Federal Register Vol. 81, No.182,

FHFA invites comments on all aspects of this 2016 proposed rulemaking and will take all comments into consideration before issuing the final rule. Copies of all comments will be posted without change, including any personal information you provide, such as your name, address, email address, and telephone number, on the FHFA Web site at http://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, Constitution Center, Eighth Floor, 400 Seventh Street, SW., Washington, DC 20219. To make an appointment to inspect comments, please call the Office of General Counsel at (202) 649-3804.

FHFA published an Interim Final Rule on Golden Parachute and Indemnification Payments in the Federal Register on September 16, 2008 (73 FR 53356). Subsequently, it published corrections rescinding that portion of the regulation that addressed indemnification payments on September 19, 2008 (73 FR 54309) and on September 23, 2008 (73 FR 54673). On November 14, 2008, a proposed amendment to the Interim Final Rule was published in the Federal Register (73 FR 67424). FHFA specifically requested comments on whether it would be in the best interests of the regulated entities to permit indemnification of first and second tier civil money penalties where the administrative proceeding or civil action related to conduct occurring while the regulated entity was in conservatorship. The public notice and comment period closed on December 29, 2008. On January 29, 2009 (74 FR 5101), FHFA published a final rule on Golden Parachute Payments. On June 29, 2009 (74 FR 30975), FHFA published a proposed amendment to that 2009 Golden Parachute final rule. At the same time, FHFA re-proposed the November 14, 2008 proposed amendment on indemnification payments (2009 re-proposal). The 2009 re-proposal noted that comments received in response to the November 14, 2008 publication on indemnification payments would be considered along with comments received in response to the 2009 re-proposal. The golden parachute provisions of the rule were re-proposed in 2013 (78 FR 28452, May 14, 2013), adopted in final form in 2014 (79 FR 4394, Jan. 28, 2014), and codified as 12 CFR 1231.1, 1231.2, and 1231.5.

In this 2016 proposed rulemaking, FHFA redrafted the proposed indemnification payments rule to make it simpler and easier to understand. The substance of this 2016 proposed rulemaking has not changed since the 2009 re-proposal, other than to replace a provision concerning indemnification payments by regulated entities in conservatorship with one that clearly states that the regulation does not apply to such entities. FHFA further desires to clarify that it does not consider indemnification payments to be subject to FHFA rules and procedures related to compensation, including 12 CFR part 1230.

The 2009 re-proposal structured its indemnification provisions in a manner similar to the indemnification provisions of the Federal Deposit Insurance Corporation's (FDIC) regulation. 12 CFR part 369. This 2016 proposed rulemaking generally carries over the structure from the 2009 re-proposal, but clarifies several provisions. Consistent with the Director's statutory discretion to “prohibit or limit any . . . indemnification payment,” 1 the 2009 re-proposal defined most indemnification payments to entity-affiliated parties as impermissible. Like the FDIC's regulation, it also identified exceptions to that definition based on stated standards and criteria and defined the characteristics required for a payment to be permissible. These criteria and standards, as they are carried over into this 2016 proposed rulemaking, constitute the “factors” that would be used for the Director to “prohibit or limit” indemnification payments by this regulation. In application, each regulated entity would be required to ensure that no indemnification payments under this rule were made unless the criteria and standards were met.

In response to the 2009 re-proposal, FHFA received comments from the following: The 12 Federal Home Loan Banks (Banks); 2 the Council of Federal Home Loan Banks, the Banks' Office of Finance (OF); Fannie Mae; and Freddie Mac. FHFA gave careful consideration to all issues raised by the commenters.

In response to FHFA's request for comments regarding indemnification of first and second tier civil money penalties under section 1376(b)(1) and (2) of the Federal Housing Enterprises Financial Safety and Soundness Act (the Safety and Soundness Act) (12 U.S.C. 4636(b)(1) and (2)) where the administrative proceeding or civil action initiated by FHFA relates to conduct occurring while the regulated entity was in conservatorship, several Banks requested that FHFA expand indemnification authority for first and second tier civil money penalties to all regulated entities, not just those that are in conservatorship (currently, Fannie Mae and Freddie Mac). The commenters assert that, by not extending the indemnification authority to all regulated entities, healthy, solvent institutions would be penalized by the regulation. FHFA has considered the comments and determined not to extend first and second tier civil money penalties indemnification to all regulated entities. The basis for the 2009 re-proposal's provision for regulated entities in conservatorship was that such regulated entities are operating with directors and some executives who govern and manage the entities in accordance with conservator or receiver instructions of varying levels of specificity and have significant limitations on their ability to take independent action. Given these circumstances, FHFA concluded that it was appropriate that regulated entities in conservatorship or receivership (or a limited-life regulated entity) and their entity-affiliated parties be subject to a different indemnification regime. FHFA continues to be of this view and has decided that they should be excluded from the rulemaking to avoid restricting a conservator's or receiver's options. In this 2016 proposed rulemaking, new § 1231.4(d) 3 would provide that the regulation does not apply to regulated entities in conservatorship or receivership or to limited-life regulated entities. In each circumstance, FHFA's power over such a regulated entity is sufficiently extensive that FHFA as conservator itself can directly require the adoption of an indemnification regime appropriate to administrating the conservatorship or receivership (or limited-life regulated entity) in the circumstances and environment actually encountered by that regulated entity.4

The 2009 re-proposal would have permitted partial indemnification when there has been a final adjudication, settlement, or finding favorable to the entity-affiliated party on some, but not all, charges, unless the proceeding or action resulted in a final prohibition order. Several Banks requested clarification of this provision with a definition of the term “final prohibition order.” FHFA has considered the comment. The 2016 proposal clarifies that a final prohibition order is an order under section 1377 of the Act (12 U.S.C. 4636a) prohibiting an entity-affiliated party from continuing or commencing to hold any office in, or participate in any manner in the conduct of the affairs of, a regulated entity, which order has become and remains effective as described in section 1377(c)(5) of the Safety and Soundness Act (12 U.S.C. 4636a(c)(5)).

One commenter noted that, as a practical matter, most settlements do not include affirmative findings of non-violation; instead settlements typically include broad language stating that the settlement is entered into without admission. That commenter therefore requested that FHFA revise the language of the exception to “prohibited indemnification payment” in the previously proposed § 1231.2 to state that, unless the proceeding results in a final prohibition order, indemnification is permissible in connection with a settlement in which the entity-affiliated party does not admit wrongdoing. FHFA has considered the comment. This 2016 proposed rulemaking would permit payment of expenses of defending an action, subject to the entity-affiliated party's agreeing to repay those expenses if the entity-affiliated party: Is not exonerated of the charges to which the expenses specifically relate; enters into a settlement of those charges in which the entity-affiliated party admits culpability with respect to them; or is subject to a final order prohibiting the entity-affiliated party from participating in the affairs of the regulated entity. FHFA believes that within these reasonably flexible boundaries for permissible and impermissible indemnification, the parties involved will be able to negotiate an appropriate resolution of legal expenses, which may itself bar or significantly limit indemnification. This flexibility, in FHFA's view, is preferable to strictly dictating a result in a regulation.

Several Banks requested clarification of the scope of § 1231.4, in the 2009 re-proposal, with respect to application of its process involving specific findings by the regulated entity's board of directors after a good faith inquiry, reflected in § 1231.4(c). Specifically, the Banks sought clarity about whether the process was considered a precondition to the advancement of legal or professional expenses by a third-party insurer under insurance or bonds purchased by the regulated entity pursuant to the definition of “prohibited indemnification payments” in § 1231.4(b)(2)(i) of the 2009 re-proposal.5 Under this 2016 proposed rulemaking, FHFA would not require a board of directors' inquiry and findings as a precondition for legal and professional expense advances paid directly to the entity-affiliated party by a third-party insurer under such insurance or bonds purchased by the regulated entity.

Several Banks requested confirmation that the issuance of a notice of charges in an administrative action and the filing of a complaint in a civil action would be the triggers for the indemnification provisions of § 1231.4(a), in these respective circumstances. These Banks are correct. Section 1231.4(a) is triggered by the Director issuing a notice of charges; or by the filing of a complaint in a civil action.

In connection with partial indemnification, one commenter requested a revision to the provision on “prohibited indemnification payments” in § 1231.4(b)(2)(i) 6 to provide that legal and professional fees incurred may be reimbursed on a proportional basis using the ratio of charges as to which the entity-affiliated party is entitled to reimbursement to the total charges. FHFA has considered the requested revision and has determined not to accept it. In many cases the appropriate amount of partial indemnification will be difficult to ascertain with certainty. The value of each charge may not equal each other charge. Services provided often will relate to multiple charges or all charges and cannot conveniently be segregated. FHFA believes that the appropriate amount of any partial indemnification is best determined on a case-by-case basis rather than by applying a predetermined formula.

The OF requested that the restriction on indemnification payments not apply to the OF; and further, confirmation that there is no intention by FHFA to assert that any funding provided by a Bank to the OF that might ultimately be used to indemnify an OF director or officer would be considered to be an indemnification payment by the Bank for purposes of the rule. FHFA considered the comment in connection with the Golden Parachute Final Rule (79 FR 4395) and determined that the OF is appropriately included in that final rule and for reasons of prudential supervision this 2016 proposed rulemaking also extends to the OF. In the Golden Parachute Final Rule, the definition of “entity-affiliated party,” applying to all of part 1231, reads: “(1) With respect to the Office of Finance, any director, officer, or manager of the Office of Finance.” 12 CFR 1231.2. This definition is appropriate because of those persons' participation in the conduct of the affairs of the Banks, specifically their funding activities.

Only the OF, including its board of directors, is responsible for OF's compliance; Banks themselves are not responsible for any improper indemnification payments by OF simply because the OF draws its funding from the Banks. However, a majority of the OF's board comprises the 11 Bank presidents, who would be responsible in their capacity as OF directors for approving indemnification payments in violation of this regulation. The issue does not require additional examination in the context of this 2016 proposal.

One commenter requested that the grandfathering provision relating to existing indemnification agreements (now reflected in § 1231.4(b)(4) of this 2016 proposed rulemaking) also be applicable to bylaw indemnification provisions that are asserted to be contractual in nature. The commenter also sought confirmation that any person who is covered by such an existing indemnification bylaw provision, which may be considered contractual, or an existing separate indemnification agreement will not be subject to any new restrictions contained in a final indemnification rule. FHFA considered the comment and determined that the grandfathering provisions are applicable only to specific indemnification agreements entered into by a regulated entity or the OF with a named entity-affiliated party on or before the day this 2016 proposed rulemaking is published in the Federal Register. In FHFA's view, only agreements of that type present equities that justify grandfathering. Accepting the argument that a Bank's bylaws are contractual in nature and that general indemnification provisions contained in them should be considered specific agreements and grandfathered could immunize a Bank's entire corps of managers and directors from the effect of this regulation in perpetuity.7

One commenter raised the issue of the standard to be used by a board of directors in conducting an investigation and making findings with respect to an entity-affiliated party. The comment suggested that for an entity-affiliated party to be eligible for advancement of expenses to the individual, the board of directors should find that the entity-affiliated party acted in good faith and in a manner that he or she believed to be in the best interests of the regulated entity. FHFA confirms that this 2016 proposed rulemaking intends that the board of directors conclude, after a good faith inquiry based on the information reasonably available to it and before agreeing to advance expenses, that the individual acted in a way that he or she believed to be in the best interest of the regulated entity or the OF. FHFA reminds the regulated entities and the OF that in addition to the standard set forth in this 2016 proposed rulemaking, they also have a concurrent obligation to follow proper corporate governance procedures in conducting their investigations.

A commenter asked about the selection of applicable state law for purposes of corporate governance practices and procedures, and indemnification consistent with the Office of Federal Housing Enterprise Oversight Corporate Governance Rule.8 After considering the comment, FHFA has determined not to address the subject in this rulemaking. FHFA published a final rule on corporate governance that addresses this issue.9 The regulated entities are reminded that an OF rule 10 authorizes the OF to select an appropriate body of governance law and to follow it with respect to practices and procedures related to indemnification, which would apply to the extent not inconsistent with this regulation.

FHFA considered a request by one Bank to allow indemnification by a ruling from the judge before whom the underlying case was heard, asserting that some jurisdictions recognize this as an alternative means by which a person may obtain indemnification. FHFA has determined not to accept the suggestion. FHFA believes that in actions brought by the Agency, the standards prescribed in this rule, within the framework of the Safety and Soundness Act, are the appropriate standards.

Section 1313(f) of the Safety and Soundness Act, as amended, requires the Director, when promulgating regulations relating to the Banks, to consider the differences between Fannie Mae and Freddie Mac (collectively, the Enterprises) and the Banks with respect to: the Banks' cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; joint and several liability; and any other differences the Director considers appropriate. See 12 U.S.C. 4513(f). In preparing this 2016 proposed rulemaking, the Director considered the differences between the Banks and the Enterprises as they relate to the above factors, and determined that the Banks should not be treated differently from the Enterprises for purposes of this 2016 proposed rulemaking. Any regulated entity in conservatorship (or receivership or a limited-life regulated entity), whether a Bank or an Enterprise, would be outside the scope of the proposed rule.

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

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation's impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). FHFA has considered the impact of the 2016 proposed rulemaking under the Regulatory Flexibility Act. The General Counsel of FHFA certifies that this 2016 proposed rulemaking, if adopted as a final rule, is not likely to have a significant economic impact on a substantial number of small entities because it would apply primarily to the regulated entities and the OF, which are not small entities for purposes of the Regulatory Flexibility Act.

Accordingly, for reasons stated in the preamble, under the authority of 12 U.S.C. 4518(e) and 4526, FHFA proposes to amend part 1231 of subchapter B of chapter XII of title 12 of the CFR as follows:

Comments Invited

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.

We will consider all comments we receive by the closing date for comments. We may change these special conditions based on the comments we receive.

On July 30, 2013, Boeing applied for an amendment to type certificate no. T00021SE to include the new Model 787-10 airplane. This airplane is a stretched-fuselage derivative of the 787-9, currently approved under type certificate no. T00021SE, with maximum single-class seating capacity of 440 passengers. The 787-10 has a maximum takeoff weight of 560,000 lbs and is powered by two General Electric GEnx-1B/P2 or Rolls-Royce Trent 1000 engines.

Under the provisions of Title 14, Code of Federal Regulations (14 CFR) 21.101, Boeing must show that the Model 787-10 airplane meets the applicable provisions of the regulations listed in type certificate no. T00021SE or the applicable regulations in effect on the date of application for the change, except for earlier amendments as agreed upon by the FAA.

In addition, the certification basis includes other regulations, special conditions, and exemptions that are not relevant to these proposed special conditions. Type certificate no. T00021SE will be updated to include a complete description of the certification basis for this airplane model.

If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the Model 787-10 airplane because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

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

In addition to the applicable airworthiness regulations and special conditions, the Model 787-10 airplane must comply with the fuel-vent and exhaust-emission requirements of 14 CFR part 34, and the noise-certification requirements of 14 CFR part 36.

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.101.

The Model 787-10 airplane will incorporate the following novel or unusual design features:

A flaps-up vertical modal suppression system.

The Boeing Model 787-10 will add a new flaps-up vertical modal-suppression (F0VMS) system to the Normal mode of the primary flight-control system (PFCS). The F0VMS system is needed to satisfy the flutter-damping margin requirements of § 25.629 and the means-of-compliance provisions in advisory circular (AC) 25.629-1B. This system will be used in lieu of typical methods of improving the flutter characteristics of an airplane, such as increasing the torsional stiffness of the wing or adding wingtip ballast weights.

The F0VMS system is an active modal-suppression system that will provide additional damping to an already stable, but low-damped, 3Hz symmetric wing, nacelle, and body aeroelastic mode of the airplane. This feedback-control system will compensate for a flutter-damping margin deficiency of the airplane and maintain adequate damping margins to flutter. The F0VMS system accomplishes this by oscillating the elevators, and, when needed, the flaperons.

Because Boeing's flutter analysis shows that the 3Hz mode is stable and does not flutter, the F0VMS system is not an active flutter-suppression system, but, rather, a damping-augmentation system. At this time, the FAA is not prepared to accept an active flutter-suppression system that suppresses a divergent flutter mode in the operational or design envelope of the airplane.

This will be the first time an active modal-suppression system will be used to compensate for a flutter-damping margin deficiency for § 25.629 compliance, and the FAA intends to take a conservative approach in the technology's application. The FAA considers the use of this new active modal-suppression system for flutter compliance to be novel or unusual when compared to the technology envisioned in the current airworthiness standards. Consequently, special conditions are required in consideration of the effects of this new system on the aeroelastic stability of the airplane, both in the normal and failed state, to maintain the level of safety intended by § 25.629.

The stretched body of the 787-10 degrades the 3Hz symmetric wing, nacelle, and body aeroelastic mode relative to the 787-9. The 3Hz aeroelastic mode of the 787-10 airplane without the F0VMS system does not meet the damping margin criteria of AC 25.629-1B within the operational envelope, as well as the design envelope, of the airplane. The 3Hz mode is not predicted to flutter, but has a lack of adequate flutter-damping margin for the airplane. Boeing has determined that typical methods of improving the flutter characteristics of the airplane, such as increasing the torsional stiffness of the wing or adding wingtip ballast weights, do not meet their business objectives. Consequently, Boeing is adding a new F0VMS system to the Normal mode of the Model 787-10 airplane PFCS to satisfy the flutter-damping margin requirements of § 25.629, and means-of-compliance provisions contained in AC 25.629-1B. The F0VMS system will be active in certain parts of the flight envelope when the flaps are retracted. The F0VMS system is a feedback-control system that adds damping to the system's 3Hz mode by oscillating the elevators symmetrically. When the elevators are expected to be ineffective due to blowdown or other limitations, the flaperons are applied to augment or supplant elevator-control input. However, the flaperons are not as effective as the elevators in providing additional damping to the 3Hz mode.

The F0VMS system will be an integral part of the PFCS Normal mode and use existing hardware, including inertial and air-data sensors. As such, the F0VMS system is expected to be as reliable as the Normal mode itself. In other words, any failures that would cause a loss of the F0VMS function would also cause a loss of the Normal mode. FAA issue paper SA-17, “Command Signal Integrity,” requires that the probability of an automatic change from Normal mode to a degraded mode of the PFCS should occur with a frequency less than 10−7 per flight hour, irrespective of flight phase. This reliability is acceptable for the F0VMS system meeting the flutter-damping margins of § 25.629 and AC 25.629-1B, and the requirements of these special conditions. The F0VMS function is only available in the PFCS Normal mode, and not available in the Secondary or Direct modes. However, the PFCS Secondary and Direct modes include a simplified modal-suppression function, which provides additional damping margin.

In addition to the Model 787-10 airplane needing the F0VMS functionality for flutter compliance, this functionality will also be used for active nacelle gust-load alleviation (NGLA), because the low damping exhibited by the 3Hz mode adversely affects nacelle gust loads. Therefore, the Boeing Model 787-9 airplane NGLA system will not need to be carried over to the Model 787-10 airplane.

These proposed special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.

As discussed above, these special conditions are applicable to the Boeing Model 787-10 airplane. Should Boeing apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, these special conditions would apply to that model as well.

This action affects only certain novel or unusual design features on one model series of airplane. It is not a rule of general applicability.

The authority citation for these special conditions is as follows:

The following special conditions are proposed to address the aeroelastic stability of the 787-10 airplane with the F0VMS system as an integral part of the PFCS Normal mode:

1. The airplane in the PFCS Normal mode (which includes F0VMS) must meet the nominal (no failures) flutter and aeroelastic stability requirements of § 25.629(b)(1), and the damping-margin criteria of AC 25.629-1B, Section 7.1.3.3. Figure 1, below, illustrates the Damping versus Airspeed plot.

a. The aeroservoelastic analysis must take into account the effect of the following items:

i. Significant structural and aerodynamic nonlinearities.

ii. Significant F0VMS nonlinearities, including control-surface rate and displacement saturation, and blowdown.

iii. The range of design maneuver load factors.

iv. Control surface freeplay.

v. Any other items that may affect the performance of the F0VMS system in maintaining adequate modal damping margins.

2. The airplane in the PFCS Normal mode, but with the F0VMS system inoperative, must exhibit a damping margin to flutter of 0.015g within the VD/MD envelope, linearly decreasing (in KEAS) to zero damping margin to flutter at 1.15 VD/1.15 MD, limited to Mach 1.0. That is, the 3Hz mode should not cross the g = 0.015 line below VD, or the g = 0.03 line below 1.15 VD, assuming the use of analysis Method 1 of AC 25.629-1B, Section 7.1.3.3. Figure 2, below, illustrates the Damping versus Airspeed plot.

3. The airplane in the PFCS Normal mode (which includes F0VMS) must meet the fail-safe flutter and aeroelastic stability requirements of § 25.629(b)(2), and the damping-margin criteria of AC 25.629-1B, Section 7.1.3.5.

4. The airplane in the PFCS Secondary and Direct modes must meet the fail-safe flutter and aeroelastic-stability requirements of § 25.629(b)(2), and the damping-margin criteria of AC 25.629-1B, Section 7.1.3.5.

The Regulatory Flexibility Act (“RFA”), codified at 5 U.S.C. 600-611, requires an agency to review its rules that have a significant economic impact upon a substantial number of small entities within ten years of the publication of such rules as final rules. 5 U.S.C. 610(a). The purpose of the review is “to determine whether such rules should be continued without change, or should be amended or rescinded . . . to minimize any significant economic impact of the rules upon a substantial number of such small entities.” 5 U.S.C. 610(a). The RFA sets forth specific considerations that must be addressed in the review of each rule:

• The continued need for the rule;

• the nature of complaints or comments received concerning the rule from the public;

• the complexity of the rule;

• the extent to which the rule overlaps, duplicates or conflicts with other federal rules, and, to the extent feasible, with state and local governmental rules; and

• the length of time since the rule has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the rule. 5 U.S.C. 610(c).

The Securities and Exchange Commission, as a matter of policy, reviews all final rules that it published for notice and comment to assess not only their continued compliance with the RFA, but also to assess generally their continued utility. When the Commission implemented the Act in 1980, it stated that it “intend[ed] to conduct a broader review [than that required by the RFA], with a view to identifying those rules in need of modification or even rescission.” Securities Act Release No. 6302 (Mar. 20, 1981), 46 FR 19251 (Mar. 30, 1981). The list below is therefore broader than that required by the RFA, and may include rules that do not have a significant economic impact on a substantial number of small entities. Where the Commission has previously made a determination of a rule's impact on small businesses, the determination is noted on the list.

The Commission particularly solicits public comment on whether the rules listed below affect small businesses in new or different ways than when they were first adopted. The rules and forms listed below are scheduled for review by staff of the Commission during the next 12 months. The list includes 11 rules adopted by the Commission in 2005.

