information provided in response to paragraph (d)(1)(i) of this section, and any other information, as appropriate.

    (2) A designation may be removed at any time, in whole or in part, if the Commission determines that the unauthorized disclosure of CEII could no longer be used to impair the security or reliability of the bulk-power system or distribution facilities or any other form of energy infrastructure.

    (3) If such a designation is removed, the submitter will receive notice and an opportunity to comment. The CEII Coordinator will notify the person who submitted the document and give the person an opportunity (at least five calendar days) in which to comment in writing prior to the removal of the designation. Notice of a removal decision will be given to any person claiming that the information is CEII no less than 5 calendar days before disclosure. The notice will briefly explain why the person's objections to the removal of the designation are not sustained by the Commission.

    (4) Prior to seeking judicial review in district court pursuant to section 215A(d)(11) of the Federal Power Act, an administrative appeal of a determination shall be made to the Commission's General Counsel.

    (f) Voluntary sharing of CEII. The Commission, taking into account standards of the Electric Reliability Organization, will facilitate voluntary sharing of CEII with, between, and by Federal, state, political subdivision, and tribal authorities; the Electric Reliability Organization; regional entities; information sharing and analysis centers established pursuant to Presidential Decision Directive 63; owners, operators, and users of critical electric infrastructure in the United States; and other entities determined appropriate by the Commission. The process will be as follows:

    (1) The Director of any Office of the Commission or his designee that wishes to voluntarily share CEII shall consult with the CEII Coordinator prior to the Office Director or his designee making a determination on whether to voluntarily share the CEII.

    (2) Consistent with section 388.113(d) of this Chapter, the Commission retains the discretion to release information as necessary to carry out its jurisdictional responsibilities in facilitating voluntary sharing or, in the case of information provided to other federal agencies, the Commission retains the discretion to release information as necessary for those agencies to carry out their jurisdictional responsibilities.

    (3) All entities receiving CEII must execute either a non-disclosure agreement or an acknowledgement and agreement. A copy of each agreement will be maintained by the Office Director with a copy to the CEII Coordinator.

    (4) When the Commission voluntarily shares CEII pursuant to this subsection, the Commission may impose additional restrictions on how the information may be used and maintained.

    (5) Submitters of CEII shall receive notification of a limited release of CEII no less than 5 calendar days before disclosure, except in instances where voluntary sharing is necessary for law enforcement purposes, to maintain infrastructure security, to address potential threats, or when notice would not be practicable.

    (g) Accessing CEII.

    (1) An owner/operator of a facility, including employees and officers of the owner/operator, may obtain CEII relating to its own facility, excluding Commission-generated information except inspection reports/operation reports and any information directed to the owner-operators, directly from Commission staff without going through the procedures outlined in paragraph (g)(5) of this section. Non-employee agents of an owner/operator of such facility may obtain CEII relating to the owner/operator's facility in the same manner as owner/operators as long as they present written authorization from the owner/operator to obtain such information. Notice of such requests must be given to the CEII Coordinator, who shall track this information.

    (2) An employee of a federal agency acting within the scope of his or her federal employment may obtain CEII directly from Commission staff without following the procedures outlined in paragraph (g)(5) of this section. Any Commission employee at or above the level of division director or its equivalent may rule on requests for access to CEII by a representative of a federal agency. To obtain access to CEII, an agency employee must sign an acknowledgement and agreement, which states that the agency will protect the CEII in the same manner as the Commission and will refer any requests for the information to the Commission. Notice of each such request also must be given to the CEII Coordinator, who shall track this information.

    (3) A landowner whose property is crossed by or in the vicinity of a project may receive detailed alignment sheets containing CEII directly from Commission staff without submitting a non-disclosure agreement as outlined in paragraph (g)(5) of this section. A landowner must provide Commission staff with proof of his or her property interest in the vicinity of a project.

    (4) Any person who is a participant in a proceeding or has filed a motion to intervene or notice of intervention in a proceeding may make a written request to the filer for a copy of the complete CEII version of the document without following the procedures outlined in paragraph (g)(5) of this section. The request must include an executed copy of the applicable protective agreement and a statement of the person's right to party or participant status or a copy of the person's motion to intervene or notice of intervention. Any person may file an objection to the proposed form of protective agreement. A filer, or any other person, may file an objection to disclosure, generally or to a particular person or persons who have sought intervention.

    (5) If any requester not described above in paragraph (g)(1)-(4) of this section has a particular need for information designated as CEII, the requester may request the information using the following procedures:

    (i) File a signed, written request with the Commission's CEII Coordinator. The request must contain the following:

    (A) Requester's name (including any other name(s) which the requester has used and the dates the requester used such name(s)), title, address, and telephone number; the name, address, and telephone number of the person or entity on whose behalf the information is requested;

    (B) A detailed Statement of Need, which must state: The extent to which a particular function is dependent upon access to the information; why the function cannot be achieved or performed without access to the information; an explanation of whether other information is available to the requester that could facilitate the same objective; how long the information will be needed; whether or not the information is needed to participate in a specific proceeding (with that proceeding identified); and an explanation of whether the information is needed expeditiously.

    (C) An executed non-disclosure agreement as described in paragraph (h)(2) of this section;

    (D) A signed statement attesting to the accuracy of the information provided in the request; and

    (E) A requester shall provide his or her date and place of birth upon request, if it is determined by the CEII Coordinator that this information is necessary to process the request.

    (ii) A requester who seeks the information on behalf of all employees of an organization should clearly state that the information is sought for the organization, that the requester is authorized to seek the information on behalf of the organization, and that all individuals in the organization that have access to the CEII will agree to be bound by a non-disclosure agreement that must be executed.

    (iii) After the request is received, the CEII Coordinator will determine if the information is CEII, and, if it is, whether to release the CEII to the requester. The CEII Coordinator will balance the requester's need for the information against the sensitivity of the information. If the requester is determined to be eligible to receive the information requested, the CEII Coordinator will determine what conditions, if any, to place on release of the information.

    (iv) If the CEII Coordinator determines that the CEII requester has not demonstrated a valid or legitimate need for the CEII or that access to the CEII should be denied for other reasons, this determination may be appealed to the General Counsel pursuant to section 388.110 of this Chapter. The General Counsel will decide whether the information is properly classified as CEII, which by definition is exempt from release under FOIA, and whether the Commission should in its discretion make such CEII available to the CEII requester in view of the requester's asserted legitimacy and need.

    (v) Once a CEII requester has been verified by Commission staff as a legitimate requester who does not pose a security risk, his or her verification will be valid for the remainder of that calendar year. Such a requester is not required to provide detailed information about himself or herself with subsequent requests during the calendar year. He or she is also not required to file a non-disclosure agreement with subsequent requests during the calendar year because the original non-disclosure agreement will apply to all subsequent releases of CEII.

    (vi) An organization that is granted access to CEII pursuant to paragraph (g)(5)(ii) of this section may seek to add additional individuals to the non-disclosure agreement within one (1) year of the date of the initial CEII request. Such an organization must provide the names of the added individuals to the CEII Coordinator and certify that notice of each added individual has been given to the submitter. Any newly added individuals must execute a supplement to the original non-disclosure agreement indicating their acceptance of its terms. If there is no written opposition within five (5) days of notifying the CEII Coordinator and the submitter concerning the addition of any newly added individuals, the CEII Coordinator will issue a standard notice accepting the addition of these names to the non-disclosure agreement. If the submitter files a timely opposition with the CEII Coordinator, the CEII Coordinator will issue a formal determination addressing the merits of such opposition. If an organization that is granted access to CEII pursuant to paragraph (g)(5)(ii) of this section wants to add new individuals to its non-disclosure agreement more than one year after the date of its initial CEII request, the organization must submit a new CEII request pursuant to paragraph (g)(5)(ii) of this section and a new non-disclosure agreement for each new individual added.

    (vii) The CEII Coordinator will attempt to respond to the requester under this section according to the timing required for responses under the FOIA in section 18 CFR 388.108(c).

    (viii) Fees for processing CEII requests will be determined in accordance with section 18 CFR 388.109.

    (ix) Nothing in this section should be construed as requiring the release of proprietary information, personally identifiable information, cultural resource information and other comparable data protected by statute or any privileged information, including information protected by the deliberative process.

    (h) Duty to protect CEII. Unauthorized disclosure of CEII is prohibited.

    (1) To ensure that the Commissioners, Commission employees, and Commission contractors protect CEII from unauthorized disclosure, internal controls will describe the handling, marking, and security controls for CEII.

    (2) Any individual who requests information pursuant to paragraph (g)(5) of this section must sign and execute a non-disclosure agreement, which indicates the individual's willingness to adhere to limitations on the use and disclosure of the information requested. The non-disclosure agreement will, at a minimum, require the following: CEII will only be used for the purpose for which it was requested; CEII may only be discussed with authorized recipients; CEII must be kept in a secure place in a manner that would prevent unauthorized access; CEII must be destroyed or returned to the Commission upon request; and the Commission may audit the Recipient's compliance with the non-disclosure agreement.

    (i) Sanctions. Any officers, employees, or agents of the Commission who knowingly and willfully disclose CEII in a manner that is not authorized under this section will be subject to appropriate sanctions, such as removal from the federal service, or possible referral for criminal prosecution. Commissioners who knowingly and willfully disclose CEII without authorization may be referred to the Department of Energy Inspector General. The Commission will take responsibility for investigating and, as necessary, imposing sanctions on its employees and agents.

    [FR Doc. 2016-14761 Filed 7-1-16; 8:45 am] BILLING CODE 6717-01-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-133673-15] RIN 1545-BN07 Deemed Distributions Under Section 305(c) of Stock and Rights To Acquire Stock; Correction AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Correction to notice of proposed rulemaking.

    SUMMARY:

    This document contains corrections to a notice of proposed rulemaking (REG-133673-15) that were published in the Federal Register on April 13, 2016 (81 FR 21795). The proposed regulations are in regards to deemed distributions of stock and rights to acquire stock. The proposed regulations would resolve ambiguities concerning the amount and timing of deemed distributions that are or result from adjustments to rights to acquire stock.

    DATES:

    Written or electronic comments and requests for a public hearing for the notice of proposed rulemaking published at 81 FR 21795, April 13, 2016 are still being accepted and must be received by July 12, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Maurice M. LaBrie at (202) 317-5322; concerning the proposed regulations under sections 860G, 861, 1441, 1461, 1471, and 1473, Subin Seth, (202) 317-6942; concerning the proposed regulations under section 6045B, Pamela Lew, (202) 317-7053; concerning submission of comments, contact Regina Johnson, (202) 317-6901 (not toll-free numbers).

    SUPPLEMENTARY INFORMATION: Background

    The notice of proposed rulemaking (REG-133673-15) that is subject of this correction is under sections 305 and 1473 of the Internal Revenue Code.

    Need for Correction

    As published, the notice of proposed rulemaking (REG-133673-15) contains errors that may prove to be misleading and are in need of clarification.

