Federal Register Vol. 81, No.169,

Federal Register Volume 81, Issue 169 (August 31, 2016)

Page Range59827-60234
FR Document

81_FR_169
Current View
Page and SubjectPDF
81 FR 60227 - Papah[amacr]naumoku[amacr]kea Marine National Monument ExpansionPDF
81 FR 60018 - Renewal of Approved Information Collection; OMB Control No. 1004-0073PDF
81 FR 59985 - Sunshine Act Meeting NoticePDF
81 FR 59977 - Black Hills National Forest Advisory BoardPDF
81 FR 59985 - Funding Down the State and Partnership Grant Slates From Fiscal Year (FY) 2014; Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP)PDF
81 FR 59987 - Extension of the Application Deadline Date for the Fiscal Year 2016; Promise Neighborhoods Program Grant ApplicationPDF
81 FR 60011 - National Institute of Diabetes and Digestive and Kidney Diseases; Notice of Closed MeetingsPDF
81 FR 60010 - National Institute of Diabetes and Digestive and Kidney Diseases; Notice of Closed MeetingsPDF
81 FR 60012 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 60011 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 60124 - Submission for OMB Review; Comment RequestPDF
81 FR 60025 - Membership of the Merit Systems Protection Board's Performance Review BoardPDF
81 FR 59986 - Agency Information Collection Activities; Comment Request; Foreign Schools Eligibility Criteria Apply To Participate in Title IV HEA ProgramsPDF
81 FR 60123 - Proposed Collection; Comment Request for Regulation ProjectPDF
81 FR 59849 - Definition of Real Estate Investment Trust Real PropertyPDF
81 FR 60113 - Eighteenth Meeting of SC-227 Navigation Information on Electronic MapsPDF
81 FR 60126 - Submission for OMB Review; Comment RequestPDF
81 FR 60124 - Proposed Collection; Comment Request for Form 8038-BPDF
81 FR 60122 - Proposed Collection; Comment Request for Regulation ProjectPDF
81 FR 59983 - United States Global Change Research Program (USGCRP)PDF
81 FR 59992 - Amador Water Agency; Notice of Preliminary Determination of a Qualifying Conduit Hydropower Facility and Soliciting Comments and Motions To IntervenePDF
81 FR 59993 - Climax Manufacturing Company; Notice of Application Accepted for Filing, Soliciting Comments, Protests and Motions To IntervenePDF
81 FR 59990 - Champlain Spinners Power Company Inc., Champlain Spinners Power, LLC; Notice of Transfer of ExemptionPDF
81 FR 59993 - Sacramento Municipal Utility District; Notice of Application Accepted for Filing, Soliciting Comments, Protests and Motions To IntervenePDF
81 FR 59995 - Commission Information Collection Activities (FERC Form 80, FERC-550, and FERC-549); Comment RequestPDF
81 FR 59994 - Brady Interconnection, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 AuthorizationPDF
81 FR 59995 - Transcontinental Gas Pipe Line Company, LLC; Notice of ApplicationPDF
81 FR 59991 - Columbia Gas Transmission, LLC; Notice of ApplicationPDF
81 FR 60000 - EcoEléctrica, L.P.; Notice of ApplicationPDF
81 FR 59998 - Combined Notice of Filings #1PDF
81 FR 59998 - City of Wadsworth, Ohio; Notice of TeleconferencePDF
81 FR 59981 - Agenda and Notice of Public Meetings of the South Dakota Advisory CommitteePDF
81 FR 60112 - Culturally Significant Objects Imported for Exhibition Determinations: “God's Servant First: The Life and Legacy of Thomas More” ExhibitionPDF
81 FR 60032 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees SchedulePDF
81 FR 60097 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 19.6, Series of Options Contracts Open for Trading, To Allow Wednesday Expirations for SPY OptionsPDF
81 FR 60070 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 19.6, Series of Options Contracts Open for Trading, To Allow Wednesday Expirations for SPY OptionsPDF
81 FR 60072 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series ProgramPDF
81 FR 60049 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series ProgramPDF
81 FR 60074 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series ProgramPDF
81 FR 60094 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 13-Equities To Eliminate Orders With a Sell “Plus” and Buy “Minus” Instruction and Retain Orders With a “Buy Minus Zero Plus” Instruction, and Make Conforming Changes to Rules 104-Equities, 107B-Equities, 123C-Equities and 1004-EquitiesPDF
81 FR 60125 - Submission for OMB Review; Comment RequestPDF
81 FR 60112 - Culturally Significant Objects Imported for Exhibition Determinations: “Medardo Rosso: Experiments in Light and Form” ExhibitionPDF
81 FR 60017 - Notice of Proposed Information Collection for Public Comment on the 2017 American Housing SurveyPDF
81 FR 60016 - 60-Day Notice of Proposed Information Collection: FHA Adjustable Rate Mortgages (ARMS)PDF
81 FR 60015 - 60-Day Notice of Proposed Information Collection: FHA-Application for Insurance of Advance of Mortgage ProceedsPDF
81 FR 59865 - Safety Zone; Great Egg Harbor Bay, Marmora, NJPDF
81 FR 59978 - Manti-La Sal Resource Advisory CommitteePDF
81 FR 60024 - Notice of Lodging of Proposed Consent Decree Under the Clean Water ActPDF
81 FR 60026 - Enhancing Participation in NRC Public MeetingsPDF
81 FR 59990 - Extension of a Currently Approved Information Collection for the Weatherization Assistance ProgramPDF
81 FR 59990 - Request for Information on the Availability of New Geothermal Electricity in the Salton Sea Area To Serve Regional Federal LoadPDF
81 FR 59902 - BLM Internet-Based AuctionsPDF
81 FR 60020 - 2016 Second Call for Nominations for Certain New Mexico Resource Advisory CouncilsPDF
81 FR 59982 - Marine Mammals and Endangered Species; File Nos. 15543-06, 15488-01, 15537-02, 18890, 19091, 19116, 19638, 20283PDF
81 FR 60024 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Certificate of Electrical Training and Applications for Mine Safety and Health Administration Approved Tests and State Tests Administered as Part of a Mine Safety and Health Administration Approved ProgramPDF
81 FR 60022 - Electronic Collection and Transfer of Import Information: Cessation of PGA Message Set Pilot ProgramPDF
81 FR 59987 - Agency Information Collection Activities; Comment Request; Application for Approval To Participate in Federal Student Aid ProgramsPDF
81 FR 60021 - Notice of Proposed Information Collection; Request for Comments for 1029-0113PDF
81 FR 60013 - Current List of HHS-Certified Laboratories and Instrumented Initial Testing Facilities Which Meet Minimum Standards To Engage in Urine Drug Testing for Federal AgenciesPDF
81 FR 59989 - President's Council of Advisors on Science and TechnologyPDF
81 FR 60001 - Agency Information Collection Activities; Proposed Collection; Comment RequestPDF
81 FR 60115 - Qualification of Drivers; Exemption Applications; VisionPDF
81 FR 60114 - Agency Information Collection Activities: Request for Comments for a New Information CollectionPDF
81 FR 59950 - Periodic ReportingPDF
81 FR 60014 - Agency Information Collection Activities: Arrival and Departure Record (Forms I-94 and I-94W) and Electronic System for Travel AuthorizationPDF
81 FR 60117 - Qualification of Drivers; Exemption Applications; VisionPDF
81 FR 59947 - Safety Zone, Jacksonville Sea and Sky Spectacular; Atlantic Ocean, Jacksonville Beach, FLPDF
81 FR 59985 - Notice of Intent To Grant Exclusive Patent License to Fox Materials Consulting, LLC; Colorado Springs, COPDF
81 FR 59977 - Beartooth Ranger District, Custer Gallatin National Forest; Carbon County, Montana; Greater Red Lodge Vegetation and Habitat Management ProjectPDF
81 FR 60023 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Environmental Information (ATF F 5000.29)PDF
81 FR 60023 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Application and Permit for Permanent Exportation of Firearms (National Firearms Act) ATF F 9 (5320.9)PDF
81 FR 60005 - Revised Recommendations for Reducing the Risk of Zika Virus Transmission by Blood and Blood Components; Guidance for Industry; AvailabilityPDF
81 FR 60004 - Submission of Warning Plans for Cigars; Draft Guidance for Industry; AvailabilityPDF
81 FR 60003 - Patient Safety Organizations: Voluntary Relinquishment From QAISys, Inc.PDF
81 FR 60007 - National Advisory Committee on Rural Health and Human Services; Notice of MeetingPDF
81 FR 60113 - Eighty-Sixth SC-147 Traffic Collision & Avoidance Committee PlenaryPDF
81 FR 60019 - Renewal of Approved Information Collection; OMB Control No. 1004-0001PDF
81 FR 59927 - Request for Comment on Subpart 400 of Regulation S-K Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance MattersPDF
81 FR 60031 - Information Collection Request; Submission for OMB ReviewPDF
81 FR 59981 - Submission for OMB Review; Comment RequestPDF
81 FR 59988 - Meeting Notice; Public Meeting of the Technical Guidelines Development CommitteePDF
81 FR 59978 - Notice of Intent To Request Revision and Extension of a Currently Approved Information CollectionPDF
81 FR 59980 - Advisory Committee on Agriculture StatisticsPDF
81 FR 59950 - Clean Energy Incentive Program Design Details; Extension of Comment PeriodPDF
81 FR 59901 - Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2017; CorrectionPDF
81 FR 60077 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee SchedulePDF
81 FR 60110 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Proposed Rule Change to Delete or Amend Outdated Rule LanguagePDF
81 FR 60080 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 13 To Eliminate Orders With a Sell “Plus” and Buy “Minus” Instruction and Retain Orders With a “Buy Minus Zero Plus” Instruction, and Make Conforming Changes to Rules 104, 107B, 123C and 1004PDF
81 FR 60031 - Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE MKT LLC; Order Granting an Extension to Limited Exemptions From Rule 612(c) of Regulation NMS in Connection With the Exchanges' Retail Liquidity Programs Until December 31, 2016PDF
81 FR 60051 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Adopt FINRA Rule 2030 and FINRA Rule 4580 To Establish “Pay-To-Play” and Related RulesPDF
81 FR 60089 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series Program To Allow Wednesday Expirations for SPY OptionsPDF
81 FR 60108 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 900.2NY(18A)PDF
81 FR 60034 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Handling of Intermarket Sweep OrdersPDF
81 FR 60037 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting an Extension to Limited Exemption From Rule 612(c) of Regulation NMS in Connection With the Exchange's Retail Liquidity Program Until December 31, 2016PDF
81 FR 60083 - Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules Regarding Qualification, Registration and Continuing Education for Persons Associated With Equity Trading Permit Holders, To Add Definitions, Amend Definitions, and To Make Technical, Non-Substantive and Conforming Amendments to RulesPDF
81 FR 60099 - Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning the Options Clearing Corporation's Escrow Deposit ProgramPDF
81 FR 60091 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 5.3(i)(3) To Amend the Requirements for the Dissemination of News in Compliance With the Exchange's Immediate Release PolicyPDF
81 FR 60038 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Rules Relating to Pre-Opening Indications and Opening ProceduresPDF
81 FR 60008 - National Institute of Mental Health; Notice of MeetingPDF
81 FR 60008 - National Center For Complementary & Integrative Health; Notice of MeetingPDF
81 FR 60009 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 60029 - Instrumentation and Controls GuidancePDF
81 FR 60119 - Request for Comments of a Previously Approved Information CollectionPDF
81 FR 60000 - Information Collection Being Submitted for Review and Approval to the Office of Management and BudgetPDF
81 FR 60021 - Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers Sanction for Breaches of Administrative Protective OrderPDF
81 FR 59945 - Safety Zone; Blasting, Delaware RiverPDF
81 FR 59952 - Endangered and Threatened Wildlife and Plants; 12-Month Finding on a Petition To Delist the Coastal California GnatcatcherPDF
81 FR 60025 - Annual Invitation for Public Nominations by U.S. Citizens for Service on NASA Federal Advisory CommitteesPDF
81 FR 59869 - Air Plan Approval; Alabama; Cross-State Air Pollution RulePDF
81 FR 59919 - Airworthiness Directives; PILATUS AIRCRAFT LTD. AirplanesPDF
81 FR 59845 - Telemarketing Sales Rule FeesPDF
81 FR 59976 - National Organic Program: Notice of Draft Guidance on Treated LumberPDF
81 FR 59929 - Schedules of Controlled Substances: Temporary Placement of Mitragynine and 7-Hydroxymitragynine Into Schedule IPDF
81 FR 60112 - Michigan Southern Railroad Company, d/b/a Napoleon, Defiance & Western Railway-Discontinuance of Service Exemption-in Henry County, OhioPDF
81 FR 59834 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 59839 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 59837 - Airworthiness Directives; Airbus Defense and Space S.A. (Formerly Known as Construcciones Aeronauticas, S.A.) AirplanesPDF
81 FR 59922 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 59827 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 59830 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 59843 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 60130 - International Entrepreneur RulePDF
81 FR 59934 - TRICARE; Reimbursement of Long Term Care Hospitals and Inpatient Rehabilitation FacilitiesPDF
81 FR 59951 - Lease and Interchange of Vehicles; Motor Carriers of PassengersPDF
81 FR 60120 - Hazardous Materials: Notice of Applications for Special PermitsPDF
81 FR 60122 - Delayed Special Permit ApplicationsPDF
81 FR 60119 - Hazardous Materials: Notice of Applications for Special PermitsPDF
81 FR 59907 - Access to Federal Employees Health Benefits (FEHB) for Employees of Certain Indian Tribal EmployersPDF
81 FR 60170 - Requirements for Foreign and Domestic Establishment Registration and Listing for Human Drugs, Including Drugs That Are Regulated Under a Biologics License Application, and Animal DrugsPDF
81 FR 59876 - Approval and Promulgation of Air Quality State Implementation Plans; California; San Joaquin Valley; Moderate Area Plan for the 2006 PM2.5PDF
81 FR 59846 - When Obstructions on Certain Tributaries of the Tennessee River Do Not Require a Section 26a Permit from the Tennessee Valley AuthorityPDF

Issue

81 169 Wednesday, August 31, 2016 Contents Agency Health Agency for Healthcare Research and Quality NOTICES Patient Safety Organizations: Voluntary Relinquishment From QAISys, Inc.; Delisting, 60003-60004 2016-20912 Agricultural Marketing Agricultural Marketing Service NOTICES Guidance: National Organic Program; Treated Lumber, 59976-59977 2016-20808 Agriculture Agriculture Department See

Agricultural Marketing Service

See

Forest Service

See

National Agricultural Statistics Service

Alcohol Tobacco Firearms Alcohol, Tobacco, Firearms, and Explosives Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application and Permit for Permanent Exportation of Firearms, 60023 2016-20915 Environmental Information, 60023-60024 2016-20917 Electronic Collection and Transfer of Import Information: Cessation of PGA Message Set Pilot Program, 60022 2016-20939 Army Army Department NOTICES Exclusive Patent Licenses: Fox Materials Consulting, LLC; Colorado Springs, CO, 59985 2016-20922 Census Bureau Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Survey of Income and Program Participation, 59981-59982 2016-20902 Centers Medicare Centers for Medicare & Medicaid Services RULES Medicare Programs: Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2017; Correction, 59901-59902 2016-20897 Civil Rights Civil Rights Commission NOTICES Meetings: South Dakota Advisory Committee, 59981 2016-20969 Coast Guard Coast Guard RULES Safety Zones: Great Egg Harbor Bay, Marmora, NJ, 59865-59869 2016-20951 PROPOSED RULES Safety Zones: Blasting, Delaware River, 59945-59947 2016-20868 Jacksonville Sea and Sky Spectacular, Atlantic Ocean, Jacksonville Beach, FL, 59947-59950 2016-20923 Commerce Commerce Department See

Census Bureau

See

National Oceanic and Atmospheric Administration

Consumer Product Consumer Product Safety Commission NOTICES Meetings; Sunshine Act, 59985 2016-21076 Defense Department Defense Department See

Army Department

PROPOSED RULES TRICARE: Reimbursement of Long Term Care Hospitals and Inpatient Rehabilitation Facilities, 59934-59945 2016-20660
Drug Drug Enforcement Administration PROPOSED RULES Schedules of Controlled Substances: Temporary Placement of Mitragynine and 7-Hydroxymitragynine into Schedule I, 59929-59934 2016-20803 Education Department Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Approval To Participate in Federal Student Aid Programs, 59987 2016-20938 Foreign Schools Eligibility Criteria Apply To Participate in Title IV HEA Programs, 59986 2016-20990 Applications for New Awards: Promise Neighborhoods Program Grant; Application Deadline Extension, 59987-59988 2016-21001 Funding Down the State and Partnership Grant Slates From Fiscal Year 2014: Gaining Early Awareness and Readiness for Undergraduate Programs, 59985-59986 2016-21006 Election Election Assistance Commission NOTICES Meetings: Technical Guidelines Development Committee, 59988-59989 2016-20901 Energy Department Energy Department See

Energy Efficiency and Renewable Energy Office

See

Federal Energy Regulatory Commission

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Weatherization Assistance Program; Extension, 59990 2016-20945 Meetings: President's Council of Advisors on Science and Technology, 59989 2016-20935
Energy Efficiency Energy Efficiency and Renewable Energy Office NOTICES Requests for Information: Availability of New Geothermal Electricity in the Salton Sea Area To Serve Regional Federal Load, 59990 2016-20944 Environmental Protection Environmental Protection Agency RULES Air Quality State Implementation Plans; Approvals and Promulgations: Alabama; Cross-State Air Pollution Rule, 59869-59876 2016-20854 California; San Joaquin Valley; Moderate Area Plan for the 2006 PM2.5 NAAQS, 59876-59901 2016-20413 PROPOSED RULES Clean Energy Incentive Program Design Details, 59950-59951 2016-20898 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: Airbus Defense and Space S.A. (Formerly Known as Construcciones Aeronauticas, S.A.) Airplanes, 59837-59839 2016-20706 Bombardier, Inc. Airplanes, 59827-59830, 59839-59845 2016-20680 2016-20693 2016-20707 The Boeing Company Airplanes, 59830-59836 2016-20686 2016-20722 PROPOSED RULES Airworthiness Directives: Airbus Airplanes, 59922-59927 2016-20696 PILATUS AIRCRAFT LTD. Airplanes, 59919-59922 2016-20828 NOTICES Meetings: SC-147 Traffic Collision and Avoidance Committee Plenary, 60113 2016-20909 SC-227 Navigation Information on Electronic Maps, 60113-60114 2016-20986 Federal Communications Federal Communications Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60000-60001 2016-20870 Federal Energy Federal Energy Regulatory Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 59995-59998 2016-20977 Applications: Climax Manufacturing Co., 59993 2016-20980 Columbia Gas Transmission, LLC, 59991 2016-20974 EcoElectrica, LP, 60000 2016-20973 Sacramento Municipal Utility District, 59993-59994 2016-20978 Transcontinental Gas Pipe Line Company, LLC, 59995 2016-20975 Combined Filings, 59998-60000 2016-20972 Initial Market-Based Rate Filings Including Requests for Blanket Section 204 Authorizations: Brady Interconnection, LLC, 59994-59995 2016-20976 Meetings: R.C. Byrd Hydroelectric Project, Wadsworth, OH; Teleconference, 59998 2016-20971 Qualifying Conduit Hydropower Facilities: Amador Water Agency, 59992 2016-20981 Transfers of Exemptions: Champlain Spinners Power Co. Inc.; Champlain Spinners Power, LLC, 59990-59991 2016-20979 Federal Highway Federal Highway Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60114 2016-20931 Federal Motor Federal Motor Carrier Safety Administration PROPOSED RULES Lease and Interchange of Vehicles: Motor Carriers of Passengers, 59951-59952 2016-20609 NOTICES Qualification of Drivers; Exemption Applications: Vision, 60115-60119 2016-20925 2016-20932 Federal Trade Federal Trade Commission RULES Telemarketing Sales Rule Fees, 59845-59846 2016-20817 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60001-60003 2016-20933 Fish Fish and Wildlife Service PROPOSED RULES Endangered and Threatened Wildlife and Plants: 12-Month Finding on Petition To Delist Coastal California Gnatcatcher, 59952-59975 2016-20864 Food and Drug Food and Drug Administration RULES Requirements for Foreign and Domestic Establishment Registration and Listing for Human Drugs, Including Drugs That Are Regulated Under a Biologics License Application, and Animal Drugs, 60170-60224 2016-20471 NOTICES Guidance: Revised Recommendations for Reducing Risk of Zika Virus Transmission by Blood and Blood Components, 60005-60007 2016-20914 Submission of Warning Plans for Cigars, 60004-60005 2016-20913 Forest Forest Service NOTICES Environmental Impact Statements; Availability, etc.: Greater Red Lodge Vegetation and Habitat Management Project, Custer Gallatin National Forest, Carbon County, MT, 59977 2016-20920 Meetings: Black Hills National Forest Advisory Board, 59977-59978 2016-21008 Manti-La Sal Resource Advisory Committee, 59978 2016-20948 Health and Human Health and Human Services Department See

Agency for Healthcare Research and Quality

See

Centers for Medicare & Medicaid Services

See

Food and Drug Administration

See

Health Resources and Services Administration

See

National Institutes of Health

See

Substance Abuse and Mental Health Services Administration

Health Resources Health Resources and Services Administration NOTICES Meetings: Advisory Committee on Rural Health and Human Services, 60007-60008 2016-20911 Homeland Homeland Security Department See

Coast Guard

See

U.S. Customs and Border Protection

PROPOSED RULES International Entrepeneurs, 60130-60168 2016-20663
Housing Housing and Urban Development Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: 2017 American Housing Survey, 60017-60018 2016-20956 FHA Adjustable Rate Mortgages, 60016-60017 2016-20954 FHA Application for Insurance of Advance of Mortgage Proceeds, 60015-60016 2016-20953 Interior Interior Department See

Fish and Wildlife Service

See

Land Management Bureau

See

Surface Mining Reclamation and Enforcement Office

Internal Revenue Internal Revenue Service RULES Definition of Real Estate Investment Trust Real Property, 59849-59865 2016-20987 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60122-60124 2016-20983 2016-20984 2016-20988 International Trade Com International Trade Commission NOTICES Sanctions for Breaches of Administrative Protective Orders: Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, 60021-60022 2016-20869 Justice Department Justice Department See

Alcohol, Tobacco, Firearms, and Explosives Bureau

See

Drug Enforcement Administration

NOTICES Consent Decrees Under the Clean Water Act, 60024 2016-20947
Labor Department Labor Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Certificate of Electrical Training and Applications for Mine Safety and Health Administration Approved Tests and State Tests Administered as Part of a Mine Safety and Health Administration Approved Program, 60024-60025 2016-20940 Land Land Management Bureau RULES Internet-Based Auctions, 59902-59906 2016-20943 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60018-60020 2016-20907 2016-21080 Requests for Nominations: Certain New Mexico Resource Advisory Councils; Second Call, 60020-60021 2016-20942 Maritime Maritime Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60119 2016-20872 Merit Merit Systems Protection Board NOTICES Performance Review Board Membership, 60025 2016-20992 NASA National Aeronautics and Space Administration NOTICES Requests for Nominations: Federal Advisory Committees, 60025-60026 2016-20863 National Agricultural National Agricultural Statistics Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 59978-59980 2016-20900 Charter Renewals: Advisory Committee on Agriculture Statistics, 59980-59981 2016-20899 National Institute National Institutes of Health NOTICES Meetings: Center for Scientific Review, 60009-60013 2016-20876 2016-20994 2016-20996 National Center for Complementary and Integrative Health, 60008-60009 2016-20877 National Institute of Diabetes and Digestive and Kidney Diseases, 60010-60012 2016-20997 2016-21000 National Institute of Mental Health, 60008 2016-20878 National Oceanic National Oceanic and Atmospheric Administration NOTICES Permits: Marine Mammals and Endangered Species; File Nos. 15543-06, 15488-01, 15537-02, 18890, 19091, 19116, 19638, 20283, 59982-59983 2016-20941 Requests for Nominations: United States Global Change Research Program, 59983-59985 2016-20982 Nuclear Regulatory Nuclear Regulatory Commission NOTICES Enhancing Participation in Public Meetings, 60026-60029 2016-20946 Review Plans: Instrumentation and Controls Guidance, 60029-60030 2016-20873 Peace Peace Corps NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60031 2016-20904 Personnel Personnel Management Office PROPOSED RULES Access to Federal Employees Health Benefits for Employees of Certain Indian Tribal Employers, 59907-59919 2016-20566 Pipeline Pipeline and Hazardous Materials Safety Administration NOTICES Delayed Special Permit Applications, 60122 2016-20589 Special Permit Applications: Hazardous Materials, 60119-60122 2016-20588 2016-20592 Postal Regulatory Postal Regulatory Commission PROPOSED RULES Periodic Reporting, 59950 2016-20930 Presidential Documents Presidential Documents PROCLAMATIONS Papahanaumokuakea Marine National Monument; Expansion (Proc. 9478), 60225-60234 2016-21138 Securities Securities and Exchange Commission PROPOSED RULES Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance Matters, 59927-59929 2016-20906 NOTICES Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc., 60097-60099 2016-20964 Bats EDGX Exchange, Inc., 60070-60072 2016-20963 Chicago Board Options Exchange, Inc., 60032-60034, 60089-60091 2016-20887 2016-20965 Chicago Stock Exchange, Inc., 60034-60037 2016-20885 Financial Industry Regulatory Authority, Inc., 60051-60070 2016-20888 Miami International Securities Exchange, LLC, 60077-60080 2016-20894 NASDAQ BX, Inc., 60049-60051 2016-20961 NASDAQ PHLX, LLC, 60074-60077, 60110-60112 2016-20893 2016-20960 NASDAQ Stock Market, LLC, 60072-60074 2016-20962 National Stock Exchange, Inc., 60083-60088 2016-20883 New York Stock Exchange LLC; NYSE MKT, LLC, 60031-60032 2016-20891 New York Stock Exchange, LLC, 60080-60083 2016-20892 NYSE Arca, Inc., 60037-60038, 60091-60093 2016-20881 2016-20884 NYSE MKT, LLC, 60038-60049, 60094-60097, 60108-60109 2016-20880 2016-20886 2016-20959 Options Clearing Corp., 60099-60108 2016-20882 State Department State Department NOTICES Culturally Significant Objects Imported for Exhibition: God's Servant First: The Life and Legacy of Thomas More, 60112 2016-20966 Medardo Rosso: Experiments in Light and Form, 60112 2016-20957 Substance Substance Abuse and Mental Health Services Administration NOTICES Current List of HHS-Certified Laboratories and Instrumented Initial Testing Facilities That Meet Minimum Standards To Engage in Urine Drug Testing for Federal Agencies, 60013-60014 2016-20936 Surface Mining Surface Mining Reclamation and Enforcement Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60021 2016-20937 Surface Transportation Surface Transportation Board NOTICES Discontinuance of Service Exemptions: Michigan Southern Railroad Co., d/b/a Napoleon, Defiance and Western Railway in Henry County, OH, 60112-60113 2016-20744 Tennessee Tennessee Valley Authority RULES Tennessee River Obstructions Not Requiring a TVA Permit, 59846-59849 2016-20093 Transportation Department Transportation Department See

Federal Aviation Administration

See

Federal Highway Administration

See

Federal Motor Carrier Safety Administration

See

Maritime Administration

See

Pipeline and Hazardous Materials Safety Administration

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60119 2016-20872
Treasury Treasury Department See

Internal Revenue Service

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 60124-60127 2016-20958 2016-20970 2016-20985 2016-20993
Customs U.S. Customs and Border Protection NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Arrival and Departure Record and Electronic System for Travel Authorization, 60014-60015 2016-20929 Separate Parts In This Issue Part II Homeland Security Department, 60130-60168 2016-20663 Part III Health and Human Services Department, Food and Drug Administration, 60170-60224 2016-20471 Part IV Presidential Documents, 60225-60234 2016-21138 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.

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81 169 Wednesday, August 31, 2016 Rules and Regulations DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-3989; Directorate Identifier 2014-NM-220-AD; Amendment 39-18629; AD 2016-17-16] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. Airplanes AGENCY:

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

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. This AD was prompted by in-service reports of passenger door tensator spring failures, and qualification testing indicating that non-conforming tensator springs could be susceptible to failure prior to reaching their safe-life limit. This AD requires revising the maintenance or inspection program to incorporate certain temporary revisions, and replacing the passenger door tensator springs with new springs. We are issuing this AD to prevent tensator spring failure, resulting in the inability to open the main passenger door, which could impede evacuation in the event of an emergency.

DATES:

This AD is effective October 5, 2016.

The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 5, 2016.

ADDRESSES:

For service information identified in this final rule, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; 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-2016-3989.

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-2016-3989; 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 Office (telephone 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:

Fabio Buttitta, 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: 516-228-7303; fax: 516-794-5531: email: [email protected]

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 certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. The NPRM published in the Federal Register on March 4, 2016 (81 FR 11471) (“the NPRM”).

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2014-39, dated November 4, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. The MCAI states:

Following the issuance of [Canadian] AD CF-2010-14, additional qualification testing of the passenger door tensator spring, Part Number (P/N) GS321-0580-1, determined that the tensator springs could be susceptible to failure prior to reaching the life limit mandated by [Canadian] AD CF-2010-14.

In addition, there have been in-service reports of passenger door tensator spring failures. Investigation determined that the material used to manufacture the tensator springs [was] improperly heat treated.

The passenger door assembly is installed with four tensator springs that assist the door actuator in opening and closing the door. In-service experience has shown that a failed tensator spring could uncoil and foul up the rotating tensator spools, resulting in the inability to open the main passenger door. The inability to open the main passenger door could impede evacuation in the event of an emergency.

This [Canadian] AD mandates the revision to the approved maintenance schedule to reduce the repetitive discard task interval and mandates the replacement of non-conforming tensator springs.

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-2016-3989. 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 Include Service Information

Bombardier, Inc. requested that we revise the Related Service Information under 1 CFR part 51 section and paragraph (g) of the proposed AD to include Temporary Revision (TR) 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks.

We agree to include TR 5-2-10, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks, as requested by the commenter. Our intent is to correspond with TCCA Canadian AD CF-2014-39, dated November 4, 2014, which includes TR 5-2-9, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks. TR 5-2-10, dated June 4, 2014, supersedes TR 5-2-9, dated September 9, 2014. We have included TR 5-2-10, dated June 4, 2014, in paragraph (g)(2) of this AD and redesignated subsequent paragraph identifiers accordingly. We have also included that same TR in the Related Service Information under 1 CFR part 51 section of this final rule. Since the NPRM inadvertently did not include a TR to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks, we must make this change to avoid operators needing to ask for approval of an alternative method of compliance (AMOC) to use a TR in order to comply with the revision required by paragraph (g) of this AD.

In addition, we have revised paragraph (g) of this AD to refer to Task Number 52-11-41-101 because some TRs include multiple tasks. This AD specifically addresses the passenger door tensator spring, part number GS321-0580-1, and the task number in the TRs for that component is 52-11-41-101.

Request To Correct Typographical Error

Bombardier, Inc. requested that we revise paragraph (g)(2) of the proposed AD to read “Model BD-700-1A10 airplanes,” instead of “Model BD-700-1A11 airplanes.”

We agree. This was a typographical error, and has been corrected in paragraph (g)(3) of this AD (paragraph (g)(2) of the proposed AD).

Request To Revise Compliance Time

NetJets requested that we revise the proposed AD so that the threshold for the initial spring replacement is based on the AD effective date, and not the TR revision date. NetJets explained that paragraph (g) of the proposed AD specifies that the compliance time for the initial replacement is per the TRs listed in paragraphs (g)(1) through (g)(4) of the proposed AD, or within 30 days after the AD effective date, whichever occurs later. NetJets explained further that the TRs base the threshold from the TR revision date of “Jun 04/2014,” and that by the time the final rule is released, the threshold in the TR will have been exceeded by approximately 2 years. NetJets argued that, therefore, the final rule will effectively mandate a 30-day threshold, which is an undue burden without technical justification.

We do not agree with the request to revise the compliance time in this AD. The compliance time in this AD corresponds with the compliance time in Canadian AD CF-2014-39, dated November 4, 2014. In addition, the commenter did not provide any data to substantiate that extending the compliance time would provide an acceptable level of safety. 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. Under the provisions of paragraph (k)(1) of this AD, however, we may consider requests for adjustments to the compliance time if data are submitted to substantiate that such an adjustment would provide an acceptable level of safety. We have made no changes to this AD in this regard.

Request To Allow for Later-Approved Revisions of Service Information

NetJets requested that we revise the NPRM to add provisions to allow later FAA-approved revisions to the time limits/maintenance checks manuals (TLMCM), so that an approval of an AMOC will not be required to incorporate the currently published TLMCM revision and future revisions. NetJets explained that the TRs specified in paragraphs (g)(1) through (g)(4) of the proposed AD have been incorporated in revisions to the listed TLMCMs.

We find that clarification is necessary. Once operators have incorporated the task in the TR into their maintenance or inspection program, the task cannot be changed without approval of an AMOC. However, once the task in the TR is incorporated into the TLMCM, operators that use the TLMCM are still in compliance because the task has not changed. If a future revision of the TLMCM changes the task, then an AMOC would be needed to use the revised task.

We have revised paragraph (g) of this AD to clarify that the revision may be done by inserting copies of the TRs identified in paragraphs (g)(1) through (g)(5) of this AD into the applicable TLMCM. When the information in a TR has been included in general revisions of the applicable TLMCM, the general revisions may be inserted in the TLMCM, and the TR may be removed.

Request for Clarification of the Necessity for a Life Limit Requirement

NetJets requested that we clarify the necessity for the life limit requirement in paragraph (i) of the proposed AD. NetJets stated that paragraph (i) of the proposed AD requires a threshold of “. . . but not exceeding the applicable life limit of the passenger tensator spring . . .” without identifying the referenced life limit, and noted that the listed service information does not include a life limit requirement.

We agree to clarify the requirement specified in paragraph (i) of this AD and the necessity for that requirement. The passenger door assembly is installed with four tensator springs that assist the door actuator in opening and closing the door. In-service experience has shown that a failed tensator spring could uncoil and foul up the rotating tensator spools, resulting in the inability to open the main passenger door. The inability to open the main passenger door could impede evacuation in the event of an emergency. The actions required by this AD are necessary to address the identified unsafe condition.

Paragraph (g) of this AD mandates the revision to the approved maintenance schedule by incorporating TRs to reduce the repetitive discard task interval. Paragraph (i) of this AD mandates, for certain airplanes, the replacement of non-conforming tensator springs within 15 months after the effective date of this AD, but not exceeding the applicable life limit of 1,500 landings for the component as listed in the applicable TRs identified in paragraph (g) of this AD. The replacement is necessary to ensure the airplanes identified in section 1.A., “Effectivity,” of Bombardier Global 5000 Service Bulletin 700-1A11-52-023, dated October 4, 2013; or Bombardier Global Express/Global Express XRS Service Bulletin 700-52-046, dated October 4, 2013, replace the tensator springs within 15 months, as specified in that service information, but not later than the new life limit. We have revised paragraph (i) of this AD to refer to the TRs in paragraph (g) of this AD for the life limit.

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 the following Bombardier, Inc. service information:

• Bombardier Global 5000 Service Bulletin 700-1A11-52-023, dated October 4, 2013.

• Bombardier Global Express/Global Express XRS Service Bulletin 700-52-046, dated October 4, 2013.

• TR 5-2-7, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express XRS BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

• TR 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks (for Model BD-700-1A11 airplanes).

• TR 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 6000 GL 6000 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

• TR 5-2-13, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A11 airplanes).

• TR 5-2-44, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

The service information describes procedures for replacing passenger door tensator springs with new springs. 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 60 airplanes of U.S. registry.

We also estimate that it would take about 40 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 $204,000, or $3,400 per product.

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): 2016-17-16 Bombardier, Inc.: Amendment 39-18629. Docket No. FAA-2016-3989; Directorate Identifier 2014-NM-220-AD. (a) Effective Date

This AD is effective October 5, 2016.

(b) Affected ADs

None.

(c) Applicability

This AD applies to Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes, certificated in any category, serial numbers 9002 and subsequent.

(d) Subject

Air Transport Association (ATA) of America Code 52, Doors.

(e) Reason

This AD was prompted by in-service reports of passenger door tensator spring failures, and qualification testing indicating that non-conforming tensator springs could be susceptible to failure prior to reaching their safe-life limit. We are issuing this AD to prevent tensator spring failure, resulting in the inability to open the main passenger door, which could impede evacuation in the event of an emergency.

(f) Compliance

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

(g) Maintenance or Inspection Program Revision

Within 30 days after the effective date of this AD, revise the maintenance or inspection program, as applicable, to incorporate task number 52-11-41-101 as specified in the Temporary Revisions (TRs) identified in paragraphs (g)(1) through (g)(5) of this AD. The compliance time for doing the initial replacement of the passenger door tensator springs with new springs is at the times specified in the applicable TR specified in paragraphs (g)(1) through (g)(5) of this AD, or within 30 days after the effective date of this AD, whichever occurs later. The revision required by this paragraph may be done by inserting copies of the TRs identified in paragraphs (g)(1) through (g)(5) of this AD into the applicable Time Limits/Maintenance Checks manual. When the information in a TR has been included in general revisions of the applicable Time Limits/Maintenance Checks manual, the general revisions may be inserted in the Time Limits/Maintenance Checks manual, and the TR may be removed.

(1) TR 5-2-7, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express XRS BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

(2) TR 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks (for Model BD-700-1A11 airplanes).

(3) TR 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 6000 GL 6000 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

(4) TR 5-2-13, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A11 airplanes).

(5) TR 5-2-44, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express BD-700 Time Limits/Maintenance Checks (for Model BD-700-1A10 airplanes).

(h) No Alternative Actions and Intervals

After accomplishing the revision required by paragraph (g) of this AD, no alternative actions (e.g., inspections) and intervals may be used unless the actions and intervals are approved as an alternative method of compliance (AMOC) in accordance with the procedures specified in paragraph (k)(1) of this AD.

(i) Replacement

For airplanes identified in section 1.A., “Effectivity,” of Bombardier Global 5000 Service Bulletin 700-1A11-52-023, dated October 4, 2013; or Bombardier Global Express/Global Express XRS Service Bulletin 700-52-046, dated October 4, 2013; except as provided by paragraph (j)(1) or (j)(2) of this AD: Within 15 months after the effective date of this AD, but not exceeding the applicable life limit of the passenger tensator spring identified in the applicable TR specified in paragraphs (g)(1) through (g)(5) of this AD, replace the passenger door tensator springs having part number (P/N) GS321-0580-1, with new springs, in accordance with the Accomplishment Instructions of Bombardier Global 5000 Service Bulletin 700-1A11-52-023, dated October 4, 2013; or Bombardier Global Express/Global Express XRS Service Bulletin 700-52-046, dated October 4, 2013; as applicable.

(j) Acceptable Alternative Actions for Paragraph (i) of This AD

(1) For airplanes having serial numbers (S/N) 9278 through 9360 inclusive: Replacement of the passenger door tensator springs having P/N GS321-0580-1 with new springs before the effective date of this AD is acceptable for compliance with the requirements of paragraph (i) of this AD. Refer to the task specified in the applicable TRs identified in paragraphs (g)(1) through (g)(5) of this AD for subsequent spring replacements.

(2) For airplanes with serial numbers other than those identified in paragraph (j)(1) of this AD: Accomplishment after the effective date of this AD of the “Time Limits/Maintenance Checks” discard task identified in the applicable service information specified in paragraphs (g)(1) through (g)(5) of this AD is acceptable for compliance with the requirements of paragraph (i) of this AD.

(k) Other FAA AD Provisions

The following provisions also apply to this AD:

(1) Alternative Methods of Compliance (AMOCs): The Manager, New York Aircraft Certification Office (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 New York 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: 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.

(l) Related Information

Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian AD CF-2014-39, dated November 4, 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-2016-3989.

(m) 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) Temporary Revision 5-2-7, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express XRS BD-700 Time Limits/Maintenance Checks.

(ii) Temporary Revision 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 GL 5000 Featuring Global Vision Flight Deck—Time Limits/Maintenance Checks.

(iii) Temporary Revision 5-2-10, dated September 9, 2014, to Part 2, Section 5-10-11, of Bombardier Global 6000 GL 6000 Time Limits/Maintenance Checks.

(iv) Temporary Revision 5-2-13, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global 5000 BD-700 Time Limits/Maintenance Checks.

(v) Temporary Revision 5-2-44, dated June 4, 2014, to Part 2, Section 5-10-11, of Bombardier Global Express BD-700 Time Limits/Maintenance Checks.

(vi) Bombardier Global Express/Global Express XRS Service Bulletin 700-52-046, dated October 4, 2013.

(vii) Bombardier Global 5000 Service Bulletin 700-1A11-52-023, dated October 4, 2013.

(3) For service information identified in this AD, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; 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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
[FR Doc. 2016-20693 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-8133; Directorate Identifier 2015-NM-101-AD; Amendment 39-18631; AD 2016-18-01] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

Federal Aviation Administration (FAA), DOT.

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes. This AD was prompted by reports of heavy corrosion and chrome damage on the forward and aft trunnion pin assemblies of the right and left main landing gears (MLGs). This AD requires repetitive lubrication of the forward and aft trunnion pin assemblies of the right and left MLGs; repetitive inspections of these assemblies for corrosion and chrome damage, and related investigative and corrective actions if necessary; and installation of new or modified trunnion pin assembly components, which will terminate the repetitive lubrication and repetitive inspections. We are issuing this AD to detect and correct heavy corrosion and chrome damage on the forward and aft trunnion pin assemblies of the right and left MLGs, which could result in cracking of these assemblies and collapse of the MLGs.

DATES:

This AD is effective October 5, 2016.

The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 5, 2016.

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-2015-8133.

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-2015-8133; 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:

Alan Pohl, Aerospace Engineer, Airframe Branch, ANM-120S, FAA Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6450; fax: 425-917-6590; email: [email protected]

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 certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes. The NPRM published in the Federal Register on December 31, 2015 (80 FR 81795) (“the NPRM”). The NPRM was prompted by reports of heavy corrosion and chrome damage on the forward and aft trunnion pin assemblies of the right and left MLGs. The NPRM proposed to require repetitive lubrication of the forward and aft trunnion pin assemblies of the right and left MLGs; repetitive inspections of these assemblies for corrosion and chrome damage, and related investigative and corrective actions if necessary; and installation of new or modified trunnion pin assembly components, which would terminate the repetitive lubrication and repetitive inspections. We are issuing this AD to detect and correct heavy corrosion and chrome damage on the forward and aft trunnion pin assemblies of the right and left MLGs, which could result in cracking of these assemblies and collapse of the MLGs.

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 concurs with the contents of the NPRM.

Effect of Winglets on Accomplishment of the Proposed Actions

Aviation Partners Boeing stated that accomplishing Supplemental Type Certificate (STC) ST00830SE does not affect the 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 new paragraph (c)(2) in this AD to state that installation of STC ST00830SE does not affect the ability to accomplish the actions required by this final rule. Therefore, for airplanes on which STC ST00830SE 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.

Request for Clarification of Requirements

Delta Airlines (DAL) requested an explanation of how the requirements are different between AD 2014-08-11, Amendment 39-17835 (79 FR 23903, April 29, 2014) (“AD 2014-08-11”) and the NPRM. DAL noted that the requirements of AD 2014-08-11 include an inspection for discrepancies of the transition radius of the MLG forward trunnion pins, and corrective actions if necessary. DAL elaborated that this inspection is for finish damage (scrapes through primer), signs of corrosion, pitting, and scratches in the base metal of that area. DAL pointed out that the NPRM requires a general visual inspection of the MLG forward trunnion pin assembly for signs of corrosion or chrome plating damage, and if either condition is found, a detailed inspection of the forward trunnion pin assembly is required. DAL mentioned that the detailed inspection requires verification that a new seal and retainer configuration is installed, and if the overhaul limits exceed what is specified in the component maintenance manual, replacement of the forward trunnion pin assembly is necessary. DAL reasoned that the forward trunnion pin inspections required by AD 2014-08-11 should be superseded by the proposed forward trunnion pin inspections in the NPRM. DAL stated that the detailed inspection proposed in the NPRM has additional corrective actions if any loose or missing chrome plating is found, beyond what is required in AD 2014-08-11. DAL also conveyed that the inspections for signs of corrosion are the same in the NPRM and AD 2014-08-11.

We agree to provide clarification regarding how the requirements are different between the requirements in the proposed AD and the requirements mandated by AD 2014-08-11. The applicability of the proposed AD includes certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes, line numbers 1 through 3526 inclusive. The applicability of AD 2014-08-11 includes certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes, line numbers 1423 through 3526 inclusive. Although certain airplane line numbers are included in the applicability of both the proposed AD and AD 2014-08-11, the issues addressed by the NPRM and AD 2014-08-11 are not the same. Furthermore, the inspection instructions in the service information required for accomplishing the actions in the proposed AD are different from the inspection instructions in the service information required by AD 2014-08-11. The inspections in the proposed AD focus on chrome damage and corrosion on the shank of the forward trunnion pins, and the inspections required by AD 2014-08-11 focus on finish scratches and corrosion in the transition radius of the forward trunnion pins. We have not changed this AD regarding this issue.

In addition, we note that the service information required to do the actions required by AD 2014-08-11 (which cites Boeing Special Attention Service Bulletin 737-32-1402, Revision 1, dated February 7, 2013), includes a recommendation by Boeing that operators accomplish the specified actions concurrently with the actions specified in Boeing Special Attention Service Bulletin 737-32-1448 (Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, is the appropriate source of service information for accomplishing the actions required by this AD). Likewise, Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, includes a recommendation by Boeing that operators accomplish the specified actions concurrently with the actions specified in Boeing Special Attention Service Bulletin 737-32-1402.

Request for Clarification of Lube Fittings Location

DAL requested clarification regarding the location of the lube fittings for the forward and aft MLG trunnion pin assemblies in paragraph (g) of the NPRM. DAL commented that the NPRM stated to do the repetitive lubrication in accordance with Work Package 1 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. DAL noted that Work Package 1 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, refers to section 12-21-11 of the Boeing 737-600/700/800/900 Aircraft Maintenance Manual (AMM) as an accepted procedure for the repetitive lubrication of the MLG trunnion pin assemblies. DAL stated that section 12-21-11 of the AMM specifically identifies the locations of the trunnion bearing housing and the aft trunnion bearing, but does not specifically identify the locations of the two lube fittings for the forward and aft trunnion pins.

We agree with the commenter that the two lube fittings for the forward and aft trunnion pins are not specifically mentioned in section 12-21-11 of the Boeing 737-600/700/800/900 AMM. These locations are identified as Item [6], “Outer Cylinder,” on page 307 of the AMM. However, there are only three lube fittings associated with Item [6], so it is possible to determine which two fittings are to be used for lubricating the forward and aft trunnion pins. We consulted with Boeing and confirmed that the two lube fittings are located on the bottom of the outer cylinder trunnion, directly under the pins. We have not changed this AD regarding this issue.

Request for Clarification of Corrective Actions in Paragraph (h) of the Proposed AD

DAL requested clarification of certain corrective actions in paragraph (h) of the proposed AD. DAL asked if an operator can replace an affected trunnion pin assembly instead of overhauling it. DAL pointed out that neither the NPRM nor Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, specify the part number of the replacement trunnion pin assembly. DAL asked if an operator can replace an affected pin assembly with any properly approved pin assembly using the Boeing 737 Aircraft Illustrated Parts Catalog, Boeing Drawing 161A0002, “Boeing Model 737-NG Main Landing Gear Component Interchangeability List,” or a similar document.

We agree with the commenter's request for clarification. Operators may elect to replace a trunnion pin assembly with a serviceable unit in lieu of performing an overhaul. However, operators should be aware that some of the existing trunnion pin assemblies require modification. Figures 9, 11, and 12 of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, provide instructions for modifying certain pin assemblies. Note (c) in each of these figures refers to paragraph 2.C.3., “Parts Modified and Reidentified,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, which shows the existing and modified part numbers. For use of other part numbers, such as those identified in the Boeing 737 Aircraft Illustrated Parts Catalog or Boeing Drawing 161A0002, “Boeing Model 737-NG Main Landing Gear Component Interchangeability List,” operators may request an alternative method of compliance in accordance with the procedures specified in paragraph (m) of this AD. We have not changed this AD regarding this issue.

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 Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. The service information describes procedures for lubricating the forward and aft trunnion pin assemblies on the left and right MLGs, inspecting the forward and aft trunnion pin assemblies for corrosion or damage, and performing corrective actions. In addition, the service information describes procedures for installing a new forward trunnion pin housing assembly, seal, and retainer configuration. 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 1,023 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
    Lubrication 2 work-hours × $85 per hour = $170, per lubrication cycle $0 $170 $173,910, per lubrication cycle (1,023 airplanes). Inspection (Groups 1 and 2, Configuration 1 airplanes) 51 work-hours × $85 per hour = $4,335, per inspection cycle 0 4,335 4,282,980, per inspection cycle (988 airplanes). Inspection (Group 3 airplanes) 93 work-hours × $85 per hour = $7,905, per inspection cycle 0 7,905 276,675, per inspection cycle (35 airplanes). Replacement/overhaul (Groups 1 and 2 airplanes) 84 work-hours × $85 per hour = $7,140 0 7,140 7,054,320 (988 airplanes). Replacement/overhaul (Group 3 airplanes) 86 work-hours × $85 per hour = $7,310 0 7,310 255,850 (35 airplanes).

    We have received no definitive data that would enable us to provide cost estimates 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

    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 adding the following new airworthiness directive (AD): 2016-18-01 The Boeing Company: Amendment 39-18631; Docket No. FAA-2015-8133; Directorate Identifier 2015-NM-101-AD. (a) Effective Date

    This AD is effective October 5, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    (1) This AD applies to certain The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes, certificated in any category, as identified in Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015.

    (2) Installation of Supplemental Type Certificate (STC) ST00830SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/184DE9A71EC3FA5586257EAE00707DA6?OpenDocument&Highlight=st00830se) does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST00830SE 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 32, Landing Gear.

    (e) Unsafe Condition

    This AD was prompted by reports of heavy corrosion and chrome damage of the forward and aft trunnion pin assemblies of the right and left main landing gears (MLGs). We are issuing this AD to detect and correct heavy corrosion and chrome damage of the forward and aft trunnion pin assemblies of the right and left MLGs, which could result in cracking of these assemblies and collapse of the MLGs.

    (f) Compliance

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

    (g) Repetitive Lubrication of MLG Trunnion Pin Assemblies

    For airplanes in Groups 1 and 2, Configuration 1, and airplanes in Group 3, as identified in Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015: Except as required by paragraph (k) of this AD, at the applicable time specified in Table 1 or Table 2 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, lubricate the forward and aft trunnion pin assemblies of the left and right MLGs, in accordance with Work Package 1 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. Repeat the lubrication thereafter at intervals not to exceed those specified in paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. Accomplishment of the actions specified in paragraph (i) of this AD terminates the repetitive lubrication required by this paragraph.

    (h) Repetitive Inspections, Corrective Actions, and Lubrication

    For airplanes in Groups 1 and 2, Configuration 1, and airplanes in Group 3, as identified in Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015: Except as required by paragraph (k) of this AD, at the applicable time specified in Table 1 or Table 2 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, do a general visual inspection of the left and right MLGs at the forward and aft trunnion pin locations and the visible surfaces of the forward and aft trunnion pin assemblies for signs of corrosion or chrome plating damage and lubricate the forward and aft trunnion pin assemblies, in accordance with Work Package 2 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. Repeat the general visual inspection thereafter at intervals not to exceed those specified in paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. If any discrepancy is found during any inspection required by this paragraph, before further flight, do all applicable related investigative and corrective actions in accordance with Work Package 2 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737 32-1448, Revision 1, dated May 29, 2015. Accomplishment of the actions required by paragraph (i) of this AD terminates the repetitive inspections required by this paragraph.

    (i) Modification of MLG Trunnion Pin Assemblies

    For airplanes in Groups 1 and 2, Configuration 1, and airplanes in Group 3, as identified in Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015: Except as required by paragraph (k) of this AD, at the applicable time specified in Table 1 or Table 2 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, modify and lubricate the left and right MLG trunnion pin assemblies, and do all applicable related investigative and corrective actions, in accordance with Work Package 3 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015. Accomplishment of the actions in Work Package 3 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, terminates the repetitive lubrication required by paragraph (g) of this AD and the repetitive inspections required by paragraph (h) of this AD.

    (j) Replacement of MLG Forward Trunnion Pin Housing Assembly, Seal, and Retainer

    For airplanes in Groups 1 and 2, Configuration 2, as identified in Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015: At the applicable time specified in Table 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, replace the seal, retainer, and support ring assembly with a new seal and retainer configuration; install the forward trunnion pin assembly into the housing assembly; and lubricate the forward and aft trunnion pin assemblies for the left and right MLGs; in accordance with Work Package 4 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015.

    (k) Exception to Service Information Specification

    Where paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015, specifies a compliance time “from the original issue date on this service bulletin,” this AD requires compliance within the specified compliance time “after the effective date of this AD.”

    (l) Credit for Previous Actions

    This paragraph provides credit for the requirements of paragraph (g) of this AD, if those actions were performed before the effective date of this AD using Boeing Special Attention Service Bulletin 737-32-1448, dated May 19, 2011, which is not incorporated by reference in this AD.

    (m) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle 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 (n)(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, Seattle 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.

    (n) Related Information

    (1) For more information about this AD, contact Alan Pohl, Aerospace Engineer, Airframe Branch, ANM-120S, FAA Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6450; fax: 425-917-6590; email: [email protected]

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (o)(3) and (o)(4) of this AD.

    (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 the AD specifies otherwise.

    (i) Boeing Special Attention Service Bulletin 737-32-1448, Revision 1, dated May 29, 2015.

    (ii) Reserved.

    (3) 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.

    (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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20686 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9047; Directorate Identifier 2016-NM-092-AD; Amendment 39-18632; AD 2016-18-02] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain The Boeing Company Model 777-200 and -300ER series airplanes. This AD requires replacing the low-pressure oxygen flex hoses with new non-conductive low-pressure oxygen flex hoses in the gaseous passenger oxygen system in airplanes equipped with therapeutic oxygen. This AD was prompted by a determination that the low-pressure oxygen flex hoses in the gaseous passenger oxygen system can potentially be conductive. We are issuing this AD to prevent electrical current from passing through the low-pressure oxygen flex hoses in the gaseous passenger oxygen system, which can cause the flex hoses to melt or burn, and a consequent oxygen-fed fire in the passenger cabin.

    DATES:

    This AD is effective September 15, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of September 15, 2016].

    We must receive comments on this AD by October 17, 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: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    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-2016-9047.

    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-2016-9047; 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 Office (phone: 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Susan Monroe, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA; phone: 425-917-6457; fax: 425-917-6590; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Discussion

    This AD was prompted by a determination that the low-pressure oxygen flex hoses in the gaseous passenger oxygen system can potentially be conductive. Conductive oxygen hoses in the flight compartment were addressed previously in AD 2012-13-05, Amendment 39-17107 (77 FR 41045, July 12, 2012).

    The gaseous passenger oxygen system equipped with therapeutic oxygen is not continuously pressurized and must be activated by the flightcrew. Exposure to electrical faults, such as unintended short circuits, can result in localized electrical heating of the low-pressure oxygen flex hoses. This condition, if not corrected, could result in electrical current passing through the low-pressure oxygen flex hoses, which can cause flex hoses to melt or burn, and a consequent oxygen-fed fire in the passenger cabin.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016. The service information describes procedures for replacing the low-pressure oxygen flex hoses with new non-conductive low-pressure oxygen flex hoses in the gaseous passenger oxygen system in airplanes equipped with therapeutic oxygen. 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

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

    AD Requirements

    This AD requires accomplishing the actions specified in Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016. For information on the procedures, see this service information at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9047.

    FAA's Justification and Determination of the Effective Date

    There are currently no domestic operators of this product. Therefore, we find that notice and opportunity for prior public comment are unnecessary and that good cause exists for making this amendment effective in less than 30 days.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety and was not preceded by notice and an opportunity for public comment. However, we invite you to send any written data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include the docket number FAA-2016-9047 and Directorate Identifier 2016-NM-092-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 because of those comments.

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

    Costs of Compliance

    Currently, there are no affected U.S.-registered airplanes. If an affected airplane is imported and placed on the U.S. Register in the future, we provide the following cost estimates to comply with this AD:

    Estimated costs Action Labor cost Parts cost Cost per
  • product
  • Replacement 33 work-hours × $85 per hour = $2,805 $15,173 $17,978

    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

    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 adding the following new airworthiness directive (AD): 2016-18-02 The Boeing Company: Amendment 39-18632; Docket No. FAA-2016-9047; Directorate Identifier 2016-NM-092-AD. (a) Effective Date

    This AD is effective September 15, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to The Boeing Company Model 777-200 and -300ER series airplanes, certificated in any category, as identified in Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016.

    (d) Subject

    Air Transport Association (ATA) of America Code 35, Oxygen.

    (e) Unsafe Condition

    This AD was prompted by a determination that the low-pressure oxygen flex hoses in the gaseous passenger oxygen system in airplanes equipped with therapeutic oxygen can potentially be conductive. We are issuing this AD to prevent electrical current from passing through the low-pressure oxygen flex hoses in the gaseous passenger oxygen system, which can cause the flex hoses to melt or burn, and a consequent oxygen-fed fire in the passenger cabin.

    (f) Compliance

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

    (g) Replacement

    Within 72 months after the effective date of this AD: Replace the low-pressure oxygen flex hoses with new non-conductive low-pressure oxygen flex hoses in the gaseous passenger oxygen system in airplanes equipped with therapeutic oxygen, in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016.

    (h) Parts Installation Prohibition

    As of the effective date of this AD, no person may install on any airplane a low-pressure oxygen flex hose having a part number that is specified to be removed from an airplane in the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016.

    (i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle 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 (j) 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, Seattle 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) For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (i)(4)(i) and (i)(4)(ii) of this AD apply.

    (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or sub-step is labeled “RC Exempt,” then the RC requirement is removed from that step or sub-step. An AMOC is required for any deviations to RC steps, including substeps and identified figures.

    (ii) Steps not labeled 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 RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition.

    (j) Related Information

    For more information about this AD, contact Susan Monroe, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA; phone: 425-917-6457; fax: 425-917-6590; email: [email protected]

    (k) 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.

    (i) Boeing Special Attention Service Bulletin 777-35-0041, dated April 8, 2016.

    (ii) Reserved.

    (3) 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.

    (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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20722 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-5467; Directorate Identifier 2015-NM-186-AD; Amendment 39-18630; AD 2016-17-17] RIN 2120-AA64 Airworthiness Directives; Airbus Defense and Space S.A. (Formerly Known as Construcciones Aeronauticas, S.A.) 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 Defense and Space S.A. Model CN-235, CN-235-200, and CN-235-300 airplanes. This AD was prompted by reports of main landing gear (MLG) access doors detaching from the airplane as a result of excessive vibration and metal fatigue in the attach fittings. This AD requires modification of the MLG access door by replacing seals in the MLG fairing and, for certain airplanes, adding an additional bolt. We are issuing this AD to prevent a fracture in the MLG access door associated with excessive vibration and metal fatigue in the attach fittings. This condition could lead to MLG access door detachment and consequent impact of flight controls, resulting in reduced control of an airplane.

    DATES:

    This AD is effective October 5, 2016.

    The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 5, 2016.

    ADDRESSES:

    For service information identified in this final rule, contact EADS-CASA, Military Transport Aircraft Division (MTAD), Integrated Customer Services (ICS), Technical Services, Avenida de Aragón 404, 28022 Madrid, Spain; telephone +34 91 585 55 84; fax +34 91 585 55 05; email MTA.[email protected]; Internet http://www.eads.net. 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-2016-5467.

    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-2016-5467; 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 Office (telephone 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:

    Shahram Daneshmandi, Aerospace Engineer, International Branch, ANM 116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1112; 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 Defense and Space S.A. Model CN-235, CN-235-200, and CN-235-300 airplanes. The NPRM published in the Federal Register on April 13, 2016 (81 FR 21766) (“the NPRM”). The NPRM was prompted by reports of MLG access doors detaching from the airplane as a result of excessive vibration and metal fatigue in the attach fittings. The NPRM proposed to require modification of the MLG access door by replacing seals in the MLG fairing and, for certain airplanes, adding an additional bolt. We are issuing this AD to prevent a fracture in the MLG access door associated with excessive vibration and metal fatigue in the attach fittings. This condition could lead to MLG access door detachment and consequent impact of flight controls, resulting in reduced control of an airplane.

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued Airworthiness Directive 2015-0225, dated November 18, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus Defense and Space S.A. Model CN-235, CN-235-200, and CN-235-300 airplanes. The MCAI states:

    Occurrences of Main Landing Gear (MLG) Access Door detachment were reported. Subsequent investigation determined that the detachments of the MLG Door occurred during maneuvers performed at high speed and with high sideslip angle on airplanes not modified in accordance with the instructions EADS-CASA Service Bulletins (SBs) SB-235-52-0061 and SB-235-52-0068. Based on the investigation results, it was determined that the fracture mechanism was associated with excessive deformation that could produce scooping in the forward edge combined with an excessive vibration of the MLG Access Door.

    This condition, if not corrected, could lead to MLG Access Door detachment and consequent impact of flight controls, resulting in reduced control of an airplane and possible injury of persons on the ground.

    To address this potential unsafe condition, EADS-CASA issued SB-235-52-0061 and SB-235-52-0068 to provide modification instructions.

    For the reasons described above, this [EASA] AD requires modification of MLG Access Doors and prohibits installation of a MLG Access Door sealing part number (P/N) CAN36032R. This [EASA] AD also prohibits installation of not modified MLG Access Doors.

    Required actions include modification of the MLG access door by replacing seals in the MLG fairing and, for certain airplanes, adding an additional bolt. 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-2016-5467.

    Comments

    We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.

    Conclusion

    We reviewed the relevant data and determined that air safety and the public interest require adopting this AD as proposed except for 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 have reviewed the following service information:

    • EADS CASA Service Bulletin SB-235-52-0061, Revision 1, dated October 24, 2014. The service information describes procedures for modifying the MLG access door by installing an additional bolt.

    • EADS CASA Service Bulletin SB-235-52-0068, Revision 2, dated January 9, 2015. The service information describes procedures for modifying the MLG access door by installing an improved fairing seal.

    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 30 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
    Modification 60 work-hours × $85 per hour = $5,100 $12,684 $17,784 $533,520
    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): 2016-17-17 Airbus Defense and Space S.A. (Formerly Known as Construcciones Aeronauticas, S.A.): Amendment 39-18630; Docket No. FAA-2016-5467; Directorate Identifier 2015-NM-186-AD. (a) Effective Date

    This AD is effective October 5, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Airbus Defense and Space S.A. (formerly known as Construcciones Aeronauticas, S.A.) Model CN-235, CN 235-200, and CN 235-300 airplanes, certificated in any category, all manufacturer serial numbers.

    (d) Subject

    Air Transport Association (ATA) of America Code 52, Doors.

    (e) Reason

    This AD was prompted by reports of main landing gear (MLG) access doors detaching from the airplane as a result of excessive vibration and metal fatigue in the attach fittings. We are issuing this AD to prevent a fracture in the MLG access door associated with excessive vibration and metal fatigue in the attach fittings. This condition could lead to MLG access door detachment and consequent impact of flight controls, resulting in reduced control of an airplane.

    (f) Compliance

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

    (g) Modifications

    (1) For all airplanes: Within 12 months after the effective date of this AD, modify each MLG access door by installing an improved fairing seal, in accordance with the Accomplishment Instructions of EADS CASA Service Bulletin SB-235-52-0068, Revision 2, dated January 9, 2015.

    (2) For all Model CN-235-200 airplanes: Concurrently with the action required in paragraph (g)(1) of this AD, modify each affected MLG access door by installing an additional bolt, in accordance with the Accomplishment Instructions of EADS CASA Service Bulletin SB-235-52-0061, Revision 1, dated October 24, 2014.

    (h) Credit for Previous Actions

    (1) This paragraph provides credit for actions required by paragraph (g)(1) of this AD, if those actions were performed before the effective date of this AD, using EADS CASA Service Bulletin SB-235-52-0068, Revision 1, dated October 24, 2014; or SB-235-52-0068, dated July 15, 2002.

    (2) This paragraph provides credit for actions required by paragraph (g)(2) of this AD, if those actions were performed before the effective date of this AD using EADS CASA Service Bulletin SB-235-52-0061, dated October 31, 1996.

    (i) Parts Installation Prohibition and Limitation

    (1) For airplanes modified as specified in paragraphs (g)(1) and (g)(2) of this AD, as applicable, before the effective date of this AD: As of the effective date of this AD, no person may install a seal having part number CAN36032R on any MLG access door.

    (2) For airplanes not modified as specified in paragraphs (g)(1) and (g)(2) of this AD, as applicable, before the effective date of this AD: After accomplishing the actions required by paragraphs (g)(1) and (g)(2) of this AD, as applicable, no person may install a seal having part number CAN36032R on any MLG access door.

    (3) As of the effective date of this AD, installation of an MLG access door on an airplane is allowed, provided the MLG access door is modified as required by paragraphs (g)(1) and (g)(2) of this AD, as applicable.

    (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: Shahram Daneshmandi, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1112; fax 425-227-1149. 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 European Aviation Safety Agency (EASA); or Airbus Defense and Space S.A.'s EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.

    (k) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2015-0225, dated November 18, 2015, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-5467.

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (l)(3) and (l)(4) of this AD.

    (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) EADS CASA Service Bulletin SB-235-52-0061, Revision 1, Dated October 24, 2014.

    (ii) EADS CASA Service Bulletin SB-235-52-0068, Revision 2, dated January 9, 2015.

    (3) For service information identified in this AD, contact EADS-CASA, Military Transport Aircraft Division (MTAD), Integrated Customer Services (ICS), Technical Services, Avenida de Aragón 404, 28022 Madrid, Spain; telephone +34 91 585 55 84; fax +34 91 585 55 05; email [email protected]; Internet http://www.eads.net. 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.

    (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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20706 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2012-1075; Directorate Identifier 2012-NM-111-AD; Amendment 39-18628; AD 2016-17-15] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. Airplanes AGENCY:

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

    ACTION:

    Final rule.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes. This AD was prompted by the need for more stringent inspection requirements for certain affected components. This AD requires revising the maintenance or inspection program to incorporate certain revised airworthiness limitations (AWL) and require repairs of affected components. We are issuing this AD to detect and correct fatigue cracking in the affected components; such cracking could result in loss of structural integrity.

    DATES:

    This AD is effective October 5, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 5, 2016.

    ADDRESSES:

    For service information identified in this final rule, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone: 514-855-5000; fax: 514-855-7401; 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-2012-1075.

    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-2012-1075; 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 Office (telephone: 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:

    Jeffrey Zimmer, 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: 516-228-7306; fax: 516-794-5531.

    SUPPLEMENTARY INFORMATION: Discussion

    We issued a supplemental notice of proposed rulemaking (SNPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Bombardier, Inc. Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes. The SNPRM published in the Federal Register on October 27, 2015 (80 FR 65666) (“the SNPRM”). We preceded the SNPRM with a notice of proposed rulemaking (NPRM) that published in the Federal Register on October 16, 2012 (77 FR 63282) (“the NPRM”). The NPRM proposed to require revising the maintenance or inspection program to incorporate revised AWL tasks specified in certain technical requirements. The NPRM was prompted by the need for more stringent inspection requirements for certain affected components. The SNPRM proposed to require revising the maintenance or inspection program to incorporate certain revised AWL tasks instead of TRs, and to require repairs of affected components. We are issuing this AD to detect and correct fatigue cracking in the affected components. Such cracking could result in loss of structural integrity.

    Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2012-13, dated April 10, 2012 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes. The MCAI states:

    A revision has been made to Part 2 of the Canadair Regional Jet Maintenance Requirements Manual (MRM), Airworthiness Limitations (AWL), to introduce more stringent inspection requirements for continued airworthiness based on re-analysis, in-service data and/or fatigue testing. Failure to comply with these revised AWL items could lead to an unsafe condition.

    This [Canadian] AD is issued to ensure that fatigue cracking of these affected components [and consequent loss of airplane structural integrity] is detected and corrected.

    Required actions include revising the maintenance program by incorporating the revised inspection requirements specified in certain TRs. 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-2012-1075.

    Comments

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

    Request To Withdraw SNPRM

    Mr. Aaron Ahern stated that the SNPRM must be denied and considered null and void. Mr. Ahern provided no justification for this statement.

    From this statement, we infer that Mr. Ahern is requesting we withdraw the SNPRM. We disagree with the request. It is within our authority to issue ADs to require actions to address unsafe conditions that are not otherwise being addressed (or are not addressed adequately) by normal maintenance procedures. We may address such unsafe conditions by requiring revisions to maintenance or inspection programs as a condition under which airplanes may continue to be operated. We agree with TCCA's finding of an unsafe condition based on analysis, in-service data, and/or fatigue testing. From the data gathered, we have determined that fatigue cracking is likely to exist or develop in certain components of the affected airplanes. As a result, we have determined that the actions required by this AD are necessary to address the identified unsafe condition. We have not changed this final rule in this regard.

    Request To Allow for Other Methods of Compliance

    Air Wisconsin Airlines Corporation (Air Wisconsin) requested that we revise the proposed AD to allow qualified FAA representatives, such as Designated Engineering Representatives (DERs) and Organization Designation Authorization (ODA) holders, to approve repair methods. Air Wisconsin stated that 14 CFR 121.1109 (Supplemental Inspections) requires a certificate holder's maintenance program to include FAA-approved damage tolerance inspections and procedures. Air Wisconsin pointed out that both DERs and ODAs already perform damage tolerance evaluations (DTEs).

    We disagree. While we might authorize a design approval holder's DERs to determine whether a design or repair method complies with a specific requirement of a structural AD, they are not authorized to make the discretionary determination of the applicable requirement. DERs are not authorized to approve repairs as alternative methods of compliance (AMOCs) to ADs, except under specific conditions described in FAA Orders 8110.103, 8100.15, and 8100.37. In addition, this AD already includes a provision for TCCA's Design Approval Organization (DAO) to approve repairs. We have not changed this AD in this regard.

    Request To Confirm Previously Approved Repairs

    Air Wisconsin requested that we confirm whether repairs that may not have been incorporated per paragraphs (k)(2)(i), (k)(2)(ii), and (k)(2)(iii) of the proposed AD (in the SNPRM) are still considered approved for compliance to this AD under paragraph (k)(2) of the proposed AD (in the SNPRM).

    We agree. As long as the previously approved repair meets the requirements of paragraphs (k)(2)(i), (k)(2)(ii), and (k)(2)(iii) of this AD, it does not matter when the repair is actually accomplished. We have clarified paragraph (k)(2)(i) of this AD to reflect this. In response to Air Wisconsin's comment regarding this issue in the NPRM, we had included a provision in paragraph (k)(2)(i) of the proposed AD (in the SNPRM) to allow for previously approved repairs in the inspection area that were approved by the Manager, New York Aircraft Certification Office, ANE-170, FAA; or TCCA; or Bombardier, Inc.'s TCCA DAO, but that provision included the language “the repairs were accomplished.” We have removed that language from paragraph (k)(2)(i) of this AD.

    Request To Reference Revised Service Information

    SkyWest Airlines (SkyWest) requested that we revise the SNPRM to reference the latest service information. SkyWest pointed out that Bombardier has issued Revision 10, dated May 10, 2015, of Part 2, Airworthiness Requirements, of the Bombardier CL-600-2B19 Maintenance Requirements Manual (MRM), CSP A-053.

    We agree to reference Bombardier Revision 10, dated May 10, 2015, of Part 2, Airworthiness Requirements, of the Bombardier CL-600-2B19 MRM, CSP A-053, as the appropriate source of service information for certain requirements of this AD. We have revised this final rule accordingly.

    Request To Remove Requirement That Repair Approvals Refer to the MCAI

    SkyWest requested that we remove the requirement that repair approvals must refer to the MCAI. SkyWest stated that leaving this paragraph in the AD would require SkyWest to request a large number of AMOCs for their fleet as soon as the AD becomes effective. SkyWest asserts that none of the repair engineering orders (REOs) and general repair engineering orders (GREOs) reference the MCAI, and do not have an inspection method.

    We disagree with the request. We are aware of instances of repairs in an affected area that are signed by the foreign authority's authorized delegate, but did not correct the unsafe condition because they were outdated. A repair that references the unsafe condition addressed in the MCAI guarantees an approved repair. A revised service document or AMOC that satisfies the requirements of paragraph (k)(2) of this AD is acceptable. We have not changed this AD in this regard.

    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 SNPRM for correcting the unsafe condition; and

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

    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

    Bombardier, Inc. has issued Appendix B—Airworthiness Limitations, of Part 2 Airworthiness Requirements, Revision 10, dated May 10, 2015, of the Bombardier CL-600-2B19 Maintenance Requirements Manual (MRM) CSP A-053. Appendix B provides specific AWLs, including the following AWLs.

    • AWL 52-11-131, “Passenger door—piano hinge half on door side.” This AWL describes procedures for a detailed visual inspection of the piano hinge half on the passenger door side.

    • AWL 53-11-122, “Windshield center post and bulkhead aft post at FS202.75.” This AWL describes procedures for a special detailed inspection of the windshield center post and bulkhead aft post at fuselage station (FS) 202.75.

    • AWL 53-21-118, “Potable water servicing door cut-out and internal structure.” This AWL describes procedures for a detailed visual inspection of the potable water servicing door cut-out and internal structure.

    • AWL 53-21-129, “Passenger door—piano hinge half on fuselage side.” This AWL describes procedures for a detailed visual inspection of the piano hinge half of the passenger door on the fuselage side.

    • AWL 53-41-199, “FS409.0 +128 vertical posts at BL0.0 and BL18.0 left and right local to WL69.0.” This AWL describes procedures for a special detailed inspection of the FS409.0 +128 left and right vertical posts at buttock line (BL) 0.0 and BL18.0 local to water line (WL) 69.0.

    • AWL 53-41-200, “FS409.0 +128 frame cap aft and fwd splice angles at STR21 left and right.” This AWL describes procedures for a detailed visual inspection of the FS409.0 +128 frame cap aft and forward splice angles at stringer 21.

    • AWL 53-41-201, “FS559.0 pressure bulkhead web and cap angle local to BL9.0 and BL18.0 left and right.” This AWL describes procedures for a special detailed inspection of the left and right FS559.0 pressure bulkhead web and cap angle local to BL9.0 and BL18.0.

    • AWL 53-61-156, “Rear pressure bulkhead forward face below floor.” This AWL describes procedures for a special detailed inspection of the below floor forward face of the rear pressure bulkhead.

    • AWL 54-10-105, “Pylon track and support fitting.” This AWL describes procedures for a special detailed inspection of the pylon track and support fitting.

    • AWL 54-10-106, “Pylon track and support fitting.” This AWL describes procedures for a special detailed inspection of the pylon track and support fitting.

    • AWL 57-21-105, “Lower wing skin, between BL0.0 to wing station (WS) 314.0.” This AWL describes procedures for a detailed visual inspection of the lower wing skin, between BL0.0 to WS314.0.

    • AWL 57-21-112, “Lower wing plank splice joints at BL45.0, WS65.75, and WS148.0.” This AWL describes procedures for a special detailed inspection of the lower wing plank splice joints at BL45.0, WS65.75, and WS148.0.

    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 575 airplanes of U.S. registry.

    We estimate the following costs to comply with this AD:

    Estimated Costs Action Labor cost Cost per
  • product
  • Cost on U.S. operators
    Revising maintenance program 1 work-hour × $85 per hour = $85 $85 $48,875
    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): 2016-17-15 Bombardier, Inc: Amendment 39-18628. Docket No. FAA-2012-1075; Directorate Identifier 2012-NM-111-AD. (a) Effective Date

    This AD is effective October 5, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Bombardier, Inc. Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes, certificated in any category, serial numbers 7003 and subsequent.

    (d) Subject

    Air Transport Association (ATA) of America Code 05, Periodic inspections.

    (e) Reason

    This AD was prompted by the need for more stringent inspection requirements for certain affected components. We are issuing this AD to detect and correct fatigue cracking in the affected components, which could result in loss of structural integrity.

    (f) Compliance

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

    (g) Maintenance Program or Inspection Program Revision

    Within 60 days after the effective date of this AD: Revise the maintenance or inspection program, as applicable, to incorporate the revised inspection requirements specified in the AWLs identified in paragraphs (g)(1) through (g)(12) of this AD. These AWLs are identified in Appendix B—Airworthiness Limitations, of Part 2, Airworthiness Requirements, Revision 10, dated May 10, 2015, of the Bombardier CL-600-2B19 Maintenance Requirements Manual (MRM) CSP A-053.

    (1) AWL 52-11-131, “Passenger door—piano hinge half on door side.”

    (2) AWL 53-11-122, “Windshield center post and bulkhead aft post at FS202.75.”

    (3) AWL 53-21-118, “Potable water servicing door cut-out and internal structure.”

    (4) AWL 53-21-129, “Passenger door—piano hinge half on fuselage side.”

    (5) AWL 53-41-199, “FS409.0+128 vertical posts at BL0.0 and BL18.0 left and right local to WL69.0.”

    (6) AWL 53-41-200, “FS409.0+128 frame cap aft and fwd splice angles at STR21 left and right.”

    (7) AWL 53-41-201, “FS559.0 pressure bulkhead web and cap angle local to BL9.0 and BL18.0 left and right.”

    (8) AWL 53-61-156, “Rear pressure bulkhead forward face below floor.”

    (9) AWL 54-10-105, “Pylon track and support fitting.”

    (10) AWL 54-10-106, “Pylon track and support fitting.”

    (11) AWL 57-21-105, “Lower wing skin, between BL0.0 to WS314.0.”

    (12) AWL 57-21-112, “Lower wing plank splice joints at BL45.0, WS65.75, and WS148.0.”

    (h) Initial Compliance Times for AWL Tasks

    (1) For tasks with phase-in schedules specified in the AWLs identified in paragraphs (g)(1) through (g)(12) of this AD: The initial compliance times are at the applicable times specified in the applicable AWL, or within 60 days after the effective date of this AD, whichever occurs later, except as specified in paragraph (h)(2) of this AD.

    (2) For tasks with no phase-in schedules specified in the AWLs identified in paragraphs (g)(1) through (g)(12) of this AD: The initial compliance times are at the applicable times specified in Appendix B—Airworthiness Limitations, of Part 2, Airworthiness Requirements, Revision 10, dated May 10, 2015, of the Bombardier CL-600-2B19 MRM CSP A-053; or within 1,000 flight cycles after the effective date of this AD; whichever occurs later.

    (i) Corrective Action

    If any damage (including, but not limited to, cracking, corrosion, and wear) is found during any inspection required by any AWL specified in paragraph (g) of this AD: Before further flight, repair using a method approved by the Manager, New York Aircraft Certification Office (ACO), ANE-170, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier, Inc.'s TCCA Design Approval Organization (DAO).