Title: XBRL Voluntary Financial Reporting Program on the EDGAR System.

Citation: 17 CFR 229.601; 17 CFR 232.401; 17 CFR 232.402; 17 CFR 232.11; 17 CFR 232.305; 17 CFR 240.13a-14; 17 CFR 240.15d-14; 17 CFR 249.220f; 17 CFR 249.306; 17 CFR 270.8b-1; 17 CFR 270.8b-2; 17 CFR 270.8b-33; and 17 CFR 270.30a-2.

Authority: 15 U.S.C. 77c, 77d, 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77s(a), 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 77sss(a), 77ttt, 78c, 78c(b), 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78o(d), 78p, 78q, 78s, 78u-5, 78w, 78w(a), 78x, 78ll, 78ll(d), 78mm, 79e, 79j, 79n, 79q, 79t, 79t(a), 80a-1, 80a-8, 80a-9, 80a-20, 80a-23, 80a-29, 80a-30, 80a-31(c), 80a-34, 80a-37, 80a-38(a), 80a-39, 80b-3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350.

Description: The amendments enable registrants to submit voluntarily supplemental tagged financial information using the eXtensible Business Reporting Language (XBRL) format as exhibits to specified EDGAR filings under the Securities Exchange Act of 1934 (“Exchange Act”) and the Investment Company Act of 1940. Registrants choosing to participate in the voluntary program also will continue to file their financial information in HTML or ASCII format, as currently required. To participate in the program, volunteers are required to submit their XBRL formatted information in accordance with the amendments. The voluntary program is intended to help the Commission evaluate the usefulness of data tagging and XBRL to registrants, investors, the Commission and the marketplace.

Prior Commission Determination Under 5 U.S.C. 601: A Final Regulatory Flexibility Analysis was prepared in accordance with 5 U.S.C. 604 in conjunction with the Commission's adoption of Release No. 33-8529 (Feb. 3, 2005). The Commission considered comments received on the Initial Regulatory Flexibility Analysis in the proposing release, Release No. 33-8496 (Sept. 27, 2004), at that time.

Section 105(e) of the Federal Alcohol Administration Act (FAA Act), 27 U.S.C. 205(e), authorizes the Secretary of the Treasury to prescribe regulations for the labeling of wine, distilled spirits, and malt beverages. The FAA Act provides that these regulations should, among other things, prohibit consumer deception and the use of misleading statements on labels and ensure that labels provide the consumer with adequate information as to the identity and quality of the product. The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the FAA Act pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has delegated various authorities through Treasury Department Order 120-01, dated December 10, 2013 (superseding Treasury Order 120-01, dated January 24, 2003), to the TTB Administrator to perform the functions and duties in the administration and enforcement of these laws.

Part 4 of the TTB regulations (27 CFR part 4) authorizes TTB to establish definitive viticultural areas and regulate the use of their names as appellations of origin on wine labels and in wine advertisements. Part 9 of the TTB regulations (27 CFR part 9) sets forth the standards for the preparation and submission of petitions for the establishment or modification of American viticultural areas (AVAs) and lists the approved American viticultural areas.

Section 4.25(e)(1)(i) of the TTB regulations (27 CFR 4.25(e)(1)(i)) defines a viticultural area for American wine as a delimited grape-growing region having distinguishing features, as described in part 9 of the regulations, and a name and a delineated boundary, as established in part 9 of the regulations. These designations allow vintners and consumers to attribute a given quality, reputation, or other characteristic of a wine made from grapes grown in an area to the wine's geographic origin. The establishment of AVAs allows vintners to describe more accurately the origin of their wines to consumers and helps consumers to identify wines they may purchase. Establishment of an AVA is neither an approval nor an endorsement by TTB of the wine produced in that area.

Section 4.25(e)(2) of the TTB regulations (27 CFR 4.25(e)(2)) outlines the procedure for proposing the establishment of an AVA and provides that any interested party may petition TTB to establish a grape-growing region as an AVA. Petitioners may use the same procedures to request changes involving existing AVAs. Section 9.12 of the TTB regulations (27 CFR 9.12) prescribes standards for petitions for modifying established AVAs. Petitions to expand an established AVA must include the following:

• Evidence that the region within the proposed expansion area boundary is nationally or locally known by the name of the established AVA;

• An explanation of the basis for defining the boundary of the proposed expansion area;

• A narrative description of the features of the proposed expansion area affecting viticulture, such as climate, geology, soils, physical features, and elevation, that make the proposed expansion area similar to the established AVA and distinguish it from adjacent areas outside the established AVA boundary;

• The appropriate United States Geological Survey (USGS) map(s) showing the location of the proposed expansion area, with the boundary of the proposed expansion area clearly drawn thereon; and

• A detailed narrative description of the proposed expansion area boundary based on USGS map markings.

TTB received a petition from John and Jan Giunco, owners of 4JG's Orchards and Vineyards in Colts Neck, New Jersey, proposing to expand the established “Outer Coastal Plain” AVA in southeastern New Jersey. The Outer Coastal Plain AVA (27 CFR 9.207) was established by T.D. TTB-58, which published in the Federal Register on February 9, 2007 (72 FR 6165). The Outer Coastal Plain AVA covers approximately 2.25 million acres in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Monmouth, Ocean, and Salem Counties, New Jersey. The Outer Coastal Plain AVA and the proposed expansion area are not located within any other AVA.

The proposed expansion area is located in Monmouth County, adjacent to the western edge of the existing Outer Coastal Plain AVA boundary, and covers approximately 32,932 acres. One commercial vineyard covering a total of 30 acres is located within the proposed expansion area. The vineyard also has its own winery. The vineyard and the winery both existed at the time the Outer Coastal Plain AVA was established in 2007. The petitioners for the expansion of the AVA claim that when the AVA was established, the region of the proposed expansion was intended to be included in the AVA but was inadvertently omitted. The petitioners state that they only recently learned that they are not within the AVA's boundaries. The petition includes a letter from the current president of the Outer Coastal Plain Vineyard Association stating that the petitioners are vineyard owners who have been members of that Association since 2006. The letter also states that the association supports the proposed expansion.

According to the petition, the soils, elevation, and climate of the proposed expansion area are similar to those of the established AVA. Unless otherwise noted, all information and data pertaining to the proposed expansion area contained in this document come from the petition and its supporting exhibits.

T.D. TTB-58, which established the Outer Coastal Plain AVA, states that New Jersey has five defined physiographic regions, and the physiographic region in which the established AVA is located is called the “Outer Coastal Plain.” The expansion petition includes several items that directly associate the proposed expansion area with the Outer Coastal Plain region. A Web site dedicated to the botany of New York, New Jersey, and Connecticut features a listing of recreational areas titled “New Jersey Natural Areas: Outer Coastal Plain.” 1 Included on this list are parks within the proposed expansion area, including Dorbrook Recreation Area in Colts Neck and the Durand Park Memorial Arboretum in Freehold Township. An article prepared by the Monmouth County Health Department, titled “Natural and Cultural Features of Monmouth County,” states that the Mount Pleasant Hills extend “from Keyport southwest through Imlaystown to the Delaware Bay in Salem County, and [form] the drainage divide between the Inner and Outer Coastal Plain.” 2 The petitioner notes that because Imlaystown is west of the proposed expansion area, this definition of the divide between the Inner and Outer Coastal Plains places the proposed expansion area within the Outer Coastal Plain. A geological and water survey map from the New Jersey Department of Environmental Protection shows the location of a well within Colts Neck Township near the western limits of the Outer Coastal Plain.3 Finally, a visitors' guide for southern New Jersey, compiled by the South Jersey Tourism Corporation, includes a section on the Outer Coastal Plain AVA. The 4JG's Vineyards, which is owned by the petitioner, is included in a listing of wineries within the AVA. TTB notes that although the petitioner's vineyard is not technically within the boundaries of the Outer Coastal Plain AVA, its inclusion in the listing demonstrates that tourism organizations and visitors currently associate the proposed expansion area with the AVA.

The current Outer Coastal Plain AVA spans the southeastern portion of New Jersey, from the Cape May Peninsula to just south of Raritan Bay. The Atlantic Ocean forms the eastern boundary. The southwestern boundary follows the shore of Delaware Bay. The western boundary follows a belt of low hills called cuestas, which separate the physiographic region known as the Outer Coastal Plain from the region known as the Inner Coastal Plain. A small portion of the Outer Coastal Plain AVA's current western boundary forms a rough angle bracket shape (“>”), where the land between the upper and lower arms of the “>” is not within the AVA. The townships of Colts Neck, Freehold, Holmdel, and Marlboro, as well as the unincorporated community of Crawford Corners, are located within this sharp angle in the AVA boundary.

The proposed expansion area is located within this sharp angle in the Outer Coastal Plain AVA's boundary, with the angle forming the northern, eastern, and southern edges of the proposed expansion area. The proposed changes would eliminate the “>” in the AVA's current western boundary by moving the AVA's boundary westward to incorporate the land within the “>” into the Outer Coastal Plain AVA. The proposed boundary change would begin in Freehold, at the intersection of Colts Neck Road, West Main Street, and State Route 79, which is the beginning point of the bottom segment of the “>” in the current AVA boundary. However, instead of following Colts Neck Road eastward to form the bottom segment of the “>”, the proposed boundary would instead follow State Route 79 northeasterly, then northerly, to the unincorporated community of Wickatunk. The proposed boundary would then proceed generally east along a series of roads, reconnecting with the current AVA boundary at the Garden State Parkway near the community of Crawford Corners, which is near the tip of the top segment of the “>” in the current boundary.

The proposed expansion area is surrounded by the current Outer Coastal Plain AVA to the north, east, and south. The Inner Coastal Plain physiographic region of New Jersey, marked by the belt of cuestas, begins west of the proposed expansion area. Elevations west of the proposed expansion area begin to increase, as shown on the elevation map included with the proposed expansion petition.

According to the proposed expansion petition, the soil, elevation, and climate of the proposed expansion area are similar to those of the established Outer Coastal Plain AVA.

According to T.D. TTB-58, which established the Outer Coastal Plain AVA, the soils of the AVA are primarily well-drained, sandy soils derived from unconsolidated sediments. The soils are described as having low pH levels and low fertility. T.D. TTB-58 did not include the names of the most common soil types in the Outer Coastal Plain AVA. The proposed expansion petition states that soils within the Outer Coastal Plain AVA generally have lower levels of clay than soils outside the AVA.

The expansion petition included soil survey maps from two sample sites within the proposed expansion area. The first sample area is located in the northwestern portion of the proposed expansion area near the proposed new boundary, and the second sample area is in the southeastern portion of the proposed expansion area near the current AVA's western boundary. The following table, compiled by TTB from data provided in the petition, lists the four most common soil types in each of the two sample areas and the percentage of the sample area covered by each soil type.

According to the soil survey information, these four soil types all contain large amounts of sand and/or gravel, similar to the soils within the Outer Coastal Plain AVA, as described in T.D. TTB-58. Additionally, all four of these soils are moderately well-drained to well-drained, which is also a characteristic of soils of the Outer Coastal Plain AVA. Well-drained soils shed excess water quickly, reducing the risk of rot and disease in the vines.

T.D. TTB-58 states that the elevations within the Outer Coastal Plain AVA are less than 280 feet above sea level. West of the AVA are the cuestas, which separate the Outer Coastal Plain from the Inner Coastal Plain. Elevations west of this belt of cuestas are higher than those within the Outer Coastal Plain AVA. Elevations northwest of the AVA can reach as high as 1,680 feet.

The petition includes a map of elevations within and surrounding the proposed expansion area. Within both the proposed expansion area and the established AVA, elevations primarily range from 6 feet to 150 feet. The map shows a small region along the western edge of the proposed expansion area that reaches elevations of 250 feet. Similar elevations are also shown in small regions along the Outer Coastal Plain AVA's current western boundary, where the transition to the cuestas begins. The map shows that the elevations within the proposed expansion area are within the range of elevations established for the Outer Coastal Plain AVA by T.D. TTB-58. The low elevations allow marine air from the Atlantic Ocean and Delaware Bay to enter both the AVA and the proposed expansion area and moderate the temperatures.

According to T.D. TTB-58, the maritime influence from the Atlantic Ocean and Delaware Bay makes the Outer Coastal Plain AVA generally warmer than the regions farther inland. As a result of warmer temperatures, the growing season within the AVA is also longer than in the surrounding regions and averages between 190 and 217 days.

The proposed expansion petition includes a map that shows the length of the growing season within the proposed expansion area and the surrounding regions. Within the majority of the proposed expansion area, the growing season ranges from 188 to 192 days. The same map shows that the majority of the portion of the AVA adjacent to the proposed expansion area has a growing season which is also within the range of 188 to 192 days. Immediately to the west of the proposed expansion area, outside of the Outer Coastal Plain AVA where the cuestas begin, the growing season is only between 185 and 188 days. The petition states that farther to the north and west, in the higher elevations outside both the proposed expansion area and the AVA, the growing season length drops to between 163 to 179 days. Because of the longer growing season, vineyards within the AVA and the proposed expansion area can grow varietals of grapes that require a longer time to mature.

TTB concludes that the petition to expand the boundaries of the established Outer Coastal Plain AVA merits consideration and public comment, as invited in this notice of proposed rulemaking.

See the narrative description of the boundary of the petitioned-for expansion area in the proposed regulatory text published at the end of this proposed rule.

To document the existing and proposed boundaries of the Outer Coastal Plain AVA, the petitioner provided a copy of the required maps, which are listed below in the proposed regulatory text.

For a wine to be labeled with a viticultural area name or with a brand name that includes an AVA name, at least 85 percent of the wine must be derived from grapes grown within the area represented by that name, and the wine must meet the other conditions listed in § 4.25(e)(3) of the TTB regulations (27 CFR 4.25(e)(3)). If the wine is not eligible for labeling with an AVA name and that name appears in the brand name, then the label is not in compliance and the bottler must change the brand name and obtain approval of a new label. Similarly, if the AVA name appears in another reference on the label in a misleading manner, the bottler would have to obtain approval of a new label. Different rules apply if a wine has a brand name containing an AVA name that was used as a brand name on a label approved before July 7, 1986. See § 4.39(i)(2) of the TTB regulations (27 CFR 4.39(i)(2)) for details.

The approval of the proposed expansion of the Outer Coastal Plain AVA would not affect any other existing viticultural area. The expansion of the Outer Coastal Plain AVA would allow vintners to use “Outer Coastal Plain” as an appellation of origin for wines made primarily from grapes grown within the proposed expansion area if the wines meet the eligibility requirements for the appellation.

TTB invites comments from interested members of the public on whether it should expand the Outer Coastal Plain AVA as proposed. TTB is specifically interested in receiving comments on the similarity of the proposed expansion area to the established Outer Coastal Plain AVA. Please provide specific information in support of your comments.

You may submit comments on this notice of proposed rulemaking by using one of the following three methods:

• Federal e-Rulemaking Portal: You may send comments via the online comment form posted with this notice within Docket No. TTB-2016-0008 on “Regulations.gov,” the Federal e-rulemaking portal, at http://www.regulations.gov. A direct link to that docket is available under Notice No. 162 on the TTB Web site at https://www.ttb.gov/wine/wine-rulemaking.shtml. Supplemental files may be attached to comments submitted via Regulations.gov. For complete instructions on how to use Regulations.gov, visit the site and click on the “Help” tab.

• U.S. Mail: You may send comments via postal mail to the Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., Box 12, Washington, DC 20005.

• Hand Delivery/Courier: You may hand-carry your comments or have them hand-carried to the Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., Suite 400, Washington, DC 20005.

Please submit your comments by the closing date shown above in this notice. Your comments must reference Notice No. 162 and include your name and mailing address. Your comments also must be made in English, be legible, and be written in language acceptable for public disclosure. TTB does not acknowledge receipt of comments, and TTB considers all comments as originals.

In your comment, please clearly state if you are commenting for yourself or on behalf of an association, business, or other entity. If you are commenting on behalf of an entity, your comment must include the entity's name, as well as your name and position title. If you comment via Regulations.gov, please enter the entity's name in the “Organization” blank of the online comment form. If you comment via postal mail or hand delivery/courier, please submit your entity's comment on letterhead.

You may also write to the Administrator before the comment closing date to ask for a public hearing. The Administrator reserves the right to determine whether to hold a public hearing.

All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or inappropriate for public disclosure.

TTB will post, and you may view, copies of this notice, selected supporting materials, and any online or mailed comments received about this proposal within Docket No. TTB-2016-0008 on the Federal e-rulemaking portal, Regulations.gov, at http://www.regulations.gov. A direct link to that docket is available on the TTB Web site at https://www.ttb.gov/wine/wine_rulemaking.shtml under Notice No. 162. You may also reach the relevant docket through the Regulations.gov search page at http://www.regulations.gov. For information on how to use Regulations.gov, click on the site's “Help” tab.

All posted comments will display the commenter's name, organization (if any), city, and State, and, in the case of mailed comments, all address information, including email addresses. TTB may omit voluminous attachments or material that the Bureau considers unsuitable for posting.

You may also view copies of this notice of proposed rulemaking, all related petitions, maps and other supporting materials, and any electronic or mailed comments that TTB receives about this proposal by appointment at the TTB Information Resource Center, 1310 G Street NW., Washington, DC 20005. You may also obtain copies at 20 cents per 8.5- x 11-inch page. Please note that TTB is unable to provide copies of USGS maps or other similarly-sized documents that may be included as part of the AVA petition. Contact TTB's information specialist at the above address or by telephone at 202-453-2265 to schedule an appointment or to request copies of comments or other materials.

TTB certifies that this proposed regulation, if adopted, would not have a significant economic impact on a substantial number of small entities. The proposed regulation imposes no new reporting, recordkeeping, or other administrative requirement. Any benefit derived from the use of an AVA name would be the result of a proprietor's efforts and consumer acceptance of wines from that area. Therefore, no regulatory flexibility analysis is required.

It has been determined that this proposed rule is not a significant regulatory action as defined by Executive Order 12866 of September 30, 1993. Therefore, no regulatory assessment is required.

Karen A. Thornton of the Regulations and Rulings Division drafted this notice of proposed rulemaking.

For the reasons discussed in the preamble, TTB proposes to amend title 27, chapter I, part 9, Code of Federal Regulations, as follows:

The revisions and additions read as set forth below:

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

The EPA is proposing to approve revisions to the Texas SIP, submitted to EPA on July 10, 2015 and supplemented on April 22, 2016 to meet certain requirements under section 182(b) of the CAA for the DFW Moderate nonattainment area (NAA) under the 2008 ozone standard. We are proposing to approve the DFW RFP SIP that includes the RFP plan, contingency measures for failure to meet RFP milestone requirements, and the 2017 transportation conformity motor vehicle emissions budgets (MVEBs). We are also proposing to approve the 2011 base year emissions inventory (EI).

On March 12, 2008, the EPA promulgated a revised 8-hour ozone standard of 0.075 parts per million (ppm) 1 and on April 30, 2012, the EPA designated and classified the DFW area (consisting of Collin, Dallas, Denton, Ellis, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise counties) 2 as a Moderate NAA under the 2008 ozone standard with an attainment date of July 20, 2018.3 Accordingly, the Texas Commission on Environmental Quality (TCEQ) was required to submit revisions to the DFW SIP to meet requirements under section 182(b) of the CAA for the Moderate NAA. A brief history of the DFW area under the prior 1-hour and 1997 8-hour ozone standards, as well as additional background information, is provided in the Technical Support Document (TSD), which is in the docket for this rulemaking.

The CAA requires that areas designated as nonattainment for ozone and classified as Moderate or worse demonstrate RFP in reducing emissions of ozone precursors (nitrogen oxides or NOX and volatile organic compounds or VOCs) 4 over a specific period of time. The RFP plan generally is designed to achieve progress toward meeting the ozone NAAQS through annual reductions in emissions of NOX and/or VOCs. In our final rule to implement the 2008 ozone standard (referred to as the SIP Requirements Rule or SRR) we addressed, among other things, the RFP requirements as they apply to areas designated nonattainment and classified as Moderate for the 2008 ozone standard. For the purposes of the 2008 ozone NAAQS, the EPA in the SRR interpreted CAA section 182(b)(1)(A)(ii) to require such Moderate areas to obtain 15 percent ozone precursor emission reductions over the first 6 years after the baseline year for the 2008 ozone NAAQS (see 80 FR 12264, March 6, 2015 and 40 CFR 51.1110).

RFP plans must also include a MVEB, which provides the allowable on-road mobile emissions an area can produce and continue to demonstrate RFP. The State's RFP submittal included MVEBs for the DFW area for the year 2017 (see Chapter 5 of the State's submittal and page 13 of our TSD). The MVEBs are discussed in detail later in this rulemaking.

Pursuant to section 172(c)(9) of the CAA, nonattainment plan provisions must also provide for the implementation of contingency measures, that is, specific measures to be undertaken if a nonattainment area fails to make reasonable further progress, or to attain the national primary ambient air quality standard by the applicable attainment date. Such contingency measures shall take effect without further action by the State or EPA, which include additional controls that would be implemented if the area fails to reach, in this case, its RFP milestones. While the CAA does not specify the type of measures or quantity of emissions reductions required, EPA has interpreted the CAA to mean that implementation of these contingency measures would provide additional emissions reductions of up to 3% of the adjusted base year inventory (or a lesser percentage that will make up the identified shortfall) in the year following the RFP milestone year. For more information on contingency measures, see the April 16, 1992 General Preamble (57 FR 13498, 13510) and the SRR (80 FR 12264, 12285). The State provided emissions reductions in excess of those needed for RFP as contingency measures (see Chapter 4, pages 15-17 of the State's submittal and Tables 6 and 7 in our TSD). The submitted contingency measures include, but are not limited to, (1) mobile source emission reductions addressing engine and fuel rules; and (2) fleet turnover.

In addition, section 182(a)(1) of the CAA requires an inventory of actual emissions from all sources of relevant pollutants in the nonattainment area. Such emissions inventories are used, among other things, in the calculations concerning RFP in such areas. In the SRR, the EPA recommended using 2011 as the base year emission inventory. Texas submitted a revised 2011 base year inventory for area and mobile source emissions in the ten-county NAA to meet this requirement.

The SIP revision submitted by the TCEQ on July 10, 2015 and supplemented on April 22, 2016 includes: (1) A revised 2011 base year EI for area and mobile sources; (2) the RFP plan (which must demonstrate NOX and/or VOC emissions reductions of at least fifteen percent through 2017 for nine of the ten counties and VOC-only emissions reductions for Wise County); (3) contingency measures to be implemented in 2018 if the 2017 RFP target is not met; and (4) the MVEBs for 2017.5

We reviewed the submittal for consistency with the requirements of the CAA, EPA regulations, and EPA guidance. A summary of our analysis and findings are provided below. For a more detailed discussion of our evaluation, please see our TSD.