    Correction to Publication

    Accordingly, the notice of proposed rulemaking (REG-133673-15) that was the subject of FR Doc. 2016-08248 is corrected as follows:

    § 1.305-3 [CORRECTED]
    1. On page 21802, first column, fourth line from the bottom of Example 6, the language “accordance with § 1.305-7(c)(4)(ii) and the” is corrected to read “accordance with § 1.305-7(c)(4)(i) and the”.
    § 1.305-7 [CORRECTED]
    2. On page 21803, third column, second line of Example 3.(ii), the language “§ 1.305-1(d)(5), the holders of the convertible” is corrected to read “§ 1.305-1(d)(4), the holders of the convertible”.
    § 1.1473-1 [CORRECTED]
    3. On page 21807, third column, in paragraph (d)(7), fifth line from the bottom of the page, the language “beneficial owner or a flow through” is corrected to read “beneficial owner, or a flow through”. Martin V. Franks, Branch Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).
    [FR Doc. 2016-15696 Filed 7-1-16; 8:45 am] BILLING CODE 4830-01-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R06-OAR-2016-0278 FRL-9948-59-Region 6] Approval and Promulgation of Implementation Plans; Louisiana; Baton Rouge Nonattainment Area; Base Year Emissions Inventory for the 2008 8-Hour Ozone Standard AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Proposed rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is proposing to approve a revision to the State Implementation Plan (SIP) submitted by the Louisiana Department of Environmental Quality (LDEQ) to address the emissions inventory (EI) requirement for the Baton Rouge ozone nonattainment area (BRNA) for the 2008 8-hour ozone National Ambient Air Quality Standards (NAAQS). The Clean Air Act (CAA) requires an EI for all ozone nonattainment areas. The inventory includes emission data for Nitrogen Oxides (NOX) and Volatile Organic Compounds (VOCs). EPA is approving the revisions pursuant to section 110 and part D of the CAA and EPA's regulations.

    DATES:

    Written comments should be received on or before August 4, 2016.

    ADDRESSES:

    Submit your comments, identified by EPA-R06-OAR-2016-0278, at http://www.regulations.gov or via email to [email protected] For additional information on how to submit comments see the detailed instructions in the ADDRESSES section of the direct final rule located in the rules section of this Federal Register.

    FOR FURTHER INFORMATION CONTACT:

    Ms. Nevine Salem, (214) 665-7222, [email protected]

    SUPPLEMENTARY INFORMATION:

    In the Rules and Regulations section of this Federal Register, the EPA is approving the State's SIP submittal as a direct rule without prior proposal because the Agency views this as noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no relevant adverse comments are received in response to this action no further activity is contemplated. If the EPA receives relevant adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. The EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time.

    For additional information, see the direct final rule which is located in the Rules and Regulations section of this Federal Register.

    Dated: June 22, 2016. Ron Curry, Regional Administrator, Region 6.
    [FR Doc. 2016-15743 Filed 7-1-16; 8:45 am] BILLING CODE 6560-50-P
    DEPARTMENT OF HOMELAND SECURITY Federal Emergency Management Agency 44 CFR Part 67 [Docket ID FEMA-2016-0002; Internal Agency Docket Nos. FEMA-B-1051 and 1060] Proposed Flood Elevation Determinations for Will County, Illinois, and Incorporated Areas; Withdrawal AGENCY:

    Federal Emergency Management Agency, DHS.

    ACTION:

    Proposed rule; withdrawal.

    SUMMARY:

    The Federal Emergency Management Agency (FEMA) is withdrawing its proposed rule concerning proposed flood elevation determinations for Will County, Illinois, and Incorporated Areas.

    DATES:

    The proposed rules published on May 26, 2009 and July 2, 2009 (74 FR 24738 and 74 FR 31656), are withdrawn effective July 5, 2016.

    ADDRESSES:

    You may submit comments, identified by Docket Nos. FEMA-B-1051 and 1060 to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646-7659, or (email) [email protected]

    FOR FURTHER INFORMATION CONTACT:

    Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646-7659, or (email) [email protected];

    SUPPLEMENTARY INFORMATION:

    On May 26, 2009 and July 2, 2009, FEMA published documents proposing flood elevation determinations along one or more flooding sources in City of Joliet, Unincorporated Areas of Will County, and the Villages of Channahon, Frankfort and Manhattan, Illinois (74 FR 24738 at 24741 and 74 FR 31656 at 31658). FEMA is withdrawing the proposed rules because FEMA has or will be issuing a Revised Preliminary Flood Insurance Rate Map, and if necessary a Flood Insurance Study report, featuring updated flood hazard information. A Notice of Proposed Flood Hazard Determinations will be published in the Federal Register and in the affected community's local newspaper following issuance of the Revised Preliminary Flood Insurance Rate Map.

    Authority:

    42 U.S.C. 4104; 44 CFR 67.4.

    Dated: May 19, 2016. Roy E. Wright, Deputy Associate Administrator for Insurance and Mitigation, Department of Homeland Security, Federal Emergency Management Agency.
    [FR Doc. 2016-15747 Filed 7-1-16; 8:45 am] BILLING CODE 9110-12-P
    81 128 Tuesday, July 5, 2016 Notices DEPARTMENT OF AGRICULTURE Office of the Secretary Request for Nominations of Members for the National Agricultural Research, Extension, Education, and Economics Advisory Board and Specialty Crop Committee AGENCY:

    Research, Education, and Economics, USDA.

    ACTION:

    Solicitation for membership.

    SUMMARY:

    In accordance with the Federal Advisory Committee Act, 5 U.S.C. App., the United States Department of Agriculture announces the solicitation for nominations to fill vacancies on the National Agricultural Research, Extension, Education, and Economics Advisory Board and its subcommittees. There are 7 vacancies on the NAREE Advisory Board, 3 vacancies on the Specialty Crop Committee, 4 vacancies on the National Genetics Advisory Council, and 6 vacancies on the Citrus Disease Committee.

    DATES:

    All nomination materials should be mailed in a single, complete package and postmarked by July 29, 2016.

    ADDRESSES:

    The nominee's name, resume or CV, completed Form AD-755, and any letters of support must be submitted via one of the following methods:

    (1) Email to [email protected]; or

    (2) By mail delivery service to Thomas Vilsack, Secretary, U.S. Department of Agriculture, 1400 Independence Avenue SW., Washington, DC 20250, Attn: NAREEE Advisory Board, Room 332A, Whitten Building.

    FOR FURTHER INFORMATION CONTACT:

    Michele Esch, Director, National Agricultural Research, Extension, Education, and Economics Advisory Board, 1400 Independence Avenue SW., Room 332A, The Whitten Building, Washington, DC 20250-2255, telephone: 202-720-3684; fax: 202-720-6199; email: [email protected] Committee Web site: www.nareeeab.ree.usda.gov.

    SUPPLEMENTARY INFORMATION: Instructions for Nominations

    Nominations are solicited from organizations, associations, societies, councils, federations, groups, and companies that represent a wide variety of food and agricultural interests throughout the country. Nominations for one individual who fits several of the categories listed above, or for more than one person who fits one category, will be accepted.

    In your nomination letter, please indicate the specific membership category for each nomine if applying for the NAREEE Advisory Committee and also specify what committee(s) you are sending your nomination is for. Each nominee must submit form AD-755, “Advisory Committee Membership Background Information” (which can be obtained from the contact person below or from: http://www.ocio.usda.gov/sites/default/files/docs/2012/AD-755_Master_2012_508%20Ver.pdf). All nominees will be vetted before selection.

    Nominations are open to all individuals without regard to race, color, religion, sex, national origin, age, mental or physical handicap, marital status, or sexual orientation. To ensure the recommendation of the Advisory Board take into account the needs of the diverse groups served by the USDA, membership shall include, to the extent practicable, individuals with demonstrated ability to represent the needs of all racial and ethnic groups, women and men, and persons with disabilities.

    Please note that registered lobbyist and individuals already serving another USDA Federal Advisory Committee, are ineligible for nomination.

    All nominees will be carefully reviewed for their expertise, leadership, and relevance. All nominees will be vetted before selection.

    Appointments to the National Agricultural Research, Extension, Education, and Economics Advisory Board and its subcommittees will be made by the Secretary of Agriculture.

    National Agricultural Research, Extension, Education, and Economics Advisory Board

    The National Agricultural Research, Extension, Education, and Economics Advisory Board was established in 1996 via section 1408 of the National Agricultural Research, Extension, and Teaching Policy Act of 1977 (7 U.S.C. 3123) to provide advice to the Secretary of Agriculture and land-grant colleges and universities on top priorities and policies for food and agricultural research, education, extension, and economics. Section 1408 of the National Agricultural Research, Extension, and Teaching Policy Act of 1977 was amended by the Farm Security and Rural Investment Act of 2002 to reduce the number of members on the National Agricultural Research, Extension, Education, and Economics Advisory Board to 25 members and required the Board to also provide advice to the Committee on Agriculture of the House of Representatives, the Committee on Agriculture, Nutrition, and Forestry of the Senate, the Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies of the Committee on Appropriations of the House of Representatives, and the Subcommittee on Agriculture, Rural Development and Related Agencies of the Committee on Appropriations of the Senate.

    Since the Advisory Boards inception by congressional legislation in 1996, each member has represented a specific category related to farming or ranching, food production and processing, forestry research, crop and animal science, land-grant institutions, non-land grant college or university with a historic commitment to research in the food and agricultural sciences, food retailing and marketing, rural economic development, and natural resource and consumer interest groups, among many others. The Board was first appointed by the Secretary of Agriculture in September 1996 and one-third of its members were appointed for a one, two, and three-year term, respectively. The terms for 7 members who represent specific categories will expire September 30, 2016. Nominations for a 3-year appointment for these 7 vacant categories are sought. All nominees will be carefully reviewed for their expertise, leadership, and relevance to a category.

    The 7 slots to be filled are:

    Category F. National Food Animal Science Society Category G. National Crop, Soil, Agronomy, Horticulture, or Weed Science Society Category L. 1890 Land-Grant Colleges and Universities Category M. 1994 Equity in Education-Land Grant Institutions Category P. American Colleges of Veterinary Medicine Category T. Rural Economic Development Category U. National Consumer Interest Group Specialty Crop Committee

    The Specialty Crop Committee was created as a subcommittee of the National Agricultural Research, Extension, Education, and Economics Advisory Board in 2004 in accordance with the Specialty Crops Competitiveness Act of 2004 under title III, section 303 of Public Law 108-465. The committee was formulated to study the scope and effectiveness of research, extension, and economics programs affecting the specialty crop industry. The legislation defines “specialty crops” as fruits, vegetables, tree nuts, dried fruits and nursery crops (including floriculture). The Agricultural Act of 2014 further expanded the scope of the Specialty Crop Committee to provide advice to the Secretary of Agriculture on the relevancy review process of the Specialty Crop Research Initiative, a granting program of the National Institute of Food and Agriculture.

    Members should represent the breadth of the specialty crop industry. 6 members of the Specialty Crop Committee are also members of the National Agricultural Research, Extension, Education, and Economics Advisory Board and 6 members represent various disciplines of the specialty crop industry.