    (j) No Alternative Actions or Intervals

    After accomplishing the revisions required by paragraph (g) of this AD, no alternative actions (e.g., inspections) or intervals may be used other than those specified in the AWLs identified in paragraphs (g)(1) through (g)(12) of this AD; unless the actions and intervals are approved as an AMOC in accordance with the procedures specified in paragraph (k) of this AD, or the actions and intervals are approved as part of a repair specified in paragraph (i) of this AD.

    (k) 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) Previously Approved Repairs: Repairs approved before the effective date of this AD that meet the conditions specified in paragraphs (k)(2)(i), (k)(2)(ii), and (k)(2)(iii) of this AD are acceptable methods of compliance for the repaired area.

    (i) The repairs were approved by the Manager, New York ACO, ANE-170, FAA; or TCCA; or Bombardier, Inc.'s TCCA DAO.

    (ii) The repair approval refers to Mandatory Continuing Airworthiness Information (MCAI) Canadian AD CF-2012-13, dated April 10, 2012, and provides an inspection program (inspection threshold, method, and repetitive interval).

    (iii) The operator has revised its maintenance or inspection program, as applicable, to include the inspection program (inspection threshold, method, and repetitive interval) for the repair.

    (3) 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, New York ACO, ANE-170, FAA; or TCCA; or Bombardier, Inc.'s TCCA DAO. If approved by the DAO, the approval must include the DAO-authorized signature.

    (l) Related Information

    Refer to MCAI Canadian AD CF-2012-13, dated April 10, 2012, for related information. 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-2012-1075.

    (m) 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) Appendix B—Airworthiness Limitations, of Part 2, Airworthiness Requirements, of the Bombardier CL-600-2B19 Maintenance Requirements Manual, Revision 10, dated May 10, 2015.

    (ii) Reserved.

    (3) For service information identified in this AD, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone: 514-855-5000; fax: 514-855-7401; 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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20707 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6415; Directorate Identifier 2015-NM-178-AD; Amendment 39-18626; AD 2016-17-13] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. Airplanes AGENCY:

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

    ACTION:

    Final rule.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model CL-600-2C10 (Regional Jet Series 700, 701, & 702) airplanes. This AD was prompted by two in-service incidents of a loss of all air data information in the flight deck. This AD requires a revision of the airplane flight manual (AFM) emergency procedures section to provide procedures to guide the crew on how to stabilize the airplane airspeed and attitude for continued safe flight when a loss of all air data information has occurred in the flight deck. We are issuing this AD to prevent loss of control when a loss of all air data information has occurred in the flight deck.

    DATES:

    This AD is effective October 5, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 5, 2016.

    ADDRESSES:

    For service information identified in this final rule, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; 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-2016-6415.

    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-2016-6415; 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 Office (telephone 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:

    Assata Dessaline, Aerospace Engineer, Avionics and Services Branch, ANE-172, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7301; fax 516-794-5531.

    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 certain Bombardier, Inc. Model CL-600-2C10 (Regional Jet Series 700, 701, & 702) airplanes. The NPRM published in the Federal Register on May 10, 2016 (81 FR 28768) (“the NPRM”). The NPRM was prompted by two in-service incidents of a loss of all air data information in the flight deck. The NPRM proposed to require a revision of the AFM emergency procedures section to provide procedures to guide the crew on how to stabilize the airplane airspeed and attitude for continued safe flight when a loss of all air data information has occurred in the flight deck. We are issuing this AD to prevent loss of control when a loss of all air data information has occurred in the flight deck.

    Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2015-20, dated July 21, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model CL-600-2C10 (Regional Jet Series 700, 701, & 702) airplanes. The MCAI states:

    Two in-service incidents have been reported on CL-600-2C10 aeroplanes regarding a loss of all air data information in the cockpit. The air data information was recovered as the aeroplane descended to lower altitudes. An investigation determined that the root cause in both events was high altitude icing (ice crystal contamination). If not addressed, this condition may affect continued safe flight.

    Due to similarities in the air data systems, such events could happen on all Bombardier CRJ models, CL-600-2B19, CL-600-2C10, CL-600-2D15, CL-600-2D24 and CL-600-2E25. Therefore, the corrective actions for these models will be mandated once their respective Airplane Flight Manual (AFM) revisions become available.

    This [Canadian] AD mandates the incorporation of AFM procedures to guide the crew to stabilize the aeroplane's airspeed and attitude for continued safe flight.

    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-2016-6415.

    Comments

    We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.

    Conclusion

    We reviewed the relevant data and determined that air safety and the public interest require adopting this AD as proposed except for 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

    Bombardier, Inc. has issued Section 03-19, “Unreliable Airspeed,” of Chapter 3, “Emergency Procedures,” in the Bombardier CRJ Series Regional Jet Model CL-600-2C10 Airplane Flight Manual CSP B-012, Revision 16A, dated November 6, 2015. The service information describes procedures to guide the crew to stabilize the airplane's airspeed and attitude for continued safe flight when a loss of all air data information has occurred in the flight deck. 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 269 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
    Revision 1 work-hour × $85 per hour = $85 $0 $85 $22,865
    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): 2016-17-13 Bombardier, Inc.: Amendment 39-18626; Docket No. FAA-2016-6415; Directorate Identifier 2015-NM-178-AD. (a) Effective Date

    This AD is effective October 5, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Bombardier, Inc. Model CL-600-2C10 (Regional Jet Series 700, 701, & 702) airplanes, certificated in any category, serial numbers 10002 and subsequent.

    (d) Subject

    Air Transport Association (ATA) of America Code 34, Navigation.

    (e) Reason

    This AD was prompted by two in-service incidents of a loss of all air data information in the flight deck. We are issuing this AD to prevent loss of control when a loss of all air data information has occurred in the flight deck.

    (f) Compliance

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

    (g) Airplane Flight Manual (AFM) Revision

    Within 30 days after the effective date of this AD, revise the emergency procedures section of the AFM by incorporating Section 03-19, “Unreliable Airspeed,” of Chapter 3, “Emergency Procedures,” in the Bombardier CRJ Series Regional Jet Model CL-600-2C10 Airplane Flight Manual CSP B-012, Revision 16A, dated November 6, 2015.

    (h) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, New York Aircraft Certification Office (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.

    (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, 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.

    (i) Related Information

    Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian Airworthiness Directive CF-2015-20, dated July 21, 2015, 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-2016-6415.

    (j) 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) Section 03-19, “Unreliable Airspeed,” of Chapter 3, “Emergency Procedures,” in the Bombardier CRJ Series Regional Jet Model CL-600-2C10 Airplane Flight Manual CSP B-012, Revision 16A, dated November 6, 2015.

    (ii) Reserved.

    (3) For service information identified in this AD, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; 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 August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20680 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    FEDERAL TRADE COMMISSION 16 CFR Part 310 RIN 3084-AA98 Telemarketing Sales Rule Fees AGENCY:

    Federal Trade Commission.

    ACTION:

    Final rule.

    SUMMARY:

    The Federal Trade Commission (the “Commission” or “FTC”) is amending its Telemarketing Sales Rule (“TSR”) by updating the fees charged to entities accessing the National Do Not Call Registry (the “Registry”) as required by the Do-Not-Call Registry Fee Extension Act of 2007.

    DATES:

    The revised fees will become effective October 1, 2016.

    ADDRESSES:

    Copies of this document are available on the Internet at the Commission's Web site: http://www.ftc.gov.

    FOR FURTHER INFORMATION CONTACT:

    Ami Joy Dziekan, (202) 326-2648, BCP, Federal Trade Commission, 600 Pennsylvania Avenue NW., Room CC-9225, Washington, DC 20580.

    SUPPLEMENTARY INFORMATION:

    To comply with the Do-Not-Call Registry Fee Extension Act of 2007 (Pub. L. 110-188, 122 Stat. 635) (“Act”), the Commission is amending the TSR by updating the fees entities are charged for accessing the Registry as follows: The revised rule increases the annual fee for access to the Registry for each area code of data from $60 to $61 per area code; increases the maximum amount that will be charged to any single entity for accessing area codes of data from $16,482 to $16,714; and the fee per area code of data during the second six months of an entity's annual subscription period remains $30.

    These increases are in accordance with the Act, which specifies that beginning after fiscal year 2009, the dollar amounts charged shall be increased by an amount equal to the amounts specified in the Act, multiplied by the percentage (if any) by which the average of the monthly consumer price index (for all urban consumers published by the Department of Labor) (“CPI”) for the most recently ended 12-month period ending on June 30 exceeds the CPI for the 12-month period ending June 30, 2008. The Act also states that any increase shall be rounded to the nearest dollar and that there shall be no increase in the dollar amounts if the change in the CPI is less than one percent. For fiscal year 2009, the Act specified that the original annual fee for access to the Registry for each area code of data was $54 per area code, or $27 per area code of data during the second six months of an entity's annual subscription period, and that the maximum amount that would be charged to any single entity for accessing area codes of data would be $14,850.

    The determination whether a fee change is required and the amount of the fee change involves a two-step process. First, to determine whether a fee change is required, we measure the change in the CPI from the time of the previous increase in fees. The last fees increase was for fiscal year 2015. Accordingly, we calculated the change in the CPI since fiscal year 2015, and the increase was 1.41 percent. Because this change is over the one percent threshold, the fees will change for fiscal year 2017.

    Second, to determine how much the fees should increase this fiscal year, we use the calculation specified by the Act set forth above, the percentage change in the baseline CPI applied to the original fees for fiscal year 2009. The average value of the CPI for July 1, 2007 to June 30, 2008 was 211.702; the average value for July 1, 2015 to June 30, 2016 was 238.276, an increase of 12.55 percent. Applying the 12.55 percent increase to the base amount from fiscal year 2009, leads to an increase from $60 to $61 in the fee from last year for access to a single area code of data for a full year for fiscal year 2017. The actual amount is $60.78, but when rounded, pursuant to the Act, the amount is $61. The fee for accessing an additional area code for a half year remains $30 (rounded from $30.39). The maximum amount charged increases to $16,714 (rounded from $16,713.68).

    Administrative Procedure Act; Regulatory Flexibility Act; Paperwork Reduction Act. The revisions to the Fee Rule are technical in nature and merely incorporate statutory changes to the TSR. These statutory changes have been adopted without change or interpretation, making public comment unnecessary. Therefore, the Commission has determined that the notice and comment requirements of the Administrative Procedure Act do not apply. See 5 U.S.C. 553(b). For this reason, the requirements of the Regulatory Flexibility Act also do not apply. See 5 U.S.C. 603, 604.

    Pursuant to the Paperwork Reduction Act, 44 U.S.C. 3501-3521, the Office of Management and Budget (“OMB”) approved the information collection requirements in the Amended TSR and assigned the following existing OMB Control Number: 3084-0097. The amendments outlined in this Final Rule pertain only to the fee provision (§ 310.8) of the Amended TSR and will not establish or alter any record keeping, reporting, or third-party disclosure requirements elsewhere in the Amended TSR.

    List of Subjects in 16 CFR Part 310

    Advertising, Consumer protection, Reporting and recordkeeping requirements, Telephone, Trade practices.

    Accordingly, the Federal Trade Commission amends part 310 of title 16 of the Code of Federal Regulations as follows:

    PART 310—TELEMARKETING SALES RULE 1. The authority citation for part 310 continues to read as follows: Authority:

    15 U.S.C. 6101-6108; 15 U.S.C. 6151-6155.

    2. In § 310.8, revise paragraphs (c) and (d) to read as follows:
    § 310.8 Fee for access to the National Do Not Call Registry.

    (c) The annual fee, which must be paid by any person prior to obtaining access to the National Do Not Call Registry, is $61 for each area code of data accessed, up to a maximum of $16,714; provided, however, that there shall be no charge to any person for accessing the first five area codes of data, and provided further, that there shall be no charge to any person engaging in or causing others to engage in outbound telephone calls to consumers and who is accessing area codes of data in the National Do Not Call Registry if the person is permitted to access, but is not required to access, the National Do Not Call Registry under this Rule, 47 CFR 64.1200, or any other Federal regulation or law. No person may participate in any arrangement to share the cost of accessing the National Do Not Call Registry, including any arrangement with any telemarketer or service provider to divide the costs to access the registry among various clients of that telemarketer or service provider.

    (d) Each person who pays, either directly or through another person, the annual fee set forth in paragraph (c) of this section, each person excepted under paragraph (c) from paying the annual fee, and each person excepted from paying an annual fee under § 310.4(b)(1)(iii)(B), will be provided a unique account number that will allow that person to access the registry data for the selected area codes at any time for the twelve month period beginning on the first day of the month in which the person paid the fee (“the annual period”). To obtain access to additional area codes of data during the first six months of the annual period, each person required to pay the fee under paragraph (c) must first pay $61 for each additional area code of data not initially selected. To obtain access to additional area codes of data during the second six months of the annual period, each person required to pay the fee under paragraph (c) must first pay $30 for each additional area code of data not initially selected. The payment of the additional fee will permit the person to access the additional area codes of data for the remainder of the annual period.

    By direction of the Commission.

    Donald S. Clark, Secretary.
    [FR Doc. 2016-20817 Filed 8-30-16; 8:45 am] BILLING CODE 6750-01-P
    TENNESSEE VALLEY AUTHORITY 18 CFR Part 1304 When Obstructions on Certain Tributaries of the Tennessee River Do Not Require a Section 26a Permit from the Tennessee Valley Authority AGENCY:

    Tennessee Valley Authority.

    ACTION:

    Interpretive Rule.

    SUMMARY:

    The Tennessee Valley Authority (TVA) is issuing guidance stating that certain structures, while obstructions across, along, or in certain tributaries of the Tennessee River, do not need a Section 26a permit from TVA, because they have an indiscernible effect on navigation, flood control or public lands or reservations.

    DATES:

    Effective August 31, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Rebecca C. Tolene, Vice President, Natural Resources, Tennessee Valley Authority, Knoxville, Tennessee (865-632-4433).

    SUPPLEMENTARY INFORMATION:

    I. Legal Authority

    This interpretive rule is promulgated under the authority of the TVA Act, as amended, 16 U.S.C. 831-831ee.

    II. Background

    Section 26a of the TVA Act requires that TVA's approval be obtained prior to the construction, operation, or maintenance of any dam, appurtenant works, or other obstruction affecting navigation, flood control, or public lands or reservations across, along, or in the Tennessee River or any of its tributaries. 16 U.S.C. 831y-1 (2012). TVA's rules governing such approval are codified at 18 CFR part 1304. The rules include a permitting process whereby applicants may request from TVA a permit for various structures such as boat docks, piers, shoreline stabilization projects, dams, and bridges, all of which qualify as “obstructions” under TVA's regulations. An obstruction is generally any man-made physical condition that during its continuance after completion impounds, checks, hinders, restricts, retards, diverts, or otherwise interferes with the movement of water or of objects on or in the water. Over the years, TVA has found that certain obstructions because of their location, the nature of their construction, or both have not discernibly interfered with the operation or management of the TVA reservoir system. In particular, this has occurred at locations across, along, or in certain tributary reaches that are upstream of the control or influence of TVA's reservoir system operations. For the purpose of this rule, these are called upstream tributary reaches. At these locations, certain obstructions have an indiscernible impact on water surface elevations in the reservoir system or the flow or volume of water entering the reservoir system and thereby do not materially interfere with TVA's flood control or navigation responsibilities. Furthermore, at these locations, TVA does not typically own property and therefore construction does not affect or interfere with the management of TVA's property. These obstructions include, but are not limited to, stream bank stabilization, bridges and culverts, stream crossings, fences, launching ramps, boat docks, piers, and certain fills and intakes. For these reasons, TVA has determined that certain obstructions do not require approval pursuant to Section 26a of the TVA Act when located across, along, or in an upstream tributary reach of the Tennessee River.

    Conversely, based on years of permitting experience, TVA has found that other obstructions across, along, or in upstream tributary reaches do potentially interfere with the management of TVA's reservoir system. These include, but are not limited to, structures such as dams, impoundments, interbasin transfers and certain water intakes. TVA will continue to require approval of these and other obstructions not set forth in Section III of this Interpretive Rule, when located across, along, or in an upstream tributary reach.

    The Tennessee River has a 41,000-square-mile drainage basin. Thousands of miles of upstream tributary reaches ultimately flow into the Tennessee River, making it impractical to identify each upstream tributary reach in this rule. For the purpose of this rule, upstream tributary reaches do not include the following:

    (1) The Tennessee River;

    (2) TVA reservoirs, (TVA reservoirs are listed in Table 1);

    (3) stream reaches within a TVA reservoir, the 500-year floodplain of the Tennessee River, or both;

    (4) stream reaches downstream of a TVA dam (these reaches are listed in Table 2); and

    (5) stream reaches where TVA owns property (whether fee-owned property or other property right, such as a right to flood) in or adjacent to the reach (including property adjacent to a TVA reservoir or downstream of a TVA dam).

    TVA will continue to review the proposed construction of obstructions located across, along, or in the above-listed five categories of reservoirs and reaches. These reservoirs and stream reaches are controlled or influenced by the operation of TVA's reservoir system. As discussed in more detail below, individual members of the public are encouraged to contact a TVA representative for help in determining whether their location is across, along, or in a reservoir or stream reach in the above-listed five categories or across, along, or in an upstream tributary reach.

    III. Scope of Interpretive Rule

    TVA hereby clarifies that, going forward, the construction of the following obstructions across, along, or in an upstream tributary reach of the Tennessee River, does not require a Section 26a permit from TVA:

    (a) Stream bank, bed, or channel stabilization structures—Natural or man-made obstructions to stabilize and protect banks, beds, or channels of streams or excavated channels (e.g., vegetation, riprap, gabions, fiber rolls, stacked rock, retaining walls, etc.);

    (b) Stream restoration, enhancement, relocation, or treatment structures—Natural or man-made obstructions for relocating a stream or for restoring or improving the stream's function (e.g., weirs or sills, boulders, wing deflectors, log, brush, rock, trees, fill, etc.);

    (c) Bridges and culverts including riprap or other stabilization necessary for their construction;

    (d) Stream crossings—A stabilized area or a structure (culvert, bridge, or fill) constructed across a stream to provide a travel-way for people, livestock, equipment, or vehicles, including riprap or other stabilization necessary for their construction;

    (e) Fences, playgrounds, picnic tables, benches, grills, and other recreational structures;

    (f) Launching ramps and marine railways;

    (g) Buoys;

    (h) Docks, piers, and other water-use facilities;

    (i) Decks, gazebos, patios, and other open structures;

    (j) Enclosed land-based structures;

    (k) Water intakes with a combined peak withdrawal of less than 50,000 gallons per day (0.08 cubic feet per second) and having a pipe diameter less than 6 inches;

    (l) Towers, poles, electrical panels, satellite antennas, service lights, signs, and their anchors and foundations;

    (m) Outfall structures;

    (n) Underground, submarine, or aerial utility pipes and lines and their support structures, anchors or foundations;

    (o) Causeways, roads, driveways, and parking lots;

    (p) Grading and fill not involving the construction of a dam or impoundment.

    Those considering construction of one or more of the above-listed obstructions across, along, or in an upstream tributary reach as defined in this rule are not required to submit an application or design drawings to TVA for approval of a Section 26a permit.

    Members of the public are responsible for knowing whether their proposed construction project is located across, along, or in an upstream tributary reach or on TVA property. If your proposed obstruction is located on TVA property, in addition to a Section 26a permit for the obstruction, approval from TVA to use the property may be required. TVA encourages members of the public to seek TVA's help in identifying whether a Section 26a permit or TVA approval to use its property is necessary. For more information or assistance in determining whether your project requires a Section 26a permit, contact TVA at 1-800-882-5263 or visit TVA's Web site at tva.com.

    Except as it applies to TVA's regulations implementing Section 26a, this interpretive rule is not a substitute for the requirements of any federal, state, or local statute, regulation, ordinance, or code, including, but not limited to, applicable building codes, now in effect or hereafter enacted.

    This guidance reflects TVA's current judgment on the types of obstructions that either individually or cumulatively do not affect navigation, flood control, or public lands or reservations across, along, or in an upstream tributary reach of the Tennessee River. TVA may refine this guidance, if circumstances warrant, in a future Federal Register notice. This guidance has no effect on whether a permit is required by other federal or state agencies.

    IV. Definitions Fee-owned property—Real property owned in fee by the United States of America in the custody and control of TVA. Property—Fee-owned property or other property right, such as a right to flood. Property right—Any legal right acquired or reserved by TVA that concerns property, such as a right to flood private property. Reach—A segment of stream between two locations. Tennessee River—The river reach from its mouth at the Ohio River to its beginning at mile 652, at the confluence of the Holston and French Broad Rivers. Tributary—Any watercourse the contents of which, if not obstructed, diverted or consumed, will ultimately flow into the Tennessee River. TVA reservoir—The impoundment created by a TVA dam constructed across the Tennessee River or one of its tributaries (including all streams reaches impounded by the dam). One dam may impound reaches of more than one stream. The impounded stream reaches together form the body of water (i.e., the reservoir) created by the construction of the dam. For example, the construction of Douglas Dam impounded a portion of the French Broad River as well as many other stream reaches, including, but not limited to, portions of Pigeon River, Nolichucky River, Flat Creek, Muddy Creek, and Seahorn Creek. All of the stream reaches impounded by Douglas Dam comprise Douglas Reservoir. TVA reservoir system—The series of interconnected dams and reservoirs, with associated facilities, on the Tennessee River and its tributaries, that, with the adjacent TVA property, are managed by TVA for purposes of navigation, flood control, and power production; and consistent with those purposes, for a wide range of other public benefits. Upstream tributary reach—Stream reaches located upstream of the control or influence of the operation of the TVA reservoir system. Dated: August 17, 2016. Rebecca C. Tolene, Deputy General Counsel and Vice President, Natural Resources. Table 1—TVA Reservoirs Tennessee River Reservoirs Kentucky Pickwick Wilson Wheeler Guntersville Nickajack Chickamauga Watts Bar Fort Loudoun Tributary Reservoirs Apalachia. Bear Creek Projects (Alabama): Beaver Creek (tributary to South Fork Holston River). Bear Creek.
  • Cedar Creek.
  • Blue Ridge. Little Bear Creek. Boone. Upper Bear Creek. Chatuge. Beech River Projects (West Tennessee): Cherokee. Beech. Clear Creek (tributary to Beaver Creek, tributary to South Fork Holston River). Cedar.
  • Dogwood.
  • Doakes Creek (Norris Reservoir). Lost Creek. Douglas. Pine. Fontana. Pin Oak. Fort Patrick Henry. Redbud. Hiwassee. Sycamore. John Sevier Detention Dam (just upstream of Cherokee Reservoir) Melton Hill Nolichucky Normandy Norris Nottely Ocoee No. 1 Ocoee No. 2 Ocoee No. 3 South Holston Tellico Tims Ford Watauga Wilbur
    Table 2—Stream Reaches Downstream of TVA dams River or stream Reach (mile) Description Tennessee River 0 to 652 Mouth to confluence of the Holston and French Broad Rivers. Beaver Creek (tributary to South Fork Holston River) 0 to 22.5 Mouth to Beaver Creek Dam. Clear Creek (tributary to Beaver Creek tributary to South Fork Holston River) 0 to 2.8 Mouth to Clear Creek Dam. Clinch River 0 to 79.8 Mouth to Norris Dam. Duck River 0 to 248.6 Mouth to Normandy Dam. Elk River (tributary to Tennessee River) 0 to 133.3 Mouth to Tims Ford Dam. French Broad River 0 to 32.3 Mouth to Douglas Dam. Hiwassee River 0 to 121.0 Mouth to Chatuge Dam. Holston River 0 to 142.2 Mouth to confluence of the North and South Fork Holston Rivers. Little Tennessee River 1 0 to 61.0 Mouth to Fontana Dam. Nolichucky River 0 to 45.6 Mouth to Nolichucky Dam. Nottely River 0 to 21.0 Mouth to Nottely Dam. Ocoee River 0 to 37.8 Mouth to the Georgia/Tennessee State Line. South Fork Holston River 0 to 49.8 Mouth to South Holston Dam. Toccoa River 0 to 53.0 The Georgia/Tennessee State Line to Blue Ridge Dam. Watauga River 0 to 36.7 Mouth to Watauga Dam. Bear Creek Projects (Alabama): Bear Creek 0 to 114.7 Mouth to Upper Bear Creek Dam. Cedar Creek 0 to 23.1 Mouth to Cedar Creek Dam. Little Bear Creek 0 to 11.6 Mouth to Little Bear Creek Dam. Beech River Projects (West Tennessee): Beech River 0 to 35.0 Mouth to Beech Dam. Big Creek 0 to 6.7 Mouth to Dogwood Dam. Browns Creek 0 to 5.1 Mouth to Pin Oak Dam. Dry Branch 0 to 1.1 Mouth to Sycamore Dam. Dry Creek 0 to 1.0 Mouth to Redbud Dam. Haley Creek 0 to 4.0 Mouth to Cedar Dam. Lost Creek 0 to 1.3 Mouth to Lost Creek Dam. Piney Creek 0 to 4.8 Mouth to Pine Dam. 1 Brookfield Smoky Mountain Hydro manages Little Tennessee River Miles 33.6 to 59.1.
    [FR Doc. 2016-20093 Filed 8-30-16; 8:45 am] BILLING CODE 8120-08-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9784] RIN 1545-BM05 Definition of Real Estate Investment Trust Real Property AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Final regulations.

    SUMMARY:

    This document contains final regulations that clarify the definition of real property for purposes of the real estate investment trust provisions of the Internal Revenue Code (Code). These final regulations provide guidance to real estate investment trusts and their shareholders.

    DATES:

    Effective date: These regulations are effective on August 31, 2016.

    Applicability date: For dates of applicability, see § 1.856-10(h).

    FOR FURTHER INFORMATION CONTACT:

    Julanne Allen of the Office of Associate Chief Counsel (Financial Institutions and Products) at (202) 317-6945 (not a toll-free number).

    SUPPLEMENTARY INFORMATION:

    Background

    This document contains amendments to the Income Tax Regulations (26 CFR part 1) relating to real estate investment trusts (REITs). Section 856 of the Code defines a REIT by setting forth various requirements. One of the requirements for a taxpayer to qualify as a REIT is that at the close of each quarter of the taxable year at least 75 percent of the value of its total assets is represented by real estate assets, cash and cash items (including receivables), and Government securities. See section 856(c)(4). Section 856(c)(5)(B) defines real estate assets to include real property (including interests in real property and interests in mortgages on real property). Section 856(c)(5)(C) defines interests in real property to include fee ownership and co-ownership of “land or improvements thereon.” Prior to these final regulations, § 1.856-3(d) of the Income Tax Regulations, promulgated in 1962 in TD 6598 (the 1962 Regulations), defined real property for purposes of the regulations under sections 856 through 859. Under § 1.856-3(d) of the 1962 Regulations, the term real property means land or improvements thereon, such as buildings or other inherently permanent structures thereon (including items which are structural components of such buildings or structures). In addition, the term “real property” includes interests in real property. Local law definitions will not be controlling for purposes of determining the meaning of the term “real property” as used in section 856 and the regulations thereunder. The term includes, for example, the wiring in a building, plumbing systems, central heating, or central air-conditioning machinery, pipes or ducts, elevators or escalators installed in the building, or other items which are structural components of a building or other permanent structure. The term does not include assets accessory to the operation of a business, such as machinery, printing press, transportation equipment which is not a structural component of the building, office equipment, refrigerators, individual air-conditioning units, grocery counters, furnishings of a motel, hotel, or office building, etc., even though such items may be termed fixtures under local law.

    The IRS issued revenue rulings between 1969 and 1975 addressing whether certain assets qualify as real property for purposes of section 856. Specifically, the published rulings address whether assets such as railroad properties,1 mobile home units permanently installed in a planned community,2 air rights over real property,3 interests in mortgage loans secured by total energy systems,4 and mortgage loans secured by microwave transmission property 5 qualify as either real property or interests in real property under section 856. After these published rulings were issued, REITs invested in various types of assets that are not directly addressed by the regulations or the published rulings, and some of these REITs received letter rulings from the IRS concluding that certain of these various assets qualified as real property. A letter ruling, however, may not be relied upon by taxpayers other than the taxpayer that received the letter ruling 6 and is limited to its particular facts. The Treasury Department and the IRS recognized the need to provide updated published guidance on the definition of real property under sections 856 through 859. On May 14, 2014, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking (REG-150760-13 at 79 FR 27508) (NPRM) to define “real property” solely for purposes of sections 856 through 859 and provisions that reference the definition of real property in section 856 and the regulations thereunder.

    1 Rev. Rul. 69-94 (1969-1 CB 189).

    2 Rev. Rul. 71-220 (1971-1 CB 210).

    3 Rev. Rul. 71-286 (1971-2 CB 263).

    4 Rev. Rul. 73-425 (1973-2 CB 222).

    5 Rev. Rul. 75-424 (1975-2 CB 269).

    6 Rev. Proc. 2016-1 (2016-1 IRB 1), section 11.02; see section 6110(k)(3) of the Code.

    Written and electronic comments responding to the NPRM were received. The written comments are available for public inspection at http://www.regulations.gov or upon request. A public hearing was held on September 18, 2014.

    After consideration of all the comments, these final regulations adopt the proposed regulations as revised by this Treasury decision.7 The comments and revisions are discussed in this preamble.

    7 Under section 856(c)(2) and (3), in order for an entity to qualify as a REIT, certain prescribed percentages of that entity's gross income must be derived from certain types of income (which include “rents from real property” and “interest on obligations secured by mortgages on real property or on interests in real property”). The definition of real property in these final regulations applies for purposes of section 856(c)(2) and (3), but these final regulations provide neither explicit nor implicit guidance regarding whether various types of income are described in section 856(c)(2) and (3).

    Summary of Comments and Explanation of Revisions I. The Definition of Land

    The proposed regulations defined the term “land” to include water and air space superjacent to land and natural products and deposits that are unsevered from the land. A commenter requested clarification that land includes water space and air space above ground that the taxpayer does not own. For example, a taxpayer may own a building and purchase air rights superjacent to one or more neighboring buildings to enhance the value of the building the taxpayer owns, or a taxpayer may purchase air rights in anticipation of using those rights to facilitate the future acquisition or development of property. The Treasury Department and the IRS agree that air space or water space superjacent to land each qualify as land even if the taxpayer owns only the air space or water space and does not own an interest in the underlying land. The proposed regulations stated that superjacent water and air space qualify as land, and these final regulations retain the language of the proposed regulations.

    II. The Definition of Improvements to Land

    The proposed regulations generally defined the term “improvements to land” to mean inherently permanent structures (IPSs) and their structural components. A commenter recommended that these final regulations clarify that clearing, grading, landscaping, and earthen dams should be treated as improvements to land. The Treasury Department and the IRS believe that, to the extent these assets are distinct assets that have value apart from the land, the REIT must analyze these assets separately under these final regulations. For example, if landscaping includes shrubs planted in the ground, the shrubs are within the definition of land in these final regulations so long as the shrubs remain unsevered natural products of the land. If, however, landscaping includes a bench that is a distinct asset, the bench is analyzed under the factors for an IPS in these final regulations to determine whether the bench is real property.

    III. The Definition of IPS A. Passive Function Requirement and Active Function Prohibition 1. In General

    Under the proposed regulations, IPSs include buildings and other inherently permanent structures (OIPSs). To qualify as an OIPS under the proposed regulations, a structure must serve a passive function, such as contain, support, shelter, cover, or protect, and not serve an active function, such as manufacture, create, produce, convert, or transport. Commenters suggested that use of the terms active and passive may cause confusion because, for example, REITs may be engaged in the active conduct of a trade or business within the meaning of section 355(b) solely by virtue of functions with respect to rental activity that produce income qualifying as rents from real property within the meaning of section 856(d).8

    8 See Rev. Rul. 2001-29 (2001-1 CB 1348).

    During the hearing, a commenter stated that REITs may perform certain services and that the requirement that an IPS serve a passive function may be at odds with this permissible activity. This commenter suggested that the requirement be revised to: (1) State that OIPSs serve a real estate-related function; (2) require that the asset not primarily contribute to the production of income other than for the use, occupancy, or financing of space; or (3) not include the terms passive and active when describing permissible and prohibited functions. Other commenters suggested that the function of a distinct asset not be considered in determining whether the distinct asset is an OIPS. These commenters maintained that inherent permanence should be the only requirement for a distinct asset to qualify as an OIPS.

    These final regulations do not adopt these suggestions. These final regulations address whether the asset itself has a passive function, not whether the asset is used in an active trade or business or whether income from the asset is income from an active trade or business. The requirement in the proposed regulations and in these final regulations that an asset serve a passive function is intended to be a more precise statement of the distinction previously set forth in § 1.856-3(d) of the 1962 Regulations, which treated as real property certain passive assets but not assets accessory to the operation of a business, including machinery. The Treasury Department and the IRS believe that the terms passive and active, when taken together with the examples in these final regulations, appropriately clarify and illustrate the permissible functions of an OIPS. The passive function requirement neither prohibits a tenant from using a passive asset, such as an office building, in the tenant's active business nor limits a REIT's ability to perform either the services excepted under section 856(d)(7)(C)(ii) or the trustee or director functions permitted by § 1.856-4(b)(5)(ii).

    The Treasury Department and the IRS believe that the commenters' suggested real estate-related standard is circular and might support real property treatment for assets that serve active functions. Further, the Treasury Department and the IRS do not agree that inherent permanence alone is a sufficient basis for a distinct asset to be treated as an IPS. For example, the Treasury Department and the IRS continue to believe that some inherently permanent assets, such as large, heavy machinery, do not qualify as real property for purposes of section 856.

    A commenter suggested replacing the passive function requirement with a test that focuses on an asset's human factor, which the commenter defined as whether, and the extent to which, human involvement is needed for an asset to function. This commenter contended that human involvement is a characteristic of an active function and, therefore, should be taken into account in determining whether a particular asset is active or passive. The Treasury Department and the IRS disagree and continue to believe that machinery, including automated machinery that functions with little or no human involvement, does not qualify as real property for purposes of section 856.

    2. Transport as a Prohibited Active Function

    The proposed regulations listed transport as an active function. Commenters noted that this active function differs from the other four active functions (manufacture, create, produce, and convert) that involve changing the physical nature or character of a commodity or good. Commenters also suggested that some of the assets on the list of types of OIPSs in the proposed regulations, such as railroad tracks and tunnels, help to transport a good or a commodity.9

    9 Commenters also noted that several assets listed as structural components, such as elevators and escalators, transport objects or occupants of a building. A structural component may have an active function if the structural component serves the passive function of the IPS of which it is constituent.

    The Treasury Department and the IRS agree that the term transport could be interpreted to describe functions of both passive conduits used for transportation and machines that push or pull items through or along a conduit. The Treasury Department and the IRS intend the term transport to mean to cause to move, and these final regulations retain transport as a prohibited active function of an OIPS. To provide clarity, these final regulations include providing a conduit (such as in the case of a pipeline or electrical wire) or route (as in the case of a road or railroad track) as a permitted passive function of an OIPS.

    3. Assets With Both Active and Passive Functions

    In addition to other requirements, § 1.856-10(d)(2)(i) of the proposed regulations stated that a distinct asset that serves an active function, such as machinery or equipment, is not a building or OIPS.

    Commenters suggested that solar panels can perform dual functions, including a passive function (that is, to shelter) and an active function (that is, to convert (energy)). Commenters stated that solar panels may be used to protect pastures, parking lots, buildings, and other structures from the detrimental effects of solar radiation and to manage temperature through shading. The structures to which solar panels are attached—or even into which they are integrated—may qualify as IPSs under the proposed regulations.

    The Treasury Department and the IRS note that the example given by the commenters presumes that the solar panel structure is a single distinct asset that serves a passive function of sheltering and an active function of converting energy for sale to third parties. If this were the case, the solar panel structure would fail to qualify as an IPS under § 1.856-10(d)(2)(i) of the proposed regulations as a result of the structure's active function. If, however, a solar panel structure is composed of multiple distinct assets, then each of those distinct assets would be analyzed under the proposed regulations to determine whether it qualifies as an IPS or as a structural component of an IPS.10 Because these final regulations retain the requirement that an IPS not serve an active function, machinery and equipment that may serve both passive and active functions are excluded from the definition of an IPS.

    10 A similar analysis was applied to the solar energy site assets in § 1.856-10(g), Example 8, of the proposed regulations.

    B. Definition of Building

    Section 1.856-10(d)(2)(ii)(A) of the proposed regulations stated that a building encloses a space within its walls and is covered by a roof. Examples given in § 1.856-10(d)(2)(ii)(B) of the proposed regulations were permanently affixed houses, apartments, hotels, factory and office buildings, warehouses, barns, enclosed garages, enclosed transportation stations and terminals, and stores.

    During the hearing, a commenter stated that for appraisal purposes, buildings are considered to be buildings regardless of their permanence. This commenter suggested that these final regulations should adopt standards published by an appraisal organization to define real property.

    Section 1.856-3(d) of the 1962 Regulations indicates that inherent permanence is important in determining whether a structure qualifies as real property. A tent, for example, may satisfy the portion of the definition of a building in the proposed regulations that referenced enclosing within its walls a space that is covered by a “roof,” but the impermanent nature of the tent would prevent it from qualifying as a building for purposes of section 856. The purposes of definitions used by appraisal organizations, which focus on valuation, differ from the purposes of definitions used for REIT qualification purposes. For example, although both permanent and impermanent property may be appraised, permanence is of crucial importance in defining real property for REIT qualification purposes. Therefore, these final regulations do not adopt standards published by an appraisal organization.

    Another commenter urged the Treasury Department and the IRS to change the definition of building in these final regulations so that the definition does not depend on whether a space is completely enclosed by its walls and covered by a roof. The commenter stated that even an outdoor sports stadium or amphitheater and an unenclosed parking garage that are permanently affixed to land or another IPS may fail to qualify as buildings under the proposed regulations.

    The Treasury Department and the IRS agree that these structures may fail to meet the definition of building under the proposed regulations. The Treasury Department and the IRS believe, however, that many outdoor sports stadiums, amphitheaters, and unenclosed parking garages would satisfy the definition of an OIPS in § 1.856-10(d)(2)(iii) of the proposed regulations and that this definition is more appropriate for these structures. Therefore, the definition of building in the proposed regulations is retained in these final regulations.

    C. Clarification of the Term Indefinitely

    The proposed regulations stated that, to qualify as an IPS, a distinct asset must be permanently affixed and that if the affixation is reasonably expected to last indefinitely based on all the facts and circumstances, the affixation is considered permanent.

    Commenters indicated that the term indefinitely as used in determining whether an asset is an IPS was unclear. A commenter suggested using an asset's useful life as an alternate to indefinitely. The Treasury Department and the IRS have concluded that relying on the useful life of an asset as the measure for permanence would have the effect of treating certain impermanent assets as real property. For example, if an asset has a useful life of two years, it would be inappropriate for the asset to be treated as permanently affixed solely because the asset was reasonably expected to remain in place for two years.

    Another commenter provided the example of a REIT that constructs a building on land on which the REIT holds a 99-year ground lease. Upon expiration of the lease, the building is subject to removal. In this case, the building may not be on the land in 100 years. Another commenter provided the example of a building that is subject to condemnation and that will be torn down in the future.

    Another commenter suggested that whether an asset is inherently permanent should be based upon an objective analysis of the physical nature of the manner of affixation, rather than on a particular taxpayer's subjective intent. This commenter recommended that if the manner of affixation is of a permanent nature and is consistent with the distinct asset remaining in place indefinitely based on all the facts and circumstances, the affixation is considered permanent. Commenters also urged the Treasury Department and the IRS to provide a statement in the preamble to these final regulations that indefinitely does not mean forever but rather means for the foreseeable future.

    The Treasury Department and the IRS do not intend the term indefinitely to mean forever. The proposed regulations stated that whether affixation is reasonably expected to last indefinitely is based on all the facts and circumstances. Section 1.856-10(d)(2)(iv) provides factors that must be taken into account to determine whether a distinct asset is an IPS if that distinct asset is not included in the lists of types of buildings in § 1.856-10(d)(2)(ii)(B) or types of OIPSs in § 1.856-10(d)(2)(iii)(B). These factors provide additional guidance on the meaning of permanent affixation. The primary focus of these factors is on the nature of the distinct asset and the affixation, including the manner in which the distinct asset is affixed, whether the distinct asset is designed to be removed, the damage that removal would cause, and the time and expense required to move the distinct asset. Although one factor includes any circumstances that suggest the expected period of affixation is not indefinite and provides as an example a lease that requires or permits removal of the distinct asset upon the expiration of the lease, the determination of whether a distinct asset is an IPS is based on all of the facts and circumstances.

    These final regulations do not adopt these suggestions and, because the Treasury Department and the IRS do not believe additional guidance regarding inherent permanence is necessary, retain the definition of IPS as proposed.

    D. Suggested Presumption for Structures With a Certificate of Occupancy or Similar License

    A commenter agreed that state or local definitions of property should not control for purposes of the definition of real property under section 856, but suggested that when a certificate of occupancy or similar license or certification is granted with respect to a structure, the structure be presumed to constitute real property for purposes of section 856 unless the facts and circumstances clearly indicate that the structure is not permanent.

    Local law standards for a certificate of occupancy or similar license or certification might be inconsistent with the definition of real property for purposes of section 856. For example, local law might permit issuance of a certificate of occupancy for a tent that is not inherently permanent. In addition, this presumption might lead to inconsistent results. For example, two identical assets located in localities that use different standards for licensing might be treated differently for purposes of section 856 because a certificate of occupancy has been granted to one of the assets and not to the other. For these reasons, we believe the suggested presumption would create confusion and administrative difficulty, and, therefore, these final regulations do not adopt this comment.

    IV. The Definition of Structural Component A. Income Produced by a Structural Component

    In generally defining the term structural component, § 1.856-10(d)(3)(i) of the proposed regulations stated, in part, that a structural component is any distinct asset that is a constituent part of and integrated into an IPS, serves the IPS in its passive function, and, even if capable of producing income other than consideration for the use or occupancy of space, does not produce or contribute to the production of such income.

    A commenter requested that the words “and related services” be added to the language of § 1.856-10(d)(3)(i). If that request were adopted, structural components would include assets that serve the IPS and even if capable of producing income other than consideration for the use or occupancy of space and related services, do not produce or contribute to the production of such income (emphasis added to indicate commenter's suggested language). The commenter stated that REITs use property such as the systems that supply utilities to a building to provide services to tenants. The commenter explained that a REIT may receive additional compensation to cover utilities that the REIT provides to the tenant when the tenant uses space in the building outside of specified business hours.

    The Treasury Department and the IRS have concluded that the definition of structural component in the proposed regulations adequately accounts for the concerns raised by the commenter, and accordingly these final regulations do not incorporate the commenter's suggested revision.

    B. Proposed Utility Safe Harbor for Structural Components

    A commenter recommended that these final regulations adopt a safe harbor for distinct assets that provide utilities to IPSs. The commenter recognized that the utility-like function aspect of the definition in the proposed regulations underscores the importance of that type of structural component and suggested that a distinct asset that serves a utility-like function with respect to an IPS should be conclusively presumed to be a structural component of that IPS.

    The Treasury Department and the IRS note that the list of types of structural components in the proposed regulations included several utility-like systems, such as plumbing systems, central heating and air-conditioning systems, fire suppression systems, central refrigeration systems, and humidity control systems. The Treasury Department and the IRS may add other systems that satisfy the factors in § 1.856-10(d)(3)(iii) to the structural component list through future guidance published in the Internal Revenue Bulletin. The proposed regulations differentiated systems that perform utility-like functions from other distinct assets to permit analysis of these systems as a whole. Under the proposed regulations, once it has been determined that an asset or assets function as a utility-like system, the system is analyzed as a distinct asset basing the determination of whether the system is real property on all of the facts and circumstances and using the factors listed under § 1.856-10(d)(3)(iii) for structural components. A system or asset that provides a utility but that does not qualify as a structural component under the facts and circumstances test under § 1.856-10(d)(3)(iii) (for example, a window air-conditioning unit) is not a structural component.

    Because the Treasury Department and the IRS believe that the factors listed under § 1.856-10(d)(3)(iii) for structural components are important to the analysis of systems that provide a utility-like function these final regulations decline to adopt the blanket rule suggested by the commenter.

    C. The Equivalent Interest Requirement for Structural Components

    Section 1.856-10(d)(3)(i) of the proposed regulations stated that a distinct asset is a structural component if the interest held therein is included with an equivalent interest held by the taxpayer in the IPS to which the structural component is functionally related. Commenters suggested that the equivalent interest requirement for structural components be deleted or amended because the requirement: (1) Is inconsistent with industry practices and an asset should qualify as a structural component even if the REIT owns the asset but leases from another party the building served by the structural component; (2) may negatively affect investment in energy efficient and renewable energy assets; (3) was not explained in the proposed regulations and seemingly serves no tax policy purpose; and (4) is contrary to congressional intent, case law, and the treatment of structural components by the IRS in other contexts.

    The Treasury Department and the IRS intended that the equivalent interest requirement in the proposed regulations ensure that an asset did not qualify as a structural component unless that asset served real property in which the REIT also had an interest. The Treasury Department and the IRS set forth a similar requirement in Rev. Rul. 73-425, which addresses notes secured by a total energy system. Rev. Rul. 73-425 holds that obligations secured by a mortgage covering a total energy system and the building that the system served qualify as real estate assets. The revenue ruling also holds that an obligation secured only by the total energy system does not qualify as a real estate asset.

    The Treasury Department and the IRS believe that, to treat an asset as a structural component, a REIT must hold its interest in the structural component together with a real property interest with respect to the space in the IPS that the structural component serves. For example, a central air-conditioning system is a machine that does not separately qualify as an IPS. A central air-conditioning system that is wholly owned by a REIT may, however, qualify as a structural component if the REIT also holds a real property interest, such as a leasehold interest, with respect to the space in the IPS served by the central air-conditioning system. Limiting the definition of structural component to assets that serve an IPS in which the REIT has a real property interest is consistent with the statutory requirement that REITs invest in real property or interests in real property.

    For these reasons, these final regulations provide that a distinct asset qualifies as a structural component only if the REIT holds its interest in the distinct asset together with a real property interest with respect to the space in the IPS that the distinct asset serves. In addition, as illustrated by Rev. Rul. 73-425, for a mortgage that is secured by a structural component to qualify as a real estate asset under these final regulations, the mortgage also must be secured by the IPS served by the structural component.

    D. Suggested Standard for Structural Components

    Section 1.856-10(3)(i) of the proposed regulations defined a structural component to include a distinct asset that serves the IPS in its passive function, and, even if capable of producing income other than consideration for the use or occupancy of space, does not produce or contribute to the production of such income. Section 1.856-10(d)(3)(ii) of the proposed regulations furnished a list of distinct assets that are structural components. The proposed regulations also stated that a distinct asset that was not on this list might still be a structural component based on all of the facts and circumstances. In particular, the proposed regulations required the factors listed under § 1.856-10(d)(3)(iii) to be taken into account.

    A commenter suggested that the standard for a structural component should be revised so that a structural component is defined as a distinct asset that is intended to protect, preserve, secure, or support the safe operation of the IPS. The commenter suggested that satisfying this standard should be sufficient to determine if a distinct asset is a structural component and, therefore, the structural component factor test under § 1.856-10(d)(3)(iii) of the proposed regulations is unnecessary.

    These final regulations do not adopt the commenter's suggestion because the standard suggested would in some circumstances unduly limit the functions a structural component may serve and in other circumstances unduly expand the functions a structural component may serve. The Treasury Department and the IRS do not believe this modification is necessary given these final regulations' requirement that a structural component serve the IPS to which the structural component is constituent in the IPS's passive function. In addition, the Treasury Department and the IRS have concluded that adopting a standard that takes into account a taxpayer's intent regarding an asset may lead to inconsistent results because different taxpayers may have different intentions regarding the same type of distinct asset.

    V. Requested Additions to the Lists of Qualifying Assets A. General Suggestions

    Sections 1.856-10(d)(2)(ii)(B), 1.856-10(d)(2)(iii)(B), and 1.856-10(d)(3)(ii) of the proposed regulations furnished lists of types of distinct assets that would qualify as buildings, OIPSs, and structural components, respectively. A commenter requested that certain other distinct assets be included on these lists. These other distinct assets included car charging stations, healthcare facilities, storage facilities, timber, electrical distribution and redundancy systems, telecommunication systems, and equipment comprising a building management system.

    The Treasury Department and the IRS have considered the proposed additions to the lists of qualifying assets and believe that the proposed regulations already addressed the tax treatment of certain of these assets, such as storage facilities and timber. In addition, the Treasury Department and the IRS are not persuaded that the other assets will in all cases satisfy the relevant definition. Therefore, these final regulations do not include these suggested additions to the lists of qualifying assets.

    B. Additions to the Lists for Types of IPSs 1. Additions to the List for Types of Buildings

    Commenters suggested adding motels, casinos, health care facilities, storage facilities, greenhouses, enclosed stadiums, enclosed shopping malls, museums, municipal buildings, other housing (such as assisted living), parking garages (whether or not fully enclosed), and mixed-use properties combining one or more of the foregoing to the list for buildings under § 1.856-10(d)(2)(ii)(B) of the proposed regulations.

    These assets would not always qualify as buildings as defined under the proposed regulations and in these final regulations. For example, casinos may be on an unaffixed barge or riverboat, health care facilities may be in tents, storage facilities may include movable pods, and greenhouses may be structures that are not permanently affixed. Unenclosed parking garages were not within the definition of a building under the proposed regulations but were included in the list of types of OIPSs in § 1.856-10(d)(2)(iii)(B) of the proposed regulations (which included permanently affixed parking facilities). Museums may exist on unaffixed boats, in a room inside a building, or in the open air.

    A mixed-use building would still qualify as a building because it encloses space within its walls and is covered by a roof. On the other hand, a mixed-use property comprised of several structures would require a separate analysis of each structure. The suggestions to include municipal buildings and assisted-living facilities focus on the use, rather than the type, of structure. In addition, office buildings, apartments, and houses were already included on the proposed regulations' list.

    A distinct asset not on the list may nevertheless qualify as a building, because the list for types of buildings in the proposed regulations is not exclusive. Moreover, many of the requested assets are already included in that list. For these reasons, these final regulations do not include all the requested assets on the list for types of buildings. However, these final regulations include as types of buildings permanently affixed motels, enclosed stadiums and arenas, and enclosed shopping malls.

    2. Additions to the List for Types of OIPSs

    Some commenters requested certain assets be added to the list under § 1.856-10(d)(2)(iii)(B) of the proposed regulations for types of OIPSs, including energy storage components, solar photovoltaic (PV) panels, related wiring and functionally related transformers, power conditioning equipment, and electrical power inverters and related wiring.

    The Treasury Department and the IRS have determined that adding these assets to the list for types of OIPSs is not warranted. Inclusion of these assets would be inconsistent with the requirements that OIPSs serve a passive function and do not serve an active function.11 Therefore, these final regulations do not include these assets on the list for types of OIPSs.

    11 Depending on all the facts and circumstances, however, some or all of these assets may qualify as structural components of an IPS.

    C. Additions to the List for Types of Structural Components

    One commenter suggested that the list under § 1.856-10(d)(3)(ii) of the proposed regulations for types of structural components should include special flooring for data centers. The proposed regulations stated that customization of a distinct asset in connection with the rental of space in or on an IPS to which the distinct asset relates does not affect whether the distinct asset qualifies as a structural component. The list of types of structural components in § 1.856-10(d)(3)(ii) of the proposed regulations included permanent coverings of floors. The commenter's suggestion of specifically including special flooring in a data center is an example of customization of a distinct asset in connection with the rental of space in an IPS. These final regulations, like the proposed regulations, permit the customization of distinct assets in connection with the rental of space in or on an IPS, provided that the customized asset is integrated into the IPS and is held together with a real property interest in the space in the IPS that is served by the asset. Accordingly, these final regulations do not include special flooring in a data center on the list of types of structural components.

    Another commenter recommended that the list for types of structural components be expanded to include solar energy generating and heating systems and related energy storage equipment. The Treasury Department and the IRS do not believe that solar energy generating and heating systems and related energy storage equipment necessarily satisfy the definition of structural components in § 1.856-10(d)(3) of the proposed regulations but rather believe these assets should be analyzed using all the facts and circumstances and taking into account the factors provided in § 1.856-10(d)(3)(iii) of these final regulations. For these reasons, these final regulations do not adopt the recommendation.

    VI. Recommended Changes to the Factor Lists in § 1.856-10(d)(2)(iii) and (3)(iv) of the Proposed Regulations A. Recommended Change to the Factors Used To Determine Whether a Distinct Asset Is an IPS

    The proposed regulations listed factors to be considered in determining whether a distinct asset (other than a type of building or type of OIPS listed in § 1.856-10(d)(2)(ii)(B) of the proposed regulations or § 1.856-10(d)(2)(iii)(B) of the proposed regulations, respectively) is an IPS. One factor is whether there are any circumstances that suggest the expected period of affixation is not indefinite (for example, a lease that requires or permits removal of the distinct asset upon the expiration of the lease).

    One commenter stated that buildings constructed on land subject to a long-term ground lease arguably would not satisfy this factor. Another commenter stated that removal provisions are common in commercial leases and, as a practical matter, such provisions may not be determinative as to whether the asset is ultimately removed by the lessee at the expiration of the lease. This commenter recommended that the factor be changed to any circumstance that suggests the manner of affixation is temporary in nature rather than permanent.

    As previously discussed in this preamble, for purposes of section 856, the Treasury Department and the IRS do not intend the term indefinitely to mean forever. Whether a distinct asset qualifies as an IPS depends on all the facts and circumstances including an analysis of the factors in § 1.856-10(d)(2)(iv). For these reasons, this factor is not modified in these final regulations.

    B. Recommended Change to the Factors Used To Determine Whether a Distinct Asset Is a Structural Component

    For distinct assets other than those listed in § 1.856-10(d)(3)(ii) of the proposed regulations as structural components, the proposed regulations listed factors under § 1.856-10(d)(3)(iii) that must be taken into account in determining whether the distinct asset qualifies as a structural component of an IPS. One of those factors was whether the owner of the property was also the legal owner of the distinct asset. A commenter noted that a REIT may have a leasehold interest in real property and may own a structural component that it installs as part of the real property. An example provided by the commenter is a REIT that leases the shell of a building and then engages independent contractors to complete internal build-outs to customize the shell of the building into a shopping mall.

    The Treasury Department and the IRS have considered this comment, along with the comments received regarding the equivalent interest requirement, as discussed in this preamble. Accordingly, these final regulations require that, for a distinct asset to be a structural component, a REIT must hold a legally enforceable real property interest in the space in the IPS that the structural component serves.

    VII. Intangible Assets A. Intangibles Derived From the Trade or Business of Earning Revenues for the Use of Real Property or Related Services

    Under § 1.856-10(f) of the proposed regulations, an intangible asset is real property or an interest in real property if the asset derives its value from real property or an interest in real property, is inseparable from that real property or interest in real property, and does not produce or contribute to the production of income other than consideration for the use or occupancy of space. Commenters requested inclusion of intangible assets derived from services that produce income other than consideration for the use or occupancy of space, which would include workforce-in-place and customer-based intangibles. The Treasury Department and the IRS believe that intangible assets that are separable from real property or an interest in real property should not qualify as real property. The final regulations clarify that intangible assets that are related to services and that are separable from the real property do not qualify as real property.

    B. In-Place Above and Below-Market Leases

    Commenters requested that intangible assets related to in-place above-market leases in which the REIT is the lessor and below-market leases in which the REIT is the lessee be treated as qualifying real property. Under section 856(c)(5)(C), a lease of land or improvements thereon is an interest in real property and, therefore, a lease of land or improvements thereon is a real estate asset under section 856(c)(5)(B). A lease of real property that produces both rents from real property under section 856(d)(1) and other income that does not so qualify is, in part, an interest in real property under section 856(c)(5)(C) and, in part, an asset other than an interest in real property. To the extent the portion of the lease that is an interest in real property has value, that portion is a real estate asset under section 856(c)(5)(B). These final regulations have been modified to clarify that an intangible asset may be, in part, an interest in real property and, in part, an asset other than an interest in real property. In addition, these final regulations include an example illustrating the application of these final regulations to an in-place above-market lease that produces both income that qualifies as rents from real property under section 856(d)(1) and other income that does not so qualify.

    C. Intangible Assets That Result From Mergers, Certain Business Combinations, and Stock or Asset Acquisitions

    Section 1.856-10(f)(1) of the proposed regulations generally defined an intangible asset to include certain intangible assets established under generally accepted accounting principles (GAAP) as a result of an acquisition of real property or an interest in real property. Commenters noted that intangible assets may result from mergers, certain business combinations, and stock or asset acquisitions. The commenters urged that the final regulations acknowledge that REITs may acquire intangible assets in both asset and stock transactions.

    The proposed regulations used the acquisition of real property or an interest in real property as an example of a type of transaction in which an intangible asset may be established under GAAP. Under § 1.856-2(d)(3), the term total assets means the gross assets of the REIT determined in accordance with GAAP. Thus, an intangible asset that, in accordance with GAAP, results from a merger, business combination, or stock or asset acquisition may qualify as real property. Because the proposed regulations did not preclude real property treatment of intangible assets resulting from mergers, certain business combinations, or stock or asset acquisitions, the Treasury Department and the IRS have concluded that no change is necessary to the final regulations to accommodate the commenter's concern.

    D. Use Permits and Leases Requiring Property To Be Operated for a Specific Use

    Section 856(c)(5)(C) defines interests in real property to include leaseholds of land or improvements thereon. Section 1.856-10(f)(2) of the proposed regulations stated that, if a license, permit, or other similar right solely for the use, enjoyment, or occupation of land or an IPS is in the nature of a leasehold or easement, that right generally is an interest in real property. However, a license or permit to engage in or operate a business generally is not real property or an interest in real property because the license or permit produces or contributes to the production of income other than consideration for the use or occupancy of space.

    Section 1.856-10(g), Example 12, of the proposed regulations concluded that a special use permit from a government that, under governmental regulations, was not a lease of the land but was a permit to use the land for a cell tower was an interest in real property. Section 1.856-10(g), Example 13, of the proposed regulations illustrated that a license from a government to operate a casino in a specific building is a license to engage in the business of operating a casino and is not real property.

    A commenter noted that many leases require property to be operated for a specific use. A property owner has an interest in requiring its property to be operated for its intended purpose. The commenter suggested that a specific-purpose lease should not be excluded from the definition of real property as an operating license.

    The Treasury Department and the IRS generally agree that a requirement in a lease agreement that property be operated for a specific use does not cause the lease to fail to be treated as an interest in real property. A specific use requirement in a lease is distinguishable from a license or permit to operate a business. Such a requirement is generally a term or condition of a lease requiring that real property be used in the manner permitted by the property owner or landlord and does not constitute a separate grant by a governmental entity of the right to operate a business. Example 12 concludes that a special use permit to use land for a specific purpose, a cell tower, is an interest in real property. Consistent with Example 13, if the special use permit in Example 12 included a governmental authorization required to conduct a business that would produce income other than consideration for the use or occupancy of space, that portion of the special use permit would not be real property for purposes of these rules. Therefore, the Treasury Department and the IRS do not believe that any change in the proposed regulations is needed to address the commenter's concern.

    E. Treatment of Intangible Assets in Another Context

    A commenter noted that goodwill is not considered real property for appraisal purposes. The commenter recommended that goodwill be characterized as something other than real property, but nevertheless be provided the same tax treatment as real property. The Treasury Department and the IRS do not agree with this recommendation. Section 856 governs the determination of whether an asset is real property for REIT qualification purposes. Under § 1.856-2(d)(3), the gross assets of the REIT are determined in accordance with GAAP. Therefore an asset determined in accordance with GAAP, such as GAAP goodwill, must for purposes of sections 856 through 859 be accounted for either as real property or as property that is not real property. Although section 856(c)(5)(J)(ii) permits the Secretary to determine that an item of income that is not otherwise qualifying REIT income is considered as gross income that is qualifying REIT income, section 856 does not include a similar provision to permit an asset that is not otherwise real property to be treated as real property.

    VIII. Procedural and Administrative Matters A. Previously Issued Letter Rulings

    A commenter requested that the final regulations provide that taxpayers may continue to rely on previously issued letter rulings. Section 11.04 of Rev. Proc. 2016-1 12 states that a letter ruling may be revoked or modified by the issuance of temporary or final regulations that are inconsistent with that letter ruling. Accordingly, to the extent a previously issued letter ruling is inconsistent with these final regulations, the letter ruling is revoked prospectively from the applicability date of these final regulations.

    12 Rev. Proc. 2016-1, 2016-1 I.R.B. at 59.

    B. Revised Applicability Date and Election To Apply These Final Regulations to Earlier Quarters

    The proposed regulations' applicability date was for calendar quarters beginning after the date that the proposed regulations are published as final regulations in the Federal Register. Commenters requested that the final regulations apply to taxable years beginning after the date that final regulations are published in the Federal Register and that taxpayers be permitted to apply the final regulations to earlier taxable years and quarters.

    The Treasury Department and the IRS understand that an applicability date based on a calendar quarter may have unintended consequences in applying the gross income tests in section 856(c)(2) and (3) because those tests apply on an annual basis. For example, for rents to qualify as rents from interests in real property, the asset from which the rents are derived must qualify as real property. An asset that qualifies as real property before the applicability date, but not on or after the applicability date, would generate rents from real property only during quarters before the applicability date. These final regulations adopt this suggestion and apply to taxable years that begin after the date that the final regulations are published as final regulations in the Federal Register. In addition, because the Treasury Department and the IRS intend these final regulations generally to be a clarification of current law, taxpayers are permitted to rely on the final regulations for periods beginning on or before the applicability date. The applicability date for these final regulations is discussed further in this preamble in the “Applicability Date” section.

    IX. Interaction of the Definition of Real Property for Purposes of Sections 856 Through 859 With Other Code Provisions A. Interaction of the Final Regulations With Other Provisions That Cross-Reference the Definition of Real Property for REIT Purposes

    A commenter noted that § 1.860G-2(a)(4) references the definition of real property found in § 1.856-3(d) of the 1962 Regulations for purposes of determining whether an obligation is “principally secured by an interest in real property” for regulated mortgage investment conduit qualification purposes. The proposed regulations were proposed to revise § 1.856-3(d) to read as follows: “See § 1.856-10 for the definition of real property.” To the extent other Treasury regulations reference the definition of real property in § 1.856-3(d), § 1.856-3(d), as proposed in the NPRM and as amended by these final regulations, directs taxpayers to apply the definition found in § 1.856-10.

    B. Reconciling Definitions of Real Property

    The preamble to the proposed regulations discussed various Code provisions in which the term real property appears. Noting the diverse contexts and varying legislative purposes of the Code provisions in which the term real property appears, the Treasury Department and the IRS requested comments on the extent to which the various meanings of real property that appear in the Treasury regulations should be reconciled.

    Several commenters were concerned that the term real property has different meanings as the term is applied for purposes of different Code provisions, which could lead to confusion and inconsistent treatment of taxpayers. A commenter noted that there is no Federal definition of real property and suggested that another Code provision's restrictions on the use of real property should not preclude a REIT from investing in or financing such real property so long as the property is otherwise inherently permanent. Another commenter noted that under section 197, certain intangible assets are amortized as separate assets not associated with another asset. A third commenter requested clarification that the final regulations apply only to the definition of real property for purposes of sections 856 through 859, so that there is no conflict between the REIT provisions and other provisions of the Code that govern the investment tax credit and depreciation.

    As discussed in the preamble to the proposed regulations, in drafting the proposed regulations, the Treasury Department and the IRS sought to balance (1) the general principle that common terms used in different provisions should have common meanings with (2) the particular policies underlying the definition used in the REIT provisions. These final regulations retain the language in § 1.856-10(a) of the proposed regulations stating that § 1.856-10 provides definitions for purposes of part II, subchapter M, chapter 1 of the Code. This language addresses the commenters' concerns by limiting the application of the definition of real property under these final regulations to sections 856 through 859.

    X. Environmental Concerns

    Some commenters suggested that the proposed regulations would encourage building in, on, or above water, which these commenters suggested is dangerous to water ecosystems and fish habitats. The commenters also suggested that the aftermath of hurricanes such as Katrina and Sandy should have demonstrated to the Government that development near or on water is dangerous to humans and extremely costly.

    Neither section 856 nor the regulations thereunder override any environmental rules or regulations that may restrict development in these areas. In defining land, the Treasury Department and the IRS have concluded that it is important to include water space superjacent to land because rights to this water space are analytically indistinguishable from rights to air space superjacent to land, which, as discussed in this preamble, are treated as real property. See Rev. Rul. 71-286.

    XI. Renewable Energy A. Consequence of Net Metering on an Asset's Qualification as Real Property

    Under § 1.856-10(d)(3)(i) of the proposed regulations, to qualify as real property, a structural component must serve an IPS and, even if capable of producing income other than consideration for the use or occupancy of space, must not produce or contribute to the production of such income. The preamble to the proposed regulations indicated that the Treasury Department and the IRS are considering guidance to address the treatment of any income earned when a system that provides electricity to an IPS held by a REIT also transfers excess electricity to a utility company. Commenters questioned whether a structural component would maintain its qualification as real property if the structural component served an IPS in its passive function but also produced a product, such as electricity, that was provided to third parties. One commenter suggested that the relevant test should be whether or not the property has net sales of electricity to the grid. Another commenter noted that the amount of electricity a building may net meter is regulated by the marketplace because utility companies often limit the percentage or amount of electricity that a building may net meter.

    The Treasury Department and the IRS are considering whether additional guidance is necessary to address the circumstances under which a distinct asset that serves an IPS may produce electricity that is also sold to third parties and qualify as a structural component of the IPS for REIT purposes. Until additional guidance is published in the Internal Revenue Bulletin, in any taxable year in which (1) the quantity of excess electricity transferred to the utility company during the taxable year from such distinct assets does not exceed (2) the quantity of electricity purchased from the utility company during the taxable year to serve the IPS, the IRS (x) will not treat the transfer of such excess electricity as affecting the qualification of such distinct assets as structural components of the IPS for REIT purposes, (y) will exercise its authority under section 856(c)(5)(J)(i) to treat any income resulting from the transfer of such excess electricity as not constituting gross income for purposes of section 856(c)(2) and (3), and (z) will not treat any net income resulting from the transfer of such excess electricity as constituting net income derived from a prohibited transaction under section 857(b)(6).

    B. Qualification of Renewable Energy Credits as Real Property for Purposes of Sections 856 Though 859

    Commenters requested that the final regulations address the qualification of renewable energy credits (RECs) as real property. Renewable energy credits are credits issued to a provider of renewable energy and may be freely bought and sold. The owner of a system that produces renewable energy may sell RECs without selling the system or the electricity produced by the system.

    Because RECs are intangible assets, the Treasury Department and the IRS have determined that RECs should be analyzed as such under § 1.856-10(f) of these final regulations. Thus, RECs do not qualify as intangible real property assets under these final regulations because RECs may be sold separately from any real property to which they relate.

    C. Treatment of Renewable Energy Assets as Real Property as a Matter of Public Policy

    Commenters urged the Treasury Department and the IRS to allow REITs to invest in solar energy sites as a means of furthering clean energy objectives. These commenters requested that investors in solar energy have the same access to REIT financing as investors in conventional energy sources such as natural gas, oil, and other fossil and electric energy property. Other commenters noted that private investment would be encouraged by treating certain electricity generating assets as real property.

    Congress has not provided for solar energy assets to be treated differently from other assets for purposes of determining whether the assets qualify as real property under the REIT provisions. For this reason, the final regulations do not adopt this suggestion.

    D. Treatment of Sunlight and Wind Rights as Interests in Land

    Commenters suggested that sunlight used to power a solar energy site should be considered either real property or an interest in real property. One commenter analogized sunlight and wind to rights to air space, suggested that a REIT should be allowed to sell the rights to the sunlight or wind enjoyed on its property to third parties, and further suggested that a REIT should be able to treat income from the sale of such rights as qualifying income. This commenter posited that the process used to convert sunlight into electricity is analogous to the process inherent in fruit-bearing plants, which are discussed in § 1.856-10(g), Example 1, of the proposed regulations, and that the sunlight, like the plants in Example 1, should be treated as real property. Another commenter characterized sunlight as a resource analogous to oil, gas, and mineral resources inherent in land.

    The Treasury Department and the IRS agree that a REIT may lease the air space superjacent to its land, which is an interest in its land, and may allow its tenants access to sunlight and wind. The Treasury Department and the IRS, however, are not aware of an approach that could be used to enable a REIT to rent or grant an interest in sunlight or wind separate from its interest in the land or the air space superjacent to the land. Therefore, these final regulations do not adopt these suggestions.

    E. Qualification of a Concentrating Solar Power System and its Associated Assets as Real Property for Purposes of Sections 856 Trough 859

    A commenter suggested that a concentrating solar power system uses assets that differ from PV panels to harvest solar energy. This commenter suggested that a concentrating solar power system, including, for example, a parabolic trough system, should be considered real property under these final regulations.

    The Treasury Department and the IRS have concluded that this type of system is comprised of many distinct assets that may serve different functions. As illustrated in § 1.856-10(g), Examples 8 and 9, these distinct assets may be analyzed using the standards provided in the final regulations for OIPSs and structural components. Accordingly, concentrating solar power systems and their associated assets are not added to the lists of qualifying assets in these final regulations.

    XII. Examples

    Section 1.856-10(g) of the proposed regulations provided thirteen examples illustrating the application of the proposed regulations in a variety of factual scenarios.

    A. References to Net Leases

    Each of § 1.856-10(g), Examples 1, 5, 6, 7, 8, and 10, of the proposed regulations stated that the REIT enters into a long term, triple-net lease of property. A commenter noted that the term “net lease” is not defined for purposes of section 856 and, therefore, may encompass different economic arrangements, the variations in which are not relevant to whether property is real property. The commenter further contended that many REITs do not net lease their assets. The commenter suggested that if it is necessary to describe the underlying facts, the term “lease” is sufficient and avoids the implication that a REIT must net lease its asset.

    Each of Examples 1, 5, 6, 7, 8, and 10 of the proposed regulations stated that the assets are net leased to avoid any potential implication that the REIT is operating the property. Examples 1, 5, 6, 7, 8, and 10 are revised in these final regulations to provide that the REIT neither operates the property nor provides services to the lessee.

    B. Example 4

    Section 1.856-10(g), Example 4, of the proposed regulations analyzed whether a bus shelter is an IPS. One commenter suggested that Example 4 be deleted because it was uncertain if a REIT would make a section 1033(g) 13 election with respect to the bus shelter. Additionally, the commenter was not aware of any REIT that leases or intends to lease bus shelters to a transit authority and believed that such shelters are rarely relocated. For these reasons, the commenter recommended that the example be stricken. No commenters, however, disagreed with the conclusion in the example.

    13 Section 1033(g)(3) provides that a taxpayer may elect to treat property that constitutes an outdoor advertising display as real property for purposes of chapter 1 of the Code.

    The Treasury Department and the IRS believe that Example 4 is helpful because it describes a structure that is not permanently affixed and thus does not qualify as an IPS under the standards provided in the regulations. Therefore, these final regulations do not adopt this suggestion.

    C. Example 6

    Section 1.856-10(g), Example 6, of the proposed regulations illustrated the definition of structural component in the context of a data center. One commenter suggested changes to Example 6 including clarification that the electrical system and telecommunication infrastructure systems are (1) embedded in significant part within the walls and floors of the building, (2) would be difficult to remove, and (3) are intended to remain in place indefinitely. Although suggestions (1) and (2) would clarify the example and would not affect the analysis or conclusion of the example, suggestion (3) is not relevant because the structural component factors in § 1.856-10(d)(3)(ii)(B) of the proposed regulations do not include the intent of the owner of the asset. Accordingly, these final regulations revise Example 6 to accurately reflect the integration of these assets into the data center building.14

    14 For consistency and clarity, similar revisions have been made to other examples illustrating the definition of structural component.

    Another commenter suggested that cross-connects used in a data center should not be considered real property because the cross-connects produce income that is not for the use or occupancy of space and this income is significant in comparison to the income produced by other assets in a data center. Example 6 did not, and was not intended to, address every distinct asset that may be part of a data center. Distinct assets that are not addressed in the example may be analyzed by applying the standards set forth in the proposed regulations. Accordingly, no change was made to the final regulation in response to this comment.

    E. Example 8

    Section 1.856-10(g), Example 8, of the proposed regulations analyzed a solar energy site that includes land, photovoltaic modules (PV modules), mounts and an exit wire. The solar energy site was triple-net leased to an operator who uses the assets to produce and transmit energy to an electrical power grid for sale to third parties. The example concluded that the land, mounts, and exit wire qualify as real property and that the PV modules do not qualify as IPSs because they convert solar energy into electricity, which is an active function.

    One commenter requested that the Treasury Department and the IRS update Example 8 to include an analysis of inverters, which the commenter contended serve an active function compared to PV modules, which the commenter contended are relatively passive. Another commenter elaborated on the function of the PV modules, above ground wiring, and inverters. The commenter proposed adding language to Example 8 to state that these assets have no moving parts and are therefore passive.

    The Treasury Department and the IRS have concluded that PV modules and inverters that are used in the generation of energy for sale to third parties do not qualify as IPSs under the proposed regulations. The Treasury Department and the IRS do not believe the inclusion of above ground wiring in Example 8, which already analyzes an exit wire, is necessary to illustrate the application of the rules in § 1.856-10 to above ground wiring. For these reasons, the final regulations do not adopt these suggestions.

    F. Example 9

    Section 1.856-10(g), Example 9, of the proposed regulations described a solar energy site similar to the solar energy site in Example 8, except that the solar energy site in Example 9 is mounted on land adjacent to an office building owned by the REIT. Other than occasional transfers of electricity to the grid, the solar energy site in Example 9 serves only the REIT's office building to which it is constituent. The solar energy site in Example 9 of the proposed regulations qualifies as a structural component.

    A commenter recommended revisions to the statements in Example 9 that the solar energy site was (1) designed specifically for the particular office building of which it is a part and (2) expensive and time consuming to install and remove. The commenter stated that most materials used for solar rooftop and other smaller-scale installations are mass-produced and standardized and can be removed and reinstalled without major complications or damage. These final regulations revise Example 9 to state that the size and other specifications of the solar energy system were established to serve the needs of the office building and that no facts indicate that the solar energy system will not remain in place indefinitely.

    Another commenter requested clarification of the term “occasionally transfers.” This commenter recommended changing “occasionally transfers” to “regularly transfers” in describing the transfer of energy from the solar energy site to a utility company. As discussed in section XI.A. of this preamble, the Treasury Department and the IRS are considering whether additional guidance is necessary to address this commenter's concern. Until the issuance of such additional guidance, the Treasury Department and the IRS (1) will not treat the transfer of the excess electricity as affecting the qualification of the distinct assets as structural components of the IPS for REIT purposes, (2) will exercise its authority under section 856(c)(5)(J)(i) to treat any income resulting from the transfer of the excess electricity as not constituting gross income for purposes of section 856(c)(2) and (3), and (3) will not treat any net income resulting from the transfer of the excess electricity as constituting net income derived from a prohibited transaction under section 857(b)(6).

    A commenter noted that even when a building uses all of the solar electricity produced by a solar energy site, such as the one in Example 9, the tenant of the building may earn income through the sale of RECs awarded under a local renewable portfolio standard. The Treasury Department and the IRS believe that income earned by a tenant from RECs in this situation would not affect the qualification of the solar energy site as a structural component. The tax consequences of income earned by a REIT from RECs are beyond the scope of this guidance.

    Another commenter requested that Example 9 be modified to address wind facilities rather than solar facilities. The Treasury Department and the IRS believe that the components of wind facilities may similarly be analyzed using the standards provided in § 1.856-10(d)(3) of the proposed regulations. For these reasons, the final regulations do not adopt these recommendations.

    G. Example 10

    Section 1.856-10(g), Example 10, of the proposed regulations addressed application of the proposed regulations to a pipeline transmission system. Distinct assets of the pipeline transmission system include underground pipelines, storage tanks, valves, vents, meters, and compressors. The example stated that the pipeline transmission system serves a passive function, containing oil, and an active function, transporting oil. The example further stated that, even though the pipeline transmission system serves an active function, a distinct asset within the system may nevertheless be an IPS if that asset does not perform an active function.

    One commenter noted that whether the entire system performs an active function is not relevant because the system is composed of distinct assets, each of which must be separately analyzed. The Treasury Department and the IRS believe that Example 10 is helpful because it demonstrates that a distinct asset within a system may still qualify as an IPS, or a structural component thereof, even though the system serves an active function.

    As discussed in section III.A.2. of this preamble, these final regulations include providing a conduit or route as a permitted passive function and retain transport, which has been clarified to mean cause to move, as a prohibited active function. The Treasury Department and the IRS have revised Example 10 to illustrate that the pipelines in Example 10 serve the passive function of providing a conduit.

    Another commenter suggested revising Example 10 so that the pipeline transmission system transports natural gas rather than oil and suggested changing the vents and valves to isolation valves and vents, pressure control valves, relief valves, and pressure regulating stations. The commenter also suggested that Example 10 be revised to apply the factors set forth in the regulations to determine whether these assets are structural components. These final regulations incorporate this commenter's suggestions.

    In addition, commenters argued that the compressors within a pipeline transmission system are analogous to elevators and escalators within a building, with the function of moving things or people within an IPS. One commenter noted that compressors may be viewed as performing a propelling function. Another commenter suggested that elevators and escalators serve a building by enabling access to taller buildings, higher levels of occupancy, and more efficient usage. Another commenter suggested that compressors enable the efficient use of space within a pipeline.

    To qualify as a structural component, a distinct asset must serve an IPS in its passive function. The compressors that transport natural gas through the pipeline transmission system in Example 10 do not serve the underground pipelines in their passive function of providing a conduit but rather cause the natural gas to move through the conduit, which is an active function. For this reason, these final regulations do not adopt these suggestions.

    H. Example 11

    Section 1.856-10(g), Example 11, of the proposed regulations addressed whether goodwill established under GAAP as a result of the acquisition of stock of a corporation that owned a hotel qualifies as real property for purposes of sections 856 through 859. This example stated that the amount of the acquisition cost allocated to the hotel was limited to the hotel's depreciated replacement cost. The example also stated that the difference between the amount paid for the acquired corporation's stock and the depreciated replacement cost of the hotel was treated as goodwill attributable to the acquired hotel. The Treasury Department and the IRS have been advised that depreciated replacement cost is no longer the standard under GAAP for valuing property such as the hotel. The Treasury Department and the IRS have therefore removed this example.

    I. Example 13

    Section 1.856-10(g), Example 13, of the proposed regulations addressed whether a license to operate a casino is real property. Example 13 concluded that because the license permits the holder to engage in the business of operating a casino the license is not real property even though the license applies only to the REIT's building and cannot be transferred to another location.

    One commenter stated that in some foreign jurisdictions, a casino license may be more in the nature of a zoning permit that may be transferred to a subsequent buyer. This commenter suggested that a license that runs with the land is more in the nature of a zoning permit. The commenter recommended either deleting Example 13 or revising it to distinguish transferable zoning-based or similar real estate-based licenses.

    Another commenter noted that the permitted use of a facility for gaming purposes may enhance its value as real estate, apart from the value of the gaming license itself. The commenter also remarked that zoning laws frequently restrict gaming activities or liquor sales to particular geographical areas or locations, which restrictions, in general, favorably affect the value of real estate in these areas or locations.