An emissions inventory is a comprehensive, accurate, and current inventory of actual emission from all sources. It is required by sections 172(c)(3) and 182(b)(1) of the CAA that require that nonattainment plan provisions include an inventory of NOX and VOC emissions from all sources in the nonattainment area. The EPA previously approved the 2011 base year inventory (see 80 FR 9204, February 20, 2015). Since that submittal, several improvements have been made, including, but not limited to, improvements to the models used to calculate the mobile source categories within the inventory. Because of these refinements, revisions to more accurately reflect the EI were made by the TCEQ. We have determined that the revised inventory was developed in accordance with EPA guidance and regulations 6 and therefore, we propose to approve the revised 2011 base year EI. For reference, the previously approved base year EI (80 FR 9204) is provided in Table 1, reported in tons per day (tpd), along with the revised 2011 base year EI, also reported in tpd. Details on how each of the emissions categories was revised and emissions totals for each county are included in the TSD.

The 2011 base year EI is the starting point for calculating RFP. The “adjusted” emissions are what we would expect to see if the on-road fleet did not implement the low Reid Vapor Pressure (RVP) gasoline and pre-1990 automobile emission controls. Such controls are not creditable under section 182(b)(1)(D) of the CAA, but are no longer required to be calculated for exclusion in RFP analyses because the Administrator determined that due to the passage of time the effect of these exclusions would be de minimis (40 CFR 51.1110). The State has chosen these non-creditable reductions to represent a more accurate accounting, which is acceptable. The result, after subtracting the non-creditable reductions, is known as the adjusted base year inventory. The RFP target levels and emissions reductions required to meet those targets are calculated from the adjusted base year inventory.

To achieve the RFP target levels, section 182(c)(2)(B) of the CAA allows for substitution of NOX emission reductions for VOC emission reductions in certain circumstances. See 80 FR 12264, 12271 and 40 CFR 51.1110.7 For example, the DFW ten-county NAA includes nine counties that have already met the 15 percent emission reduction requirement for VOC under the 1-hour ozone NAAQS (Collin, Dallas, Denton and Tarrant, see 70 FR 18993) and under the 1997 ozone NAAQS (Ellis, Johnson, Kaufman, Parker and Rockwall, see 73 FR 58475). Therefore, these nine counties may rely upon NOX and VOC emissions reductions to achieve the RFP target levels. Wise County however, must meet the 15 percent VOC emission reduction requirement because this is its first time to be covered under the ozone nonattainment SIP requirements. This also means that these VOC emission reductions are calculated separately from the other nine counties (see the TSD for a more detailed explanation). The RFP submittal provides emission reductions of NOX and VOC whose combined total is 15 percent for nine of the ten counties (all but Wise County). As explained in more detail in the State's April 22, 2016 “Technical Supplement to the 2008 Ozone DFW RFP SIP Revision,” the TCEQ provided a technical supplement to EPA to correct the 2017 RFP demonstration for Wise County as well as a corrected RFP spreadsheet that removed the transfer of VOC reductions to Wise County and credits emissions reductions from drilling rig controls that were available but not credited in its July 10, 2015 submittal. The technical supplement shows that Wise County meets the 15% VOC-only reduction requirement from the 2011 base year through the 2017 attainment year based solely on reductions from within Wise County. All the data used to meet this requirement within Wise County was included in the original submitted SIP RFP revision but was not used in the RFP calculations because TCEQ did not think it was needed at that time.

Tables 2 and 3 provide an accounting of the emissions targets through 2017. Table 2 shows the calculations and reductions required for nine of the ten counties (all but Wise County) to achieve RFP and Table 3 provides the calculations and reductions required for Wise County to achieve RFP.8

In this document “we,” “us,” and “our” means the EPA.

Pursuant to section 110(a)(1) of the CAA, states are required to submit SIPs that provide for the implementation, maintenance and enforcement of a new or revised NAAQS within 3 years following the promulgation of such new or revised NAAQS. Section 110(a)(2) lists specific requirements that SIPs must include to adequately address such new or revised NAAQS, as applicable.1

On March 27, 2008, following a periodic review of the NAAQS for ozone, EPA revised the primary and secondary 8-hour NAAQS for ozone: the level of the primary and secondary standards was revised to 0.075 parts per million (ppm), expressed to three decimal places, based on a 3-year average of the fourth-highest maximum 8-hour average concentration (see 73 FR 16436).2 Likewise, on November 12, 2008, we revised the primary and secondary NAAQS for Pb to 0.15 micrograms per cubic meter (see 73 FR 66964). Similarly, on February 9, 2010, EPA revised the primary NAAQS for NO2 to establish a new 1-hour standard at a level of 100 parts per billion (ppb), based on the 3-year average of the 98th percentile of the yearly distribution of 1-hour daily maximum concentrations, to supplement the existing annual standard (see 75 FR 6474).3 Also, on June 22, 2010, we revised the primary NAAQS for SO2 to establish a new 1-hour standard at a level of 75 ppb, based on the 3-year average of the annual 99th percentile of 1-hour daily maximum concentrations (see 75 FR 35520.) We refer to each of these NAAQS by the year promulgated, e.g., “the 2008 ozone standard.” For more information on these standards, please visit https://www.epa.gov/criteria-air-pollutants.

Our technical evaluation of the Oklahoma submittals is provided in the Technical Support Document (TSD), which is in the docket for this rulemaking.4 With the exception of three sub-elements (or “prongs”) that pertain to interstate transport and visibility protection, EPA is proposing to approve the Oklahoma i-SIP submittals for the 2008 Pb and ozone NAAQS, as well as the 2010 NO2 and SO2 NAAQS as meeting the requirements of an i-SIP. The exceptions are: Section 110(a)(2)(D)(i)(I), prongs 1 and 2, which address the contribution to nonattainment and interfere with maintenance of the 2008 ozone and 2010 SO2 NAAQS in other states; and section 110(a)(2)(D)(i)(II)—the prong that specifically addresses visibility protection for the 2010 SO2 NAAQS. We will take separate action on these three prongs for the 2008 ozone and 2010 SO2 NAAQS submittals.

The State's submittals on October 5, 2012; February 28, 2014; and January 28, 2015 demonstrate how the existing Oklahoma SIP meets the infrastructure requirements for the 2008 Pb and ozone NAAQS and the 2010 NO2 and SO2 NAAQS. A summary of our evaluation of the Oklahoma SIP for each applicable element of CAA section 110(a)(2)(A)-(M) follows. These SIP submissions became complete by operation of law on April 5, 2013, August 28, 2014, and July 18, 2015, respectively, pursuant to CAA section 110(k)(1)(B).

(A) Emission limits and other control measures: CAA section 110(a)(2)(A) requires SIPs to include enforceable emission limits and other control measures, means or techniques, as well as schedules and timetables for compliance, as may be necessary or appropriate to meet the applicable requirements of the Act, and other related matters as needed to implement, maintain and enforce each of the NAAQS.5 The Oklahoma Clean Air Act (OCAA) provides the Oklahoma Department of Environmental Quality (ODEQ) with broad legal authority, to establish and implement air quality programs and enforce regulations it has promulgated. The ODEQ has authority to adopt emission standards and compliance schedules applicable to regulated entities; other measures necessary for attainment and maintenance of the NAAQS; enforce applicable laws, regulations, standards and compliance schedules; and seek injunctive relief. The approved SIP for Oklahoma is documented at 40 CFR part 52.1920, Subpart LL. Most of the State's air quality rules and standards are codified at Title 252, Chapter 100 of the Oklahoma Administrative Code (denoted OAC 252:100). A detailed list of the applicable rules at OAC 252:100 and elsewhere in the OAC, along with the citations for approval into the SIP, is provided in Table 1 of the TSD.

(B) Ambient air quality monitoring/data system: CAA section 110(a)(2)(B) requires SIPs to provide for establishment and implementation of ambient air quality monitors, collection and analysis of monitoring data, and providing such data to EPA upon request. The OCAA provides the authority allowing the ODEQ to collect air monitoring data, quality-assure the results, and report the data. The ODEQ maintains and operates a monitoring network to measure ambient levels of the pollutants in accordance with EPA regulations which specify siting and monitoring requirements. All monitoring data is measured using EPA approved methods and subject to EPA quality assurance requirements. The ODEQ submits all required data to EPA, following EPA regulations. The monitoring network was approved into the SIP and undergoes annual review by EPA.6 In addition, 40 CFR 58.10(d) requires that state assess their monitoring network every five years. The ODEQ submitted their 5-year monitoring network assessments to us on April 11, 2016. Our comments on the 5-year assessment, dated July 22, 2016, are in the docket for this rulemaking.7 The ODEQ Web site identifies Oklahoma's ambient monitor locations, and provides past and current concentrations of criteria pollutants measured by the State's monitors.8

(C) Program for enforcement: CAA section 110(a)(2)(C) requires SIPs to include the following three elements: (1) A program providing for enforcement of the measures in paragraph A above; (2) a program for the regulation of the modification and construction of stationary sources as necessary to protect the applicable NAAQS (i.e., state-wide permitting of minor sources); and (3) a permit program to meet the major source permitting requirements of the CAA (for areas designated as attainment or unclassifiable for the NAAQS in question).9

(1) Enforcement of SIP Measures. As noted earlier in section 110(a)(2)(A), the ODEQ and its Executive Director have the authority to enforce the requirements of the OCAA and any regulations, permits, or final compliance orders. This statute also provides the ODEQ and its Executive Director with general enforcement powers. Among other things, they can investigate regulated entities; issue field citations and compliance orders; file lawsuits to compel compliance with the statutes and regulations; commence civil actions; pursue criminal prosecutions; collect criminal and civil penalties; enter into remediation agreements; and issue emergency orders to cease operations. The OCAA also provides additional enforcement authorities and funding mechanisms.

(2) Minor New Source Review (NSR). The CAA requires the SIP to include measures to regulate construction and modification of stationary sources to protect the NAAQS. The Oklahoma minor NSR permitting requirements have been approved in the SIP.10

(3) Prevention of Significant Deterioration (PSD) permit program. Oklahoma's PSD program covers all NSR regulated pollutants, as well as the NAAQS subject to our review contained herein, and has been approved by EPA into the SIP.11

(D)(i) Interstate Pollution Transport: There are four requirements the SIP must include relating to interstate transport. The SIP must prohibit emissions within Oklahoma from contributing significantly to the nonattainment of the NAAQS in other states, and from interfering with the maintenance of the NAAQS in other states (section 110(a)(2)(D)(i)(I)). The SIP must also prohibit emissions within Oklahoma both from interfering with measures required to prevent significant deterioration in other states and from interfering with measures required to protect visibility in other states (section 110(a)(2)(D)(i)(II)).

Lead: We propose to approve the portion of the submittal that addresses the requirement that emissions within Oklahoma are prohibited from contributing to nonattainment of the Pb NAAQS in other states, and from interfering with maintenance of the Pb NAAQS in other states. The physical properties of Pb, which is a basic metal element and very dense, prevent Pb emissions from experiencing a significant degree of travel in the ambient air. No complex chemistry is needed to form Pb or Pb compounds in the ambient air, thus, ambient concentrations of Pb are typically highest near Pb sources. There are no areas within the State of Oklahoma designated as nonattainment with respect to the 2008 lead NAAQS. The ODEQ 2016 ambient monitoring plan provided information on lead sources: there are two significant sources of Pb emissions within the state that emit Pb in amounts equal to or exceeding 0.5 tons per year and no sources within two miles of a neighboring state line.12

We are also proposing to approve the portion pertaining to the prevention of significant deterioration in other states for lead, as Oklahoma has an approved PSD program. The program regulates all NSR pollutants, (including greenhouse gas or GHG), which prevents significant deterioration in nearby States. In addition, as described earlier in this section, significant impacts from Pb emissions from stationary sources are limited to short distances from such sources, so visibility is not effected by lead emissions. Thus, we propose to approve the portion of the Oklahoma SIP related to the protection of visibility in other states for the Pb NAAQS.

Nitrogen Dioxide: We propose to approve the portion of the submittal which addresses the prevention of emissions which significantly contribute to the nonattainment of the NO2 NAAQS in other states and interfere with the maintenance of the NO2 NAAQS in other states. On February 17, 2012, EPA designated the entire country as “unclassifiable/attainment” for the 2010 NO2 NAAQS.13 As listed in our NO2 Design Values report, only one maintenance area exists for the prior annual NO2 NAAQS (Los Angeles, California).14 With no nonattainment or maintenance areas in surrounding states, Oklahoma does not significantly contribute to nonattainment or maintenance of these NAAQS in any of the contiguous states. Furthermore, during the three most recent design value periods (2011 through 2013, 2012 through 2014, and 2013 through 2015) we found no monitors violating the 2010 NO2 NAAQS in the US.

We are also proposing to approve the portion of the submittal related to the prevention of significant deterioration in other states, as Oklahoma has an approved PSD program. The program regulates all NSR pollutants, including GHG, which prevents significant deterioration in nearby states. In addition, on December 28, 2011 we finalized a FIP that in combination with the controls required by the portion of the Oklahoma Regional Haze (RH) submittal approved in the same rulemaking, would serve to prevent sources in Oklahoma from emitting pollutants in amounts that would interfere with efforts to protect visibility in other states (see 76 FR 81728). On March 7, 2014, we withdrew the FIP and finalized our approval of the revised Oklahoma RH plan and interstate transport affecting visibility. Thus, the Oklahoma SIP includes provisions that satisfy the CAA interstate pollution abatement requirements of section 110(a)(2)(D)(i)(II) for the 2010 NO2 NAAQS.

Ozone: At this time we are not taking action on the infrastructure submittal regarding the prevention of emissions which significantly contribute to nonattainment of the ozone NAAQS in other states, and interference with the maintenance of the ozone NAAQS in other states. We plan to act on this sub-element in a separate action.

We are proposing to approve the portion of the submittal addressing the prevention of significant deterioration in other states, as Oklahoma has an approved PSD program. The program regulates all NSR pollutants (including GHG), which prevents significant deterioration in nearby states. In addition and as discussed earlier in this rulemaking, on March 7, 2014, we finalized our determination that Oklahoma's Regional Haze Implementation Plan Revision meets the CAA provisions concerning non-interference with programs to protect visibility in other states, consistent with section 110(a)(2)(D)(i)(II) of the CAA (see 79 FR 12944). Thus, the Oklahoma SIP includes provisions that satisfy the CAA interstate pollution abatement requirements of section 110(a)(2)(D)(i)(II) for the 2008 ozone NAAQS.

Sulfur Dioxide: At this time we are not taking action on the infrastructure submittal regarding the prevention of emissions which significantly contribute to nonattainment of the SO2 NAAQS in other states, and interference with the maintenance of the SO2 NAAQS in other states (prongs 1 and 2). We are also not taking action on the portion of the submittal addressing visibility protection (prong 4). We plan to act on these three sub-elements in a separate action.

We are proposing to approve only the sub-element addressing the prevention of significant deterioration in other states, as Oklahoma has an approved PSD program. The program regulates all NSR pollutants (including GHG), which prevents significant deterioration in nearby states.

(D)(ii)Interstate Pollution Abatement and International Air Pollution: Pursuant to section 110(a)(2)(D)(ii)), states must comply with the requirements listed in sections 115 and 126 of the CAA which were designed to aid in the abatement of interstate and international pollution. Section 126(a) requires new or modified sources to notify neighboring states of potential impacts from the source. Oklahoma's PSD program contains the element pertaining to notification of neighboring states of the issuance of PSD permits. Section 115 relates to international pollution abatement. There are no findings by EPA that air emissions originating in Oklahoma affect other countries. Thus, the Oklahoma SIP satisfies the requirements of section 110(a)(2)(D)(ii) for the four NAAQS discussed herein.

(E) Adequate authority, resources, implementation, and oversight: The SIP must provide for the following: (1) Necessary assurances that the state (and other entities within the state responsible for implementing the SIP) will have adequate personnel, funding, and authority under state or local law to implement the SIP, and that there are no legal impediments to such implementation; (2) compliance with requirements relating to state boards as explained in section 128 of the CAA; and (3) necessary assurances that the state has responsibility for ensuring adequate implementation of any plan provision for which it relies on local governments or other entities to carry out that portion of the plan.

Sections 110(a)(2)(A) and (C), discussed earlier in this rulemaking, also require that the state have adequate authority to implement and enforce the SIP without legal impediments. The State's submittals describe the Oklahoma statutes and SIP regulations governing the various functions of personnel within the ODEQ, including the administrative, technical support, planning, enforcement, and permitting functions of the program. See the TSD for further detail.

With respect to funding, the OCAA and the SIP provide the ODEQ with authority to hire and compensate employees; accept and administer grants or other funds; require the ODEQ to establish an emissions fee schedule for sources in order to fund the reasonable costs of administering various air pollution control programs; and authorizes the ODEQ to collect additional fees necessary to cover reasonable costs associated with processing air permit applications. The EPA conducts periodic program reviews to ensure that the state has adequate resources and funding to, among other things, implement and enforce the SIP.

As required by the CAA, the Oklahoma statutes and the SIP stipulate that any board or body that approves permits or enforcement orders must have at least a majority of members who represent the public interest and do not derive any “significant portion” of their income from persons subject to permits and enforcement orders; and the members of the board or body, or the head of an agency with similar powers, are required to adequately disclose any potential conflicts of interest.

Oklahoma has not delegated authority to implement any of the provisions of its plan to local governmental entities—the ODEQ acts as the primary air pollution control agency.

(F) Stationary source monitoring system: The SIP must provide for the establishment of a system to monitor emissions from stationary sources and to submit periodic emission reports. It must require the installation, maintenance, and replacement of equipment, and the implementation of other necessary steps, by owners or operators of stationary sources, to monitor emissions from sources. The SIP shall also require periodic reports on the nature and amounts of emissions and emissions-related data from sources, and require that the state correlate the source reports with emission limitations or standards established under the CAA. These reports must be made available for public inspection at reasonable times.

The OCAA and SIP require stationary sources to monitor or test emissions and to file reports containing information relating to the nature and amount of emissions. There also are SIP-approved State regulations pertaining to sampling and testing and requirements for reporting of emissions inventories. In addition, SIP-approved rules establish general requirements for maintaining records and reporting emissions.15 The ODEQ uses this information, in addition to information obtained from other sources, to track progress towards maintaining the NAAQS, developing control and maintenance strategies, identifying sources and general emission levels, and determining compliance with SIP-approved regulations and additional EPA requirements. The SIP requires this information be made available to the public. Provisions concerning the handling of confidential data and proprietary business information are included in the SIP-approved regulations. These rules specifically exclude from confidential treatment any records concerning the nature and amount of emissions reported by sources.

(G) Emergency authority: The SIP must provide the ODEQ with authority to restrain any source from causing imminent and substantial endangerment to public health or welfare or the environment. The SIP must include an adequate contingency plan to implement the ODEQ's emergency authority.

The OCAA provides the ODEQ with authority to address environmental emergencies. The ODEQ has an “Emergency Episode Plan,” which includes contingency measures and these provisions are in the SIP (see 56 FR 5656, February 12, 1991). The ODEQ has general emergency powers to address any possible dangerous air pollution episode if necessary to protect the environment and public health.

(H) Future SIP revisions: States must have the authority to revise their SIPs in response to changes in the NAAQS, availability of improved methods for attaining the NAAQS, or in response to an EPA finding that the SIP is substantially inadequate to attain the NAAQS. The OCAA authorizes the ODEQ to revise the Oklahoma SIP as necessary, to account for revisions to an existing NAAQS, establishment of a new NAAQS, to attain and maintain a NAAQS, to abate air pollution, to adopt more effective methods of attaining a NAAQS, and to respond to EPA SIP calls concerning NAAQS adoption or implementation.

(I) Nonattainment areas: Section 110(a)(2)(I) of the Act requires that in the case of a plan or plan revision for areas designated as nonattainment, states must meet applicable requirements of part D of the CAA, relating to SIP requirements for designated nonattainment areas. There are no areas designated as nonattainment in Oklahoma. In addition, as noted earlier, EPA believes that nonattainment area requirements should be treated separately from the infrastructure SIP requirements. The specific SIP submissions for designated nonattainment areas, as required under CAA title I, part D, are subject to different submission schedules than those for section 110 infrastructure elements. Instead, EPA will take action on any part D attainment plan SIP submissions through a separate rulemaking process governed by the requirements for nonattainment areas, as described in part D.

(J) Consultation with government officials, public notification, PSD and visibility protection: The SIP must meet the following three CAA requirements: (1) Section 121, relating to interagency consultation; (2) section 127 relating to public notification of NAAQS exceedances and related issues; and, (3) prevention of significant deterioration of air quality and visibility protection.

(1) Interagency consultation: As required by the OCAA and the Oklahoma SIP, there must be a public hearing before the adoption of any regulations or emission control requirements, and all interested persons must be given a reasonable opportunity to review the action that is being proposed and to submit data or arguments, and to examine the testimony of witnesses from the hearing. In addition, the OCAA provides the ODEQ the power and duty to advise, consult and cooperate with other agencies of the State, towns, cities, counties, industries, other states, and the federal government regarding the prevention and control of new and existing air contamination sources in the State. Furthermore, the Oklahoma PSD SIP rules mandate that the ODEQ shall provide for public participation and notification regarding permitting applications to any other state or local air pollution control agencies, local government officials of the city or county where the source will be located, tribal authorities, and Federal Land Managers (FLMs) whose lands may be affected by emissions from the source or modification. Additionally, the State's PSD SIP rules require the ODEQ to consult with FLMs regarding permit applications for sources with the potential to impact Class I Federal Areas. The SIP also includes a commitment to consult continually with the FLMs on the review and implementation of the visibility program, and the State recognizes the expertise of the FLMs in monitoring and new source review applicability analyses for visibility and has agreed to notify the FLMs of any advance notification or early consultation with a major new or modifying source prior to the submission of a permit application.

(2) Public Notification: The ODEQ regularly notifies the public of instances or areas in which any NAAQS are exceeded. Included in the SIP are the rules for ODEQ to advise the public of the health hazard associated with such exceedances, enhance public awareness of measures that can prevent such exceedances, and inform the public on how it can participate in regulatory and other efforts to improve air quality. In addition, as described in the discussion of section 110(a)(2)(B) earlier in this rulemaking, the ODEQ air monitoring Web site provides quality data for each of the monitoring stations in Oklahoma; this data is provided instantaneously for certain pollutants, such as ozone. The Web site also provides information on the health effects of all six criteria pollutants.