    The terms of 3 members will expire on September 30, 2015. The Specialty Crop Committee is soliciting nominations to fill 3 vacant positions. Appointed members will serve 2-3 years with their terms expiring in September 2017 or 2018.

    National Genetic Resources Advisory Council

    The National Genetic Resources Advisory Council was re-established in 2012 as a permanent subcommittee of the National Agricultural Research, Extension, Education, and Economics (NAREEE) Advisory Board to formulate recommendations on actions and policies for the collection, maintenance, and utilization of genetic resources; to make recommendations for coordination of genetic resources plans of several domestic and international organizations; and to advise the Secretary of Agriculture and the National Genetic Resources Program of new and innovative approaches to genetic resources conservation. The National Genetic Resources Advisory Council will also advise the department on developing a broad strategy for maintaining plant biodiversity available to agriculture, and strengthening public sector plant breeding capacities.

    The National Genetic Resources Advisory Council membership is required to have two-thirds of the appointed members from scientific disciplines relevant to the National Genetic Resources Program including agricultural sciences, environmental sciences, natural resource sciences, health sciences, and nutritional sciences; and one-third of the appointed members from the general public including leaders in fields of public policy, trade, international development, law, or management.

    The terms of 4 members of the National Genetic Resources Advisory Council will expire on September 30, 2016. We are seeking nominations for a 4-year appointment effective October 1, 2016 through September 30, 2020. The 4 slots to be filled are to be composed of 3 scientific members and 1 general public member.

    Citrus Disease Subcommittee

    The Citrus Disease Subcommittee was established by the Agricultural Act of 2014 (Sec. 7103) to advise the Secretary of Agriculture on citrus research, extension, and development needs, engage in regular consultation and collaboration with USDA and other organizations involved in citrus, and provide recommendations for research and extension activities related to citrus disease. The Citrus Disease Subcommittee will also advise the Department on the research and extension agenda of the Emergency Citrus Disease Research and Extension Program, a granting program of the National Institute of Food and Agriculture.

    The subcommittee is composed of 9 members who must be a producer of citrus with representation from the following States: Three members from Arizona or California, five members from Florida, and one member from Texas.

    The terms of 6 Citrus Disease Subcommittee will expire on September 30, 2015. The Citrus Disease Subcommittee is soliciting nominations to fill 6 vacant positons for membership; 4 positions are to represent Florida and 2 positions are to represent California. Appointed members will serve 2-3 years with their terms expiring in September 2017 or 2018.

    Done at Washington, DC, this 28 day of June 2016. Ann Bartuska, Deputy Under Secretary, Research, Education, and Economics.
    [FR Doc. 2016-15851 Filed 7-1-16; 8:45 am] BILLING CODE 3410-03-P
    DEPARTMENT OF COMMERCE Census Bureau Proposed Information Collection; Comment Request; 2017 Economic Census AGENCY:

    U.S. Census Bureau, Commerce.

    ACTION:

    Notice.

    SUMMARY:

    The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.

    DATES:

    To ensure consideration, written comments must be submitted on or before September 6, 2016.

    ADDRESSES:

    Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at [email protected]).

    FOR FURTHER INFORMATION CONTACT:

    Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Kevin Deardorff, U.S. Census Bureau, Economy Wide Statistics Division, Room 8K154, 4600 Silver Hill Road, Washington, DC 20233, telephone (301) 763-6033, or via the Internet at [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Abstract

    The Census Bureau is the preeminent collector and provider of timely, relevant, and quality data about the people and economy of the United States. Economic data are the Census Bureau's primary program commitment during nondecennial census years. The Economic Census, conducted under authority of Title 13 United States Code, is the U.S. Government's official five-year measure of American business and the economy. It features the primary source of facts about the structure and functioning of the Nation's economy and features unique industry and geographic detail. Economic census statistics serve as part of the framework for the national accounts and provide essential information for government, business, and the public.

    The 2017 Economic Census covering the Mining; Utilities; Construction; Manufacturing; Wholesale Trade; Retail Trade; Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing; Professional, Scientific and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation; Educational Services; Health Care and Social Assistance; Arts, Entertainment, and Recreation; Accommodation and Food Services; Other Services (except Public Administration) Sectors (as defined by the North American Industry Classification System (NAICS)) will measure the economic activity of more than 7 million employer establishments. The information collected from establishments in these sectors of the economic census will produce basic statistics by industry for number of establishments, value of shipments/receipts/revenue/sales, payroll, and employment. It also will yield a variety of industry-specific statistics, including materials consumed, detailed supplies and fuels consumed, electric energy consumed, depreciable assets, selected purchased services, inventories, and capital expenditures, value of shipments/receipts/revenue/sales by product line as defined by the North American Product Classification System (NAPCS), type of operation, size of establishments, and other industry-specific measures.

    Respondent burden will be reduced by using a response driven electronic reporting instrument that includes skip patterns and will display survey paths specific to the establishment's kind of business.

    II. Method of Collection

    Establishments in the Economic Census will be selected from the Census Bureau's Business Register. The Census Bureau's Business Register provides a current and comprehensive database of U.S. business establishments and companies for statistical program use. To be eligible for selection, an establishment will be required to satisfy the following conditions: (i) It must be classified in one of the sectors listed above; (ii) it must be an active operating establishment of a multi-establishment firm (i.e., a firm that operates at more than one physical location), or it must be a single-establishment firm with payroll (i.e., a firm operating at only one physical location); and (iii) it must be located in one of the 50 states, offshore areas, or the District of Columbia. Initial contact with respondents will be a mailed letter directing them to report online. No form will be mailed. The sampling procedure will distinguish the following groups of establishments for collection:

    1. Establishments of Multi-Establishment Firms

    Selection procedures will assign all active establishments of multi-establishment firms to the mail component of the universe, except for those in industries classified as consolidated reporters. In these selected industries, where activities are not easily attributable to individual locations or establishments, firms will be asked to report their basic data for several establishments at a nation-wide level on an electronic consolidated report path(s).

    2. Single-Establishment Firms With Payroll

    All single-establishment firms having 2017 payroll (from Federal administrative records) will be included in the sampling frame. We will use a NAICS-by-state stratified sample design for selecting a sample of single-establishment firms. The largest single-establishment firms (based on 2017 payroll) will be selected with certainty. Using a NAICS-by-state stratified sample should produce reliable estimates for various characteristics at detailed NAICS-by-state levels.

    The remaining single-establishment firms with payroll that are not selected into the sample will be represented in the Economic Census by data from Federal administrative records, or by weighting the responses of the sampled establishments. Additionally, some of these single-establishment firms not selected into the sample may be requested to respond to a short questionnaire to verify or confirm that the establishments are classified in the correct NAICS industry.

    III. Data

    OMB Control Number: 0607-XXXX.

    Electronic ID Path(s): The paths in the electronic instrument used to collect information are tailored to specific industries or groups of industries. The Electronic Path ID's are too numerous to list individually in this notice.

    Type of Review: Regular submission.

    Affected Public: State or local governments, businesses, or other for profit or non-profit institutions or organizations.

    Estimated Number of Respondents: 4,423,783—see Table 1 for detail.

    Estimated Time per Response: See Table 1 for detail.

    Estimated Total Annual Burden Hours: 6,832,591—see Table 1 for detail.

    Estimated Total Annual Cost: $0.

    Respondent's Obligation: Mandatory.

    Legal Authority: Title 13 U.S.C. Section 131.

    IV. Request for Comments

    Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.

    Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.

    Dated: June 29, 2016. Glenna Mickelson, Management Analyst, Office of the Chief Information Officer. EN05JY16.011
    [FR Doc. 2016-15787 Filed 7-1-16; 8:45 am] BILLING CODE 3510-07-P
    DEPARTMENT OF COMMERCE Census Bureau Proposed Information Collection; Comment Request; 2017 Economic Census of Island Areas AGENCY:

    U.S. Census Bureau, Commerce.

    ACTION:

    Notice.

    SUMMARY:

    The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.

    DATES:

    To ensure consideration, written comments must be submitted on or before September 6, 2016.

    ADDRESSES:

    Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at [email protected]).

    FOR FURTHER INFORMATION CONTACT:

    Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Kevin Deardorff, U.S. Census Bureau, Economy Wide Statistics Division, Room 8K154, 4600 Silver Hill Road, Washington, DC 20233, telephone (301) 763-6033, or via the Internet at [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Abstract

    The Economic Census of Island Areas, conducted under authority of Title 13, United States Code (U.S.C.), Section 131, is the primary source of facts about the structure and functioning of the U.S. economy, including Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, and American Samoa, collectively referred to as Island Areas. The Economic Census of Island Areas, is the primary source of facts about each of the island areas' economies. Economic Census of Island Areas statistics serve to benchmark estimates of local net income and gross domestic product, and provide essential information for government (Federal and local), businesses, and the general public.

    The 2017 Economic Census of Island Areas will cover the following sectors as defined by the North American Industry Classification System (NAICS): Mining; Utilities; Construction; Manufacturing; Wholesale and Retail Trades; Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing; Professional, Scientific, and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services; Educational Services; Health Care and Social Assistance; Arts, Entertainment, and Recreation; Accommodation and Food Services; and Other Services (except Public Administration). This scope is roughly equivalent to that of the stateside Economic Census. Due to concerns about the completeness of the universe for collection, the Economic Census of Island Areas does not collect data on Scheduled Air Transportation (NAICS 4811) or Business, Professional, Labor, Political, and Similar Organizations (NAICS 8139). The Economic Census of Island Areas is the only source of economic data collected for the Island Areas.

    The information collected will produce statistics by kind of business on the number of establishments, sales, value of shipments, receipts, revenue, payroll, and employment. The Economic Census of Island Areas will also yield a variety of industry-specific statistics, including sales/receipts by commodity/merchandise/receipt lines, sales/value of shipments by class of customer, and number of hotel rooms. While the Economic Census of Island Areas collects the same sector level data as the Economic Census, the data published are at a less detailed NAICS level with some additional exclusions.

    Data collection for the 2017 Economic Census of Island Areas will begin in January of 2018 and will closeout in October of 2018. In an effort to reduce respondent burden, processing time, and cost, the 2017 Economic Census of Island Areas is aiming to increase data collection through the use of electronic reporting tools.

    II. Method of Collection

    The 2017 Economic Census of Island Areas will be conducted using electronic reporting instrument procedures with a follow-up mailout of a paper questionnaire. Establishments will be selected from the Census Bureau's Business Register. The Census Bureau's Business Register provides a current and comprehensive database of U.S. business establishments and companies for statistical program use. An establishment will be included in the 2017 Economic Census of Island Areas if: (a) It is engaged in any of the sectors within the scope of the census listed above; (b) it is an active operating establishment with payroll; and (c) it is located in Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa.

    III. Data

    OMB Control Number: 0607-XXXX.

    Questionnaire Number(s): Electronic Path ID(s): The questionnaires and paths in the electronic instrument used to collect information in the Islands Areas are tailored to specific industries or groups of industries. Puerto Rico questionnaires and electronic instruments are available in English as well as Spanish.