    These final regulations do not adopt these recommendations. Under § 1.856-10(f) of the proposed regulations, whether a license runs with the land is not dispositive in determining whether the license is real property for purposes of sections 856 through 859. The valuation of real property, including any effect that zoning may have on the value of real property, are beyond the scope of these final regulations.

    J. Additional Examples

    The Treasury Department and the IRS received requests to add additional examples to the final regulations.

    Section VII.B. of this preamble describes comments received requesting clarification that intangible assets related to in-place above-market leases in which the REIT is the lessor and below-market leases in which the REIT is the lessee be treated as qualifying real property. As discussed in section VII.B., these final regulations include § 1.856-10(g), Example 11, which illustrates the application of these final regulations to an in-place above-market lease that produces both rents from real property under section 856(d)(1) and other income that does not qualify as rents from real property under section 856(d)(1).

    A commenter suggested adding an example applying these final regulations to an electric transmission and distribution system. The Treasury Department and the IRS believe that the distinct assets of an electric transmission and distribution system are similar in many respects to the distinct assets of the solar energy site addressed by § 1.856-10(g), Example 8 of the proposed regulations, and may be analyzed using the standards provided in § 1.856-10(d)(2) and (3) of the proposed regulations. Accordingly, these final regulations adequately address the distinct assets that may be part of an electrical transmission and distribution system.

    Another commenter suggested that the final regulations include an example illustrating the components of an in-ground swimming pool. (The proposed regulations listed the pool itself as an OIPS.) The Treasury Department and the IRS are not aware that there have been significant questions concerning whether the various components qualify as real property. Therefore, these final regulations do not include an example addressing whether these components qualify as real property for purposes of sections 856 through 859.

    XIII. Additional Comments A. Potential Tax Inequality Among Taxpayers

    Three commenters viewed the proposed regulations as a substantial expansion of the definition of real property. The Treasury Department and the IRS believe that the proposed regulations and these final regulations generally clarify existing law. These commenters also called for equal application of the tax laws and appear to believe that REITs are a vehicle that some corporations use to avoid taxes. The REIT structure was established by Congress in 1960, and it is not within the scope of these final regulations to change the REIT structure as these commenters suggest.

    B. Clarification That Buildings Can Be on or Inside of Other Buildings or IPSs

    A commenter requested that the final regulations clarify that buildings can be on or inside of other buildings or IPSs. The Treasury Department and the IRS believe that this comment was adequately addressed by the proposed regulations, which provided that the affixation of an IPS (which may be a building) may be to land or to another IPS. In addition, § 1.856-10(g), Example 3, concludes that a large sculpture inside an office building qualifies as an IPS. A building inside another building is not analytically different from the sculpture inside the building in Example 3. Accordingly, the proposed regulations, as finalized by this Treasury decision, adequately address this commenter's concern.

    C. Qualification of Appurtenances and Zoning and Similar Rights

    A commenter suggested that appurtenances should be included in the definition of land. The commenter suggested that real estate law provides that an appurtenance encompasses easements and rights of way over another's land to access one's own land. In addition, this commenter suggested that zoning and similar rights should be included in the definition of real property.

    Taxpayers should apply § 1.856-10(f)(2) of these final regulations, which addresses the treatment of rights for the use, enjoyment, or occupation of land, to determine whether an appurtenance qualifies as real property for purposes of sections 856 through 859. Zoning rights may increase the value of real property. Consistent with § 1.856-2(d)(3), if a zoning right is considered a separate asset under GAAP, then the zoning right should be analyzed as an intangible asset under section 1.856-10(f) of these final regulations.

    D. Additional Comments

    A commenter suggested that the final regulations address the definition of rents from real property, eliminate the standard requiring that total assets be based on GAAP, and regulate the type of services that a taxable REIT subsidiary may provide. These issues are beyond the scope of these final regulations.

    Effective/Applicability Date

    These final regulations apply to taxable years that begin after August 31, 2016. Under section 856(c)(4), whether a taxpayer loses status as a REIT in one quarter may depend on whether the taxpayer satisfied section 856(c)(4) at the close of one or more prior quarters. For purposes of applying the first sentence of the flush language in section 856(c)(4) to a quarter in a taxable year that begins after August 31, 2016, these final regulations apply in determining whether the taxpayer met the requirements of section 856(c)(4) at the close of prior quarters. Taxpayers may rely on these final regulations for quarters that end before the applicability date.

    Special Analyses

    Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. No comments were received.

    Drafting Information

    The principal author of these regulations is Julanne Allen, Office of Associate Chief Council (Financial Institutions and Products). However, other personnel from the Treasury Department and the IRS participated in their development.

    Statement of Availability of IRS Documents

    The IRS revenue rulings and revenue procedure cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS Web site at www.irs.gov.

    List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

    Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

    PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority:

    26 U.S.C. 7805 * * *

    Par. 2. Section 1.856-3(d) is revised to read as follows:
    § 1.856-3 Definitions.

    (d) Real property. See § 1.856-10 for the definition of real property. A regulation that adopts the definition of real property in this paragraph is to be interpreted as if it had referred to § 1.856-10.

    Par. 3. Section 1.856-10 is added to read as follows:
    § 1.856-10 Definition of real property.

    (a) In general. This section provides definitions for purposes of part II, subchapter M, chapter 1 of the Internal Revenue Code. Paragraph (b) of this section defines real property, which includes land as defined under paragraph (c) of this section and improvements to land as defined under paragraph (d) of this section. Improvements to land include inherently permanent structures as defined under paragraph (d)(2) of this section and structural components of inherently permanent structures as defined under paragraph (d)(3) of this section. Paragraph (e) of this section provides rules for determining whether an item is a distinct asset for purposes of applying the definitions in paragraphs (b), (c), and (d) of this section. Paragraph (f) of this section identifies intangible assets that are real property or interests in real property. Paragraph (g) of this section provides examples illustrating the rules of paragraphs (b) through (f) of this section. Paragraph (h) of this section provides the effective/applicability date for this section.

    (b) Real property. The term real property means land and improvements to land. Local law definitions are not controlling for purposes of determining the meaning of the term real property.

    (c) Land. Land includes water and air space superjacent to land and natural products and deposits that are unsevered from the land. Natural products and deposits, such as crops, water, ores, and minerals, cease to be real property when they are severed, extracted, or removed from the land. The storage of severed or extracted natural products or deposits, such as crops, water, ores, and minerals, in or upon real property does not cause the stored property to be recharacterized as real property.

    (d) Improvements to land—(1) In general. The term improvements to land means inherently permanent structures and their structural components.

    (2) Inherently permanent structure—(i) In general. The term inherently permanent structure means any permanently affixed building or other permanently affixed structure. Affixation may be to land or to another inherently permanent structure and may be by weight alone. If the affixation is reasonably expected to last indefinitely based on all the facts and circumstances, the affixation is considered permanent. A distinct asset that serves an active function, such as an item of machinery or equipment, is not a building or other inherently permanent structure.

    (ii) Building—(A) In general. A building encloses a space within its walls and is covered by a roof.

    (B) Types of buildings. Buildings include the following distinct assets if permanently affixed: Houses; apartments; hotels; motels; enclosed stadiums and arenas; enclosed shopping malls; factory and office buildings; warehouses; barns; enclosed garages; enclosed transportation stations and terminals; and stores.

    (iii) Other inherently permanent structures—(A) In general. Other inherently permanent structures serve a passive function, such as to contain, support, shelter, cover, protect, or provide a conduit or a route, and do not serve an active function, such as to manufacture, create, produce, convert, or transport.

    (B) Types of other inherently permanent structures. Other inherently permanent structures include the following distinct assets if permanently affixed: Microwave transmission, cell, broadcast, and electrical transmission towers; telephone poles; parking facilities; bridges; tunnels; roadbeds; railroad tracks; transmission lines; pipelines; fences; in-ground swimming pools; offshore drilling platforms; storage structures such as silos and oil and gas storage tanks; and stationary wharves and docks. Other inherently permanent structures also include outdoor advertising displays for which an election has been properly made under section 1033(g)(3).

    (iv) Facts and circumstances determination. If a distinct asset (within the meaning of paragraph (e) of this section) does not serve an active function as described in paragraph (d)(2)(iii)(A) of this section and is not otherwise listed in paragraph (d)(2)(ii)(B) or (d)(2)(iii)(B) of this section or in guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii) of this chapter), the determination of whether that asset is an inherently permanent structure is based on all the facts and circumstances. In particular, the following factors must be taken into account:

    (A) The manner in which the distinct asset is affixed to real property;

    (B) Whether the distinct asset is designed to be removed or to remain in place indefinitely;

    (C) The damage that removal of the distinct asset would cause to the item itself or to the real property to which it is affixed;

    (D) Any circumstances that suggest the expected period of affixation is not indefinite (for example, a lease that requires or permits removal of the distinct asset upon the expiration of the lease); and

    (E) The time and expense required to move the distinct asset.

    (3) Structural components—(i) In general. The term structural component means any distinct asset (within the meaning of paragraph (e) of this section) that is a constituent part of and integrated into an inherently permanent structure, serves the inherently permanent structure in its passive function, and, even if capable of producing income other than consideration for the use or occupancy of space, does not produce or contribute to the production of such income. If interconnected assets work together to serve an inherently permanent structure with a utility-like function (for example, systems that provide a building with electricity, heat, or water), the assets are analyzed together as one distinct asset that may be a structural component. A structural component may qualify as real property only if the real estate investment trust (REIT) holds its interest in the structural component together with a real property interest in the space in the inherently permanent structure served by the structural component. A mortgage secured by a structural component is a real estate asset only if the mortgage is also secured by a real property interest in the inherently permanent structure served by the structural component. If a distinct asset is customized in connection with the rental of space in or on an inherently permanent structure to which the asset relates, the customization does not affect whether the distinct asset is a structural component.

    (ii) Types of structural components. Structural components include the following distinct assets and systems if integrated into the inherently permanent structure and held together with a real property interest in the space in the inherently permanent structure served by that distinct asset or system: Wiring; plumbing systems; central heating and air-conditioning systems; elevators or escalators; walls; floors; ceilings; permanent coverings of walls, floors, and ceilings; windows; doors; insulation; chimneys; fire suppression systems, such as sprinkler systems and fire alarms; fire escapes; central refrigeration systems; security systems; and humidity control systems.

    (iii) Facts and circumstances determination. If an interest in a distinct asset (within the meaning of paragraph (e) of this section) is held together with a real property interest in the space in the inherently permanent structure served by that distinct asset and that asset is not otherwise listed in paragraph (d)(3)(ii) of this section or in guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii) of this chapter), the determination of whether that asset is a structural component is based on all the facts and circumstances. In particular, the following factors must be taken into account:

    (A) The manner, time, and expense of installing and removing the distinct asset;

    (B) Whether the distinct asset is designed to be moved;

    (C) The damage that removal of the distinct asset would cause to the item itself or to the inherently permanent structure to which it is affixed;

    (D) Whether the distinct asset serves a utility-like function with respect to the inherently permanent structure;

    (E) Whether the distinct asset serves the inherently permanent structure in its passive function;

    (F) Whether the distinct asset produces income from consideration for the use or occupancy of space in or upon the inherently permanent structure;

    (G) Whether the distinct asset is installed during construction of the inherently permanent structure; and

    (H) Whether the distinct asset will remain if the tenant vacates the premises.

    (e) Distinct asset—(1) In general. A distinct asset is analyzed separately from any other assets to which the asset relates to determine if the asset is real property, whether as land, an inherently permanent structure, or a structural component of an inherently permanent structure.

    (2) Facts and circumstances. The determination of whether a particular separately identifiable item of property is a distinct asset is based on all the facts and circumstances. In particular, the following factors must be taken into account:

    (i) Whether the item is customarily sold or acquired as a single unit rather than as a component part of a larger asset;

    (ii) Whether the item can be separated from a larger asset, and if so, the cost of separating the item from the larger asset;

    (iii) Whether the item is commonly viewed as serving a useful function independent of a larger asset of which it is a part; and

    (iv) Whether separating the item from a larger asset of which it is a part impairs the functionality of the larger asset.

    (f) Intangible assets—(1) In general. To the extent that an intangible asset, including an intangible asset established under generally accepted accounting principles (GAAP) as a result of an acquisition of real property or an interest in real property, derives its value from real property or an interest in real property, is inseparable from that real property or interest in real property, and does not produce or contribute to the production of income other than consideration for the use or occupancy of space, the intangible asset is real property or an interest in real property.

    (2) Licenses and permits. A license, permit, or other similar right that is solely for the use, enjoyment, or occupation of land or an inherently permanent structure and that is in the nature of a leasehold or easement generally is an interest in real property. A license or permit to engage in or operate a business is not real property or an interest in real property if the license or permit produces or contributes to the production of income other than consideration for the use or occupancy of space.

    (g) Examples. The following examples demonstrate the rules of this section. Examples 1 and 2 illustrate the definition of land as provided in paragraph (c) of this section. Examples 3 through 10 illustrate the definition of improvements to land as provided in paragraph (d) of this section. Finally, Examples 11 through 13 illustrate whether certain intangible assets are real property or interests in real property as provided in paragraph (f) of this section.

    Example 1.

    Natural products of land. A is a REIT. REIT A owns land with perennial fruit-bearing plants. REIT A leases the fruit-bearing plants to a tenant and grants the tenant an easement to enter the land to cultivate the plants and to harvest the fruit. The lease and easement are long-term and REIT A provides no services to the tenant. The unsevered plants are natural products of the land and are land within the meaning of paragraph (c) of this section. The tenant annually harvests fruit from the plants. Upon severance from the land, the harvested fruit ceases to qualify as land. Storage of the harvested fruit upon or within real property does not cause the harvested fruit to be real property.

    Example 2.

    Water space superjacent to land. REIT B leases a marina from a governmental entity. The marina is comprised of U-shaped boat slips and end ties. The U-shaped boat slips are spaces on the water that are surrounded by a dock on three sides. The end ties are spaces on the water at the end of a slip or on a long, straight dock. REIT B rents the boat slips and end ties to boat owners. The boat slips and end ties are water space superjacent to land that is land within the meaning of paragraph (c) of this section and, therefore, are real property.

    Example 3.

    Indoor sculpture. (i) REIT C owns an office building and a large sculpture in the atrium of the building. The sculpture measures 30 feet tall by 18 feet wide and weighs five tons. The building was specifically designed to support the sculpture, which is permanently affixed to the building by supports embedded in the building's foundation. The sculpture was constructed within the building. Removal would be costly and time consuming and would destroy the sculpture. The sculpture is reasonably expected to remain in the building indefinitely. The sculpture does not manufacture, create, produce, convert, transport, or serve any similar active function.

    (ii) The sculpture is not an asset listed in paragraph (d)(2)(iii)(B) of this section, and, therefore, the sculpture is an asset that must be analyzed to determine whether it is an inherently permanent structure using the factors provided in paragraph (d)(2)(iv) of this section. The sculpture—

    (A) Is permanently affixed to the building by supports embedded in the building's foundation;

    (B) Is not designed to be removed and is designed to remain in place indefinitely;

    (C) Would be damaged if removed and would damage the building to which it is affixed;

    (D) Will remain affixed to the building after any tenant vacates the premises and will remain affixed to the building indefinitely; and

    (E) Would require significant time and expense to move.

    (iii) The factors described in this paragraph (g) Example 3 (ii)(A) through (E) all support the conclusion that the sculpture is an inherently permanent structure within the meaning of paragraph (d)(2) of this section and, therefore, is real property.

    Example 4.

    Bus shelters. (i) REIT D owns 400 bus shelters, each of which consists of four posts, a roof, and panels enclosing two or three sides. REIT D enters into a long-term lease with a local transit authority for use of the bus shelters. Each bus shelter is prefabricated from steel and is bolted to the sidewalk. Bus shelters are disassembled and moved when bus routes change. Moving a bus shelter takes less than a day and does not significantly damage either the bus shelter or the real property to which it was affixed.

    (ii) The bus shelters are not permanently affixed enclosed transportation stations or terminals and do not otherwise meet the definition of a building in paragraph (d)(2)(ii) of this section nor are they listed as types of other inherently permanent structures in paragraph (d)(2)(iii)(B) of this section. Therefore, the bus shelters must be analyzed to determine whether they are inherently permanent structures using the factors provided in paragraph (d)(2)(iv) of this section. The bus shelters—

    (A) Are not permanently affixed to the land or an inherently permanent structure;

    (B) Are designed to be removed and are not designed to remain in place indefinitely;

    (C) Would not be damaged if removed and would not damage the sidewalks to which they are affixed;

    (D) Will not remain affixed after the local transit authority vacates the site and will not remain affixed indefinitely; and

    (E) Would not require significant time and expense to move.

    (iii) The factors described in this paragraph (g) Example 4 (ii)(A) through (E) all support the conclusion that the bus shelters are not inherently permanent structures within the meaning of paragraph (d)(2) of this section. Although the bus shelters serve a passive function of sheltering, the bus shelters are not permanently affixed, which means the bus shelters are not inherently permanent structures within the meaning of paragraph (d)(2) of this section and, therefore, are not real property.

    Example 5.

    Cold storage warehouse. (i) REIT E owns a refrigerated warehouse (Cold Storage Warehouse). REIT E enters into a long-term lease with a tenant. REIT E neither operates the Cold Storage Warehouse nor provides services to its tenant. The tenant uses the Cold Storage Warehouse to store perishable products. Certain components and utility systems that are integrated into the Cold Storage Warehouse have been customized to accommodate the tenant's need for refrigerated storage space. For example, the Cold Storage Warehouse has customized freezer walls and a central refrigeration system. Freezer walls within the Cold Storage Warehouse are specifically designed to maintain the desired temperature within the Cold Storage Warehouse. The freezer walls and central refrigeration system comprise a series of interconnected assets that work together to serve a utility-like function within the Cold Storage Warehouse, were installed during construction of the building, and will remain in place when the tenant vacates the premises. The freezer walls and central refrigeration system were designed to remain permanently in place.

    (ii) Walls and central refrigeration systems are listed as structural components in paragraph (d)(3)(ii) of this section and, therefore, are real property. The customization of the freezer walls does not affect their qualification as structural components of REIT E's Cold Storage Warehouse within the meaning of paragraph (d)(3) of this section. Therefore, the freezer walls and central refrigeration system are structural components of REIT E's Cold Storage Warehouse.

    Example 6.

    Data center. (i) REIT F owns a building that it leases to a tenant under a long-term lease. REIT F neither operates the building nor provides services to its tenant. To accommodate the particular requirements for housing computer servers, certain interior components and utility systems within the building have been customized to provide a higher level of functionality than a conventional office building. These customized systems are owned by REIT F and include an electrical distribution and redundancy system (Electrical System), a central heating and air-conditioning system, a telecommunication infrastructure system, an integrated security system, a fire suppression system, and a humidity control system (each, a System). In addition, the space for computer servers in REIT F's building has been constructed with raised flooring that is integrated into the building to accommodate the Systems. Each System is comprised of a series of interconnected assets that work together to serve a utility-like function within the building. The Systems are integrated into the office building, were installed during construction of the building, and will remain in place when the tenant vacates the premises. Each of the Systems was customized to enhance the capacity of the System in connection with the rental of space within the building.

    (ii) The central heating and air-conditioning system, integrated security system, fire suppression system, and humidity control system are listed as structural components in paragraph (d)(3)(ii) of this section and, therefore, are real property. The customization of these Systems does not affect the qualification of these Systems as structural components of REIT F's building within the meaning of paragraph (d)(3) of this section. Therefore, these Systems are structural components of REIT F's building.

    (iii) In addition to wiring and flooring, which are listed as structural components in paragraph (d)(3)(ii) of this section and, therefore, are real property, the Electrical System and telecommunication infrastructure system include equipment used to ensure that the tenant is provided with uninterruptable, stable power and telecommunication services. The Electrical System and telecommunication infrastructure system are not listed in paragraph (d)(3)(ii) of this section, and, therefore, they must be analyzed to determine whether they are structural components of the building using the factors provided in paragraph (d)(3)(iii) of this section. The Electrical System and telecommunication infrastructure system—

    (A) Are embedded within the walls and floors of the building and would be costly to remove;

    (B) Are not designed to be moved and are designed specifically for the particular building of which they are a part;

    (C) Would not be significantly damaged upon removal and, although removing them would damage the walls and floors in which they are embedded, their removal would not significantly damage the building;

    (D) Serve a utility-like function with respect to the building;

    (E) Serve the building in its passive functions of containing, sheltering, and protecting computer servers;

    (F) Produce income as consideration for the use or occupancy of space within the building;

    (G) Were installed during construction of the building; and

    (H) Will remain in place when the tenant vacates the premises.

    (iv) The factors described in this paragraph (g) Example 6 (iii)(A), (B), and (D) through (H) all support the conclusion that the Electrical System and telecommunication infrastructure system are structural components of REIT F's building within the meaning of paragraph (d)(3) of this section and, therefore, are real property. The factor described in this paragraph (g) Example 6 (iii)(C) would support a conclusion that the Electrical System and telecommunication infrastructure system are not structural components. However this factor does not outweigh the factors supporting the conclusion that the Electric System and telecommunication infrastructure system are structural components.

    Example 7.

    Partitions. (i) REIT G owns an office building that it leases to tenants under long-term leases. REIT G neither operates the office building nor provides services to its tenants. Partitions are owned by REIT G and are used to delineate space between tenants and within each tenant's space. The office building has two types of interior, non-load-bearing drywall partition systems: a conventional drywall partition system (Conventional Partition System) and a modular drywall partition system (Modular Partition System). Neither the Conventional Partition System nor the Modular Partition System was installed during construction of the office building. Conventional Partition Systems are comprised of fully integrated gypsum board partitions, studs, joint tape, and covering joint compound. Modular Partition Systems are comprised of assembled panels, studs, tracks, and exposed joints. Both the Conventional Partition System and the Modular Partition System reach from the floor to the ceiling.

    (ii) Depending on the needs of a new tenant, the Conventional Partition System may remain in place when a tenant vacates the premises. The Conventional Partition System is integrated into the office building and is designed and constructed to remain in areas not subject to reconfiguration or expansion. The Conventional Partition System can be removed only by demolition, and, once removed, neither the Conventional Partition System nor its components can be reused. Removal of the Conventional Partition System causes substantial damage to the Conventional Partition System itself but does not cause substantial damage to the building.

    (iii) Modular Partition Systems are typically removed when a tenant vacates the premises. Modular Partition Systems are not designed or constructed to remain permanently in place. Modular Partition Systems are designed and constructed to be movable. Each Modular Partition System can be readily removed, remains in substantially the same condition as before, and can be reused. Removal of a Modular Partition System does not cause any substantial damage to the Modular Partition System itself or to the building. The Modular Partition System may be moved to accommodate the reconfigurations of the interior space within the office building for various tenants that occupy the building.

    (iv) The Conventional Partition System is comprised of walls that are integrated into an inherently permanent structure, and thus are listed as structural components in paragraph (d)(3)(ii) of this section. The Conventional Partition System, therefore, is real property.

    (v) The Modular Partition System is not integrated into the building and, therefore, is not listed in paragraph (d)(3)(ii) of this section. Thus, the Modular Partition System must be analyzed to determine whether it is a structural component using the factors provided in paragraph (d)(3)(iii) of this section. The Modular Partition System—

    (A) Is installed and removed quickly and with little expense;

    (B) Is designed to be moved and is not designed specifically for the particular building of which it is a part;

    (C) Is not damaged, and the building is not damaged, upon its removal;

    (D) Does not serve a utility-like function with respect to the building;

    (E) Serves the building in its passive functions of containing and protecting the tenants' assets;

    (F) Produces income only as consideration for the use or occupancy of space within the building;

    (G) Was not installed during construction of the building; and

    (H) Will not remain in place when a tenant vacates the premises.

    (vi) The factors described in this paragraph (g) Example 7 (v)(A) through (D), (G) and (H) all support the conclusion that the Modular Partition System is not a structural component of REIT G's building within the meaning of paragraph (d)(3) of this section and, therefore, is not real property. The factors described in this paragraph (g) Example 7 (v)(E) and (F) would support a conclusion that the Modular Partition System is a structural component. These factors, however, do not outweigh the factors supporting the conclusion that the Modular Partition System is not a structural component.

    Example 8.

    Solar energy site. (i) REIT H owns a solar energy site, among the components of which are land, photovoltaic modules (PV Modules), mounts and an exit wire. REIT H enters into a long-term lease with a tenant for the solar energy site. REIT H neither operates the solar energy site nor provides services to its tenant. The mounts support the PV Modules. The racks are affixed to the land through foundations made from poured concrete. The mounts will remain in place when the tenant vacates the solar energy site. The PV Modules convert solar photons into electric energy (electricity). The exit wire is buried underground, is connected to equipment that is in turn connected to the PV Modules, and transmits the electricity produced by the PV Modules to an electrical power grid, through which the electricity is distributed for sale to third parties.

    (ii) REIT H's PV Modules, mounts, and exit wire are each separately identifiable items. Separation from a mount does not affect the ability of a PV Module to convert photons to electricity. Separation from the equipment to which it is attached does not affect the ability of the exit wire to transmit electricity to the electrical power grid. The types of PV Modules and exit wire that REIT H owns are each customarily sold or acquired as single units. Removal of the PV Modules from the mounts that support them does not damage the function of the mounts as support structures and removal is not costly. The PV Modules serve the active function of converting photons to electricity. Disconnecting the exit wire from the equipment to which it is attached does not damage the function of that equipment, and the disconnection is not costly. The PV Modules, mounts, and exit wire are each distinct assets within the meaning of paragraph (e) of this section.

    (iii) The land is real property as defined in paragraph (c) of this section.

    (iv) The mounts are designed and constructed to remain in place indefinitely, and they have a passive function of supporting the PV Modules. The mounts are not listed in paragraph (d)(2)(iii)(B) of this section, and, therefore, the mounts are assets that must be analyzed to determine whether they are inherently permanent structures using the factors provided in paragraph (d)(2)(iv) of this section. The mounts—

    (A) Are permanently affixed to the land through the concrete foundations or molded concrete anchors (which are part of the mounts);

    (B) Are not designed to be removed and are designed to remain in place indefinitely;

    (C) Would be damaged if removed;

    (D) Will remain affixed to the land after the tenant vacates the premises and will remain affixed to the land indefinitely; and

    (E) Would require significant time and expense to move.

    (v) The factors described in this paragraph (g) Example 8 (iv)(A) through (E) all support the conclusion that the mounts are inherently permanent structures within the meaning of paragraph (d)(2) of this section and, therefore, are real property.

    (vi) The PV Modules convert solar photons into electricity that is transmitted through an electrical power grid for sale to third parties. The conversion is an active function. Thus, the PV Modules are items of machinery or equipment and therefore are not inherently permanent structures within the meaning of paragraph (d)(2) of this section and, so, are not real property. The PV Modules do not serve the mounts in their passive function of providing support; instead, the PV Modules produce electricity for sale to third parties, which is income other than consideration for the use or occupancy of space. Thus, the PV Modules are not structural components of REIT H's mounts within the meaning of paragraph (d)(3) of this section and, therefore, are not real property.

    (vii) The exit wire is buried under the ground and transmits the electricity produced by the PV Modules to the electrical power grid. The exit wire was installed during construction of the solar energy site and is designed to remain permanently in place. The exit wire is permanently affixed and is a transmission line, which is listed as an inherently permanent structure in paragraph (d)(2)(iii)(B) of this section. Therefore, the exit wire is real property.

    Example 9.

    Solar-powered building. (i) REIT I owns a solar energy site similar to that described in Example 8, except that REIT I's solar energy site assets (Solar Energy Site Assets) are mounted on land adjacent to an office building owned by REIT I. REIT I leases the office building and the solar energy site to a single tenant. REIT I does not operate the office building or the solar energy site and does not provide services to its tenant. Although the tenant occasionally transfers excess electricity produced by the Solar Energy Site Assets to a utility company, the Solar Energy Site Assets are designed and intended to produce electricity only to serve the office building. The size and specifications of the Solar Energy Site Assets were designed to be appropriate to serve only the electricity needs of the office building. Although the Solar Energy Site Assets were not installed during construction of the office building, no facts indicate either that the Solar Energy Site Assets will not remain in place indefinitely or that they may be removed if the tenant vacates the premises.

    (ii) With the exception of the occasional transfers of excess electricity to a utility company, the Solar Energy Site Assets serve the office building to which they are adjacent, and, therefore, the Solar Energy Site Assets are analyzed to determine whether they are a structural component using the factors provided in paragraph (d)(3)(iii) of this section. The Solar Energy Site Assets—

    (A) Are expensive and time consuming to install and remove;

    (B) Were designed with the size and specifications needed to serve only the office building;

    (C) Will be damaged, but will not cause damage to the office building, upon removal;

    (D) Serve a utility-like function with respect to the office building;

    (E) Serve the office building in its passive functions of containing, sheltering, and protecting the tenant and the tenant's assets;

    (F) Produce income from consideration for the use or occupancy of space within the office building;

    (G) Were not installed during construction of the office building; and

    (H) Will remain in place when the tenant vacates the premises.

    (iii) The factors described in this paragraph (g) Example 9 (ii)(A) through (C) (in part), (ii)(D) through (F), and (ii)(H) all support the conclusion that the Solar Energy Site Assets are a structural component of REIT I's office building within the meaning of paragraph (d)(3) of this section and, therefore, are real property. The factors described in this paragraph (g) Example 9 (ii)(C) (in part) and (ii)(G) would support a conclusion that the Solar Energy Site Assets are not a structural component, but these factors do not outweigh the factors supporting the conclusion that the Solar Energy Site Assets are a structural component.

    (iv) The result in this Example 9 would not change if, instead of the Solar Energy Site Assets, solar shingles were used as the roof of REIT I's office building. Solar shingles are roofing shingles like those commonly used for residential housing, except that they contain built-in PV modules. The solar shingle installation was specifically designed and constructed to serve only the needs of REIT I's office building, and the solar shingles were installed as a structural component to provide solar energy to REIT I's office building (although REIT I's tenant occasionally transfers excess electricity produced by the solar shingles to a utility company). The analysis of the application of the factors provided in paragraph (d)(3)(ii) of this section would be similar to the analysis of the application of the factors to the Solar Energy Site Assets in this paragraph (g) Example 9 (ii) and (iii).

    Example 10.

    Pipeline transmission system. (i) REIT J owns a natural gas pipeline transmission system that provides a conduit to transport natural gas from unrelated third-party producers and gathering facilities to unrelated third-party distributors and end users. REIT J enters into a long-term lease with a tenant for the pipeline transmission system. REIT J neither operates the pipeline transmission system nor provides services to its tenant. The pipeline transmission system is comprised of underground pipelines, isolation valves and vents, pressure control and relief valves, meters, and compressors. Although the pipeline transmission system as a whole serves an active function (transporting natural gas), one or more distinct assets within the system may nevertheless be inherently permanent structures that do not themselves perform active functions. Each of these distinct assets was installed during construction of the pipeline transmission system and will remain in place when the tenant vacates the pipeline transmission system. Each of these assets was designed to remain permanently in place.

    (ii) The pipelines are permanently affixed and are listed as other inherently permanent structures in paragraph (d)(2)(iii)(B) of this section. Therefore, the pipelines are real property.

    (iii) Isolation valves and vents are placed at regular intervals along the pipelines to isolate and evacuate sections of the pipelines in case there is need for a shut-down or maintenance of the pipelines. Pressure control and relief valves are installed at regular intervals along the pipelines to provide overpressure protection. The isolation valves and vents and pressure control and relief valves are not listed in paragraph (d)(3)(ii) and, therefore, must be analyzed to determine whether they are structural components using the factors provided in paragraph (d)(3)(iii) of this section. The isolation valves and vents and pressure control and relief valves—

    (A) Are time consuming and expensive to install and remove from the pipelines;

    (B) Are designed specifically for the particular pipelines for which they are a part;

    (C) Will sustain damage and will damage the pipelines if removed;

    (D) Do not serve a utility-like function with respect to the pipelines;

    (E) Serve the pipelines in their passive function of providing a conduit for natural gas;

    (F) Produce income only from consideration for the use or occupancy of space within the pipelines;

    (G) Were installed during construction of the pipelines; and

    (H) Will remain in place when the tenant vacates the premises.

    (iv) The factors described in this paragraph (g) Example 10 (iii)(A) through (C) and (iii)(E) through (H) support the conclusion that the isolation valves and vents and pressure control and relief valves are structural components of REIT J's tanks or pipelines within the meaning of paragraph (d)(3) of this section and, therefore, are real property. The factor described in this paragraph (g) Example 10 (iii)(D) would support a conclusion that the isolation valves and vents and pressure control and relief valves are not structural components, but this factor does not outweigh the factors that support the conclusion that the isolation valves and vents and pressure control and relief valves are structural components.

    (v) Meters are used to measure the natural gas passing into or out of the pipeline transmission system for purposes of determining the end users' consumption. Over long distances, pressure is lost due to friction in the pipeline transmission system. Compressors are required to add pressure to transport natural gas through the entirety of the pipeline transmission system. The meters and compressors do not serve the tanks or pipelines in their passive function of providing a conduit for the natural gas, and are used in connection with the production of income from the sale and transportation of natural gas, rather than as consideration for the use or occupancy of space within the pipelines. The meters and compressors are not structural components within the meaning of paragraph (d)(3) of this section and, therefore, are not real property.

    Example 11.

    Above-market lease. REIT K acquires an office building from an unrelated third party subject to a long-term lease with a single tenant under which the tenant pays above-market rents. The above-market lease is an intangible asset under GAAP. Seventy percent of the value of the above-market lease asset is attributable to income from the long-term lease that qualifies as rents from real property, as defined in section 856(d)(1). The remaining thirty percent of the value of the above-market lease asset is attributable to income from the long-term lease that does not qualify as rents from real property. The portion of the value of the above-market lease asset that is attributable to rents from real property (here, seventy percent) derives its value from real property, is inseparable from that real property, does not produce or contribute to the production of income other than consideration for the use or occupancy of space, and, therefore, is an interest in real property under section 856(c)(5)(C) and a real estate asset under section 856(c)(5)(B). The remaining portion of the above-market lease asset does not derive its value from real property and, therefore, is not a real estate asset.

    Example 12.

    Land use permit. REIT L receives a special use permit from the government to place a cell tower on Federal Government land that abuts a federal highway. Government regulations provide that the permit is not a lease of the land, but is a permit to use the land for a cell tower. Under the permit, the government reserves the right to cancel the permit and compensate REIT L if the site is needed for a higher public purpose. REIT L leases space on the tower to various cell service providers. Each cell service provider installs its equipment on a designated space on REIT L's cell tower. The permit does not produce, or contribute to the production of, any income other than REIT L's receipt of payments from the cell service providers in consideration for their being allowed to use space on the tower. The permit is in the nature of a leasehold that allows REIT L to place a cell tower in a specific location on government land. Therefore, the permit is an interest in real property.

    Example 13.

    License to operate a business. REIT M owns a building and receives a license from State to operate a casino in the building. The license applies only to REIT M's building and cannot be transferred to another location. REIT M's building is an inherently permanent structure under paragraph (d)(2)(i) of this section and, therefore, is real property. However, REIT M's license to operate a casino is not a right for the use, enjoyment, or occupation of REIT M's building but is rather a license to engage in the business of operating a casino in the building. Therefore, the casino license is not real property.

    (h) Effective/applicability date. The rules of this section apply for taxable years beginning after August 31, 2016. For purposes of applying the first sentence of the flush language of section 856(c)(4) to a quarter in a taxable year that begins after August 31, 2016, the rules of this section apply in determining whether the taxpayer met the requirements of section 856(c)(4) at the close of prior quarters. Taxpayers may rely on this section for quarters that end before the applicability date.

    Approved: August 8, 2016. John Dalrymple, Deputy Commissioner for Services and Enforcement. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy).
    [FR Doc. 2016-20987 Filed 8-30-16; 8:45 am] BILLING CODE 4830-01-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2016-0665] RIN 1625-AA00 Safety Zone; Great Egg Harbor Bay, Marmora, NJ AGENCY:

    Coast Guard, DHS.

    ACTION:

    Temporary final rule.

    SUMMARY:

    The Coast Guard is establishing two temporary safety zones on the waters of Great Egg Harbor Bay in Marmora, NJ. The first safety zone includes all waters within 250 feet of vessel and machinery conducting demolition operations on the remaining portions of the Route 9, Beesley Point Bridge bascule span. This safety zone is necessary to provide for the safety of life on navigable waters during the demolition and will re-route vessel traffic through an alternate channel to facilitate heavy marine equipment operating in the main navigational channel to remove the bascule span of the bridge and will be in place throughout the entire duration of the demolition work.

    The second safety zone includes all waters within 500 yards of a blasting vessel and equipment being used to conduct bridge pile blasting operations, which is the final phase of the demolition of the Route 9, Beesley Point Bridge bascule span. This safety zone will only be enforced during times of explosive detonation. The safety zone will temporarily restrict vessel traffic from transiting or anchoring in a portion of the Great Egg Harbor Bay while pile blasting and removal operations are being conducted to facilitate the removal of bridge piles from the demolished Route 9, Beesley Point Bridge.

    DATES:

    This rule is effective without actual notice from August 31, 2016 through October 20, 2016. For the purposes of enforcement, actual notice will be used from August 22, 2016, until August 31, 2016. The second safety zone will be enforced on or about October 1, 2016, only during times of explosive detonation.

    ADDRESSES:

    To view documents mentioned in this preamble as being available in the docket, go to, type USCG-2016-0665 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 about this rule, call or email Marine Science Technician First Class Tom Simkins, U.S. Coast Guard, Sector Delaware Bay, Waterways Management Division, Coast Guard; telephone (215) 271-4889, email [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 COTP Captain of the Port II. Background Information and Regulatory History

    In June of 2013, demolition work began on the Route 9, Beesley Point Bridge between Somers Point and Marmora, NJ. Route 52 Construction, the company performing this demolition work, has completed all demolition of the bridge and piles except the portion of the bridge which has the bascule span opening for the navigational channel.

    During this phase of demolition heavy marine equipment, to include a large crane and barge, will be used to remove the large bascule span arms and what is left of the bridge tender house and roadway. The barge and crane must be placed in the navigational channel to properly secure and remove what remains of the bridge.

    All piles from the demolished bridge south of the bascule span have been removed. All piles north of the bascule span have been removed with the exception of four piles, which are attached to the bascule span for support. The Coast Guard has reviewed Route 52 Construction's plan to move the main navigational channel 100 feet south of the most southern portion of the remaining bridge to allow vessel traffic to safely pass during the demolition of the bascule span. Once the bascule span is removed, the piles will be removed and the bridge will be completely removed from the waterway.

    The removal of the remaining piles, which are secured to the sea floor bed, will be completed by using explosives, after which the piles and debris will be removed. The Captain of the Port, Delaware Bay, has determined that potential hazards associated with pile blasting and removal operations, beginning on or about October 1, 2016, will be a safety concern for anyone operating within 500 yards of pile blasting and removal operations during times of explosive detonation.

    The purpose of this rule is to promote maritime safety and protect vessels from the hazards of bridge demolition and pile blasting operations, and to maintain safety of navigation in the Great Egg Harbor Bay, in the vicinity of the Route 9, Beesley Point Bridge. The rule will provide for a clear transit route for vessels, provide a safety buffer around the crane and barge while demolition operations are conducted, and provide a safety buffer around the blasting vessel during times of explosive detonation.

    The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the final details for this event were not received by the Coast Guard until August 18, 2016, and the demolition work will begin August 22, 2016. The first safety zone is required by August 22, 2016, for the demolition of the remaining portion of the bridge, and it is impracticable to publish an NPRM and consider comments before that date. Allowing this event to go forward without a safety zone in place would expose mariners and the public to unnecessary dangers associated with bridge demolition operations. The crane and barge must be placed in the main navigational channel to facilitate the removal of the remaining portion of the bridge. Therefore, it is imperative that there is a clear transit route and safety zone around the demolition location.

    Furthermore, the second safety zone is needed for blasting operations which will begin on or about October 1, 2016. It is impracticable to publish an NPRM and consider comments due to the short window of time until the operation begins. Allowing this event to go forward without a safety zone in place would expose mariners and the public to unnecessary dangers associated with pile blasting operations.

    We are issuing this rule, and under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making it effective less than 30 days after publication in the Federal Register for the reasons we stated for not publishing an NPRM. The Coast Guard expects minimal impact to vessels transiting through the alternate channel. Vessels will be able to safely transit through the alternate channel at all times, except during times of explosive detonation. The alternate channel will have the same horizontal clearance and no vertical clearance restriction, similar to the current navigational channel. Furthermore, notification for the first safety zone will be made via marine safety broadcast using VHF-FM channel 16 and through the Local Notice to Mariners.

    For the second safety zone, the pile blasting operation, two blasting events will occur on consecutive days to complete both piers. Notification for the second safety zone will be a combination of broadcast notice to mariners, local notice to mariners, posted warning signs, 500 yard marine traffic safety zone maintained by the contractor's safety boats during time of explosive detonations, a 10 minute, 5 minutes, and 1 minute warning made by the blasting vessel via VHF-FM channel 16, and warning signals at 5 minutes with 3 short blasts of the air horn, and 1 minute warning of 2 short blasts of the air horn. The schedule of the signals will be posted along with all other required company, Local, State, and Federal signage.

    III. Legal Authority and Need for Rule

    The Coast Guard is issuing this rule under authority in 33 U.S.C. 1231. The Captain of the Port, Delaware Bay has determined that potential hazards are associated with demolition and pile blasting operations of the Route 9, Beesley Point Bridge, over the Great Egg Harbor Bay, in Marmora, NJ from August 22, 2016, through October 20, 2016. The rule will provide for a clear transit route for vessels, provide a safety buffer around the crane and barge while demolition operations are conducted, and provide a safety buffer around the blasting vessel during times of explosive detonation.

    The rule will minimally impact vessels transiting through the Great Egg Harbor Bay navigational channel, in the vicinity of the Route 9, Beesley Point Bridge because vessels will be able to safely transit through an adequate alternate channel, except during times of explosive detonation. The alternate channel will have the same horizontal clearance and no vertical clearance restriction, similar to the current navigational channel.

    IV. Discussion of the Rule

    On August 22, 2016, demolition work will begin on the remaining portion of the Route 9, Beesley Point Bridge, over the Great Egg Harbor Bay, in Marmora, NJ. The Captain of the Port, Delaware Bay, has determined that the hazards associated with demolition and pile blasting operations require two separate safety zones. The first safety zone will encompass all the navigable waters within 250 feet of the marine equipment and demolition operation. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Delaware Bay, or his designated representative. Vessels wishing to transit the waterway may navigate approximately 100 feet south of the main navigational channel to the alternate navigational channel to safely pass the demolition equipment. An adequate alternate navigational channel will be established 100 feet south of the most southern portion of the bascule span which will have the a horizontal clearance of 60 feet and an unlimited vertical clearance. The alternate navigational channel will be clearly marked with red and green buoys; during the evening the buoys will be lit with red and green lights to signify the channel. The alternate channel will have the same horizontal clearance and no vertical clearance restrictions; the State of New Jersey has marked the channel with best water for passage of vessels. Vessels are requested to contact the demolition crew via VHF-FM channel 13 or 16 to make satisfactory passing arrangement and maintain a safe speed when transiting the alternate navigational channel.

    The second safety zone will be enforced starting on or about October 1, 2016, only during times of explosive detonation, and encompasses all navigable waters in the Great Egg Harbor Bay within 500 yards of vessels and machinery being used to conduct pile blasting and removal operations. The duration of the enforcement of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while explosive detonation occurs. There will be two blasting events occurring on consecutive days to complete both piers. Actual dates and times of explosive detonation will be published with a combination of broadcast notice to mariners, local notice to mariners, posted warning signs, 500 yard marine traffic safety zone maintained by the contractors safety boats, a 10 minute, 5 minutes, and 1 minute warning made by the blasting vessel via VHF-FM channel 16, and warning signals at 5 minutes with 3 short blasts of the air horn, and 1 minute warning of 2 short blasts of the air horn. The schedule of the signals will be posted along with warning signs.

    Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Delaware Bay, or his designated representative. No vessels may transit through the safety zone during times of explosives detonation. During pile blasting explosive detonation, vessels will be required to maintain a 500-yard distance from vessels and equipment used to conduct pile blasting and removal operations. This 500 yard radius will be secured by two contractor safety boats in the adjacent waterways. For safety reasons associated with the blasting operation, during times of explosive detonation the alternate navigational channel will be closed. At all other times vessels may transit through the established alternate navigational channel approximately 100 feet south of the southernmost remaining pile of the Route 9, Beesley Point Bridge.

    Signs will be posted to identify the blast area and warning signs will be posted with the schedule of the warning signals. The contractor will verify that all vessels and persons are clear of safety zone 10 minutes prior to the scheduled shot time and will remain secured until the blaster gives the “All Clear”. All persons involved with securing the blast zone will be equipped with marine radios. A 10 minute, 5 minutes, and 1 minute warning made by the blasting vessel via VHF-FM channel 16, and warning signals at 5 minutes with 3 short blasts of the air horn, and 1 minute warning of 2 short blasts of the air horn. After every explosive detonation the blasting vessels will give the “All Clear” when the alternate channel is clear for vessels to transit.

    V. Regulatory Analyses

    We developed this rule after considering numerous statutes and Executive order 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 finding is based on the limited size of the zone and the availability for vessels to transit freely through the alternate channel, around the first safety zone. Vessels will only be affected during times of explosive detonation, where the second safety zone will be enforced. The second safety zone is of a limited size and duration as blasting will occur only for a consecutive two day period. In addition, the zones will be well publicized to allow mariners to make alternative plans for transiting the affected 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 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.

    It is expected that there will be minimal disruption to the maritime community. Before the effective period, the Coast Guard will issue maritime advisories widely available to users of the river to allow mariners to make alternative plans for transiting the affected areas. In addition, vessels may transit around the zone through an alternate channel, except during time of explosive detonation.

    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 above.

    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 two safety zones, the first encompassing all the waters within 250 feet of demolition operations on the remaining portion of the Route 9, Beesley Point Bridge, over Great Egg Harbor Bay, in Marmora, NJ and the second encompassing all navigable waters in the Great Egg Harbor Bay within 500 yards of vessels and machinery being used to conduct pile blasting and removal operations during times of explosive detonation. It is categorically excluded from further review under paragraph 34(g) 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. We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

    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 165

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

    For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

    PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority:

    33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.

    2. Add temporary § 165.T05-0665, to read as follows:
    § 165.T05-0665 Safety Zone; Great Egg Harbor Bay, Marmora, NJ.

    (a) Regulated areas. The following areas are safety zones:

    (1) Bascule span demolition zone. All waters within 250 feet of vessels and machinery conducting demolition operations in Great Egg Harbor Bay, in the vicinity of Route 9, Beesley Point Bridge bascule span, in Marmora, NJ.

    (2) Bridge pile blasting zone. All waters within 500 yards of the blasting vessel and equipment conducting pile blasting operations, in Great Egg Harbor Bay, in the vicinity of Route 9, Beesley Point Bridge, in Marmora, NJ.

    (b) Regulations. The general safety zone regulations in § 165.23 apply to the safety zones created by this temporary section, § 165.T05-0665.

    (1) All vessels and persons are prohibited from entering into or moving within the safety zones described in paragraph (a) of this section while they are subject to enforcement, unless authorized by the Captain of the Port, Delaware Bay, or by his designated representative.

    (2) Persons or vessels seeking to enter or pass through the safety zones must contact the Captain of the Port, Delaware Bay, or his designated representative to seek permission to transit the area. The Captain of the Port, Delaware Bay can be contacted at telephone number 215-271-4807 or on Marine Band Radio VHF Channel 16 (156.8 MHz).

    (3) Vessels may freely transit through the marked alternate channel, approximately 100 feet south of the most southern portion of the bascule span. The alternate channel has a horizontal clearance of 60 feet and unlimited vertical clearance. The alternate channel will be marked with red and green buoys and the buoys will be lit at night. Vessels are requested to contact the demolition crew via VHF-FM channel 13 or 16 to make satisfactory passing arrangement and maintain a safe speed when transiting the alternate navigational channel.

    (4) No vessels may transit through the safety zone described in paragraph (a)(2) of this section during times of explosives detonation. During pile blasting detonation, vessels will be required to maintain a 500 yard distance from the blasting vessel and equipment. Within the 500 yards is the alternate channel, approximately 100 feet south of the most southern portion of the bascule span. Therefore no vessel may transit the alternate channel during times of explosive detonation. Actual dates and times of explosive detonation will be announced with a combination of broadcast notice to mariners, local notice to mariners, posted warning signs, 500 yard marine traffic safety zone maintained by the contractors safety boats, 10 minute, 5 minutes, and 1 minute warning made by the blasting vessel via VHF-FM channel 16, and warning signals at 5 minutes with 3 short blasts of the air horn, and 1 minute warning of 2 short blasts of the air horn. The schedule of the signals will be posted along with all other required signage.

    (5) This section applies to all vessels except those engaged in the following operations: enforcing laws, servicing aids to navigation, and emergency response vessels.

    (c) Definitions. As used in this section:

    Captain of the Port Delaware Bay means the Commander, U.S. Coast Guard Sector Delaware Bay, Philadelphia, PA.

    Designated representative means any Coast Guard commissioned, warrant, or petty officer who has been authorized by the Captain of the Port Delaware Bay to assist in enforcing the safety zone described in paragraph (a) of this section.

    (d) Enforcement. The U.S. Coast Guard may be assisted by Federal, State and local agencies in the patrol and enforcement of the zone.

    (e) Enforcement period. This first safety zone will be enforced from August 22, 2016, through October 20, 2016, unless cancelled earlier by the Captain of the Port. The second safety zone for pile blasting will only be enforced during times of explosive detonation. Pile Blasting operations are schedule to begin on or about October 1, 2016. Actual dates and times of explosive detonation will be published with a combination of broadcast notice to mariners, local notice to mariners, posted warning signs, 500 yard marine traffic safety zone maintained by the contractors safety boats, 10 minute, 5 minutes, and 1 minute warning made by the blasting vessel via VHF-FM channel 16, and warning signals at 5 minutes with 3 short blasts of the air horn, and 1 minute warning of 2 short blasts of the air horn. The schedule of the signals will be posted along with warning signs.

    Dated: August 22, 2016. Benjamin A. Cooper, Captain, U.S. Coast Guard, Captain of the Port Delaware Bay.
    [FR Doc. 2016-20951 Filed 8-30-16; 8:45 am] BILLING CODE 9110-04-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R04-OAR-2016-0294; FRL-9951-52-Region 4] Air Plan Approval; Alabama; Cross-State Air Pollution Rule AGENCY:

    Environmental Protection Agency.

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is approving portions of the October 26, 2015, State Implementation Plan (SIP) submittal from Alabama concerning the Cross-State Air Pollution Rule (CSAPR). Under CSAPR, large electricity generating units (EGUs) in Alabama are subject to Federal Implementation Plans (FIPs) requiring the units to participate in CSAPR's federal trading program for annual emissions of nitrogen oxides (NOX) and one of CSAPR's two federal trading programs for annual emissions of sulfur dioxide (SO2). This action approves the incorporation into Alabama's SIP of the state's regulations requiring Alabama EGUs to participate in new CSAPR state trading programs for annual NOX and SO2 emissions integrated with the CSAPR federal trading programs, replacing the corresponding FIP requirements. These CSAPR state trading programs are substantively identical to the CSAPR federal trading programs except with regard to the provisions allocating emission allowances among Alabama units. EPA is approving the portions of the SIP revision concerning these CSAPR state trading programs because these portions of the SIP revision meet the requirements of the Clean Air Act (CAA or Act) and EPA's regulations for approval of a CSAPR full SIP revision replacing the requirements of a CSAPR FIP. Under the CSAPR regulations, approval of these portions of the SIP revision automatically eliminates Alabama units' obligations to participate in CSAPR's federal trading programs for annual NOX and SO2 emissions under the corresponding CSAPR FIPs addressing interstate transport requirements for the 1997 and 2006 Fine Particulate Matter (PM2.5) national ambient air quality standards (NAAQS). Approval of these portions of the SIP revision fully satisfies Alabama's good neighbor obligation under the CAA to prohibit emissions which will significantly contribute to nonattainment or interfere with maintenance of the 1997 and 2006 PM2.5 NAAQS in any other state. This approval also addresses the judicial remand of the federally-established CSAPR Phase 2 SO2 budget for Alabama. EPA is not acting at this time on the portion of Alabama's SIP submittal intended to replace Alabama units' obligations to participate in CSAPR's federal trading program for ozone-season NOX emissions under a separate CSAPR FIP.

    DATES:

    This rule is effective September 30, 2016.

    ADDRESSES:

    EPA has established a docket for this action under Docket Identification No EPA-R04-OAR-2016-0294. All documents in the docket are listed on the www.regulations.gov Web site. Although listed in the index, some information may not be publicly available, i.e., Confidential Business Information or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through www.regulations.gov or in hard copy at the Air Regulatory Management Section, Air Planning and Implementation Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960. EPA requests that if at all possible, you contact the person listed in the FOR FURTHER INFORMATION CONTACT section to schedule your inspection. The Regional Office's official hours of business are Monday through Friday 8:30 a.m. to 4:30 p.m., excluding federal holidays.

    FOR FURTHER INFORMATION CONTACT:

    Steven Scofield, Air Regulatory Management Section, Air Planning and Implementation Branch, Air, Pesticides and Toxics Management Division, Region 4, U.S. Environmental Protection Agency, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960. Mr. Scofield can be reached by telephone at (404) 562-9034 or via electronic mail at [email protected]

    SUPPLEMENTARY INFORMATION: I. Background on CSAPR and CSAPR-Related SIP revisions

    EPA issued CSAPR in July 2011 to address the requirements of CAA section 110(a)(2)(D)(i)(I) concerning interstate transport of air pollution.1 As amended, CSAPR requires 28 Eastern states to limit their statewide emissions of SO2 and/or NOX in order to mitigate transported air pollution unlawfully impacting other states' ability to attain or maintain three NAAQS: the 1997 ozone NAAQS, the 1997 annual PM2.5 NAAQS, and the 2006 24-hour PM2.5 NAAQS. The CSAPR emissions limitations are defined in terms of maximum statewide “budgets” for emissions of annual SO2, annual NOX, and/or ozone-season NOX by each covered state's large EGUs. The CSAPR state budgets are implemented in two phases of generally increasing stringency, with the Phase 1 budgets applying to emissions in 2015 and 2016 and the Phase 2 budgets applying to emissions in 2017 and later years. As a mechanism for achieving compliance with the emissions limitations, CSAPR established four federal emissions trading programs: A program for annual NOX emissions, a program for ozone-season NOX emissions, and two geographically separate programs for annual SO2 emissions. CSAPR also established FIP requirements applicable to the large electricity generating units in each covered state. The CSAPR FIP provisions require each state's units to participate in up to three of the four CSAPR trading programs.

    1 Federal Implementation Plans; Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 FR 48208 (August 8, 2011) (codified as amended at 40 CFR 52.38 and 52.39 and subparts AAAAA through DDDDD of 40 CFR part 97).

    CSAPR includes provisions under which states may submit and EPA will approve SIP revisions to modify or replace the CSAPR FIP requirements while allowing states to continue to meet their transport-related obligations using either CSAPR's federal emissions trading programs or state emissions trading programs integrated with the federal programs.2 Through such a SIP revision, a state may replace EPA's default provisions for allocating emission allowances among the state's units, employing any state-selected methodology to allocate or auction the allowances, subject to timing conditions and limits on overall allowance quantities. In the case of CSAPR's federal trading program for ozone-season NOX emissions (or an integrated state trading program), a state may also expand trading program applicability to include certain smaller electricity generating units. If a state wants to replace CSAPR FIP requirements with SIP requirements under which the state's units participate in a state trading program that is integrated with and identical to the federal trading program even as to the allocation and applicability provisions, the state may submit a SIP revision for that purpose as well. However, no emissions budget increases or other substantive changes to the trading program provisions are allowed. A state whose units are subject to multiple CSAPR FIPs and federal trading programs may submit SIP revisions to modify or replace either some or all of those FIP requirements.

    2See 40 CFR 52.38, 52.39. States also retain the ability to submit SIP revisions to meet their transport-related obligations using mechanisms other than the CSAPR federal trading programs or integrated state trading programs.

    States can submit two basic forms of CSAPR-related SIP revisions effective for emissions control periods in 2017 or later years.3 Specific conditions for approval of each form of SIP revision are set forth in the CSAPR regulations. Under the first alternative—an “abbreviated” SIP revision—a state may submit a SIP revision that upon approval replaces the default allowance allocation and/or applicability provisions of a CSAPR federal trading program for the state.4 Approval of an abbreviated SIP revision leaves the corresponding CSAPR FIP and all other provisions of the relevant federal trading program in place for the state's units.

    3 CSAPR also provides for a third, more streamlined form of SIP revision that is effective only for control periods in 2016 and is not relevant here. See § 52.38(a)(3), (b)(3); § 52.39(d), (g).

    4 § 52.38(a)(4), (b)(4); § 52.39(e), (h).

    Under the second alternative—a “full” SIP revision—a state may submit a SIP revision that upon approval replaces a CSAPR federal trading program for the state with a state trading program integrated with the federal trading program, so long as the state trading program is substantively identical to the federal trading program or does not substantively differ from the federal trading program except as discussed above with regard to the allowance allocation and/or applicability provisions.5 For purposes of a full SIP revision, a state may either adopt state rules with complete trading program language, incorporate the federal trading program language into its state rules by reference (with appropriate conforming changes), or employ a combination of these approaches.

    5 § 52.38(a)(5), (b)(5); § 52.39(f), (i).

    The CSAPR regulations identify several important consequences and limitations associated with approval of a full SIP revision. First, upon EPA's approval of a full SIP revision as correcting the deficiency in the state's implementation plan that was the basis for a particular set of CSAPR FIP requirements, the obligation to participate in the corresponding CSAPR federal trading program is automatically eliminated for units subject to the state's jurisdiction without the need for a separate EPA withdrawal action, so long as EPA's approval of the SIP is full and unconditional.6 Second, approval of a full SIP revision does not terminate the obligation to participate in the corresponding CSAPR federal trading program for any units located in any Indian country within the borders of the state, and if and when a unit is located in Indian country within a state's borders, EPA may modify the SIP approval to exclude from the SIP, and include in the surviving CSAPR FIP instead, certain trading program provisions that apply jointly to units in the state and to units in Indian country within the state's borders.7 Finally, if at the time a full SIP revision is approved EPA has already started recording allocations of allowances for a given control period to a state's units, the federal trading program provisions authorizing EPA to complete the process of allocating and recording allowances for that control period to those units will continue to apply, unless EPA's approval of the SIP revision provides otherwise.8

    6 § 52.38(a)(6), (b)(6); § 52.39(j).

    7 § 52.38(a)(5)(iv)-(v), (a)(6), (b)(5)(v)-(vi), (b)(6); § 52.39(f)(4)-(5), (i)(4)-(5), (j).

    8 § 52.38(a)(7), (b)(7); § 52.39(k).

    Certain CSAPR Phase 2 emissions budgets have been remanded to EPA for reconsideration.9 However, the CSAPR trading programs remain in effect and all CSAPR emissions budgets likewise remain in effect pending EPA final action to address the remands. The remanded budgets include the CSAPR Phase 2 SO2 emissions budget applicable to Alabama units under the federal CSAPR SO2 Group 2 Trading Program.

    9EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 138 (D.C. Cir. 2015).

    In 2015, EPA proposed to update CSAPR to address Eastern states' interstate air pollution mitigation obligations with regard to the 2008 ozone NAAQS. Among other things, the proposed rule would amend the Phase 2 emissions budget applicable to Alabama units under the CSAPR NOX Ozone Season Trading Program and would make technical corrections and nomenclature changes that would apply throughout the CSAPR regulations, including the CSAPR FIPs at 40 CFR part 52 and the CSAPR federal trading program regulations for annual NOX, ozone-season NOX, and SO2 emissions at 40 CFR part 97.10

    10 80 FR 75706, 75710, 75757 (December 3, 2015).

    In the CSAPR rulemaking, EPA determined that air pollution transported from Alabama would unlawfully affect other states' ability to attain or maintain the 1997 and 2006 PM2.5 NAAQS and the 1997 ozone NAAQS.11 Alabama units meeting the CSAPR applicability criteria were consequently made subject to FIP provisions requiring participation in CSAPR federal trading programs for SO2, annual NOX, and ozone-season NOX emissions.12 On October 26, 2015, Alabama submitted to EPA a SIP revision including provisions that, if all portions were approved, would incorporate into Alabama's SIP CSAPR state trading program regulations that would replace the CSAPR regulations for all three of these federal trading programs with regard to Alabama units for control periods in 2017 and later years. In a notice of proposed rulemaking (NPRM) published on June 28, 2016 (81 FR 41914), EPA proposed to approve portions of Alabama's October 26, 2015, SIP submittal designed to replace the CSAPR federal SO2 and annual NOX trading programs. EPA did not propose to take action on the portion of the SIP submittal designed to replace the federal CSAPR ozone-season NOX trading program. The NPRM provides additional detail regarding the background and rationale for EPA's action. Comments on the NPRM were due on or before July 28, 2016. EPA received no adverse comments on the proposed action.

    11 76 FR at 48213.

    12 40 CFR 52.38(a)(2), (b)(2); § 52.39(c); § 52.54(a), (b); § 52.55.

    II. Incorporation by Reference

    In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of ADEM Administrative Code rules 335-3-8-.07 through 335-3-8-.38 (establishing Alabama's “TR NOX Annual Trading Program”) and 335-3-5-.06 through 335-3-5-.36 (establishing Alabama's “TR SO2 Group 2 Trading Program”), effective November 24, 2015.13 Therefore, these materials have been approved by EPA for inclusion in the SIP, have been incorporated by reference by EPA into that plan, are fully federally enforceable under sections 110 and 113 of the CAA as of the effective date of the final rulemaking of EPA's approval, and will be incorporated by reference by the Director of the Federal Register in the next update to the SIP compilation.14 EPA has made, and will continue to make, these materials generally available through www.regulations.gov and/or at the EPA Region 4 Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

    13 EPA notes that ADEM Administrative Code rules 335-3-5-.06 through 335-3-05-.08 and 335-3-05-.11 through 335-3-05-.14 (state effective November 24, 2015) for the TR SO2 Group 2 trading program have the same numeric regulatory citations as the regulations in the SIP for Alabama's existing CAIR SO2 trading program as identified at 40 CFR 52.50(c) and that the ADEM Administrative Code rules 335-3-8-.07 through 335-3-8-.33 (with the exception of rules 335-3-8-.15, -.19, -.22, -.28, and -.31) (state effective November 24, 2015) for the TR NOX Annual trading program have the same numeric regulatory citations as the regulations in the SIP for Alabama's existing NOX Budget trading and the CAIR NOX Annual trading programs as identified at 40 CFR 52.50(c). The existing NOX Budget trading and CAIR regulations remain in the Alabama SIP and are not superseded by the TR regulations approved into the SIP in this final action even though these TR regulations share the same numeric citations. Therefore, the regulatory table at 40 CFR 52.50(c) retains the existing NOX Budget and CAIR SO2 and NOX Annual trading programs and includes the TR SO2 Group 2 and NOX Annual trading programs.

    14 62 FR 27968 (May 22, 1997).

    III. Final Actions

    EPA is approving the portions of Alabama's October 26, 2015, SIP submittal concerning the establishment for Alabama units of CSAPR state trading programs for annual NOX and SO2 emissions for compliance periods in 2017 and later years. The revision adopts into the SIP the state trading program rules codified in ADEM Administrative Code rules 335-3-8-.07 through 335-3-8-.38 (establishing Alabama's “TR NOX Annual Trading Program”) and 335-3-5-.06 through 335-3-5-.36 (establishing Alabama's “TR SO2 Group 2 Trading Program”).15 These Alabama CSAPR state trading programs will be integrated with the federal CSAPR NOX Annual Trading Program and the federal CSAPR SO2 Group 2 Trading Program, respectively, and are substantively identical to the federal trading programs except with regard to the allowance allocation provisions.16 Following approval of these portions of the SIP revision, Alabama units therefore will generally be required to meet requirements under Alabama's CSAPR state trading programs equivalent to the requirements the units otherwise would have been required to meet under the corresponding CSAPR federal trading programs, but allocations to Alabama units of CSAPR NOX Annual allowances for compliance periods in 2017 and later years will be determined according to the SIP's allocation provisions at Alabama rule 335-3-8-.14 instead of EPA's default allocation provisions at 40 CFR 97.411(a), 97.411(b)(1), and 97.412(a), and allocations to Alabama units of CSAPR SO2 Group 2 allowances will be determined according to the SIP's allocation provisions at Alabama rule 335-3-5-.13 instead of EPA's default allocation provisions at 40 CFR 97.711(a), 97.711(b)(1), and 97.712(a). EPA is approving these portions of the SIP revision because they meet the requirements of the CAA and EPA's regulations for approval of a CSAPR full SIP revision replacing a federal trading program with a state trading program that is integrated with and substantively identical to the federal trading program except for permissible differences with respect to emission allowance allocation provisions.

    15 Consistent with the current CSAPR regulatory text, the Alabama rules use the terms “Transport Rule” and “TR” instead of the updated terms “Cross-State Air Pollution Rule” and “CSAPR”.

    16 EPA has proposed to make certain technical corrections to the CSAPR FIP and federal trading program regulations in order to more accurately reflect EPA's intent as described in the CSAPR rulemaking and has also proposed to replace “TR” with “CSAPR” throughout the regulations (for example, “TR NOX Annual unit” would become “CSAPR NOX Annual unit”). See 80 FR 75706, 75758. Because the proposed technical corrections merely clarify and do not change EPA's interpretations, where the proposed corrections would apply to a provision incorporated by reference in the Alabama rules, EPA would interpret the Alabama rules as reflecting the corrections. Further, EPA anticipates that if the proposed nomenclature updates are finalized, the final CSAPR federal regulations would explicitly provide that terms that include “CSAPR” encompass otherwise identical terms in approved SIP revisions that include “TR”.

    EPA promulgated the FIP provisions requiring Alabama units to participate in the federal CSAPR NOX Annual Trading Program and the federal CSAPR SO2 Group 2 Trading Program in order to address Alabama's obligations under CAA section 110(a)(2)(D)(i)(I) with respect to the 1997 and 2006 PM2.5 NAAQS in the absence of SIP provisions addressing those requirements. Approval of the portions of Alabama's SIP submittal adopting CSAPR state trading program rules for annual NOX and SO2 substantively identical to the corresponding CSAPR federal trading program regulations (or differing only with respect to the allowance allocation methodology) will correct the same deficiency in the SIP that otherwise would be corrected by those CSAPR FIPs. Under the CSAPR regulations, upon EPA's full and unconditional approval of a SIP revision as correcting the SIP's deficiency that is the basis for a particular CSAPR FIP, the obligation to participate in the corresponding CSAPR federal trading program is automatically eliminated for units subject to the state's jurisdiction (but not for any units located in any Indian country within the state's borders).17 The approval of the portions of Alabama's SIP submittal establishing CSAPR state trading program rules for annual NOX and SO2 emissions therefore will result in automatic termination of the obligations of Alabama units to participate in the federal CSAPR NOX Annual Trading Program and the federal CSAPR SO2 Group 2 Trading Program. Further, when promulgating the FIP provisions requiring Alabama units to participate in those two CSAPR trading programs, EPA found that those FIP requirements would fully satisfy Alabama's obligation pursuant to CAA section 110(a)(2)(D)(i)(I) to prohibit emissions which will significantly contribute to nonattainment or interfere with maintenance of the 1997 and 2006 PM2.5 NAAQS in any other state.18 This approval of portions of Alabama's SIP revision as correcting the SIP's deficiency that was the basis for those FIP requirements therefore likewise fully satisfies the state's transport obligation with respect to the 1997 and 2006 PM2.5 NAAQS.

    17 40 CFR 52.38(a)(6); § 52.39(j); see also § 52.54(a)(1); § 52.55(a).

    18See 76 FR 48208, 48210 (August 8, 2011).

    As noted in EPA's NPRM, the Phase 2 SO2 budget established for Alabama in the CSAPR rulemaking has been remanded to EPA for reconsideration.19 With the approval of these portions of the SIP revision as proposed, Alabama has fulfilled its obligations to provide a SIP that addresses the interstate transport provisions of CAA section 110(a)(2)(D)(i)(I) with respect to the 1997 and 2006 PM2.5 NAAQS. Thus, EPA no longer has an obligation to (nor does EPA have the authority to) address those transport requirements through implementation of a FIP, and approval of these portions of the SIP revision eliminates Alabama units' obligations to participate in the federal CSAPR NOX Annual Trading Program and the federal CSAPR SO2 Group 2 Trading Program. Elimination of Alabama units' obligations to participate in the federal trading programs includes elimination of the requirements to comply with the federally-established Phase 2 budgets capping allocations of CSAPR NOX Annual allowances and CSAPR SO2 Group 2 allowances to Alabama units under those federal trading programs. As approval of these portions of the SIP revision eliminates requirements to comply with Alabama's remanded federally-established Phase 2 SO2 budget and eliminates EPA's authority to subject units in Alabama to a FIP, it is EPA's opinion that finalization of approval of this SIP action addresses the judicial remand of Alabama's federally-established Phase 2 SO2 budget.20

    19EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 138 (D.C. Cir. 2015).

    20 Although the court in EME Homer City Generation remanded Alabama's Phase 2 SO2 budget because it determined that the budget was too stringent, nothing in the court's decision affects Alabama's authority to seek incorporation into its SIP of a state-established budget as stringent as the remanded federally-established budget or limits EPA's authority to approve such a SIP revision. See 42 U.S.C. 7416, 7410(k)(3).

    Large electricity generating units in Alabama are subject to additional CSAPR FIP provisions requiring them to participate in the federal CSAPR NOX Ozone Season Trading Program. While Alabama's SIP submittal also seeks to replace the CSAPR FIP requirements addressing Alabama units' ozone-season NOX emissions, EPA is not acting on that portion of the SIP submittal at this time. Approval of this SIP revision concerning other CSAPR trading programs has no effect on any CSAPR FIP requirements applicable to Alabama units regarding ozone-season NOX emissions.

    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. See 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves 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 Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

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

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

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

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

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

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

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

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

    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 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. EPA will submit a report containing this action 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 October 31, 2016. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and it 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, Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides.

    Dated: August 16, 2016. Heather McTeer Toney, Regional Administrator, Region 4.

    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 B—Alabama 2. Section 52.50(c) is amended by: a. Adding seven new entries under “Chapter No. 335-3-5 Control of Sulfur Compound Emissions” for “335-3-5-.06”, “335-3-5-.07”, “335-3-5-.08”, “335-3-5-.11”, “335-3-5-.12”, “335-3-5-.13” and “335-3-5-.14” under each existing entry for “335-3-5-.06”, “335-3-5-.07”, “335-3-5-.08”, “335-3-5-.11”, “335-3-5-.12”, “335-3-5-.13” and “335-3-5-.14” in numerical and date order; b. Adding in numerical order under “Chapter No. 335-3-5 Control of Sulfur Compound Emissions” new entries for “335-3-5-.09”, “335-3-5-.10”, and “335-3-5-.15” through “335-3-5-.36”; c. Revising the title to Chapter No. 335-3-8; d. Adding 21 new entries under “Chapter No. 335-3-8 Control of Nitrogen Oxides Emissions” for “335-3-8-.07”, “335-3-8-.08”, “335-3-8-.09”, “335-3-8-.10”, “335-3-8-.11”, “335-3-8-.12”, “335-3-8-.13”, “335-3-8-.14”, “335-3-8-.16”, “335-3-8-.17”, “335-3-8-.18”, “335-3-8-.20”, “335-3-8-.21”, “335-3-8-.23”, “335-3-8-.24”, “335-3-8-.25”, “335-3-8-.26”, “335-3-8-.27”, “335-3-8-.29”, “335-3-8-.30” and “335-3-8-.33”, under each existing entry for “335-3-8-.07”, “335-3-8-.08”, “335-3-8-.09”, “335-3-8-.10”, “335-3-8-.11”, “335-3-8-.12”, “335-3-8-.13”, “335-3-8-.14”, “335-3-8-.16”, “335-3-8-.17”, “335-3-8-.18”, “335-3-8-.20”, “335-3-8-.21”, “335-3-8-.23”, “335-3-8-.24”, “335-3-8-.25”, “335-3-8-.26”, “335-3-8-.27”, “335-3-8-.29”, “335-3-8-.30” and “335-3-8-.33”, in numerical and date order; and e. Adding in numerical order under “Chapter No. 335-3-8 Control of Nitrogen Oxides Emissions” new entries for “335-3-8-.15”, “335-3-8-.19”, “335-3-8-.22”, “335-3-8-.28”, “335-3-8-.31”, “335-3-8-.34”, “335-3-8-.35”, “335-3-8-.36”, “335-3-8-.37” and “335-3-8-.38”.

    The additions and revision read as follows:

    § 52.50 Identification of plan.

    (c) * * *

    EPA Approved Alabama Regulations State citation Title/subject State effective date EPA approval date Explanation *         *         *         *         *         *         * Chapter No. 335-3-5 Control of Sulfur Compound Emissions *         *         *         *         *         *         * Section 335-3-5-.06 TR SO2 Trading Program—Purpose and Definitions 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.06 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-5-.07 TR SO2 Trading Program—Applicability 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.07 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-5-.08 TR SO2 Trading Program—Retired Unit Exemption 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.08 are included in the approved SIP. Section 335-3-5-.09 TR SO2 Trading Program—Standard Requirements 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.10 TR SO2 Trading Program—omputation of Time 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Section 335-3-5-.11 Administrative Appeal Procedures 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.11 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-5-.12 SO2 Trading Budgets and Variability Limits 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.12 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-5-.13 TR SO2 Allowance Allocations 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.13 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-5-.14 Authorization of Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-5-.14 are included in the approved SIP. Section 335-3-5-.15 Responsibilities of Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.16 Changing Designated Representative and Alternate Designated Representative; Changes in Owners and Operators; Changes in Units at the Source 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.17 Certificate of Representation 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.18 Objections Concerning Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.19 Delegation by Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.20 Reserved 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.21 Establishment of Compliance Accounts, Assurance Accounts, and General Accounts 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.22 Recordation of TR SO2 Allowance Allocations and Auction Results 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.23 Submission of TR SO2 Allowance Transfers 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.24 Recordation of TR SO2 Allowance Transfers 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.25 Compliance with TR SO2 Emissions Limitation 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.26 Compliance with TR SO2 Assurance Provisions 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.27 Banking 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.28 Account Error 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.29 Administrator's Action on Submissions 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.30 Reserved 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.31 General Monitoring, Recordkeeping, and Reporting Requirements 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.32 Initial Monitoring System Certification and Recertification Procedures 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.33 Monitoring System Out-of-Control Periods 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.34 Notifications Concerning Monitoring 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.35 Recordkeeping and Reporting 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-5-.36 Petitions for Alternatives to Monitoring, Recordkeeping, or Reporting Requirements 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Chapter No. 335-3-8 Control of Nitrogen Oxides Emissions *         *         *         *         *         *         * Section 335-3-8-.07 TR NOX Annual Trading Program—Purpose and Definitions 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.07 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.08 TR NOX Annual Trading Program—Applicability 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.08 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.09 TR NOX Annual Trading Program—Retired Unit Exemption 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.09 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.10 TR NOX Annual Trading Program—Standard Requirements 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.10 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.11 TR NOX Annual Trading Program—Computation of Time 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.11 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.12 Administrative Appeal Procedures 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.12 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.13 NOX Annual Trading Budgets and Variability Limits 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.13 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.14 TR NOX Annual Allowance Allocations 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.14 are included in the approved SIP. Section 335-3-8-.15 Reserved 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Section 335-3-8-.16 Authorization of Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.16 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.17 Responsibilities of Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.17 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.18 Changing Designated Representative and Alternate Designated Representative; Changes in Owners and Operators; Changes in Units at the Source 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.18 are included in the approved SIP. Section 335-3-8-.19 Certificate of Representation 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.19 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.20 Objections Concerning Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.20 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.21 Delegation by Designated Representative and Alternate Designated Representative 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.21 are included in the approved SIP. Section 335-3-8-.22 Reserved 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Section 335-3-8-.23 Establishment of Compliance Accounts, Assurance Accounts, and General Accounts 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.23 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.24 Recordation of TR NOX Annual Allowance Allocations and Auction Results 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.24 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.25 Submission of TR NOX Annual Allowance Transfers 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.25 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.26 Recordation of TR NOX Annual Allowance Transfers 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.26 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.27 Compliance with TR NOX Annual Emissions Limitation 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.27 are included in the approved SIP. Section 335-3-8-.28 Compliance with TR NOX Annual Assurance Provisions 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Section 335-3-8-.29 Banking 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.297 are included in the approved SIP. *         *         *         *         *         *         * Section 335-3-8-.30 Account Error 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.30 are included in the approved SIP. Section 335-3-8-.31 Administrator's Action on Submissions 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         * Section 335-3-8-.33 General Monitoring, Recordkeeping, and Reporting Requirements 11/24/2015 8/31/2016 [Insert citation of publication] Both sections of 335-3-8-.33 are included in the approved SIP. Section 335-3-8-.34 Initial Monitoring System Certification and Recertification Procedures 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-8-.35 Monitoring System Out-of-Control Periods 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-8-.36 Notifications Concerning Monitoring 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-8-.37 Recordkeeping and Reporting 11/24/2015 8/31/2016 [Insert citation of publication] Section 335-3-8-.38 Petitions for Alternatives to Monitoring, Recordkeeping, or Reporting Requirements 11/24/2015 8/31/2016 [Insert citation of publication] *         *         *         *         *         *         *
    [FR Doc. 2016-20854 Filed 8-30-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2014-0636; FRL-9951-42-Region 9] Approval and Promulgation of Air Quality State Implementation Plans; California; San Joaquin Valley; Moderate Area Plan for the 2006 PM2.5 NAAQS AGENCY:

    U.S. Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is approving elements of the state implementation plan revisions (SIP) submitted by California to address Clean Air Act requirements for the 2006 fine particulate matter (PM2.5) National Ambient Air Quality Standards in the San Joaquin Valley Moderate PM2.5 nonattainment area. These SIP revisions are the 2012 PM2.5 Plan, submitted March 4, 2013, the 2014 Supplement, submitted November 6, 2014, and the motor vehicle emission budgets for the 2006 PM2.5 NAAQS submitted November 13, 2015. The EPA is disapproving interpollutant trading ratios identified in the SIP submission for nonattainment new source review permitting purposes because the ratios are not supported by a sufficient technical demonstration.

    DATES:

    This rule is effective on September 30, 2016.

    ADDRESSES:

    The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2014-0636. All documents in the docket are listed on the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available through http://www.regulations.gov, or please contact the person identified in the For Further Information Contact section for additional availability information.

    FOR FURTHER INFORMATION CONTACT:

    Wienke Tax, EPA Region 9, (415) 947-4192, [email protected]

    SUPPLEMENTARY INFORMATION:

    Throughout this document, “we,” “us” and “our” refer to the EPA.