(3) PSD and Visibility Protection: The PSD requirements for this element are the same as those addressed under 110(a)(2)(C) earlier in this rulemaking—the State has a SIP-approved PSD program, so this requirement has been met. The Oklahoma SIP requirements relating to visibility and regional haze are not affected when EPA establishes or revises a NAAQS. Therefore, EPA believes that there are no new visibility protection requirements due to the revision of the Pb and ozone NAAQS in 2008, and the NO2 and SO2 NAAQS in 2010, and consequently there are no newly applicable visibility protection obligations here.

(K) Air quality and modeling/data: The SIP must provide for performing air quality modeling, as prescribed by EPA, to predict the effects on ambient air quality of any emissions of any NAAQS pollutant, and for submission of such data to EPA upon request.

The ODEQ has the authority and duty under the OCAA to conduct air quality research and assessments, including the causes, effects, prevention, control and abatement of air pollution. Past modeling and emissions reductions measures have been submitted by the State and approved into the SIP. Additionally, the ODEQ has the ability to perform modeling for the NAAQS on a case-by-case permit basis consistent with their SIP-approved PSD rules and EPA guidance. Furthermore, the OCAA empowers the ODEQ to cooperate with the federal government and others concerning matters of common interest in the field of air quality control, thereby allowing the agency to make such submissions to the EPA.

(L) Permitting Fees: The SIP must require each major stationary source to pay permitting fees to the permitting authority as a condition of any permit required under the CAA. The fees cover the cost of reviewing and acting upon any application for such a permit, and, if the permit is issued, the costs of implementing and enforcing the terms of the permit. The fee requirement applies until such a time when a fee program is established by the state pursuant to Title V of the CAA, and is submitted to and is approved by EPA. The State has met this requirement as it has a fully developed fee system in place and approved in the SIP. See also the discussion of section 110(a)(2)(E) earlier in this rulemaking action.

(M) Consultation/participation by affected local entities: The SIP must provide for consultation and participation by local political subdivisions affected by the SIP.

See the discussion of section 110(a)(2)(J)(1) and (2) earlier in this rulemaking for a description of the SIP's public participation process, the authority to advise and consult, and the PSD SIP public participation requirements. Additionally, the OCAA requires cooperative action between itself and other agencies of the State, towns, cities, counties, industry, other states, affected groups, and the federal government in the prevention and control of air pollution.

EPA is proposing to approve in part the October 5, 2012, February 28, 2014 and January 28, 2015, infrastructure SIP submissions from Oklahoma, which address the requirements of CAA sections 110(a)(1) and (2) as applicable to the 2008 Pb, 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS. Table 1 outlines the specific actions we are proposing to take.

Based upon review of these infrastructure SIP submissions and relevant statutory and regulatory authorities and provisions referenced in these submissions or referenced in the Oklahoma SIP, we believe Oklahoma has the infrastructure in place to address all applicable required elements of sections 110(a)(1) and (2) (except as noted in Table 1) to ensure that the 2008 Pb, 2008 Ozone, 2010 NO2, and 2010 SO2 NAAQS are implemented in the State.

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

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive 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 proposed rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

Executive Summary A. Need for Regulatory Action

We propose to amend this regulation for two reasons. First, we want to incorporate into the rule the statutory changes that have occurred since the 1977 enactment of the Medicare-Medicaid Anti-Fraud and Abuse Amendments (Pub. L. 95-142), which amended section 1903(a) of the Social Security Act (the Act) to provide for Federal participation in the costs attributable to establishing and operating a State Medicaid Fraud Control Unit (MFCU or Unit). Second, we want to align the rule with practices and policies that have developed and evolved since the initial version of the rule was issued in 1978, 43 FR 32078 (July 24, 1978), codified at 42 CFR part 1007. Because of the extensive nature of our proposal, we have republished the entirety of part 1007 and incorporated our proposed changes as part of that publication. However, for some sections within part 1007, we are not proposing substantive changes.

The legal authority for this regulatory action is found in the Act as follows: 1007: SSA §§ 1902(a)(61), 1903(a)(6), 1903(b)(3), 1903(q), and 1102. 455: SSA §§ 1902(a)(4), 1903(i)(2), 1909.

(1) Statutory Changes. We propose to incorporate statutory changes that have occurred since 1977, including (1) raising the Federal matching rate for ongoing operating costs from 50 percent to 75 percent, (2) establishing a Medicaid State plan requirement that a State must operate an effective MFCU, (3) establishing standards under which Units must be operated, (4) allowing MFCUs to seek approval from the relevant Inspector General to investigate and prosecute violations of State law related to fraud in any aspect of the provision of health care services and activities of providers of such services under any Federal health care program, including Medicare, as long as the fraud is primarily related to Medicaid, and (5) giving MFCUs the option to investigate and prosecute patient abuse or neglect in board and care facilities, regardless of whether the facilities receive Medicaid payments.

(2) Office of Inspector General Authority. We propose to amend the regulation to codify that the authority for certification and recertification of the MFCUs as well as the administration of the grant award was transferred from the predecessor agency of CMS (Health Care Financing Administration) to OIG on July 27, 1979. 44 FR 47811 (August 15, 1979).

(3) Unit Authority. We propose to add definitions to clarify key issues related to Unit authority under the grant to conduct fraud investigations as well as patient abuse and neglect and misappropriation of patient funds investigations. Specifically, we propose to add definitions for fraud, abuse of patients, board and care facility, health care facility, misappropriation of patient funds, neglect of patients, and program abuse. We also propose to modify the definition of provider.

(4) Organizational Requirements. We propose to clarify what it means to be considered a single identifiable entity of State government.

(5) Prosecutorial Authority Requirements. We propose to make technical amendments to the prosecutorial authority requirement options to include the prosecution of patient abuse and neglect and to include referrals to other offices with statewide prosecutorial authority, in addition to the State Attorney General.

(6) Agreement with Medicaid agency. We propose that the agreement with the Medicaid agency must include establishing regular communication, procedures for coordination, including those involving payment suspension and acceptance or declination of cases. We also propose that the parties review and, if needed, update the agreement no less frequently than every 5 years.

(7) Functions and Responsibilities. In addition to the proposed statutory amendments that expand the Units' functions and responsibilities, we propose to require that Units submit all convictions to OIG for purposes of program exclusion within 30 days of sentencing or as soon as practicable if a Unit encounters delays from the courts. We propose to further clarify the requirement that a Unit make information available to, and coordinate with, OIG investigators and attorneys, other Federal investigators, and Federal prosecutors on Medicaid fraud information and investigations involving the same suspects or allegations.

(8) Staffing Requirements. We propose to clarify that Units may choose to employ professional employees as full- or part-time employees so long as they devote their “exclusive effort” to MFCU functions. We also propose that a Unit must employ a director and that all MFCU employees must be under the direction and supervision of the Unit director. We propose that MFCU professional employees may also obtain outside employment with some restriction and may perform temporary assignments that are not a required function of the Unit so long as the grant is not charged for those duties. We also propose to clarify that Units may employ employees or consultants with specialized knowledge and skills, as well as administrative and support staff, on a full- or part-time basis. We further propose to clarify that investigation and prosecution functions may not be outsourced through consultant agreements or other contracts. We propose to require that Units provide training for professional employees on Medicaid fraud and patient abuse and neglect matters. Finally, we propose to add definitions for full- and part-time employee, professional employee, director, and exclusive effort.

(9) Recertification Requirements. We propose to amend the regulation to reflect the Unit recertification process. This includes describing what is required annually by OIG as part of recertification, including submission of a reapplication, including certain requested information, as well as a statistical report. We also propose to modify the annual report requirements. We also propose to clarify the factors, such as performance standards, that OIG considers when recertifying a MFCU. We also propose to notify the Unit of approval or denial of recertification and to create procedures for reconsideration should OIG deny recertification.

(10) Federal Financial Participation (FFP). We propose to clarify that, except for Units with OIG approval to conduct data mining under this part, the prohibition of FFP for data mining activities extends only to the cost of activities that duplicate surveillance and utilization review responsibilities of State Medicaid agencies. We also propose to clarify that efforts to increase referrals through program outreach activities are eligible for FFP.

(11) Disallowance Procedures. We propose to amend the regulations to set forth procedures for OIG disallowances of FFP and for Unit requests for reconsideration and appeal of disallowances.

(12) CMS Companion Regulation. To ensure that both the MFCU and the State Medicaid agency are required to have an agreement with each other, we are including amendments to the CMS regulation at 42 CFR 455.21 of this section to require that the State Medicaid agency have an agreement with the MFCU. The regulations at 42 CFR 455.21 are enforced by CMS. However, we are including amendments to part 455 here to ensure a comprehensive regulatory package that sets forth in one location the Department's regulations related to MFCUs.

There are no significant costs associated with the proposed regulatory revisions that would impose any mandates on State, local, or tribal governments or on the private sector.

(1) Omnibus Reconciliation Act of 1980 (Pub. L. 96-499). In order to provide a continuing incentive for operation of State MFCUs, the Omnibus Reconciliation Act (OBRA) of 1980, amended section 1903(a)(6) of the Act and raised the Federal matching rate for ongoing operating costs (i.e., for all years after the initial 3 years of operations) from 50 percent to 75 percent.

(2) Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66). The Omnibus Budget Reconciliation Act of 1993 added § 1902(a)(61) to the Act, establishing a Medicaid State plan requirement that a State must operate an effective MFCU, unless the State demonstrates that effective operation of a Unit would not be cost effective and that, in the absence of a Unit, beneficiaries will be protected from abuse and neglect. The statute further requires that the Units be operated in accordance with standards established by the Secretary.

(3) Ticket to Work and Work Incentives Improvement Act of 1999 (Pub. L. 106-170). In the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA), Congress amended section 1903(q) of the Act to extend the authority of MFCUs in two ways. First, the Units may now seek approval from the relevant Inspector General (in most circumstances the Inspector General of the Department of Health and Human Services (HHS) to investigate and prosecute violations of State law related to any aspect of fraud in connection with “the provision of health care services and activities of providers of such services under any Federal health care program,” including Medicare, “if the suspected fraud or violation of State law is primarily related to” Medicaid. Second, the law gives Units the option to investigate and prosecute patient abuse or neglect in board and care facilities, regardless of whether those facilities receive Medicaid payments.

The regulation has been amended on two occasions. First, the regulation was amended at § 1007.9(e)-(g) to implement payment suspension provisions found in the Affordable Care Act (76 FR 5970 (February 2, 2011)). Second, the regulation was modified at § 1007.20 to allow FFP for data mining under certain circumstances (78 FR 29055 (May 17, 2013)). With the exception of these two revisions, the regulation has not received a wholesale revision since it was originally published in 1978. In the ensuing years, growth of the MFCU program to 50 Units (49 States and the District of Columbia) as well as changes in MFCU practice, health care, and the workplace have led to the need for many amendments to the regulation. Further, in 1994, pursuant to section 1902(a)(61) of the Act, OIG, in consultation with the MFCUs, developed 12 performance standards to be used in assessing the operations of MFCUs. These performance standards have since been revised and republished at 77 FR 32645 (June 1, 2012). OIG uses the performance standards in annually recertifying each Unit and in determining if a Unit is effectively and efficiently carrying out its duties and responsibilities.

We propose to add a new subpart A of this part entitled “General Provisions and Definitions” which includes § 1007.1, “Definitions,” and § 1007.3, “What is the statutory basis and organization of this rule?”

Current § 1007.1 defines four terms: “data mining,” “employ or employee,” “provider,” and “Unit.” We propose to modify the current definition of “provider,” eliminate the definition of “employ or employee,” and add definitions for “full-time employee,” “part-time employee,” “professional employee” and “exclusive effort.” We propose to add a definition of the term “director.” We also propose to add several additional terms to clarify the scope of the Units' duties and responsibilities: “fraud,” “abuse of patients,” “board and care facility,” “health care facility,” “misappropriation of patient funds,” “neglect of patients,” and “program abuse.”

Existing regulations at § 1007.19 preclude FFP in expenditures for any management function for the Unit, any audit or investigation, any professional legal function, or any criminal, civil or administrative prosecution that is not performed by a “full time employee of the Unit.” As a matter of policy and practice, OIG has permitted professional employees (attorneys, auditors, and investigators) to work on a part-time basis, provided that the part-time employee work exclusively on MFCU matters while on duty for the Unit. Consistent with this policy, we propose to replace the term “employ or employee” with definitions for the terms “full-time employee,” “part-time employee,” and “exclusive effort” to help clarify the staffing requirements for MFCUs. We also propose to define professional employee to mean an investigator, attorney, or auditor.

In § 1007.1, we propose to define “full-time employee” to mean an employee of the Unit who has full-time status as defined by the State. Similarly, we propose to define “part-time employee” to mean an employee of the Unit who has part-time status as defined by the State. In § 1007.13(d), we propose to require that professional employees, whether full time or part time, devote “exclusive effort” to the work of the Unit, consistent with OIG's longstanding policy. We therefore also propose to add a definition of “exclusive effort” to mean that professional employees devote their efforts exclusively to the functions and responsibilities of a Unit, as described in this part. As under the current definition of “employee,” the proposed definition for “exclusive effort” requires that duty with the Unit be intended to last for at least one year and would include arrangements in which an employee is on detail or assignment from another government agency, but only if the detail or arrangement is intended to last for at least one year. An employee detailed to the Unit from another government agency would need to work exclusively for the Unit on MFCU matters and would not be able to allocate time to both the home agency and the Unit. As discussed more fully in 1007.13 Staffing Requirements, OIG believes that “exclusive effort” should ensure that professional employees do not engage in outside employment that might jeopardize the distinct nature and specialized skills of the Unit.

These proposed definitions are consistent with OIG existing policy as found in State Fraud Policy Transmittal 2014-1 (March 14, 2014).

We also discuss these proposed definitions in section 1007.13 Staffing.

Under proposed § 1007.13 paragraph (c), we specify that each Unit must employ a director who supervises all Unit employees. We propose to add the term “director” to § 1007.1 to mean an employee of the MFCU who supervises the operations of the Unit, either directly or through other MFCU managers.

We propose to add a definition of fraud at § 1007.1 to clarify that the scope of MFCU authority to investigate “any and all aspects of fraud” encompasses any action for which civil or criminal penalties may be imposed under State law. This definition is similar to the definition of fraud contained in CMS program integrity regulations at 42 CFR 455.2, but, consistent with the MFCUs' responsibility for both criminal and civil fraud, incorporates the definition of intent that applies in a civil case.

The primary mission for MFCUs has been the investigation and prosecution (or referral for prosecution) of criminal violations related to the operation of a Medicaid program and of patient abuse and neglect in Medicaid-funded facilities and in board and care facilities. However, State and Federal health care prosecutors commonly use both criminal and civil remedies, and OIG attorneys use administrative remedies, to achieve a full resolution of provider fraud cases. The Deficit Reduction Act of 2005 (Pub. L. 109-171) added § 1909 to the Act to provide a financial incentive for States to enact their own false claims acts establishing liability to the State for the submission of false or fraudulent claims to the State's Medicaid program.

Further, OIG has issued policy guidance that civil actions, including imposition of penalties and damages, are an appropriate outcome of investigations by MFCUs, particularly when providers lack the specific intent required for prosecution under criminal fraud statutes. (State Fraud Policy Transmittal No. 99-01, December 9, 1999). Specifically, OIG stated that meritorious civil cases that are declined criminally should be tried under State law or referred to the U.S. Department of Justice or the U.S. Attorney's Office, as well as the OIG Office of Investigations. As discussed in section 1007.11 Functions and Responsibilities of the Unit, we propose to require at new § 1007.11(e)(4) that appropriate referrals of civil actions be made to Federal investigators or prosecutors, or OIG attorneys.

We propose to define the term “program abuse” at § 1007.1 to make clear that, for purposes of FFP in MFCU expenditures, program abuse includes only improper provider practices that fall short of acts for which civil or criminal penalties are warranted. Current regulations at § 1007.19(e)(1) prohibit FFP in MFCU expenditures for investigation of cases involving program abuse or other failures to comply with applicable laws and regulations, if these cases do not involve “substantial allegations or other indications of fraud.”

Congress has expanded the range of Federal civil and administrative sanctions available when false and fraudulent provider practices do not reach the level of intent required for criminal prosecution. In addition, Congress encouraged States to enact their own false claims laws. Our policy continues to be that FFP is available to MFCUs for investigations involving reasonable indications of either civil or criminal fraud. Where an overpayment has been identified in a matter in which the MFCU has determined that neither civil nor criminal enforcement action is warranted, the MFCU should refer the matter to the State Medicaid agency for collection.

Section 1903(q)(4) of the Act requires that, to be certified by the Secretary, MFCUs must have procedures for reviewing complaints of abuse or neglect of patients in health care facilities that receive Medicaid payments. In addition, the Act requires that Units have procedures for acting on these complaints under the criminal laws of the State or for referring the complaints to other State agencies for action. To clarify the scope of Units' duties and responsibilities, we propose to amend § 1007.1 to add definitions of the terms “abuse of patients” and “neglect of patients.” We propose to define the term “abuse of patients” to mean willful infliction of injury, unreasonable confinement, intimidation or punishment with resulting physical or financial harm, pain or mental anguish. We propose to define the term “neglect of patients” to mean willful failure to provide goods and services necessary to avoid physical harm, mental anguish, or mental illness. With regard to each of the terms, we propose to include within the definitions a recognition that the scope of what constitutes “abuse of patients” and “neglect of patients” includes those acts (and, with regard to the crime of neglect, omissions) that may constitute a criminal violation under applicable State law.

The Department included “misappropriation of [a] patient's private funds” as part of the scope of MFCUs' investigative authority when it issued current § 1007.11(b)(1). In the notice of final rulemaking, the Department explained that investigating “misuse of private funds being held for patients by health care facilities” would be “a natural outgrowth of an investigation of the facility for program fraud or patient abuse or neglect” and would fall under a MFCU's authority to investigate any and all aspects of provider fraud. (43 FR 32078, 32080 (July 24, 1978)).

We are maintaining this authority in the revised regulation and are including a definition of the term “misappropriation of patient funds” to mean the wrongful taking or use, as defined under applicable State law, of funds or property of a patient residing in a health care facility or board and care facility.

We chose not to specify that the patient's funds have to be held in the facility, given that misappropriation of a patient's funds may include financial fraud regarding a patient's assets that are maintained in financial accounts in any location. We also chose not to specify that the perpetrator of the misappropriation of patient's funds has to be an employee of the facility where the patient resides. Because of the many scenarios that exist with respect to misappropriation of patient funds, we invite comment on the rule not specifying the location of the patient funds or the possible perpetrator of the misappropriation.

Congress, in the initial MFCU legislation, required MFCUs to investigate patient abuse or neglect only in health care facilities receiving Medicaid payments. In 1999, as part of TWWIIA, Congress amended section 1903(q)(4) of the Act to give Units the option to investigate patient abuse or neglect in non-Medicaid “board and care” facilities, as defined in the statute.

We are proposing to amend § 1007.11 to incorporate the statutory authority for MFCUs to choose to investigate complaints of abuse or neglect in board and care facilities, regardless of the source of payment, and to add the statutory definition of “board and care facility” to the definitions at § 1007.1. Such facilities include assisted living facilities in current terminology.

We are proposing to add a definition of “health care facility” to clarify the scope of MFCU-required functions and responsibilities in connection with the investigation of complaints of neglect or abuse of patients in such facilities, consistent with section 1903(q)(4)(A) of the Act and with Medicaid program regulations.

Specifically, 42 CFR 447.10(b) defines a “facility” as “an institution that furnishes health care services to inpatients” and 42 CFR 435.1010 defines an “institution” as “an establishment that furnishes (in single or multiple facilities) food, shelter, and some treatment or services to four or more persons unrelated to the proprietor,” and “in an institution” as an individual who is admitted to live there and receive treatment or services provided there that are appropriate to his requirements.” Consistent with these definitions, we propose to add a definition at § 1007.1 to clarify that a “health care facility” is “a provider that receives payments under Medicaid and furnishes food, shelter, and some treatment or services to four or more persons unrelated to the proprietor in an inpatient setting.”

We propose to modify the definition of provider to include those who are required to enroll in a State Medicaid program, such as ordering and referring physicians. While we believe the regulation's longstanding definition of provider includes managed care and other types of providers that operate in the current healthcare environment, we think that including ordering and referring physicians in the definition clarifies that providers who are not furnishing items or services for which payment is claimed under Medicaid can be the subject of a MFCU investigation and prosecution.

The Secretary delegated to OIG the authority under sections 1903(a)(6) and (b)(3) to pay the FFP amounts of State expenditures for the establishment and operation of a MFCU and, under section 1903(q), to determine whether a MFCU meets the statutory requirements to be certified as eligible for Federal payments. We propose to revise § 1007.3 to more comprehensively set forth the statutory basis and organization of this rule, and to explicitly reference OIG's authority to certify whether a Unit has demonstrated that it is effectively carrying out its required functions under this part.

We also propose to revise § 1007.3 to reflect current law at § 1902(a)(61) of the Act requiring a State to provide in its Medicaid State plan that it operates a MFCU that “effectively carries out the functions and requirements” described in Federal law, as determined in accordance with standards established by OIG, unless the State demonstrates that a Unit would not be cost-effective because of minimal Medicaid fraud and that the State adequately protects Medicaid patients from abuse and neglect without the existence of a Unit. CMS retains the authority to determine a State's compliance with Medicaid State Plan requirements in accordance with § 1902 of the Act.

Congress initially established a matching rate of 90 percent for 12 quarters to give States an incentive to develop a MFCU. Later, as a continuing incentive, Congress provided that after the initial 12 quarters of 90 percent Federal matching, MFCUs would receive Federal matching of 75 percent of the ongoing costs of operating a MFCU.

Regulations at both § 1007.3 and § 1007.19(a) provide that a State will receive Federal reimbursement for 90 percent of the costs of establishing and operating a State MFCU. To eliminate redundancy, and to reflect the current statute's FFP provisions, we propose to remove the statement regarding 90 percent Federal funding at § 1007.3. We propose to retain the provision at current § 1007.19(a) and to amend it to reflect the current statute's limitation of 75 percent FFP for the operation of a MFCU after the initial 12 quarters.

We propose to add a new Subpart B “Requirements for Certification,” containing sections 1007.5 through 1007.17.

Section 1903(q) of the Act defines the term “State Medicaid fraud control unit” to mean “a single identifiable entity of the State government which the Secretary certifies (and recertifies) as meeting” statutory requirements. This basic requirement is reflected in current § 1007.5 and is widely accepted as a prerequisite for establishing and operating a Unit. We propose to amend the MFCU regulations to define the phrase “single identifiable entity” and to clarify that Units must satisfy the definition to be certified and recertified.

We propose that Units have the following characteristics to be considered a “single identifiable entity in State government” and to be eligible for certification and recertification. Units must: (1) Be a single organization reporting to the single Unit director; (2) operate under its own budget that is separate from that of its parent division or agency; and (3) have the headquarters office and any field offices each in their own contiguous space.