    Questionnaire No. and electronic path ID Island area Trade 2101T Puerto Rico Utilities, Transportation, and Warehousing. 2102T Puerto Rico Utilidades, Transportacion y Almacenaje. 2103T Selected U.S. Territories Utilities, Transportation, and Warehousing. 2104T American Samoa Utilities, Transportation, and Warehousing. 2301T Puerto Rico Construction. 2302T Puerto Rico Industrias de Construccion. 2303T Selected U.S. Territories Construction. 2304T American Samoa Construction. 3101T Puerto Rico Manufacturing. 3102T Puerto Rico Manufactura. 3103T Selected U.S. Territories Manufacturing. 3104T American Samoa Manufacturing. 4201T Puerto Rico Wholesale Trade. 4202T Puerto Rico Comercio al Poy Mayor. 4203T Selected U.S. Territories Wholesale Trade. 4204T American Samoa Wholesale Trade. 4401T Puerto Rico Retail Trade. 4402T Puerto Rico Comercio al Detal. 4403T Selected U.S. Territories Retail Trade. 4404T American Samoa Retail Trade. 5101T Puerto Rico Services. 5102T Puerto Rico Servicios. 5103T Selected U.S. Territories Services. 5104T American Samoa Services. 5201T Puerto Rico Finance, Insurance, Real Estate, Rental, and Leasing. 5202T Puerto Rico Finanzas y Seguros, Bienes Raices, Alquiler y Arrendamiento. 5203T Selected U.S. Territories Finance, Insurance, Real Estate, Rental, and Leasing. 5204T American Samoa Finance, Insurance, Real Estate, Rental, and Leasing. 7201T Puerto Rico Accommodation Services. 7202T Puerto Rico Servicios de Alojamiento. 7203T Selected U.S. Territories Accommodation Services. 7204T American Samoa Accommodation Services.

    Type of Review: Regular submission.

    Affected Public: Local governments, businesses, and other for profit or nonprofit institutions or organizations.

    Estimated Number of Respondents: 52,970 (Puerto Rico: 45,000; Guam: 3,400; Commonwealth of the Northern Mariana Islands: 1,400; U.S. Virgin Islands: 2,700; American Samoa: 470).

    Estimated Time per Response: 1 hour.

    Estimated Total Annual Burden Hours: 52,970 hours.

    Estimated Total Annual Cost to Public: $0.

    Respondent's Obligation: Mandatory.

    Legal Authority: Title 13, U.S.C., Section 131 and 191.

    IV. Request for Comments

    Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.

    Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.

    Dated: June 29, 2016. Glenna Mickelson, Management Analyst, Office of the Chief Information Officer.
    [FR Doc. 2016-15786 Filed 7-1-16; 8:45 am] BILLING CODE 3510-07-P
    DEPARTMENT OF COMMERCE Submission for OMB Review; Comment Request

    The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35).

    Agency: U.S. Census Bureau.

    Title: Address Canvassing Testing.

    OMB Control Number: 0607-XXXX.

    Form Number(s):

    DF-31DA(E/S) Confidentiality Notice. LiMA Screenshots.

    Type of Request: Regular Submission.

    Number of Respondents: 86,250.

    Average Hours per Response: 5 minutes per Household.

    Burden Hours: 7,188.

    Needs and Uses: During the years preceding the 2020 Census, the Census Bureau will pursue its commitment to reduce the costs of conducting a decennial census, while maintaining our commitment to quality. The goal of Reengineering Address Canvassing is to ensure an accurate address frame is developed utilizing innovative methodologies and data for updating the Master Address File (MAF)/Topologically Integrated Geographic Encoding and Referencing (TIGER) System throughout the decade. The Census Bureau plans to test Address Canvassing during the Fall of 2016 in the Address Canvassing Test, and in the Spring of 2017 as part of the 2017 Puerto Rico Census Test. Both tests will include two major components of the reengineered Address Canvassing operation: In-Office Address Canvassing and In-Field Address Canvassing. The purpose of the tests is to determine the accuracy and feasibility of some of the planned innovations for Address Canvassing. The Census Bureau believes that there are other means for accomplishing the address list updates and determining which areas have housing changes without canvassing every single block in the field just before the census as was done in previous censuses. These tests will examine these new methods, which will allow decisions to be made about their feasibility for use within the decennial census.

    The following objectives are crucial to a successful Address Canvassing Test and 2017 Puerto Rico Census Test:

    • Implementing all planned 2020 Census In-Office Address Canvassing processes, including Interactive Review (IR), Active Block Resolution (ABR), MAF Updating and Identification of the In-Field Address Canvassing workload.

    • Evaluating the effectiveness of online training for Field Supervisors and Field Representatives.

    • Measuring the effectiveness of In-Office Address Canvassing through In-Field Address Canvassing.

    • Integrating multiple information technology applications to create one seamless operational data collection, control and management system.

    The Address Canvassing Test occurs in two sites within the continental United States. Each site is comprised of 4,000 blocks with up to 125,000 addresses in each site. All living quarters in the test sites are included in the In-Office Address Canvassing workload, as well as the In-Field Address Canvassing workload. For the In-Field Address Canvassing data collection, listers will knock on every door to ask residents about their living quarters. In addition to the Address Canvassing Test, the Census Bureau will also test the Address Canvassing operation as part of the 2017 Puerto Rico Census Test. This information is new compared to the information that was included in the Federal Register Notice for the Address Canvassing Test. The addition of the 2017 Puerto Rico Census Test Address Canvassing necessitated a name change for this package to “Address Canvassing Testing” from the “Address Canvassing Test” that appeared in the earlier Federal Register Notice. The Address Canvassing operations in the 2017 Puerto Rico Census Test will occur in the winter of 2017 and in the sites selected for the 2017 Puerto Rico Census Test. This universe consists of an estimated 95,000 housing units in the selected areas. The methodology and test objectives for the Address Canvassing operation in the 2017 Puerto Rico Census Test are the same as the Address Canvassing Test.

    Supporting Documents About the 2020 Census Design and the Address Canvassing Test Objectives

    We are submitting with the package the following documents with the purpose stated:

    1. The 2020 Census Operational Plan documents at a high-level the objectives for the census tests already completed, as well as those planned for the future. This document shows the current planned design of the 2020 Census and identifies design decisions made, as well as remaining decisions to be made using census test results. https://www.census.gov/programs-surveys/decennial-census/2020-census/planning-management/memo-series/2020-memo-2015_02.html.

    2. The 2020 Census Detailed Operational Plan for the Address Canvassing Operation complements the U.S. Census Bureau's 2020 Census Operational Plan. This document describes the objectives and procedures for all aspects of the Address Canvassing program, including a description of the major tasks involved in the implementation, the overall program workflow, and the overall resources needed to support the effort. https://www.census.gov/programs-surveys/decennial-census/2020-census/planning-management/memo-series/2020-memo-2015_04.html.

    3. The 2020 Census Research and Testing Management Plan defines the high-level research for the life-cycle of the program, thereby providing direction for research and testing activities and for decision-making based on the outcomes. https://www.census.gov/programs-surveys/decennial-census/2020-census/planning-management/memo-series/2020-memo-2015_03.html.

    In addition, we are submitting planning documents that list our Goals, Objectives, and Success Criteria for the Address Canvassing Test and the 2017 Puerto Rico Census Test, which outlines the research questions related to the design decisions to be made using the results of this test.

    Address Canvassing Test—Buncombe County, North Carolina and St. Louis (Part), Missouri

    For the Address Canvassing Test, the areas within Buncombe County, North Carolina and St. Louis (part), Missouri were chosen based on a variety of characteristics:

    • One site is experiencing population and housing unit growth and contains a mix of urban, suburban and rural territory.

    • One site is a city experiencing sustained population decline.

    • Both sites contain a mix of address styles, such as city-style addresses (i.e., 101 Main St.), non city-style addresses (i.e., Rural Route 2, Box 12) and location descriptions (i.e., Tan Mobile Home).

    • The urban site contains a mix of housing types and conditions, including small and large multi-unit structures, commercial-to-residential conversions, and mixed commercial and residential uses, and residential redevelopment, as well as an area in which housing units are vacant, uninhabitable, and have been demolished.

    These characteristics can help the Census Bureau refine its operational plans for the 2020 Census by testing processes and systems in a growth setting as well as processes and systems in an area containing small and large multi-unit structures, commercial-to-residential conversions, mixed commercial and residential uses, and various housing unit status, such as vacant, uninhabitable and demolished.

    Buncombe County, North Carolina places and Census designated places
  • (CDP)
  • St. Louis, Missouri (part) places
    Asheville city St. Louis city. Biltmore Forest town Black Mountain town Montreat town Weaverville town Woodfin town Avery Creek CDP Bent Creek CDP Fairview CDP Royal Pines CDP Swannanoa CDP

    All living quarters in the test sites are included in the In-Office Address Canvassing workload, as well as the In-Field Address Canvassing workload. This allows for the comparison of results from both In-Office Address Canvassing and In-Field Address Canvassing to measure the effectiveness of In-Office Address Canvassing procedures and processes.

    2017 Puerto Rico Census Test—Carolina, Loíza, and Trujillo Alto Municipios

    For the 2017 Puerto Rico Census Test, the areas of Carolina, Loíza, and Trujillo Alto municipios were chosen based on a variety of characteristics:

    • Site is within the San Juan metropolitan area.

    • Site includes anticipated areas of Self Response and Update Enumerate

    • Site has a municipio with a mix of address types.

    These characteristics can help the Census Bureau refine its operational plans for the 2020 Census by testing processes and systems in an area containing a large variety of address types, and it affords the opportunity to test both Self Response and Update Enumerate. The Self Response areas are where In-Field Address Canvassing will be conducted.

    Carolina Municipio Census designated places
  • (CDP)
  • Loíza Municipio census
  • designated places
  • (CDP)
  • Trujillo Alto Municipio Census
  • designated places
  • (CDP)
  • Carolina zona urbana Loíza zona urbana Trujillo Alto zona urbana. Suárez comunidad
  • Vieques comunidad
  • All living quarters in the test sites are included in the In-Office Address Canvassing workload, as well as in the In-Field Address Canvassing workload. This allows for the comparison of results from both In-Office Address Canvassing and In-Field Address Canvassing to measure the effectiveness of In-Office Address Canvassing procedures and processes.

    Address Canvassing Background

    For the 2010 Census, the Address Canvassing field staff, referred to as listers, traversed almost every block in the nation to compare what they observed on the ground to the contents of the Census Bureau's address list. Listers verified or corrected addresses that were on the list, added new addresses to the list, and deleted addresses that no longer existed. Listers also collected map spot locations (i.e., Global Positioning System coordinates) for each structure and added new streets.

    In addition to Address Canvassing, the Census Bureau conducted the Group Quarters Validation (GQV) operation after the Address Canvassing operation and prior to enumeration for the 2010 Census. The purpose of the GQV operation was to improve the Group Quarters (GQ) frame. A GQ is a place where people live or stay, in a group living arrangement, that is owned or managed by an entity or organization providing housing and/or services for the residents. This is not a typical household-type living arrangement, and residency is commonly restricted to those receiving specific services. People living in GQs are usually not related to each other. Types of GQs include such places as college residence halls, residential treatment centers, skilled-nursing facilities, group homes, military barracks, correctional facilities, and workers' dormitories. Services offered may include custodial or medical care, as well as other types of assistance.