    Table of Contents I. Background II. Public Comments and the EPA's Responses III. Final Action IV. Statutory and Executive Order Reviews I. Background A. Proposed Action

    On January 13, 2015, we proposed to approve SIP revisions submitted by California to address Clean Air Act (CAA or “the Act”) requirements for the 2006 primary and secondary 24-hour PM2.5 national ambient air quality standards (NAAQS or “standards”) in the San Joaquin Valley (SJV) PM2.5 nonattainment area.1 These SIP revisions are the 2012 PM2.5 Plan, submitted March 4, 2013, and the “Supplemental Document, Clean Air Act Subpart 4: The 2012 PM2.5 Plan for the 2006 PM2.5 Standard, and District Rule 2201 (New and Modified Stationary Source Review)” (2014 Supplement), submitted November 6, 2014. We also proposed to approve, through parallel processing, the proposed motor vehicle emissions budgets (MVEBs) for the 2006 PM2.5 NAAQS submitted on November 6, 2014, which California submitted in final form on December 29, 2014, and the related trading mechanism for transportation conformity purposes. We refer to these submissions collectively herein as “the 2012 PM2.5 Plan” or simply “the Plan.”

    1 80 FR 1816 (January 13, 2015).

    The EPA proposed to approve the following elements of the 2012 PM2.5 Plan as satisfying applicable CAA requirements: (1) The 2007 base year emissions inventories, (2) the demonstration that attainment by the Moderate area attainment date of December 31, 2015 is impracticable, (3) the reasonably available control measures/reasonably available control technology (RACM/RACT) demonstration, (4) the reasonable further progress (RFP) demonstration, (5) the San Joaquin Valley Unified Air Pollution Control District's (SJVUAPCD's or “District's”) commitments to adopt and implement specific rules and measures by specific dates, and (6) the 2014 and 2017 MVEBs for direct PM2.5 and oxides of nitrogen (NOX). The EPA also proposed to determine that volatile organic compounds (VOC) emissions do not contribute significantly to ambient PM2.5 levels that exceed the 2006 PM2.5 NAAQS in the SJV but to find the State's and District's demonstration concerning ammonia emissions insufficient to rebut the regulatory presumption for ammonia.

    The EPA proposed to disapprove interpollutant trading ratios identified in these SIP submittals for nonattainment new source review (NNSR) permitting purposes. Finally, the EPA proposed to reclassify the SJV area, including Indian country within it, as a Serious nonattainment area for the 2006 PM2.5 NAAQS, based on the EPA's determination that the area could not practicably attain these standards by the applicable Moderate area attainment date of December 31, 2015.

    B. Final Reclassification of the SJV Area From Moderate to Serious for the 2006 PM2.5 NAAQS

    On December 22, 2015, we finalized our January 13, 2015 proposal to reclassify the SJV area from Moderate to Serious for the 2006 PM2.5 NAAQS.2 As a result of that action, by August 21, 2017, California is required to submit additional SIP revisions to satisfy the statutory requirements that apply to Serious PM2.5 nonattainment areas, including the requirements of subpart 4 of part D, title I of the Act. The Serious area plan must provide for attainment of the 2006 PM2.5 NAAQS in the SJV area as expeditiously as practicable, but no later than December 31, 2019, in accordance with the requirements of part D of title I of the Act.

    2 81 FR 2993 (January 20, 2016) (final rule) and 81 FR 42263 (June 29, 2016) (correcting amendment).

    C. Motor Vehicle Emissions Budgets in the 2012 PM2.5 Plan

    As part of our January 13, 2015 proposed action, we proposed to approve the proposed 2014 and 2017 MVEBs for the 2006 PM2.5 NAAQS submitted by the California Air Resources Board (CARB) on November 6, 2014 with a request for parallel processing. CARB formally submitted the final budgets to the EPA on December 29, 2014.3 On April 1, 2016, we found the NOX and direct PM2.5 budgets in the 2012 PM2.5 Plan and 2014 Supplement, as submitted December 29, 2014, to be adequate for conformity purposes.4 On November 13, 2015, CARB submitted a SIP revision to replace several previously-submitted MVEBs developed using EMFAC2011 with revised MVEBs developed using EMFAC2014.5

    3 Letter dated December 29, 2014, from Richard W. Corey, Executive Officer, CARB, to Jared Blumenfeld, Regional Administrator, EPA Region 9, with enclosures.

    4 Letter dated April 1, 2016, from Deborah Jordan, Director, Air Division, EPA Region 9, to Richard W. Corey, Executive Officer, CARB, and 81 FR 22194 (April 15, 2016).

    5 Letter dated November 13, 2015, from Richard W. Corey, Executive Officer, CARB, to Jared Blumenfeld, Regional Administrator, EPA Region 9, with enclosures.

    On May 18, 2016, we proposed to approve the revised MVEBs submitted on November 13, 2015, which address the 1997 8-hour ozone standards, the 2006 PM2.5 standards, and the 1987 coarse particulate matter (PM10) standard for the SJV area.6 We received no public comments on this proposal. Today, we are finalizing action only on the revised 2017 MVEBs addressing the 2006 PM2.5 NAAQS in the SJV, as submitted November 13, 2015.7 These NOX and direct PM2.5 budgets were revised using EMFAC2014, the most recent version of California's motor vehicle emission factor model approved by the EPA for use in SIPs and conformity analyses.8 The revised budgets, presented in Table 1 below, were developed in consultation with the SJVUAPCD, the eight SJV metropolitan planning organizations (MPOs), the EPA and CARB. These budgets replace the NOX and direct PM2.5 budgets submitted on December 29, 2014.

    6 81 FR 31212 (May 18, 2016).

    7 The EPA took final action on the revised ozone and PM10 budgets at 81 FR 53294 (August 12, 2016). Although the 2012 PM2.5 Plan contained MVEBs for both 2014 and 2017, MVEBs for 2014 are no longer relevant for conformity analyses since that year has passed.

    8 80 FR 77337 (December 14, 2015).

    Table 1—San Joaquin Valley Revised Budgets Developed Using EMFAC2014 County 2017
  • (tons per winter day)
  • PM2.5 NOX
    Fresno 1.0 32.1 Kern (SJV) 0.8 28.8 Kings 0.2 5.9 Madera 0.2 6.0 Merced 0.3 11.0 San Joaquin 0.6 15.5 Stanislaus 0.4 12.3 Tulare 0.4 11.2 Note: CARB calculated the revised PM2.5 budgets by taking the sum of the county-by-county emissions results from EMFAC and rounding the SJV-wide total up to the nearest whole ton for NOX and to the nearest tenth of a ton for direct PM2.5, then reallocating to the individual counties based on the ratio of each county's contribution to the total, and then rounding each county's emissions to the nearest tenth of a ton using the conventional rounding method. The existing adequate PM2.5 budgets submitted December 29, 2014 were calculated in the same manner.

    As part of our January 13, 2015 proposed action, the EPA also proposed to approve, in accordance with 40 CFR 93.124, the trading mechanism as described on p. C-32 in Appendix C of the 2012 PM2.5 Plan as an enforceable component of the transportation conformity program for the SJV for the 2006 PM2.5 NAAQS, with the condition that trades are limited to substituting excess reductions in NOX for increases in PM2.5. This trading mechanism was not revised by the November 13, 2015 MVEB submittal.9 We are finalizing our proposal to approve the trading mechanism identified in the Plan for transportation conformity purposes.

    9 81 FR 31212, 31218 (May 18, 2016).

    The budgets that the EPA is approving herein relate to the 2006 PM2.5 NAAQS only, and our approval of them does not affect the status of the previously-approved MVEBs for the 1997 PM2.5 NAAQS and related trading mechanism, which remain in effect for that PM2.5 NAAQS.

    II. Public Comments and the EPA's Responses

    The EPA provided a 45-day period for the public to comment on our proposed rule. During this comment period, which ended on February 27, 2015, we received two sets of public comments, one from the SJVUAPCD and another from Earthjustice on behalf of the Central Valley Air Quality Coalition, Greenaction, the Association of Irritated Residents, the Sierra Club—Tehipite Chapter, and Global Community Monitor (Earthjustice).10 Copies of these comment letters can be found in the docket.

    10See letter dated February 27, 2015 from Sheraz Gill, Director of Strategies and Incentives at SJVAPCD, to Wienke Tax, EPA Region 9, “Re: Docket No. EPA-R09-OAR-2014-0636, Comments on Proposed Approval and Promulgation of Implementation Plans; Designation of Areas for Air Quality Planning Purposes; California; San Joaquin Valley Moderate Area Plan and Reclassification as Serious Nonattainment for the 2006 PM2.5 NAAQS,” and letter dated February 27, 2015 from Paul Cort and Adenike Adeyeye, Earthjustice, to Ms. Wienke Tax, Air Planning Office, EPA Region 9.

    In our December 22, 2015 final action to reclassify the SJV area as a “Serious” PM2.5 nonattainment area, we summarized and responded to public comments pertaining to the reclassification and its consequences and stated that we would, in a separate rulemaking, respond to comments pertaining to our proposed action on the submitted plan.11 In our April 15, 2016 notice of adequacy, we responded to a public comment pertaining to the adequacy of the budgets.12

    11 81 FR 2993 (January 20, 2016).

    12 81 FR 22194 (April 15, 2016).

    We summarize below and provide our responses to all remaining public comments on our proposed action on the 2012 PM2.5 Plan.

    A. Comment Regarding Emissions Inventories

    Comment 1: Earthjustice comments on the importance of emissions inventories, noting that CAA section 172(c)(3) requires that nonattainment plans “include a comprehensive, accurate, current inventory of actual emissions from all sources of the relevant pollutant or pollutants in such area” (emphasis by commenter). Earthjustice argues that the EPA's proposed determination that the 2012 PM2.5 inventories “are based on the most current and accurate information available to the State and District at the time the Plan and its inventories were being developed,” does not satisfy the requirements of section 172(c)(3) that the inventory be accurate and current. While acknowledging that it is unaware of information calling into question the inventories used in the Plan, Earthjustice asserts that the EPA must take further steps to confirm that the inventories “are” (i.e., remain) current and accurate before it approves the inventories. Citing Sierra Club v. United States EPA, 671 F.3d 955, 968 (9th Cir. 2012), Earthjustice states that the EPA's failure to confirm that the inventories are current and accurate “undermines the rational basis for the approval.”

    Response 1: The EPA does not dispute the importance of emissions inventories. We evaluated the emissions inventories in the 2012 PM2.5 Plan to determine whether they satisfy the requirements of CAA section 172(c)(3) and adequately support the Plan's RACM, RFP, and impracticability demonstrations. Based on this evaluation, we have concluded that the Plan's 2007 base year emissions inventory was based on the most current and accurate information available to the State and District at the time the Plan was developed and submitted, and that it comprehensively addresses all source categories in the SJV area, consistent with applicable CAA requirements and EPA guidance.13

    13 80 FR 1816 at 1819-1820; see also “General Preamble for Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498, 13502 (April 16, 1992) (“General Preamble”).

    CAA section 172(b) provides that a state containing a nonattainment area shall submit a plan or plan revision (including the plan items) meeting the applicable requirements of CAA section 172(c) and section 110 on the schedule established by the EPA. Section 172(c) contains, inter alia, the requirement that nonattainment area plans include a “comprehensive, accurate, current inventory” of actual emissions from all sources of the relevant pollutant or pollutants in the area. We believe it is reasonable to read these provisions together as requiring that the state submit an inventory that is comprehensive, accurate, and current at the time the state submitted it to the EPA, rather than requiring that the state continually revise its plan as new emissions data become available.14 Air quality planning is an iterative process and states and the EPA must rely on the best available data at the time the plans are created. Nothing in the Sierra Club decision cited by the commenters (671 F.3d 955, 9th Cir. 2012) compels the EPA to alter this longstanding interpretation of the CAA.15

    14 EPA, Office of Transportation and Air Quality (OTAQ), “Policy Guidance on the Use of MOVES2010 for State Implementation Plan Development, Transportation Conformity, and Other Purposes,” December 2009; see also Memorandum from John Seitz, EPA, Office of Air Quality Planning and Standards and Margo Oge, OTAQ, “Policy Guidance on the Use of MOBILE6 for SIP Development and Transportation Conformity,” January 18, 2002.

    15 In Sierra Club v. EPA, 671 F.3d 955 (9th Cir. 2012), the Ninth Circuit remanded the EPA's final action approving an ozone plan for the SJV on the ground that the EPA's failure to consider new inventory data submitted by CARB long before the EPA's action on the plan was arbitrary and capricious under the Administrative Procedure Act. See 671 F.3d at 966 (“EPA stands on shaky legal ground relying on significantly outdated data, given the amount of time that EMFAC2007 was available and authorized for use before the EPA approved the 2004 SIP”). The decision did not disturb the EPA's longstanding policy of requiring states to use the most current emissions estimate models available at the time of SIP development.

    B. Comments Regarding Precursors

    Comment 2: The SJVUAPCD argues that ammonia is not a significant precursor for PM2.5 and that additional ammonia controls are not required. The District asserts that the EPA's proposal to reject these findings is based on “technical assertions not supported by the extensive scientific research and modeling” conducted for the Plan, and that the technical analyses in the Plan demonstrate that ammonia reductions are ineffective for attaining the PM2.5 NAAQS. Although the District recognizes that ammonia is an integral component of ammonium nitrate, which contributes substantially to wintertime PM2.5 mass in the SJV, it argues that its scientific evaluations in the Plan provide “sufficient substantiation that controls on ammonia are known to be very insensitive to reducing ammonium nitrate mass concentrations.” The District also comments that the EPA did not provide references or support for statements in its technical support document that “a detailed evaluation of the modeling shows that ammonia controls can be effective at reducing ambient PM2.5 in some locations,” and that “[i]n the various studies, when ammonia emissions were reduced by up to 50 percent, ambient ammonium nitrate decreased by 5 to 25 percent, depending on the episode modeled and the geographic location evaluated . . . . These percentages for ammonia benefits are generally smaller than those for NOX reductions, but these modeling results show that reductions in ammonia emissions under certain circumstances can effectively reduce ambient PM2.5” (internal citations omitted). The District argues that these statements are contrary to the Plan's Weight of Evidence Analysis in Appendix G of the 2012 PM2.5 Plan.

    Response 2: We disagree with the District's claim that we did not provide support for our conclusions about ammonia impacts in the SJV. As stated on pg. 56 of the EPA's technical support document (TSD) for the proposed rule (hereafter “Proposal TSD”),16 the EPA's conclusion that ammonia controls can be effective at reducing ambient PM2.5 in some locations in the SJV is based on (1) sensitivity to ammonia reductions in the air quality modeling and Weight of Evidence Analysis in the 2012 PM2.5 Plan, (2) a number of peer-reviewed journal papers cited in the Plan showing ammonium nitrate reductions of up to 25 percent when ammonia emissions are reduced by 50 percent, and (3) the severity of PM2.5 nonattainment in the area.17

    16 EPA, Region 9, Air Division, Technical Support Document, “Proposed Action on the San Joaquin Valley 2012 PM2.5 State Implementation Plan and 2014 Supplemental Document and Proposed Reclassification of the San Joaquin Valley as Serious Nonattainment for the 2006 PM2.5 Standard,” December 2014 [“Proposal TSD”].

    17Id. at p. 56.

    Comment 3: The SJVUAPCD recognizes that ammonia is a large component of ammonium nitrate and that ammonium nitrate contributes substantially to wintertime PM2.5 mass, but asserts that this does not necessarily mean that reductions in ammonia emissions are effective in reducing PM2.5 concentrations in the SJV. Similarly, the District acknowledges that ammonia is found in the SJV at higher wintertime concentrations than NOX but states that ammonia's physical abundance does not solely determine its significance as a precursor. The District cites language in the EPA's Proposal TSD stating that the EPA reviews a determination to exclude a PM2.5 precursor by considering both “the magnitude of the precursor's contribution to ambient PM2.5 concentrations” and “the sensitivity of ambient PM2.5 concentrations in the area to reductions in emissions of that precursor.” The District interprets this language to establish two necessary elements for precursor significance: (1) A “relatively high contribution” to overall PM2.5 mass, and (2) availability of control mechanisms for the precursor that demonstrate a “reasonable rather than negligible” reduction in PM2.5 mass. The District asserts that PM2.5 concentrations in the SJV are highly insensitive to ammonia controls, particularly when compared to alternative controls on NOX, which it claims is the limiting precursor for ammonia nitrate formation. While the District agrees with the EPA that the decision of whether to require reductions of a precursor should not be based solely on the control effectiveness of the precursor relative to other precursors, the District comments that an “additional key issue that must also be taken under consideration is the development and implementation of effective emission reductions strategies for reducing ambient PM2.5 and bringing the [SJV] into attainment.”

    Response 3: The EPA generally agrees with the District's statement that both the contribution of a precursor to PM2.5 concentrations in the area and the area's sensitivity to reductions in emissions of the precursor may be relevant for assessing the level of contribution of a PM2.5 precursor to ambient PM2.5 levels. The EPA also agrees with the District's conclusion that ambient PM2.5 concentrations are more sensitive to NOX emission reductions than to ammonia emission reductions. We disagree, however, with the District's suggestion that the effectiveness of reductions of a particular precursor in improving PM2.5 air quality relative to a different precursor may support a conclusion that a given precursor does not contribute significantly to ambient PM2.5 levels that exceed the NAAQS. We also disagree with the District's suggestion that the “availability of control mechanisms for the precursor that demonstrate a `reasonable rather than negligible' reduction in PM2.5 mass” is a necessary consideration in determining whether a particular PM2.5 precursor is subject to control evaluation under subpart 4.

    As explained in our proposed rule, ammonia is a precursor to the formation of PM2.5 and is, therefore, presumptively regulated under subpart 4 of part D, title I of the Act.18 Thus, CARB and the District must evaluate ammonia emissions for potential controls unless the State submits a demonstration adequate to rebut the regulatory presumption in the SJV area. The pertinent question in a demonstration to rebut the regulatory presumption for ammonia is whether ammonia emission sources “contribute significantly” to PM2.5 levels that exceed the PM2.5 NAAQS in the SJV, not whether existing emission control measures can achieve a specified amount of emission reductions in the area or how effective ammonia reductions are compared to reductions of other PM2.5 precursors.19 More specifically, with respect to the sensitivity-based contribution analysis, the pertinent question is whether PM2.5 concentrations in the nonattainment area are “insensitive” to emissions reductions of the precursor.20 We note that the EPA may, in some cases, require a state to identify and evaluate potential control measures to reduce emissions of a particular PM2.5 precursor from existing sources as part of a sensitivity-based contribution analysis, i.e., in order to adequately demonstrate that regulation of the precursor would not provide meaningful improvements in ambient air quality.21

    18 80 FR 1816, 1821 (January 13, 2015) (citing NRDC v. EPA, 706 F.3d 428 (D.C. Cir. 2013)).

    19 CAA section 189(e).

    20See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at Section III.C.3.d, pp. 50-54 (discussing technical issues associated with sensitivity-based contribution analysis).

    21See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at 40 CFR 51.1009(a)(2)(ii). Although this regulatory text is not yet effective, it reflects the EPA's interpretation of the statutory requirements. See also EPA, Response to Comments on the Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements, July 29, 2016, at p. 23 (noting that “while a valid sensitivity-based precursor demonstration generally will not require an evaluation of available controls, the EPA may determine, based on the facts and circumstances of the area, that the state needs to conduct a control measure evaluation for the relevant precursor to adequately demonstrate that regulation of the precursor would not provide meaningful reductions in ambient air quality”).

    Given the severity of PM2.5 nonattainment in the SJV area, the ambient contribution of ammonia emissions, the area's demonstrated sensitivity to ammonia control,22 and our finding that the precursor demonstration in the Plan is insufficient to rebut the regulatory presumption for ammonia, we conclude that ammonia emissions contribute significantly to ambient PM2.5 levels that exceed the PM2.5 NAAQS in the SJV area and that the 2012 PM2.5 Plan must, therefore, contain an evaluation of potential ammonia controls.

    22 Proposal TSD at p. 57; see also 80 FR 1816, 1825 (January 13, 2015).

    Comment 4: Earthjustice challenges the EPA's method for identifying PM2.5 precursors subject to regulation by the Plan. Specifically, Earthjustice objects to the EPA's consideration of “both the magnitude of the precursor's contribution to ambient PM2.5 concentrations in the nonattainment areas and the sensitivity of ambient PM2.5 concentrations in the area to reductions in emissions of that precursor.” Earthjustice argues that this language differs from CAA section 189(e), which provides that control requirements shall apply to major stationary sources of particulate matter (PM) precursors unless the EPA finds that these sources “do not contribute significantly to PM-10 levels which exceed the standard in the area.” Thus, according to Earthjustice, “the statute allows for consideration only of the significance of the contribution” and does not allow for consideration of the effectiveness of controls in determining whether a precursor must be subject to control.

    Earthjustice also characterizes the EPA's consideration of the sensitivity of ambient concentrations to precursor emissions reductions as a “bad” policy assessment and argues that “looking merely at the sensitivity ratios ignores the fact that pollutants like ammonia have been historically under-regulated and very well may represent the cheapest opportunities for emission reductions.” Earthjustice argues that even if much larger amounts of ammonia reductions would be required to achieve the benefits of a few tons of NOX reductions, ammonia controls may still be the “best” policy option because incremental NOX emissions, which have already been heavily regulated, may be much more expensive. Earthjustice claims that the EPA's sensitivity test is a policy-based test but that it is not a rational policy test, because it does not consider the full regulatory context. According to Earthjustice, “decisions on how to balance controls on sources of ammonia versus sources of NOX are for the control strategy of the Plan,” and that if additional reductions beyond those achieved through the required RACM or BACM controls are necessary, “that is where the `effectiveness' of the controls can and should be considered—not in the determination of whether a pollutant is a precursor subject to control under the Act.”

    Earthjustice states that the EPA has correctly proposed to determine that ammonia emissions “contribute significantly” to PM2.5 nonattainment in the SJV given that ammonium nitrate is the largest component of the Valley's PM2.5 levels. Thus, according to Earthjustice, ammonia controls are mandated under CAA section 189(e) regardless of the relative sensitivity of ambient concentrations to emission reductions.

    Response 4: We disagree with the commenter's characterization of the legal test for determining whether or not a particular PM2.5 precursor must be subject to control evaluation. With respect to ammonia emissions, however, this issue does not affect our action on the 2012 PM2.5 Plan because the EPA is not determining that ammonia emission sources “do not contribute significantly” to PM2.5 levels that exceed the 2006 PM2.5 NAAQS in the SJV area. Instead, the EPA has concluded that the State's and District's demonstration concerning ammonia emissions in the 2012 PM2.5 Plan and 2014 Supplement is insufficient to rebut the regulatory presumption under subpart 4 and that ammonia is, therefore, a PM2.5 precursor subject to control evaluation for purposes of attaining the 2006 PM2.5 NAAQS in the SJV.

    As explained in our proposed rule, section 189(e) of the Act requires that the control requirements for major stationary sources of direct PM10 also apply to major stationary sources of PM10 precursors, except where the Administrator determines that such sources do not contribute significantly to PM10 levels that exceed the standard in the area. Section 189(e) contains the only express exception to the control requirements under subpart 4 (e.g., requirements for RACM and RACT, best available control measures (BACM) and best available control technology (BACT), most stringent measures, and NSR) for sources of direct PM2.5 and PM2.5 precursor emissions. Although section 189(e) explicitly addresses only major stationary sources, the EPA interprets the Act as authorizing it also to determine, under appropriate circumstances, that regulation of specific PM2.5 precursors from other source categories in a given nonattainment area is not necessary. For example, under the EPA's longstanding interpretation of the control requirements that apply to stationary, area, and mobile sources of PM10 precursors area-wide under CAA section 172(c)(1) and subpart 4 (see General Preamble, 57 FR 13498 at 13539-42), a state may demonstrate in a SIP submittal that control of a certain precursor pollutant is not necessary in light of its insignificant contribution to PM10 levels in the nonattainment area.23

    23 80 FR 1816, 1821-1822 (January 13, 2015). Courts have upheld this approach to the requirements of subpart 4 for PM10. See, e.g., Assoc. of Irritated Residents v. EPA, et al., 423 F.3d 989, 997 (9th Cir. 2005) (noting discretion vested in the EPA to consider various factors in determining whether a precursor “contributes significantly” to PM10 levels).

    We evaluated the SJV PM2.5 Plan in accordance with the presumption embodied within subpart 4 that all PM2.5 precursors must be addressed in the state's evaluation of potential control measures, unless the state adequately demonstrates that emissions of a particular precursor do not “contribute significantly” to ambient PM2.5 levels that exceed the PM2.5 NAAQS in the nonattainment area. Both the magnitude of a precursor's contribution to ambient PM2.5 concentrations in the nonattainment area and the sensitivity of ambient PM2.5 concentrations in the area to reductions in emissions of that precursor may be relevant to an assessment of whether the precursor contributes significantly to ambient PM2.5 levels that exceed the PM2.5 NAAQS in the area. As explained in the preamble to the EPA's July 29, 2016 final rule to implement the PM2.5 NAAQS:

    The EPA . . . believes that a sensitivity-based contribution analysis is consistent with the language and intent of CAA section 189(e). As applied to attainment plans, CAA section 189(e) allows states to evaluate whether PM2.5 precursors significantly contribute to levels which exceed the standard in the area. The intent of CAA section 189(e) in applying control requirements to PM2.5 precursors is to ensure expeditious attainment of the standard. However, if conditions in a particular area are such that control of sources of one or more precursors does not reduce PM2.5 concentrations in the area, then those controls will not help the area attain (expeditiously or otherwise). Therefore, the EPA disagrees with commenters who argue that sensitivity-based contribution analyses are not appropriate for determining if precursors do not significantly contribute to PM2.5 levels in the area. The EPA believes that sensitivity-based contribution analyses can be useful for determining whether adoption of control requirements for sources of a particular precursor would be effective in reducing PM2.5 concentrations, and can be useful for determining whether potential emissions increases under the NNSR program would lead to insignificant air quality changes. For this reason, the final rule allows states to conduct sensitivity-based contribution analyses for the comprehensive, major stationary source, and NNSR precursor demonstrations.24

    24 EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at Section III.C, p. 59.

    Based on our evaluation of the precursor demonstrations in the 2012 PM2.5 Plan, we agree with Earthjustice's claim that ammonia emission sources “contribute significantly” to PM2.5 levels that exceed the PM2.5 NAAQS in the SJV and that an ammonia control evaluation is therefore necessary to satisfy the requirements of the Act for the 2006 PM2.5 NAAQS. For the reasons provided in our proposed rule, however, we conclude that VOC emissions do not “contribute significantly” to ambient PM2.5 levels that exceed the 2006 PM2.5 NAAQS in the SJV area and that a VOC control evaluation therefore is not necessary in this Plan. As the commenter has not raised any specific concern regarding our proposal on VOC emissions, we are not addressing these issues further with respect to VOCs.

    Comment 5: The District states that it is important to acknowledge the public health co-benefits of reducing NOX emissions in the region. The District states that ozone production in the SJV is limited by NOX concentrations relative to VOC concentrations, and that NOX reductions typically involve the elimination, reduction, and/or control of hydrocarbon combustion sources, and produce net reductions in direct particulates, metals, organic carbon, elemental carbon, and hazardous air pollutants. The District asserts that reductions in secondary ammonium nitrate are not accompanied by these additional co-benefits.

    Response 5: We agree with the commenter that it is important to reduce NOX emissions for improved public health in the San Joaquin Valley, because it is a precursor to both PM2.5 and ozone. As to the air quality benefits of reductions in secondary ammonium nitrate, theoretically these air quality benefits could be achieved by reductions in either NOX emissions or ammonia emissions. Reductions in secondary ammonium nitrate through NOX control would achieve the co-benefits identified by the commenter. Given that there is no atmospheric chemistry connection between ammonia emissions and ozone production, we agree with the commenter that ammonia reductions would not achieve the same co-benefits with respect to ozone that NOX reductions achieve. Ammonia reductions may, however, achieve other air quality co-benefits depending on the specifics of the ammonia controls, which are not explored in the Plan but may be uncovered by additional analysis. In any case, this issue does not affect our conclusion that ammonia is a PM2.5 precursor subject to control evaluation for purposes of the 2006 PM2.5 NAAQS in the SJV.

    C. Comments Regarding RACM/RACT and Adopted Control Strategy

    Comment 6: Earthjustice argues that the EPA should disapprove the Plan's RACM/RACT demonstration because it does not include all reasonably available control measures. Earthjustice asserts that the EPA's review of this demonstration in its proposed rule “does little more than rubberstamp the District's unsupported assertions” that all reasonable controls have been exhausted, and identifies six source categories for which it claims that existing control measures could reasonably be strengthened or other reasonable new control measures have yet to be adopted and implemented.

    Response 6: We disagree with these arguments. Section 107(a) of the CAA provides states with both authority and primary responsibility for developing SIPs that meet applicable statutory and regulatory requirements for attaining, maintaining, and enforcing the NAAQS. States have discretion in formulating their SIPs, and the EPA is required to approve a SIP submission that satisfies the applicable requirements of the Act.25

    25 CAA section 110(k)(3), 42 U.S.C. 7410(k)(3) and 40 CFR 52.02(a); see also Union Elec. Co. v. EPA, 427 U.S. 246, 250 (1976); Train v. Natural Res. Def. Council, 421 U.S. 60, 79 (1975).

    As explained in our proposed rule, the 2012 PM2.5 Plan discusses the District's process for evaluating potential RACM/RACT in accordance with the EPA's recommendations in the General Preamble and describes each of the control measures for sources of direct PM2.5, NOX, SO2, and ammonia that the Plan relies on to satisfy the RACM/RACT requirement for the 2006 PM2.5 NAAQS.26 For the reasons provided in our proposed rule and further below, we conclude that the 2012 PM2.5 Plan provides for the implementation of all RACM/RACT that could reasonably be implemented in the SJV by the statutory implementation deadline, as required by CAA sections 172(c) and 189(a)(1)(C).

    26 80 FR 1816, 1827-1830.

    We note that, as of the date of our proposed action on the 2012 PM2.5 Plan and 2014 Supplement, which published on January 13, 2015, it was not practicable for the state to adopt additional control measures for implementation by the RACM implementation deadline under CAA section 189(a)(1)(C), which was December 14, 2013.27 The State and District must, however, include in the Serious area plan for the 2006 PM2.5 NAAQS, which is due August 21, 2017, provisions to assure that the best available control measures (BACM) for the control of PM2.5 and PM2.5 precursors shall be implemented no later than 4 years after the date the area was reclassified as a Serious area, i.e., by February 19, 2020.28 The required evaluation of BACM/BACT control measures in the Serious area plan must address sources of direct PM2.5 and all PM2.5 precursors, except for any PM2.5 precursor(s) for which the State submits and the EPA approves a comprehensive precursor demonstration consistent with the requirements of subpart 4 of part D, title I of the Act. In accordance with the requirements of CAA section 172(c)(6), the Serious area plan must also include any additional feasible measures to control emissions of direct PM2.5 and PM2.5 precursors that are necessary or appropriate to provide for attainment of the 2006 PM2.5 NAAQS as expeditiously as practicable and no later than December 31, 2019.29

    27 The SJV area was designated nonattainment for the 2006 PM2.5 NAAQS effective December 14, 2009. 74 FR 58688 (November 13, 2009) and 40 CFR 81.305. Therefore, the statutory deadline for implementation of RACM in the SJV under CAA section 189(a)(1)(C) for this NAAQS was December 14, 2013.

    28 The EPA reclassified the SJV area as a Serious nonattainment area for the 2006 PM2.5 NAAQS effective February 19, 2016. 81 FR 2993 (January 20, 2016) (final reclassification) and 81 FR 42263 (June 29, 2016) (correcting amendment). Therefore, the statutory deadline for implementation of BACM in the SJV under CAA section 189(b)(1)(B) for this NAAQS is February 19, 2020.

    29See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at 40 CFR 51.1010(a)(4)(ii). Although this regulatory text is not yet effective, it reflects the EPA's interpretation of the statutory requirements.

    We respond below to the specific comments pertaining to the six source categories highlighted by Earthjustice.

    Comment 6a: Standards for Agricultural Equipment. Earthjustice asserts that the District's “replacement of more than 1,000 pieces of off-road equipment and agricultural equipment” through implementation of incentive programs has demonstrated the feasibility of emission controls on off-road agricultural equipment and argues that CARB has the ability to create binding, enforceable regulations to reduce NOX emissions from off-road agricultural equipment to hasten attainment of the 2006 PM2.5 NAAQS in the SJV.

    Response 6a: To the extent Earthjustice intended to argue that the replacement of off-road agricultural equipment through incentive programs implemented in the SJV demonstrates that NOX controls for such equipment are both technologically and economically feasible, we disagree.

    Given the commenter did not specify the types and/or sizes of off-road equipment for which it believes NOX controls are feasible, we evaluated several types of off-road agricultural equipment replacement projects funded through the Carl Moyer Memorial Air Quality Standards Attainment Program in the SJV in recent years to determine the costs and technical issues associated with such replacements. We used the SJVUAPCD's “Annual Demonstration Report” data sheets for 2013,30 2014,31 and 2015,32 which the District submitted pursuant to SJVUAPCD Rule 9610, to determine the cost effectiveness and technological feasibility of off-road agricultural equipment replacements. We limited our analysis to projects categorized as “off-road” and as “vehicle replacements,” and that included data for “cost of new equip vehicle” 33 and non-zero emission reductions values reported for NOX and/or particulate matter (PM).34 Off-road agricultural equipment encompasses a wide variety of types of equipment. The 1807 pieces of equipment listed in the data sheets that we reviewed include: Almond shakers, almond sweepers, backhoes, bale wagons, balers, bulk carriers, combines, cotton pickers, forage harvesters, forklifts, harvesters, hay haulers, loaders, silage baggers, sprayers, swathers, tomato harvesters, tractors, tractor crawlers, and wheel loaders. Additionally, as seen in Tables 2, 3, and 4 below, the data sheets identify a wide range of equipment horsepower levels and capital costs of replacing agricultural off-road equipment, from which the EPA calculated mean and median values and cost-effectiveness values for NOX controls.35

    30 Available at http://www.valleyair.org/MOP/docs/069610ProjectDataforPublicUNLOCKED-1-30-14.xlsx.

    31 Available at http://www.valleyair.org/MOP/docs/9610ProjectDataforPublicUNLOCKED-8-11-14.xlsx.

    32 Available at http://www.valleyair.org/MOP/docs/9610ProjectDataforPublic2015.xlsx.

    33 We did not evaluate the 125 projects in the 2014 Data Sheet categorized as “off-road” and as “vehicle replacements” for which the Data Sheet identified “cost retrofit” instead of “cost of new equip vehicle” values.

    34 We did not evaluate the 29 projects in the 2013 Data Sheet categorized as “off-road” and as “vehicle replacements” for which the Data Sheet identified zero NOX and PM emission reductions.

    35 We calculated the cost-effectiveness of NOX controls by dividing the “Cost of New Equipment” values by the “NOX Lifetime Reduced (tons)” values for each of the identified projects to obtain $/ton values.

    Table 2—Horsepower for Off-Road Agricultural Equipment Horsepower
  • (HP)
  • Project ID Date of
  • “Annual
  • Demonstration
  • Report” data sheet identifying project
  • Minimum 28 C-21377-A 2014 Maximum 653 C-21973-A 2014 Mean 128 Median 105 Source: Minimum and maximum horsepower based on EPA review of SJVUAPCD, “Annual Demonstration Report” data sheets for 2013, 2014, and 2015. Mean and median values calculated by EPA.
    Table 3—Cost of Off-Road Agricultural Equipment Cost of new equipment
  • ($)
  • Project ID Date of
  • “Annual
  • Demonstration
  • Report” data sheet identifying project
  • Minimum 10,031.50 C-22064-A 2014 Maximum 685,736.52 C-27498-A 2015 Mean 82,182.69 Median 51,212.29 Source: Minimum and maximum cost based on EPA review of SJVUAPCD, “Annual Demonstration Report” data sheets for 2013, 2014, and 2015. Mean and median values calculated by EPA.
    Table 4—Cost Effectiveness of NOX Control for Off-Road Agricultural Equipment Cost
  • effectiveness
  • ($/ton)
  • Project ID Date of
  • “Annual
  • Demonstration
  • Report” data sheet identifying project
  • Minimum 1,141.00 C-8160A 2013 Maximum 436,140.00 C-22654-A 2014 Mean 38,687.61 Median 18,863.95 Source: EPA, “Agricultural Mobile Engine Projects—EPA cost-effectiveness calculations,” July 21, 2016.

    The significant costs associated with replacing off-road agricultural equipment in the SJV indicate that replacement of such equipment without funding assistance generally is not economically feasible at this time. In addition, the wide variations in the sizes and uses of such equipment in the SJV and the available control technologies indicate that replacement of off-road agricultural equipment in the SJV may not be technically feasible for many types of equipment. Accordingly, we disagree with Earthjustice's suggestion that requirements to replace off-road agricultural equipment are required RACM in the SJV.

    Comment 6b: Fleet Rules. Earthjustice comments that the District can further reduce emissions from mobile sources by adopting additional “fleet” rules to regulate emissions from publicly-owned vehicles. Earthjustice notes that while the District currently maintains a fleet rule only for school buses, the South Coast Air Quality Management District (SCAQMD) has adopted rules for buses; light-, medium-, and heavy-duty public fleet vehicles; waste collection vehicles; airport ground transportation such as taxis and shuttles; and street sweepers. Earthjustice states that the District should implement similar restrictions on publicly-owned vehicles.

    Response 6b: We disagree with Earthjustice's suggestion that adoption of additional “fleet” rules is necessary to satisfy the RACM/RACT requirement for the 2006 PM2.5 NAAQS in the SJV.

    As the commenter notes, the SCAQMD has adopted several rules to encourage public agencies and some private entities to shift to the use of lower emissions vehicles,36 including the following:

    36 The applicability of these rules was narrowed to exclude federal fleets and certain private fleets. See http://www.aqmd.gov/docs/default-source/Regulations/Fleet-Rules/fleetruleadvisory-july202005.pdf?sfvrsn=0.

    Rule 1186.1 Less-Polluting Street Sweepers, adopted August 18, 2000; Rule 1191 Clean On-Road Light and Medium Duty Public Fleet Vehicles, adopted June 16, 2000; Rule 1192 Clean On-Road Transit Buses, adopted June 16, 2000; Rule 1193 Clean On-Road Residential and Commercial Refuse Collection Vehicles, adopted June 16, 2000. Rule 1194 Commercial Airport Ground Access Vehicles, adopted August 18, 2000; Rule 1195 Clean On-Road School Buses, adopted April 20, 2001; and Rule 1196 Clean On-Road Heavy-Duty Public Fleet Vehicles, adopted October 20, 2000.

    As explained in Appendix C of the 2012 PM2.5 Plan, both CARB and the SJVUAPCD have adopted fleet rules to reduce emissions from specific types of on-road vehicle fleets, e.g., CARB's Fleet Rule for Public Agencies and Utilities, which addresses diesel particulate matter from vehicle fleets operated by public agencies and utilities, and SJVUAPCD Rule 9310 (School Bus Fleets), which requires replacement, retrofit, or repowering of older diesel-fueled school buses.37 The District acknowledges in Appendix C of the Plan that the SCAQMD is implementing a fleet rule that requires solid waste collection vehicle fleets to operate entirely on alternative fuel beginning in 2011 but explains that transitioning a fleet from diesel to alternative fuel can be costly and may not be economically feasible in the SJV.38 Additionally, according to the SJVUAPCD, the emissions benefit associated with such a transition is minimal given the stringent particulate matter requirements under CARB's Fleet Rule for Public Agencies, and the relatively small difference in NOX emissions, if any, between diesel and alternative fuel vehicles.39 The commenter provides no information to support a claim that the SJVUAPCD could reasonably have adopted and implemented identical or similar rules in the SJV prior to the RACM/RACT implementation deadline, which was December 14, 2013. We note that none of the SCAQMD fleet rules identified above has been submitted for approved into the California SIP.

    37 2012 PM2.5 Plan, Appendix C at C-7 to C-11.

    38Id. at C-8, C-9 (noting that “establishing new alternative fuel infrastructure can cost millions of dollars and alternative fuel SWCVs generally cost $25,000 more than diesel”).

    39Id.

    Comment 6c: Indirect Source Review (ISR) Improvements. Earthjustice comments that the District can obtain additional emissions reductions by expanding the applicability of its ISR rule, which Earthjustice notes was last updated in 2005. Earthjustice suggests that the District could eliminate provisions that allow businesses to mitigate their emissions by paying fees (or establish a minimum emission level for when a business may use this option), add limits for PM2.5 emissions, and require projects to achieve greater emissions reductions.

    Response 6c: We disagree with the commenter's suggestion that revisions to SJVUAPCD Rule 9510 (“Indirect Source Review”) are necessary to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV.

    SJVUAPCD Rule 9510, as adopted December 15, 2005, requires applicants for development projects of certain sizes and certain transportation or transit projects to reduce NOX and particulate matter (PM) emissions from the development and use of such projects through various on-site mitigation measures or payment of fees to fund off-site emission reduction projects. The EPA approved SJVUAPCD Rule 9510 into the California SIP at 76 FR 26609 (May 9, 2011) but explained in that action that the EPA and the District were acting under section 110(a)(5) of the CAA. Under that section, the EPA is prohibited from requiring states to include ISR programs in SIPs. Specifically, CAA section 110(a)(5)(A)(i) states that any State may include in a State implementation plan, but the Administrator may not require as a condition of approval of such plan under this section, any indirect source review program. Section 110(a)(5)(A)(i) also states that the Administrator may approve and enforce, as part of an applicable implementation plan, an indirect source review program which the State chooses to adopt and submit as part of its plan.40 Because SJVUAPCD Rule 9510 constitutes an ISR program, the EPA may not require the District to consider revisions to this rule, for RACM purposes or otherwise.

    40 CAA section 110(a)(5)(A)(i).

    Comment 6d: Fireplace Rule Improvements. Earthjustice comments that the District could reduce direct PM2.5 emissions by making SJVUAPCD Rule 4901 (Wood Burning Fireplaces and Wood Burning Heaters) more stringent. Earthjustice notes that this rule was updated in 2014, but argues that this update did not make the rule “as stringent as it reasonably could,” because it allows cleaner classes of wood-burning heaters to be used at ambient concentrations up to 65 microgram per meter cubed (μg/m3). Earthjustice argues that a more appropriate threshold would be35 μg/m3, the attainment level for the 2006 PM2.5 NAAQS, and that the District should amend the rule to disallow use of these heaters when concentrations are expected to exceed this level. Earthjustice asserts that the District “should prioritize making the rule as protective as possible” to reduce direct PM2.5 emissions.

    Response 6d: We disagree with the commenter's suggestion that revisions to SJVUAPCD Rule 4901 are necessary to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV.

    Consistent with the District's rule amendment commitments in the 2012 PM2.5 Plan,41 the SJVUAPCD amended Rule 4901 on September 18, 2014, and CARB submitted the amended rule to the EPA for SIP action on November 6, 2014.42 On August 15, 2016, Acting Regional Administrator Alexis Strauss signed a notice of final rulemaking to approve SJVUAPCD Rule 4901, as amended September 18, 2014, as meeting applicable CAA requirements and implementing RACM/RACT for PM2.5 emissions from wood burning devices.43

    41 80 FR 1816, 1832 at Table 3 (January 13, 2015); see also 2012 PM2.5 Plan, Chapter 5 (“Control Strategy”), Section 5.3 (“New Control Measures”), p. 5-21 to 5-22.

    42 80 FR 58637 (September 30, 2015).

    43 EPA, Final Rule, “Approval of California Air Plan Revisions, San Joaquin Valley Unified Air Pollution Control District,” August 15, 2016 (pre-publication notice).

    Comment 6e: Interim Charbroiling Regulations. Earthjustice argues that the District has delayed updating its charbroiler rule even though the Bay Area Air Quality Management District (BAAQMD) has already implemented regulations on under-fired charbroilers. Earthjustice points out that in 2012, it and other organizations asked the District to update the rule sooner, to include controls similar to those in the Bay Area and to follow up with another rule update when new technologies are reasonably available.

    Response 6e: We disagree with the commenter's suggestion that SJVUAPCD Rule 4692 (Commercial Charbroiling) fails to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV and that control measures for under-fired charbroilers are necessary to satisfy these requirements.

    SJVUAPCD Rule 4692, as amended September 17, 2009, applies to chain-driven charbroilers used in commercial meat cooking and requires a catalytic oxidizer or alternative controls with a control efficiency of at least 83 percent for PM10 emissions and 86 percent for VOC emissions. The rule exempts charbroilers used to cook less than 400 pounds of meat in a calendar week, and other limited-use charbroilers that do not exceed weekly and rolling 12-month maximum use limits and that have not previously been required to comply with the rule's control requirements. It does not regulate under-fired charbroilers.44

    44 SJVUAPCD Rule 4692 (amended September 17, 2009), sections 4.1, 5.1, and 5.2.

    The BAAQMD is the only air district that we are aware of that has adopted regulations to reduce emissions from under-fired charbroilers. BAAQMD Regulation 6, Rule 2 (Commercial Cooking Equipment),45 applies to chain-driven charbroilers in restaurants that purchase 500 pounds or more of beef per week, and to under-fired charbroilers in restaurants that purchase 1,000 pounds or more of beef per week. The rule requires these restaurants to control emissions using a certified control device and to register charbroilers and associated emission control devices with the BAAQMD. The rule exempts low-utilized charbroilers, including under-fired charbroilers used to grill less than 800 pounds of beef per week.46

    45 BAAQMD Regulation 6, Rule 2 (adopted December 5, 2007), available at http://www.arb.ca.gov/DRDB/BA/CURHTML/R6-2.PDF.

    46 BAAQMD Regulation 6, Rule 2 (adopted December 5, 2007), sections 6-2-102, 6-2-110, 6-2-111, 6-2-300, and 6-2-400.

    According to BAAQMD planning and compliance staff, the control requirements in Regulation 6, Rule 2 for under-fired charbroilers have not yet been implemented in practice.47 BAAQMD staff noted that no under-fired charbroilers in the Bay Area are currently registered pursuant to Regulation 6 Rule 2, indicating that restaurants in the Bay Area are operating below the thresholds that trigger the requirements. In addition, the BAAQMD's most recent inspections found that restaurants were below these thresholds.48 Significantly, the BAAQMD has not yet certified any emission control devices for under-fired charbroilers. BAAQMD staff explained that they are waiting to receive and review final test reports from the University of California at Riverside, Center for Environmental Research and Technology (CE-CERT) before making certifications.49

    47 Email dated April 4, 2016, from Virginia Lau of the BAAQMD to Stanley Tong of EPA Region 9, regarding “Update on Bay Area charbroiler registration.”

    48 BAAQMD staff noted that these inspections occurred during a period of economic recession, and that conditions may have changed since. Email dated April 4, 2016, from Virginia Lau of the BAAQMD to Stanley Tong of EPA Region 9, regarding “Update on Bay Area charbroiler registration.”

    49 CE-CERT informed SCAQMD that charbroiler testing will be delayed for up to four months due to fire suppression system upgrades in its test kitchen. Email dated March 16, 2016 from Michael Laybourn of the SCAQMD to Stanley Tong of EPA Region 9, regarding “Charbroiler Testing.”

    The SJVUAPCD's 2012 PM2.5 Plan summarizes PM control technology for under-fired charbroilers.50 It finds that catalytic oxidizers are not effective for under-fired charbroilers because the exhaust from these devices loses too much heat before it reaches the catalyst. The Plan lists High Efficiency Particulate-Arresting (HEPA) filtration, Electrostatic Precipitators (ESP), and Wet Scrubbers as potentially more effective control technology for under-fired charbroilers, but notes that the SJVUAPCD found these technologies were “unproven and extremely costly” when it amended SJVUAPCD Rule 4692 in 2009. During that amendment process, the District found that the initial costs for these controls ranged from $37,500 to $104,000, which results in a cost of approximately $58,200 per ton of PM2.5 reduced. The District has estimated the total costs of installing, operating, and maintaining these controls to be as much as 20 to 30 percent of a restaurant's net profits.51 As a result, the District decided not to adopt regulations for under-fired charbroilers as part of its rule amendments in 2009. We note that the Plan contains the District Governing Board's commitment to adopt control measures for under-fired charbroilers in 2016.52

    50 2012 PM2.5 Plan, Appendix D at D-111 to D-117.

    51 Action Summary Minutes, San Joaquin Unified Air Pollution Control District, Governing Board, August 20, 2009, page 7, available at http://www.valleyair.org/Board_meetings/GB/agenda_minutes/Minutes/2009/Minutes_GB_2009_Aug.pdf.

    52 2012 PM2.5 Plan, Chapter 5 (“Control Strategy”), Section 5.3 (“New Control Measures”), p. 5-21 to 5-22, and SJVUAPCD Governing Board Resolution 2012-12-19 (December 20, 2012), page 4; see also 80 FR 1816, 1832 at Table 3 (January 13, 2015).

    A study conducted by the University of California at Berkeley 53 arrives at a similar conclusion regarding the cost of PM controls for under-fired charbroilers. Using 2007 economic census data, the study estimates the average annual profit of restaurants in the SJVUAPCD area to be $23,000-$47,000 per establishment, for a profit margin of 3.5-5.9 percent. Similarly, the study estimates the annual profit for average large restaurants (i.e., restaurants averaging 60 employees) to be approximately $110,000. The study also finds that the average capital cost for particulate matter (PM) emission controls such as an ESP, HEPA filtration, or wet scrubber can range from approximately $38,750 to $50,000, with average annualized costs for installation and operation of $11,000-$15,000. The study calculates the total costs associated with these controls to be approximately 10-14 percent of an average large restaurant's profits. The study states that “[t]hese figures may appear modest . . . given that installing control technologies would amount to only a tenth of [large] restaurant profits. However . . . this figure is several times larger than the case of successful chain-driven charbroiler regulations, where the cost of installing catalytic oxidizers represented just 2.2 percent of average restaurant profits.” 54 The study notes that its annualized cost estimates parallel SJVUAPCD's estimates, even though the data were drawn from different sources.55

    53 Bellisario, J., Mandel, B., Perkins, J., Ruan, Y., “Regulating Emissions from Under-fired Charbroilers,” University of California, Berkeley, Goldman School of Public Policy, May 2012.

    54Id. at p. 24.

    55Id. at p. 24.

    We anticipate the CE-CERT research report will help clarify the cost effectiveness of various under-fired charbroiler emission control technologies, some of which are prototypes, which will supplement the earlier Berkeley study to help inform more effective rule development.56 Additionally, the District is currently undertaking efforts that may yield additional information relevant to whether additional controls for charbroilers would be appropriate and feasible in the SJV. To help study the technological feasibility and effectiveness of potential control technologies, the SJVUAPCD Governing Board approved $750,000 for its Restaurant Charbroiler Technology Partnership program to fund PM control technology demonstration projects for under-fired charbroilers at Valley restaurants.57 The District's funding would include the full purchase cost, installation, operation, maintenance, and other costs such as modifications to existing system configurations and structural reinforcements, and will help evaluate control systems operations, maintenance, and labor costs in the field. Completion of these research efforts will allow regulatory agencies to evaluate overall PM reduction strategies, which will help in designing economically and technically feasible regulations that can achieve the necessary PM reductions.

    56 The SCAQMD, BAAQMD, SJVUAPCD, and EPA Region 9 are part of a workgroup to provide input on the CE-CERT under-fired charbroiler testing research.

    57See Restaurant Charbroiler Technology Partnership, available at http://valleyair.org/grants/rctp.htm, and “Charbroilers Come Under San Joaquin Valley Air District's Microscope,” The Modesto Bee, December 27, 2015, http://www.recordnet.com/article/20160101/NEWS/160109993.

    Based on these evaluations, we find that SJVUAPCD Rule 4692 implements RACM/RACT for charbroilers for purposes of the 2006 PM2.5 NAAQS in the SJV.

    Comment 6f: Performance Standards for Flares. Earthjustice comments that the District could strengthen Rule 4311 (Flares) by adopting a performance-based standard for flaring. Earthjustice states that the District should assess the strength of its rule against rules in other areas with high oil and gas production, and suggests North Dakota as an example. As explained by Earthjustice, North Dakota requires operators to meet targets for natural gas capture that increase over time from 74 percent in 2014 to an expected 90 percent by 2020, and allows state regulators to restrict oil production if the operators do not meet these targets. Earthjustice says that the District could “borrow from” this approach by assessing the percentage of natural gas flared in the San Joaquin Valley and developing regulations to reduce flaring.

    Response 6f: We disagree with the commenter's suggestion that revisions to SJVUAPCD Rule 4311 (Flares) are necessary to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV.

    SJVUAPCD Rule 4311, as amended June 18, 2009, limits VOC, NOX, and sulfur oxides (SOX) emissions from industrial operations involving the use of flares. The rule includes general requirements for combusting waste gases, emission standards for ground-level enclosed flares, and performance targets for petroleum refinery flares. Operators of refinery flares and flares with capacity greater than 5.0 MMBtu/hour are required to submit flare minimization plans (FMPs) containing information such as detailed process diagrams, descriptions of upstream equipment, and evaluations of preventive measures to reduce flaring.58 The rule prohibits flaring unless it is done consistently with a District-approved FMP.59 Additionally, the rule includes monitoring, recordkeeping, and reporting requirements, including a requirement for operators to investigate and report flaring events.60

    58 SJVUAPCD Rule 4311 (adopted June 18, 2009), sections 5.8 and 6.5.

    59Id.

    60Id. at sections 6.1 and 6.2.

    As the commenter notes, North Dakota has adopted rules governing flaring in the oil and gas industry, through provisions of the North Dakota Century Code and an Order issued by the Industrial Commission of North Dakota. Section 38-08-06.4 of the North Dakota Century Code allows oil wells to flare gas during the first year of production, and thereafter requires wells either to be capped or to be equipped with approved capture or control measures that, at a minimum, reduce flared gas by at least 60 percent, unless the operator can demonstrate that such measures are not economically feasible.61 Industrial Commission Order 24665 adopts tiered gas capture goals that include a target of 74 percent capture in 2014 and an end target of 90 percent capture in 2020.62

    61 North Dakota Century Code, Section 38-08-06.4, as effective January 2016.

    62 State of North Dakota, Industrial Commission Order No. 24665 (dated July 1, 2014).

    The SJVUAPCD's 2012 PM2.5 Plan states that Rule 4311 is more stringent than flare rules in other California air districts. Appendix D of the Plan compares Rule 4311 to SCAQMD Rule 1118, BAAQMD Rules 12-11 and 12-12, and Santa Barbara County Air Pollution Control District (SBCAPCD) Rule 359.63 According to the District, these rules contain requirements for FMPs and monitoring, recordkeeping, and reporting provisions similar to those in SJVUAPCD Rule 4311, and emission standards for ground-level enclosed flares, but Rule 4311 applies to a wider range of operations and does not include certain exemptions present in the other districts' rules.64 The District also states that the Sacramento Metropolitan Air Quality Management District (SMAQMD) and Ventura County Air Pollution Control District (VCAPCD) do not have specific prohibitory rules for flares.65

    63 The 2012 PM2.5 Plan mistakenly identifies the Santa Barbara rule as “Rule 4359.” 2012 PM2.5 Plan, Appendix D at D-71.

    64 2012 PM2.5 Plan, Appendix D at D-71.

    65Id. The VCAPCD does not have a specific flaring rule, but VACPCD Rule 54, “Sulfur Compounds” includes requirements for flaring events, including FMPs. The District's “2015 Plan for the 1997 PM2.5 Standard” (“2015 PM2.5 Plan”) includes this rule in a table comparing Rule 4311 to other California air district rules, and states that SJVUAPCD Rule 4311 is at least as stringent. 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at page C-79.

    The District has addressed the North Dakota Century Code and the Industrial Commission Order in Appendix C of the “2015 Plan for the 1997 PM2.5 Standard” (hereafter “2015 PM2.5 Plan”).66 There, the District concludes that SJVUAPCD Rule 4311 is more stringent than the North Dakota rule. Among its findings in support of this conclusion, the District notes that Rule 4311 applies to a broader range of sources and achieves a higher percentage of gas capture.67 Appendix C of the 2015 PM2.5 Plan also discusses SBCAPCD Rule 359, which includes a performance standard for gas volume.68 The District concludes that Rule 4311 is more stringent than this rule, citing reasons that include Rule 4311's applicability to a broader range of sources, fewer exemptions, and greater percentage gas capture.69

    66 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at page C-81.

    67 In its comparison of Rule 4311 to the North Dakota provisions, the 2015 PM2.5 Plan states that Rule 4311 “requires 95% capture and treatment of produced gas.” 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at page C-82. We interpret this to mean that the rule achieves at least 95 percent capture in practice, as demonstrated at Table C-11 of the Plan. 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at page C-80. See email dated May 20, 2016, from Sheraz Gill of the SJVUAPCD to Andrew Steckel of EPA Region 9, regarding Small flares question.

    68 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at pp. C-79 to C-81.

    69Id. at C-81.

    We agree with the District's analysis and conclusion that SJVUAPCD Rule 4311 is at least as stringent as the rules adopted by the other California air districts and the requirements in place in North Dakota. Therefore, we disagree with the commenter's assertion that a performance-based standard like North Dakota's would be more protective than Rule 4311. While Rule 4311 does not set performance targets for reducing flared gas, information in the record indicates that it achieves emission reductions greater than those targets. Table C-11 of the 2015 PM2.5 Plan shows that the percentage of gas flared in the SJV in the years between 2009 and 2013 has never exceeded 5 percent.70 This analysis addresses the commenter's suggestion that the District should assess the percentage of natural gas flared in the District, and it indicates that adoption of requirements like North Dakota's would not reduce emissions from flaring in the SJV.

    70 2015 PM2.5 Plan, Appendix C: BACM and MSM for Stationary and Area Sources, at page C-79. SJVUAPCD staff confirmed that the data in this table comes from the annual emissions inventory reports submitted by sources to the District. Email dated April 27, 2016, from Sheraz Gill of the SJVUAPCD to Andrew Steckel of EPA Region 9, regarding SJV flares data inquiry.

    Based on this assessment, we find that SJVUAPCD Rule 4311 represents RACT for flaring operations in the SJV, and that the alternatives suggested by the commenter would not achieve additional emission reductions.

    Comment 7: Earthjustice comments that the RACM/RACT analysis in the Plan does not include reasonable controls for condensable emissions, and that the EPA must therefore disapprove the RACM/RACT demonstration. Earthjustice states that 40 CFR 51.1002(c) requires agencies to set controls for condensable emissions beginning January 1, 2011, and quotes the EPA's prior statement at 72 FR 20586, 20652 that “[w]e expect States to address the control of direct PM2.5 emissions, including condensables [sic] 71 with any new actions taken after January 1, 2011.”

    71 The Federal Register notice uses the term “condensable PM.”

    Response 7: We agree with Earthjustice's statement that the transition period under 40 CFR 51.1002(c) (as effective May 29, 2007) 72 allowing state and local agencies to submit plans that do not address condensable emissions ended on January 1, 2011. We disagree, however, with the claim that the EPA must disapprove the RACM/RACT demonstration in the Plan for failure to assess controls on condensable PM2.5 emissions.

    72 72 FR 20586 (April 25, 2007). The EPA's recent final rule to implement the PM2.5 NAAQS also requires that emission limitations for PM2.5 sources address condensable PM2.5. See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at p. 567 (requiring at 40 CFR 51.1009(c) that, for new or revised source emissions limitations on sources of direct PM2.5 emissions, states apply such emissions limitations either to the total of the filterable plus condensable fractions of direct PM2.5, or to filterable PM2.5 and condensable PM2.5 separately).

    EPA regulations at 40 CFR 51.1002(c), as effective May 29, 2007, provide that, after January 1, 2011, for purposes of establishing emissions limits to satisfy requirements for RFP and reasonably available control measures/reasonably available control technology (RACM/RACT), states must establish such limits taking into consideration the condensable fraction of direct PM2.5 emissions. Because direct PM2.5 is comprised of both filterable PM2.5 and condensable PM2.5,73 the EPA has explained that both the emissions inventories underlying a PM2.5 attainment plan and any emission limits for sources of direct PM2.5 in the control strategy must take into consideration the condensable fraction of PM2.5 emissions.74 As the EPA stated in the July 29, 2016 final rule to implement the PM2.5 NAAQS, it is particularly important to ensure that both the filterable and condensable components of direct PM2.5 emissions are accurately represented in the base year emissions inventory underlying a RACM/RACT control analysis.75

    73 Certain commercial or industrial activities involving high temperature processes (e.g., fuel combustion, metal processing, and cooking operations) emit gaseous pollutants into the ambient air which rapidly condense into particle form. These “condensable” particulate matter emissions exist almost entirely in the 2.5 or less micron range and can consist of organic material, sulfuric acid and metals. 80 FR 15340, 15343 at n. 7 (March 23, 2015); see also 72 FR 20586, 20651 (April 25, 2007).

    74See, e.g., 80 FR 15340, 15412 (March 23, 2015) (discussing requirement to address condensable PM2.5 in base year emissions inventory and related SIP control strategies).

    75See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at pp. 66-77, 90-104 and 139-140 (discussing requirements to include condensable PM2.5 in base year emissions inventories and in RACM/RACT control evaluations); see also 80 FR 15340 at 15378, 15412.

    Chapter 4 of the 2012 PM2.5 Plan contains a brief discussion of the District's approach to condensable PM2.5 emissions and states that condensable particulates are included in the District's total emissions inventory for direct PM2.5.76 The base year inventory for direct PM2.5 emissions is provided in Appendix B of the 2012 PM2.5 Plan and includes condensable emissions. Specifically, the PM2.5 emissions inventory for commercial cooking operations incorporates emission factors from a source testing study that collected both filterable and condensable particulate matter (PM).77 Similarly, the SJVUAPCD's PM2.5 emission factors for natural gas fired boilers, turbines and engines in the manufacturing and industrial category are based on the EPA's AP-42 emission factors, which include both filterable and condensable PM.78 Also, PM in the emissions inventory from biomass boilers and natural gas turbines for the electric utilities sector is based on PM10 testing required by operating permits and includes both filterable and condensable PM.79 According to the emissions inventories in the 2012 PM2.5 Plan, approximately 38 percent of the 2007 direct PM2.5 inventory for stationary and area sources comes from fugitive dust and farming, emission sources that generally do not produce condensable PM emissions. Stationary source combustion processes that emit condensable PM, such as electric utilities, commercial cooking operations and glass melting furnaces, account for approximately 13.5 percent of the 2007 PM2.5 inventory for stationary and area sources. Residential fuel combustion, fires, and managed burning activities account for 44 percent of the stationary and area source inventory, and miscellaneous industrial processes make up the remainder of the non-mobile source inventory.80

    76See 2012 PM2.5 Plan at p. 4-22.

    77See “2006 Area Source Emissions Inventory Methodology 690—Commercial Cooking Operations,” available at http://www.valleyair.org/Air_Quality_Plans/EmissionsMethods/MethodForms/Current/CommercialCooking2006.pdf. See also Welch, W.A. and Norbeck, J.M., 1998, “Development of Emission Test Methods and Emission Factors for Various Commercial Cooking Operations,” TO-98-14-3 and email dated May 20, 2016, from W. Welch of the SCAQMD to Stanley Tong of USEPA, RE: Development of PM Charbroiling Emission Factors using SC 5.1 (confirming that tests were performed using SCAQMD Method 5.1 which includes both filterable and condensable PM).

    78 SJVUAPCD. “2006 Area Source Emissions Inventory Methodology 050—Industrial Natural Gas Combustion” at p. 3 (identifying emission factors are based on the EPA's AP-42 chapters 1.4 and 3.2, which include filterable and condensable PM).

    79 Email dated May 18, 2016, from Chay Thao of the SJVUAPCD to Stanley Tong of EPA Region 9, regarding “Gas Turbine PM source testing condensible”; see also SJVUAPCD, Notice of Final Action, Minor Title V Permit Modification, District Facility #C-14 (April 26, 2012), permit condition 21, available at https://yosemite.epa.gov/R9/air/EPSS.NSF/0201370ee436adf08825653000726dc1/e76e9625e609621088257a0e00535d9c/$FILE/Public%20Notice%20Pkg.pdf and SJVUAPCD, Notice of Final Action, Revised Final Determination of Compliance, Project Number: N-1113502 (January 18, 2012), permit condition 51, available at https://yosemite.epa.gov/R9/air/EPSS.NSF/0201370ee436adf08825653000726dc1/5f867ce070483067882579c300793cbe/$FILE/Public%20Notice%20Package.pdf.

    80 2012 PM2.5 Plan, Appendix B at B-3.

    The 2012 PM2.5 Plan relies on several SJVUAPCD rules regulating direct PM emissions as part of the PM2.5 control strategy, including Rule 4692 (Commercial Charbroiling, amended September 17, 2009), Rule 4103 (Open Burning, amended April 15, 2010), Rule 4354 (Glass Melting Furnaces, amended May 19, 2011), and Rule 4901 (Wood Burning Fireplaces and Wood Burning Heaters, amended September 18, 2014).81 Of the SJVUAPCD rules that control direct PM emissions, only two establish emission limits for PM: Rule 4692 and Rule 4354. Both of these rules contain control requirements that apply to condensable PM and require sources to use test methods that measure condensable PM.

    81 81 FR 6936 at 6951-52, Table 3 (February 9, 2016).

    Specifically, section 5.2 of SJVUAPCD Rule 4692 requires that each chain-driven charbroiler be equipped and operated with a catalytic oxidizer that has a control efficiency of at least 83 percent for PM10 emissions, and section 6.5.1 of the rule requires testing in accordance with the “South Coast Air Quality Management District's Protocol,” which requires measurement of both condensable and filterable PM in accordance with SCAQMD Test Method 5.1.82 SJVUAPCD Rule 4692 defines PM10 as defined in SJVUAPCD Rule 1020 and states that “[f]or purposes of determining control efficiency, all particulate collected using the test method specified in Section 6.5 shall be considered PM10.” 83 Because section 6.5 of SJVUAPCD Rule 4692 requires measurement of both condensable and filterable PM, both condensable and filterable PM are considered PM10 under the rule.84 Similarly, section 5.4 of SJVUAPCD Rule 4354 establishes emission limits for PM10, also defined as in SJVUAPCD Rule 1020,85 and states that “total PM10 includes both filterable PM10 and condensable PM10.” Section 6.5.9 of SJVUAPCD Rule 4354 requires testing for condensable PM emissions using EPA Method 202.86 No other SIP control measure in the RACM/RACT demonstrations in the 2012 PM2.5 Plan establishes direct PM emission limitations.

    82See SCAQMD Protocol, Determination of Particulate and Volatile Organic Compound Emissions From Restaurant Operations, November 14, 1997, available at http://yosemite.epa.gov/R9/R9Testmethod.nsf/0/3D4DEB4D21AB4AAF882570AD005DFF69/$file/SC%20Rest%20emiss.pdf and SCAQMD Test Method 5.1, Determination of Particulate Matter Emissions From Stationary Sources Using a Wet Impingement Train, March 1989, available at http://www.aqmd.gov/docs/default-source/laboratory-procedures/methods-procedures/stm-005-1.pdf?sfvrsn=2.

    83 SJVUAPCD Rule 4692 (amended September 17, 2009), section 3.6, defining PM10 “as defined in Rule 1020 (Definitions).” SJVUAPCD Rule 1020 defines “particulate matter” as “any material except uncombined water, which exists in a finely divided form as a liquid or solid at standard conditions,” and defines “PM-10” as “particulate matter with an aerodynamic diameter smaller than or equal to a nominal ten (10) microns as measured by the applicable state and federal reference test methods.” SJVUAPCD Rule 1020 (amended February 21, 2013), sections 3.32 and 3.36, approved at 79 FR 59433 (October 2, 2014).

    84 Welch, W.A. and Norbeck, J.M., 1998, “Development of Emission Test Methods and Emission Factors for Various Commercial Cooking Operations,” TO-98-14-3 (indicating that the majority of PM emitted from commercial cooking operations is less than 2.5 microns).

    85See SJVUAPCD Rule 4354 (amended May 19, 2011), section 3.30, defining PM10 “as defined in Rule 1020 (Definitions).” SJVUAPCD Rule 1020 defines “particulate matter” as “any material except uncombined water, which exists in a finely divided form as a liquid or solid at standard conditions,” and defines “PM10” as “particulate matter with an aerodynamic diameter smaller than or equal to a nominal ten (10) microns as measured by the applicable state and federal reference test methods.” SJVUAPCD Rule 1020 (amended February 21, 2013), sections 3.32 and 3.36, approved at 79 FR 59433 (October 2, 2014).

    86 75 FR 80118 (December 21, 2010).

    We therefore find that the 2012 PM2.5 Plan adequately addresses the condensable fraction of direct PM2.5 both in the base year emissions inventory and in the SIP control strategy.

    Comment 8: Earthjustice argues that the EPA must disapprove the ammonia RACM/RACT demonstration because the District has not demonstrated that it has adopted all reasonably available control measures. According to Earthjustice, the Plan “includes no analysis of how Rules 4565, 4566, and 4570 actually control ammonia emissions,” and the District's ammonia RACM/RACT demonstration “is little more than the District's rationalizations for not adopting reasonable controls” (emphasis in comment). Earthjustice says that the EPA has proposed to excuse the Plan's failure to analyze ammonia controls “because it was submitted too soon after the decision in NRDC for the District to have incorporated a full analysis of ammonia controls into the Plan.” Earthjustice asserts that this consideration “provides no basis for finding that the statutory requirements have been met.”

    Response 8: We disagree with Earthjustice's assertion that the EPA must disapprove the ammonia RACM/RACT demonstration in the Plan. As we explained in our proposed rule, the 2014 Supplement contains a discussion of three SIP-approved District rules that regulate VOCs but also have the effect of reducing ammonia emissions in the SJV, as well as ammonia control measures implemented elsewhere that the District evaluated for technical and economic feasibility.87 These analyses, which the EPA has developed further below, demonstrate that SJVUAPCD Rule 4565, Rule 4566, and Rule 4570 reduce ammonia emissions from confined animal facilities (CAFs) and composting operations in the SJV, which together account for approximately 76 percent of the District's estimates of total 2015 ammonia emissions in the SJV.88 We find these evaluations sufficient to demonstrate that the District has adopted RACM/RACT for ammonia emissions for purposes of the 2006 PM2.5 NAAQS in the SJV.

    87 80 FR 1816 at 1827-1830 (referencing 2014 Supplement at Attachment A).

    88 2012 PM2.5 Plan, Appendix B at B-17 and 2014 Supplement at Attachment A, p. A-1 (indicating that “farming operations” account for 239.2 tpd of ammonia emission and that “waste disposal,” which includes composting solid waste operations, accounts for 20.5 tpd of ammonia emissions in 2015, from a total 2015 ammonia inventory of 340.7 tpd).

    SJVUAPCD Rule 4565 (Biosolids, Animal Manure, and Poultry Litter Operations), as adopted March 15, 2007, requires that each operator of a composting/co-composting facility with a throughput of at least 100,000 wet tons per year conduct all active or curing composting either in aerated static pile(s) vented to an emission control device with a VOC control efficiency of at least 80 percent by weight, or in an in-vessel composting system vented to an emission control device with a VOC control efficiency of at least 80 percent by weight.89 Alternatively, the operator may implement an “alternative Class Two mitigation measure” that is determined by the SJVUAPCD Air Pollution Control Officer (APCO) and the EPA to achieve equivalent VOC emission reductions.90 According to the District's staff report for SJVUAPCD Rule 4565, the most commonly used VOC emission control devices at composting facilities are biofilters, which are used at over twenty composting facilities in the U.S. and at least five composting facilities in California.91 Biofilters reduce both VOC and ammonia emissions by oxidizing VOC to carbon dioxide and water and degrading ammonia emissions into nitrate.92 For operators that use a biofilter as an emission control device, SJVUAPCD Rule 4565 contains detailed requirements for regularly maintaining, monitoring, and testing the biofilter.93

    89 SJVUAPCD Rule 4565 (adopted March 15, 2007), section 5.3.3 (requiring implementation of at least one “Class Two mitigation measure”); see also 2014 Supplement at Attachment A, p. A-36 to A-39.

    90 SJVUAPCD Rule 4565 (adopted March 15, 2007), section 5.3.3 and section 3.3 (defining “alternative mitigation measure”).

    91 SJVUAPCD, Final Staff Report, Revised Proposed New Rule 4565 (Biosolids, Animal Manure, and Poultry Litter Operations), March 30, 2007, at p. 9.

    92 SCAQMD, “Technology Assessment for Proposed Rule 1133 (Emission Reductions from Composting and Related Operations),” March 22, 2002, at p. 3-4 and 3-5 (“biofilters use microorganism that live in the biofilm . . . to adsorb and biologically degrade contaminated air into non-harmful substances. In particular, VOC is oxidized to carbon dioxide and water, and ammonia is degraded into nitrate without creating aggravating pollution issues”); see also SCAQMD Rule 1133.2 (adopted January 10, 2003), section (c)(5) (defining “biofiltration” as “a pollution control technology that removes and oxidizes VOC and ammonia through the action of bacteria and other microorganisms”).

    93 SJVUAPCD Rule 4565 (adopted March 15, 2007), sections 5.5 and 5.7.

    Similarly, SCAQMD Rule 1133.2, as adopted January 10, 2003, generally requires operators of “new” co-composting facilities (i.e., those that started operations after January 10, 2003) with design capacities of at least 1,000 tons of throughput per year to conduct all active co-composting within the confines of an enclosure meeting certain conditions, to conduct all curing using an aeration system meeting certain conditions, and to vent the exhaust from the enclosure and aeration system to an emissions control system designed and operated with a control efficiency of at least 80 percent, by weight, for both VOC and ammonia emissions.94 Alternatively, an operator of a new co-composting facility may submit a compliance plan, for approval by the SCAQMD Executive Officer, that demonstrates an overall emission reduction of 80 percent, by weight, from specified baseline emission factors for both VOC and ammonia emissions.95 Existing co-composting facilities with design capacities of at least 35,000 tons of throughput per year must submit a compliance plan that demonstrates an overall emission reduction of 70 percent, by weight, from specified baseline emission factors for both VOC and ammonia emissions.96 For existing facilities or new facilities that elect to submit alternative compliance plans, the compliance plan must specify the operator's selected control method(s), which may include (among others) enclosure design or technology; aeration system design and operation; biofiltration; process controls; or best management practices.97 According to the final staff report for SCAQMD Rule 1133.2, a well-designed, well-operated, and well-maintained biofilter can achieve 80 percent control efficiency for both VOC and ammonia emissions.98

    94 SCAQMD Rule 1133.2 (adopted January 10, 2003), section (d)(1).

    95Id. at section (d)(2).

    96Id. at sections (d)(3) and (j)(1).

    97Id. at section (e).

    98 SCAQMD, Final Staff Report, “Proposed Rule 1133—Composting and Related Operations: General Administrative Requirements; Proposed Rule 1133.1—Chipping and Grinding Activities; Proposed Rule 1133.2—Emission Reductions from Co-Composting Operations,” January 10, 2003, at p. 18 (stating that “[b]ased on the information collected so far on existing biofilter composting applications, control efficiencies of about 80% to 90% for VOC and 70% to over 90% for ammonia have been achieved. . . . [demonstrating] that a well-designed, well-operated, and well-maintained biofilter is capable of achieving 80 percent control efficiency for VOC and ammonia”).

    Although SJVUAPCD Rule 4565 does not explicitly require operators of composting/co-composting facilities to achieve specified levels of ammonia emission reductions, as does SCAQMD Rule 1133.2, both rules generally require composting facilities to use enclosures and/or aeration systems vented to an emission control device with a VOC control efficiency of 70 or 80 percent. Given the similarity in the control requirements contained in these rules, we find the requirements of SJVUAPCD Rule 4565 sufficient to satisfy RACM/RACT requirements for ammonia control for the 2006 PM2.5 NAAQS.

    We also disagree with Earthjustice's claim that the EPA has “proposed to excuse the Plan's failure to analyze ammonia controls” because of the timing of its submission after the D.C. Circuit's decision in NRDC v. EPA, 706 F.3d 428 (D.C. Cir. 2013). In our proposed rule, we noted that “the timing of the NRDC decision in early 2013 may have constrained the State's and District's ability to fully evaluate additional ammonia control measures as part of a RACM/RACT control strategy ahead of the applicable Moderate area attainment date (December 31, 2015)” and stated that we were taking this unique circumstance into account in our evaluation of the Plan.99 We also noted the absence of specific information regarding more stringent ammonia air emission control measures that may be technologically and economically feasible for implementation in the SJV area and recommended that the State and District conduct a more thorough evaluation of all available ammonia control measures as part of its development of a Serious area plan for the area.100 The commenter argues generally that the Plan includes no analysis of how the District's rules control ammonia emissions but provides no specific information to show that more stringent control measures are technologically and economically feasible for implementation in the SJV area.

    99 80 FR 1816, 1830 (January 13, 2015).

    100Id.

    As explained in our proposed rule, sections 172(c)(1) and 189(a)(1)(C) of the Act require that attainment plans for Moderate nonattainment areas provide for the implementation of RACM and RACT for existing sources of PM2.5 and PM2.5 precursors in the nonattainment area as expeditiously as practicable but no later than 4 years after designation. In longstanding guidance, the EPA has interpreted the RACM requirement to include any potential control measure for a point, area, on-road or non-road emission source that is technologically and economically feasible and is not “absurd, unenforceable, or impracticable.” 101 The Act does not require adoption of every conceivable control measure to satisfy the RACM requirement in a Moderate PM2.5 nonattainment area.102 Consistent with the EPA's recommended process for determining RACM/RACT for a given area, the District compiled a list of potential control measures for ammonia emission sources in the SJV; evaluated the identified control measures for “reasonableness,” considering technological and economic feasibility and potentially adverse impacts; and identified the SIP-approved control measures in the Plan that it was relying on to implement RACM for ammonia emission sources.103 Although the Plan does not contain every conceivable control measure for ammonia emissions, we find the control evaluations in the Plan sufficient to demonstrate that it provides for the implementation of all RACM/RACT for ammonia sources that could reasonably be implemented by the statutory implementation deadline under CAA section 189(a)(1)(C) for the 2006 PM2.5 NAAQS. We discuss Earthjustice's specific comments about SJVUAPCD Rule 4566 in Response 9 below, and its specific comments about SJVUAPCD Rule 4570 in Response 10 below.

    101 80 FR 1816, 1826 (January 13, 2015) (citing “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498 (April 16, 1992) (General Preamble) at 13540, 13560).

    102See 55 FR 38326 (September 18, 1990) (revoking prior EPA guidance to the extent it suggested or stated that areas with severe pollution problems must implement every conceivable control measure including those that would cause severe socioeconomic disruption to satisfy RACM).

    103 2014 Supplement at Attachment A (ammonia controls).