We believe that each of these three characteristics is necessary to ensure that Unit is able to operate independently of its parent agency and to maintain its independent character as a single, identifiable entity. We believe that these characteristics are consistent with the statement at time of enactment by the Senate Committee on Finance that “a separate Statewide investigative entity” substantially increases the rate of prosecutions and convictions (Senate Report 95-453 (September 26, 1977), page 35). We also believe, on the basis of our observation and knowledge of the 50 existing Units, that Units generally share these characteristics and operate under the assumption that each of the characteristics is required for certification purposes. We invite comment on these newly articulated requirements for determining whether a Unit would be considered a single identifiable entity.

Specifically, we believe that all Unit employees reporting to a single Unit director provides the most efficient management structure and helps to ensure that the Unit can act independently of its parent agency. Secondly, to ensure that a Unit has the resources to undertake its mission, to operate efficiently and effectively, and to continue as an ongoing operation, we believe a Unit should operate under its own budget that is separate from that of its parent agency.

Finally, we also believe that having headquarters and any field offices each in their own contiguous space leads to the most efficient conduct of Unit business by fostering a Unit's multidisciplinary approach of investigators, attorneys, auditors, and other employees working together on cases and helps ensure that employees devote their exclusive effort to MFCU purposes. Further, we believe that allowing MFCU employees to work in non-contiguous space alongside other State employees would undermine the ability of MFCU management to monitor whether MFCU employees are devoted exclusively to the mission of the MFCU. Headquarters or field offices would be considered duty stations, and telework and other “out of duty office” work arrangements are not precluded, if permitted under State policies. We believe that all Unit offices currently operate in contiguous space, although in certain larger Units the contiguous space may, for example, be on separate floors of the same building. We believe that such arrangements qualify as “contiguous” as long as the separation permits the Unit's three professional groups to interact effectively in the course of their duties. For example, OIG does not believe that an office arrangement would be contiguous if all or groups of Unit investigators, or attorneys, were located in a different space from the rest of the Unit.

Section 1903(q)(1) of the Act provides for three alternative prosecutorial arrangements for a State MFCU, depending on the location of criminal prosecuting authority in the State. Current § 1007.7(b) states that if there is no State agency with Statewide authority and capability for criminal fraud prosecutions, the Unit must establish formal procedures that ensure that the Unit refers suspected cases of criminal fraud to the appropriate prosecuting authorities. We propose that § 1007.7(b) be amended to also include such procedures for patient abuse and neglect prosecutions, consistent with the language of the statute.

Section 1007.7(c) requires a formal working relationship with the office of the State Attorney General. We propose that § 1007.7(c) be amended to reference the office of the State Attorney General “or another office with Statewide prosecutorial authority.” We also propose to amend §§ 1007.7(b) and 1007.7(c) to clarify that the formal procedures be written. Finally, we propose to make a minor wording change to emphasize the requirement that a Unit be organized according to one of three prosecutorial arrangements and to change the name of § 1007.7 to “What are the prosecutorial authority requirements for a Unit?” to more accurately describe its contents.

Current § 1007.9(d) requires that the MFCU enter into an agreement with the Medicaid agency to ensure the Unit has access to fraud case referrals and case information. Companion regulations governing fraud control activities of the Medicaid agency impose obligations on the Medicaid agency to identify, investigate, and refer suspected fraud cases, but do not explicitly require an agreement with the Unit. CMS enforces the regulations at 42 CFR part 455 (See September 30, 1986 final rule (51 FR 34787)). Given the importance of the working relationship between the MFCU and Medicaid agency, in this joint proposed rule, OIG and CMS propose to add additional guidance at § 1007.9, and through the addition of a new § 455.21(c), to clarify that both the Medicaid agency and the MFCU must enter into a written agreement, such as a memorandum of understanding (MOU).

We also propose to add to both § 1007.9(d)(3) and to the new § 455.21(c) that the MOU include the following required elements. First, we propose that the MOU must include an agreement to establish a practice of regular communication or meetings between the MFCU and the Medicaid agency to discuss such matters as case updates, new complaints and possible referrals, documentation and data requests, policy changes, fraud trends, and joint activities. Second, we propose that the MOU must establish procedures for how the MFCU and the Medicaid agency will coordinate their efforts as they carry out their respective responsibilities. Third, we propose that the MOU must establish procedures related to payment suspension and notification of acceptance or declination of cases, as found at §§ 1007.9(e) through 1007.9(h). Finally, we propose that the MOU must be reviewed and, if needed, updated by both the MFCU and the Medicaid agency at least every 5 years to ensure that it reflects current law and practice.

We also propose a minor amendment at § 1007.9(f) which requires that any request by the Unit to the Medicaid agency to delay notification to the provider of a payment suspension under § 455.23 must be made in writing. We propose to add the word “promptly” to that provision. In order to avoid the risk of jeopardizing a MFCU investigation, we think it is important for Units to provide prompt written notice to a Medicaid agency if a provider is the subject of an investigation. Further, we also propose a similar amendment to § 1007.9(g) which requires the Unit to notify the Medicaid agency in writing as to whether the Unit accepts or declines a case referred by the Medicaid agency. We propose that the Unit should make this decision in a timely manner and promptly inform the Medicaid agency of its decision. Again, prompt notification by the MFCU allows the Medicaid agency to uphold a payment suspension, or in the case of a declination, re-establish payments to the provider. Additionally, if a referral is declined by the Unit, the Medicaid agency may pursue administrative actions against the provider in a timely manner.

We propose an amendment at § 1007.9(h) to require the MFCU to provide certification to the Medicaid agency, upon request on a quarterly basis, that any matter accepted on the basis of a referral continues to be under investigation and thus warranting continuation of payment suspension. Under § 455.23(d)(3)(ii), the Medicaid agency must request this certification from the MFCU, but the regulations do not require the MFCU to comply with this request. Placing this responsibility on the MFCU is consistent with the temporary nature of the payment suspension process.

MFCU regulations, in describing the duties and responsibilities of a Unit for patient abuse or neglect, provide in paragraph 1007.11(b)(1): “The unit will also review complaints alleging abuse or neglect of patients in health care facilities receiving payments under the State Medicaid plan and may review complaints of the misappropriation of patient's private funds in such facilities.” In implementing a Unit's statutory responsibility for patient abuse or neglect, the Department thus expanded responsibility for abuse or neglect to the financial crime of “misappropriation of [a] patient's private funds,” but made such cases optional (“may review complaints. . . .”). Cases involving private funds have become a substantial part of MFCU caseloads, reflecting the significance of financial abuse in crimes against seniors and other facility residents.

In our proposed definition in paragraph 1007.1 of “abuse of patients,” we have included “financial harm” as one element. Consistent with this definition and with the recognized importance of financial abuse as a type of patient abuse or neglect, we propose to revise the regulation at 1007.11(b)(1) to require the Unit to review complaints involving misappropriation of funds. We believe that making the review of such complaints mandatory is consistent with the broad statutory responsibility for patient abuse or neglect.

The TWWIIA amended section 1903(q) of the Act to allow MFCUs to receive FFP for the investigation and prosecution of Medicare or other Federal health care cases that are primarily related to Medicaid, with the approval of the Inspector General of the relevant Federal agency (most typically, the Inspector General for HHS). We propose to revise § 1007.11 to specify that the MFCU must obtain written permission from the relevant Federal Inspector General to investigate cases of provider fraud in health care programs other than Medicaid. OIG issued guidance for seeking approval for this extended investigative authority from HHS-OIG in State Fraud Policy Transmittal No. 2000-1 (September 7, 2000). In order for OIG to effectively monitor these approvals, we propose to codify at § 1007.17(a)(1)(i) the requirement from the policy transmittal that Units report annually to OIG of any approvals for extended investigative authority from any Federal Inspector General.

TWWIIA also gave MFCUs the option to review complaints of patient abuse or neglect in non-Medicaid board and care facilities, as defined in the statute, and to have procedures for acting on such complaints. For the regulation, we interpret the law's requirement to have “procedures for acting on such complaints” to mean that Units can investigate cases arising from those complaints. Consistent with our proposal to permit investigation of misappropriation of patient funds in health care facilities, we also propose to permit such investigations in board and care facilities.

At new § 1007.11(a)(3), we propose that applicable State laws pertaining to Medicaid fraud include criminal statutes as well as civil false claims statutes or other civil authorities. Further, at new § 1007.11(e)(4), we propose that if no State civil fraud statute exists, MFCUs should make appropriate referrals of meritorious civil cases to Federal investigators or prosecutors, such as the U.S. Department of Justice or the U.S Attorney's Office, as well as to the HHS-OIG Office of Investigations and Office of Counsel to the Inspector General. OIG believes that assessing civil penalties and damages is an appropriate law enforcement tool when providers lack the specific intent required for criminal conviction but satisfy the applicable civil standard of liability. This proposal is consistent with State Fraud Policy Transmittal No. 99-01 (December 9, 1999) which encouraged MFCUs to pursue potential civil remedies when no potential criminal remedy exists. Additionally, as discussed in Section B, we propose to add a definition of “fraud” that clarifies MFCU authority to investigate and prosecute both criminal and civil fraud.

At § 1007.11(c), we propose to clarify that when a Unit discovers that overpayments have been made to a provider or facility, the Unit must either recover the overpayment as part of its resolution of a fraud case or refer the matter to the proper State agency for collection.

At § 1007.11(e)(1) and (2), we propose to retain the current requirement that a Unit make available to Federal investigators and prosecutors and OIG attorneys all information in its possession concerning Medicaid fraud and that the Unit coordinate with such officials any Federal and State investigations or prosecutions involving the same suspects or allegations. The Federal and State governments share responsibility for the investigation and prosecution of Medicaid provider fraud, and Federal agencies may need to coordinate an action in a particular State with other Federal law enforcement efforts.

We also propose to expand paragraph (e) in three other ways to further ensure the effective collaboration between the Units, OIG investigators and attorneys, other Federal investigators and prosecutors.

First, we propose in paragraph (e)(3) to specify that a MFCU establish a practice of regular meetings or communication with OIG investigators and Federal prosecutors. In States in which OIG does not have the resources to maintain a regular presence, such communication could be by telephone or video conference. Given OIG's coordinating role on Federal health care fraud cases, we believe that regular contact with OIG investigators is critical in each of the States. For Federal prosecutors, the Unit should establish a schedule of meetings or regular communication with one or more of the U.S. Attorneys' Offices with jurisdiction in the State. In most jurisdictions, it is standard practice for the U.S. Attorney to operate a health care fraud task force, and regular communication can be achieved through regular participation by the Unit on the health care fraud task forces.

We believe that requiring regular meetings or communication with OIG investigators and with Federal prosecutors will strengthen relationships, enhance the effectiveness of fraud investigations and prosecutions, and ultimately improve the integrity of the Medicaid program. We believe that such communication is routine in most of the Units, but we also know through our onsite reviews that there are Units with a lack of communication with OIG investigators and Federal prosecutors.

Second, we propose to specify in paragraph (e)(4) that Units make appropriate referrals to OIG investigators and attorneys, other Federal investigators, and Federal prosecutors. It is not unusual for Units to investigate cases of Medicaid fraud that involve Medicare or other Federal programs, and such cases should be referred to OIG investigators, unless the MFCU receives authority under § 1007.11(a)(2) to investigate the Medicare or other program fraud itself. Many such referred cases will be investigated jointly by the MFCU and the Federal Government, and the investigation will benefit from the combined skills and resources of both offices. Also, health care fraud cases often involve both criminal fraud as well as the possibility of a civil recovery through application of a civil false claims act. As a matter of policy, we have for many years requested MFCUs to refer such civil cases to Federal investigators or prosecutors for possible application of the Federal civil false claims act. Many States have the ability to pursue civil actions either through State civil false claims acts or other State authority, but other States may lack the ability to prosecute such cases. Also, in many States, there may be a lack of investigative resources to pursue such cases even if the State has the authority to do so.

Finally, we further propose in paragraph (e)(5) that Units develop written procedures for those items addressed in paragraphs (1)through(4). We believe that most Units comply with each of these steps as a routine part of their process, but we also believe that it is important to formalize them as part of the Unit's written procedures because of the critical importance of case coordination. This will also permit OIG, in its oversight of the Units, to verify that coordination procedures are in place. Our proposal does not specify what the procedures should be, but would allow the MFCU and its Federal partners to tailor procedures to most effectively meet the needs in their State. An example of an established procedure for paragraph (e)(3) would be the sharing between the Unit and OIG's Office of Investigations weekly or monthly reports describing newly opened cases as well as a schedule of monthly or quarterly meetings.

We propose to revise § 1007.11(f) to require a Unit to provide adequate safeguards to protect sensitive information and data under the Unit's control. Under the current regulation at § 1007.11(f), MFCUs have been required to safeguard privacy rights and to prevent the misuse of information under their control. In the past, this requirement largely referred to paper case files and other case-related materials, such as evidence. Many MFCUs now maintain case information in an electronic format and do not rely exclusively on paper case files. Because Unit electronic record and data systems may contain personally identifiable and other sensitive information, Units need to protect that information with a robust data security program. Such a program should guard against unauthorized access or release of case information as well as unauthorized intrusions from external sources.

Finally, consistent with the MFCU mission to prosecute Medicaid provider fraud and patient abuse or neglect, we propose to amend the regulations at new § 1007.11(g) to require that a Unit transmit to OIG, for purposes of excluding convicted individuals and entities from participation in Federal health care programs under section 1128 of the Act, pertinent documentation on all convictions obtained by the Unit, including those cases investigated jointly with another law enforcement agency, as well as those prosecuted by another agency at the local, State, or Federal level. This requirement would be consistent with the longstanding published performance standard for MFCUs that such referrals be made. By referring convicted individuals or entities to OIG for exclusion, MFCUs help to ensure that such individuals and entities do not have the opportunity to defraud Medicaid and other Federal health programs or to commit patient abuse or neglect. Historically, referrals by MFCUs have constituted a significant part of the exclusions imposed each year by OIG.

We propose that such information be provided within 30 days of sentencing or, if MFCUs are unable to obtain pertinent information from the sentencing court within 30 days, as soon as reasonably practicable. We propose this “reasonableness” provision because we are aware that courts may on occasion not provide pertinent documents to MFCUs in a timely manner. In assessing whether such additional time is reasonable, OIG will assess the steps the MFCU has taken to obtain the court documents in a timely manner.

Finally, at § 1007.11(a) through (c), in describing the activities for which a Unit is responsible, we propose to revise references to “the State [Medicaid] plan” to instead refer to “Medicaid,” and to refer to a “provider” (defined in section § 1007.1 in relationship to Medicaid), rather than “provider of medical assistance under the State Medicaid plan.” This reflects the reality that many States operate under State plan waiver programs and that provider activities in waiver programs were not intended to be excluded from a Unit's responsibility. This is consistent with the statute's broad description of a Unit's function as extending to “any and all aspects of fraud in connection with . . . any aspect of the provision of medical assistance. . . .” Section 1903(q)(3) of the Act, 42 U.S.C. 1396b(q)(3).

Current regulations at § 1007.19(e)(4) prohibit FFP for “any management function for the Unit, any audit or investigation, any professional legal function, or any criminal, civil or administrative prosecution of suspected providers that is not performed by a full-time employee of the Unit.” (Emphasis added.) Similarly, the current definitions at § 1007.1 define “employ” or “employee” to mean “full-time duty intended to last at least a year.” In recognition of changes to the modern workplace, OIG has taken a flexible approach with respect to the employment of professional employees who may wish to have part-time schedules. OIG has thus also interpreted the “full-time” rule to permit FFP for professional employees who are employed on a part-time basis, as long as their professional activities are devoted “exclusively” to MFCU purposes.

We therefore propose to revise the regulations to clarify that MFCU professional employees do not need to be “full time” to receive FFP, but to retain the longstanding policy and practice that FFP is permitted only for MFCU professional employees who are devoted “exclusively” to the MFCU mission except for limited circumstances that are specifically described in the regulation. Therefore, we propose to add definitions in 1007.1 of “part-time employee,” “full-time employee,” “professional employee,” and “exclusive effort.”

We thus propose to add a new § 1007.13(d) that describes the requirements for professional employees to receive FFP. Paragraph (d)(1) would require that, for professional employees to be eligible for FFP, they must devote their “exclusive effort” to the work of the Unit. This proposal is also reflected in § 1007.19(e)(4), which would prohibit FFP for “the performance of any audit or investigation, any professional legal function, or any criminal, civil or administrative prosecution of suspected providers by a person other than an employee who devotes exclusive effort to the Unit's work.”

New § 1007.13(d) would also describe, in paragraphs (d)(2) and (d)(3), two circumstances in which professional employees may perform limited non-MFCU activities: Outside employment during non-duty hours and temporary non-MFCU assignments. These proposals, discussed separately, are consistent with longstanding MFCU practice and OIG policy as expressed in State Fraud Policy Transmittal No. 2014-1 (June 3, 2014).

As also stated in the preamble to the regulations regarding the prohibition of FFP for other than a professional “full time employee,” we believe that “exclusive effort” by professional employees is necessary because the employment of temporary staff, or the occasional pursuit of isolated cases by different investigators and prosecutors, will undermine a Unit's ability to create an effective team with specialized knowledge of health care fraud and patient abuse or neglect. 43 FR 32078 (July 24, 1978). We also believe that the character of a MFCU as a “single identifiable entity,” and the development of specialized expertise in Medicaid fraud and patient abuse or neglect, would be frustrated by the employment of professional employees whose responsibilities are split between the MFCU and another agency. We believe that the long-standing policy and practice of MFCUs employing professional employees devoted exclusively to the MFCU mission has been key to the success of MFCUs.

One limitation on the use of part-time professional employees is the certification requirement found at § 1007.13(a), retained in this rulemaking, that MFCUs “will employ sufficient professional, administrative, and support staff to carry out its duties and responsibilities in an effective and efficient manner.” For example, Unit management may want to consider whether employing key staff, such as the director or chief investigator, on a part-time basis would undermine the Unit's effectiveness and efficiency.

We further propose, in § 1007.13(d)(2), to reflect the restrictions contained in our current policy regarding outside employment of professional employees during non-duty hours. Specifically, in subsection (d)(2), we propose that, to be eligible for FFP, professional employees may not be employed by other State agencies during non-duty hours. As stated previously, we believe it is important to maintain the separate nature of the MFCU because of the potential compromise between the MFCU mission and other missions of the State.

We do not have the same concerns about employment outside of State government. As part of paragraph (d)(2), we also propose that professional employees may obtain employment outside of State government, if State law allows it, but only if the outside employment presents no conflict of interest to Unit activities. A common example of such employment would be a MFCU auditor working as a tax accountant during his or her off-hours. The Unit should follow its State's process to ensure that any proposed outside employment is in accordance with applicable professional standards and State ethics rules or policies. In the absence of a State process, the MFCU should develop its own process to avoid conflicts of interest between a professional employee's outside employment and the work of the MFCU.

In proposed § 1007.13(d)(3), we reflect the current policy and practice regarding temporary, non-MFCU assignments. Paragraph (d)(3) would permit MFCU professional employees to engage in temporary assignments that are not within the functions and responsibilities of a MFCU only if such assignments are truly limited in duration. As with other non-MFCU activities, such assignments would not be funded by the Federal MFCU grant. For example, MFCU professional employees have been deployed to assist in maintaining order during natural disasters and other Statewide emergencies.

We expect that such situations will be unusual and infrequent, so MFCU directors should assess each on a case-by-case basis and may consult with OIG in determining whether the assignments are appropriate. Before directing staff to take a temporary assignment, a Unit should determine whether the assignment has a limited and defined duration and whether the assignment would pose any conflict with MFCU operations. The Unit may also want to consider whether the skills and expertise of the employees(s) are necessary for the assignment. If a MFCU permits temporary non-MFCU assignments, the Unit must document all hours spent on the assignment and ensure that the hours are excluded from the MFCU's financial status reports for purposes of receiving FFP.

We propose to add a requirement at § 1007.13(c) that the Unit must employ a director who supervises all Unit employees. Regulations do not specify that a MFCU must have a director, although all MFCUs for many years have operated with a director. We have found that having a director to whom all Unit employees ultimately report is critical to the successful management and operation of a MFCU. We also propose to define “director.” We further note that in some small Units, the director is the Unit's only attorney and can be considered the one required attorney under § 1007.13(b).

Proposed § 1007.13(d)(4) would further require that professional employees must be under the direction and supervision of the MFCU director (or, in larger Units, a subordinate Unit manager). This requirement has been a part of OIG's longstanding interpretation of the full-time rule and the statutory definition of a Unit as a “single, identifiable entity.” Allowing attorneys or investigators to report to supervisory officials outside the Unit would both undermine the ability of the Unit director to effectively manage the Unit and would interfere with the ability of MFCU professional employees to collaborate as a team.

Consistent with the proposal to require exclusive effort by professional employees to receive FFP, we also propose to clarify, in § 1007.13(g)(2), that the Unit may not receive FFP when it relies on individuals not employed directly by the MFCU for the investigation or prosecution of cases, including through consultant agreements or other contractual arrangements. As with the exclusive effort rule, we believe that the contracting out of investigative or legal functions would undermine the character of MFCUs as single, identifiable entities. This proposal is consistent with a longstanding practice of not allowing the contracting out of the investigation or prosecution of cases. We note that this proposal does not affect those MFCUs contained in state entities that lack the authority to prosecute fraud or patient abuse or neglect. Such MFCUs rely on non-MFCU prosecutors in other government agencies, who are not paid on the grant, to bring MFCU cases to trial.

However, we also propose to clarify at § 1007.13(g)(1) that Units may receive FFP for the employment of, or have available through consultant agreements or other arrangements, individuals with particular knowledge, skills, and/or expertise that a Unit believes will support the Unit in the investigation or prosecution of cases. For example, Units may have consultant agreements with expert witnesses or other forensics experts or may employ nurses to support investigations and prosecutions.

Regulations do not address training of MFCU professional employees. Because of the importance of training for MFCU professionals, we propose to add a requirement at § 1007.13(h) that a Unit must provide training for its professional employees for the purpose of establishing and maintaining proficiency in the investigation and prosecution of Medicaid fraud and patient abuse and neglect. This requirement is consistent with MFCU performance standards, which state that a Unit “conduct training that aids in the mission of the Unit.”

We propose to clarify several staffing issues by this regulation, including requiring a director; allowing part-time administrative and support staff; and clarifying the qualifications of attorneys, auditors, and the senior investigator.

We clarify at § 1007.13(e) that a Unit may hire administrative and support staff on a part-time basis. Part-time administrative and support staff, unlike professional employees in the new § 1007.13(d)(2), may hold another part-time State job or allocate their time between two offices within the Office of the Attorney General, for example. In those instances, we will continue to require that all claims for Federal reimbursement for part-time support staff be supported with proper documentation of hours worked.