    For the 2010 Census GQV operation, field staff visited a specific address to determine if it was a GQ, a housing unit, a transitory location, a non-residential unit, or if it was nonexistent. If the address was a GQ, the lister conducted an in-person interview with the GQ contact person to determine a type of GQ and collect additional information to plan for enumeration. In support of a more efficient census design strategy, the Census Bureau will not conduct a separate operation to validate GQ information in the 2020 Census. Instead, during the Address Canvassing Test and the 2020 Census, GQ information will be validated during the Address Canvassing operation.

    2020 Census Address Canvassing: In-Office Address Canvassing

    In-Office Address Canvassing is the process of using empirical geographic evidence (e.g., imagery, comparison of the Census Bureau's address list to partner-provided lists) to assess the current address list and make changes where necessary. This component removes geographic areas from the In-Field Address Canvassing workload based on the determination of address stability. In addition, this component detects and captures change from high quality administrative and third-party data, reducing the In-Field Address Canvassing workload as well.

    In-Office Address Canvassing starts with Interactive Review (IR), which is an imagery-based review to assess the extent to which the number of addresses—both housing units and GQs—in the census address list are consistent with the number of addresses visible in current imagery. It also assesses the changes between the current imagery and an older vintage of imagery (around the time of the 2010 Census Address Canvassing).

    Results from IR inform the Active Block Resolution (ABR) process, which seeks to research and update areas identified with growth, decline, undercoverage of addresses, or overcoverage of addresses from the comparison of the two different vintages of imagery and counts of addresses in the MAF. In addition to using the results from IR, the ABR process uses other data sources to attempt to resolve the identified issues in the office rather than sending these areas to In-Field Address Canvassing. The other data sources include local Geographic Information Systems (GIS) viewers available online, parcel data from local governments, local files acquired through the U.S. Census Bureau's Geographic Support System (GSS) program, and commercial data. Areas not resolved in the office become the universe of geographic areas for the In-Field Address Canvassing.

    2020 Census Address Canvasing: In-Field Address Canvassing

    In-Field Address Canvassing is the process of having field staff visit specific geographic areas to identify every place where people could live or stay and compare what they see on the ground to the existing census address list to either verify or correct the address and location information. In general, the field staff will:

    • Receive assignments and prepare for work.

    • Locate and travel to an assignment.

    • Compare what is on the ground to the Census Bureau address list and update it as necessary (add addresses, delete addresses, and correct addresses).

    • Update the map as required (update street names, add streets, and collect GPS coordinates).

    • Collect GQ information including the GQ type for GQ addresses.

    • Mark the assignment as complete and submit the results.

    • Receive next assignment until no more assignments exist.

    Listers will knock on doors at every structure in an attempt to locate Living Quarters (LQs). If someone answers, the lister will provide a Confidentiality Notice and ask about the address in order to verify or update the information, as appropriate. The listers will then ask if there are any additional LQs in the structure or on the property. If there are additional LQs, the listers will collect/update that information, as appropriate. If listers do not find anyone at home, they will update the address list by observation, as was done in the 2010 Census Address Canvassing. The Census Bureau expects that they would make contact with residents (i.e., someone is at home) approximately 25 percent of the time. Please note, the Address Canvassing Testing FRN incorrectly stated that the Census Bureau expects the listers would make contact with residents 50 percent of the time.

    The purpose of the Address Canvassing Operation in the 2020 Census is (1) to deliver a complete and accurate address list and spatial database for enumeration and tabulation, and (2) to determine the type and address characteristics for each living quarter. A complete and accurate address list and map is the cornerstone of a successful census.

    The Census Bureau needs to solidify evidence showing whether the strategies being tested can reduce the cost per housing unit during a decennial census, while still providing high quality and accurate census data. The results of this Address Canvassing Test and the 2017 Puerto Rico Census Test will inform decisions that the Census Bureau will make to refine the 2020 Census Operational Plan as well as the 2020 Census Detailed Operational Plan for the Address Canvassing Operation. The results will also help guide the evaluation of additional 2020 Census test results later this decade.

    Affected Public: Households/Individuals.

    Frequency: One time.

    Respondent's Obligation: Mandatory.

    Legal Authority: Title 13 United States Code, Sections 141 and 193.

    This information collection request may be viewed at www.reginfo.gov. Follow the instructions to view Department of Commerce collections currently under review by OMB.

    Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to [email protected] or fax to (202)395-5806.

    Dated: June 28, 2016. Glenna Mickelson, Management Analyst, Office of the Chief Information Officer.
    [FR Doc. 2016-15742 Filed 7-1-16; 8:45 am] BILLING CODE 3510-07-P
    DEPARTMENT OF COMMERCE International Trade Administration [C-570-041] Truck and Bus Tires From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, in Part, and Alignment of Final Determination With Final Antidumping Determination AGENCY:

    Enforcement and Compliance, International Trade Administration, Department of Commerce.

    SUMMARY:

    The Department of Commerce (the Department) preliminarily determines that countervailable subsidies are being provided to producers and exporters of truck and bus tires from the People's Republic of China (PRC). The period of investigation is January 1, 2015, through December 31, 2015. Interested parties are invited to comment on this preliminary determination.

    DATES:

    Effective Date: July 5, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Jennifer Shore or Mark Kennedy, AD/CVD Operations, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-2778 or (202) 482-7883, respectively.

    Alignment of Final Countervailing Duty (CVD) Determination With Final Antidumping Duty (AD) Determination

    On the same day the Department initiated this CVD investigation, the Department also initiated an AD investigation of truck and bus tires from the PRC.1 This CVD investigation and the companion AD investigation cover the same merchandise.

    1See Truck and Bus Tires from the People's Republic of China: Initiation of Countervailing Duty Investigation, 81 FR 9428 (February 25, 2016) (Initiation Notice). See also Truck and Bus Tires from the People's Republic of China: Initiation of Antidumping Duty Investigation, 81 FR 9434 (February 25, 2016).

    On June 15, 2016, in accordance with section 705(a)(1) of the Tariff Act of 1930, as amended (Act), the petitioner 2 requested alignment of the final CVD determination of truck and bus tires from the PRC with the final AD determination of truck and bus tires tires from the PRC. Therefore, in accordance with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), we are aligning the final CVD determination with the final PRC AD determination. Consequently, the final CVD determination will be issued on the same date as the PRC AD determination, which is currently scheduled to be issued no later than November 9, 2016.

    2 The petitioner in this investigation is the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC (the “USW”).

    Scope of the Investigation

    The product covered by this investigation is truck and bus tires from the PRC. For a full description of the scope of the investigation, see Appendix I.

    Scope Comments

    Certain interested parties commented on the scope of the investigation as it appeared in the Initiation Notice. For discussion of those comments, see the Preliminary Decision Memorandum.3

    3See Memorandum from Christian Marsh, Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, to Paul Piquado, Assistant Secretary for Enforcement and Compliance, regarding “Decision Memorandum for the Preliminary Affirmative Determination: Countervailing Duty Investigation of Truck and Bus Tires from the People's Republic of China; and the Preliminary Affirmative Determination of Critical Circummstances, in Part” dated concurrently with this notice (Preliminary Decision Memorandum).

    Methodology

    The Department is conducting this CVD investigation in accordance with section 701 of the Act. For each of the subsidy programs found countervailable, we preliminarily determine that there is a subsidy (i.e., a financial contribution by an “authority” that gives rise to a benefit to the recipient) and that the subsidy is specific.4 For a full description of the methodology underlying our preliminary conclusions, see the Preliminary Decision Memorandum.

    4See sections 771(5)(B) and (D) of the Act regarding financial contribution; section 771(5)(E) of the Act regarding benefit; and section 771(5A) of the Act regarding specificity.

    In making this preliminary determination, the Department relied, in part, on facts otherwise available, with the application of adverse inferences.5 For further information, see “Use of Facts Otherwise Available and Application of Adverse Inferences” in the accompanying Preliminary Decision Memorandum.

    5See section 776(a) of the Act.

    The Preliminary Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at http://access.trade.gov, and is available to all parties in the Central Records Unit, room B8024 of the main Department of Commerce building. In addition, a complete version of the Preliminary Decision Memorandum can be accessed directly at http://enforcement.trade.gov/frn/. The signed Preliminary Decision Memorandum and the electronic version of the Preliminary Decision Memorandum are identical in content.

    Preliminary Determination of Critical Circumstances, in Part

    In accordance with section 703(e)(1) of the Act, we preliminarily find that critical circumstances exist with respect to imports of truck and bus tires from the PRC for mandatory respondent Guizhou Tyre Co., Ltd. (GTC) and its cross-owned trading company, Guizhou Tyre Import and Export Co., Ltd. (GTCIE). A discussion of our determination can be found in the Preliminary Decision Memorandum.

    Preliminary Determination and Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we calculated a CVD rate for each individually-investigated producer/exporter of the subject merchandise. We preliminarily determine that countervailable subsidies are being provided with respect to the manufacture, production, or exportation of the subject merchandise. In accordance with sections 703(d) and 705(c)(5)(A) of the Act, for companies not individually examined, we apply an “all-others” rate, which is normally calculated by weighting the subsidy rates of the individual companies as respondents by those companies' exports of the subject merchandise to the United States. Under section 705(c)(5)(A)(i) of the Act, the all-others rate should exclude zero and de minimis rates or any rates based entirely on facts otherwise available pursuant to section 776 of the Act. Neither of the mandatory respondents' rates in this preliminary determination were zero or de minimis or based entirely on facts otherwise available. In order to ensure that business proprietary information is not disclosed, we have calculated the all-others rate as a simple average of the countervailable subsidy rates found for the two mandatory repsondents.6

    6See Preliminary Decision Memorandum at “CALCULATION OF THE ALL-OTHERS RATE” (for further explanation of the business propretiary information concerns).

    We preliminarily determine the countervailable subsidy rates to be:

    Company Subsidy rate
  • (percent)
  • Double Coin Holdings Ltd.; Double Coin Group (Jiangsu) Tyre Co., Ltd.; Double Coin Group (Chongqing) Tyre Co., Ltd.; Double Coin Group Shanghai Donghai Tyre Co. Ltd.; Double Coin Group (Xinjiang) Kunlun Tyre Co., Ltd. 17.06 Guizhou Tyre Import and Export Co., Ltd.; Guizhou Tyre Co., Ltd. 23.38 All-Others 20.22

    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are directing U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of truck and bus tires from the PRC that are entered, or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the Federal Register, and to require a cash deposit for such entries of merchandise in the amounts indicated above. Section 703(e)(2) of the Act provides that, given an affirmative determination of critical circumstances, any suspension of liquidation shall apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the later of: (a) The date which is 90 days before the date on which the suspension of liquidation was first ordered; or (b) the date on which notice of initiation of the investigation was published. We preliminarily found that critical circumstances exist for GTC and GTCIE. Therefore, in accordance with section 703(e)(2)(A) of the Act, we are directing CBP to apply the suspension of liquidation to any unliquidated entries entered, or withdrawn form warehouse for consumption by GTC and GTCIE, on or after the date that is 90 days prioir to the publication of this notice in the Federal Register.