    Comment 9: Earthjustice disputes the District's finding that its composting rule, Rule 4566, is at least as stringent as SCAQMD Rule 1133.3, and argues that the District failed to consider some of the requirements of SCAQMD Rule 1133.3 in the table that it used to compare the two rules. Earthjustice notes that SCAQMD Rule 1133.3 requires implementation of a mitigation measure that demonstrates emissions reductions, by weight, of at least 40 percent for VOC and at least 20 percent for ammonia, and that SJVUAPCD Rule 4566 requires a mitigation measure that demonstrates emissions reductions of VOC of at least 19 percent, and does not regulate ammonia. While noting that “VOC emissions reductions may result in some ammonia emissions reductions,” Earthjustice asserts that because Rule 4566 does not regulate ammonia, the District cannot rely on the rule to result in a certain amount of ammonia emissions.

    Response 9: Although SJVUAPCD Rule 4566 does not explicitly regulate ammonia emissions, we disagree with Earthjustice's suggestion that the District cannot rely on this rule as part of its RACM/RACT control strategy for the 2006 PM2.5 NAAQS.

    SJVUAPCD Rule 4566, as adopted August 18, 2011, requires smaller composting operations to implement at least three turns during active-phase composting and one of several mitigation measures listed in Table 1 of the rule, such as application of water or a finished compost cover, or in the alternative to implement an alternative mitigation measure approved by the APCO and the EPA that demonstrates at least 19 percent reduction, by weight, in VOC emissions.104 For larger composting operations (i.e., those with a total throughput between 200,000 and 750,000 wet tons per year of organic material), Rule 4566 requires operators to apply both watering and a finished compost cover in addition to implementation of at least three turns during active-phase composting, or in the alternative to implement an alternative mitigation measure approved by the APCO and the EPA that demonstrates at least 60 percent reduction, by weight, in VOC emissions.105 For the largest composting operations (i.e., those with a total throughput of at least 750,000 wet tons per year of organic material), Rule 4566 requires operators to implement an alternative mitigation measure approved by the APCO and the EPA that demonstrates at least 80 percent reduction, by weight, in VOC emissions.106

    104 SJVUAPCD Rule 4566 (adopted August 18, 2011), section 5.2.1.

    105Id. at section 5.2.2.

    106Id. at section 5.2.3.

    SCAQMD Rule 1133.3, as adopted July 8, 2011, establishes similar requirements for greenwaste composting operations to periodically turn and water active compost piles and to apply finished compost covers.107 According to the SCAQMD's staff report for Rule 1133.3, these types of “good composting practices” minimize both VOC and ammonia emissions by balancing the carbon-to-nitrogen ratio and providing adequate aeration and moisture in the compost.108 As Earthjustice correctly notes, SCAQMD Rule 1133.3 also allows operators of such operations to implement an alternate mitigation measure approved by the SCAQMD Executive Officer, CARB, and the EPA that demonstrates VOC emission reductions by at least 40 percent by weight and ammonia emission reductions by at least 20 percent by weight.109 For composting operations involving greater than 5,000 tons per year of foodwaste throughput, SCAQMD Rule 1133.3 establishes requirements to conduct the active phase composting using an emission control device designed and operated with an overall system control efficiency of at least 80 percent, by weight, each for VOC and ammonia emissions, or to implement an alternate mitigation measure approved by the SCAQMD Executive Officer, CARB, and the EPA that achieves equivalent reductions in both VOCs and ammonia.110

    107 SCAQMD Rule 1133.3 (adopted July 8, 2011), section (d)(2).

    108 SCAQMD, Final Staff Report, “Proposed Amended Rule 1133.1—Chipping and Grinding Activities; Proposed Rule 1133.3—Emission Reductions from Greenwaste Composting Operations,” July 2011, at p. 3 (“[g]ood composting practices, which balance the carbon-to-nitrogen (C:N) ratio and provide adequate aeration and moisture, will minimize VOC, ammonia and GHG emissions”).

    109 SCAQMD Rule 1133.3 (adopted July 8, 2011), section (d)(2)(E).

    110Id. at section (d)(3).

    According to CARB, the water management requirements in SJVUAPCD Rule 4566 and SCAQMD Rule 1133.3 achieve an ammonia control efficiency of 19 percent, while use of certain kinds of aerated static piles (ASP) vented to a biofilter achieves an ammonia control efficiency ranging from 20 to 99 percent.111 In the absence of specific information about more stringent ammonia control requirements for composting operations that the District could reasonably have implemented by the statutory implementation deadline for RACM/RACT in this area (December 14, 2013), we find the requirements of SJVUAPCD Rule 4566 adequate to satisfy RACM/RACT requirements for composting operations for purposes of the 2006 PM2.5 NAAQS in the SJV.

    111 CARB, “ARB Emissions Inventory Methodology for Composting Facilities” (posted 2015) at Table III-3 (“Control Techniques for Composting Operations”), available at http://www.arb.ca.gov/ei/areasrc/Composting%20Emissions%20Inventory%20Methodology%20Final%20Combined.pdf.

    Comment 10: Earthjustice comments that the District did not adequately review Rule 4570 (Confined Animal Facilities) when it compared it to similar rules in other California districts and the state of Idaho. According to Earthjustice, SJVUAPCD Rule 4570 and Idaho's rule “employ drastically different methods to reduce emissions from dairies,” and the District has not fully explored aspects of the Idaho rule that could strengthen SJVUAPCD Rule 4570. In particular, Earthjustice asserts that the District misconstrued a statement by the Idaho Department of Environmental Quality (Idaho DEQ) that described the Idaho rule as employing an “arbitrary” point system. According to Earthjustice, the maximum number of points in the system's rating scale was “arbitrary” in the sense that another number could have been selected, but the Idaho DEQ “thoroughly analyzed the control measures and their associated ammonia emission reductions,” and allocated points based on these reductions. Because the District has not done a similar evaluation of the measures in SJVUAPCD Rule 4570, Earthjustice asserts, it has not fully compared the stringency of the rule against the Idaho rule.

    Earthjustice asserts that the District's comparison of the stringency of SJVUAPCD Rule 4570 and other California air district rules is insufficient because the District considered only the number of mitigation measures required by each district. Earthjustice states that the District should consider instead the ammonia emissions reductions achieved under each rule. Further, Earthjustice states, if the District finds that other air districts' mitigation measures are more effective in reducing emissions, it should incorporate those measures into its rule.

    Response 10: We agree that the District appears to have misconstrued the Idaho DEQ's statement about the point system in Idaho Rule 58.01.01, sections 760-764 (Rules for the Control of Ammonia from Dairy Farms) (hereafter “Idaho CAF Rule”) and that the District should have considered the ammonia emission reductions achieved under the rules that it evaluated, rather than simply addressing the number of mitigation measures required in each rule. For the reasons provided below, however, we find SJVUAPCD Rule 4570 adequate to satisfy RACM/RACT requirements for the 2006 PM2.5 NAAQS in the SJV.

    SJVUAPCD Rule 4570, as amended October 21, 2010, requires that CAFs of certain sizes for dairy cows, other cattle, swine, poultry, and layer hens implement measures to reduce VOC emissions during feed operations, manure management and other CAF processes.112 Both VOCs and ammonia are emitted during these activities at CAFs. Given the large proportion of ammonia emissions that come from cow manure produced at CAFs,113 we focus our evaluation below on measures to reduce ammonia from the production and handling of cow manure at dairy CAFs.

    112See generally SJVUAPCD Rule 4570 (amended October 21, 2010).

    113 “Ammonia Emissions and Animal Agriculture,” Susan W. Gay and Katharine F. Knowlton, Virginia Cooperative Extension, Virginia Tech, 2009 (noting that “[a]mmonia is a common by-product of animal waste due to the often inefficient conversion of feed nitrogen into animal product. Livestock and poultry are often fed high-protein feed, which contains surplus nitrogen, to ensure that the animals' nutritional requirements are met. Nitrogen that is not metabolized into animal protein (i.e., milk, meat, or eggs) is excreted in the urine and feces of livestock and poultry where further microbial action releases ammonia into the air during manure decomposition”).

    Ammonia emissions from CAF manure processes may be reduced by flushing lanes in freestall barns 114 and limiting manure exposure to air through land incorporation.115 According to the SJVUAPCD, freestall barns are the largest source of manure at SJV dairies.116 Rule 4570 contains mandatory requirements for all dairy CAFs subject to the rule that house animals in freestalls to frequently clean the housing flush lanes—specifically, to “flush or scrape freestall flush lanes at least three (3) times per day” or to “flush, scrape, or vacuum freestall flush lanes” immediately before, after, or during each milking.117 In practice, most CAFs in the SJV comply with the SJVUAPCD Rule 4570 manure management requirements by flushing manure to dilute the urea in urine, which reduces ammonia emissions,118 and by incorporating solid manure into crop land within 72 hours of land application.119

    114 W. Kroodsma, J.W.H. Huis In 't Veld & R. Scholtens, 1993, “Ammonia emissions and its reduction from cubicle houses by flushing,” Livestock Production Science 35: 293-302.

    115 Ndegwa, P.M., A.N. Hristov, J. Arogo, and R.E. Sheffield, “A review of ammonia emission mitigation techniques for concentrated animal feeding operations,” J. Bioengineering Systems, ed. 100, 2008, p. 463-464.

    116 SJVUAPCD, Final Staff Report: Rule 4570 (October 21, 2010), at p. 9.

    117 SJVUAPCD Rule 4570 (amended October 21, 2010) at Section 5.6.1 and Table 4.1.D.2. Milking generally occurs at least twice a day at a typical dairy CAF. See Walter L. Hurley, Lactation Biology Web site, ANSC 438, University of Illinois, available at http://ansci.illinois.edu/static/ansc438/Lactation/milkingfrequency.html.

    118 Memorandum dated June 15, 2016, from Andy Steckel to Kerry Drake, EPA Region 9, “Summary of our 6/10/16 Discussion with Kevin Abernathy, Milk Producers Council” and W. Kroodsma, et al., 1993, “Ammonia emissions and its reduction from cubicle houses by flushing,” Livestock Production Science 35: 293-302, at p. 300 (noting that “[f]lushing has a significant emission reducing effect [because] . . . the urea concentration on slats, concrete floors and in the top layer of the slurry is lowered by dilution”); see also SJVUAPCD, Final Staff Report: Rule 4570 (October 21, 2010), at p. 10 (noting that “[l]iquid systems are common in large dairies due to their lower labor costs and ease of use with automatic flushing systems”).

    119 Memorandum dated June 15, 2016, from Andy Steckel to Kerry Drake, EPA Region 9, “Summary of our 6/10/16 Discussion with Kevin Abernathy, Milk Producers Council”; see also email dated June 9, 2016, from Samir Sheikh of the SJVUAPCD to Kerry Drake of EPA Region 9, regarding “Manure Land Application.”

    In addition, SJVUAPCD Rule 4570 requires each owner/operator of a large dairy CAF that handles or stores solid manure or separated solids outside the animal housing to remove dry manure or separated solids from the facility or cover it with a weatherproof covering from October through May, within 72 hours of collecting it, or to implement an “alternative mitigation measure” 120 approved by CARB and the EPA.121 SJVUAPCD Rule 4570 provides, in Table 4.1.H, specific requirements for applying manure to agricultural lands on the facility including the option to incorporate all solid manure within 72 hours.

    120 “Alternative Mitigation Measure” is defined in Rule 4570 as “a mitigation measure that is determined by the APCO, CARB, and EPA to achieve reductions that are equal to or exceed the reductions that would be achieved by other mitigation measures listed in this rule that owners/operators could choose to comply with rule requirements.” SJVUAPCD Rule 4570 (amended October 21, 2010), Section 3.4.

    121 SJVUAPCD Rule 4570 (amended October 21, 2010), Section 5.6.1 at Table 4.1.F.

    We are aware of only two rules implemented in other areas that explicitly regulate ammonia emissions from dairy facilities—the Idaho CAF Rule and SCAQMD Rule 1127 (Emission Reductions from Livestock Waste).122 The Idaho CAF Rule assigns points to each ammonia mitigation measure listed in the rule and requires dairy farm operators to implement measures that collectively achieve at least 27 points.123 The rule only applies, however, to dairy farms containing between 1,638 and 5,063 cows, depending on the type of dairy facility.124 SJVUAPCD Rule 4570, on the other hand, applies to dairy CAFs containing at least 500 milking cows and also applies to other types of CAFs, including beef cattle feedlots, other cattle facilities, poultry facilities, and swine facilities.125 As we stated in our proposed rule, because the structure of the Idaho CAF Rule differs substantially from the structure of SJVUAPCD Rule 4570, it is difficult to compare the requirements in these two rules directly.126

    122See Idaho Administrative Code 58.01.01, section 760, and SCAQMD Rule 1127 (adopted August 6, 2004), paragraph (a). Other CAF rules in California include SCAQMD Rule 223, BAAQMD Rule 2-10, SMAQMD Rule 496, VCAPCD Rule 23, Imperial County APCD (ICAPCD) Rule 217, and Butte County AQMD Rule 450. Each of these rules also regulates CAFs but does not establish specific requirements for ammonia control. For example, SCAQMD Rule 223 (adopted June 2, 2006) identifies ammonia as a precursor to particulates, but its requirements are very similar to SJVUAPCD Rule 4570 as originally adopted June 15, 2006. Similarly, ICAPCD Rule 217 states that its purpose is to limit emissions of VOC and ammonia, but the mitigation requirements are generally equivalent to those in SJVUAPCD Rule 4570.

    123 Idaho Administrative Code 58.01.01, section 764, paragraph 01 (“Dairy farm best management practices”) (requiring dairies to “employ BMPs for the control of ammonia to total twenty-seven (27) points”).

    124Id. at section 761 (“General applicability”).

    125 SJVUAPCD Rule 4570 (amended October 21, 2010), Table 2 and Section 5.6.

    126 80 FR 1816, 1829-30 (January 13, 2015) (noting, for example, that the Idaho CAF Rule identifies certain mitigation measures that are not included in SJVUAPCD Rule 4570, while Rule 4570 contains more stringent applicability thresholds and provisions for testing and records retention).

    Additionally, according to information submitted by the SJVUAPCD, the option in the Idaho CAF Rule to cover synthetic lagoons (one of the key mitigation measures in the rule) would not be effective in the SJV and could increase ammonia emissions at CAFs in the SJV.127 Furthermore, the Idaho CAF Rule states that “[p]oints may be obtained through third party export with sufficient documentation” and that “[a]s new information becomes available or upon request, the Director may determine a practice not listed in the table constitutes a BMP and assign a point value.” 128 These ambiguously phrased provisions allow CAF owners/operators to comply with the rule by implementing measures entirely different from those listed in the rule that may or may not be effective in reducing ammonia emissions. The commenter has provided no information to support a conclusion that the requirements of the Idaho CAF Rule will actually achieve ammonia emission reductions, nor any information to indicate that the requirements of this rule are more stringent than those in SJVUAPCD Rule 4570.

    127 Email dated June 25, 2015 from Sheraz Gill of the SJVUAPCD to Andrew Steckel of EPA Region 9, regarding “Requested Information” and attachment, “Evaluation of Covers Lagoons Manure Piles for NH3.pdf.”

    128 Idaho Administrative Code 58.01.01, at section 764-01 (“BMPs”).

    SCAQMD Rule 1127, as adopted August 6, 2004, applies only to livestock waste (i.e., manure management) at dairy farms and related operations. Unlike SJVUAPCD Rule 4570, which explicitly requires that dairy CAFs regularly flush, scrape, or vacuum freestall flush lanes,129 SCAQMD Rule 1127 contains no analogous requirement to regularly clean flush lanes in freestall barns.130 SCAQMD Rule 223, as adopted June 2, 2006, contains menu-based options for flushing, scraping, or vacuuming freestall barns but does not specifically mandate such measures.131

    129 SJVUAPCD Rule 4570 (amended October 21, 2010) at Section 5.6.1 and Table 4.1.D.2. Milking generally occurs at least twice a day at a typical dairy CAF. Walter L. Hurley, Lactation Biology Web site, ANSC 438, University of Illinois at http://ansci.illinois.edu/static/ansc438/Lactation/milkingfrequency.html.

    130 SCAQMD Rule 1127 does require dairies to remove manure accumulated in corrals at least 4 times per year and to remove manure stockpiles within 3 months of the last corral clearing day, and no more than 3 months after the date that previous stockpiles were last completely cleared. SCAQMD Rule 1127 (adopted August 6, 2004), sections (d)(4) and (d)(5).

    131 SCAQMD Rule 223, Appendix A, Table 1.C (requiring owners/operations at large dairy CAFs that house animals in freestall barns to implement at least 2 of 9 listed mitigation measures, including measures to regularly flush, scrape or vacuum freestalls).

    Additionally, SCAQMD Rule 1127 requires that a dairy operator disposing of manure within the South Coast area remove or contract to remove the manure to a manure processing operation approved in accordance with specific requirements and/or to agricultural land within the SCAQMD approved by local ordinance and/or the regional water quality board for the spreading of manure.132 Rule 1127 does not require that manure be incorporated into agricultural land within any specific timeframe to reduce ammonia emissions.

    132Id. at section (e).

    Thus, neither SJVUAPCD Rule 4570 nor SCAQMD Rule 1127 strictly requires dairy CAF operators to promptly remove and dispose of collected manure to minimize ammonia emissions. The commenter has failed to identify any measure implemented in the South Coast or elsewhere that is more stringent than the requirements of SJVUAPCD Rule 4570 for this particular component of the manure handling process.

    On balance, we find that SJVUAPCD Rule 4570 is more stringent than the Idaho CAF Rule and SCAQMD Rule 1127 given SJVUAPCD Rule 4570 establishes specific requirements for the frequency of flushing manure from freestall barns, which are a significant source of manure and ammonia emissions at dairy CAFs in SJV, while the Idaho CAF Rule and SCAQMD Rule 1127 contain no analogous requirements. In the absence of specific information about more stringent ammonia control requirements for CAFs that the District could reasonably have implemented by the statutory implementation deadline for RACM/RACT in this area (December 14, 2013), we find the requirements of SJVUAPCD Rule 4570 adequate to satisfy RACM/RACT requirements for CAFs for purposes of the 2006 PM2.5 NAAQS in the SJV.

    Comment 11: Earthjustice argues that the RACM/RACT demonstration fails to comply with CAA section 189(a)(1)(C), which requires a plan to include provisions to assure that RACM is implemented no later than four years after a moderate nonattainment designation. Earthjustice asserts that this section required the District to implement RACM for the 2006 PM2.5 standards by December 14, 2013. According to Earthjustice, because the District has not implemented controls identified by Earthjustice as RACM/RACT and has delayed additional charbroiling and residential furnace controls, the EPA must disapprove the demonstration and place the District on a clock to ensure that the missing measures are adopted expeditiously.

    Response 11: We disagree. Section 107(a) of the CAA provides states with both the authority and primary responsibility to develop SIPs that meet applicable statutory and regulatory requirements for attaining, maintaining, and enforcing the NAAQS. States have discretion in formulating their SIPs, and the EPA is required to approve a SIP submission that satisfies the applicable requirements of the Act.133

    133 CAA section 110(k)(3), 42 U.S.C. 7410(k)(3) and 40 CFR 52.02(a); see also Union Elec. Co. v. EPA, 427 U.S. 246, 250 (1976); Train v. Natural Res. Def. Council, 421 U.S. 60, 79 (1975).

    As the commenter notes, CAA section 189(a)(1)(C) requires that each attainment plan for a Moderate PM2.5 nonattainment area include provisions to assure that RACM for the control of PM2.5 and PM2.5 precursors are implemented no later than four years after the area's designation as nonattainment. For the SJV area, the deadline for implementation of RACM for the 2006 PM2.5 NAAQS under CAA section 189(a)(1)(C) was December 14, 2013. For the reasons provided in our proposed rule and further explained above in Response 6 through Response 10, we conclude that the 2012 PM2.5 Plan and 2014 Supplement provide for the implementation of all RACM/RACT that could reasonably be implemented in the SJV by the statutory implementation deadline, as required by CAA sections 172(c) and 189(a)(1)(C).

    Additionally, we disagree with the commenter's assertion that revisions to SJVUAPCD Rule 4901 (“Wood Burning Fireplaces and Wood Burning Heaters”) are necessary to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV. See Response 6.d. Similarly, we disagree with the commenter's assertion that SJVUAPCD Rule 4692 (Commercial Charbroiling) fails to satisfy RACM requirements for the 2006 PM2.5 NAAQS in the SJV. See Response 6.e.

    Comment 12: Earthjustice argues that much of the Plan's control strategy is unenforceable and that this is inconsistent with CAA section 110(a)(2)(A), which requires SIPs to “include enforceable emissions limitations and other control measures.” Specifically, Earthjustice argues that three control strategies challenged in recent litigation are not enforceable: (1) Mobile sources measures that are not included in the SIP; (2) open-ended tonnage commitments; and (3) voluntary incentive programs.

    Comment 12a: Mobile source “waiver” measures. Earthjustice notes that a significant portion of the emissions reductions in the Plan come from state mobile source measures for which the EPA has issued a waiver under CAA section 209. Earthjustice argues that because these measures are not included in the SIP, they are not enforceable by either the EPA or citizens, and therefore do not meet the requirements of CAA section 110(a)(2)(A).

    Earthjustice also criticizes the EPA's general policy of not including these “waiver measures” in the SIP. Earthjustice argues that requiring the EPA to approve waiver measures into the SIP is not inconsistent with Congress' intent to provide California with “the broadest possible discretion” to develop mobile source measures, and that there is no conflict between CAA sections 110 and 209 that would prevent the EPA from adding these measures to the SIP. Additionally, Earthjustice argues that Congress has not ratified the EPA's policy of excluding waiver measures from SIPs, asserting that the EPA had not affirmatively expressed its policy until recently and that the agency has contradicted this policy in previous statements.

    Response 12a: The EPA has historically allowed California to take credit for measures for which the state has obtained a waiver of federal preemption under CAA section 209 (“waiver” measures) even though the waiver measures themselves (i.e., CARB's regulations) had not been adopted and approved as part of the California SIP. However, a recent decision by the Ninth Circuit Court of Appeals held that the EPA's longstanding practice in this regard was at odds with the CAA requirement that state and local emissions limits relied upon to meet the NAAQS be enforceable by the EPA or private citizens through adoption and approval of such limits in the SIP.134

    134 See Committee for a Better Arvin v. EPA, 786 F.3d 1169 (9th Cir. 2015).

    In response to the court's decision, CARB has adopted the necessary waiver measures as revisions to the California SIP and submitted them to the EPA for approval.135 The EPA proposed to approve the waiver measures into the California SIP at 80 FR 69915 (November 12, 2015) and took final action to approve these measures into the SIP at 81 FR 39424 (June 16, 2016). Accordingly, these waiver measures are now enforceable by the EPA or private citizens under the CAA, consistent with the enforceability requirement in CAA section 110(a)(2)(A).

    135 See letter dated August 14, 2015, from Richard W. Corey, Executive Officer, California Air Resources Board, to Jared Blumenfeld, Regional Administrator, EPA Region 9, with attachments.

    Comment 12b: Open-ended commitments. Earthjustice asserts that the District's commitment to reduce direct PM2.5 by 1.9 tons per day (tpd) by 2019 is not enforceable. According to Earthjustice, although the District has committed to proposing certain measures to its board, it has not specified when it will implement those measures or committed to achieving reductions as a result of the measures. Earthjustice characterizes these measures as “goals” that have been found by courts to be unenforceable, citing Bayview Hunters Point Community Advocates v. Metropolitan Transportation Commission, 366 F.3d 692 (9th Cir. 2004). According to Earthjustice, it will be “virtually impossible” for either citizens or the EPA to determine whether the District has in fact met its 2019 reduction target, citing the EPA's statement at 57 FR at 13,568 that “[a] regulatory limit is not enforceable if, for example, it is impractical to determine compliance with the published limit.” Additionally, citing CAA section 182(e)(5), Earthjustice asserts that the CAA allows “open-ended commitments” only in limited circumstances and that there is no parallel provision for creating such a “black box” in PM2.5 plans.

    Response 12b: We disagree with the commenter's claim that the District's commitments in the 2012 PM2.5 Plan are not enforceable. We also disagree with the commenter's suggestion that the long-term strategy provision for ozone attainment plans in CAA section 182(e)(5) is the only statutory provision that allows for approval of attainment plans that rely on state commitments, and that commitments such as those identified in the 2012 PM2.5 Plan are not permissible in PM2.5 attainment plans.

    Section 182(e)(5) of the CAA authorizes the EPA to approve provisions of an attainment plan for an extreme ozone nonattainment area that anticipate development of new control techniques or improvement of existing control technologies, and to approve an attainment demonstration based on such provisions, if, inter alia, the State has submitted enforceable commitments to submit adopted contingency measures meeting certain criteria no later than three years before proposed implementation of the new technology measures.136 Contrary to the commenter's suggestion, section 182(e)(5) is not the only provision in the CAA that allows for approval of attainment plans that rely on enforceable commitments. Sections 110(a)(2)(A) and 172(c)(6) of the CAA require that SIPs include enforceable emission limitations and such other control measures, means or techniques, as well as schedules and timetables for compliance, as may be necessary or appropriate to provide for attainment of the NAAQS by the applicable attainment date. For over 20 years, the EPA has consistently maintained its interpretation of these provisions as allowing for approval, under certain circumstances, of a SIP that contains an enforceable commitment to adopt additional controls as part of a comprehensive control strategy for attaining the NAAQS.137 The EPA's interpretation of the Act as allowing for approval of limited enforceable commitments has been upheld by several courts of appeals.138

    136 CAA section 182(e)(5).

    137See, e.g., 62 FR 1150, 1187 (Jan. 8, 1997) (approving ozone attainment demonstration for the South Coast Air Basin); 65 FR 18903 (Apr. 10, 2000) (approving revisions to ozone attainment demonstration for the South Coast Air Basin); 63 FR 41326 (Aug. 3, 1998) (promulgating federal implementation plan for PM-10 for Phoenix); 69 FR 30005 (May 26, 2004) (approving PM-10 attainment demonstration for San Joaquin Valley); 48 FR 51472 (approving ozone attainment demonstration for New Jersey).

    138See, e.g., City of Seabrook v. EPA, 659 F.2d 1349 (5th Cir. 1981); Connecticut Fund for the Environment v. EPA, 672 F.2d 998 (2d Cir.), cert. denied 459 U.S. 1035 (1982); BCCA Appeal Group v. EPA, 355 F.3d 817 (5th Cir. 2003), reh'g denied, 2004 U.S. App. LEXIS 215 (5th Cir., January 8, 2004); Environmental Defense v. EPA, 369 F.3d 193, 209 (2d Cir. 2004); and Committee for a Better Arvin v. EPA, 786 F.3d 1169 (9th Cir. 2015) (upholding EPA approval of CARB and SJVUAPCD commitments as enforceable SIP measures consistent with requirements of CAA section 110(a)(2)(A)).

    As explained in our proposed rule, we generally consider three factors in determining whether to approve the use of an enforceable commitment to meet a CAA requirement: (1) Does the commitment address a limited portion of the CAA-required program; (2) is the state capable of fulfilling its commitment; and (3) is the commitment for a reasonable and appropriate period of time. We stated in our proposed rule that we were not evaluating the commitments in the 2012 PM2.5 Plan in accordance with this three-factor test because the Plan did not rely on any of these commitments to satisfy CAA requirements.139 In response to these comments, however, we have evaluated the commitments in the 2012 PM2.5 Plan to amend SJVUAPCD Rule 4308 in 2013 and to adopt Rule 4905 in 2014 in accordance with our three-factor test, because these commitments were part of the control strategy to be implemented prior to the Moderate area attainment date (December 31, 2015) for the 2006 PM2.5 NAAQS in the SJV area.140 We find that these commitments satisfy the EPA's three-factor test as follows: (1) The commitments address a limited portion of the CAA-required program because the Plan relies on them only to supplement the RACM and RFP control strategies in the impracticability demonstration and does not rely on either commitment for necessary emission reductions; (2) the state has fulfilled both commitments, as explained further below in this response; and (3) each commitment was for a reasonable and appropriate period of time—i.e., to be fulfilled by 2013 and 2014, ahead of the December 31, 2015 Moderate area attainment date. Accordingly, we are approving the District's commitment to amend Rule 4308 as a RACM and approving the District's commitment to adopt Rule 4905 in 2014 as an additional reasonable measure under CAA section 172(c)(6).141

    139 80 FR 1816, 1833 (January 13, 2015).

    140 We did not evaluate the District's commitments to amend Rule 4692 and Rule 4901 in 2016 or to achieve an aggregate reduction of 1.9 tpd of direct PM2.5 by 2019 in accordance with our three-factor test because these commitments address actions to be undertaken after the Moderate area attainment date (December 31, 2015) and, therefore, are not part of the control strategy for this impracticability demonstration. Additionally, we did not evaluate the District's commitment to adopt Rule 9610 in 2013 in accordance with our three-factor test because this rule is not a control measure and therefore is not eligible for SIP emission reduction credit. See Response 12c, infra.

    141 The District's commitment to adopt Rule 4905 in 2014 does not qualify as a RACM because it is a measure implemented after the RACM implementation deadline (December 14, 2013). It is, however, an additional measure implemented before the Moderate area attainment date (December 31, 2015) and therefore may be treated as part of the Moderate area control strategy for the area under CAA section 172(c)(6).

    We also find that the commitments are enforceable and therefore appropriate for approval under CAA section 110.142 Specifically, SJVUAPCD Governing Board Resolution 2012-12-19 states:

    142See Committee for a Better Arvin v. EPA, 786 F.3d 1169 (9th Cir. 2015) (upholding EPA approval of CARB and SJVUAPCD commitments as enforceable SIP measures consistent with requirements of CAA section 110(a)(2)(A)).

    The District Governing Board commits to adopt and implement the rules and measures in the Plan by the dates specified in Chapter 5 to achieve the emissions reductions shown in Chapter 5, and to submit these rules and measures to ARB within 30 days of adoption for transmittal to EPA as a revision to the State Implementation Plan (SIP). If the total emission reductions from the adopted rules are less than those committed to in the Plan, the District Governing Board commits to adopt, submit, and implement substitute rules that will achieve equivalent reductions in emissions of direct PM2.5 or PM2.5 precursors in the same adoption and implementation timeframes or in the timeframes needed to meet CAA milestones.143

    143 SJVUAPCD Governing Board Resolution 2012-12-19, “In the Matter of: Adopting the San Joaquin Valley Unified Air Pollution Control District 2012 PM2.5 Plan.”

    Chapter 5 of the 2012 PM2.5 Plan identifies, in Table 5-3, the “regulatory control measure commitments” and related amendment dates, compliance dates, and amounts of emission reductions shown in Table 5.

    Table 5—San Joaquin Valley Unified Air Pollution Control District, 2012 PM2.5 Plan, Specific Rule Adoption/Amendment Commitments Rule number Rule title Amendment date Compliance date Emission reductions 4308 Boilers, Steam Generators, and Process Heaters 0.075 to <2 MMBtu/hr 144 2013 2015 TBD. 4692 Commercial Charbroiling 2016 2017 0.4 tpd PM2.5. 4901 Wood Burning Fireplaces and Wood Burning Heaters 2016 2016/2017 1.5 tpd of PM2.5. 4905 Natural Gas-Fired, Fan-Type Residential Central Furnaces 2014 2015 TBD. 9610 SIP Creditability of Incentives 2013 2013 TBD. Source: 2012 PM2.5 Plan, Chapter 5, Table 5-3 (“Regulatory Control Measure Commitments”).

    Thus, the District Governing Board's commitment specifies the actions the Board committed to undertake, the dates by which it would take such actions, and the emission reductions (if any) that it would achieve through these actions. We find these commitments specific enough to be enforced by the EPA or by citizens under the CAA and are, therefore, approving them into the California SIP.

    144 “MMBtu” means million British Thermal Units.

    We note that the SJVUAPCD has made substantial progress on satisfying the commitments identified in the Plan, as follows:

    Rule 4308. The District amended SJVUAPCD Rule 4308 on November 14, 2013, and CARB submitted it to the EPA for SIP action on May 13, 2014. The EPA approved amended SJVUAPCD Rule 4308 at 80 FR 7813 (February 12, 2015).

    Rule 4905. The District adopted Rule 4905 on January 22, 2015, and CARB submitted the rule to the EPA for SIP action on April 7, 2015. The EPA approved Rule 4905 at 81 FR 17390 (March 29, 2016).

    Rule 9610. The District adopted Rule 9610 on June 20, 2013, and CARB submitted the rule to the EPA for SIP action on June 26, 2013. The EPA finalized a limited approval and limited disapproval of Rule 9610 at 80 FR 19020 (April 9, 2015).

    Rule 4901. The District amended Rule 4901 on September 18, 2014, and CARB submitted the rule to the EPA for SIP action on November 6, 2014. On August 15, 2016, Acting Regional Administrator Alexis Strauss signed a notice of final rulemaking to approve SJVUAPCD Rule 4901.145

    145 EPA, Final Rule, “Approval of California Air Plan Revisions, San Joaquin Valley Unified Air Pollution Control District,” August 15, 2016 (pre-publication notice).

    Comment 12c: Voluntary incentive programs. Earthjustice states that the EPA's suggestion that Rule 9610 (State Implementation Plan Credit for Emission Reductions Generated Through Incentive Programs) may provide emission reductions to help satisfy the District's tonnage commitment is particularly confusing. Earthjustice understands the EPA's proposed approval of Rule 9610 and related technical support document to say that an incentive program's compliance with the rule's SIP-creditability definitions does not mean that the incentive program is, in fact, SIP-creditable. Thus, Earthjustice states, commenters “do not understand how Rule 9610 itself will provide any creditable emission reductions.”

    More fundamentally, Earthjustice asserts, the emissions reductions that may be achieved through the District's incentive programs cannot be credited in a SIP unless they are treated under the EPA's voluntary emissions reductions policy. Earthjustice states that “[t]he requirement to reduce emissions in exchange for incentive funding is not enshrined in any sort of control measure that is included in the [SIP] and enforceable by EPA or citizens” and that, as with “waiver measures,” approval of a strategy built upon these reductions would (again) violate Clean Air Act section 110(a)(2)(A).”

    Response 12c: We agree with Earthjustice's statement that SJVUAPCD Rule 9610 itself is not a SIP-creditable control measure and that the District therefore cannot rely on this rule to satisfy any SIP emission reduction commitments.

    SJVUAPCD Rule 9610, as adopted June 20, 2013, establishes a regulatory framework for the District's quantification of emission reductions achieved through incentive programs and provides opportunities for the EPA, CARB, and the public to review and comment on the District's evaluations on an annual basis. As we stated in our May 19, 2014 proposal to approve Rule 9610, the rule “does not establish any emission limitation, control measure, or other requirement that applies directly to an emission source” and therefore “is not intended to implement the reasonably available control technology (RACT) standard or any other control standard under the Act.” 146 Instead, Rule 9610 “establishes an administrative mechanism designed to ensure that each SIP submittal in which the District relies upon emission reductions achieved through implementation of incentive programs in the SJV will adequately address the requirements of the Act.” 147 The requirements and procedures in Rule 9610 apply only to the District and lay the groundwork for the District's incorporation of incentive programs into air quality plans going forward.148 The EPA finalized a limited approval and limited disapproval of Rule 9610 on April 9, 2015, thereby making its requirements and procedures enforceable by the EPA or citizens against the District.149

    146 79 FR 28650, 28652 and n. 5 (May 19, 2014).

    147Id.

    148Id.

    149 80 FR 19020 (April 9, 2015) (concluding that Rule 9610 largely satisfies CAA requirements but contains several deficiencies warranting limited disapproval).

    As part of our proposed action on the 2012 PM2.5 Plan, we listed SJVUAPCD Rule 9610 among the District's rule amendment commitments 150 and explained that the District had committed to adopt, submit, and implement Rule 9610 to “provide a process for quantifying emissions reductions from the use of incentive funds.” 151 To the extent our proposed rule suggested that SJVUAPCD Rule 9610 may itself be a SIP-creditable control measure, we hereby clarify that this rule does not achieve any SIP-creditable emission reductions and therefore cannot be credited for any SIP purpose.

    150 80 FR 1816 at 1827 (Table 2), 1832 (Table 3).

    151 80 FR 1816, 1831 (emphasis added).

    Additionally, to the extent Earthjustice intended to assert that emissions reductions achieved through a state or local incentive program cannot be credited in a SIP except through a SIP submission that satisfies the requirement of the Act as interpreted in EPA guidance, we agree. As we explained in our final action on SJVUAPCD Rule 9610:

    We expect the District to address the applicable requirements of the CAA in each individual SIP submittal that relies on incentive programs, and our recommendations in both the proposal and today's final rule are intended to provide the District with general guidance on how these requirements, as interpreted in EPA guidance, apply to future SIP submittals developed pursuant to Rule 9610 and the requirements of the Act. . . . EPA will review each SIP submittal developed pursuant to Rule 9610 (including the necessary evaluation of the applicable incentive program guidelines) on a case-by-case basis, following notice-and-comment rulemaking, to determine whether the applicable requirements of the Act are met [internal citations omitted]. Nothing in today's action prohibits EPA from disapproving a SIP relying on incentive-based emission reductions that fails to satisfy the requirements of the CAA.152

    152 80 FR 19020, 19022 (April 9, 2015).

    With respect to Earthjustice's statement that “[t]he requirement to reduce emissions in exchange for incentive funding is not enshrined in any sort of control measure that is included in the [SIP] and enforceable by EPA or citizens,” we note that under longstanding EPA guidance, SIP credit may be allowed for a voluntary or other nontraditional measure only where the State submits enforceable mechanisms to ensure that the emission reductions necessary to meet applicable CAA requirements are achieved—e.g., an enforceable commitment to monitor and report on emission reductions achieved and to rectify any shortfall in a timely manner.153 Thus, if California intends to satisfy a SIP requirement through reliance on an incentive program that the EPA and citizens may not directly enforce against participating sources, the State/District must take responsibility for assuring that SIP emission reduction requirements are met through an enforceable commitment, which the EPA and citizens may enforce against the State/District upon the EPA's approval of the commitment into the SIP.154 Approval of a control strategy built upon emission reductions achieved through incentive programs may satisfy CAA section 110(a)(2)(A) only if these enforceability requirements are met.155

    153Id. at 19026.

    154Id.

    155 The EPA has recommended presumptive limits on the amounts of emission reductions from certain voluntary and other nontraditional measures that may be credited in a SIP. Specifically, for voluntary mobile source emission reduction programs (VMEPs), the EPA has identified a presumptive limit of three percent (3%) of the total projected future year emission reductions required to attain the appropriate NAAQS, and for any particular SIP submittal to demonstrate attainment or maintenance of the NAAQS or progress toward attainment (e.g., RFP), 3% of the specific statutory requirement. See, e.g., “Guidance on Incorporating Voluntary Mobile Source Emission Reduction Programs in State Implementation Plans (SIPs),” EPA, Office of Air and Radiation (OAR), October 24, 1997, at 5 and “Improving Air Quality with Economic Incentive Programs,” EPA, OAR, January 2001, at 158. For voluntary stationary and area source measures, the EPA has identified a presumptive limit of 6% of the total amount of emission reductions required for RFP, attainment, or maintenance demonstration purposes. See, e.g., “Incorporating Emerging and Voluntary Measures in a State Implementation Plan,” EPA, OAR, September 2004 (“2004 Emerging and Voluntary Measures Guidance”) at 9 and “Incorporating Bundled Measures in a State Implementation Plan (SIP),” August 2005 (“2005 Bundled Measures Guidance”), at 8. The EPA has also long stated, however, that states may justify higher amounts of SIP emission reduction credit for voluntary programs on a case-by-case basis, and that the EPA may approve measures for SIP credit in excess of the presumptive limits “where a clear and convincing justification is made by the State as to why a higher limit should apply in [its] case.” 2004 Emerging and Voluntary Measures Guidance at 9; see also 2005 Bundled Measures Guidance at 8, n. 6 and “Diesel Retrofits: Quantifying and Using Their Emission Benefits in SIPs and Conformity,” EPA, OTAQ, February 2014, at 12.

    D. Comments on RFP, RFP Contingency Measures, and Quantitative Milestones

    Comment 13: Earthjustice disagrees with the EPA's proposal to approve the RFP demonstration in the Plan, quoting the statutory definition of “reasonable further progress” in CAA section 171(1) and asserting that the EPA's approach to RFP “divorces the RFP targets from attainment altogether by claiming that the RFP requirement of CAA section 172(c)(2) can be met by assuring implementation of RACM/RACT.” Earthjustice asserts that RFP is a requirement separate and independent from RACM/RACT and that the EPA's approach undermines Congress' intent for RFP and milestones to serve as enforceable targets that will trigger consequences when RACM/RACT controls are not implemented on a particular schedule.

    Earthjustice also states that the Plan's RACM/RACT demonstration cannot support the RFP targets approved by the EPA because it is incomplete, particularly for ammonia. According to Earthjustice, the ammonia RACM/RACT demonstration sets no RACM/RACT requirements and therefore makes it impossible to assess whether the Plan will achieve RFP. Further, Earthjustice says, because the Plan allows ammonia emissions to increase after 2012, it does not provide “annual incremental reductions” (emphasis in comment) as required by CAA section 171. Earthjustice states that the EPA must disapprove the RFP demonstration because it has no basis for concluding that the Plan will provide such annual incremental reductions in emissions of the relevant air pollutant as are required for the purpose of ensuring attainment by the applicable date.

    Response 13: We disagree with the commenter's assertion that the EPA's approach to RFP in this action is inconsistent with the statutory RFP requirements.

    Section 172(c)(2) of the Act requires that plan provisions for all PM2.5 nonattainment areas require RFP, which is defined in section 171(1) as such annual incremental reductions in emissions of the relevant air pollutant as are required by part D, title I of the Act or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable NAAQS by the applicable date. In the EPA's July 29, 2016 final rule to implement the PM2.5 NAAQS, the EPA explained that for areas that cannot demonstrate attainment by the statutory deadline for Moderate areas in CAA section 188(c)(1), the state must demonstrate either generally linear or stepwise emissions reductions toward the full amount of reductions that will be achieved by that deadline, i.e., the amount that reflects implementation of all of the control measures identified as RACM and RACT and additional reasonable measures for the entire period of the applicable attainment plan.156 The EPA explained that generally linear progress toward this full amount would meet the RFP requirement, while slower progress would require further justification.157

    156 EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at pp. 178-179.

    157Id.

    As we explained in our proposed rule, the 2012 PM2.5 Plan shows that emissions of direct PM2.5, NOX and SOX will decline from the 2007 base year through 2015 and states that emissions will remain below the levels needed to show “generally linear progress” from 2007 to 2019, the year that the Plan projects to be the earliest practicable attainment date.158 The Plan also demonstrates that all RACM/RACT and additional reasonable measures for sources of direct PM2.5, NOX, SOX and ammonia are being implemented as expeditiously as practicable 159 and identifies projected emission levels for each of these pollutants in 2014 and 2017 that reflect full implementation of the State's and District's Moderate area control strategy for the area.160 In an area that cannot practicably attain the PM2.5 NAAQS by the applicable Moderate area attainment date, we believe it is reasonable to find that full implementation of a control strategy that satisfies the Moderate area control requirements (i.e., RACM/RACT and additional reasonable measures) represents reasonable further progress toward attainment.

    158 80 FR 1816, 1835 (January 13, 2015) (citing 2012 PM2.5 Plan, section 9.3).

    159 As explained in Response 12b, supra, we are approving the District's commitment in the 2012 PM2.5 Plan to adopt Rule 4905 in 2014 as an additional reasonable measure under CAA section 172(c)(6) because it is a control measure implemented after the RACM implementation deadline (December 14, 2013) but before the Moderate area attainment date (December 31, 2015).

    160Id. at 1835, 1836.

    We also disagree with the commenter's claim that the Plan's RACM/RACT demonstration for ammonia cannot support the RFP targets approved by the EPA because it is incomplete and lacks any RACM/RACT requirements. For the reasons provided above in Response 6 through Response 10, we find the RACM/RACT demonstration in the 2012 PM2.5 Plan consistent with the statutory requirement for RACM/RACT in CAA section 189(a)(1)(C).

    Finally, we disagree with Earthjustice's claim that the Plan fails to satisfy the RFP requirement because it allows ammonia emissions to increase after 2012 and, therefore, does not provide annual incremental reductions as required by CAA section 171. As the EPA explained in the preamble to the July 29, 2016 final rule to implement the PM2.5 NAAQS, states may in certain circumstances develop approvable RFP plans in which emissions of one or more PM2.5 precursors subject to control evaluation are not decreasing. The EPA explained that in this scenario:

    . . . The state must demonstrate that the emissions reductions of direct PM2.5 combined with the aggregate emissions reductions of PM2.5 plan precursors support expeditious attainment of the applicable PM2.5 NAAQS. To accomplish this, the EPA expects that a state could use the relative air quality impacts of the different PM2.5 plan precursors identified in the attainment modeling to demonstrate that the emissions reductions of direct PM2.5 and aggregate PM2.5 plan precursors constitute an acceptable RFP plan. For example, the state could demonstrate that even if one or more PM2.5 plan precursor is not decreasing, the emissions reductions of direct PM2.5 and the remaining PM2.5 plan precursors are the dominant factors in reducing ambient PM2.5 levels and are therefore adequate to support expeditious attainment. In providing this flexibility, the EPA recognizes that control measures for certain pollutants may be more effective at reducing PM2.5 concentrations than others, and that states may be able to implement some measures more quickly than others while still achieving reasonable overall progress toward attainment.161

    161 EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at p. 179.

    Consistent with these recommendations, the 2012 PM2.5 Plan demonstrates that despite the increase in ammonia emissions after 2012, the reductions in emissions of direct PM2.5, NOX and SOX are the dominant factors in reducing ambient PM2.5 levels and are therefore adequate to support expeditious attainment.162 Because the Plan provides for generally linear reductions in emissions of direct PM2.5 and PM2.5 precursors in the aggregate, we find that it provides for such annual incremental reductions in emissions of the relevant air pollutant as are required by part D, title I of the Act or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable NAAQS by the applicable date.

    162 80 FR 1816, 1835-1836 (January 13, 2015).

    As a result of our December 22, 2015 action reclassifying the SJV area as a Serious nonattainment area for the 2006 PM2.5 NAAQS, the area is now subject to Serious area planning requirements under subpart 4 and must reevaluate and strengthen its SIP control strategy as necessary to meet the Serious area requirement for BACM and BACT, among other requirements.163 The State must also demonstrate attainment as expeditiously as practicable, but no later than December 31, 2019, and provide a revised RFP demonstration, both taking into consideration the implementation of the Serious Area control strategy.164 Today, we are approving certain elements of the 2012 PM2.5 Plan only for the limited purpose of satisfying the statutory control requirements that apply to Moderate areas demonstrating that attainment by the Moderate Area attainment date under subpart 4 is impracticable.

    163 81 FR 2993 (January 20, 2016) (final rule) and 81 FR 42263 (June 29, 2016) (correcting amendment).

    164Id.

    Comment 14: Earthjustice asserts that the EPA does not have authority to defer action on quantitative milestones and RFP contingency measures. Earthjustice notes that the EPA has deemed the District's SIP revision complete and asserts that the EPA is under a mandatory duty as a result to take one of the actions enumerated in CAA section 110(k). Earthjustice contends that disapproval of the quantitative milestones and RFP contingency measures is the only reasonable option. According to Earthjustice, deferring action on these parts effectively waives the statutory consequences for failing to submit a complete plan, including sanctions, and leaves the District with “no actual plan for attaining the PM2.5 standards.” Earthjustice says that interim milestones and RFP targets will be needed to ensure progress before the District's next attainment plan is adopted.

    Response 14: These comments are outside the scope of this action. We did not propose any action concerning quantitative milestones or RFP contingency measures in the Plan and, therefore, are not finalizing any action with respect to these requirements at this time.

    For all areas designated nonattainment for the 2006 PM2.5 NAAQS effective December 14, 2009, including the SJV area, the EPA has established December 31, 2014 as the starting point for the first 3-year period for quantitative milestones under CAA section 189(c).165 This is because December 31, 2014, was the due date for states to submit additional SIP elements necessary to satisfy the subpart 4 Moderate area requirements for the 1997 and 2006 PM2.5 standards.166 Establishing December 31, 2014 as the starting point for the first 3-year period under CAA section 189(c) for the 2006 PM2.5 NAAQS is in keeping with the EPA's historical approach to quantitative milestone dates (i.e., using the due date for the Moderate area plan submission as the starting point for the first 3-year milestone period). Thus, for the SJV PM2.5 Serious nonattainment area, the state must submit quantitative milestones to be achieved by December 31, 2017 (the first milestone date) and every 3 years thereafter until the milestone date that falls within 3 years after the Serious area attainment date.167

    165See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at 40 CFR 51.1013(a)(4). Although this regulatory text is not yet effective, it reflects the EPA's interpretation of the statutory requirements.

    166 EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at p. 203 (referencing 79 FR 31566 (June 2, 2014) (final rule establishing subpart 4 moderate area classifications and deadline for related SIP submissions)); see also 80 FR 1816, 1835 (January 13, 2015).

    167See EPA, Final Rule, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements,” July 29, 2016 (pre-publication notice) at 40 CFR 51.1013(a)(4). Although this regulatory text is not yet effective, it reflects the EPA's interpretation of the statutory requirements.

    With respect to RFP contingency measures, we explained in our proposed rule that once the SJV area is reclassified as a Serious area, the State would be obligated to demonstrate that the SIP provides for the implementation of BACM and BACT and for attainment as expeditiously as practicable, and no later than 2019.168 We also noted that as part of this demonstration, the State would need to revise its RFP demonstration to establish new RFP targets, quantitative milestones, and RFP contingency measures for the 2006 PM2.5 NAAQS. As a consequence of our January 20, 2016 final action reclassifying the SJV area as a Serious area for the 2006 PM2.5 NAAQS, California is subject to an August 21, 2017 deadline to submit these Serious area plan elements.169

    168 80 FR 1816, 1837 (January 13, 2015).

    169 81 FR 2993, 3000 (January 20, 2016) and 40 CFR 52.247(e).

    Following the State's submission of a Serious area plan to provide for attainment of the 2006 PM2.5 NAAQS in the SJV area, the EPA intends to review the submitted plan for compliance with these requirements for quantitative milestones and RFP contingency measures.

    E. Comments Regarding Interpollutant Trading Ratios for NNSR

    Comment 15: The SJVUAPCD disagrees with the EPA's proposal to disapprove the District's NNSR interpollutant trading (IPT) ratios to offset PM2.5 emission increases with NOX and SOX emissions reductions. The District asserts that its use of a single IPT ratio for each pollutant based on the average of different calculated ratios across the District is simpler and more equitable than the EPA's suggestion that ratios should either differ across the regions of the SJV or be set based on a maximum calculated value for any point in the SJV. The District believes the EPA's suggested geographically-based ratios would be unfair, since the ratio used for a particular source could depend on which side of the road it is located on.

    The SJVUAPCD further asserts that the District's reliance on the use of a basin-wide average for each pollutant is consistent with the EPA's NNSR regulations at 40 CFR part 51, Appendix S, as well as prior EPA approvals of NNSR programs that mitigate emission increases across an air basin. The District also states that it models local impacts of increased PM2.5 emissions for every facility subject to NNSR and will not issue a permit to a facility if the modeled impacts indicate a significant health risk or a significant increase in PM2.5 emissions. The SJVUAPCD concludes that its NNSR modeling analysis and proposed IPT ratios prevent localized impacts and appropriately offset regional impacts, and that the EPA should therefore approve the ratios.

    Response 15: We disagree with the District's assertion that the EPA should approve the NNSR IPT ratios in the 2012 PM2.5 Plan. Our primary concern regarding the District's approach to interpollutant trading for NSR purposes is that the Plan provided only a ratio calculation, without a rationale to support the use of this ratio for NNSR purposes. Under section IV.G.5 of 40 CFR part 51, Appendix S, interpollutant trades to meet NNSR offset requirements for emissions of direct PM2.5 or PM2.5 precursors may be allowed if such offsets comply with an interprecursor trading hierarchy and ratio approved by the Administrator. As stated in our proposal, the EPA issued a 2011 guidance memorandum on interpollutant trading stating that “any ratio involving PM2.5 precursors submitted to the EPA for approval for use in a state's interpollutant offset program for PM2.5 nonattainment areas must be accompanied by a technical demonstration that shows the net air quality benefits of such ratio for the PM2.5 nonattainment area in which it will be applied.” 170 Therefore, a PM2.5 NNSR SIP submittal containing interpollutant trading ratios for use in NNSR offsetting must describe a method for calculating ratios and provide a rationale demonstrating that the method is consistent with the purpose of NNSR offsets.

    170 Memorandum dated July 21, 2011, from Gina McCarthy, Assistant Administrator, to Regional Air Division Directors, Regions 1-10, Subject: Revised Policy to Address Reconsideration of Interpollutant Trading Provisions for Fine Particles (PM2.5) (“IPT memo”).

    The EPA disagrees with the District's claim that the use of a single trading ratio, even the maximum ratio over an area, is necessarily more equitable or less complex than using multiple ratios. While the use of a single interpollutant trading ratio for all locations in a nonattainment area may be simpler than separate ratios for different geographic zones, the District has provided no rationale concerning the net air quality benefits of such an approach. The impact of emissions of a given pollutant varies by the chemical environment the emissions occur in, and that chemical environment varies by location. The ratio of impacts between emissions of NOX and SOX precursors will also necessarily vary by geographic location. The importance of that impact for total concentration is another consideration; emissions from a remote, relatively clean area used to offset emissions in a highly polluted area may not meet the requirement in Condition 3 of 40 CFR part 51, Appendix S, section IV.A, which states that offsets from existing sources in the area of the proposed source are required such that there will be reasonable progress toward attainment of the applicable NAAQS. The use of a ratio that is an average over a broad geographic area, or any ratio less than the maximum ratio for such an area, could allow for a new source whose location-specific modeling gives the maximum ratio to obtain a permit without offsetting its full impact and, thus, potentially interfere with progress toward attainment.

    The District suggests that the use of the maximum ratio poses an equity problem for a source whose location-specific ratio is lower, as such a source would have to offset more than it should. However, the use of an average ratio across the entire nonattainment area poses a different equity problem: A source whose location-specific ratio is the maximum would be offsetting less than it should while other sources would have to offset more. Use of different ratios tailored to specific geographic zones would be one way to help address these issues. Although the District correctly notes that a source located to one side of a zone boundary may have a different ratio than one located just to the other side of the boundary, creating potential inequities, we believe such an approach is generally more appropriate and equitable as sources in each zone would offset approximately their fair share. In any case, the EPA will review each technical demonstration accompanying an NNSR SIP submission to determine whether the state's requested interpollutant trading ratio(s) will achieve a net air quality benefit in the PM2.5 nonattainment area.

    Comment 16: The SJVUAPCD disagrees with the EPA's proposal to disapprove the District's interpollutant trading ratio sensitivity calculation based on a 50 percent reduction in stationary source emissions. The District comments that the EPA has provided only limited guidance on the development of interpollutant trading ratios and has failed to propose a mechanism to determine the sensitivity of PM2.5 formation to NOX and SOX emission decreases for NNSR, even though, according to the District, federal law requires the EPA to do so. The District asserts that its method is consistent with the EPA's existing guidance on NNSR IPT ratios and with state techniques that the EPA has approved for attainment demonstration purposes. The District contends that the EPA's disapproval of its approach creates new standards not reflected in previous guidance, and that the EPA should establish new standards only through the proper regulatory approval process. The District states that the EPA should therefore approve its 50 percent reduction sensitivity approach.

    Response 16: Although it may be reasonable to use modeling of 50 percent reductions in calculating interpollutant trading ratios,171 consistent with the provisions of 40 CFR part 51, Appendix S and EPA guidance, the state must provide a rationale for the reduction used and demonstrate its appropriateness for NSR offsetting purposes. As we stated in our proposed rule, the Plan provides no rationale for the appropriateness of a 50 percent reduction. Generally, the emission reductions model should have a direct connection to the emission reductions expected in IPT trades for NSR offsetting.

    171 We note, however, that such a level of reduction does not match the scale of reductions involved in a typical NNSR offsetting transaction.

    Comment 17: The District disagrees with the EPA's general comment that the Plan fails to provide an overall rationale for the District's methodology that is grounded in the statutory purpose of NSR offsets, and also with the EPA's specific concern that the 2012 PM2.5 Plan does not show that its offsets provide a “net air quality benefit in the affected area,” as required by 40 CFR part 51, Appendix S, section IV.A. The District asserts that Appendix H of the Plan demonstrates that the Plan's interpollutant trading ratios are consistent with the federal NNSR requirements and that the use of credits would not interfere with attainment efforts. The District states that the proposed trading ratios substitute only one precursor pollutant to the current offsetting requirements that the EPA has already found “to comply with the CAA and EPA's NSR implementation regulations,” and that this substitution uses a predetermined ratio demonstrated to be equal in ability to offset PM2.5. For this reason, the District argues that the ratios have already been demonstrated to provide an air quality benefit to the area and should be approved.

    Response 17: The EPA disagrees with the District's claim that the Plan demonstrates that its proposed interpollutant offsets would not interfere with attainment efforts, and that its ratio represents equivalent PM2.5 offsetting impacts. As we explained above in Response 15 concerning location-specific ratios, depending on the locations of the new or modified sources and the offsetting sources, offsets based on interpollutant trades could interfere with progress toward attainment of the PM2.5 NAAQS. The District used modeling of emission reductions occurring over a large geographic area and calculated ratios of the effects at multiple monitor locations, without providing a rationale for the procedure used. The modeling reflects the average response of geographically distributed emission reductions but does not show the effect of any particular offset for a new source, and it is unclear how it is related to the aggregate effect of many such trades. Because the 2012 PM2.5 Plan does not address the locations of either the PM2.5 precursor emission increases and offsets or the ambient PM2.5 effects, we find the technical analyses in the Plan insufficient to demonstrate that the District's proposed offset ratio will assure reasonable progress toward attainment of the PM2.5 NAAQS in the SJV.

    F. Comments on Motor Vehicle Emissions Budgets

    Comment 18: Earthjustice agrees with the EPA's proposal to disapprove the interpollutant trading ratios for NSR but argues that the EPA should also disapprove the District's 8:1 ratio for offsetting mobile source emission increases of PM2.5 for conformity purposes. Earthjustice claims that the EPA did not evaluate the methodology supporting this ratio and instead approved it on the basis that it was more stringent than regional modeling determinations. According to Earthjustice, given the EPA concluded that the regional modeling was arbitrary and lacked any rationale for its methodology, the mere fact that the conformity ratios are “more stringent” does not provide the EPA with any rational basis for approving an 8:1 ratio for conformity purposes.

    Response 18: The EPA disagrees with Earthjustice's claim that the 8:1 NOX:direct PM2.5 ratio for transportation conformity has no rational basis. As an initial matter, we note that the EPA did not state that the regional modeling was arbitrary, but rather that the Plan had not provided a rationale for its particular approach to using modeled sensitivity ratios to derive IPT ratios for NSR offsetting purposes.172 The EPA made these statements in the context of NNSR permitting requirements, not trading mechanisms for transportation conformity purposes.

    172 80 FR 1816, 1838 (January 13, 2015).

    The District's methodology for estimating the IPT ratio for conformity purposes is essentially an update (based on newer modeling) of the approach that the EPA previously approved for the 2008 PM2.5 Plan for the 1997 PM2.5 NAAQS in the SJV.173 The District's approach in the 2008 PM2.5 Plan was to model the ambient PM2.5 effect of areawide NOX emissions reductions and of areawide direct PM2.5 reductions, and to express the ratio of these modeled sensitivities as an interpollutant trading ratio. Variable factors in this method included the extent of the area over which emission reductions were applied and the location(s) at which the resulting ambient PM2.5 effect was evaluated. As part of the EPA's November 2011 action partially approving the 2008 PM2.5 Plan for the 1997 PM2.5 NAAQS in the SJV, the EPA stated that this methodology “is adequate for purposes of assessing the effect of area-wide emissions changes, such as are used in RFP, contingency measures, and conformity budgets.” 174 In the TSD supporting that action, we stated that “[t]he method modeled `across the board' emission changes over the entire modeling domain; emissions considered in transportation conformity are also domain-wide.” 175

    173See 80 FR 1816, 1841 (January 13, 2015) (noting the EPA's prior approval of MVEBs for the 1997 annual and 24-hour PM2.5 standards in the 2008 PM2.5 Plan at 76 FR 69896, November 9, 2011).

    174 76 FR 69896, 69919 (November 9, 2011).

    175 EPA, Region 9, Air Division, “Technical Support Document and Responses to Comments, Final Rule on the San Joaquin Valley 2008 PM2.5 State Implementation Plan,” September 30, 2011, at pp. 46 and 165.

    As part of our proposed action on the 2012 PM2.5 Plan, we stated that the areawide methodology used in the 2008 PM2.5 Plan gave a range of IPT ratios from 2.8 to 4.7, depending on the ambient location chosen.176 Using the same method would entail using the IPT ratio evaluated at the California Street, Bakersfield design value site, 4:3. The 8:1 ratio used in the Plan is larger than both the Bakersfield ratio and any ratio using variants of the previously-approved approach, and is thus a more stringent (and conservatively high) trading mechanism to use for estimating the NOX reductions needed to offset PM2.5 increases.177 We are approving the 8:1 trading ratio for transportation conformity purposes because it is significantly more stringent than any of the other ratios calculated in the Plan for different locations in the SJV, all of which were calculated using a methodology that the EPA previously approved for transportation conformity purposes in the SJV.

    176 The maximum ratio for the 1st Street location in Fresno was actually 5:2, based on emission reduction sensitivities for NOX and for direct PM in the State's Weight of Evidence Analysis, Appendix G to the 2012 PM2.5 Plan, Table 7, p. G-65.

    177 The Bakersfield ratio is based on values in “Table 7. Modeled PM2.5 air quality benefit per ton of valley wide precursor emission reductions”, 2012 PM2.5 Plan, Appendix G, p. 65.

    Comment 19: Earthjustice comments that the EPA's conformity regulations require MVEB to be consistent with the requirements for RFP. Earthjustice argues that because the RFP demonstration is not approvable, the EPA also should not approve the MVEBs.

    Response 19: We disagree with Earthjustice's claim that the EPA should disapprove the MVEBs in the Plan.

    As we explained above in Response 13, we are approving the RFP demonstration in the 2012 PM2.5 Plan based on our conclusion that it provides for generally linear reductions in emissions of direct PM2.5 and PM2.5 precursors in the aggregate and, therefore, provides for such annual incremental reductions in emissions of the relevant air pollutant as are required by part D, title I of the Act or may reasonably be required by the Administrator for the purpose of ensuring attainment of the 2006 PM2.5 NAAQS by the applicable attainment date.

    The 2012 PM2.5 Plan contains 2014 and 2017 MVEBs for emissions of direct PM2.5 and NOX. We proposed to approve these budgets based on a conclusion that they are consistent with applicable requirements for RFP, are clearly identified and precisely quantified, and meet all other applicable statutory and regulatory requirements including the adequacy criteria in 40 CFR 93.118(e)(4).178 Additionally, in accordance with 40 CFR 93.102(b)(2)(v), we proposed to find that on-road emissions of VOCs, SO2 and ammonia are not significant contributors to the PM2.5 nonattainment problem in the SJV area, and accordingly, that transportation conformity requirements do not apply for these pollutants in this area.179 In April 2016, the EPA found the direct PM2.5 and NOX MVEBs in the Plan, as submitted December 29, 2014, adequate for transportation conformity purposes.180 On November 13, 2015, the State submitted revised direct PM2.5 and NOX budgets based on EMFAC2014 for the 2006 PM2.5 NAAQS. The EPA proposed to approve these revised budgets based on our conclusion that the 2012 PM2.5 Plan continues to meet applicable requirements for RFP in 2017 when the EMFAC2011-based budgets are replaced with the new EMFAC2014-based budgets and that these budgets are clearly identified, precisely quantified, and meet all of the other criteria in 40 CFR 93.118(e)(4).181

    178 80 FR 1816, 1840 (January 13, 2015).

    179Id.

    180 Letter dated April 1, 2016, from Deborah Jordan, Director, Air Division, EPA, to Richard W. Corey, Executive Officer, California Air Resources Board, and 81 FR 22194 (April 15, 2016).

    181 81 FR 31212, 31218 (May 18, 2016).

    The commenter has not identified any information that compels us to reconsider our conclusion that the MVEBs in the 2012 PM2.5 Plan are consistent with applicable requirements for reasonable further progress. Therefore, we are approving the 2017 MVEBs for direct PM2.5 and NOX, as submitted November 13, 2015.182

    182 Although the 2012 PM2.5 Plan contained MVEBs for both 2014 and 2017, MVEBs for 2014 are no longer relevant for conformity analyses since that year has passed.

    We note that, because the provisions of 40 CFR part 93, subpart A, apply only with respect to emissions of NOX and direct PM2.5 for purposes of the 2006 PM2.5 NAAQS in the SJV area, the commenter's arguments about ammonia emissions are not germane to our action on these MVEBs.

    G. Other Comments

    Comment 20: Earthjustice asserts that the EPA has no basis for deferring action on the NSR component of the Plan and that deferral will put the EPA in violation of the statutory deadlines under CAA section 110(k)(2). Earthjustice states that the District's NSR program does not meet all subpart 4 requirements because it does not regulate ammonia, which according to Earthjustice is required under CAA section 189(e).

    Response 20: These comments are outside the scope of this action. We did not propose any action on the portions of the 2014 Supplement that address NNSR requirements for PM2.5 in the SJV and, therefore, are not finalizing any action with respect to these Plan elements at this time. The EPA intends to act on these components of the Plan through a separate rulemaking.

    We note that as a consequence of the EPA's January 20, 2016 final action reclassifying the SJV area as a Serious nonattainment area for the 2006 PM2.5 NAAQS, California is subject to a February 21, 2017 deadline to submit NNSR rule revisions for the SJV that satisfy the requirements of sections 189(b)(3) and 189(e) and all other applicable requirements of the CAA for implementation of the 2006 PM2.5 NAAQS.183 These SIP revisions must appropriately address the NNSR requirements for direct PM2.5 and all PM2.5 precursors, including ammonia.

    183 81 FR 2993, 3000 (January 20, 2016) and 40 CFR 52.245(e).

    III. Final Action

    The EPA is taking final action to approve elements of the following SIP revisions submitted by California to address Clean Air Act requirements for implementation of the 2006 PM2.5 NAAQS in the SJV: The 2012 PM2.5 Plan, submitted March 4, 2013; the 2014 Supplement, submitted November 6, 2014; and the motor vehicle emissions budgets for direct PM2.5 and NOX, as submitted November 13, 2015.

    Specifically, under CAA section 110(k)(3), the EPA is proposing to approve the following elements of the 2012 PM2.5 Plan and 2014 Supplement:

    1. The 2007 base year emissions inventories as meeting the requirements of CAA section 172(c)(3);

    2. the demonstration that attainment by the Moderate area attainment date of December 31, 2015 is impracticable as meeting the requirements of CAA section 189(a)(1)(B)(ii);

    3. the reasonably available control measures/reasonably available control technology demonstration as meeting the requirements of CAA sections 172(c)(1) and 189(a)(1)(C);

    4. the reasonable further progress demonstration as meeting the requirements of CAA section 172(c)(2); and

    5. SJVUAPCD's commitments to adopt and implement specific rules and measures by the dates specified in Chapter 5 of the 2012 PM2.5 Plan to achieve the emissions reductions shown therein, and to submit these rules and measures to CARB within 30 days of adoption for transmittal to the EPA as a revision to the SIP, or if the total emission reductions from the adopted rules are less than those committed to in the Plan, to adopt, submit, and implement substitute rules that will achieve equivalent reductions in emissions of direct PM2.5 or PM2.5 precursors in the same adoption and implementation timeframes or in the timeframes needed to meet CAA milestones, as stated on p. 4 of SJVUAPCD Governing Board Resolution 12-12-19, dated December 20, 2012, “In the Matter of Adopting the San Joaquin Valley Unified Air Pollution Control District 2012 PM 2.5 Plan.

    In addition, the EPA is approving the 2017 NOX and PM2.5 motor vehicle emissions budgets submitted November 13, 2015,184 as shown in Table 1 above, because they are derived from an approvable RFP demonstration and meet the applicable requirements of CAA section 176(c) and 40 CFR part 93, subpart A. We are also approving, in accordance with 40 CFR 93.124, the trading mechanism described on p. C-32 in Appendix C of the 2012 PM2.5 Plan as an enforceable component of the transportation conformity program for the 2006 PM2.5 NAAQS in the SJV, with the condition that the trades are limited to substituting excess reductions in NOX for increases in PM2.5. The budgets that the EPA is approving herein relate to the 2006 PM2.5 NAAQS only, and our approval of them does not affect the status of the previously-approved MVEBs for the 1997 PM2.5 NAAQS and related trading mechanism, which remain in effect for that PM2.5 NAAQS.

    184 See letter dated November 13, 2015, from Richard W. Corey, Executive Officer, CARB to Jared Blumenfeld, Regional Administrator, EPA Region 9, with enclosures.

    The EPA is disapproving the PM2.5 interpollutant trading ratios provided in Appendix H of the 2012 PM2.5 Plan for NNSR permitting purposes. Under section 179(a) of the CAA, final disapproval of a SIP submittal that addresses a requirement of part D, title I of the Act or is required in response to a finding of substantial inadequacy as described in CAA section 110(k)(5) (SIP Call) starts a sanctions clock. The NNSR interpollutant trading ratios provided in the 2012 PM2.5 Plan were not submitted to meet either of these requirements. Therefore, our final action to disapprove this component of the Plan does not trigger a sanctions clock. Disapproval of a SIP element also triggers the requirement under CAA section 110(c) for the EPA to promulgate a Federal Implementation Plan (FIP) no later than two years from the date of the disapproval unless the State corrects the deficiency, and the Administrator approves the plan or plan revision, before the Administrator promulgates such FIP. Disapproval of these NNSR interpollutant trading ratios, however, does not create any deficiency in the Plan, and therefore does not trigger the obligation on the EPA to promulgate a FIP under section 110(c).

    IV. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders can be found at http://www2.epa.gov/laws-regulations/laws-and-executive-orders.

    A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

    This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.

    B. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under the PRA because this action does not impose additional requirements beyond those imposed by state law.

    C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities beyond those imposed by state law.

    D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action does not impose additional requirements beyond those imposed by state law. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, will result from this action.

    E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

    F. Executive Order 13175: Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in Executive Order 13175, because the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, and will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this action.

    G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not impose additional requirements beyond those imposed by state law.

    H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

    I. National Technology Transfer and Advancement Act (NTTAA)

    Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. The EPA believes that this action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with the CAA.

    J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Population

    The EPA lacks the discretionary authority to address environmental justice in this rulemaking.

    K. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    L. Petitions for Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 31, 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, Ammonia, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.

    Authority:

    42 U.S.C. 7401 et seq.

    Dated: August 16, 2016. Alexis Strauss, Acting Regional Administrator, EPA Region 9.

    Chapter I, title 40 of the Code of Federal Regulations is amended as follows:

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

    42 U.S.C. 7401 et seq.

    Subpart F—California 2. Section 52.220 is amended by adding paragraphs (c)(476)(ii)(A)(2), (c)(478), and (c)(479) to read as follows:
    § 52.220 Identification of plan—in part.

    (c) * * *

    (476) * * *

    (ii) * * *

    (A) * * *

    (2) Attachment A to Resolution 15-50, “Updates to the Transportation Conformity Budgets for the San Joaquin Valley 2007 PM10, 2007 Ozone and 2012 PM2.5 SIPs,” Table A-2 (Updated Transportation Conformity Budgets for the 2012 PM2.5 Plan (Tons per winter day).

    (478) The following plan was submitted on March 4, 2013, by the Governor's Designee.

    (i) [Reserved]

    (ii) Additional materials.

    (A) San Joaquin Valley Unified Air Pollution Control District.

    (1) “2012 PM2.5 Plan” (dated December 20, 2012), adopted December 20, 2012, except for the motor vehicle emission budgets used for transportation conformity purposes.

    (2) SJVUAPCD Governing Board Resolution No. 12-12-19, dated December 20, 2012, “In the Matter of Adopting the San Joaquin Valley Unified Air Pollution Control District 2012 PM 2.5 Plan.

    (3) SJVUAPCD's commitments to adopt and implement specific rules and measures by the dates specified in Chapter 5 of the 2012 PM2.5 Plan to achieve the emissions reductions shown therein, and to submit these rules and measures to CARB within 30 days of adoption for transmittal to EPA as a revision to the SIP, or if the total emission reductions from the adopted rules are less than those committed to in the Plan, to adopt, submit, and implement substitute rules that will achieve equivalent reductions in emissions of direct PM2.5 or PM2.5 precursors in the same adoption and implementation timeframes or in the timeframes needed to meet CAA milestones, as stated on p. 4 of SJVUAPCD Governing Board Resolution 12-12-19, dated December 20, 2012.

    (B) California Air Resources Board.

    (1) CARB Resolution 13-2, dated January 24, 2013, “San Joaquin Valley PM2.5 State Implementation Plan.”

    (479) The following plan was submitted on November 6, 2014, by the Governor's Designee.

    (i) [Reserved]

    (ii) Additional materials.

    (A) San Joaquin Valley Unified Air Pollution Control District.

    (1) “Supplemental Document, Clean Air Act Subpart 4: The 2012 PM2.5 Plan for the 2006 PM2.5 Standard and District Rule 2201 (New and Modified Stationary Source Review)” (dated September 18, 2014), adopted September 18, 2014.

    (2) SJVUAPCD Governing Board Resolution No. 14-09-01, dated September 18, 2014, “In the Matter of: Authorizing Submittal of “Supplemental Document for the 2012 PM2.5 Plan” to EPA.”

    (B) California Air Resources Board.

    (1) CARB Resolution 14-37, dated October 24, 2014, “Supplemental Document for the San Joaquin Valley 24-Hour PM2.5 State Implementation Plan.”

    [FR Doc. 2016-20413 Filed 8-30-16; 8:45 am] BILLING CODE 6560-50-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 412 [CMS-1647-CN] RIN 0938-AS78 Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2017; Correction AGENCY:

    Centers for Medicare & Medicaid Services (CMS), HHS.

    ACTION:

    Final rule; correction.

    SUMMARY:

    This document corrects typographical errors in the final rule that appeared in the August 5, 2016 Federal Register entitled, “Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2017”.

    DATES:

    The final rule published August 5, 2016 (81 FR 52056 through 52141) is corrected as of August 30, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Christine Grose, (410) 786- 1362.

    SUPPLEMENTARY INFORMATION:

    I. Background

    In FR Doc. 2016-18196 (81 FR 52056 through 52141), the final rule entitled, “Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2017” (hereinafter referred as the FY 2017 IRF PPS final rule), there were typographical errors that are identified and corrected in this correcting document. The correction is applicable as of August 30, 2016.

    II. Summary of Errors in the Preamble

    On page 52118 of the FY 2017 IRF PPS final rule, we inadvertently included a reference to Table 10 instead of Table 18.

    On page 52118 of the FY 2017 IRF PPS final rule, we inadvertently included a reference to Table 10 instead of Table 11.

    On page 52118 of the FY 2017 IRF PPS final rule, we inadvertently included a reference to Table 10 instead of Table 16.

    On page 52118 of the FY 2017 IRF PPS final rule, we inadvertently included a reference to Table 10 instead of Table 17.

    On page 52118 of the FY 2017 IRF PPS final rule, in the footnote to Table 10, we inadvertently included a reference to Table 10 instead of Table 17.

    On page 52118 of the FY 2017 IRF PPS final rule, in the footnote to Table 10, we inadvertently included a reference to Table 10 instead of Table 16.

    On page 52119 of the FY 2017 IRF PPS final rule, in the footnote to Table 11, we inadvertently included a reference to Table 11 instead of Table 10.

    On page 52119 of the FY 2017 IRF PPS final rule, in the footnote to Table 13, we inadvertently included a reference to Table 12 instead of Table 10.

    On page 52120 of the FY 2017 IRF PPS final rule, in the footnote to Table 14, in two instances, we inadvertently included a reference to Table 14 instead of Table 10.

    On page 52120 of the FY 2017 IRF PPS final rule, in the footnote to Table 15, in two instances, we inadvertently included a reference to Table 15 instead of Table 10.

    On page 52121 of the FY 2017 IRF PPS final rule, in the footnote to Table 16, we inadvertently included a reference to Table 16 instead of Table 10.

    III. Waiver of Proposed Rulemaking and Delay in Effective Date

    Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), the agency is required to publish a notice of the proposed rule in the Federal Register and provide a period for public comment before the provisions of a rule take effect. Similarly, section 1871(b)(1) of the Act requires the Secretary to provide for notice of the proposed rule in the Federal Register and provide a period of not less than 60 days for public comment. In addition, section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act mandate a 30-day delay in effective date after issuance or publication of a rule. Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from the APA notice and comment and delay in effective date requirements; in cases in which these exceptions apply, sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the Act provide exceptions from the notice and 60-day comment period and delay in effective date requirements of the Act, as well. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act authorize an agency to dispense with normal notice and comment rulemaking procedures for good cause if the agency makes a finding that the notice and comment process is impracticable, unnecessary, or contrary to the public interest; and includes a statement of the finding and the reasons for it in the rule. In addition, section 553(d)(3) of the APA and section 1871(e)(1)(B)(ii) of the Act allow the agency to avoid the 30-day delay in effective date where such delay is contrary to the public interest and the agency includes in the rule a statement of the finding and the reasons for it.

    In our view, this correcting document does not constitute a rulemaking that would be subject to these requirements. This document merely corrects typographical errors in the preamble of the FY 2017 IRF PPS final rule. The corrections contained in this document are consistent with, and do not make substantive changes to, the policies and payment methodologies that were adopted subject to notice and comment procedures in the FY 2017 IRF PPS final rule. As a result, the correction made through this correcting document is intended to resolve inadvertent typographical errors.

    Even if this were a rulemaking to which the notice and comment and delayed effective date requirements applied, we find that there is good cause to waive such requirements. Undertaking further notice and comment procedures to incorporate the corrections in this document into the FY 2017 IRF PPS final rule or delaying the effective date of the corrections would be contrary to the public interest because it is in the public interest to ensure that the rule accurately reflects the our policies as of the date they take effect and are applicable. Further, such procedures would be unnecessary, because we are not making any substantive revision to the final rule, but rather, we are simply correcting the Federal Register document to reflect the correct table references in the footnotes. For these reasons, we believe there is good cause to waive the requirements for notice and comment and delay in effective date.

    IV. Correction of Errors in the Preamble

    In FR Doc. 2016-18196 (81 FR 52056), published August 5, 2016, make the following corrections:

    1. On page 52118,

    a. In the second column, in the second full paragraph, line 11, the reference “Table 10” is corrected to read “Table 18”.

    b. In the third column, in the first partial paragraph, line 2, the reference “Table 10” is corrected to read “Table 11”.

    c. In the third column, in the first partial paragraph, line 30, the reference “Table 10” is corrected to read “Table 16”.

    d. In the third column, in the first partial paragraph, line 37, the reference “Table 10” is corrected to read “Table 17”.

    e. In the footnote to Table 10, the phrase “*We refer readers to Table 10” is corrected to read “*We refer readers to Table 17”.

    f. In the footnote to Table 10, the phrase “^We refer readers to Table 10” is corrected to read “^We refer readers to Table 16”.