We also propose minor clarifications at § 1007.13(b) of the qualifications of attorneys, auditors, and the senior investigator. For attorneys, we propose that they must be capable of prosecuting health care fraud or criminal cases. For auditors, we propose a minor change, that an auditor be capable of reviewing financial records, rather than the current language, that an auditor is “capable of supervising the review of financial records.” We also propose to expand requirements to include that an auditor be capable of advising or assisting in the investigation of patient abuse and neglect. For the senior investigator, we propose to eliminate the prerequisite of “substantial experience in commercial or financial investigations,” and propose instead only that the senior investigator be capable of supervising and directing the investigative activities of the Unit. Further, consistent with 1007.13(a), requiring that a Unit hire sufficient staff to carry out its duties and responsibilities effectively and efficiently, we propose the requirement that Units hire one “or more investigators.”

We propose at § 1007.15(b) to clarify that initial certification will be based on the information and documentation specified at § 1007.15(a). To receive Federal reimbursement, a MFCU must be certified and annually recertified by OIG, consistent with section 1903(a)(6) of the Act. For initial certification, a Unit must meet the basic requirements established in section 1903(q) as implemented in this part. Basic certification requirements include organization, location, relationships with the Medicaid agency, Unit duties and responsibilities, and staffing. We also propose to eliminate the requirement at § 1007.15(a)(6) that an initial application include a projection of caseload. We believe that it is unrealistic for State or territory preparing an initial application to provide any meaningful caseload projection.

A MFCU must be recertified annually by OIG to receive Federal reimbursement for a portion of its costs. Forty-nine States and the District of Columbia have established and operate a Unit. We propose to revise regulations to reflect the recertification process that has evolved since the program began. The proposed regulation at § 1007.17 would: (1) Describe the information that must be provided to OIG, including the recertification reapplication and statistical reporting; (2) describe other information considered for recertification; (3) clarify the basis for recertification by OIG; (4) create a procedure in which OIG notifies the Unit whether the reapplication is approved or denied by the Unit's recertification date; (5) clarify that an approved reapplication may be subject to special conditions; and (6) establish basic procedures for reconsideration of an OIG denial of recertification.

Section 1903(q)(7) of the Act requires a Unit to submit to the Secretary an application and “annual report containing such information as the Secretary determines, by regulations, to be necessary to determine whether the entity meets the other requirements of this paragraph.” Current regulations at § 1007.17 describe the content of the “annual report,” including certain statistical data and budget information, a narrative evaluating performance, any specific problems that have arisen over the year, and other matters that have impaired the Unit's effectiveness.

We propose to revise § 1007.17(a) to describe the information that Units must submit annually to OIG to fulfill the statutory mandate that Units provide “annual reports” to the Secretary. Under our proposal, Units may choose to no longer submit a document labeled “annual report,” so long as the items described in the proposed regulation are submitted to OIG on an annual basis in the timeframes established for each Unit as part of its annual reapplication. Such information includes statistical and other information provided to OIG in an electronic format. We describe below the items that must be submitted by each MFCU over the course of the year that satisfy the requirement for an annual report.

Narrative and approved data mining activities. First, as part of the reapplication, at the new § 1007.17(a)(1), we would continue to require the narrative from current § 1007.17(h) that evaluates the Unit's performance, describes any specific problems it has had in connection with the procedures and agreements under this part, and discusses other matters that have impaired its effectiveness. The narrative should also include any extended investigative approvals, pursuant to proposed § 1007.11(a)(2). Second, for Units that have received OIG approval to conduct data mining under § 1007.20, we would also continue to require that they submit information on their data mining activities.

Information Request. At the new § 1007.17(a)(1)(iii), we propose an annual requirement that Units provide information to OIG addressing their compliance with this part and adherence to MFCU performance standards. This proposed provision would align the regulation with current practice in which the Units, as part of their reapplication, provide information requested by OIG for that year. We have also included in the proposed regulation a requirement that Units advise OIG of significant changes since the prior year's recertification. This would replace a provision contained in § 1007.15(c)(1), requiring the Unit to advise the Secretary of any significant changes in the information and documentation submitted with the initial MFCU application. However, we think it is more appropriate for a Unit to advise OIG of significant changes that occurred during the prior year, rather than since its initial application, which for some Units could be 30 years or more. The information requested by OIG prompts a Unit to answer questions about all aspects of its operations, which should lead to responses that describe any significant changes.

Statistical report. Under the new § 1007.17(a)(2), we propose to amend the regulations to include the requirement that MFCUs submit an annual statistical report by November 30 of each year for the prior Federal fiscal year (FFY), containing the required data elements developed by OIG in collaboration with the MFCUs. Units submit to OIG statistical reports that include information on staffing, investigations, criminal prosecutions and civil actions, and other case outcomes. The statistical reports would be used, along with other information, to evaluate MFCUs for recertification. The statistical data provided by the Units would also enable OIG to assess performance and identify trends for all MFCUs.

We propose that the requirement for a separate annual statistical report replace the statistics that are required as part of the current annual report at § 1007.17(a) through (e). This would eliminate duplication of reported statistics and provide a standard timeframe (the FFY) for reporting rather than the current annual report requirement, which is tied to the recertification period of each Unit and is often a different year period than the FFY. Further, the current regulation requires the Unit to submit projected performance statistics for the upcoming recertification period. We no longer require this level of detail because of the difficulty of providing projected statistics. Finally, the current regulation requires a Unit to submit its costs incurred for the recertification period. Because a Unit submits an official Federal financial form (SF-425) reporting its costs to OIG for the FFY, we do not need an unofficial accounting of costs for the recertification period which, as noted, is often different from the FFY.

We also propose at the new § 1007.17(b) to include other information not submitted by the MFCU, but which, when appropriate, is reviewed for recertification. This would include information obtained during periodic onsite reviews and other information OIG deems necessary or warranted. It may also include obtaining feedback from stakeholders, such as the Medicaid program integrity director and the OIG special agent-in-charge, on their working relationships and business processes with the MFCU.

Section 1007.15(d) describes items that OIG considers when recertifying a MFCU, including the information on the MFCU's reapplication, the annual report, the effective use of resources in investigating and prosecuting fraud, and “other reviews or information” deemed necessary or warranted. We propose to describe at the new § 1007.17(c) OIG's basis for recertifying a MFCU, including specifying the “other reviews or information” OIG deems necessary or warranted. To determine whether a Unit has demonstrated that it effectively carries out the functions and responsibilities of this part for purposes of recertification, OIG examines a Unit's compliance with this part and other applicable Federal regulations as well as with OIG policy transmittals. OIG consults with MFCU stakeholders. OIG also uses the statutory performance standards that Units must satisfy under § 1902(a)(61) of the Act as a guideline in evaluating whether a Unit is effectively and efficiently carrying out its duties and responsibilities.

Further, as described in § 1007.11, in addition to the responsibility of having a Statewide program for investigating and prosecuting (or referring for prosecution) Medicaid fraud, MFCUs are also responsible for reviewing complaints alleging abuse or neglect of patients in health care facilities receiving payments under the State Medicaid plan and either investigating the complaints or referring them to the appropriate authority, which we interpret to mean that Units can investigate and prosecute cases arising from those complaints. At § 1007.17(c)(5), we propose to also include effective performance of the latter responsibility as an additional consideration in OIG's recertification review. OIG is aware that Units apportion their resources between the two responsibilities in different ways but believes that Units should not neglect one type of case.

Section 1007.15(d)(l) provides that a Unit will be notified promptly whether its reapplication has been approved. We propose to modify the notice procedure at proposed § 1007.17(d) to state that OIG will provide notice of approval or denial of recertification by the Unit's recertification date. We also propose that the recertification approval may be subject to special conditions or restrictions, as provided in 45 CFR 75.207, and may require corrective action. Further, if an application for recertification is denied, we propose in the new § 1007.17(e) that a Unit may request reconsideration of a denial by providing written information addressing the findings on which the denial was based. Within 30 days of receipt of the request for reconsideration, OIG provides a final decision, and its basis, in writing to the Unit and notifies CMS if the Unit does not meet the requirements for recertification. Under section 1903(a)(6), the Federal Government may not provide FFP in costs incurred by a Unit that is not certified by OIG as meeting the requirements for operating a Unit as found at section 1903(q).

In the initial legislation establishing MFCUs, Congress provided that Federal funds would reimburse States for 90 percent of their MFCU costs for 12 quarters in order to encourage the development of State MFCUs. In 1980, Congress amended section 1903(a)(6) to provide a continuing incentive by authorizing ongoing Federal reimbursement at 75 percent of a MFCU's allowable costs after the first 12 quarters of operation.

We propose to modify § 1007.19(a) to reflect that, under law, FFP is available at the rate of 90 percent during the first 12 quarters of a Unit's operation and at 75 percent thereafter, beginning with the 13th quarter of a Unit's operation. We also propose other modifications to clarify that each quarter of reimbursement at the 90 percent matching rate is counted in determining when the 13th quarter begins. Quarters of MFCU operation do not have to be consecutive to accumulate for purposes of determining when the 90 percent matching period has ended.

We also propose to amend § 1007.19(d) to clarify in regulation that a Unit may receive FFP for its efforts to increase referrals through program outreach activities. These are activities that most Units currently undertake as a part of their responsibilities under the grant but are not addressed in the program regulations in part 1007. Permissible program outreach activities by the Units may include efforts to educate Medicaid providers, law enforcement entities, and the public about Medicaid fraud, patient abuse or neglect, and MFCU authority and jurisdiction. Program outreach activities may also include the dissemination of outreach and educational materials specifically designed to increase awareness of the MFCU mission that could lead to referrals to the Unit. These outreach materials must be of a de minimus cost and be useful and practical.

We propose to amend § 1007.19(e)(2) to clarify the prohibition on the ability of Units to receive FFP to “identify situations in which a question of fraud may exist.” Specifically, the provision prohibits FFP “for expenditures attributable to: [. . .], except as provided under § 1007.20 [allowing Units to seek OIG approval to conduct data mining], efforts to identify situations in which a question of fraud may exist, including the screening of claims and analysis of patterns and practice that involve data mining as defined in § 1007.1.” We are proposing to replace “including the screening of claims . . .” with “by the screening of claims . . .” to clarify the ability of Units to engage in activities, other than data mining, to identify potential civil or criminal fraud in the Medicaid program.

We believe that this revision to the Unit's permissible activities is supported by the following: MFCUs have the ability to work with a variety of State agencies and private referral sources to identify possible fraud and to undertake sophisticated detection activities, such as undercover operations. None of these activities interferes with the program integrity activities of the State Medicaid agency, which we believe was the initial intended purpose of the prohibition. Our proposal would remove from the Medicaid agency the sole burden of identifying potential fraud and would allow MFCUs to be less dependent on referrals from Medicaid agencies.

We propose to amend the regulation in the new § 1007.21 to establish procedures for taking formal disallowances of FFP, for Units to request reconsideration of disallowances and to appeal to the HHS Departmental Appeals Board. The proposal is similar to CMS's requirements for the appeal of disallowances by State Medicaid agencies found at 42 CFR 430.42.

We propose to update the listing, contained in § 1007.21, of other applicable HHS regulations that were amended after the current MFCU regulations were promulgated. Specifically, we have updated the reference to the Department's award administration regulations now contained in 45 CFR part 75. 45 CFR part 75 establishes the HHS specific regulations for the Office of Management and Budget (OMB) interim final rule of the Uniform Guidance (UG) at 2 CFR part 200, published on December 26, 2014. We are also updating references to regulations governing HHS Departmental Appeals Board procedures and HHS nondiscrimination policies.

We have examined the impact of this rule, as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This rule does not reach the economic threshold, and thus is not considered a major rule. Since the proposed regulation would only implement current practice and policy, we believe the economic impact to be negligible.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $7.5 million to $38.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this final rule will not have a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals.

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 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold is approximately $144 million. This rule will have no consequential effect on State, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain principles and criteria that an agency must follow when it implements a regulation or other policy that has Federalism implications, defined in the Order to mean that the regulation or policy has 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. The Order also requires a level of consultation with State or local officials when an agency formulates and implements a regulation that has Federalism implications, that imposes substantial direct compliance costs on State and local governments, and that is not required by statute.

We do not believe that this proposed regulation has Federal implications as it would not have a substantial direct effect on the States or on the relationship or distribution of power and responsibilities among levels of government. We also do not believe that the proposed regulation would impose substantial direct compliance costs on States. Rather, the regulation would reflect certain statutory changes governing operation of the MFCUs that have already been implemented and would codify policy and practice involving the organization and operation of the Units. We believe that the content of the regulation is consistent with the partnership between the Federal and State governments that has been established for the financing and administration of the larger Medicaid program. We further believe that any costs related to compliance with the proposed regulation are minimal and not substantial.

However, to the extent that that the proposed regulation is seen as having Federal implications, the proposed regulation is consistent with the principles and criteria established in the Order. The proposed regulation would strictly adhere to constitutional principles and would be deferential to the States with respect to the policymaking and administration of State operations related to the investigation and prosecution of Medicaid provider fraud and patient abuse or neglect. With regard to consultation, the policies contained in the proposed regulation were developed in consultation and collaboration with the States.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by OMB.

Under the Paperwork Reduction Act (PRA) of 1995, before a collection-of-information requirement is submitted to OMB for review and approval, we are required to provide a 60-day notice in the Federal Register and solicit public comment. We propose to revise the scope of our annual collection of information as part of this NPRM to revise the MFCU oversight regulations contained in 42 CFR part 1007. The collection would contain certain mandatory information required annually as outlined at proposed 42 CFR 1007.17 which includes a reapplication of a brief narrative, data mining outcomes, and an information request as well as an annual statistical report. All of these items would replace the “Annual Report” required at current § 1007.17. Specifically, the proposed reapplication contains several elements. First, it would include a brief narrative that evaluates the Unit's performance, describes any specific problems it has had, and discusses any other matters that have impaired its effectiveness. This narrative could be in any format, as determined by each MFCU.

Second, those MFCUs approved by OIG to conduct data mining under 42 CFR 1007.20 are required by the current regulation to submit the costs expended by the MFCU on data mining activities, the amount of staff time devoted to data mining activities, the number of cases generated from those activities, the outcome and status of those cases, and any other relevant indicia of return on investment from data mining activities. The reporting format for data mining activities is determined by each reporting MFCU.

Third, the proposed reapplication would also include an information request concerning compliance with the statute, regulations, and policy transmittals as well as adherence to the MFCU performance standards. The information request would be in a standard question and answer format and has always been a part of the reapplication.

Fourth, and separate from the reapplication, we propose that MFCUs provide a Federal fiscal year (FFY) annual statistical report containing data points found at proposed 42 CFR 1007.17(b). This is consistent with the MFCU performance standard that a Unit have a case management system that (1) allows efficient access to case information and other performance data from initiation to resolution and (2) allows for reporting of case information. Units maintain case management systems on an ongoing basis and would upload the proposed data to a secure web portal through a Federal service provider, OMB MAX by November 30 of each year. This annual statistical report would replace the statistical information that we propose to no longer require in an “Annual Report,” as at 42 CFR 1007.17(a) through (e), although some of the data points are the same or similar to the statistics proposed in the annual statistical report. The proposed new data points would be an enhancement to our current information and would, on a FFY basis, more completely and accurately describe Unit staffing, caseload, criminal and civil case outcomes, collections, and referrals.

We estimate that the burden for these proposed collections would be similar to the burden approved under OMB approval No. 0990-0162. First, the currently approved burden estimate for the “Annual Report” is 88 hours per respondent. Because the burden previously assigned to the “Annual Report” would shift to the separate annual statistical report provided at the end of the FFY, we have re-estimated that preparing the brief narrative would take 3 hours per respondent. Based on reports from MFCU officials, providing information on data mining activities, if required, would require 1 hour of additional burden, as is currently approved. We have then shifted most of the balance of the current “Annual Report” burden (80 hours) to the proposed annual statistical report. We believe that most of the burden for preparing the annual statistical report consists of the ongoing updating of the Unit's case management system and not for the uploading of the actual report, so we believe the estimate is accurate. Second, the recertification reapplication information request has not changed from current practice and is approved under OMB No. 0990-0162. However, based on reports from MFCU officials, we have increased the reapplication information request burden estimate by 4 hours per respondent to 9 hours. Thus, we estimate that after shifting the burden between collections, the total burden would be the same as currently approved.

Based on our knowledge of MFCU staff hourly rates and which MFCU staff person would prepare each collection, we estimate a MFCU official would spend approximately 29 hours at an estimated $38 per hour preparing the reapplication and annual statistical report. We estimate that a MFCU support staff person would spend approximately 64 hours of effort at an estimated hourly rate of $16 per hour to develop draft products, fulfill data entry activities, complete all required administrative functions, and confer with the MFCU supervising official, all of which are necessary to finalize the collection for submission to OIG. Based on these estimated hours and staff wage rates, the weighted average wage rate is $22.85 per hour. Thus, identical to the estimate that was approved under OMB No. 0990-0162, our best estimate is that about 93 burden hours would be expended by each of the 50 MFCUs.

OIG would use the information collected to determine the MFCUs' compliance with Federal requirements and eligibility for continued Federal financial participation (FFP) under the Federal MFCU grant program, as part of the annual recertification process for each MFCU. The collection would also allow OIG to assess performance and trends in Medicaid fraud and patient abuse and neglect across all MFCUs.

In order to evaluate fairly whether this information collection should be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we solicit comment on the following issues:

• The need for the information collection and its usefulness in carrying out the proper functions of our agency;

• The accuracy of our estimate of the information collection burden;

• The quality, utility, and clarity of the information to be collected; and

• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

Under the PRA, the time, effort, and financial resources necessary to meet the information collection requirements referenced in this section are to be considered. We explicitly seek, and will consider, public comment on our assumptions as they relate to the PRA requirements summarized in this section. Comments on these information collection activities should be sent to the following address within 60 days following the Federal Register publication of this proposed rule: OIG Desk Officer, Office of Management and Budget, Room 10235, New Executive Office Building, 725 17th Street NW., Washington, DC 20053.

I. Why We're Publishing This Proposed Rule and What It Does

In late 2012, the Department published a final rule updating and replacing the Department's previous Freedom of Information Act (FOIA) regulations. In early 2016, the Department updated that final rule, primarily to authorize the Office of Inspector General (OIG) to process their own FOIA appeals. On June 30, 2016, the FOIA Improvement Act of 2016, Pub. L. 114-185, 130 Stat. 538 (the Act) was enacted. The Act specifically requires all agencies to review and update their FOIA regulations in accordance with its provisions, and the Department is making changes to its regulations accordingly. Finally, the Department has received feedback from its FOIA practitioners and requesters and identified areas where it would be possible to further update, clarify, and streamline the language of some procedural provisions. Therefore, the Department is proposing to make the following changes:

• Section 2.4(e) would be amended to provide additional guidance on how bureaus handle misdirected requests.

• Section 2.15 would be amended to bring attention to the Department's existing FOIA Request Tracking Tool (https://foia.doi.gov/requeststatus).

• Section 2.19 would be amended to bring further attention to the services provided by the Office of Government Information Services (OGIS), in accordance with the provisions of the Act.

• Section 2.21 would be amended to reflect that the OGIS would be defined earlier in the regulations than it previously had been.

• Section 2.24 would be amended to require a foreseeable harm analysis, in accordance with the provisions of the Act, and to require bureaus to provide an explanation to the requester when an estimate of the volume of any records withheld in full or in part is not provided.

• Section 2.37(f) would be amended to reflect the provisions of the Act.

• Section 2.39 would be amended to remove what would be superfluous language, after the changes to section 2.37(f).

• Section 2.58 would be amended to provide more time for requesters to appeal, in accordance with the provisions of the Act.

Executive Order (E.O) 12866 provides that the Office of Information and Regulatory Affairs will review all significant rules. The Office of Information and Regulatory Affairs has determined that this rulemaking is not significant.

Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The Executive Order 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. We have developed this proposed rule in a manner consistent with these requirements.

The Department of the Interior certifies that this rulemaking will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

This is not a major rule under 5 U.S.C. 804(2), 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, or local government agencies, or geographic regions.

c. Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

This rulemaking does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. This rulemaking does not have a significant or unique effect on State, local, or tribal governments or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required.

In accordance with Executive Order 12630, this rulemaking does not have significant takings implications. A takings implication assessment is not required.

In accordance with Executive Order 13132, this proposed rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. It would not substantially and directly affect the relationship between the Federal and state governments. A federalism summary impact statement is not required.

In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rulemaking does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Executive Order.

Under the criteria in Executive Order 13175, we have evaluated this proposed rule and determined that it has no potential effects on federally recognized Indian tribes. This rulemaking does not have tribal implications that impose substantial direct compliance costs on Indian Tribal governments.

This proposed rule does not contain information collection requirements, and a submission to the Office of Management and Budget under the Paperwork Reduction Act is not required.

This rulemaking does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq. (NEPA), is not required. Pursuant to 43 CFR 46.205(b) and 43 CFR 46.210(i), the Department of the Interior NEPA implementing procedures exclude from preparation of an environmental assessment or impact statement “[p]olicies, directives, regulations, and guidelines: that are of an administrative, financial, legal, technical, or procedural nature. . . .” None of the extraordinary circumstances listed in 43 CFR 46.215 exists for this rulemaking. Accordingly, this proposed rule is categorically excluded from environmental analysis under 43 CFR 46.210(i).

This rulemaking is not a significant energy action under the definition in Executive Order 13211. A Statement of Energy Effects is not required. This rulemaking will not have a significant effect on the nation's energy supply, distribution, or use.

We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

If you feel that we have not met these requirements, send us comments by one of the methods listed in the ADDRESSES section. To better help us revise the rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that you find unclear, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.

For the reasons stated in the preamble, the Department of the Interior proposes to amend part 2 of title 43 of the Code of Federal Regulations as follows:

a. In paragraph (b)(3), adding the words “, along with a statement that the bureau reasonably foresees that disclosure would harm an interest protected by the applied exemption(s) or disclosure is prohibited by law” after the words “or in part”; and

b. In paragraph (b)(4), adding the word “including” after the word “unless” and adding the words “and the bureau explains this harm to you” after the words “withhold the records”.

On August 22, 2016, at 81 FR 57402, the Federal Emergency Management Agency (FEMA) proposed to amend its regulations on “Floodplain Management and Protection of Wetlands” and proposed a supplementary policy that would further clarify how FEMA applies the Federal Flood Risk Management Standard. Through this Notice of Data Availability (NODA), FEMA is making available to the public, and soliciting comment on, a draft report, 2016 Evaluation of the Benefits of Freeboard for Public and Nonresidential Buildings in Coastal Areas that became available after publication of the proposed rule.