    Verification

    As provided in section 782(i)(1) of the Act, we intend to verify the information submitted by the respondents prior to making our final determination.

    U.S. International Trade Commission

    In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Enforcement and Compliance.

    In accordance with section 705(b)(2) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination.

    Disclosure and Public Comment

    The Department intends to disclose calculations performed for this preliminary determination to the parties within five days of the date of public announcement of this determination in accordance with 19 CFR 351.224(b). Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the final verification report is issued in this proceeding, and rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline date for case briefs.7 A table of contents, list of authorities used, and an executive summary of issues should accompany any briefs submitted to the Department, pursuant to 19 CFR 351.309(c)(2) and (d)(2). This summary should be limited to five pages total, including footnotes.

    7See 19 CFR 351.309; see also 19 CFR 351.303 (for general filing requirements).

    Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, filed electronically using ACCESS. An electronically-filed request must be received successfully, and in its entirety, by ACCESS by 5:00 p.m. Eastern Time, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number; the number of participants; and a list of the issues to be discussed. If a request for a hearing is made, the Department intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230, at a date, time, and specific location to be determined. Parties will be notified of the date, time, and location of any hearing. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.

    This determination is issued and published pursuant to sections 703(f) and 777(i) of the Act and 19 CFR 351.205(c).

    Dated: June 27, 2016. Paul Piquado, Assistant Secretary for Enforcement and Compliance. Appendix I Scope of the Investigation

    The scope of the investigation covers truck and bus tires. Truck and bus tires are new pneumatic tires, of rubber, with a truck or bus size designation. Truck and bus tires covered by this investigation may be tube-type, tubeless, radial, or non-radial.

    Subject tires have, at the time of importation, the symbol “DOT” on the sidewall, certifying that the tire conforms to applicable motor vehicle safety standards. Subject tires may also have one of the following suffixes in their tire size designation, which also appear on the sidewall of the tire:

    TR—Identifies tires for service on trucks or buses to differentiate them from similarly sized passenger car and light truck tires;

    MH—Identifies tires for mobile homes; and

    HC—Identifies a 17.5 inch rim diameter code for use on low platform trailers.

    All tires with a “TR,” “MH,” or “HC” suffix in their size designations are covered by this investigation regardless of their intended use.

    In addition, all tires that lack one of the above suffix markings are included in the scope, regardless of their intended use, as long as the tire is of a size that is among the numerical size designations listed in the “Truck-Bus” section of the Tire and Rim Association Year Book, as updated annually, unless the tire falls within one of the specific exclusions set out below.

    Truck and bus tires, whether or not mounted on wheels or rims, are included in the scope. However, if a subject tire is imported mounted on a wheel or rim, only the tire is covered by the scope. Subject merchandise includes truck and bus tires produced in the subject country whether mounted on wheels or rims in the subject country or in a third country. Truck and bus tires are covered whether or not they are accompanied by other parts, e.g., a wheel, rim, axle parts, bolts, nuts, etc. Truck and bus tires that enter attached to a vehicle are not covered by the scope.

    Specifically excluded from the scope of this investigation are the following types of tires: (1) Pneumatic tires, of rubber, that are not new, including recycled and retreaded tires; and (2) non-pneumatic tires, such as solid rubber tires.

    The subject merchandise is currently classifiable under Harmonized Tariff Schedule of the United States (HTSUS) subheadings: 4011.20.1015 and 4011.20.5020. Tires meeting the scope description may also enter under the following HTSUS subheadings: 4011.99.4520, 4011.99.4590, 4011.99.8520, 4011.99.8590, 8708.70.4530, 8708.70.6030, and 8708.70.6060. While HTSUS subheadings are provided for convenience and for customs purposes, the written description of the subject merchandise is dispositive.

    Appendix II—List of Topics Discussed in the Preliminary Decision Memorandum I. Summary II. Background III. Scope Comments IV. Scope of the Investigation V. Critical Circumstances VI. Injury Test VII. Use of Facts Otherwise Available and Application of Adverse Inferences VIII. Application of the Countervailing Duty Law to Imports From the PRC IX. Subsidies Valuation X. Interest Rate Benchmarks, Discount Rates, Input and Land Benchmarks XI. Analysis of Programs XII. Calculation of All-Others Rate XIII. ITC Notification XIV. Disclosure and Public Comment XV. Verification XVI. Conclusion
    [FR Doc. 2016-15837 Filed 7-1-16; 8:45 am] BILLING CODE 3510-DS-P
    DEPARTMENT OF COMMERCE International Trade Administration [C-570-039] Countervailing Duty Investigation of Certain Amorphous Silica Fabric From the People's Republic of China: Preliminary Determination and Alignment of Final Determination With Final Antidumping Duty Determination AGENCY:

    Enforcement and Compliance, International Trade Administration, Department of Commerce.

    SUMMARY:

    The Department of Commerce (the Department) preliminarily determines that countervailable subsidies are being provided to producers and exporters of certain amorphous silica fabric (silica fabric) from the People's Republic of China (the PRC). The period of investigation is January 1, 2015 through December 31, 2015. We invite interested parties to comment on this preliminary determination.

    DATES:

    Effective July 5, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Emily Maloof or John Corrigan, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone (202) 482-5649 or (202) 482-7438, respectively.

    SUPPLEMENTARY INFORMATION:

    Scope of the Investigation

    The merchandise covered by this investigation is silica fabric from the PRC. For a complete description of the scope of this investigation, see Appendix II.

    Scope Comments

    In accordance with the preamble to the Department's regulations,1 we set aside a period of time in our Initiation Notice for parties to raise issues regarding product coverage, and we encouraged all parties to submit comments within 20 calendar days of the signature date of that notice.2

    1See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997) (Preamble).

    2See Certain Amorphous Silica Fabric From the People's Republic of China: Initiation of Countervailing Duty Investigation, 81 FR 8909 (February 23, 2016) (Initiation Notice).

    We received several comments concerning the scope of the antidumping (AD) and countervailing duty (CVD) investigations of silica fabric from the PRC. We intend to issue our preliminary decision regarding the scope of the AD and CVD investigations in the preliminary determination of the companion AD investigation, which is due for signature on August 24, 2016. On March 13, 2016, Lewco Specialty Products, Inc. (Lewco) submitted a letter that was later rejected by the Department as it was improperly filed.3 We intend to issue our preliminary decision regarding the scope of the AD and CVD investigations in the preliminary determination of the companion AD investigation, which is due for signature on August 24, 2016.

    3See Memorandum to the File from John K. Drury, “Request to Take Action on Certain Barcodes,” dated March 18, 2016.

    Methodology

    The Department is conducting this CVD investigation in accordance with section 701 of the Tariff Act of 1930, as amended (the Act). For each of the subsidy programs found countervailable, we preliminarily determine that there is a subsidy, i.e., a financial contribution by an “authority” that gives rise to a benefit to the recipient, and that the subsidy is specific.4 For a full description of the methodology underlying our preliminary conclusions, see the Preliminary Decision Memorandum.5 The Preliminary Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at http://access.trade.gov, and is available to all parties in the Central Records Unit, room B8024 of the main Department of Commerce building. In addition, a complete version of the Preliminary Decision Memorandum can be accessed directly at http://trade.gov/enforcement. The signed Preliminary Decision Memorandum and the electronic versions of the Preliminary Decision Memorandum are identical in content.

    4See sections 771(5)(B) and (D) of the Act regarding financial contribution; section 771(5)(E) of the Act regarding benefit; and section 771(5A) of the Act regarding specificity.

    5 See Memorandum to Paul Piquado, “Decision Memorandum for the Preliminary Affirmative Determination: Countervailing Duty Investigation of Certain Amorphous Silica Fabric from the People's Republic of China,” dated June 27, 2016 (Preliminary Decision Memorandum).

    The Department notes that, in making this preliminary determination, we relied, in part, on facts available and, because one or more respondents did not act to the best of their ability to respond to the Department's requests for information, we drew an adverse inference where appropriate in selecting from among the facts otherwise available.6 For further information, see “Use of Facts Otherwise Available and Adverse Inferences” in the Preliminary Decision Memorandum.

    6See sections 776(a) and (b) of the Act.

    Alignment

    As noted in the Preliminary Decision Memorandum, in accordance with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), we are aligning the final CVD determination in this investigation with the final determination in the companion AD investigation of silica fabric from the PRC based on a request made by Petitioner.7 Consequently, the final CVD determination will be issued on the same date as the final AD determination, which is currently scheduled to be issued no later than November 7, 2016, unless postponed.

    7 Auburn Manufacturing, Inc. (AMI) (Petitioner); see also Letter from AMI, “Re: Certain Amorphous Silica Fabric from the People's Republic of China: Petitioner's Request for Postponement of Date for Final Countervailing Duty Determinations to Align to the Date of the Final Antidumping Determination,” dated June 9, 2016.

    Preliminary Determination and Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we calculated an individual rate for each exporter/producer of the subject merchandise individually investigated. We preliminarily determine the countervailable subsidy rates to be:

    Exporter/producer Subsidy rate
  • (percent)
  • ACIT (Pinghu) Inc. and ACIT (Shanghai) Inc 4.36 Nanjing Tianyuan Fiberglass Material Co. Ltd 28.25 Acmetex Co., Ltd.,* Beijing Great Pack Materials, Co. Ltd.,* Beijing Landingji Engineering Tech Co., Ltd.,* Changshu Yaoxing Fiberglass Insulation Products Co., Ltd.,* Changzhou Kingze Composite Materials Co., Ltd.,* Changzhou Utek Composite Co.,* Chengdu Chang Yuan Shun Co., Ltd.,* China Beihai Fiberglass Co., Ltd.,* China Yangzhou Guo Tai Fiberglass Co., Ltd.,* Chongqing Polycomp International Corp.,* Chongqing Yangkai Import & Export Trade Co., Ltd.,* Cixi Sunrise Sealing Material Co., Ltd.,* Fujian Minshan Fire-Fighting Co., Ltd.,* Grand Fiberglass Co., Ltd.,* Haining Jiete Fiberglass Fabric Co., Ltd.,* Hebei Yuniu Fiberglass Manufacturing Co., Ltd.,* Hebei Yuyin Trade Co., Ltd.,* Hengshui Aohong International Trading Co., Ltd.,* Hitex Insulation (Ningbo) Co., Ltd.,* Mowco Industry Limited,* Nanjing Debeili New Materials Co., Ltd.,* Ningbo Fitow High Strength Composites Co., Ltd.,* Ningbo Universal Star Industry & Trade Limited,* Ningguo BST Thermal Protection Products Co., Ltd.,* Qingdao Feelongda Industry & Trade Co., Ltd.,* Qingdao Shishuo Industry Co., Ltd.,* Rugao City Ouhua Composite Material Co., Ltd.,* Rugao Nebola Fiberglass Co., Ltd.,* Shanghai Bonthe Insulative Material Co., Ltd.,* Shanghai Horse Construction Co., Ltd.,* Shanghai Liankun Electronics Material Co., Ltd.,* Shanghai Suita Environmental Protection Technology Co., Ltd.,* Shangqui Huanyu Fiberglass Co., Ltd.,* Shengzhou Top-Tech New Material Co., Ltd.,* Shenzhen Songxin Silicone Products Co., Ltd.,* Taixing Chuanda Plastic Co., Ltd.,* Taixing Vichen Composite Material Co., Ltd.,* TaiZhou Xinxing Fiberglass Products Co., Ltd.,* Tenglong Sealing Products Manufactory Yuyao,* Texaspro (China) Company,* Wallean Industries Co., Ltd.,* Wuxi First Special-Type Fiberglass Co., Ltd.,* Wuxi Xingxiao Hi-Tech Material Co., Ltd.,* Yuyao Feida Insulation Sealing Factory,* Yuyao Tianyi Special Carbon Fiber Co., Ltd.,* Zibo Irvine Trading Co., Ltd.,* Zibo Yao Xing Fire-Resistant and Heat-Preservation Material Co., Ltd.,* Zibo Yuntai Furnace Technology Co., Ltd.* 104.10 All-Others 4.36 * Non-cooperative company to which an adverse facts available rate is being applied. See “Use of Facts Otherwise Available and Adverse Inferences,” section in the Preliminary Decision Memorandum.