    2. On page 52119,

    a. In the footnote to Table 11, the phrase “*We refer readers to the Table 11” is corrected to read “*We refer readers to the Table 10”.

    b. In the footnote to Table 13, the phrase “*We refer readers to the Table 12” is corrected to read “*We refer readers to the Table 10”.

    3. On page 52120,

    a. In the footnote to Table 14, the phrase “*We refer readers to the Table 14” is corrected to read “*We refer readers to the Table 10”.

    b. In the footnote to Table 14, the phrase “**As is illustrated in Table 14” is corrected to read “**As is illustrated in Table 10”.

    c. In the footnote to Table 15, the phrase “*We refer readers to the Table 15” is corrected to read “*We refer readers to the Table 10”.

    d. In the footnote to Table 15, the phrase “***As is illustrated in Table 15” is corrected to read “***As is illustrated in Table 10”.

    4. On page 52121, in the footnote to Table 16, the phrase “**As illustrated in Table 16” is corrected to read “**As illustrated in Table 10”.

    Dated: August 25, 2016. Madhura Valverde, Executive Secretary to the Department, Department of Health and Human Services.
    [FR Doc. 2016-20897 Filed 8-30-16; 8:45 am] BILLING CODE 4120-01-P
    DEPARTMENT OF THE INTERIOR Bureau of Land Management 43 CFR Parts 3100, 3110, and 3120 [16X.LLWO310000.L13100000.PP0000] RIN 1004-AE48 BLM Internet-Based Auctions AGENCY:

    Bureau of Land Management, Interior.

    ACTION:

    Final rule.

    SUMMARY:

    This procedural rule amends certain provisions of the oil and gas regulations administered by the Bureau of Land Management (BLM) to recognize that the BLM is authorized to use either oral or internet-based auction procedures to conduct oil and gas lease sales under the Mineral Leasing Act of 1920, as amended (MLA). The changes made by this rule update the BLM's regulations to be consistent with the National Defense Authorization Act for Fiscal Year (FY) 2015 (NDAA), which specifically granted the BLM the authority to use internet-based bidding for its competitive oil and gas lease sales.

    DATES:

    This rule is effective on August 31, 2016.

    FOR FURTHER INFORMATION CONTACT:

    For questions on technical issues, contact Jully McQuilliams, Senior Mineral Leasing Specialist, by telephone at 202-912-7156, or by email to [email protected] For regulatory questions, contact Jennifer Noe, Division of Regulatory Affairs, by telephone at 202-912-7442, or by email to [email protected] Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 800-877-8339 to contact the above individuals during normal business hours. FIRS is available 24 hours a day, 7 days a week to leave a message or question with the above individuals. You will receive a reply during normal business hours.

    SUPPLEMENTARY INFORMATION: I. Background

    This rule makes minor amendments to the BLM regulations governing onshore oil and gas lease sales to make them consistent with existing statutory authority that allows the BLM to use either oral or internet-based auction procedures.

    The MLA authorizes the Secretary of the Interior to lease federally owned deposits of oil and gas and the lands containing those deposits in the manner provided for in the Act. 30 U.S.C. 181-287. The Secretary has delegated responsibility for implementing that authority to the BLM. Prior to 2015, the BLM was authorized to conduct oil and gas lease sales using only oral auction methods. See 30 U.S.C. 226(b)(1) (“Lease sales shall be conducted by oral bidding.”). As a result, the BLM's implementing regulations governing lease sales in 43 CFR parts 3100, 3110, and 3120, reference only oral auctions or oral bidding. See e.g., 43 CFR 3120.1-2, 3120.5-1. Under these regulations, parties interested in obtaining a Federal oil or gas lease were required to travel to the physical location of a BLM auction (normally the BLM State Office where the parcels being offered were located) in order to participate in person in the oral auction for the parcels being offered. Generally speaking, those sales were conducted by a BLM-contracted auctioneer who facilitated the auction in an escalating bid sequential manner. The lease sale would start with the auctioneer stating the minimum bid. Interested bidders would increase their bids until the highest bidder for each parcel prevailed and was ultimately awarded the parcel. See 30 U.S.C. 226(b)(1)(A); 43 CFR 3120.5-3(b).

    Recognizing the costs associated with holding in-person oil and gas lease sales and the opportunities for increased efficiency provided by an internet-based system, Congress, in 2008, directed the Secretary of the Interior, through the BLM, to conduct an oil and gas leasing internet pilot program. Consolidated Appropriations Act, 2008, Public Law 110-161, Sec. 117, 121 Stat. 2120 (2007). Accordingly, the BLM conducted an internet-based auction pilot in 2009, offering parcels located on BLM-managed lands in Colorado to test the feasibility of internet-based lease sales. The purpose of the pilot was to evaluate the potential costs and benefits to the Federal Government and lease sale participants from using such a system. For this pilot, the BLM relied on a system that had been developed by a private entity.

    As outlined in a subsequent report to Congress submitted in February 2012, which presented the results of the 2009 internet-based auction pilot, the BLM found that transitioning to internet-based lease sales would have immediate cost savings and other benefits. Report to Congress, Results of the Internet Oil and Gas Auction Pilot and Recommendation on How to Implement the Program in Fiscal Year 2011 (Dep't of the Interior, Feb. 21, 2012) (Internet Leasing Report). The BLM prepared the report in response to a congressional request. See Senate Report 111-38, Department of the Interior, Environment, and Related Agencies Appropriations Bill, 2010 (July 7, 2009). Almost double the number of bidders participated in the internet-based pilot sale as compared to the number that typically participate at an in-person lease sale hosted by the BLM Colorado State Office. In the Internet Leasing Report, the BLM estimated that greater competition among bidders has the potential to increase competitive bonuses by about one percent (approximately $2 million per year in aggregate), (Internet Leasing Report). However, it should be noted that, in addition to the number of bidders, bonus bids are also affected by broader market conditions, and therefore the transition to internet-based leasing could have an even larger impact on auction proceeds. In addition to increased revenues, a shift to internet-based sales would also help reduce the BLM's administrative costs associated with holding a lease sale, and reduce the risk of weather-related or other logistical disruptions in lease sales.

    As a result of this auction pilot, the Secretary recommended in his report that Congress amend the MLA to allow the BLM maximum discretion to use either in-person or internet-based procedures to conduct competitive lease sales for BLM-managed onshore oil and gas resources. Id. Notably, since the 2009 BLM internet-based auction pilot, many state governments' oil and gas lease sales have moved entirely to online sales, including states with significant oil and gas resources, such as Colorado, North Dakota, Texas, Utah, and Wyoming.

    Consistent with the Secretary's recommendations, in the NDAA, Congress amended the MLA at 30 U.S.C. 226(b)(1) to authorize the Secretary of the Interior to “conduct onshore lease sales through Internet-based bidding methods.” See Public Law 113-291, Sec. 3022(a), 128 Stat. 3762 (2014). The NDAA adds a new paragraph to section 226(b)(1), which provides: “In order to diversify and expand the Nation's onshore leasing program to ensure the best return to the Federal taxpayer, reduce fraud, and secure the leasing process, the Secretary may conduct onshore lease sales through Internet-based bidding methods. Each individual Internet-based lease sale shall conclude within 7 days.”

    The NDAA does not modify parcel selection, bidder eligibility, auction style, or payment requirements, which will continue to apply regardless of the method selected by the BLM to conduct a particular oil and gas lease sale. The BLM will also continue to award leases to the highest responsible qualified bidder at its competitive auctions, pursuant to the MLA. Consistent with existing regulations at 43 CFR subpart 3110, if a parcel offered for sale does not sell at a competitive auction, it will be available on a noncompetitive basis in the BLM State Offices with jurisdiction over the areas where the parcels are located for the period of time set forth in the regulations.

    II. Explanation of Amendments

    The BLM has determined that this procedural rule is necessary because the BLM's existing regulations refer only to oral auction or oral bidding, even though the BLM is statutorily authorized to use either oral or internet-based auction procedures to conduct its oil and gas lease sales. To implement the new authority provided by the NDAA, this rule amends 43 CFR subparts 3100, 3110, and 3120 to add the phrase “or internet-based” after every reference to “oral” auctions or bidding. Specific changes are made to the following provisions: 43 CFR 3103.3-2, 3110.1, 3110.2, 3120.1-2, 3120.3-7, 3120.5-1, 3120.5-2, 3120.5-3, and 3120.6.

    This rule does not make any other changes to the regulations in 43 CFR chapter II. It does not change the parcel selection, bidder eligibility, auction style, or payment requirements for the BLM's competitive oil and gas lease sales. This rule merely makes minor technical amendments that give the BLM the option to conduct lease sales either in person or over the internet consistent with applicable statutory authority.

    III. Procedural Matters A. Administrative Procedure Act

    As explained in the Background Section of this Preamble, this rule makes minor, non-substantive, technical amendments to the BLM's rules governing oil and gas lease sales. These changes involve agency organization, procedure or practice, and do not create rights or impose obligations on members of the public. As a result, under section 553(b)(3)(A) of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(3)(A), this rule may be published without notice and comment procedures. Because the rule relates solely to agency procedure and practice and merely restates the terms of the statute it implements, it is not substantive, and therefore is also not subject to the 30-day delayed effective date for substantive rules under section 553(d) of the APA. 5 U.S.C. 553(d). This rule is therefore effective immediately upon publication in the Federal Register.

    The U.S. Court of Appeals for the District of Columbia has emphasized that the “critical feature” of a rule that satisfies the so-called procedural exception to the APA's notice-and-comment requirements is that the rule “covers agency actions that do not themselves alter the rights or interests of parties, although it may alter the manner in which the parties present themselves or their viewpoints to the agency.” James V. Hurson Assoc. v. Glickman, 229 F.3d 277, 280 (D.C. Cir. 2000) (quoting JEM Broad Co. v. FCC, 22 F.3d 320, 326 (D.C. Cir. 1994)). The court held in Hurson that a U.S. Department of Agriculture rule eliminating face-to-face meetings to approve food labels was within the APA's procedural exception because the rule did not alter the substantive standards by which the agency would approve or deny proposed labels; it simply changed the procedures the agency would follow in applying those standards. Similarly, this BLM rule adding a reference to internet-based auctions merely alters the manner in which parties may present themselves to the BLM; nothing in this rule alters either the substantive criteria by which a party is eligible to participate in a BLM oil and gas lease sale or the requirements for obtaining a Federal oil and gas lease. Therefore, the rule fits squarely within the procedural rule exemption. See also Nat'l Whistleblower Ctr. v. Nuclear Regulatory Comm'n, 208 F.3d 256, 262 (D.C. Cir. 2000), cert. denied, 531 U.S. 1070 (2001).

    Moreover, when a rule merely restates the statute it implements, APA notice-and-comment procedures are unnecessary. See Komjathy v. Nat'l Transp. Safety Bd., 832 F.2d 1294 (D.C. Cir. 1987), cert. denied, 486 U.S. 1057 (1988). Here, the BLM's amendments to 43 CFR parts 3100, 3110 and 3120 do no more than restate the relevant language of the MLA in 30 U.S.C. 226(b)(1), as amended, authorizing BLM to conduct onshore lease sales through internet-based bidding methods.

    B. Regulatory Planning and Review (Executive Orders 12866 and 13563)

    While Executive Order (E.O.) 12866 does not apply to “(r)egulations or rules that are limited to agency organization, management, or personnel matters,” it does not exempt those rules that describe the procedure or practice requirements of an agency. E.O. 12866, Sec. 3(d). The E.O. provides that the Office of Information and Regulatory Affairs (OIRA) will review all significant rules. Because this rule does not meet any of the standards for a significant regulatory action in E.O. 12866, this rule is not significant for purposes of the E.O. See E.O. 12866, Sec. 3(f).

    E.O. 13563 reaffirms the principles of E.O. 12866, while calling for improvements in the nation's regulatory system to promote predictability, reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory objectives. This E.O. directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas, where appropriate. The BLM developed this rule in a manner consistent with these requirements.

    C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires an agency to prepare a regulatory flexibility analysis for rules unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. However, the RFA applies only to rules for which an agency is required to first publish a proposed rule. See 5 U.S.C. 603(a) and 604(a). Because no notice of proposed rulemaking is required, the RFA does not require an initial or final regulatory flexibility analysis of this rule.

    D. Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2) of the Small Business Regulatory Enforcement Fairness Act. This rule:

    (a) Does not have an annual effect on the economy of $100 million or more.

    (b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, Indian, or local government agencies or geographic regions.

    (c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises.

    This rule merely makes procedural changes involving agency organization, procedure, or practice, by adding the option, consistent with applicable statutory authority, for the BLM to use internet-based bidding in addition to oral auctions for its competitive oil and gas lease sales.

    E. Unfunded Mandates Reform Act

    Under the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531 et seq., agencies must prepare a written statement about benefits and costs prior to issuing a proposed or final rule that may result in aggregate expenditures by State, local, and tribal governments or by the private sector of $100 million or more in any one year. This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. This rule does not have a significant or unique effect on State, local, or tribal governments or the private sector. Since this rule is not an unfunded mandate, the BLM is not required to provide a statement containing the information that the Unfunded Mandates Reform Act requires.

    F. Takings (E.O. 12630)

    Under the criteria in section 2 of E.O. 12630, this rule does not have any significant takings implications. This rule will not impose conditions or limitations on the use of any private property. Therefore, this rule does not require a Takings Implication Assessment.

    G. Federalism (E.O. 13132)

    Under the criteria in section 1 of E.O. 13132, this rule does not have Federalism implications that warrant the preparation of a Federalism summary impact statement. The management of Federal mineral leases is the responsibility of the Secretary of the Interior. This rule does not impose administrative costs on States or local governments. This rule also does not substantially and directly affect the relationship between the Federal and State governments. Because this rule does not alter that relationship, this rule does not require a Federalism summary impact statement.

    H. Civil Justice Reform (E.O. 12988)

    This rule complies with the requirements of E.O. 12988. Specifically, this rule:

    a. Meets the criteria of section 3(a), which requires that agencies review all regulations to eliminate errors and ambiguity and write them to minimize litigation.

    b. Meets the criteria of section 3(b)(2), which requires that agencies write all regulations in clear language using clear legal standards.

    I. Consultation With Indian Tribal Governments (E.O. 13175)

    Under E.O. 13175, the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951, May 4, 1994), the Department of the Interior (DOI) Policy on Consultation with Indian Tribes (Dec. 1, 2011), and the DOI Departmental Manual, part 512, section 2, the BLM evaluated possible effects of the rule on Federally recognized Indian tribes. The DOI strives to strengthen its government-to-government relationship with Indian tribes through a commitment to consultation with Indian tribes and recognition of their right to self-governance and tribal sovereignty. The BLM determined that this rule has no tribal implications because the BLM does not conduct oil and gas lease sales for Indian tribal, corporate, or allotted lands. Thus, Indian tribal governments are not impacted by the changes made by this rule, and consultation is not required.

    J. Paperwork Reduction Act of 1995

    This rule will modify 43 CFR 3103.3-2, 3110.1, 3110.2, 3120.1-2, 3120.3-7, 3120.5-1, 3120.5-2, 3120.5-3, and 3120.6 to recognize that the BLM is statutorily authorized to use either oral or internet-based auctions to conduct its oil and gas lease sales. None of these regulations has required an Office of Management and Budget (OMB) control number in the past, nor do they require an OMB control number as revised. They are within 5 CFR 1320.3(h)(1), which provides an exception from Paperwork Reduction Act requirements for affirmations, certifications, or acknowledgements as long as they entail no burden other than that necessary to identify the respondent, the date, the respondent's address, and the nature of the instrument. This rule does not contain any new information collection requirements, and therefore, does not require a submission to the OMB under the Paperwork Reduction Act.

    K. National Environmental Policy Act

    This rule is procedural in nature; therefore, it qualifies for categorical exclusion under 43 CFR 46.210(i). As a result, a detailed statement under the National Environmental Policy Act of 1969 (NEPA) is not required. The BLM has also determined that this rule does not involve any of the extraordinary circumstances listed in 43 CFR 46.215 that would require further analysis under NEPA, even though a categorical exclusion exists. Moreover, this rule does not constitute a major Federal action significantly affecting the quality of the human environment, as the procedural changes resulting from these amendments will have no effect on the physical environment. The rule only expands the methods the BLM may use to conduct an oil and gas leases sale; it does not modify the standards or requirements the BLM applies when deciding to offer a particular parcel for lease.

    L. Effects on the Nation's Energy Supply (E.O. 13211)

    Under E.O. 13211, agencies are required to prepare and submit to OMB a Statement of Energy Effects for significant energy actions. This Statement must include a detailed statement of “any adverse effects on energy supply, distribution, or use (including a shortfall in supply, price increases, and increased use of foreign supplies)” for the action, and reasonable alternatives and their effects. Section 4(b) of E.O. 13211 defines a “significant energy action” as “any action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: (1)(i) That is a significant regulatory action under Executive Order 12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) that is designated by the Administrator of OIRA as a significant energy action.” This rule will not have any adverse effects on energy supply, distribution, or use and is therefore not a significant energy action under the definition in E.O. 13211, and, therefore, a Statement of Energy Effects is not required.

    List of Subjects 43 CFR Part 3100

    Government contracts, Mineral royalties, Oil and gas reserves, Public lands—mineral resources, Reporting and recordkeeping requirements, Surety bonds.

    43 CFR Part 3110

    Government contracts, Oil and gas exploration, Public lands—mineral resources, Reporting and recordkeeping requirements.

    43 CFR Part 3120

    Government contracts, Oil and gas exploration, Public lands—mineral resources, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, the BLM amends 43 CFR parts 3100, 3110, and 3120 as follows:

    PART 3100—OIL AND GAS LEASING 1. The authority citation for part 3100 is revised to read as follows: Authority:

    30 U.S.C. 189 and 359; 43 U.S.C. 1732(b), 1733, and 1740; the Energy Policy Act of 2005 (Pub. L. 109-58); and the National Defense Authorization Act for Fiscal Year 2015 (Pub. L. 113-291, 128 Stat. 3762).

    Subpart 3103—Fees, Rentals and Royalty 2. In § 3103.3-2, revise paragraph (a)(2) to read as follows:
    § 3103.3-2 Minimum royalties.

    (a) * * *

    (2) On leases issued from offers filed after December 22, 1987, and on competitive leases issued from successful bids placed at oral or internet-based auctions conducted after December 22, 1987, a minimum royalty in lieu of rental of not less than the amount of rental which otherwise would be required for that lease year.

    PART 3110—NONCOMPETITIVE LEASES 3. The authority citation for part 3110 is revised to read as follows: Authority:

    16 U.S.C. 3101 et seq.; 30 U.S.C. 181 et seq. and 351-359; 31 U.S.C. 9701; 43 U.S.C. 1701 et seq.; Pub. L. 97-35 Stat. 357; and the National Defense Authorization Act for Fiscal Year 2015 (Pub. L. 113-291, 128 Stat. 3762).

    Subpart 3110—Noncompetitive Leases 4. In § 3110.1, revise the second sentence of paragraph (b) to read as follows:
    § 3110.1 Lands available for noncompetitive offer and lease.

    (b) * * * Such lands shall become available for a period of 2 years beginning on the first business day following the last day of the competitive oral or internet-based auction, or when formal nominations have been requested as specified in § 3120.3-1 of this title, or the first business day following the posting of the Notice of Competitive Lease Sale, and ending on that same day 2 years later. * * *

    5. In § 3110.2, revise the first sentence of paragraph (a) to read as follows:
    § 3110.2 Priority.

    (a) Offers filed for lands available for noncompetitive offer or lease, as specified in §§ 3110.1(a)(1) and 3110.1(b) of this title, shall receive priority as of the date and time of filing as specified in § 1821.2-3(a) of this title, except that all noncompetitive offers shall be considered simultaneously filed if received in the proper BLM office any time during the first business day following the last day of the competitive oral or internet-based auction, or when formal nominations have been requested as specified in § 3120.3-1 of this title, on the first business day following the posting of the Notice of Competitive Lease Sale. * * *

    PART 3120—COMPETITIVE LEASES 6. The authority citation for part 3120 is revised to read as follows: Authority:

    16 U.S.C. 3101 et seq.; 30 U.S.C. 181 et seq. and 351-359; 40 U.S.C. 471 et seq.; 43 U.S.C. 1701 et seq.; the Attorney General's Opinion of April 2, 1941 (40 Op. Atty. Gen. 41); and the National Defense Authorization Act for Fiscal Year 2015 (Pub. L. 113-291, 128 Stat. 3762).

    Subpart 3120—Competitive Leases 7. In § 3120.1-2, revise paragraph (b) to read as follows:
    § 3120.1-2 Requirements.

    (b) Lease sales shall be conducted by a competitive oral or internet-based bidding process.

    8. Revise § 3120.3-7 to read as follows:
    § 3120.3-7 Refund.

    The minimum bid, first year's rental and administrative fee shall be refunded to all nominators who are unsuccessful at the oral or internet-based auction.

    9. Amend § 3120.5-1 by revising the section heading;, the first sentence of paragraph (a), the first sentence of paragraph (b), and paragraph (c) to read as follows:
    § 3120.5-1 Oral or Internet-based auction.

    (a) Parcels shall be offered by oral or internet-based bidding. * * *

    (b) A winning bid shall be the highest oral or internet-based bid by a qualified bidder, equal to or exceeding the national minimum acceptable bid. * * *

    (c) Two or more nominations on the same parcel when the bids are equal to the national minimum acceptable bid, with no higher oral or internet-based bid being made, shall be returned with all moneys refunded. If the Bureau reoffers the parcel, it shall be reoffered only competitively under this subpart with any noncompetitive offer filed under § 3110.1(a) of this title retaining priority, provided no bid is received at an oral or internet-based auction.

    10. In § 3120.5-2, revise paragraph (c) to read as follows:
    § 3120.5-2 Payments required.

    (c) The winning bidder shall submit the balance of the bonus bid to the proper BLM office within 10 working days after the last day of the oral or internet-based auction.

    11. In § 3120.5-3, revise paragraph (c) to read as follows:
    § 3120.5-3 Award of lease.

    (c) If a bid is rejected, the land shall be reoffered competitively under this subpart with any noncompetitive offer filed under § 3110.1(a) of this title retaining priority, provided no bid is received in an oral or internet-based auction.

    12. Revise § 3120.6 to read as follows:
    § 3120.6 Parcels not bid on at auction.

    Lands offered at the oral or internet-based auction that received no bids shall be available for filing for noncompetitive lease for a 2-year period beginning the first business day following the auction at a time specified in the Notice of Competitive Lease Sale.

    Dated: August 24, 2016. Amanda C. Leiter, Acting Assistant Secretary, Land and Minerals Management.
    [FR Doc. 2016-20943 Filed 8-30-16; 8:45 am] BILLING CODE 4310-84-P
    81 169 Wednesday, August 31, 2016 Proposed Rules OFFICE OF PERSONNEL MANAGEMENT 5 CFR Part 890 RIN 3206-AM40 Access to Federal Employees Health Benefits (FEHB) for Employees of Certain Indian Tribal Employers AGENCY:

    U.S. Office of Personnel Management.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The U.S. Office of Personnel Management (OPM) is issuing a Notice of Proposed Rulemaking to address the implementation of certain provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (ACA) making Federal employee health insurance accessible to employees of certain Indian tribal entities. The ACA includes authorization for Indian tribes, tribal organizations, and urban Indian organizations that carry out certain programs to purchase coverage, rights, and benefits under the Federal Employees Health Benefits (FEHB) Program for their employees. Tribal employers and tribal employees will be responsible for the full cost of benefits, plus an administrative fee.

    DATES:

    Comment date: Comments are due on or before October 31, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Chelsea Ruediger, Senior Policy Analyst (202) 606-0004.

    ADDRESSES:

    You may submit comments, identified by RIN number “3206-AM40” using any of the following methods:

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

    Mail: Chelsea Ruediger, Senior Policy Analyst, Planning and Policy Analysis, U.S. Office of Personnel Management, 1900 E Street NW., Washington, DC 20415.

    SUPPLEMENTARY INFORMATION: Background

    The U.S. Office of Personnel Management (OPM) is issuing a notice of proposed rulemaking to extend certain Federal employee benefits to employees of certain Indian tribal employers. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended (ACA) extended eligibility to purchase coverage, rights, and benefits under the Federal Employees Health Benefits (FEHB) Program to employees of those Indian tribes and tribal organizations carrying out programs under the Indian Self-Determination and Education Assistance Act (ISDEAA), and urban Indian organizations carrying out programs under title V of the Indian Health Care Improvement Act (IHCIA). This regulation includes program rules for tribal employers and tribal employees in accordance with chapter 89 of title 5, United States Code. The new regulatory provisions are set forth in new subpart N, part 890 of title 5 of the Code of Federal Regulations.

    These proposed rules, which codify previously issued guidance, adopt the FEHB program for Federal employees under 5 U.S.C. 89 with slight variations to meet the needs of the tribal population. OPM performed consultation and developed sub-regulatory guidance in 2011-2012 to administer the program. OPM has been operating the program since then and tribal employers began purchasing FEHB for their employees on March 22, 2012 with an insurance coverage effective date of May 1, 2012. As of the publication date of this proposed rule, 19,540 tribal employees and 90 tribes are participating in the program. These proposed rules codify the program as set forth in previous guidance after extensive work understanding tribal population needs.

    Authorizing Legislation

    Section 10221 of the ACA enacted the entire text of S. 1790 as reported on December 16, 2009 by the Senate Committee on Indian Affairs to Public Law 111-148. S. 1790 revised and extended the IHCIA, including adding a new section 409 to the IHCIA (codified at 25 U.S.C. 1647b).

    This proposed regulation refers to tribes, tribal organizations, and urban Indian organizations that are entitled to access insurance under section 409 as “tribal employers.” Moreover, because the term “employee” as used in 5 U.S.C. chapter 89 is a statutorily defined term, OPM refers to a tribal employer's employees who are eligible to enroll in FEHB as “tribal employees.” 1 This proposed regulation establishes how FEHB enrollment will be administered, including eligibility, tribal employer and tribal employee contribution to premiums, the process by which tribal employers will access these programs, the process by which tribal employees will elect coverage, and circumstances for termination and cancellation of enrollment.

    1 The ACA establishes entitlement for certain tribal employers to purchase FEHB coverage, rights, and benefits for their tribal employees in a manner consistent with the FEHB statute 5 U.S.C. Ch. 89. The Department of Labor reviewed this notice of proposed rulemaking and advised that the tribal employer does not “establish or maintain” an employee welfare benefit subject to Title I of ERISA with such a purchase pursuant to the ACA, and advised that the enrollment of tribal employees in FEHB coverage does not affect the status of the FEHB as a governmental plan for purposes of the exemption from title I of ERISA at 29 U.S.C. 1003(b)(1). In addition, the Department of the Treasury, including the Internal Revenue Service, reviewed this notice of proposed rulemaking and advised that the enrollment of tribal employees in FEHB coverage does not affect the status of the FEHB as a governmental plan within the meaning of 26 U.S.C. 9832(d)(2).

    Where practicable, this regulation provides for the administration of benefits by and for tribal employers and tribal employees in the same manner as these benefits are administered by and for Federal agencies and Federal employees. There may be some instances for which there is no established procedure in place for the Federal Government, such as the procedure and timeline by which tribal employers certify entitlement to purchase FEHB. When there are no established procedures in place, OPM has proposed a procedure.

    OPM has worked in consultation with tribal leaders to establish program rules.

    Tribal Consultation

    Under Executive Order 13175, OPM has an obligation to engage in “regular and meaningful consultation and collaboration with tribal officials in the development of Federal policies that have tribal implications.” OPM is committed to fulfilling this obligation.

    Following the passage of the ACA, OPM published a series of policy papers (found here under Outreach Documentation) regarding the implementation of the Tribal FEHB Program. Tribes, tribal organizations, and urban Indian organizations were given an opportunity to provide feedback on these papers at outreach events and tribal conferences and meetings. Written feedback was also accepted.

    A Tribal Technical Workgroup composed of tribal human resource representatives and OPM operational and policy staff was established when developing this regulation and in support of the implementation of the Tribal FEHB Program. The primary purpose was to ensure system requirements for enrollment processing were completed according to the needs of tribal employers.

    Additional tribal consultative actions included collaborating with the Department of Health and Human Services (HHS) to conduct in-person briefings for tribal communities across the country, focusing on the implementation of the ACA.

    OPM representatives have attended more than 20 tribal conferences and meetings to provide information and consultation about the Tribal FEHB Program since its inception. In addition, OPM has hosted training sessions for interested tribes and tribal organizations on numerous occasions. Tribal Benefits Administration Letters (TBAL) are released and distributed to participating tribal employers regularly, just as they are for Federal agencies. Questions following the release of a TBAL are directed to OPM's dedicated Tribal Desk. The Tribal Desk is available during regular business hours and is answered by the OPM staff who administer the program. Whenever possible, OPM has created direct lines of communication and fostered collaboration between tribal employers and OPM employees.

    When important program changes occur, OPM issues Dear Tribal Leader Letters (DTLL) to notify tribes, tribal organizations and urban Indian organizations. An example was the DTLL issued describing the revision of the original “all-or-nothing” policy. The original policy had required a tribal employer to enroll all of their billing units. Due to concerns raised by tribal employers, OPM amended that policy to allow tribal employers to select which of their billing units will receive FEHB and which will not. As a result, interest in FEHB enrollment has increased.

    OPM's obligation to consult with tribal officials is ongoing. OPM will consider the public comment period of this proposed rule as an important consultation period. Tribal leaders will be alerted of the publication of this proposed rule and the process for submitting formal comments with a DTLL. As appropriate, OPM will conduct meetings with tribal officials to address components of this proposed rule. A DTLL will also be issued in tandem with the publication of a final rule.

    FEHB Background

    The FEHB Program was established in 1960 to provide health benefits to Federal employees, annuitants, spouses, and children. Approximately 8.2 million employees, annuitants, and family members are now covered. Federal employees can choose among various forms of health plans, including nationwide Fee-for-Service (FFS) plans, local Health Maintenance Organizations (HMO), Consumer-Driven Health Plans (CDHP), and High-Deductible Health Plans (HDHP). FEHB plans typically cover inpatient and outpatient hospital care, primary care and specialist doctor visits, and pharmacy benefits. Some FEHB plans offer limited routine vision and dental benefits.

    Currently, there are three FEHB enrollment categories: (1) Self only; (2) self plus one; and (3) self and family. A self only enrollment covers only the enrollee. A self plus one enrollment covers the enrollee and one designated eligible family member. A self and family enrollment covers the enrollee and all eligible family members. Eligible family members include a spouse and/or child(ren) under age 26 (including married children, adopted children, and stepchildren). A child age 26 or over who is incapable of self-support because of a mental or physical disability that existed before age 26 is also an eligible family member. A foster child may be covered if the child lives with the employee in a parent-child relationship and the employee expects to raise the child to adulthood.

    A newly eligible Federal employee can enroll in any FEHB plan available in his or her geographic region within 60 days of becoming eligible. FEHB coverage is effective the first day of the pay period after the enrollment request is received by the Federal employee's employing office and that follows a pay period during any part of which the employee is in pay status. Federal employees can enroll, cancel enrollment, increase or decrease enrollment, or change plans or options during the annual open season usually held from mid-November to mid-December. Any changes made during open season are effective for the following calendar year. Enrollees can also change enrollment in conjunction with a qualifying life event (QLE), such as marriage, divorce, birth or adoption of a child, change in employment status that affects insurance coverage or cost, or a move outside of an HMO's service area.

    The employing Federal agency pays a Government contribution of approximately 72 percent of the weighted average of premiums in effect for each calendar year. The Government contribution to any individual plan is capped at 75 percent of premium. FEHB plans generally require enrollee cost sharing in the form of calendar year deductibles, copayments, and/or coinsurance for covered services.

    Definitions

    Section 890.1402 defines several terms used in the new subpart N of Part 890. This section also includes a series of deemed references. Defining these terms and identifying deemed references are necessary to make clear how OPM will modify and apply existing regulations to govern tribal employers' purchase of FEHB for tribal employees.

    The new subpart N refers to and incorporates many other subparts of part 890 that govern how the FEHB Program functions. The deemed references make it clear that references to statutory terms such as “employee,” and other terms used throughout part 890 will be deemed references to “tribal employee,” and other terms as appropriate, in context, to govern tribal employers' purchase of FEHB for its tribal employees pursuant to the ACA.

    Scope of Entitlement for Tribal Employers

    Entitlement to offer FEHB coverage, rights, and benefits will be available to any tribe, tribal organization, or urban Indian organization carrying out at least one of the programs under the ISDEAA or Title V of the IHCIA as specified in section 409 of the IHCIA. The terms “ tribe,” “ tribal organization,” and “ urban Indian organization” are defined in the IHCIA. Those definitions, set forth below, are incorporated by reference in the regulatory text at § 890.1402 which defines the term “ tribal employer.” The term “ tribal employer” is used to refer to any of these entities that fulfill the requirements to be entitled to purchase FEHB for its employees.

    A tribe is any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or group or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) [43 U.S.C.A. 1601 et seq.], which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. 25 U.S.C. 1603(14).

    A tribal organization is the recognized governing body of any Indian tribe; any legally established organization of Indians which is controlled, sanctioned, or chartered by such governing body or which is democratically elected by the adult members of the Indian community to be served by such organization and which includes the maximum participation of Indians in all phases of its activities: That in any case in which a contract is let or grant made to an organization to perform services benefiting more than one Indian tribe, the approval of each such Indian tribe shall be a prerequisite to the letting or making of such contract or grant. 25 U.S.C. 1603(26), incorporating by reference 25 U.S.C. 450b(l) (definition of “ tribal organization”).

    An urban Indian organization is a non-profit corporate body situated in an urban center, governed by an urban Indian controlled board of directors, and providing for the maximum participation of all interested Indian groups and individuals, which body is capable of legally cooperating with other public and private entities for the purpose of performing the activities described in section 1653(a) of this title. 25 U.S.C. 1603(29).

    For purposes of this regulation, tribes and tribal organizations carrying out at least one program under the ISDEAA, and urban Indian organizations carrying out at least one program under Title V of the IHCIA, are entitled to purchase FEHB for their employees. If the tribal employer ceases to carry out one of these programs, entitlement to purchase FEHB ceases at the end of the calendar year in which the tribal employer ceased to carry out one of those programs.

    If OPM determines that a tribal employer is not entitled to purchase FEHB, the tribal employer may appeal that decision to OPM. OPM retains sole authority for deciding entitlement.

    Eligible Tribal Employees

    OPM has defined the term “ tribal employee” in § 890.1402 broadly to mean a common law employee of a tribal employer. This section incorporates the regulatory standard under the Federal employment tax regulations, (which, for this purpose, includes Federal Insurance Contributions Act tax and Federal income tax withholding), which generally provides that an individual is a common law employee if the tribal employer has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. This determination is based on all the facts and circumstances. The section then indicates that this determination is to be guided by a list of 20 factors 2 developed by the Internal Revenue Service (IRS), or any future guidance the IRS releases related to the common law employee relationship for Federal employment tax purposes. Because OPM expects tribal employers to treat tribal employees consistently for purposes of Federal employment taxation and access to Federal insurance, the tribal employer's determination of common law employee status for purposes of eligibility for FEHB must be consistent with any determination of common law employee status made by the tribal employer for Federal employment tax purposes.

    2 IRS in Rev. Rul. 87-41, 1987-1 C.B. 296 and referenced in Joint Committee on Taxation report JCX-26-07 “Present Law and Background Relating to Worker Classification for Federal Tax Purposes,” dated May 7, 2007 http://www.irs.gov/pub/irs-utl/x-26-07.pdf.

    OPM recognizes that there may be very limited cases in which a tribal employer has determined that a worker is a common law employee but has also determined that no Federal employment taxes are due with respect to the worker. Under these circumstances, OPM will defer to the tribal employer's reasonable determination that the worker is a common law employee for purposes of eligibility to enroll in FEHB.

    Each tribal employer entitled to access Federal insurance will be able to offer FEHB coverage, rights, and benefits to all of its tribal employees, not just those carrying out functions under the ISDEAA or IHCIA title V programs. OPM has determined that tribal employees (who, by definition, are common law employees) engaged in governmental or commercial operations, such as casino or hospitality operations, will be eligible to enroll in FEHB if it is purchased by their tribal employer. As discussed below, individuals who retire from employment with a tribal employer lose their status as tribal employees upon retirement and their enrollment will terminate.

    A tribal employer carrying out programs under the ISDEAA or Title V of the IHCIA may purchase FEHB for employees of one or more billing units carrying out programs or activities under their contract. Once a tribal employer has enrolled at least one billing unit carrying out programs or activities under ISDEAA or IHCIA, the tribal employer may enroll one or more billing units that are not carrying out programs or activities under ISDEAA or IHCIA. Section 890.1405 establishes that all eligible full-time and part-time tribal employees of each participating billing unit of a tribal employer must be offered the opportunity to enroll in FEHB. Intermittent, seasonal, and temporary tribal employees will be treated similarly to intermittent, seasonal and temporary Federal employees. However, under § 890.102(k), the tribal employer may choose not to extend coverage to certain intermittent, seasonal, and temporary employees if written notification is provided to the Director of OPM.

    Tribal employers may not segment tribal employee populations by offering a different set of health benefits to different groups of tribal employees within a single billing unit. An exception to this rule is if tribal employees within a billing unit are offered alternative coverage as part of a collective bargaining agreement.

    Coverage of Family Members

    As described in § 890.1405(e), family members of tribal employees will be eligible for coverage in FEHB under substantially the same terms as family members of Federal employees. One exception is that former spouses of tribal employees may not enroll in FEHB under the Civil Service Retirement Spouse Equity Act. This is because Spouse Equity coverage is linked to the former spouse's entitlement to a portion of a Federal employee's annuity. Another exception is that if the tribal employee dies while employed, a surviving spouse cannot continue FEHB enrollment or enroll in his or her own right, unless the surviving spouse is also FEHB-eligible through his or her employment. This is because continuing FEHB eligibility for surviving spouses of Federal employees is linked to a survivor annuity.

    Section 890.1406 states that correction of enrollment errors will take place according to the same terms as for Federal employees. Requirements for tribal employees' appeals of eligibility and enrollment decisions are described in § 890.1415.

    Tribal Employer and Tribal Employee Contributions and Administrative Fee

    Section 890.1403 explains that a tribal employer is entitled to purchase FEHB if payment, defined by § 890.1402 as all premiums plus administrative fees, are currently deposited in the Employees Health Benefits Fund, as required by the authorizing statute. This section provides that a payment will be considered “currently deposited” if it is received by the Fund before, during, or within fourteen days after the end of the calendar month covered by the payment.

    Section 890.1413 describes how payment will work for tribal employers participating in FEHB. Tribal employer and tribal employee contributions for FEHB will be handled similarly for tribal employees as for Federal employees, with the tribal employer responsible for contributing a share of premium that is at least equivalent to the share of premium that the Federal Government contributes for Federal employees. The percentage contribution requirements are described in 5 U.S.C. 8906. The FEHB contributions for part-time tribal employees working between 16 and 32 hours per week may be pro-rated in accordance with the terms applicable to part-time Federal employees. FEHB enrollment for tribal employees on unpaid leave may be continued in a manner similar to Federal employees on unpaid leave under 5 CFR 890.502(b), as long as the full premium is paid.

    The tribal employer's FEHB contribution percentage must equal or exceed the contribution that the Federal Government would make each month for a Federal employee for the same plan. Tribal employers may elect to pay a greater tribal employer contribution, but may not pay a lesser amount than the Federal Government contribution for each plan. There is no cap on the percentage of premium that a tribal employer may contribute. The tribal employer may vary the contribution by type of enrollment (self only, self plus one, self and family) but must treat tribal employees in a uniform manner. As an example, a tribal employer could contribute 100% for all tribal employees in self only or self plus one enrollments and 90% for all tribal employees in self and family enrollments. Tribal employers may not vary the tribal employer contribution in order to encourage or discourage enrollment in any particular plan or plan option. Tribal employers may choose to vary the contribution amounts for each billing unit, provided each billing unit meets the requirements set forth above.

    In addition, the tribal employer is required to pay an administrative fee, in an amount set by OPM each year, for each tribal employee's enrollment on a monthly basis. This fee covers the costs of a paymaster to perform the collection and remittance functions that is performed for Federal employees by Federal payroll offices. The paymaster is the entity designated by OPM as responsible for receiving FEHB premiums from the tribal employer, forwarding premiums to the Employees Health Benefits Fund, and maintaining enrollment records for all participating tribal employers. Tribal employers may not charge this fee to tribal employees. The total aggregate amount for tribal employees' and tribal employer's share of the premium and the administrative fee must be available for receipt by the paymaster on an agreed upon date set in the agreement with the tribal employer.

    Tribal Employers' Entitlement and Election to Purchase FEHB

    Section 890.1404 establishes a process by which tribal employers may demonstrate entitlement and elect to purchase, FEHB for their tribal employees. The tribal employer must notify OPM by email or telephone of the intention to purchase FEHB. Through an agreement described in § 890.1404(b), OPM will confirm: (1) The tribal employer's contact information; (2) the date that FEHB coverage will begin; (3) the approximate number of tribal employees eligible to enroll; (4) the tribal employer's agreement not to make available to FEHB-eligible tribal employees alternate tribal employer-sponsored health insurance coverage concurrent with FEHB; (5) the tribal employer is entitled to participate in the FEHB by carrying out at least one program under ISDEAA or title V of IHCIA; (6) the tribal employer's acknowledgement that participation in FEHB makes the tribal employer subject to Federal Government audit with respect to such participation and to OPM authority to direct the administration of the program; (7) the tribal employer's agreement to establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer regarding an individual's status as a tribal employee; (8) the tribal employer's agreement to supply necessary enrollment information, payment of the tribal employer and tribal employee share of premium and payment of an administrative fee to the paymaster; (9) the tribal employer's agreement to notify OPM in the event that the tribal employer is no longer carrying out at least one program under the ISDEAA or title V of IHCIA, and (10) the tribal employer's agreement to abide by other terms and conditions of participation.

    Section 890.1404(c) allows a tribal employer to elect to purchase FEHB at any time. The election to purchase FEHB will commit the tribal employer to purchase FEHB at least through the remainder of the calendar year in which the election is made. Elections will be automatically renewable year to year unless revoked by the tribal employer or terminated by OPM. Section 890.1404(d) allows a tribal employer to revoke its election to purchase FEHB with 60 days' notice to OPM. If a tribal employer revokes an election to purchase FEHB, that tribal employer may only re-elect to purchase FEHB during the first annual open enrollment season that occurs at least twelve months after the election is revoked. If the tribal employer revokes an election to participate a second time, the tribal employer may only re-elect to purchase FEHB during the first open season that falls at least twenty-four months after the second revocation. Section 890.1404(f) states that OPM maintains final authority to determine entitlement of a tribal employer to purchase FEHB.

    A tribal employer that begins to carry out a program under ISDEAA or Title V of IHCIA after this rule is effective may notify OPM of its intention to purchase benefits after the entitlement is established. Section 890.1407 states that a tribal employer electing to purchase FEHB for its employees may not concurrently make contributions toward non-FEHB tribal employer-sponsored health insurance to any tribal employee eligible for FEHB. However, a tribal employer electing FEHB may concurrently offer non-FEHB dental, vision, or disability coverage. This requirement will keep tribal employees' enrollment conditions aligned with those of Federal employees.

    Interaction With Other FEHB Coverage

    Section 890.1405(f) establishes that eligibility to enroll in FEHB does not cause any tribal employee to be identified or characterized as a Federal employee, nor does it convey any additional rights or privileges of Federal employment. There may be circumstances in which a tribal employee is also an FEHB-eligible Federal employee. In such a case, the tribal employee may participate in FEHB through either employer. A tribal employee who is also a Federal employee cannot enroll in FEHB through both employers. FEHB enrollments may be transferred between Federal employing offices and tribal employers in a similar manner as transfer of enrollments between Federal agencies.

    Initial Tribal Employee Enrollment Period, Open Season, and QLEs

    Section 890.1405 describes tribal employee eligibility for enrollment in FEHB. Tribal employees will be able to enroll in FEHB after an agreement between the tribal employer and OPM is signed. The effective date of coverage will be decided by the tribal employer and OPM. A third party paymaster will handle payroll functions including remitting tribal employer and tribal employee contributions to FEHB premiums.

    The enrollment process for tribal employees into FEHB is described in § 890.1407. Tribal employers must establish an initial enrollment opportunity for tribal employees. After that initial enrollment opportunity, for plan years during which a tribal employer's election to offer FEHB is in place, the FEHB enrollment period for tribal employees will be the same as for Federal employees: Up to 60 days after becoming a new tribal employee or changing to an eligible position, during the annual open season, or 31 days before to 60 days after experiencing a qualifying life event. The effective date of enrollment for tribal employees will be the same as for Federal employees under parts 890 or 892, depending on premium conversion status. Upon enrollment in the FEHB Program, tribal employees will choose among the same nationwide and local FEHB plans that are available to Federal employees.

    Section 890.1408 describes the circumstances under which a tribal employee may change enrollment type, plan, or option. These changes are allowed and will take effect under the same circumstances as for Federal employees. Changes may be restricted if the tribal employer has a premium conversion plan in effect (pre-tax treatment of premiums) and the tribal employee has elected premium conversion.

    Cancellation of Coverage, Decreases in Enrollment

    Section 890.1409 establishes that a tribal employee may cancel his or her FEHB coverage or decrease his or her enrollment only under the same circumstances as a Federal employee. If the tribal employee has elected premium conversion, this cancellation or change is restricted.

    Termination of Enrollment

    Section 890.1410 establishes that FEHB enrollment will terminate when employment with the tribal employer ends due to resignation, dismissal, or retirement, or when the tribal employer discontinues its purchase of FEHB. Termination of enrollment does not refer to a voluntary cancellation by the tribal employee during a period of continued employment. Upon termination of enrollment, the tribal employee will receive a 31-day temporary extension of coverage without premium contribution from the tribal employee or tribal employer and will have an opportunity to convert to an individual policy. Tribal employees whose FEHB enrollment terminates due to separation from tribal employment (unless the separation is for gross misconduct) are also eligible for temporary continuation of FEHB coverage (TCC), described at 5 U.S.C. 8905a and 5 CFR part 890 subpart K.

    If an FEHB enrollment is terminated due to the death of the tribal employee, the tribal employee's spouse and covered children are entitled to a 31-day temporary extension of coverage and opportunity to convert to an individual policy. Covered children, if any, may elect TCC and may cover the tribal employee's surviving spouse as a member of family.

    Termination Due to Non-Payment of Premiums

    Section 890.1410(f) establishes that insufficient payment from the tribal employer to the paymaster can result in termination of enrollment for all of the tribal employer's tribal employees affected by the paymaster's failure to obtain current deposit. In such a case, FEHB enrollment for all affected tribal employees will be terminated according to a process determined by OPM. FEHB enrollment of all tribal employees affected by the paymaster's failure to obtain current deposit will be terminated effective as of midnight on the last day of the month in which premium payment was received. These tribal employees will be entitled to a 31-day temporary extension of coverage without additional premium contribution and the opportunity to convert to an individual policy. In the event that a tribal employer elects to purchase FEHB and does not pay premiums for the first month in which payment is due, no 31-day temporary extension of coverage or opportunity to convert to an individual policy will be provided. Termination of enrollment due to non-payment of premiums in either case will not result in an opportunity to enroll in TCC since current tribal employees do not meet the conditions for TCC enrollment. Tribal employers will have full responsibility for communicating notice of termination of enrollment, and accompanying rights and obligations, to their tribal employees. Any outstanding premium due for coverage in arrears will be treated as a debt owed solely by the tribal employer.

    Temporary Continuation of Coverage (TCC)

    Tribal employees and certain family members whose FEHB coverage terminates under certain circumstances can elect to purchase temporary continuation of coverage (TCC) for up to 18 or 36 months. Section 890.1411 establishes the criteria for TCC participation for tribal employees and their family members. In general, tribal employees who are enrolled in FEHB and separate from tribal employment, except for reasons of gross misconduct, may elect to purchase TCC. Certain formerly covered family members, including children or stepchildren who no longer meet the requirements of a covered family member, and former spouses, may elect TCC. The surviving spouse of a deceased enrollee who was enrolled in FEHB is not eligible to elect TCC, but may be covered by the TCC enrollment of an eligible child.

    The administrative fee is the same as would apply to a former Federal employee enrolled in TCC. The administrative fee described in § 890.1413(e) would not apply to a TCC enrollment of a tribal employee or family member.

    Non-Pay Status, Insufficient Pay, or Change to Ineligible Position

    Section 890.1412 establishes that a tribal employee in non-pay status or with insufficient pay to cover the premium costs may continue FEHB enrollment for up to 365 days. Tribal employees in non-pay status due to uniformed service are entitled to continue FEHB enrollment for up to 24 months. After termination, the tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution, and conversion to an individual policy.

    Section 890.1412 also establishes that a temporary tribal employee who has insufficient pay to cover the employee share of FEHB premiums may choose a less expensive plan. If the tribal employee does not or cannot move to a less expensive plan, the FEHB enrollment will be terminated and the enrollee is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy.

    If a tribal employee moves from an FEHB-eligible to a FEHB ineligible position, the FEHB enrollment can continue if there has not been a break in service of more than three days. If there has been a break in service of longer than three days, FEHB enrollment will terminate at midnight of the last day of the pay period in which the employment status changed. Such a tribal employee will be entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy.

    Responsibilities of the Tribal Employer

    Section 890.1414 describes the responsibilities of the tribal employer. These include premium payment, eligibility determinations, enrollment, establishment of appeals process, communications regarding FEHB, and notification requirements.

    Eligibility and Enrollment Decisions and Appeal Rights

    Section 890.1415 requires that a tribal employer establish or identify an independent panel to resolve disputes about eligibility of individuals for FEHB enrollment. This panel must be authorized to adjudicate such disputes and enforce eligibility and enrollment determinations. The tribal employer must inform tribal employees of this avenue for dispute resolution. Decisions of the independent panel must be written, a record of evidence considered by the panel must be retained and available for OPM review, and the panel decisions remain subject to final OPM authority.

    Filing Claims for Payment or Service; Court Review of Disputed Claims

    Section 890.1416 describes the procedures for (1) filing claims for payment or service; and (2) invoking the provisions for court review of disputed claims. Both situations will follow the established procedures for Federal employees.

    No Continuation of FEHB Enrollment Into Retirement From Employment With a Tribal Employer

    Section 890.1417 states that an FEHB enrollment cannot be continued into retirement from employment with a tribal employer. This is a statutory requirement as the law entitles tribal employers to purchase FEHB for employees but it does not extend that entitlement to permit tribal employers to purchase FEHB for retirees.

    A Federal annuitant may continue FEHB into retirement and any enrollment in, or coverage as a family member under FEHB during employment with a tribal employer will count toward the “five-year rule.” The “five-year rule” generally requires five years of pre-retirement FEHB enrollment, or coverage as a family member, in order to continue FEHB into retirement. Section 890.1417 further states that a Federal annuitant who has continued FEHB into retirement and who begins post-retirement employment with a tribal employer that has elected to purchase FEHB may transfer the FEHB enrollment with his or her Federal retirement system to an enrollment with the tribal employer in a similar manner as that used for Federal annuitants re-employed by Federal agencies.

    No Continuation of FEHB Enrollment for Compensationers Past 365 days

    Section 890.1418 establishes that tribal employees who are not also Federal employees, but are receiving worker's compensation benefits in leave without pay status for more than 365 days under programs run by the U.S. Department of Labor may not be enrolled in FEHB.

    Regulatory Impact Analysis

    OPM has examined the impact of this proposed rule as required by Executive Order 12866 and Executive Order 13563, which directs 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), and based on that analysis, it has determined that it is an economically significant rule. A regulatory impact analysis must be prepared for economically significant rules.

    Need for Regulatory Action

    As part of the ACA, section 10221 incorporated and enacted S. 1790, the Indian Health Care Improvement Reauthorization and Extension Act of 2009, resulting in the addition of section 409 to the IHCIA. Section 409 allows tribes, tribal organizations and urban Indian organizations carrying out specific programs under Federal law to purchase the rights and benefits FEHB Program for their employees. As the administrator of the FEHB, OPM has extended eligibility to entitled tribal employees within the meaning of section 409. Section 409 has been implemented and over 16,000 tribal employees are currently covered by FEHB. Federal regulations are necessary to protect the interests of all stakeholders, memorialize processes and procedures, and provide transparency.

    Regulatory Baseline

    The costs, benefits and transfers assessed in remaining portions of this regulatory impact analysis reflect existing FEHB coverage of tribal employees. This analysis is consistent with the guidance provided in OMB Circular A-4.

    Benefits of Coverage

    Health insurance coverage improves access to health care services, including preventive services, improves clinical outcomes, financial security, and decreases uncompensated care.3 Although section 409 extends FEHB to employees of tribes, tribal organizations, and urban Indian organizations regardless of their status as tribal members, the authorizing legislation for this regulation falls under 25 U.S.C. Chapter 18 which clearly outlines congressional intent to “maintain and improve the health of the Indians” and identifies providing “the resources, processes, and structure that will enable Indian tribes and tribal members to obtain the quantity and quality of health care services and opportunities that will eradicate the health disparities between Indians and the general population of the United States” as a major national goal of the United States (section 1601). Thus, the following section discusses the benefits of extending health insurance to tribal members, rather than to tribal employees in general.

    3 See Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, Exchange Standards for Employers (CMS-9989-FWP) and Standards Related to Reinsurance, Risk Corridors and Risk Adjustment (CMS-9975-F) for a more detailed description of the benefits of health insurance.

    While the exact benefits of health insurance are difficult to quantify, evidence supports that American Indians and Alaska Natives could benefit more from health insurance than the average population. According to a 2013 Kaiser Family Foundation report, American Indians and Alaska Natives were more likely than other nonelderly adult Americans to report being in fair or poor health, being overweight or obese, having diabetes and cardiovascular disease, and experiencing frequent mental distress.4 They had limited access to employer-sponsored coverage because more were unemployed or in low-wage jobs that did not offer health benefits. Almost a third of them were uninsured. More than 90% had incomes below 400% and 60% had incomes below 138% of the Federal poverty level. The infant mortality rate was 150 percent higher for Native American infants than white infants, and the suicide rate for Native Americans was two and a half times the national rate.5

    4 Kaiser Family Foundation, “Health Coverage and Care for American Indians and Alaska Natives,” October 2013.

    5 Then Senator Barack Obama, Indian Health Care Improvement Act Amendments of 2007 Floor Speech, U.S. Senate, January 2008.

    The Indian Health Service (IHS), which provides services through a network of hospitals, clinics, and health stations to about 2.2 million American Indians and Alaska Natives, has historically been underfunded. Access to services varies significantly by location and funds are insufficient to meet health care needs. According to the Federal Disparity Index, in 2010 the IHS funds covered less than 60% of those needed to pay for coverage equivalent to that of Federal employees.6

    6 The Federal Employees Health Plan Disparity Index (hereinafter “FDI”) is an index comparing Indian Health Service (IHS) funding to the cost of providing medical insurance for American Indian/Alaska Native (AI/AN) users in a mainstream health insurance plan such as that offered under the Federal Employees Health Benefits Program (FEHBP). The FDI uses actuarial methods that control for age, sex, and health status to price health benefits for Indian people using the FEHBP, which is then used to make per capita health expenditure comparisons. See http://www.nihb.org/docs/07112013/FY%202015%20IHS%20budget%20full%20report_FINAL.pdf for 2010 information.

    Health services not available through direct care must be purchased through the Purchased/Referred Care (PRC) (formerly Contract Health Services) 7 program. Some estimates indicate that the PRC program has lost at least $778 million due to unfunded medical inflation and population growth between 1992 and 2008.8 This has resulted in allocating of health care services using the PRC medical priority system, in which many patients cannot receive care unless they are in a priority status. In FY 2007, this under-funding resulted in a backlog of over 300,000 health services that were not provided because there was not enough funding. Unfortunately, the denied/deferred services report understates the need of PRC resources due to data limitations and the fact that many tribes no longer report deferred or denied services because of the expense involved in tracking.

    7 This program was renamed in The Consolidated Appropriations Act of 2014 to the Purchased/Referred Care program. Discussion in this regulatory impact analysis provides pre-statutory examples covering 1992-2008 and cites the 2009 budget request. Although there is currently still major unmet need, funding for this program has increased from $579 million in FY 2008 to $914 million in FY 2016. See the FY17 Congressional Budget Justification at https://www.ihs.gov/budgetformulation/includes/themes/newihstheme/documents/FY2017CongressionalJustification.pdf for more up to date information.

    8 “The FY 2009 IHS Budget: Analysis and Recommendations,” p. 22, March 17, 2008, available at: www.npaihb.org.

    The sources referenced above illustrate the health disparities specific to the Native American population. Expanding healthcare access to this group not only addresses this disparity and generates benefits to the individual, but also generates societal benefits in the form of decreased healthcare costs for chronic illnesses, increased employee productivity, and a healthier population that are the result of expanding access to healthcare to any group.

    Costs of Coverage

    In the following section, costs associated with this rule are analyzed for the following groups: Tribal employers, tribal employees, the Tribal Insurance Processing System (TIPS) (the system used by the current paymaster), OPM, and FEHB carriers. Most of the costs described below either result in a direct benefit to the individual or are transfers from one group to another. For example, costs incurred by tribal employees (premiums, deductibles, copays, etc.) result in individual benefits in the form of improved health outcomes. Costs incurred by tribal employers to cover premiums are a benefit to tribal employees. OPM has determined that the total dollar amounts do meet the threshold for this to be considered an economically significant rule.

    OPM analyzed actual fiscal year 2015 enrollment data for the over 16,000 tribal employees enrolled in the FEHB Program and found the annual cost of enrollment to be $168.5 million. This includes both premiums and the administrative fee added to each tribal FEHB enrollment. The administrative fee covers the costs of program administration for the paymaster.9 A per member per month (cost per month for each covered individual) cost of approximately $413 was calculated.10

    9 This number does not include OPM's administrative costs to operate this program.

    10 The number of enrollments was multiplied by a family factor to estimate total covered lives including family members. The family factor is calculated for the FEHB Program as a whole, not based on actual tribal enrollment. The total annual cost was then divided by the total number of covered lives, the result of this was divided by 12 to estimate the cost per member per month.

    Premiums in the FEHB Program have increased between 3-6% each year for the last five years, below increases in the commercial market. As enrollment increases, total spending on premium costs will increase. However, the administrative fee will likely decrease as administrative costs are spread among a growing number of enrollments.

    Costs for Tribal Employers

    To cover the cost of program administration, this proposed rule includes an administrative fee assessed on a per contract basis, paid by the tribal employer.11 OPM has contracted with a paymaster to develop and maintain TIPS, an online portal for the input of enrollment data and transmission to carriers.

    11 This is analogous with Federal agencies who cover the cost of program administration without an additional fee to employees.

    For fiscal year 2015, the administrative fee was $15.15 per contract; for fiscal year 2016 it is $12. This fee is adjusted to align with actual programmatic costs. As enrollment increases, this cost will go down as the costs of maintaining TIPS will be spread among more enrollments.

    The cost of coverage for each tribal employer depends upon the number of enrollees covered, the health plans selected by those enrollees, and the portion of the premium paid by the employer.

    Currently, the largest number of employees enrolled for one tribal employer is just under 4,000 and the smallest tribal employers have just one employee enrolled.12 The majority of participating tribal employers have fewer than 150 employees enrolled, with a program-wide median of 71 enrolled employees.

    12 Based on September 2015 enrollment.

    The average cost per enrollment in the program, including the administrative fee, is estimated at approximately $10,172.13

    13 Total annual cost (including administrative fee) divided by number of enrollees (using September 2015 data).

    Tribal employers are required by this rule to contribute to the premium for tribal employees at least the same as the Federal government does for its employees and may contribute more, up to 100% of the premium costs. The Federal government contribution is statutorily defined as the lesser of 72% of the weighted average of all premiums or 75% of the plan premium.14 This averages out to approximately 70% paid by the employer, program-wide.

    14 5 U.S.C. 8906.

    Based on averages for fiscal year 2015, a tribal employer may pay from just over $7,000 to over $40 million, depending on the number of tribal employees covered and percentage of premium contributed by the tribal employer. Of course, actual costs will vary based on plan selection.

    Tribal employers assess the cost of participating and recognize that participation in the FEHB Program is a business decision made by the employers themselves. It often is a decision made by comparing the cost of other forms of health coverage and coverage through the FEHB Program. For those tribes that choose to participate it can be assumed that the benefits outweigh the costs of participation.

    Costs for Tribal Employees

    Costs for tribal employees depend upon the plan selected, enrollment type, and the percentage of premium contributed by the tribal employer. Based on FY15 data, the average cost for an annual enrollment is approximately $10,035 15 with an average annual employee contribution of approximately $3,011. The actual tribal employee contribution varies based on the tribal employer contribution towards the premium.

    15 Does not include the Administrative Fee, which is covered by tribal employers.

    Other costs such as copays, deductibles, and coinsurance are also the responsibility of the tribal employee, to the extent that such cost sharing is not otherwise prohibited by Federal law. These costs differ based on plan selection and utilization. Individual enrollment in the FEHB Program is voluntary so it can be assumed that the benefits to the individual of enrolling in tribal employer-sponsored coverage outweigh the costs of enrollment.

    Administration of TIPS

    Annual costs for administering TIPS, incurred by the paymaster, are described in the chart below. These costs are covered by the administrative fee paid by tribal employers.

    Dates Costs May 2012 (launch date) through Sept 30, 2012 $1,096,932.00 2013 Fiscal year 1,677,293.68 2014 Fiscal year 1,653,397.93 2015 Fiscal year 1,815,660.00 Costs for OPM

    Implementation of the Tribal FEHB Program began in fiscal year 2011. In addition to policy development and tribal consultation costs, OPM contracted with a paymaster to develop an electronic enrollment portal for tribal employers. Development of the Tribal Insurance Processing System (TIPS) cost approximately $3.9 million. OPM received approximately $3 million in funds from the Department of Health and Human Services' (HHS) Health Insurance Reform Implementation Fund and covered the remaining costs from funds appropriated to OPM.

    OPM continues to incur costs associated with managing the Tribal FEHB Program. These costs are not covered by the administrative fee included in each tribal enrollment. See the chart below for Full Time Equivalent in FY2012-FY2015.

    Fiscal year FTE FY2012 5.3 FY2013 3.5 FY2014 2.3 FY2015 1.8 FEHB Carriers

    The impact on carriers is relatively small, as tribal enrollments are a very small percentage of the over 4 million FEHB enrollments. Premiums cover claims costs, administrative costs, plus a small profit known as the service charge.

    Conclusion

    While this rule meets the thresholds in Executive Orders 12866 and 13563 to be deemed an economically significant rule, many of the associated costs constitute transfers among involved parties. Under the provisions of this rule, participation in the FEHB Program is voluntary for both tribal employers and tribal employees. This, in conjunction with the relationship between costs incurred and the benefits of offering coverage, indicates that the benefits of this rule outweigh the costs.

    List of Subjects on 5 CFR Part 890

    Administrative practice and procedure, Government employees, Health insurance.

    U.S. Office of Personnel Management. Beth F. Cobert, Acting Director.

    For the reasons set forth in the preamble, OPM amends 5 CFR part 890 to read as follows:

    PART 890—FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM 1. The authority citation for Part 890 is revised to read as follows: Authority:

    5 U.S.C. 8913; Sec. 890.303 also issued under Sec. 50 U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; Subpart L also issued under Sec. 599C of Public Law 101-513, 104 Stat. 2064, as amended; Sec. 890.102 also issued under Secs. 11202(f), 11232(e), 11246(b) and (c) of Public Law 105-33, 111 Stat. 251; Sec. 721 of Public Law 105-261, 112 Stat. 2061 unless otherwise noted; Sec. 890.111 also issued under Sec. 1622(b) of Public Law 104-106, 110 Stat. 515. Subpart N issued under Sec. 10221, Pub. L. 111-148, 124 Stat 935 [25 U.S.C. 1647b].

    2. Add new subpart N to read as follows: Subpart N—Federal Employees Health Benefits for Employees of Certain Indian Tribal Employers Sec. 890.1401 Purpose. 890.1402 Definitions and deemed references. 890.1403 Tribal employer purchase of FEHB requires current deposit of payment. 890.1404 Tribal employer election and agreement to purchase FEHB. 890.1405 Tribal employees eligible for enrollment. 890.1406 Correction of enrollment errors. 890.1407 Enrollment process; effective dates. 890.1408 Change in enrollment type, plan, or option. 890.1409 Cancellation of coverage or decreases in enrollment. 890.1410 Termination of enrollment and 31-day temporary extension of coverage; and conversion to individual policy. 890.1411 Temporary Continuation of Coverage (TCC). 890.1412 Non-pay status, insufficient pay, or change to ineligible position. 890.1413 Premiums and administrative fee. 890.1414 Responsibilities of the tribal employer. 890.1415 Reconsideration of enrollment and eligibility decisions and appeal rights. 890.1416 Filing claims for payment or service and court review. 890.1417 No continuation of FEHB enrollment into retirement from employment with a tribal employer. 890.1418 No continuation of FEHB enrollment in compensationer status past 365 days. Subpart N—Federal Employees Health Benefits for Employees of Certain Indian Tribal Employers
    § 890.1401 Purpose.

    This subpart sets forth the conditions for coverage, rights, and benefits under Chapter 89 of title 5, United States Code, according to the provisions of 25 U.S.C. 1647b.

    § 890.1402 Definitions and deemed references.

    (a) In this subpart—

    Billing unit is a subdivision of the tribal employer's workforce that aligns tribal employees for purposes of administering FEHB enrollment and collection of payment. A billing unit may be either governmental or commercial or a combination of both. So long as a tribal employer purchases FEHB for at least one billing unit that is carrying out at least one program under ISDEAA or IHCIA, the tribal employer may purchase FEHB for other billing units without regard to its programs.

    Pay period is the interval of time for which a paycheck is issued by the tribal employer for work performed by the tribal employee.

    Paymaster is the entity designated by OPM as responsible for receiving FEHB premiums from the tribal employer, forwarding premiums to the Employees Health Benefits Fund, and maintaining enrollment records for all participating tribal employers.

    Payment is the sum of the tribal employer's share of premium plus the tribal employees' share of premium plus any administrative fees or costs required under this subpart, due for the enrollment, in the aggregate, of the tribal employer's tribal employees.

    Tribal employee is a full-time or part-time common law employee of a tribal employer. An individual is a common law employee if, based on all the facts and circumstances, the tribal employer has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. This determination is based on all facts and circumstances and shall be guided by the factors described by the Internal Revenue Service in Rev. Rul. 87-41, 1987-1 C.B. 296 and referenced in Joint Committee on Taxation report JCX-26-07 Present Law and Background Relating to Worker Classification for Federal Tax Purposes, dated May 7, 2007, and shall be consistent with the tribal employer's determination of common law employee status for Federal employment tax purposes, if any. For purposes of this subpart, tribal employees do not include retirees or annuitants of a tribal employer, volunteers of a tribal employer, or others who are not common law employees of a tribal employer. Categories of excluded tribal employees are described at § 890.1405(b). FEHB benefits available to tribal employees are set forth in this subpart and to the extent there exists any ambiguity or inconsistency between this subpart and other subparts of Part 890, the terms of this subpart will govern FEHB benefits available to tribal employees.

    Tribal employer is an Indian tribe or tribal organization (as those terms are defined in 25 U.S.C. Chapter 18, “Indian Health Care”) carrying out at least one program under the Indian Self-Determination and Education Assistance Act or an urban Indian organization (as that term is defined in 25 U.S.C. Chapter 18, “Indian Health Care”) carrying out at least one program under the title V of the Indian Health Care Improvement Act, provided that the tribe, tribal organization, or urban Indian organization certifies entitlement to purchase FEHB according to the process described in subpart N. FEHB benefits that tribal employers are entitled to purchase for their tribal employees are set forth in this subpart and to the extent there exists any ambiguity or inconsistency between this subpart and other subparts of Part 890, the terms of this subpart will govern FEHB benefits available for purchase by tribal employers.

    (b) In this subpart, wherever reference is made to other subparts of Part 890:

    (1) A reference to employee is deemed a reference to tribal employee;

    (2) A reference to employer is deemed a reference to tribal employer;

    (3) A reference to enrollee is deemed a reference to a tribal employee in whose name the enrollment is carried;

    (4) A reference to employing agency, employing office, or agency is deemed a reference to tribal employer, and/or if the reference involves the subject of a paymaster function, the paymaster, as appropriate;

    (5) A reference to United States, Federal Government, or Government in the capacity of an employer is deemed a reference to tribal employer;

    (6) A reference to Federal Service or Government Service is deemed a reference to employment with a tribal employer;

    (7) A reference to annuitant, survivor annuitant, or an individual with entitlement to an annuity is deemed inapplicable in the context of this subpart; and

    (8) A reference incorporated into this subpart that does not otherwise apply to tribal employees and tribal employers shall have no meaning and is deemed inapplicable in the context of this subpart.

    § 890.1403 Tribal employer purchase of FEHB requires current deposit of payment.

    (a) A tribal employer shall be entitled to purchase coverage, rights, and benefits for its tribal employees under chapter 89 of title 5, United States Code, if payment for the coverage, rights, and benefits for the period of employment with such tribal employer is currently deposited in the Employees Health Benefits Fund.

    (b) Payment will be considered currently deposited if received by the Employees Health Benefits Fund before, during, or within fourteen days after the end of the month covered by the payment.

    (c) Purchase of FEHB coverage by a tribal employer confers all the rights and benefits of FEHB as set forth in subpart N to the tribal employer and tribal employee.

    § 890.1404 Tribal employer election and agreement to purchase FEHB.

    (a) A tribal employer that intends to purchase FEHB for its tribal employees shall notify OPM by email or telephone.

    (1) A tribal employer must purchase FEHB for at least one billing unit carrying out programs or activities under the tribal employer's ISDEAA or IHCIA contract.

    (2) For so long as a tribal employer continues to purchase FEHB for at least one billing unit carrying out programs or activities under a tribal employer's ISDEAA or IHCIA contract, the tribal employer may purchase FEHB for one or more billing units without regard to whether they are carrying out programs or activities under the tribal employer's ISDEAA or IHCIA contract.

    (b) A tribal employer must enter into an agreement with OPM to purchase FEHB. This agreement will include:

    (1) The name, job title, and contact information of the individual responsible for health insurance coverage decisions for the tribal employer,

    (2) The date on which the tribal employer will begin to purchase FEHB coverage,

    (3) The approximate number of tribal employees who will be eligible to enroll,

    (4) A certification that the eligible tribal employees within the enrolling billing unit will not have alternate tribal employer-sponsored health insurance coverage available concurrent with FEHB,

    (5) A certification and documentation demonstrating that the tribal employer is entitled to purchase FEHB as either: An Indian tribe or tribal organization carrying out at least one program under the Indian Self-Determination and Education Assistance Act; or an urban Indian organization carrying out at least one program under Title V of the Indian Health Care Improvement Act,

    (6) Agreement by the tribal employer that its purchase of FEHB makes the tribal employer responsible for administering the program in accordance with this subpart, subject to Federal Government audit with respect to such purchase and administration, and subject to OPM authority to direct the administration of the program, including but not limited to the correction of errors,

    (7) Agreement that the tribal employer will establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer regarding an individual's status as a tribal employee eligible to enroll in FEHB, eligibility of family members, and eligibility to change enrollment. This panel must have authority to enforce eligibility decisions,

    (8) A certification that the tribal employer will supply necessary enrollment information and payment to the paymaster,

    (9) Agreement to provide notice to OPM in the event that the tribal employer is no longer carrying out at least one program under the ISDEAA or title V of IHCIA, and

    (10) Other terms and conditions as appropriate.

    (c) A tribal employer may make an initial election to purchase FEHB at any time. A tribal employer purchasing FEHB shall commit to purchase FEHB for at least the remainder of the calendar year in which the agreement is signed. Elections will be automatically renewable year to year unless revoked by the tribal employer or terminated by OPM.

    (d) If a tribal employer revokes the initial election, OPM must be given 60 days notice. The tribal employer may not re-elect to purchase FEHB until the first annual open season that falls at least twelve months after the revocation. If the tribal employer revokes an election to participate a second time, the tribal employer may not re-elect to purchase FEHB until the first open season that falls at least twenty-four months after the second revocation.

    (e) OPM maintains final authority, in consultation with the United States Department of the Interior and the United States Department of Health and Human Services,to determine whether a tribal employer is entitled to purchase FEHB as either:

    (1) An Indian tribe or tribal organization carrying out at least one program under the Indian Self-Determination and Education Assistance Act; or

    (2) An urban Indian organization carrying out at least one program under Title V of the Indian Health Care Improvement Act. If a tribe, tribal organization or urban Indian organization believes it has been improperly denied the entitlement to purchase FEHB, it may appeal the denial to OPM. The appeal will be given an independent level of review within OPM and the decision on review will be final.

    § 890.1405 Tribal employees eligible for enrollment.

    (a)(1) A tribal employee who is a full-time or part-time common law employee of a tribal employer is eligible to enroll in FEHB if that tribal employer has elected to purchase FEHB coverage for the tribal employees of that tribal employer's billing unit, except that a tribal employee described in paragraph (b) of this section is not eligible to enroll in FEHB.

    (2) Status as a tribal employee under § 890.1402(a) for purposes of eligibility to enroll in FEHB is initially made based on a reasonable determination by the tribal employer. OPM maintains final authority to correct errors regarding FEHB enrollment as set forth at § 890.1406.

    (3) Retirees, annuitants, volunteers, compensationers under Federal worker's disability programs past 365 days, and others who are not common law employees of the tribal employer are not eligible to enroll under this subpart.

    (b) The following tribal employees are not eligible to enroll in FEHB:

    (1) A tribal employee whose employment is limited to one year or less and who has not completed one year of continuous employment, including any break in service of 5 days or less;

    (2) A tribal employee who is expected to work less than 6 months in one year;

    (3) An intermittent tribal employee—a non-full-time tribal employee without a prearranged regular tour of duty;

    (4) A beneficiary or patient employee in a Government or tribal hospital or home; and

    (5) A tribal employee paid on a piecework basis, except one whose work schedule provides for full-time service or part-time service with a regular tour of duty.

    (c) Notwithstanding paragraphs (b)(1), (2), and (3) of this section a tribal employee working on a temporary appointment, a tribal employee working on a seasonal schedule of less than 6 months in a year, or a tribal employee working on an intermittent schedule, for whom the tribal employer expects the total hours in pay status (including overtime hours) plus qualifying leave without pay hours to be at least 130 hours per calendar month, is eligible to enroll in FEHB according to terms described in § 890.102(j) unless the tribal employer provides written notification to the Director as described in § 890.102(k).

    (d) The tribal employer initially determines eligibility of a tribal employee to enroll in FEHB, eligibility of family members, and eligibility of tribal employee to change enrollment. The tribal employer's initial decision may be appealed pursuant to § 890.1415.

    (e) A tribal employee who is eligible and enrolls in FEHB under this subpart will have the option of enrolling in any FEHB open fee-for-service plan or health maintenance organization (HMO), consumer driven health plan (CDHP), or high deductible health plan (HDHP) available to Federal employees in the same geographic location as the tribal employee. The tribal employee will have the same choice of self only, self plus one, or self and family enrollment as is available to Federal employees.

    (f) Family members of tribal employees will be covered by FEHB according to terms described at § 890.302. Children of tribal employees, whether married or not married, and whether or not dependent, are covered under a self and family enrollment or a self plus one enrollment (if the child is the designated covered family member) up to the age of 26. Former spouses of tribal employees are not former spouses as described at 5 U.S.C. 8901(10) and are not eligible to elect coverage under subpart H.

    (g) Eligibility for FEHB under this subpart does not identify an individual as a Federal employee for any purpose, nor does it convey any additional rights or privileges of Federal employment.

    § 890.1406 Correction of enrollment errors.

    Correction of errors regarding FEHB enrollment for tribal employees takes place according to the terms described in § 890.103.

    § 890.1407 Enrollment process; effective dates.

    (a) FEHB election for tribal employers. Tribal employers may purchase FEHB coverage for their tribal employees after an agreement is accepted by OPM. Tribal employers will not be permitted to access FEHB if the tribal employer contributes toward an alternative employer-sponsored health insurance plan for tribal employees within the billing unit(s) for which the employer seeks to purchase FEHB coverage, with the exception of a collectively bargained alternative plan. A stand-alone dental, vision, or disability plan is not considered alternative health insurance.

    (b) Opportunities for tribal employees to enroll. (1) Upon electing to purchase FEHB, a tribal employer will establish an initial enrollment opportunity for tribal employees. A tribal employee's enrollment upon an initial enrollment opportunity becomes effective as prescribed by OPM.

    (2) After the initial enrollment opportunity, described in § 890.1407(b)(1), tribal employees are subject to the same initial enrollment period, belated enrollment rules, enrollment by proxy, and open season as Federal employees, as described at § 890.301(a),(b),(c), and (f).

    (3) A tribal employee who enrolls after the initial enrollment opportunity and who does not elect premium conversion through his or her tribal employer's premium conversion plan, if one is available, will be subject to the enrollment and qualifying life event rules described at § 890.301 and effective dates described at § 890.301(b) and (f).

    (4) A tribal employee who enrolls after the initial enrollment opportunity and who elects premium conversion through his or her tribal employer's premium conversion plan, if one is available, will be subject to the enrollment rules, qualifying life event rules and effective dates described at §§ 892.207, 892.208 and 892.210 of this chapter (together with § 890.301 as referenced therein).

    § 890.1408 Change in enrollment type, plan, or option.

    (a) A tribal employee enrolled under this subpart may increase or decrease his or her enrollment, or may change enrollment from one plan or option to another, as described in § 890.301 (for tribal employees who did not elect premium conversion) or Part 892 (for tribal employees who did elect premium conversion).

    (b) A change in enrollment type, plan, or option under this section becomes effective as described in § 890.301 (for tribal employees who did not elect premium conversion) or Part 892 (for tribal employees who did elect premium conversion).

    § 890.1409 Cancellation of coverage or decreases in enrollment.

    (a) A tribal employee enrolled under this subpart may cancel enrollment as described at § 890.304(d) or decrease his or her enrollment as described at § 890.301. A tribal employee who does not participate in premium conversion may cancel his or her enrollment or decrease his or her enrollment at any time by request to the tribal employer, unless there is a legally binding court or administrative order requiring coverage of a child as described at § 890.301(g)(3). A tribal employee who participates in premium conversion may cancel his or her enrollment as provided by § 892.209 or decrease his or her enrollment as provided by § 892.208 of this chapter only during open season or because of and consistent with a qualifying life event.

    (b) A cancellation of enrollment becomes effective as described at § 890.304(d). A decrease in enrollment becomes effective as described in § 890.301(e)(2).

    (c) A tribal employee who cancels his or her enrollment under this section or decreases his or her enrollment may reenroll or increase his or her enrollment only during open season or because of and consistent with a qualifying life event.

    § 890.1410 Termination of enrollment and 31-day temporary extension of coverage; and conversion to individual policy.

    (a) Tribal Employee Separation. (1) Enrollment of a tribal employee under this subpart terminates due to separation from employment with the tribal employer for reasons of resignation, dismissal, or retirement. Termination of enrollment is effective at midnight of the last day of the pay period in which the tribal employee separates from employment.