As part of the rulemaking process, FEMA included in the docket a Regulatory Evaluation to estimate the potential costs and benefits of the proposed rule. The evaluation accompanying the proposed rule addressed costs associated with elevating and floodproofing FEMA Federally Funded Projects to specified freeboard levels. Cost and benefit estimates were made using the 2008 Supplement to the 2006 Evaluation of the National Flood Insurance Program's Building Standards (2008 report), which evaluated the costs and benefits associated with elevating newly constructed residential structures, located in coastal areas.

While the 2008 report was the best available data at the time, it was limited in scope to single-family residential structures. The proposed rule primarily affects non-residential structures owned by local government agencies and private non-profit organizations. The 2008 report is also limited to new construction projects. Most of the projects affected by the proposed rule would be retrofitted structures. The draft report includes data and analysis specific to some of the types of projects most likely to be affected by the proposed rule.

The purpose of this 2016 draft report, which is part of a broader effort related to FEMA's Hazard Mitigation Assistance Program, was to determine if increased freeboard requirements would result in sufficient reductions in damages to be considered cost-effective. The results of this analysis provide some insight into the potential costs and benefits associated with constructing nonresidential and public buildings with higher freeboard requirements. The draft report provides cost and benefit estimates for elevating new construction buildings, as well as the costs and benefits of dry floodproofing both new and existing structures. The Regulatory Evaluation for the proposed rule discussed the differences in potential costs and benefits associated with elevation and floodproofing of new construction and existing buildings. However, because of a lack of data available to FEMA at the time that FEMA published the Regulatory Evaluation, the Evaluation does not quantify these costs separately. Additionally, the draft report includes significant additional discussion of the effects of sea level rise on the benefit-cost ratios of freeboard elevation. FEMA notes for the public's awareness that similar to the 2008 report, the draft report is limited, as riverine areas were not included in the analysis. Moreover, the report is still in draft form and is not peer-reviewed. FEMA welcomes comments on these and other aspects of the draft report. In particular, FEMA requests comments on whether the draft report contains enough information on which the public can base a conclusion on its use to quantify benefits for the proposed rule. For example, the study describes its methodology, outlines its basic assumptions, and provides summary statistics and overall benefit-cost ratios, but it does not show the inputs used for many of its calculations and assumptions.

Because of the above-referenced differences between the 2008 report and the draft report, FEMA welcomes comment on whether it would be more appropriate to use the draft report to estimate the costs and benefits in a future regulatory evaluation of a final rule on this topic. FEMA seeks comments from the public about all aspects of the applicability of this draft report to the rulemaking, including how the data in this draft report may be applied in estimating costs and benefits associated with elevating and floodproofing structures to the proposed freeboard levels in the final rule.

For example, data and analysis from the draft report could be used to estimate the costs and benefits associated with elevating and floodproofing FEMA Federally Funded projects involving nonresidential structures. The draft report includes data and analysis relevant to the following building types in coastal areas: elementary schools, hospitals, police stations, retail stores, and office buildings. The analysis suggests that for the above-referenced building types, evaluated costs could range from $1.03 to $16.29 per square foot, depending on the type of structure.

In addition, FEMA did not monetize the benefits of the freeboard value approach in the Regulatory Evaluation, but FEMA did provide the cost-benefit ratios that the 2008 study described for various freeboard levels. The draft report includes updated cost-benefit ratios that might more accurately depict the benefits of freeboard levels for different types of non-residential structures in coastal areas. FEMA specifically requests comments from the public about the potential applicability of these cost-benefit ratios and whether and how they should be incorporated into the Regulatory Evaluation of a final rule.

Authority: E.O. 11988 of May 24, 1977. 3 CFR, 1977 Comp., p. 117; E.O. 11990 of May 24 1977, 3 CFR, 1977 Comp. p. 121; Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of March 31, 1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376; E.O. 12148 of July 20, 1979, 44 FR 43239, 3 CFR, 1979 Comp., p. 412, as amended.; E.O. 12127; E.O. 12148; 42 U.S.C. 5201.

NHTSA administers a program for reducing motor vehicle theft. The central feature of this program is the Federal Motor Vehicle Theft Prevention Standard, 49 CFR part 541. The standard specifies performance requirements for inscribing or affixing vehicle identification numbers (VINs) onto certain major original equipment and replacement parts of high-theft lines of passenger motor vehicles.

NHTSA obtains, from the most reliable source, accurate and timely theft data, and publishes the data for review and comment in accordance with 49 U.S.C. 33104(b)(4). This document reports the preliminary theft data for CY 2014, the most recent calendar year for which data are available.

In calculating the 2014 theft rates, NHTSA followed the same procedures it has used since publication of the MY/CY 1983/1984 theft rate data (50 FR 46669, November 12, 1985). The MY/CY 2014 theft rate for each vehicle line was calculated by dividing the number of reported thefts of MY 2014 vehicles of that line stolen during calendar year 2014 by the total number of vehicles in that line manufactured for MY 2014, as reported to the Environmental Protection Agency (EPA). As in all previous reports, NHTSA's data were based on information provided to NHTSA by the National Crime Information Center (NCIC) of the Federal Bureau of Investigation. The NCIC is a government system that receives vehicle theft information from approximately 23,000 criminal justice agencies and other law enforcement authorities throughout the United States. The NCIC data also include reported thefts of self-insured and uninsured vehicles, not all of which are reported to other data sources.

The preliminary MY/CY 2014 theft data show a decrease in the vehicle theft rate when compared to the theft rate experienced in MY/CY 2013 (For 2013 theft data, see 80 FR 72929 November 23, 2015). The preliminary theft rate for MY 2014 passenger vehicles stolen in calendar year 2014 decreased to 1.1525 thefts per thousand vehicles produced, a decrease of 0.32 percent from the rate of 1.1562 thefts per thousand vehicles experienced by MY 2013 vehicles stolen in CY 2013. For MY 2014 vehicles, out of a total of 236 vehicle lines, five lines had a theft rate higher than 3.5826 per thousand vehicles, the median theft rate established for MYs 1990/1991 (See 59 FR 12400, March 16, 1994). Of the five vehicle lines with a theft rate higher than 3.5826, four are passenger car lines, one is a multipurpose passenger vehicle line, and none are light-duty truck lines.

The data presented in this publication reflect a slight decrease in the overall vehicle theft rate for MY/CY 2014 which is consistent with the general theft rate trend over the past several years.

In Table I, NHTSA has tentatively ranked each of the MY 2014 vehicle lines in descending order of theft rate. Public comment is sought on the accuracy of the data, including the data for the production volumes of individual vehicle lines.

Comments must not exceed 15 pages in length (49 CFR 553.21). Attachments may be appended to these submissions without regard to the 15 page limit. This limitation is intended to encourage commenters to detail their primary arguments in a concise fashion.

If a commenter wishes to submit certain information under a claim of confidentiality, three copies of the complete submission, including purportedly confidential business information, should be submitted to the Chief Counsel, NHTSA, at the street address given in the FOR FURTHER INFORMATION CONTACT section, and two copies from which the purportedly confidential information has been deleted should be submitted to the docket. A request for confidentiality should be accompanied by a cover letter setting forth the information specified in the agency's confidential business information regulation. 49 CFR part 512.

All comments received before the close of business on the comment closing date indicated above for this document will be considered, and will be available for examination in the docket at the above address both before and after that date. To the extent possible, comments filed after the closing date will also be considered. Comments on this document will be available for inspection in the docket. NHTSA will continue to file relevant information as it becomes available for inspection in the docket after the closing date, and it is recommended that interested persons continue to examine the docket for new material.

Those persons desiring to be notified upon receipt of their comments in the rules docket should enclose a self-addressed, stamped postcard in the envelope with their comments. Upon receiving the comments, the docket supervisor will return the postcard by mail.

Privacy Act: Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://DocketsInfo.dot.gov.

This document consists of: (1) A 12-month petition finding that listing the iiwi under the Act is warranted; and (2) a proposed rule to list the iiwi as a threatened species under the Act.

Why we need to publish a rule. Under the Endangered Species Act, 16 U.S.C. 1531 et seq., a species or subspecies may warrant protection through listing if it is endangered or threatened throughout all or a significant portion of its range. Critical habitat shall be designated, to the maximum extent prudent and determinable, for any species determined to be an endangered or threatened species under the Act.

We are proposing to list the iiwi (Drepanis coccinea) as threatened under the Act because of current and future threats, and listing can only be done by issuing a rule. The iiwi no longer occurs across much of its historical range, and faces a variety of threats in the form of diseases and impacts to its remaining habitat.

Delineation of critical habitat requires, within the geographical area occupied by the species, identification of the physical or biological features essential to the species' conservation. A careful assessment of the biological needs of the species and the areas that may have the physical or biological features essential for the conservation of the species and that may require special management considerations or protections, and thus qualify for designation as critical habitat, is particularly complicated in this case by the ongoing and projected effects of climate change and will require a thorough assessment. We require additional time to analyze the best available scientific data in order to identify specific areas appropriate for critical habitat designation and to analyze the impacts of designating such areas as critical habitat. Accordingly, we find designation of critical habitat for the iiwi to be “not determinable” at this time.

What this document does. This document proposes the listing of the iiwi as a threatened species. We previously published a 90-day finding for the iiwi, and this document includes a 12-month finding and proposed listing rule, which assesses all available information regarding status of and threats to the iiwi.

The basis for our action. Under the Act, we can determine that a species is an endangered or threatened species based on any of five factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) Overutilization for commercial, recreational, scientific, or educational purposes; (C) Disease or predation; (D) The inadequacy of existing regulatory mechanisms; or (E) Other natural or manmade factors affecting its continued existence. We have determined that the primary threats to the iiwi are its susceptibility to avian malaria (Factor C) and the expected reduction in disease-free habitat as a result of increased temperatures caused by climate change (Factor E). Although not identified as primary threat factors, rapid ohia death, a disease that affects the tree species required by iiwi for nesting and foraging, and impacts from nonnative invasive plants and feral ungulates, contribute to the degradation and curtailment of the iiwi's remaining, disease-free native ohia forest habitat, exacerbating threats to the species' viability.

We will seek peer review. We will seek comments from independent specialists to ensure that our designation is based on scientifically sound data, assumptions, and analyses. We will invite these peer reviewers to comment on our listing proposal. Because we will consider all comments and information received during the comment period, our final determination may differ from this proposal.

A species status report for the iiwi was prepared by a team of Service biologists, with the assistance of scientists from the U.S. Geological Survey's (USGS) Pacific Islands Ecosystems Research Center and the Service's Pacific Islands Climate Change Cooperative. We also obtained review and input from experts familiar with avian malaria and avian genetics. The species status report represents a compilation of the best scientific and commercial data available concerning the status of the species, including the past, present, and future threats to the iiwi. We will invite at least three scientists with expertise in Hawaiian forest bird biology, avian malaria, and climate change to conduct an independent peer review of the species status report. The species status report and other materials relating to this proposal can be found at http://www.regulations.gov, at Docket No. FWS-R1-ES-2016-0057, or by contacting the Pacific Islands Fish and Wildlife Office (see FOR FURTHER INFORMATION CONTACT).

We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from the public, including land owners and land managers, other concerned governmental agencies, the scientific community, industry, or any other interested parties concerning this proposed rule. We particularly seek comments concerning:

(1) The iiwi's biology, range, and population trends, including:

(a) Biological or ecological requirements of the species, including habitat requirements for feeding, breeding, and sheltering;

(b) Genetics and taxonomy;

(c) Historical and current range including distribution patterns;

(d) Historical and current population levels, and current and projected trends; and

(e) Past and ongoing conservation measures for the species, its habitat, or both.

(2) Factors that may affect the continued existence of the species, which may include habitat modification or destruction, overutilization, disease, predation, the inadequacy of existing regulatory mechanisms, or other natural or manmade factors.

(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to this species and existing regulations that may be addressing those threats.

(4) Additional information concerning the historical and current status, range, distribution, and population size of this species, including the locations of any additional populations of the iiwi.

(5) Specific information on:

• What areas currently occupied, and that contain the necessary physical or biological features essential for the conservation of the iiwi, we should include in any future designation of critical habitat and why;

• Whether special management considerations or protections may be required for the physical or biological features essential to the conservation of the iiwi; and

• What areas not currently occupied are essential to the conservation of the iiwi and why.

Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.

Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is a threatened or endangered species must be made “solely on the basis of the best scientific and commercial data available.”

You may submit your comments and materials concerning this proposed rule by one of the methods listed in ADDRESSES. We request that you send comments only by the methods described in ADDRESSES.

If you submit information via http://www.regulations.gov, your entire submission—including any personal identifying information—will be posted on the Web site. If your submission is made via a hardcopy that includes personal identifying information, you may request at the top of your document that we withhold this information from public review. However, we cannot guarantee that we will be able to do so. We will post all hardcopy submissions on http://www.regulations.gov.

Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on http://www.regulations.gov, or by appointment, during normal business hours, at the U.S. Fish and Wildlife Service, Pacific Islands Fish and Wildlife Office (see FOR FURTHER INFORMATION CONTACT).

Section 4(b)(5) of the Act provides for one or more public hearings on this proposal, if requested. Requests must be received within 45 days after the date of publication of this proposed rule in the Federal Register. Such requests must be sent to the address shown in FOR FURTHER INFORMATION CONTACT. We will schedule one or more public hearings on this proposal, if any are requested, and announce the dates, times, and places of those hearings, as well as how to obtain reasonable accommodations, in the Federal Register and local newspapers at least 15 days before the hearing.

In accordance with our joint policy on peer review published in the Federal Register on July 1, 1994 (59 FR 34270), we will seek the expert opinions of appropriate and independent specialists regarding this proposed rule and the accompanying draft species status report (see Status Assessment for the Iiwi, below). The purpose of peer review is to ensure that our listing determination is based on scientifically sound data, assumptions, and analyses. Peer reviewers have expertise in the iiwi's life history, habitat, physical and biological requirements, avian diseases including malaria, and climate change, and are currently reviewing the draft species status report, which will inform our determination. We invite comment from the peer reviewers during this public comment period.

Section 4(b)(3)(B) of the Act requires that, for any petition to revise the Federal Lists of Threatened and Endangered Wildlife and Plants (Lists) that contains substantial scientific or commercial information indicating that listing a species may be warranted, we make a finding within 12 months of the date of receipt of the petition that the petitioned action is either: (a) Not warranted; (b) warranted; or (3) warranted, but the immediate proposal of a regulation implementing the petitioned action is precluded by pending proposals to determine whether other species are endangered or threatened, and expeditious progress is being made to add or remove qualified species from the Lists. With this publication, we have determined that the petitioned action to list the iiwi is warranted, and we are proposing to list the species.

On August 25, 2010, we received a petition dated August 24, 2010, from Noah Greenwald, Center for Biological Diversity, and Dr. Tony Povilitis, Life Net, requesting that the iiwi be listed as an endangered or threatened species and that critical habitat be designated under the Act. In a September 10, 2010, letter to the petitioners, we responded that we had reviewed the information presented in the petition and determined that issuing an emergency regulation temporarily listing the species under section 4(b)(7) of the Act was not warranted. We also stated that we were required to complete a significant number of listing and critical habitat actions in Fiscal Year 2010, including complying with court orders and court-approved settlement agreements with specific deadlines, listing actions with absolute statutory deadlines, and high-priority listing actions. Our listing and critical habitat funding for Fiscal Year 2010 was committed to complying with these court orders, settlement agreements, and statutory deadlines. Therefore, we were unable to further address the petition to list the iiwi at that time.

We published a 90-day finding for the iiwi in the Federal Register on January 24, 2012 (77 FR 3423). Based on that review, we found that the petition presented substantial information indicating that listing the iiwi may be warranted, and we initiated a status review of the species. With the publication of this notice, we provide our 12-month finding and a proposal to list the iiwi as a threatened species under the Act.

A thorough review of the taxonomy, life history, and ecology of the iiwi (Drepanis coccinea) is presented in the draft Iiwi (Drepanis coccinea) Species Status Report, available online at http://www.regulations.gov under Docket No. FWS-R1-ES-2016-0057. The species status report documents the results of our comprehensive biological status review for the iiwi, including an assessment of the potential stressors to the species. The species status report does not represent a decision by the Service on whether the iiwi should be proposed for listing as a threatened or endangered species under the Act. It does, however, provide the scientific basis that informs our regulatory decision, which involves the further application of standards within the Act and its implementing regulations and policies. The following is a summary of the key results and conclusions from the species status report.

A medium-sized forest bird notable for its iconic bright red feathers, black wings and tail, and a long, curved bill (Hawaii Audubon Society 2011, p. 97), the iiwi belongs to the family Fringillidae and the endemic Hawaiian honeycreeper subfamily, Drepanidinae (Pratt et al. 2009, pp. 114, 122). Iiwi songs are complex with variable creaks (often described as sounding like a “rusty hinge”), whistles, or gurgling sounds, and they sometimes mimic other birds (Hawaii Audubon Society 2011, p. 97). The species is found primarily in closed canopy, montane wet or montane mesic forests composed of tall stature ohia (Metrosideros polymorpha) trees or ohia and koa (Acacia koa) tree mixed forest. The iiwi's diet consists primarily of nectar from the flowers of ohia and mamane (Sophora chrysophylla), various plants in the lobelia (Campanulaceae) family (Pratt et al. 2009, p. 193), and occasionally, insects and spiders (Pratt et al. 2009, p. 193; Hawaii Audubon Society 2011, p. 97).

Although iiwi may breed anytime between October and August (Hawaii Audubon Society 2011, p. 97), the main breeding season occurs between February and June, which coincides with peak flowering of ohia (Fancy and Ralph 1997, p. 2). Iiwi create cup-shaped nests typically within the upper canopy of ohia (Hawaii Audubon Society 2011, p. 97), and breeding pairs defend a small area around the nest and disperse after the breeding season (Fancy and Ralph 1997, p. 2). An iiwi clutch typically consists of two eggs, with a breeding pair raising one to two broods per year (Hawaii Audubon Society 2011, p. 97).

Well known for their seasonal movements in response to the availability of flowering ohia and mamane, iiwi are strong fliers that move long distances following their breeding season to locate nectar sources (Fancy and Ralph 1998, p. 3; Kuntz 2008, p. 1; Guillamet et al. 2015, pp. EV-8—EV-9). The iiwi's seasonal movement to lower elevation areas in search of nectar sources is an important factor in the exposure of the species to avian diseases, particularly malaria (discussed below).

Although historical abundance estimates are not available, the iiwi was considered one of the most common of the native forest birds in Hawaii by early naturalists, described as “ubiquitous” and found from sea level to the tree line across all the major islands (Banko 1981, pp. 1-2). Today the iiwi is no longer found on Lanai and only a few individuals may be found on Oahu, Molokai, and west Maui. Remaining populations of iiwi are largely restricted to forests above approximately 3,937 feet (ft) (1,200 meters (m)) in elevation on Hawaii Island (Big Island), east Maui, and Kauai. As described below, the present distribution of iiwi corresponds with areas that are above the elevation at which the transmission of avian malaria readily occurs (“disease-free” habitats). The current abundance of iiwi rangewide is estimated at a mean of 605,418 individuals (range 550,972 to 659,864). Ninety percent of all iiwi now occur on Hawaii Island, followed by east Maui (about 10 percent), and Kauai (less than 1 percent) (Paxton et al. 2013, p. 10).

Iiwi population trends and abundance vary across the islands. The population on Kauai appears to be in steep decline, with a modeled rate of decrease equivalent to a 92 percent reduction in population over a 25-year period (Paxton et al. 2013, p. 10); the total population on Kauai is estimated at a mean of 2,551 birds (range 1,934 to 3,167) (Paxton et al. 2013, p. 10). Trends on Maui are mixed, but populations there generally appear to be in decline; East Maui supports an estimated population of 59,859 individuals (range 54,569 to 65,148) (Paxton et al. 2013, p. 10). On Hawaii Island, which supports the largest remaining numbers of iiwi at an estimated average of 543,009 individuals (range 516,312 to 569,706), there is evidence for stable or declining populations on the windward side of the island, while trends are strongly increasing on the leeward (Kona) side. As noted above, iiwi have been extirpated from Lanai, and only a few individual birds have been sporadically detected on the islands of Oahu, Molokai, and on west Maui in recent decades. Of the nine iiwi population regions for which sufficient information is available for quantitative inference, five of those show strong or very strong evidence of declining populations; one, a stable to declining population; one, a stable to increasing population; and two, strong evidence for increasing populations. Four of the nine regions show evidence of range contraction. Overall, based on the most recent surveys (up to 2012), approximately 90 percent of remaining iiwi are restricted to forest within a narrow band between 4,265 and 6,234 ft (1,300 and 1,900 m) in elevation (Paxton et al. 2013, pp. 1, 10-11, and Figure 1) (See the Population Status section of the draft species status report for details).

The Act directs us to determine whether any species is an endangered species or a threatened species because of any of five various factors affecting its continued existence. Our species status report evaluated many potential stressors to iiwi, particularly direct impacts on the species from introduced diseases, as well as predation by introduced mammals, competition with nonnative birds, climate change, ectoparasites, and the effects of small population size. We also assessed stressors that may affect the extent or quality of the iiwi's required ohia forest habitat, including ohia dieback, ohia rust, drought, fires, volcanic eruptions, climate change, and particularly rapid ohia death and habitat alteration by nonnative plants and feral ungulates.

All species experience stressors; we consider a stressor to rise to the level of a threat to the species if the magnitude of the stressor is such that it places the current or future viability of the species at risk. In considering what stressors or factors might constitute threats to a species, we must look beyond the exposure of the species to a particular stressor to evaluate whether the species may respond to that stressor in a way that causes impacts to the species now or is likely to cause impacts in the future. If there is exposure to a stressor and the species responds negatively, the stressor may be a threat. We consider the stressor to be a threat if it drives, or contributes to, the risk of extinction of the species such that the species warrants listing as endangered or threatened as those terms are defined in the Act. However, the identification of stressors that could affect a species negatively may not be sufficient to compel a finding that the species warrants listing. The information must include evidence sufficient to suggest that these stressors are operative threats that act on the species to the point that the species may meet the definition of endangered or threatened under the Act.

Our species status report examines all of the potential stressors to iiwi in detail. Here we describe those stressors that we conclude rise to the level of a threat to the long-term viability of iiwi.