    In accordance with sections 703(d)(1)(B) and (d)(2) of the Act, we are directing U.S. Customs and Border Protection to suspend liquidation of all entries of silica fabric from the PRC that are entered, or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the Federal Register, and to require a cash deposit for such entries of merchandise in the amounts indicated above.

    Sections 703(d) and 705(c)(5)(A) of the Act state that, for companies not investigated, we determine an “all-others rate,” by weighting the subsidy rates of the individual company subsidy rate of each of the companies investigated by each company's exports of subject merchandise to the United States excluding rates that are zero or de minimis or any rates determined entirely on the facts available. Notwithstanding the language of section 705(c)(5)(A)(i) of the Act, we have not calculated the “all-others” rate by weight-averaging the rates of the two individually investigated respondents, because the rate calculated for Nanjing Tianyuan was determined entirely on facts available. Therefore, for the “all-others” rate, we applied the rate calculated for ACIT Pinghu.

    Verification

    As provided in section 782(i)(1) of the Act, we intend to verify the information submitted by the respondents prior to making our final determination.

    Disclosure and Public Comment

    The Department will disclose calculations performed for this preliminary determination to the parties within five days of the date of public announcement of this determination in accordance with 19 CFR 351.224(b). Case briefs or other written comments for all non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the final verification report is issued in this proceeding, and rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline date for case briefs.8 A table of contents, list of authorities used and an executive summary of issues should accompany any briefs submitted to the Department. This summary should be limited to five pages total, including footnotes.

    8See 19 CFR 351.309; see also 19 CFR 351.303 (for general filing requirements).

    Interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, filed electronically using ACCESS. An electronically filed request for a hearing must be received successfully in its entirety by the Department's electronic records system, ACCESS, by 5:00 p.m. Eastern Time, within 30 days after the date of publication of this notice.9 Requests should contain the party's name, address, and telephone number; the number of participants; and a list of the issues to be discussed. If a request for a hearing is made, the Department intends to hold the hearing at the U.S. Department of Commerce, 14th Street and Constitution Avenue NW, Washington, DC 20230, at a date and time to be determined. Parties will be notified of the date and time of any hearing. The hearing will be limited to issues raised in the respective briefs.10

    9See 19 CFR 351.310(c).

    10Id.

    International Trade Commission Notification

    In accordance with section 703(f) of the Act, we will notify the International Trade Commission (ITC) of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Enforcement and Compliance.

    In accordance with section 705(b)(2) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination.

    This determination is issued and published pursuant to sections 703(f) and 777(i) of the Act and 19 CFR 351.205(c).

    Dated: June 27, 2016. Paul Piquado, Assistant Secretary for Enforcement and Compliance. Appendix I List of Topics Discussed in the Preliminary Decision Memorandum I. Summary II. Background A. Initiation and Case History B. Postponement of Preliminary Determination C. Period of Investigation III. Alignment IV. Scope Comments V. Scope of the Investigation VI. Injury Test VII. Application of the CVD Law to Imports From the PRC VIII. Subsidies Valuation A. Allocation Period B. Attribution of Subsidies C. Denominators IX. Benchmarks and Interest Rates A. Renminbi-Denominated Loans B. Discount Rates X. Use of Facts Otherwise Available and Adverse Inferences A. Application of AFA: Non-Responsive Companies to the Q&V Questionnaire B. Application of AFA: Nanjing Tianyuan C. Application of AFA: Provision of Electricity for LTAR D. Application of AFA: Policy Loans to the Silica Fabric Industry E. Application of AFA: Provision of “Other Subsidies” as Specific XI. Analysis of Programs A. Programs Preliminarily Determined To Be Countervailable 1. Policy Loans to the Silica Fabric Industry 2. Provision of Electricity for LTAR B. Programs Preliminary Determined Not To Be Used During the POI 1. Preferential Export Financing 2. Preferential Loans to SOEs 3. Export Seller's Credits 4. Export Buyer's Credits 5. Export Credit Insurance 6. Provision of Land for LTAR in SEZs 7. Provision of Fiberglass Yarn for LTAR 8. Provision of Services at LTAR Through Demonstration Bases and Common Service Platform Programs 9. Income Tax Reduction for HNTEs 10. Income Tax Reduction for R&D Under the EITL 11. Income Tax Reduction/Exemption for HNTEs for Geographic Location 12. Import Tariff and VAT Exemptions on Imported Equipment in Encouraged Industries 13. City Construction Tax and Education Fees Exemptions for FIEs 14. Other VAT Subsidies 15. GOC and Sub-Central Government Subsidies for Development of Famous Brands and China World Top Brands 16. International Market Exploration Fund (SME Fund) 17. Science and Technology Awards XII. ITC Notification XIII. Disclosure and Public Comment XIV. Verification XV. Conclusion Appendix II Scope of the Investigation

    The product covered by this investigation is woven (whether from yarns or rovings) industrial grade amorphous silica fabric, which contains a minimum of 90 percent silica (SiO2) by nominal weight, and a nominal width in excess of 8 inches. The investigation covers industrial grade amorphous silica fabric regardless of other materials contained in the fabric, regardless of whether in roll form or cut-to-length, regardless of weight, width (except as noted above), or length. The investigation covers industrial grade amorphous silica fabric regardless of whether the product is approved by a standards testing body (such as being Factory Mutual (FM) Approved), or regardless of whether it meets any governmental specification.

    Industrial grade amorphous silica fabric may be produced in various colors. The investigation covers industrial grade amorphous silica fabric regardless of whether the fabric is colored. Industrial grade amorphous silica fabric may be coated or treated with materials that include, but are not limited to, oils, vermiculite, acrylic latex compound, silicone, aluminized polyester (Mylar®) film, pressure-sensitive adhesive, or other coatings and treatments. The investigation covers industrial grade amorphous silica fabric regardless of whether the fabric is coated or treated, and regardless of coating or treatment weight as a percentage of total product weight. Industrial grade amorphous silica fabric may be heat-cleaned. The investigation covers industrial grade amorphous silica fabric regardless of whether the fabric is heat-cleaned.

    Industrial grade amorphous silica fabric may be imported in rolls or may be cut-to-length and then further fabricated to make welding curtains, welding blankets, welding pads, fire blankets, fire pads, or fire screens. Regardless of the name, all industrial grade amorphous silica fabric that has been further cut-to-length or cut-to-width or further finished by finishing the edges and/or adding grommets, is included within the scope of this investigation.

    Subject merchandise also includes (1) any industrial grade amorphous silica fabric that has been converted into industrial grade amorphous silica fabric in China from fiberglass cloth produced in a third country; and (2) any industrial grade amorphous silica fabric that has been further processed in a third country prior to export to the United States, including but not limited to treating, coating, slitting, cutting to length, cutting to width, finishing the edges, adding grommets, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the in-scope industrial grade amorphous silica fabric.

    Excluded from the scope of the investigation is amorphous silica fabric that is subjected to controlled shrinkage, which is also called “pre-shrunk” or “aerospace grade” amorphous silica fabric. In order to be excluded as a pre-shrunk or aerospace grade amorphous silica fabric, the amorphous silica fabric must meet the following exclusion criteria: (1) The amorphous silica fabric must contain a minimum of 98 percent silica (SiO2) by nominal weight; (2) the amorphous silica fabric must have an areal shrinkage of 4 percent or less; (3) the amorphous silica fabric must contain no coatings or treatments; and (4) the amorphous silica fabric must be white in color. For purposes of this scope, “areal shrinkage” refers to the extent to which a specimen of amorphous silica fabric shrinks while subjected to heating at 1800 degrees F for 30 minutes.

    EN05JY16.010

    Also excluded from the scope are amorphous silica fabric rope and tubing (or sleeving). Amorphous silica fabric rope is a knitted or braided product made from amorphous silica yarns. Silica tubing (or sleeving) is braided into a hollow sleeve from amorphous silica yarns.

    The subject imports are normally classified in subheadings 7019.59.4021, 7019.59.4096, 7019.59.9021, and 7019.59.9096 of the Harmonized Tariff Schedule of the United States (HTSUS), but may also enter under HTSUS subheadings 7019.40.4030, 7019.40.4060, 7019.40.9030, 7019.40.9060, 7019.51.9010, 7019.51.9090, 7019.52.9010, 7019.52.9021, 7019.52.9096 and 7019.90.1000. HTSUS subheadings are provided for convenience and customs purposes only; the written description of the scope of this investigation is dispositive.

    [FR Doc. 2016-15729 Filed 7-1-16; 8:45 am] BILLING CODE 3510-DS-P
    DEPARTMENT OF COMMERCE International Trade Administration [A-570-979] Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China: Final Results of Changed Circumstances Review AGENCY:

    Enforcement and Compliance, International Trade Administration, Department of Commerce.

    SUMMARY:

    On May 26, 2016, the Department of Commerce (the “Department”) published its notice of initiation and preliminary results of a changed circumstances review of the antidumping duty (“AD”) order on crystalline silicon photovoltaic cells, whether or not assembled into modules (“solar cells”), from the People's Republic of China (“PRC”).1 The Department preliminarily determined that Hangzhou Sunny Energy Science and Technology Co., Ltd. (“Hangzhou Sunny”) is the successor-in-interest to Hangzhou Zhejiang University Sunny Energy Science and Technology Co., Ltd. (“Hangzhou ZU Sunny”) for purposes of the AD order on solar cells from the PRC and, as such, is entitled to Hangzhou ZU Sunny's cash deposit rate with respect to entries of subject merchandise. We invited interested parties to comment on the Preliminary Results. As no parties submitted comments, and there is no other information or evidence on the record calling into question our Preliminary Results, the Department is making no changes to the Preliminary Results. For these final results, the Department continues to find that Hangzhou Sunny is the successor in interest to Hangzhou ZU Sunny.