    (2) A former tribal employee who is separated under this subpart due to resignation, dismissal, or retirement and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (b) Death of tribal employee. (1) Enrollment of a tribal employee terminates at midnight of the last day of the pay period in which the tribal employee dies.

    (2) If, at the time of death, the deceased tribal employee was enrolled in self and family FEHB coverage:

    (i) The surviving spouse is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401;

    (ii) The covered children of the deceased tribal employee are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (3) If, at the time of death, the deceased tribal employee was enrolled in self plus one FEHB coverage, only the designated covered family member is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (c) Termination of family member coverage. (1) Coverage of a family member of a tribal employee who was covered under this subpart terminates, subject to the 31-day temporary extension of coverage, for conversion, at midnight of the earlier of the following dates:

    (i) The day on which he or she ceases to be a family member; or

    (ii) The day the tribal employee's enrollment terminates, unless the family member is entitled to continued coverage under the enrollment of another.

    (2) Family members who lose coverage under this subsection are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (d) Tribal employer loses entitlement to purchase FEHB. (1) Coverage of a tribal employee and family members under this subpart, except TCC that is already elected and in effect, terminates at midnight of the last day of the calendar year in which a tribal employer is no longer entitled to purchase FEHB. FEHB can terminate earlier at the request of the tribal employer.

    (2) Following the termination described in § 890.1410(d)(1), enrolled tribal employees and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (e) Tribal employer revokes election to purchase FEHB. If a tribal employer voluntarily revokes its election to purchase FEHB, tribal employees will be entitled to a 31-day temporary extension of coverage and may convert to an individual policy as described at § 890.401. In such a case, the FEHB enrollment terminates effective the first day for which premium payment is not received and the 31-day temporary extension of coverage, for conversion begins immediately thereafter.

    (f) Failure to currently deposit payment. (1) If payment is not currently deposited in the Employees Health Benefits Fund, the tribal employer's entitlement to purchase FEHB can be terminated, and all enrollments affected by the paymaster's failure to obtain current deposit of payment will be terminated, for non-payment.

    (2) Enrollments of all of the tribal employer's tribal employees affected by the paymaster's failure to obtain current deposit of payment will be terminated effective midnight of the last day of the month for which payment was received.

    (3) In the case of termination of enrollment due to non-payment, affected tribal employees will be entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401. The 31-day extension of coverage begins immediately upon termination of enrollment.

    (4) In the event that a tribal employer elects to purchase FEHB for its tribal employees but does not currently deposit payment in the first month that it is due, the enrollment of tribal employees affected by the paymaster's failure to obtain current deposit of payment will be terminated effective midnight of the last day of the month for which payment was not currently deposited. Tribal employees affected by the paymaster's failure to obtain current deposit of payment will not be entitled to a 31-day temporary extension of coverage and may not convert to an individual policy as described at § 890.401.

    (5) Any outstanding premium due for coverage in arrears will be treated as a debt owed solely by the tribal employer.

    § 890.1411 Temporary Continuation of Coverage (TCC).

    (a) For purposes of this subpart, temporary continuation of coverage (TCC) is described by 5 U.S.C. 8905a and subpart K. The administrative fee for TCC for tribal employees is the same as for Federal employees, with no specific tribal administrative fee as described in § 890.1413(e).

    (b) A former tribal employee who is separated under this subpart due to resignation, dismissal, or retirement may elect TCC, unless the separation is due to gross misconduct as defined in § 890.1102.

    (c) Eligibility for TCC for tribal employees following procedures provided in § 890.1103 of subpart K, except that former spouses of tribal employees are not eligible for TCC.

    § 890.1412 Non-pay status, insufficient pay, or change to ineligible position.

    (a) Non-pay status for 365 days. Enrollment of a tribal employee and coverage of family members may continue for up to 365 days during which the tribal employee is in a non-pay status (as described at § 890.303(e)(1)) under terms described at § 890.502(b). Enrollment terminates at midnight of the last day of the pay period which includes the 365th consecutive day of nonpay status or the last day of leave under the Family and Medical Leave Act, whichever is later. The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (b) Insufficient Pay. If the pay of a non-temporary tribal employee who is enrolled in FEHB is insufficient to pay for the tribal employee's share of premiums, the tribal employer must follow the procedure described at § 890.502(b). If the enrollment is terminated due to insufficient pay, the tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (c) Insufficient Pay for temporary tribal employees. If the pay of a temporary tribal employee who meets eligibility requirements described at 5 U.S.C. 8906a is insufficient to pay the tribal employee's share of premiums as described at § 890.304(a)(2), and the tribal employee does not or cannot elect a plan at a cost to him or her not in excess of the pay, the tribal employee's enrollment must be terminated as described at § 890.304(a)(2). The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (d) Change to ineligible position. A tribal employee who moves from an FEHB eligible to a non-FEHB-eligible position at a tribal employer will be eligible to continue FEHB enrollment as described in § 890.303(b).

    (e) Non-pay status due to Uniformed Service. (1) Enrollment of a tribal employee and coverage of family members terminates at midnight of the earliest of the dates described at § 890.304(a)(1)(vi)-(viii). The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

    (2) Enrollment is reinstated on the date the tribal employee is restored to duty in an eligible position with the tribal employer upon return from Uniformed Service, pursuant to applicable law, provided that the tribal employer continues to purchase FEHB for its tribal employees in the affected tribal employee's billing unit on that date.

    § 890.1413 Premiums and administrative fee.

    (a) Premium contributions and withholdings described at §§ 890.501 and 890.502 must be paid by the tribal employer and the tribal employee, except that the term OPM as used in § 890.502(c) is deemed to be a reference to the paymaster, as appropriate, for purposes of this subpart. There is no Government contribution as that term is used in 5 U.S.C 8906.

    (b) Contribution requirements. (1)A tribal employer must contribute at least the monthly equivalent of the minimum Government contribution for a specific FEHB plan as described in 5 U.S.C. 8906;

    (2) There is no cap on the percentage of premium that a tribal employer may contribute, as long as the contribution and withholding arrangement is not designed to encourage or discourage enrollment in any particular plan or plan option;

    (3) A tribal employer may vary the contribution amount by type of FEHB enrollment (self only, self plus one, self and family), providing it is done in a uniform manner and meets the requirements described in § 890.1413(b)(1) and (2); and

    (4) A tribal employer may vary the contribution amount by billing unit, providing each billing unit meets the requirements described in § 890.1413(b)(1)-(3).

    (c) A tribal employer may, but is not required to, prorate the tribal employer and tribal employee share of premium attributable to enrollment of its part-time tribal employees working between 16 and 32 hours per week by prorating shares in proportion to the percentage of time that a tribal employee in a comparable full time position is regularly scheduled to work.

    (d) Tribal employee and tribal employer contributions to premiums under this subpart will be aggregated by the tribal employer. The tribal employee and tribal employer contributions must be available for receipt by the paymaster on an agreed upon date. The paymaster will receive the premium contributions together with the fee described at paragraph (e) of this section and will deposit the payment into the Employees Health Benefits Fund described in 5 U.S.C. 8909.

    (e) A fee determined annually by OPM will be charged in addition to premium for each enrollment of a tribal employee. The fee may be used for other purposes as determined by OPM. The fee must be paid entirely by the tribal employer as part of the payment to purchase FEHB for tribal employees, and must be available for collection by the paymaster, together with the aggregate tribal employee and tribal employer contributions, in time to be currently deposited into the Employees Health Benefits Fund described in 5 U.S.C. 8909.

    § 890.1414 Responsibilities of the tribal employer.

    (a) The tribal employer pays premiums for tribal employees enrolled under this subpart pursuant to §§ 890.1403 and 890.1413.

    (b) The tribal employer must determine the eligibility of individuals who attempt to enroll for coverage under this subpart and enroll those it finds eligible.

    (c) The tribal employer must determine whether eligible tribal employees have eligible family member(s) and allow coverage under a self plus one or self and family enrollment as described in § 890.302 for those it finds eligible.

    (d) The tribal employer must establish or identify an independent dispute resolution panel for reconsideration of enrollment and eligibility decisions as described in § 890.1415.

    (e) The tribal employer has the following notification responsibilities. The tribal employer must:

    (1) Notify OPM and tribal employees in writing of intent to revoke election to purchase FEHB at least 60 days before such revocation described at § 890.1404(d);

    (2) Promptly notify tribal employees and OPM if there is a change in the tribal employer's entitlement to purchase FEHB described at § 890.1410(d);

    (3) Promptly notify affected tribal employees of termination of enrollment due to non-payment, the 31-day temporary extension of coverage and its ending date described at § 890.1410(f)(2)-(3); and

    (4) Promptly notify affected tribal employees of termination of enrollment due to non-payment described at § 890.1410(f)(4).

    § 890.1415 Reconsideration of enrollment and eligibility decisions and appeal rights.

    (a) The tribal employer shall establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer denying an individual's status as a tribal employee eligible to enroll in FEHB or denying a change in the type of enrollment (i.e., to or from self only coverage) under this subpart. Such panel shall be authorized to enforce enrollment and eligibility decisions. The tribal employer shall notify affected individuals of this panel and its functions.

    (b) Under procedures set forth by the tribal employer, an individual may file a written request to the independent dispute resolution panel to reconsider an initial decision of the tribal employer under this subpart. A reconsideration decision made by the panel must be issued to the individual in writing and must fully state the findings and reasons for the findings. The panel may consider information from the tribal employer, the individual, or another source. The panel must retain a file of its documentation until December 31 of the 3rd year after the year in which the decision was made, and must provide the file to OPM upon request.

    (c) If the panel determines that the individual is ineligible to enroll in FEHB as a tribal employee or to change enrollment, the individual may request that OPM reconsider the denial. Such a request must be made in writing and any decision by OPM will be binding on the tribal employer.

    (d) OPM may request a panel decision file during the retention period described at paragraph (b) of this section. Panel decisions remain subject to final OPM authority to correct errors, as set forth in § 890.1406.

    § 890.1416 Filing claims for payment or service and court review.

    (a) Tribal employees may file claims for payment or service as described at § 890.105.

    (b) Tribal employees may invoke the provisions for court review described at § 890.107(b)-(d).

    § 890.1417 No continuation of FEHB enrollment into retirement from employment with a tribal employer.

    (a) An FEHB enrollment cannot be continued into retirement from employment with a tribal employer.

    (b) A Federal annuitant may continue FEHB enrollment into retirement from Federal service if the requirements of 5 U.S.C. 8905(b) for carrying FEHB coverage into retirement are satisfied through enrollment, or coverage as a family member, either through a Federal employing office or a tribal employer, or any combination thereof.

    (c) A Federal annuitant who is employed after retirement by a tribal employer in an FEHB eligible position may participate in FEHB through the tribal employer. In such a case, the Federal annuitant's retirement system will transfer the FEHB enrollment to the tribal employer, in a similar manner as for a Federal annuitant who is employed by a Federal agency after retirement.

    (d) A tribal employee who becomes a survivor annuitant as described in 890.303(d)(2) is entitled to reinstatement of health benefits coverage as a Federal employee would under the same circumstances.

    § 890.1418 No continuation of FEHB enrollment in compensationer status past 365 days.

    A tribal employee who is not also a Federal employee who becomes eligible for one of the Department of Labor's disability compensation programs may not continue FEHB coverage in leave without pay status past 365 days.

    [FR Doc. 2016-20566 Filed 8-30-16; 8:45 am] BILLING CODE 6325-63-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-7003; Directorate Identifier 2016-CE-015-AD] RIN 2120-AA64 Airworthiness Directives; PILATUS AIRCRAFT LTD. Airplanes AGENCY:

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

    ACTION:

    Supplemental notice of proposed rulemaking (NPRM); reopening of the comment period.

    SUMMARY:

    We are revising an earlier NPRM for all PILATUS AIRCRAFT LTD. Models PC-12, PC-12/45, PC-12/47, and PC-12/47E airplanes that would supersede AD 2014-22-01. This proposed AD results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as a need to incorporate new revisions into the Limitations section, Chapter 4, of the FAA-approved maintenance program (e.g., maintenance manual). We are issuing this proposed AD to require actions to address the unsafe condition on these products.

    DATES:

    We must receive comments on this proposed AD by October 17, 2016.

    ADDRESSES:

    You may send comments 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 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this proposed AD, contact PILATUS AIRCRAFT LTD., Customer Service Manager, CH-6371 STANS, Switzerland; telephone: +41 (0) 41 619 33 33; fax: +41 (0) 41 619 73 11; Internet: http://www.pilatus-aircraft.com or email: [email protected] You may review copies of the referenced service information at the FAA, Small Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For information on the availability of this material at the FAA, call (816) 329-4148.

    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-2016-7003; 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 proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket 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:

    Doug Rudolph, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: (816) 329-4059; fax: (816) 329-4090; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-7003; Directorate Identifier 2016-CE-015-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

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

    Discussion

    We proposed to amend 14 CFR part 39 with an NPRM for all PILATUS AIRCRAFT LTD. Models PC-12, PC-12/45, PC-12/47, and PC-12/47E airplanes that would supersede AD 2014-22-01, which was published in the Federal Register on June 8, 2016 (81 FR 36810). The NPRM proposed to require actions intended to address the unsafe condition for the products listed above and was based on mandatory continuing airworthiness information (MCAI) originated by another country. The MCAI states:

    The airworthiness limitations are currently defined and published in the Pilatus PC-12 Aircraft Maintenance Manual(s) (AMM) under Chapter 4, Structural, Component and Miscellaneous—Airworthiness Limitations Section (ALS) documents. The limitations contained in these documents have been identified as mandatory for continued airworthiness.

    Failure to comply with these instructions could result in an unsafe condition.

    EASA issued AD 2014-0170 requiring the actions as specified in ALS, Chapter 4 of AMM report 02049 issue 28, for PC-12, PC-12/45 and PC-12/47 aeroplanes, and Chapter 4 of AMM report 02300 issue 11, for PC-12/47E aeroplanes.

    Since that AD was issued, Pilatus issued Chapter 4 of PC-12 AMM report 02049 issue 31, and Chapter 4 of PC-12 AMM report 02300 issue 14 (hereafter collectively referred to as `the applicable ALS' in this AD), to incorporate new six-year and ten-year inspection intervals for several main landing gear (MLG) attachment bolts, and an annual inspection interval for the MLG shock absorber attachment bolts, which was previously included in the AMM Chapter 5 annual inspection. After a further review of the in-service data, Pilatus issued Service Letter (SL) 186, extending the special compliance time applicable for the MLG bolts inspection.

    For the reasons described above, this AD retains the requirements of EASA AD 2014-0170, which is superseded, and requires the accomplishment of the new maintenance tasks, as described in the applicable ALS.

    The MCAI can be found in the AD docket on the Internet at https://www.regulations.gov/document?D=FAA-2016-7003-0002.

    Since the NPRM was issued, PILATUS AIRCRAFT LTD. has issued new revisions to the Limitations section, Chapter 4, to be incorporated into the FAA-approved maintenance program (e.g., maintenance manual).

    Related Service Information Under 1 CFR Part 51

    PILATUS AIRCRAFT LTD. has issued Structural, Component and Miscellaneous—Airworthiness Limitations, document 12-A-04-00-00-00A-000A-A, dated July 12, 2016, and Structural and Component Limitations—Airworthiness Limitations, document 12-B-04-00-00-00A-000A-A, dated July 19, 2016. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this supplemental NPRM.

    Comments

    We have considered the following comments received on the NPRM.

    Request To Incorporate Newly Issued Revisions to the Limitations Section, Chapter 4, of the FAA-Approved Maintenance Program (e.g., Maintenance Manual)

    Johan Kruger of Pilatus Aircraft requested incorporating a newly issued revision of the Limitation section, Chapter 4, of each applicable maintenace manual into the proposed AD.

    Johan Kruger of Pilatus Aircraft stated that in the Aircraft Maintenance Manual (AMM) Airworthines Limitations Section (ALS) 12-A-04-00-00-00A-000A-A, the Supplemental Structural Inspection Document (SSID) part has been updated with kit numbers and brought in line with Service Bulletin (SB) SB 04-009. The commenter stated that the changes were coordinated with the FAA, who concurred that no new limitations are incorporated in the ALS. The AMM/ALS 12-B-04-00-00-00A-000A-A has also been updated by introducing an inspection of the passenger oxygen (drop down mask) system if installed, and this change was also coordinated with the FAA. Since the drop down O2 system is only required by European operation requirements and not currently earmarked for the United States, it is also not introducing new limitations for U.S. operators.

    We agree with the commenter and have changed this supplemental NPRM based on this comment.

    Request To Change the Compliance Times for Inspecting the Main Landing Gear (MLG) Attachment Bolts

    Johan Kruger of Pilatus Aircraft and Blake Morley of Aero Air, LLC requested changing the compliance time for inspecting the main landing gear (MLG) attachment bolts. The commenters stated that the compliance time in the proposed AD is causing confusion because the way it is currently stated, which is “within the next 6 years . . . or within the next 3 months . . . whichever occurs later,” does not makes sense because 6 years will always occur later and it goes against what is specified in the revisions to the ALS that is being incorporated by this proposed AD.

    Johan Kruger of Pilatus Aircraft stated that, in the ALS Notes, Note 1 (ALS 12-B-04) and Note 3 (ALS 12-A-04) respectively, the inspection is to be done by a specific date, and he wants those dates incorporated into this proposed AD. Blake Morley of Aeroa Air, LLC stated that EASA has also adopted the grace period extension in EASA AD 2016-0083, stating: “Note 1: For the purpose of this AD, the thresholds and intervals include `special' compliance times for certain tasks as defined in the applicable ALS, and the `special' compliance time for the inspection of MLG bolts, as defined in SL 186.” Blake Morley also requested the “3-month” grace period compliance time be changed to “before December 31, 2016.”

    We partially agree with the commenters. We do agree that the compliance times for the inspection of the MLG attachment bolts needs to be corrected to reflect before or upon the accumulation of time-in-service (TIS) on the MLG attachment bolts instead of the TIS on the airplane, which then makes the 3-month grace period more applicable. We have changed this supplemental NPRM action based on this portion of the comment.

    We do not agree with using a specific date as a compliance time. There is no correlation with the requested dates and the unsafe condition. The mere fact that the service document or an international civil aviation authority's AD refers to a calendar date is not enough to justify using a calendar date in a U.S. AD. We have not changed this supplemental NPRM action based on this portion of the comment.

    FAA's Determination and Requirements of This Proposed 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 this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

    Certain changes described above expand the scope of the NPRM. As a result, we have determined that it is necessary to reopen the comment period to provide additional opportunity for the public to comment on this supplemental NPRM.

    Costs of Compliance

    We estimate that this proposed AD will affect 770 products of U.S. registry. We also estimate that it would take about 1.5 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $98,175, or $127.50 per product. This breaks down as follows:

    • Incorporating new revisions into the Limitations section, Chapter 4, of the FAA-approved maintenance program (e.g., maintenance manual): .5 work-hour for a fleet cost of $32,725, or $42.50 per product.

    • New inspections of the MLG attachment bolts: 1 work-hour with no parts cost for fleet cost of $65,450 or $85 per product.

    In addition, we estimate that any necessary corrective actions (on-condition costs) that must be taken based on the proposed inspections, would take about 1 work-hour and require parts costing approximately $100 for a cost of $185 per product. We have no way of determining the number of products that may need these necessary corrective actions.

    The only costs that would be imposed by this proposed AD over that already required by AD 2014-22-01 is the costs associated with the insertion of the revised Limitation section and the MLG attachment bolts inspection and replacement as necessary.

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

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

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

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

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

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new AD: PILATUS AIRCRAFT LTD.: Docket No. FAA-2016-7003; Directorate Identifier 2016-CE-015-AD. (a) Comments Due Date

    We must receive comments by October 17, 2016.

    (b) Affected ADs

    This AD replaces AD 2014-22-01, 39-18005 (79 FR 67343, November 13, 2014).

    (c) Applicability

    This AD applies to PILATUS AIRCRAFT LTD. Models PC-12, PC-12/45, PC-12/47, and PC-12/47E airplanes, all manufacturer serial numbers (MSNs), certificated in any category.

    (d) Subject

    Air Transport Association of America (ATA) Code 5: Time Limits.

    (e) Reason

    This AD was prompted by mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as a need to incorporate new revisions into the Limitations section, Chapter 4, of the FAA-approved maintenance program (e.g., maintenance manual). The limitations were revised to include repetitive inspections of the main landing gear (MLG) attachment bolts. These actions are required to ensure the continued operational safety of the affected airplanes.

    (f) Actions and Compliance

    Unless already done, do the actions in paragraphs (f)(1) through (6) of this AD:

    (1) Before further flight after October 5, 2016 (the effective date of this AD), insert the following revisions into the Limitations section of the FAA-approved maintenance program (e.g., maintenance manual):

    (i) STRUCTURAL, COMPONENT AND MISCELLANEOUS—AIRWORTHINESS LIMITATIONS, Data module code 12-A-04-00-00-00A-000A-A, dated July 12, 2016, of the Pilatus Model type—PC-12, PC-12/45, PC-12/47, Aircraft Maintenance Manual (AMM), Document No. 02049, 12-A-AM-00-00-00-I, revision 32, dated July 18, 2016; and

    (ii) STRUCTURAL AND COMPONENT LIMITATIONS—AIRWORTHINESS LIMITATIONS, Data module code 12-B-04-00-00-00A-000A-A, dated July 19, 2016, of the Pilatus Model type—PC-12/47E MSN-1001-UP, Aircraft Maintenance Manual (AMM), Document No. 02300, 12-B-AM-00-00-00-I, revision 15, dated July 30, 2016.

    (2) The new limitations section revisions listed in paragraphs (f)(1)(i) and (ii) of this AD specify the following:

    (i) Establish inspections of the MLG attachment bolts,

    (ii) Specify replacement of components before or upon reaching the applicable life limit, and

    (iii) Specify accomplishment of all applicable maintenance tasks within certain thresholds and intervals.

    (3) Only authorized Pilatus Service Centers can do the Supplemental Structural Inspection Document (SSID) as required by the documents in paragraphs (f)(1)(i) and (ii) of this AD because deviations from the type design in critical locations could make the airplane ineligible for this life extension.

    (4) If no compliance time is specified in the documents listed in paragraphs (f)(1)(i) and (ii) of this AD when doing any corrective actions where discrepancies are found as required in paragraph (f)(2)(iii) of this AD, do these corrective actions before further flight after doing the applicable maintenance task.

    (5) During the accomplishment of the actions required in paragraph (f)(2) of this AD, including all subparagraphs, if a discrepancy is found that is not identified in the documents listed in paragraphs (f)(1)(i) and (ii) of this AD, before further flight after finding the discrepancy, contact PILATUS AIRCRAFT LTD. at the address specified in paragraph (h) of this AD for a repair scheme and incorporate that repair scheme.

    (6) Before or upon accumulating 6 years time-in-service (TIS) on the MLG attachment bolts or within the next 3 months TIS after October 5, 2016 (the effective date of this AD), whichever occurs later, inspect the MLB attachment bolts for cracks and corrosion and before further flight take all necessary corrective actions.

    (g) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, Standards Office, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Send information to ATTN: Doug Rudolph, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: (816) 329-4059; fax: (816) 329-4090; email: [email protected]

    (i) Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector (PI) in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO.

    (ii) AMOCs approved for AD 2014-22-01, 39-18005 (79 FR 67343, November 13, 2014) are not approved as AMOCs for this AD.

    (2) Airworthy Product: For any requirement in this AD to obtain corrective actions from a manufacturer or other source, use these actions if they are FAA-approved. Corrective actions are considered FAA-approved if they are approved by the State of Design Authority (or their delegated agent). You are required to assure the product is airworthy before it is returned to service.

    (h) Related Information

    Refer to MCAI European Aviation Safety Agency (EASA) AD No. 2016-0083, dated April 28, 2016, for related information. You may examine the MCAI on the Internet at https://www.regulations.gov/document?D=FAA-2016-7003-0002. For service information related to this AD, contact PILATUS AIRCRAFT LTD., Customer Service Manager, CH-6371 STANS, Switzerland; telephone: +41 (0) 41 619 33 33; fax: +41 (0) 41 619 73 11; Internet: http://www.pilatus-aircraft.com or email: [email protected] You may review copies of the referenced service information at the FAA, Small Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For information on the availability of this material at the FAA, call (816) 329-4148.

    Issued in Kansas City, Missouri, on August 23, 2016. David R. Showers, Acting Manager, Small Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20828 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-8851; Directorate Identifier 2016-NM-070-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for all Airbus Model A330-200 Freighter, -200, and -300 series airplanes; and Airbus Model A340-500, and -600 series airplanes. This proposed AD was prompted by reports that non-conforming aluminum alloy was used to manufacture several structural parts on the inboard flap. This proposed AD would require identification of the potentially affected inboard flap parts, a one-time eddy current inspection to identify which material the parts are made of, and depending on findings, replacement with serviceable parts. We are proposing this AD to detect and correct structural parts of inboard flaps made of nonconforming aluminum alloy, which could result in reduced structural integrity of the airplane.

    DATES:

    We must receive comments on this proposed AD by October 17, 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: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this NPRM, contact Airbus SAS, Airworthiness Office—EAL, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 45 80; 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.

    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-2016-8851; 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 proposed 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:

    Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1138; fax: 425-227-1149.

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-8851; Directorate Identifier 2016-NM-070-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

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

    Discussion

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2016-0082, dated April 27, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition all Airbus Model A330-200 Freighter, -200, and -300 series airplanes; and Airbus Model A340-500, and -600 series airplanes. The MCAI states:

    Following an Airbus quality control review on the final assembly line, it was discovered that non-conforming aluminium alloy was used to manufacture several structural parts on the inboard flap.

    This condition, if not detected and corrected, could reduce the structural integrity of the aeroplane.

    To address this potential unsafe condition, Airbus issued Service Bulletin (SB) A330-57-3120 and SB A340-57-5036 to provide instructions to identify and inspect the potentially affected parts.

    For the reasons described above, this [EASA] AD requires identification of the potentially affected inboard flap parts, a one-time Special Detailed Inspection (SDI) [eddy current measurement] to identify which material they are made of and, depending on findings, replacement with serviceable parts.

    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-2016-8851.

    Related Service Information Under 1 CFR Part 51

    We reviewed Airbus Service Bulletin A330-57-3120, dated September 18, 2015; and Airbus Service Bulletin A340-57-5036, dated September 18, 2015. The service information describes procedures for inspecting inboard flaps using eddy current inspection methods. 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 Proposed 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 proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    Costs of Compliance

    We estimate that this proposed AD affects 31 airplanes of U.S. registry.

    We estimate the following costs to comply with this proposed AD:

    Estimated Costs Action Labor cost Parts cost Cost per
  • product
  • Cost on U.S. operators
    Inspection 5 work-hours × $85 per hour = $425 $0 $425 $13,175

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

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Remove and Replace Flap 60 work-hours × $85 per hour = $5,100 Unavailable $5,100

    According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. The cost of purchasing a flap spare is not available. As a result, we have included only labor 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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

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

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

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

    3. Will not affect intrastate aviation in Alaska; and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): Airbus: Docket No. FAA-2016-8851; Directorate Identifier 2016-NM-070-AD. (a) Comments Due Date

    We must receive comments by October 17, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Airbus Model A330-223F and -243F airplanes; A330-201, -202, -203, -223, and -243 airplanes; A330-301, -302, -303, -321, -322, -323, -341, -342, and -343 airplanes; A340-541 airplanes; and A340-642 airplanes; certificated in any category, all manufacturer serial numbers.

    (d) Subject

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

    (e) Reason

    This AD was prompted by reports that nonconforming aluminum alloy was used to manufacture several structural parts on the inboard flap. We are issuing this AD to detect and correct structural parts of inboard flaps made of nonconforming aluminum alloy, 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) Inboard Flap Serial Number Identification

    Within 24 months after the effective date of this AD: Inspect each left-hand (LH) and right-hand (RH) inboard flap, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A330-57-3120, dated September 18, 2015; and Airbus Service Bulletin A340-57-5036, dated September 18, 2015; as applicable; to identify the serial number. A review of airplane delivery and maintenance records is acceptable in lieu of inspecting the inboard flaps, provided those records can be relied upon for that purpose and the serial number of the affected parts can be conclusively identified from that review. The serial numbers of affected inboard flaps are identified in figure 1 to paragraph (g) of this AD.

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

    Airbus Service Bulletin A330-57-3120, dated September 18, 2015; and Airbus Service Bulletin A340-57-5036, dated September 18, 2015; list the serial numbers of potentially affected LH and RH inboard flaps and the corresponding airplane serial number on which these parts were installed during production. The airplane serial number list is for information only, as it cannot be excluded that a potentially affected inboard flap has been removed from an airplane and later re-installed on another airplane.

    Figure 1 to Paragraph (g) of This AD—Affected Flap Serial Numbers (s/n) Date of first operation LH s/n RH s/n Date of first operation LH s/n RH s/n Date of first operation LH s/n RH s/n 29/09/10 11004 11004 28/02/11 11202 11201 19/12/12 11349 11349 21/07/09 11030 11028 22/02/11 11198 11202 17/12/12 11352 11352 17/08/09 11034 11002 07/03/11 11203 11203 15/11/12 11353 11353 21/05/10 11031 11031 30/03/11 11204 11204 30/10/12 11354 11354 09/08/10 11071 11071 31/05/11 11205 11229 22/10/12 11355 11355 10/07/09 11033 11057 15/03/11 11206 11206 31/10/12 11383 11357 06/08/10 11036 11098 24/03/11 11208 11208 30/10/12 11380 11356 29/07/09 11035 11035 04/04/11 11209 11209 26/11/12 11359 11393 19/08/09 11057 11036 22/03/11 11210 11210 30/11/12 11361 11361 23/12/09 11037 11033 23/03/11 11211 11213 16/11/12 11358 11358 14/09/09 11038 11038 24/03/11 11212 11212 30/11/12 11325 11360 17/09/10 11042 11039 14/04/11 11213 11214 12/12/12 11399 11365 23/09/09 11040 11040 14/04/11 11229 11215 26/11/12 11362 11362 11/09/09 11041 11041 11/04/11 11215 11217 09/11/12 11363 11363 12/05/10 11046 11042 06/04/11 11216 11216 30/11/12 11364 11364 01/10/09 11043 11043 12/04/11 11217 11219 23/11/12 11365 11368 01/10/09 11044 11044 15/04/11 11218 11218 07/12/12 11366 11366 08/09/09 11047 11045 04/05/11 11219 11221 06/12/12 11367 11367 07/09/09 11049 11046 29/04/11 11220 11220 19/12/12 11368 11370 18/09/09 1970 11047 11/05/11 11238 11222 11/12/12 11369 11369 30/09/09 11048 11048 13/05/11 11222 11223 21/12/12 11370 11372 26/10/09 11055 11049 06/05/11 11223 11224 13/12/12 11372 11375 03/09/10 11051 11051 19/05/11 11224 11225 20/12/12 11373 11373 30/10/09 11054 11054 19/05/11 11225 11205 21/12/12 11374 11374 19/11/09 11053 11053 29/06/11 11226 11226 16/01/13 11375 11377 28/10/10 11008 11019 25/05/11 11227 11227 11/01/13 11376 11376 27/10/09 11015 11055 16/05/11 11228 11228 15/01/13 11377 11350 28/10/09 11059 11059 10/06/11 11092 11092 05/02/13 11378 11381 29/10/09 11060 11060 23/11/11 11231 11231 25/01/13 11379 11379 16/11/10 11063 11063 08/07/11 11232 11232 18/01/13 11382 11380 23/12/09 11061 11061 23/06/11 11234 11234 22/03/13 11381 11382 23/11/09 11066 11066 22/06/11 11233 11233 27/02/13 11371 11371 03/11/10 11070 11070 24/06/11 11237 11237 08/03/13 11385 11383 30/11/09 11065 11065 15/06/11 11235 11235 06/02/13 11384 11384 30/11/09 11032 11032 01/07/11 11236 11236 05/02/13 11386 11385 18/11/09 11067 11067 12/07/11 11239 11239 19/02/13 11406 11389 17/12/09 11072 11072 25/11/11 11115 11115 16/03/13 11387 11387 24/11/09 11074 11074 29/07/11 11240 11240 25/02/13 11388 11388 17/09/10 11147 11147 06/10/11 11243 11243 15/02/13 11390 11390 23/12/09 11095 11095 29/07/11 11244 11241 25/02/13 11392 11392 10/12/09 11075 11075 03/08/11 11245 11245 01/03/13 11391 11403 07/12/09 11076 11076 29/08/11 11246 11244 01/03/13 11394 11394 23/12/09 11077 11077 22/08/11 11247 11247 11/03/13 11393 11395 22/12/09 11069 11069 20/12/11 11248 11246 08/03/13 11397 11397 07/12/09 11079 11079 30/08/11 11249 11249 14/03/13 11395 11399 19/01/10 11078 11078 25/08/11 11136 11248 18/03/13 11396 11396 11/02/10 11081 11081 06/09/11 11250 11250 18/03/13 11356 11400 26/03/10 11080 11080 27/09/11 11252 11254 28/03/13 11398 11398 28/01/10 11082 11082 28/09/11 11221 11251 22/03/13 11401 11401 28/01/10 11084 11084 15/09/11 11214 11255 09/04/13 11400 11402 04/02/10 11098 11030 20/10/11 11266 11256 21/03/13 11404 11404 29/01/10 11085 11085 19/12/11 11258 11258 09/04/13 11402 11405 05/02/10 11039 11037 19/10/11 11255 11259 26/04/13 11403 11407 29/03/10 11086 11086 10/11/11 11259 11260 15/04/13 11360 11406 09/03/10 11087 11087 05/10/11 11261 11261 11/04/13 11407 11408 15/04/10 11088 11088 17/10/11 11260 11263 19/04/13 11409 11409 16/04/10 11089 11089 10/11/11 11254 11252 24/04/13 11410 11410 29/03/10 11090 11090 17/11/11 11262 11262 19/04/13 11411 14411 11/06/10 11091 11091 16/11/11 11263 11264 22/04/13 11408 11412 22/06/11 11230 11230 16/11/11 11264 11265 26/04/13 11413 11413 23/03/10 11093 11093 25/11/11 11265 11266 30/04/13 11414 11414 23/02/10 11094 11094 28/11/11 11267 11267 22/04/13 11412 11415 24/03/10 11073 11073 05/12/11 11268 11268 15/07/13 11416 11416 31/03/10 11096 11096 29/11/11 11270 11270 17/05/13 11405 11417 16/03/10 11097 11097 06/12/11 11271 11271 28/05/13 11415 11418 10/03/10 11101 11101 12/12/11 11272 11272 23/05/13 11419 11419 15/03/10 11099 11099 07/12/11 11275 11275 17/05/13 11417 11421 23/03/10 11100 11100 14/12/11 11269 11269 30/05/13 11418 11420 16/06/10 11105 11105 15/12/11 11274 11274 30/05/13 11357 11386 07/12/10 11102 11130 12/12/11 11276 11276 27/05/13 11420 11422 13/04/10 11106 11106 11/01/12 11279 11279 13/06/13 11421 11423 27/04/10 11104 11104 20/01/12 11278 11278 04/06/13 11424 11424 30/04/10 11103 11103 19/01/12 11164 11164 17/06/13 11426 11378 07/04/10 11108 11108 12/01/12 11277 11277 10/06/13 11423 11427 16/04/10 11133 11133 19/01/12 11280 11281 27/06/13 11428 11428 10/05/10 11114 11114 23/01/12 11298 11282 20/06/13 11425 11425 10/05/10 11110 11110 17/01/12 11282 11284 27/06/13 11429 11426 06/05/10 11116 11116 30/01/12 11283 11283 21/06/13 11427 11429 27/05/10 11112 11112 01/02/12 11284 11285 01/07/13 11434 11434 13/07/11 11241 11238 24/02/12 11286 11286 01/07/13 11432 11432 11/05/10 11111 11034 17/02/12 11285 11287 23/07/13 11430 11430 17/06/10 11118 11118 29/02/12 11287 11289 31/07/13 11431 11431 09/06/10 11120 11120 22/02/12 11288 11288 19/07/13 11436 11436 16/07/10 11122 11122 23/02/12 11289 11291 12/07/13 11433 11433 06/07/10 11123 11123 24/02/12 11290 11290 01/08/13 11437 11437 21/05/10 11124 11124 21/02/12 11291 11293 15/07/13 11435 11435 12/07/10 11126 11126 04/04/12 11292 11292 19/07/13 11438 11316 28/06/10 11127 11127 05/04/12 11293 11294 13/11/13 11440 11438 18/06/10 11129 11129 20/03/12 11294 11296 06/08/13 11441 11441 22/06/10 11130 11102 09/03/12 11295 11295 02/08/13 11439 11439 24/09/10 11135 11135 30/03/12 11296 11298 05/08/13 11442 11440 25/06/10 11132 11132 29/03/12 11297 11297 09/08/13 11443 11391 26/07/10 E11006 11111 16/03/12 11299 11175 27/08/13 11446 11442 23/07/10 11138 11138 29/03/12 11300 11300 19/08/13 11447 11443 14/09/11 11251 11136 18/04/12 11281 11301 04/09/13 11444 11444 15/07/10 11062 11062 12/04/12 11302 11180 03/09/13 11445 11445 23/07/10 11141 11141 26/04/12 11301 11303 25/09/13 11449 11446 23/08/10 11145 11145 20/04/12 11303 11306 13/09/13 11450 11447 27/08/10 11117 11117 24/04/12 11304 11307 29/10/13 11448 11448 13/08/10 11146 11146 27/04/12 11305 11305 26/09/13 11453 11449 13/09/10 11149 11149 25/04/12 11306 11308 02/12/13 11454 11450 27/09/10 11150 11150 26/04/12 11307 11196 25/09/13 11451 11451 14/11/11 11148 11148 14/05/12 11308 11310 25/09/13 11472 11464 17/09/10 11151 11151 10/05/12 11310 11312 27/09/13 11457 11453 28/09/10 11107 11107 11/05/12 11312 11317 28/10/13 11458 11454 27/09/10 11159 11159 09/05/12 11309 11299 22/10/13 11456 11455 25/10/10 11153 11153 25/05/12 11311 11311 11/10/13 11455 11456 29/09/10 11155 11155 29/05/12 11313 11313 25/10/13 11459 11459 08/10/10 11156 11156 31/05/12 11314 11314 20/11/13 11460 11458 13/10/10 11157 11157 28/06/12 11317 11315 17/10/13 11461 11461 15/10/10 11168 11168 15/06/12 11316 11336 21/10/13 11462 11460 13/10/10 11186 11160 15/06/12 11318 11318 23/10/13 11463 11463 22/10/10 11161 11161 31/05/12 11319 11319 05/11/13 11465 11462 22/10/10 11163 11163 18/06/12 11320 11320 04/11/13 11466 11466 25/01/12 11256 11280 22/06/12 11321 11321 13/11/13 11452 11473 22/11/10 11165 11165 19/07/12 11322 11322 04/11/13 11389 11465 10/11/10 11167 11167 29/06/12 11323 11323 22/11/13 11468 11457 02/12/10 1960 1960 11/07/12 11324 11324 27/11/13 11467 11467 15/11/10 11169 11169 26/06/12 11348 11325 11/12/13 11470 11468 30/11/10 11178 11170 09/07/12 11326 11326 18/11/13 11469 11469 10/11/10 11171 11171 03/07/12 11327 11327 02/12/13 11474 11470 30/11/10 11183 11172 12/07/12 11328 11328 02/12/13 11471 11471 26/11/10 11173 11173 16/07/12 11329 11329 30/12/13 11503 11488 14/12/10 11174 11174 24/08/12 11330 11330 16/12/13 11476 11474 15/06/12 11175 11302 13/07/12 11331 11331 16/12/13 11477 11477 19/11/10 11177 11177 23/07/12 11332 11332 06/12/13 11475 11475 23/12/10 11172 11178 29/08/12 11333 11333 03/12/13 11479 11476 11/04/12 11315 11304 10/08/12 11334 11334 09/12/13 11480 11480 16/12/10 11181 11181 23/07/12 11335 11335 09/12/13 11478 11489 15/12/10 11184 11183 30/08/12 11337 11337 09/12/13 11481 11481 15/12/10 11187 11184 30/07/12 11336 11309 17/12/13 11482 11482 14/01/11 11188 11188 31/08/12 11180 11339 09/01/14 11483 11483 25/01/11 11189 11187 18/09/12 11340 11340 21/01/14 11484 11484 21/01/11 11160 11189 30/11/12 11339 11341 27/02/14 11486 11486 12/01/11 11190 11190 12/09/12 11341 11343 27/01/14 11487 11487 25/01/11 11192 11186 15/10/12 11343 11345 17/01/14 11485 11485 07/02/11 11191 11191 17/09/12 11346 11347 31/01/14 11489 11490 07/02/11 11193 11192 28/09/12 11345 11344 14/01/14 11490 11491 18/02/11 11195 11193 09/10/12 11342 11342 29/01/14 11488 11492 24/02/11 11196 11195 24/09/12 11344 11346 30/01/14 11492 11493 25/02/11 11199 11211 15/10/12 11347 9015 24/01/14 11493 11479 25/02/11 11200 11198 21/09/12 11338 11348 27/02/14 11491 11494 21/02/11 11201 11199 19/10/12 11350 11359 16/06/14 11495 11495 14/02/11 11170 11200 17/10/12 11351 11351 14/02/14 11498 11498 (h) Eddy Current Conductivity Measurement

    For each affected inboard flap, within 6 years after the effective date of this AD, or within 12 years after the date of the flap first operation, whichever occurs first, accomplish an eddy current conductivity measurement, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A330-57-3120, dated September 18, 2015; or Airbus Service Bulletin A340-57-5036, dated September 18, 2015; as applicable.

    Note 2 to paragraph (h) of this AD:

    The date of first operation is shown in figure 1 to paragraph (g) of this AD as day, month, year (dd/mm/yy).

    (i) Replacement

    If a part manufactured from non-conforming material is detected during the eddy current inspection required by paragraph (h) of this AD, within 30 days after doing the eddy current inspection, replace the affected part 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).

    (j) Parts Installation Limitation

    As of the effective date of this AD, an inboard flap may be installed on any airplane, provided the part is a serviceable part. A serviceable part is:

    (1) A part that is not listed by serial number in figure 1 to paragraph (g) of this AD; or

    (2) A part that has a serial number listed in figure 1 to paragraph (g) of this AD, but which has passed an eddy current conductivity measurement in accordance with the Accomplishment Instructions of Airbus Service Bulletin A330-57-3120, dated September 18, 2015; or Airbus Service Bulletin A340-57-5036, dated September 18, 2015; as applicable.

    (k) 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: Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1138; 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 European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.

    (3) Required for Compliance (RC): 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.

    (l) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2016-0082, dated April 27, 2016, 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-2016-8851.

    (2) For service information identified in this AD, contact Airbus SAS, Airworthiness Office—EAL, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 45 80; email: [email protected]; Internet: http://www.airbus.com. 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.

    Issued in Renton, Washington, on August 18, 2016. Dorr M. Anderson, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-20696 Filed 8-30-16; 8:45 am] BILLING CODE 4910-13-P
    SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 229 [Release No. 33-10198; 34-78687; File No. S7-18-16] Request for Comment on Subpart 400 of Regulation S-K Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance Matters AGENCY:

    Securities and Exchange Commission.

    ACTION:

    Request for comment.

    SUMMARY:

    The Commission is requesting public comment on certain disclosure requirements in Regulation S-K relating to management, certain security holders, and corporate governance matters contained in Subpart 400. This request is part of an initiative by the Division of Corporation Finance to review the disclosure requirements in Regulation S-K to consider ways to improve them for the benefit of investors and registrants. Comments received in response to this request for comment will also inform the Commission's study on Regulation S-K, which is required by Section 72003 of the Fixing America's Surface Transportation Act (“FAST Act”).

    DATES:

    Comments should be received on or before October 31, 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/other.shtml); or

    • Send an email to [email protected] Please include File Number S7-18-16 in 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 S7-18-16. This file number should be included in the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Web site (http://www.sec.gov/rules/other.shtml). Comments also are 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 10:00 a.m. and 3:00 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. FOR FURTHER INFORMATION CONTACT:

    Eduardo A. Aleman, Special Counsel, Office of Rulemaking, Division of Corporation Finance, at (202) 551-3430, 100 F Street NE., Washington, DC 20549.

    SUPPLEMENTARY INFORMATION:

    Background and Discussion

    Over the years, the Commission has evaluated its disclosure regime and engaged periodically in rulemakings designed to enhance its disclosure and registration requirements.1 Most recently, the Commission published a concept release to seek public comment on modernizing certain business and financial disclosure requirements in Regulation S-K.2 The purpose of the Regulation S-K Concept Release is to assess whether the business and financial disclosure requirements in Regulation S-K continue to provide the information that investors need to make informed investment and voting decisions. The Regulation S-K Concept Release focuses on the business and financial disclosures that registrants provide in their periodic reports, which are a subset of the disclosure requirements in Regulation S-K, because many of them have changed little since they were first adopted and are often the foundation of the disclosures investors look to when making investment decisions. These requirements have also been revisited by the Commission or the staff less frequently in the recent past than other disclosure requirements in Regulation S-K, such as executive compensation and governance contained in Subpart 400 of Regulation S-K.3 Last year, the Commission also published a request for comment to seek public input about the financial disclosure requirements in Regulation S-X for certain entities other than a registrant.4

    1 For a summary of the relevant history and background of Regulation S-K, see Business and Financial Disclosure Required by Regulation S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23916 (Apr. 22, 2016)] (“Regulation S-K Concept Release”).

    2See id.

    3See, e.g., Executive Compensation and Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 FR 53157 (Sept. 8, 2006)]; Proxy Disclosure Enhancements, Release No. 33-9089 (Dec. 16, 2009) [74 FR 68333 (Dec. 23, 2009)]; Staff Observations in the Review of Executive Compensation Disclosure, Division of Corporation Finance (Oct. 9, 2007), available at https://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm. As the Commission noted in the Regulation S-K Concept Release, the scope of that release does not include certain disclosure requirements for information other than business and financial disclosures, such as Subpart 400, which requires disclosure about management and certain security holders as well as corporate governance matters. See Regulation S-K Concept Release, supra note 1, at Section I, n. 4. This request for comment directly covers those subjects.

    4See Request for Comment on the Effectiveness of Financial Disclosures about Entities Other Than the Registrant, Release No. 33-9929 (Sept. 25, 2015) [80 FR 59083 (Oct. 1, 2015)].

    These efforts, in addition to this request for comment, are part of a comprehensive evaluation of the Commission's disclosure requirements recommended in the staff's Report on Review of Disclosure Requirements in Regulation S-K (“S-K Study”), which was mandated by Section 108 of the Jumpstart Our Business Startups Act (“JOBS Act”).5 As noted in the Regulation S-K Concept Release, based on the S-K Study's recommendation and at the request of the Chair, Commission staff initiated a comprehensive evaluation of the type of information our rules require registrants to disclose, how this information is presented, where and how this information is disclosed, and how the Commission can leverage technology as part of these efforts (collectively, “Disclosure Effectiveness Initiative”). Section 72003(a) of the FAST Act 6 also requires the Commission to carry out a study of the requirements contained in Regulation S-K.7 Specifically, Section 72003(a) requires that the study of Regulation S-K:

    5 Public Law 112-106, Sec. 108, 126 Stat. 306 (2012). Section 108 of the JOBS Act requires the Commission to conduct a review of Regulation S-K to determine how such requirements can be updated to modernize and simplify the registration process for emerging growth companies. The S-K Study is available at http://www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf. For a further discussion of the S-K Study, see the Regulation S-K Concept Release, supra note 1, at Section II.C.

    6 Public Law 114-94, Sec. 72003, 129 Stat. 1312 (2015).

    7 In conducting this study, the Commission is required to consult with the Investor Advisory Committee and the Advisory Committee on Small and Emerging Companies.

    • Determine how best to modernize and simplify such requirements in a manner that reduces the costs and burdens on issuers while still providing all material information;

    • Emphasize a company-by-company approach that allows relevant and material information to be disseminated to investors without boilerplate language or static requirements while preserving completeness and comparability of information across registrants; and

    • Evaluate methods of information delivery and presentation and explore methods for discouraging repetition and the disclosure of immaterial information.8

    8 Public Law 114-94, Sec. 72003, 129 Stat. 1312 (2015).

    Request for Comment

    The initiative to review the disclosure requirements in Regulation S-K is intended to result in recommendations and proposals that will improve our disclosure system for the benefit of investors and registrants. The purpose of this request for comment is to solicit public input on Subpart 400 of Regulation S-K, which requires certain disclosures about a registrant's management, certain security holders, and corporate governance matters.9 The input can include comments on existing requirements in these rules as well as on potential disclosure issues that commenters believe the rules should address.10 The comments received in response to this request for comment, as well as comments received in response to the Regulation S-K Concept Release, will inform the Commission in carrying out the study of Regulation S-K required by Section 72003(a) of the FAST Act.11

    9 17 CFR 229.401 et seq.

    10 For example, as noted in the Regulation S-K Concept Release, supra note 1, this could include industry-specific disclosure requirements, information about sustainability and governance matters, and additional instances in which scaled disclosure could be implemented.

    11 Comment letters received in response to this request for comment will be considered in connection with any future rulemaking related to the disclosure requirements in Subpart 400 of Regulation S-K. If the Commission proposes changes to these disclosure requirements the proposed changes will be subject to public notice and comment.

    • Item 401 of Regulation S-K generally requires certain disclosures about a registrant's directors, executive officers, promoters and control persons.12

    12 17 CFR 229.401.

    • Item 402 of Regulation S-K generally requires disclosure of all plan and non-plan compensation awarded to, earned by, or paid to a registrant's named executive officers and directors.13

    13 17 CFR 229.402. Item 402 also describes the disclosure requirements for certain categories of registrants such as foreign private issuers and smaller reporting companies. The Commission has a number of outstanding proposals related to executive compensation disclosure and listing requirements. See Disclosure of Hedging by Employees, Officers and Directors, Release No. 33-9723 (Feb. 9, 2015) [80 FR 8485 (Feb. 17, 2015)]; Pay Versus Performance, Release 34-74835 (Apr. 29, 2015) [80 FR 26329 (May 7, 2015)]; Listing Standards for Recovery of Erroneously Awarded Compensation, Release No. 33-9861 (July 1, 2015) [80 FR 41143 (July 14, 2015)]. This release requests comment on the disclosure requirements in Item 402 generally and is not intended to solicit specific comment on those proposals.

    • Item 403 of Regulation S-K generally requires a description of the security ownership of certain beneficial owners and management.14

    14 17 CFR 229.403.

    • Item 404 of Regulation S-K generally requires a description of certain transactions with related persons, promoters and certain control persons.15

    15 17 CFR 229.404.

    • Item 405 of Regulation S-K generally requires a registrant to identify certain persons who failed to file on a timely basis, as disclosed in certain forms, reports required by Section 16(a) of the Securities Exchange Act 16 during the most recent fiscal year or prior fiscal years.17

    16 15 U.S.C. 78p.

    17 17 CFR 229.405.

    • Item 406 of Regulation S-K generally requires disclosures about whether the registrant has adopted a code of ethics that applies to certain of the registrant's executive officers, or persons performing similar functions, and, if it has not adopted such a code of ethics, an explanation why it has not done so.18

    18 17 CFR 229.406.

    • Item 407 of Regulation S-K generally requires certain corporate governance disclosure about director independence, board meetings, various board committees (e.g., nominating, audit and compensation committees) and any process for shareholder communications.19

    19 17 CFR 229.407.

    In connection with the staff's continuing Disclosure Effectiveness Initiative and corresponding work on the FAST Act mandate, the Commission welcomes public comments on the issues that the staff should consider in conducting its review of Subpart 400 of Regulation S-K, including, among other things, how best to modernize and simplify these disclosure items in view of the objectives of the Regulation S-K study set forth in Section 72003 of the FAST Act and whether additional disclosures in these areas are necessary or appropriate to facilitate investor protection, to maintain fair, orderly, and efficient markets, and/or to facilitate capital formation. In addition to the substance of the disclosure requirements, the Commission welcomes comments on how information can be presented to improve its readability, navigability and comparability and how technology and structured data can facilitate data aggregation and analysis. All interested parties are invited to submit their views and any data, in writing, on any matter relating to Subpart 400 of RegulationS-K.

    By the Commission.

    Dated: August 25, 2016. Brent J. Fields, Secretary.
    [FR Doc. 2016-20906 Filed 8-30-16; 8:45 am] BILLING CODE 8011-01-P
    DEPARTMENT OF JUSTICE Drug Enforcement Administration 21 CFR Part 1308 [Docket No. DEA-442] Schedules of Controlled Substances: Temporary Placement of Mitragynine and 7-Hydroxymitragynine Into Schedule I AGENCY:

    Drug Enforcement Administration, Department of Justice.

    ACTION:

    Notice of intent.

    SUMMARY:

    The Administrator of the Drug Enforcement Administration is issuing this notice of intent to temporarily schedule the opioids mitragynine and 7-hydroxymitragynine, which are the main active constituents of the plant kratom, into schedule I pursuant to the temporary scheduling provisions of the Controlled Substances Act. This action is based on a finding by the Administrator that the placement of these opioids into schedule I of the Controlled Substances Act is necessary to avoid an imminent hazard to the public safety. Any final order will impose the administrative, civil, and criminal sanctions and regulatory controls applicable to schedule I controlled substances under the Controlled Substances Act on the manufacture, distribution, possession, importation, and exportation of, and research and conduct of instructional activities of these opioids.

    DATES:

    August 31, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Michael J. Lewis, Office of Diversion Control, Drug Enforcement Administration; Mailing Address: 8701 Morrissette Drive, Springfield, Virginia 22152; Telephone: (202) 598-6812.

    SUPPLEMENTARY INFORMATION:

    Any final order will be published in the Federal Register and may not be effective prior to September 30, 2016.

    Legal Authority

    The Drug Enforcement Administration (DEA) implements and enforces titles II and III of the Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended. 21 U.S.C. 801-971. Titles II and III are referred to as the “Controlled Substances Act” and the “Controlled Substances Import and Export Act,” respectively, and are collectively referred to as the “Controlled Substances Act” or the “CSA” for the purpose of this action. The DEA publishes the implementing regulations for these statutes in title 21 of the Code of Federal Regulations (CFR), chapter II. The CSA and its implementing regulations are designed to prevent, detect, and eliminate the diversion of controlled substances and listed chemicals into the illicit market while providing for the legitimate medical, scientific, research, and industrial needs of the United States. Controlled substances have the potential for abuse and dependence and are controlled to protect the public health and safety.

    Under the CSA, each controlled substance is classified into one of five schedules based upon its potential for abuse, its currently accepted medical use in treatment in the United States, and the degree of dependence the drug or other substance may cause. 21 U.S.C. 812. The initial schedules of controlled substances established by Congress are found at 21 U.S.C. 812(c), and the current list of all scheduled substances is published at 21 CFR part 1308.

    Section 201 of the CSA, 21 U.S.C. 811, provides the Attorney General with the authority to temporarily place a substance into schedule I of the CSA for two years without regard to the requirements of 21 U.S.C. 811(b) if she finds that such action is necessary to avoid an imminent hazard to the public safety. 21 U.S.C. 811(h)(1). In addition, if proceedings to control a substance are initiated under 21 U.S.C. 811(a)(1), the Attorney General may extend the temporary scheduling for up to one year. 21 U.S.C. 811(h)(2).

    Where the necessary findings are made, a substance may be temporarily scheduled if it is not listed in any other schedule under section 202 of the CSA, 21 U.S.C. 812, or if there is no exemption or approval in effect for the substance under section 505 of the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 355. 21 U.S.C. 811(h)(1). The Attorney General has delegated scheduling authority under 21 U.S.C. 811 to the Administrator of the DEA. 28 CFR 0.100.

    Background

    Section 201(h)(4) of the CSA, 21 U.S.C. 811(h)(4), requires the Administrator to notify the Secretary of the Department of Health and Human Services (HHS) of his intention to temporarily place a substance into schedule I of the CSA.1 The Administrator transmitted notice of his intent to place mitragynine and 7-hydroxymitragynine in schedule I on a temporary basis to the Assistant Secretary by letter dated May 6, 2016. The Assistant Secretary responded to this notice by letter dated May 18, 2016, and advised that based on review by the Food and Drug Administration (FDA), there are currently no investigational new drug applications or approved new drug applications for mitragynine and 7-hydroxymitragynine. The Assistant Secretary also stated that the HHS has no objection to the temporary placement of mitragynine and 7-hydroxymitragynine into schedule I of the CSA. Neither mitragynine nor 7-hydroxymitragynine is currently listed in any schedule under the CSA, and no approved new drug applications or investigational new drug applications for mitragynine or 7-hydroxymitragynine exist, 21 U.S.C. 355. The DEA has found that the control of mitragynine and 7-hydroxymitragynine in schedule I on a temporary basis is necessary to avoid an imminent hazard to public safety.

    1 As discussed in a memorandum of understanding entered into by the Food and Drug Administration (FDA) and the National Institute on Drug Abuse (NIDA), the FDA acts as the lead agency within the Department of Health and Human Services (HHS) in carrying out the Secretary's scheduling responsibilities under the CSA, with the concurrence of NIDA. 50 FR 9518, Mar. 8, 1985. The Secretary of the HHS has delegated to the Assistant Secretary for Health of the HHS the authority to make domestic drug scheduling recommendations. 58 FR 35460, July 1, 1993.

    To find that placing a substance temporarily into schedule I of the CSA is necessary to avoid an imminent hazard to the public safety, the Administrator is required to consider three of the eight factors set forth in section 201(c) of the CSA, 21 U.S.C. 811(c): the substance's history and current pattern of abuse; the scope, duration and significance of abuse; and what, if any, risk there is to the public health. 21 U.S.C. 811(h)(3). Consideration of these factors includes actual abuse, diversion from legitimate channels, and clandestine importation, manufacture, or distribution. 21 U.S.C. 811(h)(3).

    A substance meeting the statutory requirements for temporary scheduling may only be placed in schedule I. 21 U.S.C. 811(h)(1). Substances in schedule I are those that have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. 21 U.S.C. 812(b)(1).

    Mitragynine and 7-hydroxymitragynine, the Main Active Constituents of the Plant Kratom

    Mitragynine and 7-hydroxymitragynine are the main active constituents of the plant Mitragyna speciosa Korth (commonly known as kratom), an indigenous plant of Southeast Asia. Kratom is the only known species of Mitragyna to contain mitragynine and 7-hydroxymitragynine. Kratom is abused for its ability to produce opioid-like effects. Kratom is available in several different forms to include dried/crushed leaves, powder, capsules, tablets, liquids, and gum/resin. Consequently, kratom, which contains the main active constituents mitragynine and 7-hydroxymitragynine, is an increasingly popular drug of abuse and readily available on the recreational drug market in the United States. Attempted importations of kratom are routinely misdeclared and falsely labeled. This is similar to other attempts to import controlled substances or substances intended to mimic controlled substances. The amount of kratom material seized by law enforcement for the first half of 2016 greatly exceeds any previous year totals and easily accounts for millions of dosage units intended for the recreational market.2 Available data and information for mitragynine and 7-hydroxymitragynine, the main active constituents of the plant kratom, and the plant kratom, are summarized below. Available information indicates that these opioid substances, constituents of the plant kratom, have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. The DEA's three-factor analysis is available in its entirety under of the public docket of this action as a supporting document at www.regulations.gov under Docket Number DEA-442.

    2 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016.

    Factor 4. History and Current Pattern of Abuse

    Kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine, has a long history of use in Southeast Asia as an opium substitute. Kratom is also known in Southeast Asia as thang, thom, krathom, kakuam, ketum, and biak. In recent years, the presence of the psychoactive plant kratom has increased dramatically on the recreational market in the United States due to its opioid-like effects. Numerous vendors selling kratom have appeared in the past few years, markedly increasing its availability.

    Kratom preparations, which contain the main active alkaloids mitragynine and 7-hydroxymitragynine, are easily obtained from smoke shops and over the Internet. The Internet is the most utilized source for the purchase of kratom products, making kratom just “a click” away for users. In the United States, law enforcement has seized kratom/mitragynine products in the following forms: powder/plant, powder, plant or vegetable material, capsules, tablets, liquids, gum/resin, and drug patch.

    Since abusers obtain kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragyine, through unknown sources, the identity, purity, and quantity of these substances are uncertain and inconsistent, thus posing significant adverse health risks to users. Several studies have analyzed the concentrations of mitragynine 3 and/or 7-hydroxymitragynine 4 in different kratom products. The studies showed that there were inconsistencies in the levels of the opioid mitragynine present in similar kratom products, and some products contained other psychoactive substances (see 3-factor analysis). Based on the variability of the mitragynine concentration in each product, users may experience differing effects when consuming similar amounts of different products.

    3 Mitragynine is the most abundant alkaloid in kratom and constitutes about 66 percent of the total alkaloid content of the plant. The alkaloid content of mitragynine was 45 percent of all alkaloids detected during analyses performed. Such large relative differences in proportions of plant alkaloids (66%:45%) are common among plant species and will lead to variations in potency and the risk of overdose.

    4 7-Hydroxymitragynine is a more potent agonist than mitragynine although it only comprises about 1.6 percent of the total alkaloid content of the plant. The alkaloid content of 7-hydroxymitragynine was 4 percent of all alkaloids detected in analyses performed. Such large relative differences in proportions of plant alkaloids (4.0%:1.6%) are common among plant species and will lead to variations in potency and the risk of overdose.

    Evidence suggests that kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine, is abused individually, and with other psychoactive substances. In a 2016 publication, the Centers for Disease Control (CDC) characterized kratom exposures reported to poison centers and uploaded to the National Poison Data System (NPDS) 5 from January 2010 through December 2015. During the stated timeframe, U.S. poison centers received 660 calls related to kratom exposure. Of the calls reported, 487 (73.8%) reported intentional exposure to kratom, and 595 (90.2%) reported ingestion of the drug. In addition to reports of isolated exposures to kratom (428 (64.8%)), reports of kratom being used with other substances (ethanol, benzodiazepines, narcotics, acetaminophen, and other botanicals) were also recorded. Additionally, forensic laboratory analyses of drug evidence have identified kratom/mitragynine, along with synthetic cannabinoids and synthetic opioids during the analyses of products seized on the illicit market. The consumption of kratom individually, or in conjunction with alcohol or other drugs, is of serious concern as it can lead to severe adverse effects and death.

    5 The National Poison Data System (NPDS) is a national database of information logged by the country's regional poison centers serving all 50 United States, Puerto Rico and the District of Columbia. The NPDS is maintained by the American Association of Poison Control Centers. NPDS case records are the result of call reports made by users (i.e., self-reports), friends and family members, and health care providers.

    Kratom does not have an approved medical use in the United States and has not been studied as a treatment agent in the United States. Kratom has a history of being used as an opium substitute in Southeast Asia. Kratom has also been used to self-treat chronic pain and withdrawal symptoms from opioid use. Especially concerning, reports note users have turned to kratom as a replacement for other opioids, such as heroin.

    In the United States, kratom is misused to self-treat chronic pain and opioid withdrawal symptoms, with users reporting its effects to be comparable to prescription opioids. Users have also reported dose-dependent psychoactive effects to include euphoria, simultaneous stimulation and relaxation, analgesia, vivid dreams, and sedation (at higher doses). As noted in the actions by the United States Food and Drug Administration,6 kratom products have been encountered with false claims, an extremely concerning issue for public health and safety. These products are marketed as safe for self-medication, but have not been approved by the Food and Drug Administration (FDA) for any medical uses.

    6 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016.

    Information from the published literature, poison control centers data, and medical examiner data, suggests that kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine, is abused by a diverse population to include recreational opioid users, young adults, and adults. The most commonly described route of administration of kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine, is oral. The leaves are typically brewed and ingested as a tea; however, smoking, chewing the raw leaves (done traditionally), and ingestion of kratom capsules or resin extracts have also been reported.

    Factor 5. Scope, Duration and Significance of Abuse

    The abuse of kratom, containing the main active alkaloids mitragynine and 7-hydroxymitragynine, is increasing in the United States and remains extremely concerning for law enforcement and public health. As the abuse of the plant increases, as demonstrated by the increasing availability per border encounters,7 it has been noted that physicians should be aware of the kratom's adverse health effects, toxicity, dependence, and withdrawal .is.

    7 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016.

    Reports from law enforcement indicate that kratom is being imported for widespread distribution to the public within the United States.8 Between February 2014 and July 2016, over 55,000 kilograms (kg) of kratom material were encountered by law enforcement at various ports of entry within the United States.9 Additionally, over 57,000 kg of kratom material offered for import at numerous ports of entry, between 2014 and 2016, are awaiting an FDA admissibility decision.10 The amount of kratom currently seized or awaiting an admissibility decision by law enforcement, between 2014 and 2016, is enough to produce over 12 million doses of kratom.11 Such alarming quantities create an imminent public health and safety threat.

    8 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016. Represents Customs and Border Patrol (CBP) seizures from February 2014 through July 2016.

    9 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016. Represents Customs and Border Patrol (CBP) seizures from February 2014 through July 2016.

    10 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016.

    11 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016. Assuming a high dose of 9 g of kratom.

    According to press announcements released in 2014 and 2016, the FDA requested the seizure, by US Marshals, of more than 25,000 pounds of raw kratom material, nearly 90,000 bottles of dietary supplements labeled as containing kratom, and over 100 cases of products labeled as kratom, respectively.12 The FDA stated that kratom products “pose a risk to the public health and have the potential for abuse” and the seizure of certain kratom products was necessary “to safeguard the public from a dangerous product”.13 The FDA has also warned the public not to use any products labeled as containing kratom due to serious concerns about toxicity and potential health impacts.14 To further protect the public health and safety from the large influx of kratom materials, the FDA issued and updated two import alerts related to numerous kratom and kratom-containing products.15 These import alerts allow for detention without physical examination of dietary supplements and bulk ingredients that are or contain kratom, and detention without physical examination of unapproved new drugs promoted in the United States, which includes kratom products that make false health claims. Since 2014, 121 firms have been added to these import alerts for importing kratom products.16

    12 Relevant press release can be found online at: www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm416318.htm; http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm480344.htm; and http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm515085.htm.

    13 Relevant press release can be found online at: www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm416318.htm.

    14 Relevant press release can be found online at: http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm515085.htm.

    15 Relevant Import alerts (#'s 54-15 and 66-41) can be found online at: www.accessdata.fda.gov/cms_ia/importalert_1137.html.and www.accessdata.fda.gov/cms_ia/importalert_190.html.

    16 2015-CDER-DEA Memorandum of Understanding for sharing information (Provided under 21 CFR 20.85) dated August 4, 2016.

    Drug reports pertaining to the trafficking, distribution, and abuse of kratom/mitragynine 17 were analyzed by Federal, State, and local forensic laboratories.18 According to data from the System to Retrieve Information from Drug Evidence (STRIDE) and STARLiMS (a web-based, commercial laboratory information management system), from January 2006 through March 2016, there were 293 records for kratom and/or mitragynine. From January 2010 through May 2016, the National Forensic Laboratory Information System (NFLIS) registered 720 reports containing mitragynine (See 3-Factor analysis). NFLIS and STRIDE/STARLiMS records/reports were reported across 43 States, thus showing the widespread abuse and trafficking of kratom/mitragynine.19 The presence of these substances during drug evidence analyses demonstrates the presence of these substances on the recreational drug market.

    17 Mitrgynine is used to confirmatively identify plant material as kratom.

    18 While law enforcement data is not direct evidence of abuse, it can lead to an inference that a drug has been diverted and abused.

    19 STRIDE, STARLiMS, and NFLIS data reflect data reported by the forensic laboratory systems. Encounters reported in these systems, and the overall number of seizures, may be low because kratom/mitragynine is not federally controlled under the CSA. Typically, after control, these numbers will increase.

    Growing concern over the use of kratom is reflected in the increased requests for analyses of mitragynine and 7-hydroxymitragynine in human toxicology panels (blood/urine samples) 20 to private analytical laboratories.21 These analyses have been requested by addiction treatment facilities/pain management doctors, drug courts, medical examiner/coroner offices, drug testing facilities, state laboratory systems, state police department, and private entities.22 The number of positive results from these analyses increased as follows: 31 positive results from August 2012 to July 2013 for mitragynine and/or 7-hydroxymitragynine; 23 274 positive results for mitragynine between July 2013 and May 2014; 24 555 positive results for mitragynine between December 2014 and March 2016.25 The increasing trend in the number of positive results from these analyses demonstrates the growing abuse and popularity of these substances and the concern related to the abuse of this plant material and its psychoactive constituents.

    20 The quantitative values for mitragynine and 7-hydroxymitragynine were not available for all positive results shown.

    21 Substances are tested as part of a toxicology panel that includes illicit or commonly abused substances routinely analyzed.

    22 Email correspondences with analytical laboratories in Willow Grove, PA, Clearwater, FL, and Santa Rosa, CA.

    23 Located in Willow Grove, PA, analyzed blood/urine samples from Canada and thirteen U.S. states. Correspondences on file with DEA.

    24 Located in Clearwater, FL, analyzed urine samples from multiple states across the U.S. Correspondences on file with DEA.

    25 Located in Santa Rosa, CA, analyzed urine samples from multiple states across the United States. Correspondences on file with DEA.

    Evidence from poison control centers in the United States also shows that there is an increase in the number of individuals abusing kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine. As such, there has been a steady increase in the reporting of kratom exposures by poison control centers. The American Association of Poison Control Centers identified two exposures to kratom between 2000 and 2005. Additionally, the Texas Poison Center Network (TPCN), which is comprised of six poison centers that service the State of Texas, reported 14 exposures to kratom between January 2009 and September 2013. Between January 2010 and December 2015 U.S. poison centers received 660 calls related to kratom exposure. During this time, there was a tenfold increase in the number of calls received, from 26 in 2010 to 263 in 2015.

    Furthermore, the abuse and addictive properties of kratom, which contains the main active alkaloids mitragynine, and 7-hydroxymitragynine, have prompted at least 15 countries,26 and 6 states and the District of Columbia to ban kratom, mitragynine and/or 7-hydroxymitragynine and two states within the United States,27 to place regulatory controls on these substances. Six other States within the United States have proposed to ban or place regulatory controls on these substances.28

    26 Z. Aziz, Kratom The Epidemiology, Use and Abuse, Addiction Potential, and Legal Status, in Kratom and Other Mitragynines The Chemistry and Pharmacology of Opioids from a Non-Opium Source 309-319 (Raffa, R.B., ed 2014); European Monitoring Center for Drugs and Drug Addiction, Drug Profiles: Kratom, www.emcdda.europa.eu/publications/drug-profiles/kratom (accessed 08/28/2013); Misuse of Drugs Act 1977 Order 2011 (S.I. No. 551/2011) (Ir.); Misuse of Drugs (Amendment Regulations 2011 (S.I. No. 552/2011) (Ir.).

    27 Alabama—Ala. Code § 20-2-23; Arkansas—Ark. Admin. Code 007.07.2; Illinois—IL ST CH 720 § 642/5; Indiana—IC 35-31.5-2-321; Louisiana—LA R.S. 40:989.3; Tennessee—T.C.A. § 39-17-452; Vermont—Vt. Admin. Code 12-5-23:4.0; Wisconsin—W.S.A. 961.14 and District of Columbia—22-B DC ADC § 1201.

    28 New Hampshire—2015 NH S.B. 540 and 2015 NH S.B. 540; New Jersey—2016 NJ A.B. 3281; New York—2015 NY A.B. 9121, 2015 NY A.B. 9068, 2015 NY A.B. 8670, and 2015 NY S.B. 6345; North Carolina—2015 NC H.B. 747 (NS) and 2015 NC S.B. 830 (NS); Florida—2016 FL S.B. 1182 and 2016 FL H.B. 73; and Kentucky—2016 KY S.B. 136.

    Internationally, the increased presence and abuse of kratom, containing the main active alkaloids mitragynine and 7-hydroxymitragynine, have garnered the attention of the International Narcotics Control Board (INCB).29 In a 2010 report, the INCB noted the increased interest in the recreational use of kratom. The INCB recommended that governments experiencing problems with persons trafficking or using kratom 30 recreationally should consider controlling kratom and kratom preparations at the national level, where necessary.

    29 The INCB is an independent monitoring body that is responsible for evaluating the implementation of the United Nations international drug controls conventions.

    30 Kratom was listed as a plant material containing psychoactive substances in the INCB report for which recommendations were made for specified plant materials.

    Factor 6. What, if Any, Risk There Is to the Public Health

    The use of kratom and associated products, which contains the main active alkaloids mitragynine and 7-hydroxymitragine, pose an imminent hazard to public safety. These substances produce opioid-like effects, making their abuse a serious public health concern. Information from published literature, public health officials, and poison control center data demonstrate that the use of kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragynine, has caused numerous adverse effects on users.

    In a 2016 publication, the CDC characterized kratom exposures reported to poison centers and uploaded to the NPDS from January 2010 through December 2015.31 These exposures resulted in medical outcomes that varied in severity, ranging from minor (having minimal signs or symptoms that resolved rapidly with no residual disability), moderate (having non-life threatening and no residual disability, but requiring some form of treatment), major (having life-threatening signs or symptoms with some residual disability), and death. Additionally, several adverse effects related to kratom exposure were reported, which include agitation or irritability, tachycardia, nausea, drowsiness, and hypertension. The severity of the reported outcomes, health effects, and increased use of kratom suggests an emerging public health threat.

    31 Calls from healthcare providers comprised a large portion of calls received, representing 75.2% of calls reported.

    Information from the scientific literature also demonstrates the health risks associated with kratom use. Reports of hepatotoxicity, psychosis, seizure, weight loss, insomnia, tachycardia, vomiting, poor concentration, hallucinations, and death associated with kratom use have been documented. Additionally, published case reports describe events where individuals sought medical care for the purported use of kratom. Some examples of the reported adverse events involving kratom exposure are described in the 3-factor analysis.

    Numerous deaths associated with kratom, which contains the main active constituents mitragynine and 7-hydroxymitragynine, have been reported indicating that this substance is a serious public health threat. In 2016, DEA has received correspondences from public/state officials which indicate that there were a significant number of overdoses and traffic fatalities directly, or indirectly, involving kratom.32 Deaths related to kratom exposure have been reported in the scientific literature beginning in 2009-2010, with a cluster of nine deaths in Sweden from use of the kratom product “Krypton”. Since then, five more deaths related to kratom exposure were reported in the scientific literature, and sixteen other deaths related to kratom exposure, have been confirmed by autopsy/medical examiner reports (mitragynine and/or 7-hydroxymitragynine were identified in biological samples).33 Of these deaths, 15 occurred between 2014 and 2016. This information demonstrates the severe risks associated with kratom misuse and the increasing occurrence of fatal outcomes related to kratom exposure. Details of some of these events are summarized in the 3-factor analysis.

    32 Correspondences on file with DEA (dated April 19, 2016).

    33 Autopsy/Medical Examiner (ME) reports on file with DEA.

    Since abusers obtain kratom, which contains the main active alkaloids mitragynine and 7-hydroxymitragyine, through unknown sources, the identity, purity, and quantity of these substances are uncertain and inconsistent, thus posing significant adverse health risks to users. According to the FDA, in a letter dated May 18, 2016, there are no approved new drug applications, or investigational new drug applications for mitragynine or 7-hydroxymitragynine. As such, kratom products have no accepted medical use within the United States. Despite FDA warnings, kratom products continue to be easily available and abused by diverse populations. Distributors of kratom are knowingly putting the public at risk. Unknown factors including detailed product analysis and dosage variations between various packages present a significant danger to an abusing individual. With no accepted medical use, the abuse of kratom, which contains mitragynine and 7-hydroxymitragynine, poses an imminent hazard to the public safety.

    Finding of Necessity of Schedule I Placement To Avoid Imminent Hazard to Public Safety

    In accordance with 21 U.S.C. 811(h)(3), based on the available data and information, summarized above, the continued uncontrolled manufacture, distribution, reverse distribution, importation, exportation, conduct of research and chemical analysis, possession, and abuse of mitragynine and 7-hydroxymitragynine pose an imminent hazard to the public safety. The DEA is not aware of any currently accepted medical uses for these substances in the United States. A substance meeting the statutory requirements for temporary scheduling, 21 U.S.C. 811(h)(1), may only be placed in schedule I. Substances in schedule I are those that have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. Available data and information for mitragynine and 7-hydroxymitragynine indicate that these substances have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. As required by section 201(h)(4) of the CSA, 21 U.S.C. 811(h)(4), the Administrator, through a letter dated May 6, 2016, notified the Assistant Secretary of the Department of Health and Human Services of the DEA's intention to temporarily place these substances in schedule I.

    Conclusion

    This notice of intent initiates an expedited temporary scheduling action and provides the 30-day notice pursuant to section 201(h) of the CSA, 21 U.S.C. 811(h). In accordance with the provisions of section 201(h) of the CSA, 21 U.S.C. 811(h), the Administrator considered available data and information, herein set forth the grounds for his determination that it is necessary to temporarily schedule mitragynine and 7-hydroxymitragynine in schedule I of the CSA, and finds that placement of these opioid substances into schedule I of the CSA is necessary in order to avoid an imminent hazard to the public safety.

    Because the Administrator hereby finds that it is necessary to temporarily place these opioids into schedule I to avoid an imminent hazard to the public safety, any subsequent final order temporarily scheduling these substances will be effective on the date of publication in the Federal Register, and will be in effect for a period of two years, with a possible extension of one additional year, pending completion of the regular scheduling process. 21 U.S.C. 811(h) (1) and (2). It is the intention of the Administrator to issue such a final order as soon as possible after the expiration of 30 days from the date of publication of this notice. Mitragynine and 7-hydroxymitragynine will then be subject to the regulatory controls and administrative, civil, and criminal sanctions applicable to the manufacture, distribution, reverse distribution, importation, exportation, research, conduct of instructional activities and chemical analysis, and possession of a schedule I controlled substance.

    The CSA sets forth specific criteria for scheduling a drug or other substance. Regular scheduling actions in accordance with 21 U.S.C. 811(a) are subject to formal rulemaking procedures done “on the record after opportunity for a hearing” conducted pursuant to the provisions of 5 U.S.C. 556 and 557. 21 U.S.C. 811. The regular scheduling process of formal rulemaking affords interested parties with appropriate process and the government with any additional relevant information needed to make a determination. Final decisions that conclude the regular scheduling process of formal rulemaking are subject to judicial review. 21 U.S.C. 877. Temporary scheduling orders are not subject to judicial review. 21 U.S.C. 811(h)(6).

    Regulatory Matters

    Section 201(h) of the CSA, 21 U.S.C. 811(h), provides for an expedited temporary scheduling action where such action is necessary to avoid an imminent hazard to the public safety. As provided in this subsection, the Attorney General may, by order, schedule a substance in schedule I on a temporary basis. Such an order may not be issued before the expiration of 30 days from (1) the publication of a notice in the Federal Register of the intention to issue such order and the grounds upon which such order is to be issued, and (2) the date that notice of the proposed temporary scheduling order is transmitted to the Assistant Secretary of HHS. 21 U.S.C. 811(h)(1).

    Inasmuch as section 201(h) of the CSA directs that temporary scheduling actions be issued by order and sets forth the procedures by which such orders are to be issued, the DEA believes that the notice and comment requirements of section 553 of the Administrative Procedure Act (APA), 5 U.S.C. 553, do not apply to this notice of intent. In the alternative, even assuming that this notice of intent might be subject to section 553 of the APA, the Administrator finds that there is good cause to forgo the notice and comment requirements of section 553, as any further delays in the process for issuance of temporary scheduling orders would be impracticable and contrary to the public interest in view of the manifest urgency to avoid an imminent hazard to the public safety.

    Although the DEA believes this notice of intent to issue a temporary scheduling order is not subject to the notice and comment requirements of section 553 of the APA, the DEA notes that in accordance with 21 U.S.C. 811(h)(4), the Administrator will take into consideration any comments submitted by the Assistant Secretary with regard to the proposed temporary scheduling order.

    Further, the DEA believes that this temporary scheduling action is not a “rule” as defined by 5 U.S.C. 601(2), and, accordingly, is not subject to the requirements of the Regulatory Flexibility Act (RFA). The requirements for the preparation of an initial regulatory flexibility analysis in 5 U.S.C. 603(a) are not applicable where, as here, the DEA is not required by section 553 of the APA or any other law to publish a general notice of proposed rulemaking.

    Additionally, this action is not a significant regulatory action as defined by Executive Order 12866 (Regulatory Planning and Review), section 3(f), and, accordingly, this action has not been reviewed by the Office of Management and Budget (OMB).

    This action 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. Therefore, in accordance with Executive Order 13132 (Federalism) it is determined that this action does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

    List of Subjects in 21 CFR Part 1308

    Administrative practice and procedure, Drug traffic control, Reporting and recordkeeping requirements.

    For the reasons set out above, the DEA proposes to amend 21 CFR part 1308 as follows:

    PART 1308—SCHEDULES OF CONTROLLED SUBSTANCES 1. The authority citation for part 1308 continues to read as follows: Authority:

    21 U.S.C. 811, 812, 871(b), unless otherwise noted.

    2. In § 1308.11, add paragraphs (h)(28) and (29) to read as follows:
    § 1308.11 Schedule I

    (h) * * *

    (28) Mitragynine (to include synthetic equivalents as well as mitragynine naturally contained in the plant of the genus and species name: Mitragyna speciosa Korth, also known as kratom) its isomers, esters, ethers, salts and salts of isomers, esters and ethers . . . (9823)

    (29) 7-Hydroxymitragynine (to include synthetic equivalents as well as 7-hydroxymitragynine naturally contained in the plant of the genus and species name: Mitragyna speciosa Korth, also known as kratom) its isomers, esters, ethers, salts and salts of isomers, esters and ethers . . . (9838)

    Dated: August 25, 2016. Chuck Rosenberg, Acting Administrator.
    [FR Doc. 2016-20803 Filed 8-30-16; 8:45 am] BILLING CODE 4410-09-P
    DEPARTMENT OF DEFENSE Office of the Secretary 32 CFR Part 199 [Docket ID: DOD-2012-HA-0146] RIN 0720-AB47 TRICARE; Reimbursement of Long Term Care Hospitals and Inpatient Rehabilitation Facilities AGENCY:

    Office of the Secretary, Department of Defense (DoD).

    ACTION:

    Proposed rule.

    SUMMARY:

    The Department of Defense, Defense Health Agency, is proposing to revise its reimbursement of Long Term Care Hospitals (LTCHs) and Inpatient Rehabilitation Facilities (IRFs). Proposed revisions are in accordance with the statutory provision at title 10, United States Code (U.S.C.), section 1079(i)(2) that requires TRICARE payment methods for institutional care be determined, to the extent practicable, in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under Medicare. Our regulation includes a definition for “Hospital, long-term (tuberculosis, chronic care, or rehabilitation).” This rule proposes to delete this definition and create separate definitions for “Long Term Care Hospital” and “Inpatient Rehabilitation Facility” in accordance with Centers for Medicare & Medicaid Services (CMS) classification criteria. Under TRICARE, LTCHs and IRFs (both freestanding rehabilitation hospitals and rehabilitation hospital units) are currently paid the lower of a negotiated rate (if they are a network provider) or billed charges (if they are a non-network provider). Although Medicare's reimbursement methods for LTCHs and IRFs are different, it is prudent to propose adopting both the Medicare LTCH and IRF Prospective Payment System (PPS) methods simultaneously to align with our statutory requirement to utilize the same reimbursement system as Medicare. This proposed rule sets forth the proposed regulation modifications necessary for TRICARE to adopt Medicare's LTCH and IRF Prospective Payment Systems and rates applicable for inpatient services provided by LTCHs and IRFs to TRICARE beneficiaries.

    DATES:

    Written comments received at the address indicated below by October 31, 2016 will be accepted.

    ADDRESSES:

    You may submit comments, identified by docket number or Regulatory Information Number (RIN) and title, by either of the following methods:

    The Web site: http://www.regulations.gov. Follow the instructions for submitting comments.

    Mail: Department of Defense, Deputy Chief Management Officer, Directorate for Oversight and Compliance, 4800 Mark Center Drive, ATTN: Box 24, Alexandria, VA 22350-1700.

    Instructions: All submissions received must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the Internet at http://www.regulations.gov as they are received without change, including any personal identifiers or contact information.

    FOR FURTHER INFORMATION CONTACT:

    Sharon Seelmeyer, Defense Health Agency (DHA), Medical Benefits and Reimbursement Section, telephone (303) 676-3690.

    SUPPLEMENTARY INFORMATION: I. Executive Summary A. Purpose of the Proposed Rule 1. Long Term Care Hospitals (LTCHs)

    This rule publishes TRICARE's proposed modifications to our regulation that are necessary to adopt the Medicare LTCH Prospective Payment System and rates. This is in accordance with the statutory requirement that for TRICARE institutional services “payments shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under [Medicare].” Medicare pays LTCHs using a LTCH Prospective Payment System (PPS) which classifies LTCH patients into distinct Diagnosis-Related Groups (DRGs). The patient classification system groupings are called Medicare Severity Long Term Care Diagnosis Related Groups (MS-LTC-DRGs), which are the same DRG groupings used under the Medicare acute hospital inpatient prospective payment system (IPPS), but that have been weighted to reflect the resources required to treat the medically complex patients treated at LTCHs.

    On January 26, 2015, a TRICARE proposed rule was published in the Federal Register [79 FR 51127], proposing to adopt a TRICARE LTCH PPS similar to the CMS' reimbursement system for LTCHs, with the exception of not adopting Medicare's LTCH 25 percent rule. However, that proposed rule acknowledged that the Department of Health and Human Services intended to address implementation of Section 1206(a) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67) in their FY 2016 rulemaking process. As a result, the TRICARE proposed rule included a statement that DoD would “defer action on this issue pending review of the final Medicare policy.” This review has been completed and we have changed our approach regarding implementation of the TRICARE LTCH PPS. Consequently, we are withdrawing the proposed rule published in the Federal Register on January 26, 2015, and publishing this new proposed rule to inform the public of our intent to adopt the CMS LTCH PPS system with no modifications or exceptions. We have determined that it is practicable to adopt Medicare's LTCH PPS reimbursement methodology in its entirety without deviations.

    On August 22, 2014, the CMS final rule on updating the annual payment rates for the Medicare PPS for inpatient hospital services provided by LTCHs was published in the Federal Register [79 FR 49853]. As part of its final rule, CMS discussed the need for future policy changes that would be required to carry out the provisions under section 1206 of the Pathway for SGR Reform Act of 2013, to include section 1206(a), which provides for the establishment of an alternate “site-neutral” payment rate for Medicare LTCH patients that fail to meet certain statutorily defined criteria, such as having been discharged by an IPPS hospital immediately preceding the LTCH admission, having 3 or more days in an ICU during the immediately preceding IPPS stay or having received at least 96 hours of respiratory ventilation services. If the above statutorily defined criteria is not met, the LTCH will receive a “site-neutral” payment rate. As mentioned earlier, as a result of the unspecified potential changes that might be required to Medicare's LTCH reimbursement system, a statement was added to TRICARE's proposed rule that DoD would defer action on adopting Medicare's potential changes relating to “site-neutral” payments until DoD could review the final Medicare policy. Upon review of Medicare's final rule published on August 17, 2015, we learned that significant changes had been made to Medicare's previous LTCH reimbursement system, specifically the precise details about the creation of Medicare's “site-neutral” payments beginning in FY 2016. This proposed rule explains our new reimbursement approach for LTCHs based on CMS' changes.

    TRICARE pays for most hospital care under the TRICARE DRG-based payment system, which is similar to Medicare's, but some hospitals are exempt from the TRICARE DRG-based payment system. LTCHs are currently exempt from the TRICARE DRG-based payment system and are paid by TRICARE at the lower of a negotiated rate (if they are a network provider) or billed charges (if they are a non-network provider). Paying billed charges is fiscally imprudent and inconsistent with TRICARE's governing statute. Paying LTCHs under Medicare's methods is prudent, because it reduces government costs without affecting beneficiary access to services or quality; it is practicable, because it can be implemented without major costs; and it is harmonious with the statute because the statute states that TRICARE shall determine its payments for institutional services to the extent practicable in accordance with Medicare's payment rates. Our legal authority for this portion of the proposed rule is 10 U.S.C. 1079(i)(2).

    2. Inpatient Rehabilitation Facilities (IRFs)

    This rule also publishes proposed TRICARE regulation modifications necessary to adopt the Medicare IRF Prospective Payment System (PPS) and rates. This is in accordance with the statutory requirement that for TRICARE institutional services “payments shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under [Medicare].” Medicare pays IRFs using an IRF Prospective Payment System (PPS) which classifies IRF patients into one of 92 case-mix groups (CMGs).

    Similarly to LTCHs, IRFs, (both freestanding rehabilitation hospital and rehabilitation hospital units) are currently exempt from the TRICARE DRG-based payment system and are paid by TRICARE at the lower of a negotiated rate (if they are a network provider) or billed charges (if they are a non-network provider). As discussed earlier, paying billed charges is fiscally imprudent and inconsistent with TRICARE's governing statute. Paying IRFs under a method similar to Medicare's is prudent, practicable, and harmonious with the statute. Our legal authority for this portion of the proposed rule is 10 U.S.C. 1079(i)(2).

    B. Summary of the Major Provisions of the Proposed Rule 1. Adoption of Medicare's Prospective Payment System Methodology for LTCHs

    TRICARE proposes to reimburse LTCHs for inpatient care using Medicare's LTCH PPS using Medicare's MS-LTC-DRGs. Under the proposed TRICARE LTCH PPS reimbursement methodology, payment for a TRICARE patient will be made at a predetermined, per-discharge amount for each MS-LTC-DRG. The TRICARE LTCH PPS reimbursement methodology would include payment for all inpatient operating and capital costs of furnishing covered services (including routine and ancillary services), but not certain pass-through costs (e.g., bad debts, direct medical education, and blood clotting factors). When the Medicare day limit is exhausted for TRICARE beneficiaries who are also eligible for Medicare (i.e., TRICARE For Life (TFL) beneficiaries), TRICARE will be the primary payer for medically necessary services and the beneficiary will be responsible for the appropriate TRICARE inpatient cost share. We anticipate the beneficiary's out-of-pocket costs will be limited by the statutory catastrophic cap of $1,000 per family, per fiscal year for active duty family members and reserve select beneficiaries and $3,000 cap per family, per fiscal year for all other beneficiaries.

    2. Transition Period

    The Pathway for SGR Reform Act of 2013 directed CMS to make significant changes to the payment system for LTCHs. The law directs CMS to establish two different types of LTCH PPS payment rates depending on whether or not the patient meets certain clinical criteria: (1) Standard LTCH PPS payment rates; and (2) lower site-neutral LTCH PPS payment rates that are generally based on the Medicare acute hospital IPPS rates. Site-neutral patients include LTCH patients who do not use prolonged mechanical ventilation during their LTCH stay or who did not spend three or more days in the intensive care unit (ICU) during their prior acute care hospital stay. The law transitions the payment reductions in FY16 and FY17 by requiring payment based on a 50/50 blend of the standard LTCH PPS rate and the site-neutral LTCH PPS rate for site-neutral patients. In FY17, when we anticipate implementing the TRICARE LTCH PPS payment changes, we propose that TRICARE adopt Medicare's FY17 LTCH PPS payment policies, which will include Medicare's payment of site-neutral cases with Medicare's 50/50 blended payment for site-neutral patients. Medicare has not yet set the payment for site neutral cases for FY 2018, however, we will follow that payment rate once it is determined. For example, if the blended payment rate ends by FY18, we would also follow Medicare and all TRICARE site-neutral LTCH patients would receive the site-neutral payment (without a blend with the standard LTCH PPS rate). If implementation of the TRICARE LTCH PPS is delayed beyond FY17, there will be no transition period for site-neutral patients. Rather, TRICARE will adopt the Medicare LTCH PPS methodology applicable at the time of TRICARE implementation.

    3. Adoption of Medicare's Prospective Payment System Methodology for IRFs

    TRICARE proposes to reimburse IRFs for inpatient care using Medicare's IRF PPS which pays a prospectively-set, fixed payment per discharge based on a patient's classification into one of 92 case-mix groups (CMGs). Each CMG has a national relative weight reflecting the expected relative costliness of treatment for patients in that category compared with that for the average Medicare inpatient rehabilitation patient. The relative weight for each CMG is multiplied by a standardized Medicare IRF base payment amount to calculate the case-mix adjusted prospective payment rate. The TRICARE IRF PPS payment rates would cover all inpatient operating and capital costs that IRFs are expected to incur in furnishing intensive rehabilitation services. When the Medicare day limit is exhausted for TRICARE beneficiaries who are also eligible for Medicare (i.e., TFL beneficiaries), TRICARE will be the primary payer for medically necessary services and the beneficiary will be responsible for the appropriate TRICARE inpatient cost share. We anticipate the beneficiary's out-of-pocket costs will be limited by the statutory catastrophic cap of $1,000 per family, per fiscal year for active duty family members and reserve select beneficiaries and $3,000 cap per family, per fiscal year for all other beneficiaries.

    4. Removal of Outdated Terms

    This proposed rule removes outdated definitions in 32 CFR 199.2 for “Hospital, long-term (tuberculosis, chronic care, or rehabilitation)” and “Long-term hospital care” and adds a new definition for “Long-Term Care Hospital (LTCH)” as well as adding a new definition for “Inpatient Rehabilitation Facility (IRF).” The new definitions are based on CMS' LTCH and IRF classifications. Our review of the data shows that there were no facilities reimbursed under our existing LTCH or IRF reimbursement methodologies that will not meet the new proposed definitions. The TRICARE requirements for both LTCHs and IRFs to be authorized institutional providers have been added to 32 CFR 199.6.

    C. Costs and Benefits

    The economic impact of the proposed rule is anticipated to reduce DoD allowed amounts to LTCHs by approximately $77 million during implementation if that occurs as planned in FY17, when TRICARE site-neutral cases will be paid based on a transitional 50/50 blended payment and $87 million if implemented in FY18 when site-neutral payments are fully phased-in. If implementation is delayed beyond FY17, TRICARE will use the Medicare fully phased in site-neutral payments for site-neutral patients. This proposed rule is also anticipated to reduce DoD allowed amounts to IRFs by approximately $53 million in FY17.

    II. Introduction and Background A. Reimbursement 1. TRICARE LTCH PPS Reimbursement

    Patients with clinically complex problems, such as multiple acute or chronic conditions, may need hospital care for an extended period of time. LTCHs represent a relatively small number of hospitals (approximately 424 under Medicare), which treat a critically ill population with complex needs and long lengths of stay. Per 32 Code of Federal Regulations (CFR) 199.14(a)(1)(ii)(D)(4), LTCHs are currently exempt from the TRICARE DRG-based payment system, just as they were exempt from Medicare's Inpatient Prospective Payment System (IPPS) when the CMS initially implemented its DRG-based payment system. Because there is no alternate TRICARE reimbursement mechanism in 32 CFR part 199 at this time, LTCH inpatient care provided to TRICARE beneficiaries is currently paid the lower of a negotiated rate if a network LTCH, which is usually substantially greater than what would be paid using the TRICARE DRG method, or billed charges if a non-network LTCH.

    Medicare created a PPS for LTCHs effective with the cost reporting period beginning on or after October 1, 2002. The MS-LTC-DRG system under Medicare's LTCH PPS classifies patients into distinct diagnostic groups based on their clinical characteristics and expected resource needs. The patient classification groupings, which are the same groupings used under the inpatient acute care hospital groupings (i.e., MS-DRGs) are weighted to reflect the resources required to treat the medically complex patients who are treated in LTCHs. By their nature, LTCHs treat patients with comorbidities requiring long-stay, hospital-level care.

    TRICARE often adopts Medicare's reimbursement methods but delays implementation generally until any transition phase is complete for the Medicare program. CMS included a 5-year transition period when it adopted LTCH PPS for Medicare, under which LTCHs could elect to be paid a blended rate for a set period of time. This transition period ended in 2006. Following the transition phase, in 2008 Medicare adopted an LTCH-specific DRG system, which uses MS-LTC-DRGs, as the patient classification method for LTCHs. In FY16, Medicare will begin its adoption of a site-neutral payment system for LTCHs. Beginning in FY16 and continuing in FY17, CMS is phasing in a site-neutral payment methodology; during the transition period in FY16 and FY17, for site-neutral patients, 50 percent of the allowed amount will be calculated using the site-neutral payment methodology and 50 percent will be calculated using the current full LTCH PPS standard federal payment rate methodology. Beginning in FY18, all Medicare payments for site-neutral patients will be calculated using the site-neutral payment methodology. Given TRICARE's statutory requirement to adopt Medicare's reimbursement methods when practicable, TRICARE is proposing to adopt Medicare's LTCH PPS reimbursement method for our beneficiaries, including the Medicare site-neutral payment methodology. TRICARE will adopt the Medicare payment methodology that is in place at the time of TRICARE's implementation. For example, for an FY17 implementation, we will follow Medicare and use a 50/50 blend of the site-neutral method and the full LTCH PPS payments for site-neutral patients use a 50/50 blend. If implementation is delayed beyond FY17, TRICARE will use the Medicare site-neutral payments for site-neutral patients.

    Under 10 U.S.C. 1079(i)(2), the amount to be paid to hospitals, skilled nursing facilities, and other institutional providers under TRICARE, “shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under [Medicare].” Based on 1079(i)(2), TRICARE is proposing to adopt Medicare's LTCH PPS as the methodology to reimburse TRICARE authorized LTCHs. A change is needed to conform to the statute.

    For TRICARE, we were able to identify complete claims information for 678 patients who were Active Duty Service Members (ADSMs), their dependents, or retirees and their dependents who were not eligible for the TRICARE For Life program (referred to as non-TFL), and 56 TFL LTCH admissions in FY14, for which TRICARE was the primary payer for patients with no other health insurance (referred to as non-Other Health Insurance (OHI)). We also identified 27 non-TFL and 3 TFL non-OHI LTCH admissions in FY14 with incomplete claims data, and excluded these claims from the analysis. TRICARE allowed charges for non-TFL beneficiaries were approximately $73 million in FY14. We found that the average TRICARE allowed amount for non-TFL beneficiaries was approximately $107,000 in FY14, which is significantly more than the estimated amount that Medicare would have paid for these discharges (the average Medicare LTCH PPS payment would have been approximately $42,000). Using the Medicare LTCH PPS system would have reduced TRICARE-allowed amounts by almost $45 million in FY14 for non-TFL beneficiaries.

    For TFL beneficiaries for whom TRICARE was the primary payer, TRICARE paid approximately $19 million in allowed charges in FY14. In cases where TRICARE is the primary payer for LTCH care of TFL beneficiaries, such as when a Medicare beneficiary exhausts his/her day limits, TRICARE is paying billed charges. Reimbursing using methods similar to the Medicare LTCH PPS methodology would have reduced TRICARE allowed charges for TFL beneficiaries by approximately $15 million in FY14.

    Shifting to methods similar to the Medicare LTCH PPS methodology would have reduced TRICARE allowed charges to LTCHs for non-TFL and TFL beneficiaries by $60 million in FY14 and is expected to reduce allowed charges by $77 million in FY17, assuming that site-neutral payments will be based on a 50/50 blend of the standard LTCH PPS rate and the site-neutral LTCH PPS rate. We projected savings in FY17 by first projecting costs under TRICARE's current policy for reimbursing LTCHs. We assumed that the costs would increase by 7 percent per year from FY14 to 17 reflecting increases in both TRICARE admissions to LTCHs under current policy and increases in TRICARE billed charges. We then projected the costs under the proposed policy assuming that under the Medicare LTCH-PPS the combination of admissions and higher reimbursement rates would increase costs by 3 percent per year. This percentage annual increase in TRICARE allowed amounts using the LTCH-PPS is less than the current policy percentage increase to reflect lower rates of increases in LTCH reimbursement rates under the LTCH-PPS (in comparison to TRICARE billed charges) and fewer LTCH admissions due to the phased in implementation of the Medicare LTCH site-neutral policy. The difference between the current policy and proposed policy amounts was equal to savings of $77 million in FY17, assuming partial phase-in of site-neutral payments.

    As discussed above, TRICARE's current payment method results in TRICARE reimbursing LTCHs substantially more than Medicare does for equivalent inpatient care. Adopting Medicare's LTCH PPS methodology is practicable. Even though the beneficiary populations differ between Medicare and TRICARE non-TFL beneficiaries, we have found that the distribution of LTCH cases by diagnosis groups is similar between the two populations. To adjust for the differences in use by the TRICARE and Medicare populations, we considered developing TRICARE-specific weights and rates. However, TRICARE has a low volume of admissions to LTCHs, so calculating weights and rates for TRICARE admissions to LTCHs is impracticable. We are able to calculate our own weights for admissions to general hospitals on an annual basis because of the volume of TRICARE admissions to general hospitals; however, it would be difficult to determine a new set of TRICARE LTCH weights because of the small number of TRICARE admissions. For example, there were only about 700 TRICARE admissions in FY14 in the approximately 750 MS-LTC-DRG groups. Only four MS-LTC-DRGs had 25 or more TRICARE admissions in FY14 and only 14 had ten or more TRICARE admissions in that year. Approximately 600 MS-LTC-DRGs had no TRICARE LTCH admissions. Consequently, we are proposing to adopt the weights and rates used currently in Medicare's MS-LTC-DRGs.

    Further, TRICARE proposes to adopt Medicare's LTCH PPS to include short-stay outliers, the 25 percent threshold payment adjustment, site-neutral payments, interrupted stay policy, the method of payment for preadmission services, and high-cost outlier payments. TRICARE also proposes to incorporate Medicare's Long Term Care Hospital Quality Reporting (LTCHQR) payment adjustments for TRICARE LTCHs that reflect Medicare's annual payment update for that facility. TRICARE is not establishing a separate reporting requirement for hospitals, but will utilize Medicare's payment adjustments resulting from their LTCHQR Program. Please see Medicare's final rule [CMS-1632-F; CMS-1632-CN2] RIN 0938-AS41.

    2. TRICARE IRF PPS Reimbursement

    IRFs are free standing rehabilitation hospitals and rehabilitation units in acute care hospitals that provide an intensive rehabilitation program. Per 32 CFR 199.14(a)(1)(ii)(D)(2) and (3), IRFs are currently exempt from the TRICARE DRG-based payment system, just as they were exempt from Medicare's IPPS when the CMS initially implemented its DRG-based payment system. Per 42 CFR 412.1(a)(1), an inpatient rehabilitation hospital or rehabilitation unit of an acute care hospital must meet the requirement for classification as an IRF stipulated in subpart B of 42 CFR part 412. One criterion specified at 42 CFR 412.29(b)(1) that Medicare uses for classifying a hospital or unit of a hospital as an IRF is that a minimum percentage (currently 60 percent) of a facility's total inpatient population must meet at least one of 13 medical conditions listed in 42 CFR 412.29(b)(2). Because there is no alternate TRICARE reimbursement mechanism in 32 CFR part 199 at this time, IRF care provided to TRICARE beneficiaries in this setting is currently paid the lower of a negotiated rate if a network IRF, or billed charges if a non-network IRF.

    Medicare created a PPS for IRFs effective with the cost reporting period beginning in January 2002. Section 4421 of the Balanced Budget Act of 1997 (Pub. L. 105-33) modified how Medicare payment for IRF services is to be made by creating Section 1886(j) of the Social Security Act, which authorized the implementation of a per-discharge prospective payment system for inpatient rehabilitation hospitals and rehabilitation units of acute care hospitals—referred to as IRFs. As required by Section 1886(j) of the Act, the Federal rates reflect all costs of furnishing IRF services (routine, ancillary, and capital related). CMS included a 9-month transition period when it adopted the IRF PPS for Medicare, under which IRFs could elect to be paid a blended rate. The transition period ended October 1, 2002. Following the transition period, payment to all IRFs was based entirely on the prospective payment.

    Under 10 U.S.C. 1079(i)(2), the amount to be paid to hospitals, skilled nursing facilities, and other institutional providers under TRICARE, “shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under [Medicare].” Based on 1079(i)(2), TRICARE is proposing to adopt Medicare's reimbursement methodology to reimburse TRICARE authorized IRFs. A change is needed to conform to the statute.

    For TRICARE, we were able to identify complete claims information for 2,929 TRICARE beneficiaries discharged from IRFs in FY14 where TRICARE was the primary payer. TRICARE allowed charges for these beneficiaries was approximately $121 million in FY14. These allowed amounts were equal to 74 percent of billed charges, indicating that there were significant discounts offered by IRFs. Excluding Children's and Veterans (VA) hospital claims, which are not paid under the IRF-PPS, TRICARE allowed amounts were $89 million in FY14. We found that the average allowed amount per IRF stay (excluding Children's and VA hospital claims) was $34,300 in FY14, which is significantly more than the estimated amount that Medicare would have paid for these discharges (the average Medicare IRF PPS payment was approximately $18,600 in 2014). The 2014 Medicare payment amount per case was reported in the 2016 Medicare Payment Advisory Commission (MedPAC) report. Using the Medicare IRF PPS system would have reduced TRICARE allowed amounts by approximately $41 million in FY14.

    Given TRICARE's statutory requirement to adopt Medicare's reimbursement methods when practicable, TRICARE is proposing to adopt Medicare's IRF PPS reimbursement method for its beneficiaries who receive rehabilitative care in IRFs. TRICARE proposes to adopt Medicare's IRF PPS and include Medicare's adjustments for interrupted stays, short stays of less than three days, short-stays transfers (defined as transfers to another institutional setting with an IRF length of stay less than the average length for the CMG), and high-cost outliers. TRICARE proposes to not adopt Medicare's low-income payment (LIP) adjustment for IRFs, because TRICARE does not adjust for Disproportionate Share in acute care hospitals under the TRICARE DRG system. TRICARE also proposes to incorporate Medicare's Inpatient Rehabilitation Hospital Quality Reporting (IRFQR) payment adjustments for TRICARE IRFs, that reflect Medicare's annual payment update for that facility. TRICARE is not establishing a separate reporting requirement for hospitals, but will utilize Medicare's payment adjustments resulting from their IRFQR Program. Please see Medicare's final rule [CMS-1632-F; CMS-1632-CN2] RIN 0938-AS41.

    B. Pediatric Cases 1. LTCH

    Our analysis found that the TRICARE pediatric LTCH patients and Medicare populations have similar diagnoses and that the estimated TRICARE costs in each MS-LTC-DRG group are similar to those in Medicare. There are very few TRICARE LTCH cases for patients under age 17; however, these pediatric cases have similar diagnoses as other TRICARE LTCH admissions. Therefore, we propose to adopt the same LTCH PPS methodology for pediatric patients in LTCHs as we are for all other TRICARE beneficiaries.

    We are inviting comments on this proposal and welcome feedback on whether the MS-LTC-DRG weights are appropriate for pediatric cases. We also welcome options and alternative approaches for consideration in establishing LTCH reimbursement for pediatric beneficiaries.

    2. IRF

    In 2014, approximately 50 patients under the age of 17 received IRF care under TRICARE. Approximately 38 percent of those TRICARE pediatric IRF cases were treated at Children's hospitals, which are exempt from Medicare's IRF PPS. TRICARE is proposing that pediatric rehabilitation cases at Children's hospitals would also be exempt under the TRICARE IRF PPS and instead paid under the TRICARE DRG system. Pediatric cases treated at TRICARE IRFs would be paid under the TRICARE IRF PPS.

    C. Veterans (VA) Hospitals

    VA hospitals specialize in treating injured veterans and provide access to rehabilitative care. VA hospitals are not Medicare authorized IRFs (because they are Federal hospitals) and they do not use Medicare's IRF PPS method. TRICARE allows VA hospitals to provide inpatient rehabilitation care to TRICARE beneficiaries, and VA hospitals provide care for over 200 TRICARE patients each year (mostly Active Duty Service Members (ADSMs)). VA hospitals will continue to be paid under existing methodologies.

    III. Regulatory Impact Analyses for LTCHs and IRFs A. Overall Impact

    DoD has examined the impacts of this proposed rule as required by Executive Orders (E.O.s) 12866 (September 1993, Regulatory Planning and Review) and 13563 (January 18, 2011, Improving Regulation and Regulatory Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and the Congressional Review Act (5 U.S.C. 804(2)).

    1. Executive Order 12866 and Executive Order 13563

    E.O.s 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). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any one year).

    We estimate that the effects of the LTCH and IRF provisions that would be implemented by this rule would not result in LTCH or IRF revenue reductions exceeding $100 million in any one year individually; however, when combined, revenue reductions would exceed $100 million, making this rulemaking “economically significant” as measured by the $100 million threshold. We have prepared Regulatory Impact Analyses that, to the best of our ability, presents the costs and benefits of the rulemaking. This proposed rule is anticipated to reduce DoD allowed amounts to LTCHs by $77 million and to IRFs by $53 million in FY17.

    2. Congressional Review Act. 5 U.S.C. 801

    Under the Congressional Review Act, a major rule may not take effect until at least 60 days after submission to Congress of a report regarding the rule. A major rule is one that would have an annual effect on the economy of $100 million or more or have certain other impacts. This Notice of Proposed Rule Making is a major rule under the Congressional Review Act.

    3. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals are considered to be small entities, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) identification of a small business (having revenues of $34.5 million or less in any one year). For purposes of the RFA, we have determined that the majority of LTCHs and all IRFs would be considered small entities according to the SBA size standards. Individuals and States are not included in the definition of a small entity. Therefore, this Rule would have a significant impact on a substantial number of small entities. The Regulatory Impact Analyses, as well as the contents contained in the preamble, also serves as the Regulatory Flexibility Analysis.

    4. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any one year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $140 million. This Proposed Rule will not mandate any requirements for State, local, or tribal governments or the private sector.

    5. Paperwork Reduction Act

    This rule will not impose significant additional information collection requirements on the public under the Paperwork Reduction Act of 1995 (44 U.S.C. 3502-3511). Existing information collection requirements of the TRICARE and Medicare programs will be utilized. We do not anticipate any increased costs to hospitals because of paperwork, billing, or software requirements since we are keeping TRICARE's billing/coding requirements (i.e., hospitals will be coding and filing claims in the same manner as they currently are with TRICARE).

    6. Executive Order 13132, “Federalism”

    This rule has been examined for its impact under E.O. 13132, and it does not contain policies that have federalism implications that would have substantial direct effects on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of Government. Therefore, consultation with State and local officials is not required.

    B. Hospitals Included in and Excluded From the Proposed LTCH and IRF PPS Reimbursement Methodologies

    The TRICARE LTCH PPS and the TRICARE IRF PPS encompass all Medicare-classified LTCHs and IRFs that are also authorized by TRICARE and that have inpatient stays for TRICARE beneficiaries, except for hospitals in States that are paid by Medicare and TRICARE under a waiver that exempts them from Medicare's inpatient prospective payment system or the CHAMPUS DRG-based payment system, respectively. Currently, only Maryland hospitals operate under such a waiver.

    C. Analysis of the Impact of Policy Changes on Payment for LTCH and IRF Alternatives Considered

    The alternatives that were considered, the changes that we are proposing, and the reasons that we have chosen these options are discussed below.

    1. Alternatives Considered for Addressing Reduction in LTCH Payments

    Under the method discussed here, TRICARE's LTCH payments per discharge would decrease by an average of 45-75 percent for most LTCHs. Because the impact of moving from a charge-based reimbursement method to Medicare's method would produce such large reductions in the TRICARE allowed amounts for LTCH care, we considered a 4-year phase-in of this approach. Under this option, one portion of the payment would continue to be paid as the billed charge and the remaining portion would be paid under the Medicare approach. In the first year, 75 percent of the payment would be based on billed charges and in each subsequent year this portion would be reduced by 25 percentage points so that by the fourth year the billed charge portion would be zero points.

    For the following reasons, we have determined that a transition period is unnecessary because the Medicare-based payment amounts will have a minimal impact on overall LTCH payments and to any particular LTCH under TRICARE. First, the TRICARE payments to LTCHs will be equal to Medicare's LTCH payments. The Medicare Payment Advisory Committee (MedPAC) is an independent congressional agency which advises the U.S. Congress on issues affecting the Medicare program. MedPAC's most recent research indicates that Medicare LTCHs have a positive Medicare margin. Second, the number of TRICARE discharges from LTCHs is very small in comparison to the number of Medicare discharges in LTCHs each year. In FY14, there were 764 discharges to LTCHs in which TRICARE was the primary payer (including the 30 discharges with incomplete data). Medicare, in comparison, had approximately 138,000 discharges to LTCHs in 2013. Thus, in aggregate, the TRICARE LTCH claims are a very small percentage of the industry's claims (about one-half of one percent). Third, we found that in FY14 there were only 5 LTCHs with 15 or more TRICARE admissions. For all but two TRICARE LTCHs, we found that TRICARE admissions accounted for less than six percent of the number of Medicare discharges. Of the 212 LTCHs with TRICARE discharges, we found that 154 had 3 or fewer discharges in FY14 and that 208 Medicare LTCHs had no admissions in FY14 where TRICARE was the primary payer. Thus, the number of TRICARE discharges at any one LTCH is small and TRICARE is a small portion of LTCH revenues. Fourth, we do not think that there will be access problems for TRICARE beneficiaries. MedPAC has analyzed LTCH access for Medicare patients and concluded that Medicare beneficiaries have continued access to LTCHs under the Medicare payment methodology proposed here as evidenced by an increasing supply of providers and an increasing number of LTCH stays. Given that the TRICARE LTCH rates will equal Medicare LTCH rates and will have a limited impact on overall LTCH payments, we do not anticipate access problems for TRICARE beneficiaries. Further, by statute, hospitals that participate under Medicare are required to agree to accept TRICARE reimbursement. In summary, for these four reasons we do not think that a transition period is necessary, but we invite comments on this approach.

    2. Alternatives Considered for Addressing Reduction in IRF Payments

    Under the method discussed here, TRICARE's IRF payments per discharge would decrease by 30-40 percent for most IRFs. Because the impact of moving from a charge-based reimbursement method to Medicare's method would produce such large reductions in the TRICARE allowed amounts for IRF care, we considered a 3-year phase-in of this approach. Under this option, one portion of the payment would continue to be paid as the billed charge and the remaining portion would be paid under the Medicare approach. In the first year, two-thirds of the payment would be based on billed charges and in each subsequent year this portion would be reduced by one-third so that by the third year the billed charge portion would be zero points.

    For the following reasons, we have determined that a transition period is unnecessary because the Medicare-based payment amounts will have a minimal impact on overall LTCH payments and to any particular LTCH under TRICARE. First, the TRICARE payments to IRFs will be equal to Medicare's IRF payments. The Medicare Payment Advisory Committee (MedPAC) is an independent congressional agency which advises the U.S. Congress on issues affecting the Medicare program. MedPAC's most recent research from March 2015 indicates that Medicare IRFs generally have positive Medicare margins. Thus, we think that IRFs will earn a positive margin from TRICARE. Second, the number of TRICARE discharges from IRFs is very small in comparison to the number of Medicare IRF discharges each year. In FY14, there were 2,681 IRF discharges in which TRICARE was the primary payer (including the 78 discharges with incomplete data and excluding discharges from Children's and VA hospitals). Medicare, in comparison, had approximately 376,000 IRF stays in 2014. Thus, in aggregate, the TRICARE IRF claims account for less than one percent of the industry's claims. Third, we found that in FY14 there were only 24 IRFs with 20 or more TRICARE admissions. For all but nine TRICARE IRFs, we found that TRICARE admissions accounted for less than ten percent of the number of Medicare discharges. Of the 591 IRFs with TRICARE discharges (including the 23 with incomplete data), we found that 408 had 3 or fewer discharges in FY14 and that 771 Medicare IRFs had no TRICARE admissions in FY14 where TRICARE was the primary payer. Thus, the number of TRICARE discharges at any one IRF is small and TRICARE accounts for a small portion of IRF revenues. Fourth, we do not think that there will be access problems for TRICARE beneficiaries. MedPAC has analyzed IRF access for Medicare patients and concluded that Medicare beneficiaries have continued access to IRFs. MedPAC reports the number of providers and volume of services in IRFs has remained stable between 2012 and 2013. Because the TRICARE IRF rates will equal Medicare IRF rates and will have a limited impact on overall LTCH payments, we do not anticipate access problems for TRICARE beneficiaries. Further, by statute, hospitals that participate under Medicare are required to agree to accept TRICARE reimbursement. In summary, for these four reasons we do not think that a transition period is necessary, but we invite comments on this approach.

    D. Analysis of the Impact of TRICARE LTCH and IRF Payment Reform on LTCHs and IRFs 1. LTCH Methodology

    We analyzed the impact of TRICARE implementing a new method of payment for LTCHs. The proposed method is Medicare's LTCH payment method, which uses the Medicare MS-LTC-DRG system for cases that meet specific clinical criteria to qualify for the standard LTCH PPS payment rates and, as of FY17, the Medicare IPPS MS-DRG system for all other (site-neutral) patients. Our analysis compares the impact on allowed charges of the new methodology compared to current TRICARE methodology (where TRICARE pays billed charges or discounts off of these billed charges for all LTCH claims).

    The data used in developing the quantitative analyses presented below are taken from TRICARE allowed charge data from October 2013 to September 2014. We drew upon various sources for the data used to categorize hospitals in Table 1, below. We attempted to construct these variables using information from Medicare's FY14 Impact file to verify that each provider was in fact a Medicare LTCH. One limitation is that for individual hospitals, some miscategorizations are possible. We were unable to match 30 hospital claims from 6 LTCHs to the FY14 Impact file, and as a result, these claims were excluded from the analysis. All Maryland LTCHs were also excluded from the analysis. After we removed the excluded claims which we could not assign charge and hospital classification variables for, we used the remaining hospitals and claims as the basis for our analysis.

    Using allowed charge data from 2014, the FY14 Medicare MS-LTC-DRG and MS-DRG weights, the FY14 Medicare LTCH and IPPS national base payment rates, the FY14 Medicare high cost outlier fixed thresholds, and the FY14 wage index adjustment factors, we simulated TRICARE allowed amounts in FY14 using the proposed LTCH prospective payment method. We focused the analysis on TRICARE claims where TRICARE was the primary payer because only these TRICARE payments will be affected by the proposed reforms.

    2. IRF Methodology

    We analyzed the impact of TRICARE implementing a new method of payment for IRFs. The proposed method is Medicare's IRF prospective payment system (PPS) method, which pays a prospectively-set fixed payment per discharge based on a patient's classification into one of 92 case-mix groups (CMGs). Our analysis compares the impact on allowed charges of the new methodology compared to current TRICARE methodology (where TRICARE pays billed charges or discounts off of these billed charges for all IRF claims).

    The data used in developing the quantitative analyses presented below are taken from TRICARE allowed charge data from October 2013 to September 2014. We drew upon various sources for the data used to categorize hospitals in Table 1, below. We attempted to construct these variables using information from Medicare's FY16 IRF rate setting file and the Medicare Provider file to verify that each TRICARE IRF provider was in fact a Medicare IRF. One limitation is that for individual hospitals, some miscategorizations are possible. We were unable to match 78 IRF claims from 23 IRFs to Medicare provider numbers within the FY16 IRF rate setting file or the October 2015 Medicare IRF PSF file, and as a result, these claims were excluded from the analysis. We also excluded all Children's Hospital (4 hospitals, 22 discharges) and all Veterans hospital (12 Veterans hospitals, 226 discharges) claims because these hospitals are not paid under the Medicare IRF-PPS. After we removed the excluded claims which we could not assign charge and hospital classification variables for, we used the remaining hospitals and claims as the basis for our analysis.

    The impact of adopting the Medicare IRF-PPS is difficult to estimate because there is insufficient diagnosis information on the TRICARE claims to classify TRICARE patients into a CMG. Because we were unable to classify TRICARE discharges into one of the 92 Medicare CMGs, we took an alternative approach to estimate the costs of adopting the Medicare IRF-PPS system. Our approach is based on first calculating the facility-specific “Medicare” costs for TRICARE IRF discharges at each IRF using the FY14 TRICARE billed charges at that IRF and the Medicare cost-to-charge ratio (CCR) for that IRF. We then used Medicare payment and cost data from the FY16 Medicare IRF rate setting file to calculate the Medicare margin at each IRF. In a third step of our approach we multiplied the estimated cost of each TRICARE discharge calculated in the first step by the IRF-specific margin to get an estimate of the allowed amount that would be paid by TRICARE under the Medicare IRF-PPS for each discharge. Under “current policy” we assumed that TRICARE IRF costs would increase by 6 percent per year from FY14 to FY17 to reflect increases in billed charges. We then projected the costs under the proposed policy, assuming that under the Medicare IRF-PPS, costs would increase by 2.5 percent per year from FY14 to FY17. Under the Medicare IRF-PPS, the percentage annual increase of 2.5 percent in TRICARE allowed amounts is less than the percentage increase under current policy due to slower increases in Medicare IRF reimbursement rates (in comparison to TRICARE billed charges). The difference between the current and the proposed policy was equal to $53 million in FY17. As a result, this approach allows us to estimate the change in allowed amounts under the Medicare method without having CMG data on TRICARE patients. We focused the analysis on TRICARE claims where TRICARE was the primary payer because only these TRICARE payments will be affected by the proposed reforms.

    3. Effect on Hospitals

    Table 1, Impact of TRICARE LTCH Rule in FY14, Assuming Full Implementation of the Medicare Site-Neutral Payment Policy, below, presents the results of our analysis of FY14 TRICARE claims data. This table categorizes LTCHs which had TRICARE inpatient stays in FY14 by various geographic and special payment consideration groups to illustrate the varying impacts on different types of LTCHs. The first column represents the number of LTCHs in FY14 in each category which had inpatient stays in which TRICARE was the primary payer. The second column shows the number of TRICARE discharges in each category. The third column shows the average TRICARE allowed amount per discharge in FY14. The fourth column shows the simulated average allowed amount per discharge under the Medicare LTCH payment method, assuming full implementation of the Medicare site-neutral payment policy. The fifth column shows the percentage reduction in the allowed amounts under the full implementation of the Medicare site-neutral method relative to the current allowed amounts.

    The first row in Table 1 shows the overall impact on the 222 LTCHs included in the analysis. The next three rows of the table contain hospitals categorized according to their urban/rural status in FY14 (large urban, other urban, and rural). The second major grouping is by LTCH bed-size category, followed by TRICARE network status of the LTCH. The fourth grouping shows the LTCHs by regional divisions while the final grouping is by LTCH ownership status.

    We estimate that in FY14, assuming full implementation of the Medicare site-neutral payment policy, TRICARE allowed amounts to LTCHs would have decreased by 67 percent in comparison to allowed amounts paid to LTCHs under the current TRICARE policy. For all groups of LTCHs, allowed amounts under the proposed payment methodology would have been reduced.

    The following discussion highlights some of the changes in allowed amounts among LTCH classifications. Ninety-six percent of all TRICARE LTCH admissions were to urban LTCHs. Allowed amounts would have decreased by 69 percent for large urban, 64 percent for other urban, and 71 percent for rural LTCHs.

    Very small LTCHs (1-24 beds) would have had the least impact; allowed amounts would have been reduced by 49 percent. The change in payment methodology would have had the greatest impact on large LTCHs (125 or more beds), where allowed amounts would have been reduced by about 72 percent.

    The change in LTCH payment methodology would have a larger impact on TRICARE non-network LTCHs than network LTCHs because network LTCHs currently offer a discount off billed charges while non-network LTCHs do not. Allowed charges to non-network LTCHs would have declined by 74 percent, in comparison to 64 percent for in-network hospitals. We found that network hospitals on average provide a 30 percent discount off billed charges for non-TFL TRICARE beneficiaries and that 79 percent of all TRICARE LTCH discharges were in-network in FY14.

    LTCHs in various geographic areas would have been affected differently due to this change in payment methodology. The two regions with the largest number of TRICARE claims, the South Atlantic and West South Central region, would have had an average decrease of 68 and 69 percent in allowed charges respectively, which are very similar to the overall average of 67 percent. LTCHs in the East North Central and West North Central regions would have had the lowest reductions in allowed charges: 59 and 45 percent, respectively.

    Seventy-nine percent of all TRICARE LTCH discharges in FY14 were in proprietary (for-profit) LTCHs, and these facilities would have had their allowed amounts reduced by approximately 68 percent. The decline in allowed amounts for voluntary (not-for-profit) LTCHs would have been less than for-profit hospitals (63 percent).

    Table 1—Impact of TRICARE LTCH Rule in FY14, Assuming Full Implementation of the Medicare Site-Neutral Payment Policy Number of LTCHs with TRICARE stays Number of TRICARE
  • discharges
  • Allowed per discharge
  • (current policy)
  • Allowed per discharge
  • (Medicare method)
  • Percent
  • reduction in
  • allowed
  • amounts
  • All LTCHs 222 734 $125,235 $41,071 67 Large Urban 110 405 148,099 46,255 69 Other Urban 103 312 96,193 34,787 64 Rural 9 17 113,576 32,880 71 Beds 222 734 125,235 41,071 67 1-24 7 13 53,921 27,635 49 25-34 42 103 107,786 38,029 65 35-49 55 164 114,849 39,252 66 50-74 63 205 108,308 36,920 66 75-124 35 151 137,763 44,779 67 125+ 20 98 186,523 52,064 72 Network Status 222 734 125,235 41,071 67 Network 160 580 110,147 39,461 64 Non-Network 62 154 182,062 47,133 74 Region 222 734 125,235 41,071 67 New England 5 15 74,012 24,186 67 Mid Atlantic 11 22 121,182 29,631 76 South Atlantic 39 238 131,922 41,939 68 East North Central 32 71 93,975 38,786 59 East South Central 19 54 146,180 46,381 68 West North Central 13 27 87,161 48,098 45 West South Central 68 214 104,033 31,831 69 Mountain 18 56 166,254 60,533 64 Pacific 17 37 223,154 64,625 71 Ownership 222 734 125,235 41,071 67 Proprietary 175 567 127,929 40,763 68 Government Owned 10 29 108,139 32,452 70 Voluntary 37 138 117,760 44,147 63 Source: FY14 TRICARE LTCH claims and FY14 Medicare Impact File. Excludes claims with other health insurance (OHI). Amounts adjusted for FY14 Wage Index and FY14 COLA. Note: Excludes 30 claims from 6 TRICARE LTCHs that did not have a cost-to-charge ratio (CCR) in the FY14 Medicare Impact File.

    Table 2, Impact of TRICARE IRF Rule in FY14, presents the results of our analysis of FY14 TRICARE claims data. This table categorizes IRFs which had TRICARE inpatient stays in FY14 by various geographic and special payment consideration groups to illustrate the varying impacts on different types of IRFs. The first column represents the number of IRFs in FY14 in each category which had inpatient stays in which TRICARE was the primary payer. The second column shows the simulated number of TRICARE discharges in each category. The third column shows the average TRICARE allowed amount per discharge in FY14. The fourth column shows the average allowed amount per discharge under the Medicare IRF payment method, excluding the LIP adjustment. The fifth column shows the percentage reduction in the allowed amounts under the Medicare payment method relative to the current TRICARE allowed amounts.

    The first row in Table 2 shows the overall impact on the 568 IRFs included in the analysis. The next two rows of the table categorize hospitals according to their geographic location in FY14 (urban and rural). The second major grouping is whether the IRF is a freestanding facility or a part of a hospital unit, followed by a grouping for TRICARE network status. The fourth grouping is whether the IRF is a teaching facility and the fifth groups IRFs by Census division. The final grouping is by IRF ownership status.

    The following discussion highlights some of the changes in allowed amounts among IRF classifications. Ninety-five percent of all TRICARE IRF admissions were to urban IRFs. Allowed amounts would have decreased by 45 percent for urban IRFs and 21 percent for rural IRFs.

    Table 2—Impact of TRICARE IRF Rule in FY14 Number of IRFs with TRICARE stays Number of TRICARE
  • discharges
  • Allowed per discharge
  • (current policy)
  • Proposed
  • policy allowed
  • per discharge
  • (medicare method)
  • Percent reduction in allowed amounts
    All IRFs 568 2,603 $34,260 $19,129 44 Urban 523 2,473 34,944 19,257 45 Rural 45 130 21,248 16,687 21 Type 568 2,603 34,260 19,129 44 Freestanding 181 1,191 26,852 19,661 27 Hospital Unit 387 1,412 40,508 18,680 54 Network Status 568 2,603 34,260 19,129 44 Network 433 2,323 32,806 19,169 42 Non-Network 135 280 46,318 18,800 59 Teaching Status 568 2,603 34,260 19,129 44 Teaching 56 444 43,861 22,195 49 Non-Teaching 512 2,159 32,285 18,498 43 Region 568 2,603, 34,260 19,129 44 North East and Middle Atlantic 78 184 27,964 22,299 20 South Atlantic 47 242 27,730 16,486 41 East North Central 112 787 32,048 19,076 40 East South Central 44 122 33,838 15,707 54 West North Central 72 185 33,972 19,093 44 West South Central 109 611 33,749 18,714 45 Mountain 56 242 38,008 17,603 54 Pacific 50 230 51,600 24,108 53 Ownership 568 2,603 34,260 19,129 44 Proprietary 196 1,099 30,601 18,709 39 Government Owned 73 350 36,075 18,835 48 Voluntary 299 1,154 37,193 19,618 47 Source: FY14 TRICARE IRF Claims and FY16 Medicare Rate Setting File. Excludes claims with other health insurance (OHI). Note: Excludes claims from 12 VA Hospitals (226 discharges), 4 Children's Hospitals (22 discharges), and 28 IRFs where we were unable to identify Medicare certification or sufficient Medicare data (78 discharges). We have combined the North East and Middle Atlantic states for the purpose of this impact analysis due to small sample size in the North East region.

    The change in payment methodology would have resulted in a 54 percent reduction in the allowed amounts for IRFs that are part of a hospital unit. In comparison, freestanding IRF payments would have been reduced by 27 percent.

    The change in IRF payment methodology would have a larger impact on TRICARE non-network IRFs than network IRFs because network IRFs currently offer a discount off billed charges while non-network IRFs do not. Allowed charges to non-network IRFs would have declined by 59 percent, in comparison to 42 percent for in-network hospitals. We found that network hospitals on average provide a 32 percent discount off billed charges for non-OHI TRICARE beneficiaries and that 89 percent of all TRICARE IRF discharges were in-network in FY14.

    We also found that the change in IRF payment methodology would have a larger impact on teaching hospitals, where payments would have been reduced by 49 percent, in comparison to non-teaching hospitals, where payments would have been reduced by 43 percent. Approximately 83 percent of all TRICARE IRF discharges were from non-teaching IRF facilities.

    IRFs in various geographic areas will be affected differently due to this change in payment methodology. The two regions with the largest number of TRICARE claims, the East North Central (787 discharges) and West South Central (611 discharges), would have had an average decrease of 40 and 45 percent in allowed charges respectively. IRFs in the North East and Middle Atlantic would have had the lowest reductions in allowed charges of 20 percent. The Mountain, East South Central, and Pacific regions would have had the highest reductions of between 53 and 54 percent.

    Forty-two percent of all TRICARE IRF discharges in FY14 were in proprietary (for-profit) IRFs, and these facilities would have had their allowed amounts reduced by approximately 39 percent. The decline in allowed amounts for voluntary (not-for-profit) and government-owned IRFs would have been slightly more than proprietary hospitals (47 and 48 percent respectively).

    List of Subjects in 32 CFR Part 199

    Claims, Dental health, Health care, Health insurance, Individuals with disabilities, Military personnel.

    Accordingly, 32 CFR part 199 is proposed to be amended as follows:

    PART 199—CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES (CHAMPUS) 1. The authority citation for part 199 continues to read as follows: Authority:

    5 U.S.C. 301; 10 U.S.C. chapter 55.

    2. In § 199.2, paragraph (b) is amended by: a. Removing the definitions of “Hospital, long-term (tuberculosis, chronic care, or rehabilitation)” and “Long-term hospital care”; and b. Adding the definitions of “Long Term Care Hospital (LTCH)” and “Inpatient Rehabilitation Facility (IRF) ” in alphabetical order.

    The additions read as follows:

    § 199.2 Definitions.

    (b) * * *

    Long Term Care Hospital (LTCH). A hospital that is classified by the Centers for Medicare and Medicaid Services (CMS) as a LTCH and meets the applicable requirements established by § 199.6(b)(4)(v) (which includes the requirement to be a Medicare participating provider).

    Inpatient Rehabilitation Facility (IRF). A facility classified by CMS as an IRF and meets the applicable requirements established by Sec 199.6(b)(4)(xviii) (which includes the requirement to be a Medicare participating provider).

    3. In § 199.6, revise paragraphs (b)(4)(v) and (xvi), and add paragraph (xviii) to read as follows:
    § 199.6 TRICARE—authorized providers.

    (b) * * *

    (4) * * *

    (v) Long Term Care Hospital (LTCH). LTCHs must meet all the criteria for classification as an LTCH under 42 CFR part 412, subpart O, as well as all of the requirements of this Part in order to be considered an authorized LTCH under the TRICARE program.

    (A) In order for the services of LTCHs to be covered, the hospital must comply with the provisions outlined in paragraph (b)(4)(i) of this section. In addition, in order for services provided by such hospitals to be covered by TRICARE, they must be primarily for the treatment of the presenting illness.

    (B) Custodial or domiciliary care is not coverable under TRICARE, even if rendered in an otherwise authorized LTCH.

    (C) The controlling factor in determining whether a beneficiary's stay in a LTCH is coverable by TRICARE is the level of professional care, supervision, and skilled nursing care that the beneficiary requires, in addition to the diagnosis, type of condition, or degree of functional limitations. The type and level of medical services required or rendered is controlling for purposes of extending TRICARE benefits; not the type of provider or condition of the beneficiary.

    (xvi) Critical Access Hospitals (CAHs). CAHs must meet all conditions of participation under 42 CFR 485.601 through 485.645 in relation to TRICARE beneficiaries in order to receive payment under the TRICARE program. If a CAH provides inpatient psychiatric services or inpatient rehabilitation services in a distinct part unit, the distinct part unit must meet the conditions of participation in 42 CFR 485.647, with the exception of being paid under the inpatient prospective payment system for psychiatric facilities as specified in 42 CFR 412.1(a)(2) or the inpatient prospective payment system for rehabilitation hospitals or rehabilitation units as specified in 42 CFR 412.1(a)(3). Upon implementation of TRICARE's IRF PPS in 199.14(a)(10), if a CAH provides inpatient rehabilitation services in a distinct part unit, the distinct part unit shall be paid under TRICARE's IRF PPS.

    (xviii) Inpatient Rehabilitation Facility (IRF). IRFs must meet all the criteria for classification as an IRF under 42 CFR part 412, subpart B, and meet all applicable requirements established in this part in order to be considered an authorized IRF under the TRICARE program.

    (A) In order for the services of inpatient rehabilitation facilities to be covered, the facility must comply with the provisions outlined in paragraph (b)(4)(i) of this section. In addition, in order for services provided by these facilities to be covered by TRICARE, they must be primarily for the treatment of the presenting illness.

    (B) Custodial or domiciliary care is not coverable under TRICARE, even if rendered in an otherwise authorized inpatient rehabilitation facility.

    (C) The controlling factor in determining whether a beneficiary's stay in an inpatient rehabilitation facility is coverable by TRICARE is the level of professional care, supervision, and skilled nursing care that the beneficiary requires, in addition to the diagnosis, type of condition, or degree of functional limitations. The type and level of medical services required or rendered is controlling for purposes of extending TRICARE benefits; not the type of provider or condition of the beneficiary.

    4. Section 199.14 is amended by: a. Revising paragraphs (a)(1)(ii)(D)(2), (3) and (4), and (ii)(E); b. Revising paragraph (a)(3)(i) introductory text; and c. Adding new paragraphs (a)(9) and (10).

    The revisions and additions read as follows:

    § 199.14 Provider reimbursement methods.

    (a) * * *

    (1) * * *

    (ii) * * *

    (D) * * *

    (2) Inpatient Rehabilitation Facilities (IRF). Prior to implementation of the IRF PPS methodology described in paragraph (a)(10) of this section, an inpatient rehabilitation facility which is exempt from the Medicare prospective payment system is also exempt from the TRICARE DRG-based payment system.

    (3) Psychiatric and rehabilitation units (distinct parts). Prior to implementation of the IRF PPS methodology described in paragraph (a)(10) of this section, a rehabilitation unit which is exempt from the Medicare prospective payment system is also exempt from the TRICARE DRG-based payment system. A psychiatric unit which is exempt from the Medicare prospective payment system is also exempt from the TRICARE DRG-based payment system.

    (4) Long Term Care Hospitals. Prior to implementation of the LTCH PPS methodology described in paragraph (a)(9) of this section, a long term care hospital which is exempt from the Medicare prospective payment system is also exempt from the CHAMPUS DRG-based payment system.

    (E) Hospitals which do not participate in Medicare. With the exceptions of CAHs, in addition to LTCHs and IRFs which must be Medicare-participating providers upon implementation of TRICARE's LTCH and IRF PPS, it is not required that a hospital be a Medicare-participating provider in order to be an authorized TRICARE provider. However, any hospital which is subject to the CHAMPUS DRG-based payment system and which otherwise meets CHAMPUS requirements but which is not a Medicare-participating provider (having completed a form HCA-1514, Hospital Request for Certification in the Medicare/Medicaid Program and a form HCFA-1561, Health Insurance Benefit Agreement) must complete a participation agreement with TRICARE. By completing the participation agreement, the hospital agrees to participate on all CHAMPUS inpatient claims and to accept the CHAMPUS-determined allowable amount as payment in full for these claims. Any hospital which does not participate in Medicare and does not complete a participation agreement with TRICARE will not be authorized to provide services to TRICARE beneficiaries.

    (3) * * *

    (i) For admissions on or after December 1, 2009, inpatient services provided by a CAH, other than services provided in psychiatric and rehabilitation distinct part units, shall be reimbursed at allowable cost (i.e., 101 percent of reasonable cost) under procedures, guidelines, and instructions issued by the DHA Director, or designee. This does not include any costs of physicians' services or other professional services provided to CAH inpatients. Inpatient services provided in psychiatric distinct part units would be subject to the TRICARE mental health payment system. Inpatient services provided in rehabilitation distinct part units would be subject to billed charges. Upon implementation of TRICARE's IRF PPS, inpatient services provided in rehabilitation distinct part units would be subject to the TRICARE IRF PPS methodology in (a)(10) of this section.

    (9) Reimbursement for inpatient services provided by an LTCH. (i) In accordance with 10 U.S.C. 1079(i)(2), TRICARE payment methods for institutional care shall be determined, to the extent practicable, in accordance with the same reimbursement rules as those that apply to payments to providers of services of the same type under Medicare. The TRICARE-LTC-DRG reimbursement methodology shall be in accordance with Medicare's Medicare Severity Long Term Care Diagnosis Related Groups (MS-LTC-DRGs) as found in regulation at 42 CFR part 412, subpart O. Inpatient services provided in hospitals subject to the Medicare LTCH Prospective Payment System (PPS) and classified as LTCHs and also as specified in 42 CFR parts 412 and 413 will be paid in accordance with the provisions outlined in sections 1886(d)(1)(B)(IV) and 1886 (m)(6) of the Social Security Act and its implementing Medicare regulation (42 CFR parts 412, 413, and 170) to the extent practicable. Under the above governing provisions, TRICARE will recognize, to the extent practicable, in accordance with 10 U.S.C. 1079(i)(2), Medicare's LTCH PPS methodology to include the relative weights, inpatient operating and capital costs of furnishing covered services (including routine and ancillary services), interrupted stay policy, short-stay and high cost outlier payments, the 25 percent threshold payment adjustment, site-neutral payments, wage adjustments for variations in labor-related costs across geographical regions, cost-of-living adjustments, payment adjustments associated with the quality reporting program, method of payment for preadmission services, and updates to the system.

    (ii) Exemption. The TRICARE LTCH PPS methodology under this paragraph does not apply to hospitals in States that are reimbursed by Medicare and TRICARE under a waiver that exempts them from Medicare's inpatient prospective payment system or the TRICARE DRG-based payment system, respectively.

    (10) Reimbursement for inpatient services provided by Inpatient Rehabilitation Facilities. (i) In accordance with 10 U.S.C. 1079(i)(2), TRICARE payment methods for institutional care shall be determined to the extent practicable, in accordance with the same reimbursement rules as those that apply to payments to providers of services of the same type under Medicare. The TRICARE IRF PPS reimbursement methodology shall be in accordance with Medicare's IRF PPS as found in 42 CFR part 412. Inpatient services provided in IRFs subject to the Medicare IRF prospective payment system (PPS) and classified as IRFs and also as specified in Subpart B of 42 CFR part 412 will be paid in accordance with the provisions outlined in section 1886(j) of the Social Security Act and its implementing Medicare regulation found at 42 CFR 412 subpart P to the extent practicable. Under the above governing provisions, TRICARE will recognize, to the extent practicable, in accordance with 10 U.S.C. 1979(i)(2), Medicare's IRF PPS methodology to include the relative weights, payment rates covering all operating and capitals costs of furnishing rehabilitative services adjusted for wage variations in labor-related costs across geographical regions, adjustments for 60 percent compliance threshold, teaching adjustment, rural adjustment, high-cost outlier payments, payment adjustments associated with the quality reporting program, and updates to the system. TRICARE will not adopt Medicare's low-income payment adjustment under TRICARE's IRF PPS.

    (ii) Exemption. The TRICARE IRF PPS methodology under this paragraph does not apply to hospitals in States that are reimbursed by Medicare and TRICARE under a waiver that exempts them from Medicare's inpatient prospective payment system or the TRICARE DRG-based payment system, respectively.

    Dated: August 24, 2016. Aaron Siegel, Alternate OSD Federal Register Liaison Officer, Department of Defense.
    [FR Doc. 2016-20660 Filed 8-30-16; 8:45 am] BILLING CODE 5001-06-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2016-0715] RIN 1625-AA00 Safety Zone; Blasting, Delaware River AGENCY:

    Coast Guard, DHS.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The Coast Guard proposes to establish a temporary safety zone on the waters of the Tinicum Range, Eddystone Range, Chester Range, and Marcus Hook Range, in the Delaware River from December 1, 2016 to March 15, 2016. The safety zone would temporarily restrict vessel traffic from transiting or anchoring in a portion of the Delaware River while rock blasting, dredging, and rock removal operations are being conducted to facilitate the Delaware River Main Channel Deepening project for the main navigational channel of the Delaware River. This action is needed to protect personnel, vessels, and the marine environment from potential hazards created by rock blasting, dredging, and rock removal operations. We invite your comments on this proposed rulemaking.

    DATES:

    Comments and related material must be received by the Coast Guard on or before September 30, 2016.

    ADDRESSES:

    You may submit comments identified by docket number USCG-2016-0715 using the Federal eRulemaking Portal at http://www.regulations.gov. See the “Public Participation and Request for Comments” portion of the SUPPLEMENTARY INFORMATION section for further instructions on submitting comments.

    FOR FURTHER INFORMATION CONTACT:

    If you have questions about this rulemaking, call or email MST1 Thomas Simkins, Sector Delaware Bay Waterways Management Division, U.S. Coast Guard; telephone 215-271-4889, email [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 COTP Captain of the Port II. Background, Purpose, and Legal Basis

    The Army Corps of Engineers (ACOE) is sponsoring a project, termed “The Deepening,” in which dredging operations are taking place in the Delaware River and Bay navigational channel deepening the channel to 45 feet. The project goal is to maintain a minimum depth of 45 feet to accommodate larger vessel traffic entering the Sector Delaware Bay Zone. The upcoming portion of the project requires the deepening of the Delaware River from Tiniucm Range, south, through Marcus Hook Rang, in which the topography consist of mostly rock bottom. To satisfy the minimum project depth of 45 feet the ACOE has hired Great Lakes Dredging Company to perform rock blasting operations, dredging, and removal of rock in Tinicum Range, Eddystone Range, Chester Range, and Marcus Hook Range, in the Delaware River from December 1, 2016, to March 15, 2017. The Captain of the Port, Delaware Bay, has determined that potential hazards associated with rock blasting, dredging, and rock removal operations, will be a safety concern for anyone within 500 yards of rock blasting, dredging, and rock removal operations. This proposed rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the operational area.

    The purpose of this rulemaking is to ensure the safety of vessels and the navigable waters within a 500-yard radius of rock blasting, dredging, and rock removal operations. The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1231; 33 CFR 1.05-1 and 160.5; and Department of Homeland Security Delegation No. 0170.1.

    III. Discussion of Proposed Rule

    This proposed rule would establish a safety zone from December 1, 2016, through March 15, 2017. The safety zone would cover all navigable waters in the Delaware River within 500 yards of vessels and machinery being used by personnel to conduct rock blasting, dredging, and rock removal. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while operations are being conducted.

    For the duration of the project, in the vicinity of the rock blasting, rock removal, and dredging operation, one side of the main navigational channel will be closed due to the drill boat APACHE being unable to relocate for vessel traffic while conducting rock blasting and removal operations. Additionally there is a potential for blasted rock to be within the navigational channel causing a navigational safety hazard for vessels transiting the safety zone. Vessels wishing to transit the safety zone in the main navigational channel may do so if they can make satisfactory passing arrangements with drill boat APACHE, dredge TEXAS, or dredge NEW YORK in accordance with the navigational rules in 33 CFR subchapter E via VHF-FM channel 13 at least 30 minutes prior to arrival. If vessels are unable to make satisfactory passing arrangements with the drill boat APACHE, dredge TEXAS, or dredge NEW YORK they may request permission from the Captain of the Port, or his designated representative, on VHF-FM channel 16. All vessels must operate at the minimum safe speed necessary to maintain steerage and reduce wake.

    No vessels may transit through the safety zone during times of explosives detonation. During rock blasting detonation, vessels would be required to maintain a 500 yard distance from the drill boat APACHE. The drill boat APACHE will make broadcasts, via VHF-FM channels 13 and 16, at 15 minutes, 5 minutes, and 1 minute prior to detonation, as well as a countdown to detonation on VHF-FM channel 16. The drill boat APACHE will also raise a red flag signifying when a detonation is occurring. The 500 yard radius will be secured by a contracted security vessel on either side of the blast area. Security vessels will ensure the blasting area is clear prior to explosive detonation. Sector Delaware Bay will ensure significant notice is given to the maritime community of dates and times of blasting via broadcast notice to mariners on VHF-FM channel 16. After every explosive detonation, a survey will be conducted to ensure the navigational channel is clear for vessels to transit. The drill boat APACHE will broadcast, via VHF-FM channels 13 and 16, when the survey has been completed and the channel is clear to transit. Vessels granted permission to transit through the safety zone must proceed as directed by the designated representative of the Captain of the Port, and must contact the drill boat APACHE, dredge TEXAS, or dredge NEW YORK on VHF-FM channel 13 to make satisfactory passing arrangements.

    IV. Regulatory Analyses

    We developed this proposed 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 NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget.

    This regulatory action determination is based on the size, location, duration, and traffic management of the safety zone. The Coast Guard does not anticipate any significant economic impact because the safety zone would be enforced in an area and in a manner that does not conflict with transiting commercial and recreational traffic, except for the short periods of time when explosive detonation evolutions are being conducted. The blasting detonations will not occur more than three times a day. At all other times, at least one side of the main navigational channel would be open for vessels to transit. Moreover, the Coast Guard will work in coordination with the pilots to ensure vessel traffic is limited during the times of detonation and Broadcast Notice to Mariners are made via VHF-FM marine channels 13 and 16 when blasting operations will occur.

    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 certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.

    While some owners or operators of vessels intending to anchor in or transit the safety zone may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.

    If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this proposed rule would economically affect it.

    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 proposed 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. 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 proposed rule would 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 proposed 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 proposed 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 above.

    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 proposed rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

    F. Environment

    We have analyzed this proposed 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 proposed rule involves a safety zone in force from December 1, 2016, through March 15, 2017, that prohibits entry within 500 yards of vessels and machinery being used by personnel conducting rock blasting, dredging, and rock removal operations within Tinicum Range, Eddystone Range, Chester Range, and Marcus Hook Range. It is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction M16475.1D. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

    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.

    V. Public Participation and Request for Comments

    We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

    We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

    We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, you may review a Privacy Act notice regarding the Federal Docket Management System in the March 24, 2005, issue of the Federal Register (70 FR 15086).

    Documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that Web site's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

    List of Subjects in 33 CFR Part 165

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

    For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows:

    PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority:

    33 U.S.C 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.

    2. Add temporary § 165.T05-0715 under the undesignated center heading Fifth Coast Guard District to read as follows:
    § 165.T05-0715 Safety Zone; Blasting, Delaware River.

    (a) Regulated area. The following area is a safety zone: all the waters of the Delaware River within 500 yards of the drill boat or dredges performing rock blasting, rock removal, and dredging operations, in the Delaware River between the southern end of Marcus Hook Range to the eastern end of Tinicum Range.

    (b) Regulations. The general safety zone regulations in § 165.23 apply to the safety zone created by this temporary section, § 165.T05-0715.

    (1) All vessels and persons are prohibited from entering into or moving within the safety zone unless authorized by the Captain of the Port, Delaware Bay, or by his designated representative.

    (2) Vessels wishing to transit the safety zone, described in paragraph (a) of this section, in the main navigational channel, may do so if they can make satisfactory passing arrangements with the drill boat APACHE, dredge TEXAS, or dredge NEW YORK in accordance with the Navigational Rules in 33 CFR subchapter E via VHF-FM channel 13 at least 30 minutes prior to arrival. If vessels are unable to make satisfactory passing arrangements with the drill boat APACHE, dredge TEXAS, or dredge NEW YORK, they may request permission from the Captain of the Port, or his designated representative, on VHF-FM channel 16.

    (3) No vessels may transit through the safety zone during times of explosives detonation. During rock blasting detonation, vessels are required to maintain a 500 yard distance from the drill boat APACHE. The drill boat APACHE will make broadcasts, via VHF-FM channels 13 and 16, at 15 minutes, 5 minutes, and 1 minute prior to detonation, as well as a countdown to detonation on VHF-FM channel 16. The drill boat APACHE will also raise a red flag signifying when a detonation is occurring. The 500 yard radius will be secured by contracted security vessel on either side of the blast area. Security vessel will ensure the blasting area is clear prior to explosive detonation. Sector Delaware Bay will ensure significant notice is given to the maritime community of dates and times of blasting via broadcast notice to mariners on VHF-FM channel 16.

    (4) After every explosive detonation, a survey will be conducted to ensure the navigational channel is clear for vessels to transit. The drill boat APACHE will broadcast, via VHF-FM channels 13 and 16, when the survey has been completed and the channel is clear to transit. Vessels granted permission to transit through the safety zone must proceed as directed by the designated representative of the Captain of the Port and contact the drill boat APACHE on VHF-FM channel 13 to make satisfactory passing arrangements in accordance with the navigational rules in 33 CFR subchapter E.

    (5) This section applies to all vessels except vessels that are engaged in the following operations: enforcing laws; servicing aids to navigation, and emergency response vessels.

    (c) Definitions. As used in this section:

    Captain of the Port Delaware Bay means the Commander, U.S. Coast Guard Sector Delaware Bay, Philadelphia, PA.

    Designated representative means any Coast Guard commissioned, warrant, or petty officer who has been authorized by the Captain of the Port Delaware Bay to assist in enforcing the safety zone described in paragraph (a) of this section.

    (d) Enforcement. The U.S. Coast Guard may be assisted by Federal, State and local agencies in the patrol and enforcement of the zone.

    (e) Enforcement period. This section will be effective from December 1, 2016, through March 15, 2017.

    Dated: August 23, 2016. Benjamin A. Cooper, Captain, U.S. Coast Guard, Captain of the Port Delaware Bay.
    [FR Doc. 2016-20868 Filed 8-30-16; 8:45 am] BILLING CODE 9110-04-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG-2016-0271] RIN 1625-AA00 Safety Zone, Jacksonville Sea and Sky Spectacular; Atlantic Ocean, Jacksonville Beach, FL AGENCY:

    Coast Guard, DHS.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The Coast Guard proposes to establish a safety zone on the waters of the Atlantic Ocean east of Jacksonville Beach, Florida during the Jacksonville Sea and Sky Spectacular. This safety zone will be enforced daily 10 a.m. to 4:30 p.m., from November 2 through November 6, 2016. This proposed rulemaking would prohibit persons and vessels from being in the safety zone unless authorized by the Captain of the Port (COTP) Jacksonville or a designated representative. The Coast Guard invites your comments on this proposed rulemaking.

    DATES:

    Comments and related material must be received by the Coast Guard on or before September 30, 2016.

    ADDRESSES:

    You may submit comments identified by docket number USCG-2016-0271 using the Federal eRulemaking Portal at http://www.regulations.gov. See the “Public Participation and Request for Comments” portion of the SUPPLEMENTARY INFORMATION section for further instructions on submitting comments.

    FOR FURTHER INFORMATION CONTACT:

    If you have questions about this proposed rulemaking, call or email Lieutenant Allan Storm, Sector Jacksonville, Waterways Management Division, U.S. Coast Guard; telephone (904) 714-7616, email [email protected]

    SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security E.O. Executive order FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code COTP Captain of the Port II. Background, Purpose, and Legal Basis

    On February 22, 2016, the City of Jacksonville submitted a marine event application to the Coast Guard for the Jacksonville Sea and Sky Spectacular that will take place from 10 a.m. to 4:30 p.m. on November 2 through November 6, 2016. The air show will consist of various flight demonstrations over the Atlantic Ocean, just offshore from Jacksonville Beach, FL. Over the years, there have been unfortunate instances of aircraft mishaps that involve crashing during performances at various air shows around the world. Occasionally, these incidents result in a wide area of scattered debris in the water that can damage property or cause significant injury or death to the public observing the air shows. The Captain of the Port (COTP) Jacksonville has determined that a safety zone is necessary to protect the general public from hazards associated with aerial flight demonstrations.

    The purpose of the rulemaking is to ensure the safety of vessels and persons during the air show on the navigable waters of the Atlantic Ocean in Jacksonville Beach, FL. The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1231.

    III. Discussion of Proposed Rule

    The COTP proposes to establish a safety zone from 10 a.m. to 4:30 p.m. on November 2 through November 6, 2016. The safety zone will encompass all waters within an area approximately three miles parallel to the shoreline, and one half mile out into the Atlantic Ocean offshore from Jacksonville Beach, Florida. The duration of the zone is intended to ensure the safety of the public and these navigable waters during the aerial flight demonstrations. No vessel or person would be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. The regulatory text the Coast Guard is proposing appears at the end of the document.

    IV. Regulatory Analyses

    The Coast Guard developed this proposed rule after considering numerous statutes and Executive orders (E.O.s) related to rulemaking. A summary of the statutory analyses, analyses of E.O.s, and discussion of First Amendment rights of protestors is included below.

    A. Regulatory Planning and Review

    E.O.s 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 NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM 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 safety zone. Vessel traffic would be able to safely transit around this safety zone which would impact a small designated area of the Atlantic Ocean for six and a half hours on each of the five days the air show is occurring. Moreover, the Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the zone, and the rule would allow vessels to seek permission to enter the zone.

    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 certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.

    While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section IV.A above this proposed rule would not have a significant economic impact on any vessel owner or operator.

    If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

    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 proposed 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. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

    C. Collection of Information

    This proposed rule would 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 E.O. 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 proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in E.O. 13132.

    Also, this proposed rule does not have tribal implications under E.O. 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed 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 proposed rule would not result in such an expenditure, the Coast Guard discusses the effects of this rule elsewhere in this preamble.

    F. Environment

    The Coast Guard analyzed this proposed 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 made a preliminary determination 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 proposed rule involves a safety zone that will help protect the general public from hazards associated with aerial flight demonstrations occurring during the air show, and will be in effect from 10 a.m. to 4:30 p.m. on November 2 through November 6, 2016.

    It is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of Commandant Instruction M16475.lD. A preliminary environmental analysis checklist and Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

    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.

    V. Public Participation and Request for Comments

    Public participation is essential to effective rulemaking, and the Coast Guard will consider all comments and related materials received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

    We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

    We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, you may review a Privacy Act notice regarding the Federal Docket Management System in the March 24, 2005, issue of the Federal Register (70 FR 15086).

    To view comments, as well as documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that Web site's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

    List of Subjects in 33 CFR Part 165

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

    For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows:

    PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority:

    33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.

    2. Add § 165.T07-0271 to read as follows:
    § 165.T07-0271 Safety Zone; Jacksonville Sea and Sky Spectacular, Atlantic Ocean, Jacksonville Beach, FL.

    (a) Regulated Area. The following regulated area is a safety zone located offshore from Jacksonville Beach, FL. All waters of the Atlantic Ocean encompassed within an imaginary line connecting the following points: starting at Point 1 in position 30°15′52.3″ N., 081°23′0.18″ W.; thence northwest to Point 2 in position 30°18′35.19″ N., 081°23′33.93″ W.; thence northeast to Point 3 in position 30°18′40.81″ N., 081°22′57.97″ W.; thence southeast to Point 4 in position 30°15′57.91″ N., 081°22′24.22″ W.; thence southwest back to origin. These coordinates are based on North American Datum 1983.

    (b) Definition. The term “designated representative” means Coast Guard Patrol Commanders, including Coast Guard coxswains, petty officers, and other officers operating Coast Guard vessels, and Federal, state, and local officers designated by or assisting the Captain of the Port Jacksonville in the enforcement of the regulated area.

    (c) Regulations. (1) All persons and vessels are prohibited from entering, transiting through, anchoring in, or remaining within the regulated area unless authorized by the Captain of the Port Jacksonville or a designated representative.

    (2) Persons and vessels desiring to enter, transit through, anchor in, or remain within the regulated area may contact the Captain of the Port Jacksonville by telephone at 904-714-7557, or a designated representative via VHF-FM radio on channel 16, to request authorization. If authorization is granted by the Captain of the Port Jacksonville or a designated representative, all persons and vessels receiving such authorization must comply with the instructions of the Captain of the Port Jacksonville or a designated representative.

    (3) The Coast Guard will provide notice of the regulated area through Broadcast Notice to Mariners via VHF-FM channel 16 and by on-scene designated representatives.

    (d) Enforcement Period. This rule is effective from November 2 t