    1See Initiation and Preliminary Results of Antidumping Duty Changed Circumstances Review: Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules From the People's Republic of China, 81 FR 33463 (May 26, 2016) (“Preliminary Results”), and accompanying Preliminary Decision Memorandum.

    DATES:

    Effective Date: July 5, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Jeff Pedersen, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-2769.

    SUPPLEMENTARY INFORMATION: Background

    On December 7, 2012, the Department published the AD Order on solar cells from the PRC in the Federal Register.2 On April 4, 2016, Hangzhou Sunny requested that the Department initiate an expedited changed circumstances review to determine that Hangzhou Sunny is the successor-in-interest to Hangzhou ZU Sunny for AD purposes.3 On May 20, 2016, the Department initiated a changed circumstances review and made a preliminary finding that Hangzhou Sunny is the successor-in-interest to Hangzhou ZU Sunny, and is entitled to Hangzhou ZU Sunny's cash deposit rate with respect to entries of merchandise subject to the AD Order on solar cells from the PRC.4 We provided interested parties 14 days from the date of publication of the Preliminary Results to submit case briefs. No interested parties submitted case briefs or requested a hearing.

    2See Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China: Amended Final Determination of Sales at Less Than Fair Value, and Antidumping Duty Order, 77 FR 73018 (December 7, 2012) (“Order”).

    3See Letter from Hangzhou Sunny to the Department regarding, “Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules from the People's Republic of China: Request for Expedited Changed Circumstances Review” (April 4, 2016) (“CCR Request”).

    4See Preliminary Results, 81 FR 33463.

    Scope of the Order

    The merchandise covered by the Order is crystalline silicon photovoltaic cells, whether or not assembled into modules, subject to certain exceptions.5 Merchandise covered by this Order is currently classified in the Harmonized Tariff System of the United States (“HTSUS”) under subheadings 8501.61.0000, 8507.20.80, 8541.40.6020, 8541.40.6030, and 8501.31.8000. While these HTSUS subheadings are provided for convenience and customs purposes; the written description of the scope of this Order is dispositive.

    5 For a complete description of the scope of the Order, see Memorandum to Paul Piquado, Assistant Secretary for Enforcement and Compliance, from Christian Marsh, Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, “Preliminary Results of Changed Circumstances Review: Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, from the People's Republic of China” (“Preliminary Results Memorandum”).

    Final Results of Changed Circumstances Review

    Because the record contains no information or evidence that calls into question the Preliminary Results, for the reasons stated in the Preliminary Results, the Department continues to find that Hangzhou Sunny is the successor-in-interest to Hangzhou ZU Sunny, and is entitled to Hangzhou ZU Sunny's cash deposit rate with respect to entries of merchandise subject to the AD Order on solar cells from the PRC.6 We are issuing this determination and publishing these final results and notice in accordance with sections 751(b)(1) and 777(i)(1) and (2) of the Tariff Act of 1930, as amended (“the Act”), and 19 CFR 351.216 and 351.221(c)(3).

    6 For a complete discussion of the Department's findings, which remain unchanged in these final results and which are herein incorporated by reference and adopted by this notice, see generally the Preliminary Results Memorandum accompanying the Preliminary Results.

    Instructions to U.S. Customs and Border Protection

    Based on these final results, we will instruct U.S. Customs and Border Protection to collect estimated antidumping duties for all shipments of subject merchandise exported by Hangzhou Sunny and entered, or withdrawn from warehouse, for consumption on or after the publication date of this notice in the Federal Register at the current AD cash deposit rate for Hangzhou ZU Sunny (i.e., 9.67 percent).7 This cash deposit requirement shall remain in effect until further notice.

    7See Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled into Modules, from the People's Republic of China: Final Results of Antidumping Duty Administrative Review and Final Determination of No Shipments; 2012-2013, 80 FR 40998 (June 14, 2015).

    Notification to Interested Parties

    This notice serves as a final reminder to parties subject to administrative protective order (“APO”) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.

    We are issuing and publishing this final results notice in accordance with sections 751(b) and 777(i) of the Act and 19 CFR 351.216.

    Dated: June 28, 2016. Paul Piquado, Assistant Secretary for Enforcement and Compliance.
    [FR Doc. 2016-15836 Filed 7-1-16; 8:45 am] BILLING CODE 3510-DS-P
    DEPARTMENT OF COMMERCE International Trade Administration Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Advance Notification of Sunset Reviews AGENCY:

    Enforcement and Compliance, International Trade Administration, Department of Commerce.

    Background

    Every five years, pursuant to section 751(c) of the Tariff Act of 1930, as amended (“the Act”), the Department of Commerce (“the Department”) and the International Trade Commission automatically initiate and conduct a review to determine whether revocation of a countervailing or antidumping duty order or termination of an investigation suspended under section 704 or 734 of the Act would be likely to lead to continuation or recurrence of dumping or a countervailable subsidy (as the case may be) and of material injury.

    Upcoming Sunset Reviews for August 2016

    The following Sunset Reviews are scheduled for initiation in August 2016 and will appear in that month's Notice of Initiation of Five-Year Sunset Review (“Sunset Review”).

    Department contact Antidumping Duty Proceedings Glycine from China (A-570-836) (4th Review) Jacqueline Arrowsmith, (202) 482-5255. Polyester Staple Fiber from the Republic of Korea (A-580-839) (3rd Review) David Goldberger, (202) 482-4136. Polyester Staple Fiber from Taiwan (A-583-833) (3rd Review) David Goldberger, (202) 482-4136. Countervailing Duty Proceedings

    No Sunset Review of countervailing duty orders is scheduled for initiation in August 2016.

    Suspended Investigations

    No Sunset Review of suspended investigations is scheduled for initiation in August 2016.

    The Department's procedures for the conduct of Sunset Reviews are set forth in 19 CFR 351.218. The Notice of Initiation of Five-Year (“Sunset”) Reviews provides further information regarding what is required of all parties to participate in Sunset Reviews.

    Pursuant to 19 CFR 351.103(c), the Department will maintain and make available a service list for these proceedings. To facilitate the timely preparation of the service list(s), it is requested that those seeking recognition as interested parties to a proceeding contact the Department in writing within 10 days of the publication of the Notice of Initiation.

    Please note that if the Department receives a Notice of Intent to Participate from a member of the domestic industry within 15 days of the date of initiation, the review will continue. Thereafter, any interested party wishing to participate in the Sunset Review must provide substantive comments in response to the notice of initiation no later than 30 days after the date of initiation.

    This notice is not required by statute but is published as a service to the international trading community.

    Dated: June 28, 2016. Christian Marsh, Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations.
    [FR Doc. 2016-15724 Filed 7-1-16; 8:45 am] BILLING CODE 3510-DS-P
    DEPARTMENT OF COMMERCE International Trade Administration Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review AGENCY:

    Enforcement and Compliance, International Trade Administration, Department of Commerce.

    FOR FURTHER INFORMATION CONTACT:

    Brenda E. Waters, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230, telephone: (202) 482-4735.

    Background

    Each year during the anniversary month of the publication of an antidumping or countervailing duty order, finding, or suspended investigation, an interested party, as defined in section 771(9) of the Tariff Act of 1930, as amended (“the Act”), may request, in accordance with 19 CFR 351.213, that the Department of Commerce (“the Department”) conduct an administrative review of that antidumping or countervailing duty order, finding, or suspended investigation.

    All deadlines for the submission of comments or actions by the Department discussed below refer to the number of calendar days from the applicable starting date.

    Respondent Selection

    In the event the Department limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, the Department intends to select respondents based on U.S. Customs and Border Protection (“CBP”) data for U.S. imports during the period of review. We intend to release the CBP data under Administrative Protective Order (“APO”) to all parties having an APO within five days of publication of the initiation notice and to make our decision regarding respondent selection within 21 days of publication of the initiation Federal Register notice. Therefore, we encourage all parties interested in commenting on respondent selection to submit their APO applications on the date of publication of the initiation notice, or as soon thereafter as possible. The Department invites comments regarding the CBP data and respondent selection within five days of placement of the CBP data on the record of the review.

    In the event the Department decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act:

    In general, the Department finds that determinations concerning whether particular companies should be “collapsed” (i.e., treated as a single entity for purposes of calculating antidumping duty rates) require a substantial amount of detailed information and analysis, which often require follow-up questions and analysis. Accordingly, the Department will not conduct collapsing analyses at the respondent selection phase of this review and will not collapse companies at the respondent selection phase unless there has been a determination to collapse certain companies in a previous segment of this antidumping proceeding (i.e., investigation, administrative review, new shipper review or changed circumstances review). For any company subject to this review, if the Department determined, or continued to treat, that company as collapsed with others, the Department will assume that such companies continue to operate in the same manner and will collapse them for respondent selection purposes. Otherwise, the Department will not collapse companies for purposes of respondent selection. Parties are requested to (a) identify which companies subject to review previously were collapsed, and (b) provide a citation to the proceeding in which they were collapsed. Further, if companies are requested to complete the Quantity and Value Questionnaire for purposes of respondent selection, in general each company must report volume and value data separately for itself. Parties should not include data for any other party, even if they believe they should be treated as a single entity with that other party. If a company was collapsed with another company or companies in the most recently completed segment of this proceeding where the Department considered collapsing that entity, complete quantity and value data for that collapsed entity must be submitted.

    Deadline for Withdrawal of Request for Administrative Review

    Pursuant to 19 CFR 351.213(d)(1), a party that requests a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that the Department may extend this time if it is reasonable to do so. In order to provide parties additional certainty with respect to when the Department will exercise its discretion to extend this 90-day deadline, interested parties are advised that, with regard to reviews requested on the basis of anniversary months on or after July 2016, the Department does not intend to extend the 90-day deadline unless the requestor demonstrates that an extraordinary circumstance prevented it from submitting a timely withdrawal request. Determinations by the Department to extend the 90-day deadline will be made on a case-by-case basis.

    The Department is providing this notice on its Web site, as well as in its “Opportunity to Request Administrative Review” notices, so that interested parties will be aware of the manner in which the Department intends to exercise its discretion in the future.

    Opportunity To Request A Review: Not later than the last day of July 2016,1 interested parties may request administrative review of the following orders, findings, or suspended investigations, with anniversary dates in July for the following periods:

    1 Or the next business day, if the deadline falls on a weekend, federal holiday or any other day when the Department is closed.

    Period of Review Antidumping Duty Proceedings INDIA: Polyethylene Terephthalate (Pet) Film, A-533-824 7/1/15-6/30/16 IRAN: In-Shell Pistachios, A-507-502 7/1/15-6/30/16 ITALY: Certain Pasta, A-475-818 7/1/15-6/30/16 JAPAN: Clad Steel Plate, A-588-838 7/1/15-6/30/16 Polyvinyl Alcohol, A-588-861 7/1/15-6/30/16 Stainless Steel Sheet and Strip in Coils, A-588-845 7/1/15-6/30/16 MALAYSIA: Steel Nails, A-557-816 12/29/14-6/30/16 Welded Stainless Steel Pressure Pipe, A-557-815 7/1/15-6/30/16 OMAN: Steel Nails, A-523-808 12/29/14-6/30/