Based on our comprehensive assessment of the status of the iiwi in our species status report, we conclude that the best scientific data available consistently identifies avian malaria as the primary driver of declines in abundance and distribution of iiwi observed since the turn of the 20th century. This conclusion is supported by the extremely high mortality rate of iiwi (approximately 95 percent) in response to avian malaria, and the disappearance of iiwi from low-elevation ohia forest where it was formerly common and where malaria is prevalent today. Both the life cycle of the mosquito vector and the development and transmission of the malaria parasite are temperature-limited, thus iiwi are now found primarily in high elevation forests above 3,937 ft (1,200 m) where malaria prevalence and transmission is only brief and episodic, or nonexistent, under current conditions. Iiwi have not demonstrated any substantial sign of developing resistance to avian malaria to date and do not appear to be genetically predisposed to evolve resistance (Jarvi et al. 2004, pp. 2,164-2,166). As the prevalence of avian malaria increases in association with warmer temperatures (e.g., LaPointe et al. 2012, p. 217), the extent and impact of avian diseases upon iiwi are projected to become greatly exacerbated by climate change during this century.

Additionally, on Hawaii Island where 90 percent of the iiwi currently occur, the disease rapid ohia death was identified as an emergent source of habitat loss and degradation that has the potential to exacerbate other stressors to ohia forest habitat, as well as reduce the amount of habitat remaining for iiwi in an already limited, disease-free zone contained within a narrow elevation band. Rapid ohia death, a recently discovered tree disease that leads to significant mortality of the ohia that iiwi depend upon for nesting and foraging, is quickly becoming a matter of urgent concern. If rapid ohia death continues to spread across the native ohia forests, it will directly threaten iiwi by eliminating the limited, malaria-free native forest areas that remain for the species.

Based on the analysis in our species status report, invasive, nonnative plants and feral ungulates have major, adverse impacts on ohia forest habitat. Although we did not find that the historical and ongoing habitat alteration by nonnative species is the primary cause of the significant observed decline in iiwi's abundance and distribution, the cumulative impacts to iiwi's habitat, and in particular the activities of feral ungulates, are not insignificant and likely exacerbate the effects of avian malaria. Feral ungulates, particularly pigs (Sus scrofa), goats (Capra hircus), and axis deer (Axis axis), degrade ohia forest habitat by spreading nonnative plant seeds and grazing on and trampling native vegetation, and contributing to erosion (Mountainspring 1986, p. 95; Camp et al. 2010, p. 198). Invasive nonnative plants, such as strawberry guava (Psidium cattleianum) and albizia trees (Falcataria moluccana), prevent or retard regeneration of ohia forest used by iiwi for foraging and nesting. The combined effects of drought and nonnative, invasive grasses have resulted in increased fire frequency and the conversion of mesic ohia woodland to exotic grassland in many areas of Hawaii ((D'Antonio and Vitousek 1992, p. 67; Smith and Tunison 1992, pp. 395-397; Vitousek et al. 1997, pp. 7-8; D'Antonio et al. 2011, p. 1,617). Beyond alteration of ohia forest, feral pig activities that create mosquito habitat in ohia forest where there would otherwise be very little to none is identified as an important compounding stressor that acts synergistically with the prevalence of malaria and results in iiwi mortality. Although habitat loss and degradation is not, by itself, considered to be a primary driver of iiwi declines, the habitat impacts described above contribute cumulatively to the vulnerability of the species to the threat of avian malaria by degrading the quality and quantity of the remaining disease-free habitat upon which the iiwi depends. In this regard, rapid ohia death, discussed above, is quickly becoming a matter of urgent concern as it can further exacerbate and compound effects from the suite of stressors that impact iiwi (see below).

The introduction of avian diseases transmitted by the introduced southern house mosquito (Culex quinquefasciatus), including avian malaria (caused by the protozoan Plasmodium relictum) and avian pox (Avipoxvirus sp.), has been a key driving force in both extinctions and extensive declines over the last century in the abundance, diversity, and distribution of many Hawaiian forest bird species, including declines of the iiwi and other endemic honeycreepers (e.g., Warner 1968, entire; Van Riper et al. 1986, entire; Benning et al. 2002, p. 14,246; Atkinson and LaPointe 2009a, p. 243; Atkinson and LaPointe 2009b, pp. 55-56; Samuel et al. 2011, p. 2,970; LaPointe et al. 2012, p. 214; Samuel et al. 2015, pp. 13-15). Nonnative to Hawaii, the first species of mosquitoes were accidentally introduced to the Hawaiian Islands in 1826, and spread quickly to the lowlands of all the major islands (Warner 1968, p. 104; Van Riper et al. 1986, p. 340). Early observations of birds with characteristic lesions suggest that avian poxvirus was established in Hawaii by the late 1800s (Warner 1968, p. 106; Atkinson and LaPointe 2009a, p. 55), and later genetic analyses indicate pox was present in the Hawaiian Islands by at least 1900 (Jarvi et al. 2008, p. 339). Avian malaria had arrived in Hawaii by at least 1920 (Warner 1968, p. 107; Van Riper et al. 1986, pp. 340-341; Atkinson and LaPointe 2009, p. 55; Banko and Banko 2009, p. 52), likely in association with imported cage birds (Yorinks and Atkinson 2000, p. 731), or through the deliberate introduction of nonnative birds to replace the native birds that had by then disappeared from the lowlands (Atkinson and LaPointe 2009a, p. 55).

As noted above, avian malaria is a disease caused by the protozoan parasite Plasmodium relictum; the parasite is transmitted by the mosquito Culex quinquefasciatus, and invades the red blood cells of birds. Birds suffering from malaria infection undergo an acute phase of the disease during which parasitemia, a quantitative measure of the number of Plasmodium parasites in the circulating red blood cells, increases steadily. Because the parasite destroys the red blood cells, anemia and decline of physical condition can quickly result. In native Hawaiian forest birds, death may result either directly from the effects of anemia, or indirectly when anemia-weakened birds become vulnerable to predation, starvation, or a combination of other stressors (LaPointe et al. 2012, p. 213). Studies have demonstrated that native Hawaiian birds that survive avian malaria remain chronically infected, thus becoming lifetime reservoirs of the disease (Samuel et al. 2011, p. 2,960; LaPointe et al. 2012, p. 216) and remaining capable of further disease transmission to other native birds. In contrast, nonnative birds in Hawaii are little affected by avian malaria and later become incapable of disease transmission (LaPointe et al. 2012, p. 216).

Wild iiwi infected with malaria are rarely captured, apparently because the onset of infection leads to rapid mortality, precluding their capture (Samuel et al. 2011, p. 2,967; LaPointe et al. 2016, p. 11). However, controlled experiments with captive birds have demonstrated the susceptibility of native Hawaiian honeycreepers to avian malaria; mortality is extremely high in some species, including iiwi, experimentally infected with the disease. As early as the 1960s, experiments with Laysan finches (Telespiza cantans) and several other species of native Hawaiian honeycreepers demonstrated 100 percent mortality from malaria in a very short period of time (Warner 1968, pp. 109-112, 118; Fig. 426). In a study specific to iiwi, Atkinson et al. (1995, entire) demonstrated that the species suffers approximately 95 percent mortality when infected with malaria (Atkinson et al. 1995, p. S65). In that study, iiwi and a nonnative control species were exposed to avian malaria through infective mosquito bites, and subjected to different dosages of infection (single vs. multiple bites). Following exposure to biting mosquitoes, food consumption, weight, and parasitemia were monitored for all test groups. None of the nonnative birds developed malarial infections, while all of the exposed iiwi developed infections within 4 days. Mortality of the high-dose iiwi reached 100 percent by day 29, and mortality of the low-dose birds reached 90 percent by day 37, an average of 95 percent mortality between the two groups (Atkinson et al. 1994, p. S63). A single male iiwi survived the initial infection and, following re-exposure with the same Plasmodium isolate, no subsequent increase in parasitemia was detected, suggesting a possible development of some immunity (Atkinson et al. 1995, p. S66). The authors suggested that iiwi may lack sufficient diversity in the major histocompatibility complex or genetically based immunity traits capable of recognizing and responding to malarial antigens, an important factor in iiwi's susceptibility to introduced disease (Atkinson et al. 1995, pp. S65-S66).

Despite extremely high mortality of iiwi from avian malaria in general, the aforementioned study as well as two other studies have demonstrated that a few individuals are capable of surviving the infection (Van Riper et al. 1986, p. 334; Atkinson et al. 1995, p. S63; Freed et al. 2005, p. 759). If a genetic correlation were identified, it is possible that surviving individuals could serve as a potential source for the evolution of genetic resistance to malaria, although evidence of this is scant to date. Eggert et al. (2008, p. 8) reported a slight but detectable level of genetic differentiation between iiwi populations located at mid and high elevation, potentially the first sign of selection acting on these populations in response to disease. Additionally, the infrequent but occasional sighting of iiwi on Oahu indicates a possible developed resistance or tolerance to avian malaria.

Despite these observations, there is, as of yet, no indication that iiwi have developed significant resistance to malaria such that individuals can survive in areas where the disease is strongly prevalent, including all potential low-elevation forest habitat and most mid-elevation forest habitat (Foster et al. 2007, p. 4,743; Eggert et al. 2008, p. 2). In one study, for example, 4 years of mist-netting effort across extensive areas of Hawaii Island resulted in the capture of a substantial number of iiwi, yet no iiwi were captured in low-elevation forests and only a few were captured in mid-elevation forests (Samuel et al. 2015, p. 11). In addition, the results of several studies indicate that iiwi have low genetic variability, and even genetic impediments to a possible evolved resistance to malaria in the future (Jarvi et al. 2001, p. 255; Jarvi et al. 2004, Table 4, p. 2,164; Foster et al. 2007, p. 4,744; Samuel et al. 2015, pp. 12-13). For example, Eggert et al. (2008, p. 9) noted that gene variations that may confer resistance appear to be rare in iiwi. Three factors—the homogeneity of a portion of the iiwi genome, the high mortality rate of iiwi in response to avian malaria, and high levels of gene flow resulting from the wide-ranging nature of the species—suggest that iiwi would likely require a significant amount of time for development of genetic resistance to avian malaria, assuming the species retains a sufficiently large reservoir of genetic diversity for a response to natural selection. Genetic studies of iiwi have also noted a dichotomy between the lack of variation in mitochondrial DNA (Tarr and Fleischer 1993, 1995; Fleischer et al. 1998; Foster et al. 2007, p. 4,743), and maintenance of variation in nuclear DNA (Jarvi et al. 2004, p. 2,166; Foster et al. 2007, p. 4,744); both attributes suggest that iiwi may have historically experienced a drastic reduction in population size that led to a genetic bottleneck. Studies have also found low diversity in the antigen-binding sites of the iiwi's major histocompatibility complex (that part of an organism's immune system that helps to recognize foreign or incompatible proteins (antigens) and trigger an immune response).

The relationship between temperature and avian malaria is of extreme importance to the current persistence of iiwi and the viability of the species in the future. The development of the Plasmodium parasite that carries malaria responds positively to increased temperature, such that malaria transmission is greatest in warm, low-elevation forests with an average temperature of 72 °F (22 °C), and is largely absent in high-elevation forests above 4,921 ft (1,500 m) with cooler mean annual temperatures around 57 °F (14 °C) (Ahumada et al. 2004, p. 1,167; LaPointe et al. 2010, p. 318; Liao et al. 2015, p. 4,343). High-elevation forests thus currently serve as disease-free habitat zones for Hawaiian forest birds, including iiwi. Once one of the most common birds in forests throughout the Hawaiian islands, iiwi are now rarely found at lower elevations, and are increasingly restricted to high-elevation mesic and wet forests where cooler temperatures limit both the development of the malarial parasite and mosquito densities (Scott et al. 1986, pp. 367-368; Ahumada et al. 2004, p. 1,167; LaPointe et al. 2010, p. 318; Samuel et al. 2011, p. 2,960; Liao et al. 2015, p. 4,346; Samuel et al. 2015, p. 14).

Temperature also affects the life cycle of the malaria mosquito vector, Culex quinquefasciatus. Lower temperatures slow the development of larval stages and can affect the survival of adults (Ahumada et al. 2005, pp. 1,165-1,168; LaPointe et al. 2012, p. 217). Although closely tied to altitude and a corresponding decrease in temperature, the actual range of mosquitoes varies with season. Generally, as temperature decreases with increasing elevation, mosquito abundance drops significantly at higher altitudes. In the Hawaiian Islands, the mosquito boundary occurs between 4,921 and 5,577 ft (1,500 and 1,700 m) (VanRiper et al. 1986, p. 338; LaPointe et al. 2012, p. 218). Areas above this elevation are at least seasonally relatively free of mosquitoes, thus malaria transmission is unlikely at these high elevations under current conditions.

Early on, Ralph and Fancy (1995, p. 741) and Atkinson et al. (1995, p. S66) suggested that the seasonal movements of iiwi to lower elevation areas where ohia is flowering may result in increased contact with malaria-infected mosquitoes, which, combined with the iiwi's high susceptibility to the disease, may explain their observed low annual survivorship relative to other native Hawaiian birds. Compounding the issue, other bird species, which overlap with iiwi in habitat, including Apapane (Himatione sanguinea), are relatively resistant to the diseases and carry both Plasmodium and avian pox virus. As reservoirs, they carry these diseases upslope where mosquitoes are less abundant but still occur in numbers sufficient to facilitate and continue transmission to iiwi (Ralph and Fancy 1995, p. 741). Subsequent studies have confirmed the correlation between risk of malaria infection and iiwi altitudinal migrations, and suggest upper elevation forest reserves in Hawaii may not adequately protect mobile nectarivores such as iiwi. Kuntz (2008, p. 3) found iiwi populations at upper elevation study sites (6,300 ft (1,920 m)) declined during the non-breeding season when birds departed for lower elevations in search of flowering ohia, traveling up to 12 mi (19.4 km) over contiguous mosquito-infested wet forest. Guillamet et al. (2015, p. 192) used empirical measures of seasonal movement patterns in iiwi to model how movement across elevations increases the risk of disease exposure, even affecting breeding populations in disease-free areas. La Pointe et al. (unpublished data 2015) found that, based on malaria prevalence in all Hawaiian forest birds, species migrating between upper elevations to lower elevations increased their risk of exposure to avian malaria by as much as 27 times. The greater risk was shown to be due to a much higher abundance of mosquitoes at lower elevations, which in turn was attributable at least in part to the higher abundance of pigs and their activities in lower elevation forests (discussed further below).

Avian pox (or bird pox) is an infection caused by the virus Avipoxvirus, which produces large, granular, and eventually necrotic lesions or tumors on exposed skin or diphtheritic lesions on the mouth, trachea, and esophagus of infected birds. Avian pox can be transmitted through cuts or wounds upon physical contact or through the mouth parts of blood-sucking insects such as the mosquito Culex quinquefasciatus, the common vector for both the pox virus and avian malaria (LaPointe et al. 2012, p. 221). Tumors or lesions caused by avian pox can be crippling for birds, and may result in death. Although not extensively studied, existing data suggest that mortality from avian pox may range from 4 to 10 percent observed in Oahu Elepaio (Chasiempis ibidis) (for birds with active lesions (VanderWerf 2009, p. 743) to 100 percent in Laysan finches (Warner 1968, p. 108). VanderWerf (2009, p. 743) has also suggested that mortality levels from pox may correlate with higher rainfall years, and at least in the case of the Elepaio, observed mortality may decrease over time with a reduction in susceptible birds.

As early as 1902 native birds suffering from avian pox were observed in the Hawaiian Islands, and Warner (1968, p. 106) described reports that epizootics of avian pox “were so numerous and extreme that large numbers of diseased and badly debilitated birds could be observed in the field.” As the initial wave of post-European extinctions of native Hawaiian birds was largely observed in the late 1800s, prior to the introduction of avian malaria (Van Riper et al. 1986, p. 342), it is possible that avian pox played a significant role, although there is no direct evidence (Warner 1968, p. 106). Molecular work has revealed two genetically distinct variants of the pox virus affecting forest birds in Hawaii that differ in virulence (Jarvi et al. 2008, p. 347): One tends to produce fatal lesions, and the other appears to be less severe, based on the observation of recurring pox infections in birds with healed lesions (Atkinson et al. 2009, p. 56).

The largest study of avian pox in scope and scale took place between 1977 and 1980, during which approximately 15,000 native and nonnative forest birds were captured and examined for pox virus lesions from 16 different locations on transects along Mauna Loa on Hawaii Island (Van Riper et al. 2002, pp. 929-942). The study made several important determinations, including that native forest birds were indeed more susceptible than introduced species, that all species were more likely to be infected during the wet season, and that pox prevalence was greatest at mid-elevation sites approximately 3,937 ft (1,200 m) in elevation, coinciding with the greatest overlap between birds and the mosquito vector. Of the 107 iiwi captured and examined during the study, 17 percent showed signs of either active or inactive pox lesions (Van Riper et al. 2002, p. 932). Many studies of avian pox have documented that native birds are frequently infected with both avian pox and avian malaria (Van Riper et al. 1986, p. 331; Atkinson et al. 2005, p. 537; Jarvi et al. 2008, p. 347). This may be due to mosquito transmission of both pathogens simultaneously, because documented immune system suppression by the pox virus renders chronically infected birds more vulnerable to infection by, or a relapse of, malaria (Jarvi et al. 2008, p. 347), or due to other unknown factors. The relative frequency with which the two diseases co-occur makes it challenging to disentangle the independent impact of either stressor acting alone (LaPointe et al. 2012, p. 221), and we lack any indication of the degree to which pox may be a specific threat to iiwi or contributing to its decline.

It has been widely established that damage to native tree ferns (Cibotium spp.) and rooting and wallowing activity by feral pigs create mosquito larval breeding sites in Hawaiian forests where they would not otherwise occur. The porous geology and relative absence of puddles, ponds, and slow-moving streams in most Hawaiian landscapes precludes an abundance of water-holding habitat sites for mosquito larvae; however, Culex quinquefasciatus mosquitoes, the sole vector for avian malaria in Hawaii, now occur in great density in many wet forests where their larvae primarily rely on habitats created by pig activity (LaPointe 2006, pp. 1-3; Ahumada et al. 2009, p. 354; Atkinson and LaPointe 2009, p. 60; Samuel et al. 2011, p. 2,971). Pigs compact volcanic soils and create wallows and water containers within downed, hollowed-out tree ferns, knocked over and consumed for their starchy pith (Scott et al. 1986, pp. 365-368; Atkinson et al. 1995, p. S68). The abundance of C. quinquefasciatus mosquitoes is also much greater in suburban and agricultural areas than in undisturbed native forest, and the mosquito is capable of dispersing up to 1 mile (1.6 kilometers) within closed-canopy native forest, including habitat occupied by the iiwi (LaPointe 2006, p. 3; LaPointe et al. 2009, p. 409).

In studies of native forest plots where feral ungulates (including pigs) were removed by trapping and other methods, researchers have demonstrated a correlation in the abundance of Culex spp. mosquitoes when comparing pig-free, fenced areas to adjacent sites where feral pig activity is unmanaged. Aruch et al. 2007 (p. 574), LaPointe 2006 (pp. 1-3) and LaPointe et al. (2009, p. 409; 2012, pp. 215, 219) assert that management of feral pigs may be strategic to managing avian malaria and pox, particularly in remote Hawaiian rain forests where studies have documented that habitats created by pigs are the most abundant and productive habitat for larval mosquitoes. Studies suggest that reduction in mosquito habitat must involve pig management across large landscapes due to the tremendous dispersal ability of C. quinquefasciatus and the possibility of the species invading from adjacent areas lacking management (LaPointe 2006, pp. 3-4). The consequences of feral pig activities thus further exacerbate the impacts to iiwi from avian malaria and avian pox, by creating and enhancing larval habitats for the mosquito vector, thereby increasing exposure to these diseases.

The relatively recent introduction of avian pox and avian malaria, in concert with the introduction of the mosquito disease vector, is widely viewed as one of the key factors underlying the loss and decline of native forest birds throughout the Hawaiian Islands. Evolving in the absence of mosquitoes and their vectored pathogens, native Hawaiian forest birds, particularly honeycreepers such as iiwi, lack natural immunity or genetic resistance, and thus are more susceptible to these diseases than are nonnative bird species (van Riper et al. 1986, pp. 327-328; Yorinks and Atkinson 2000, p. 737). Researchers consider iiwi one of the most vulnerable species, with studies showing an average of 95 percent mortality in response to infection with avian malaria (Atkinson et al. 1995, p. S63; Samuel et al. 2015, p. 2). Many native forest birds, including iiwi, are now absent from warm, low-elevation areas that support large populations of disease-carrying mosquitoes, and these birds persist only in relatively disease-free zones in high-elevation forests, above roughly 4,921 to 5,577 ft (1,500 to 1,700 m), where both the development of the malarial parasite and the density of mosquito populations are held in check by cooler temperatures (Scott et al. 1986, pp. 85, 100, 365-368; Woodworth et al. 2009, p. 1,531; Liao et al. 2015, pp. 4,342-4,343; Samuel et al. 2015, pp. 11-12). Even at these elevations, however, disease transmission may occur when iiwi move downslope to forage on ephemeral patches of flowering ohia in the nonbreeding season, encountering disease-carrying mosquitoes in the process (Ralph and Fancy 1995, p. 741; Fancy and Ralph 1998, p. 3; Guillaumet et al. 2015, p. EV-8; LaPointe et al. 2015, p. 1). Iiwi have not demonstrably developed resistance to avian malaria, unlike related honeycreepers including Amakihi (Hemignathus spp.) and Apapane. Due to the known extreme mortality rate of iiwi when exposed to avian malaria, we consider avian malaria in particular to pose a threat to iiwi. Having already experienced local extinctions and widespread population declines, it is possible that the species may not possess sufficient genetic diversity to adapt to these diseases (Atkinson et al. 2009, p. 58).

Based on the assessment of the best scientific data available in our species status report, we concluded that climate change exacerbates the impacts to iiwi from mosquito-borne disease, and this effect is likely to continue and worsen in the future. Air temperature in Hawaii has increased in the past century and particularly since the 1970s, with the greatest increases at higher elevations, and several conservative climate change models project continued warming in Hawaii into the future. As a result, the temperature barrier to the development and transmission of avian malaria will continue to move up in elevation in response to warmer conditions, leading to the curtailment or loss of disease-free habitats for iiwi. We briefly discuss below three climate studies that conservatively predict the iiwi will lose between 60 and 90 percent of its current (and already limited) disease-free range by the end of this century, with significant effects occurring by mid-century.

Climate change is a stressor that is likely to significantly exacerbate the effects of avian malaria on iiwi both directly through increased prevalence and mortality, and indirectly through the loss of disease-free habitat. Air temperature in Hawaii has increased in the past century and particularly since the 1970s, with greater increases at high elevation (Giambelluca et al. 2008, pp. 2-4; Wang et al. 2014, pp. 95, 97). Documented impacts of increased temperature include the prevalence of avian malaria in forest birds at increasing elevation, including high-elevation sites where iiwi are already declining, for example, on Kauai (Paxton et al. 2013, p. 13). Several projections for future climate in Hawaii describe a continued warming trend, especially at high elevations. In our species status report, we analyzed in particular three climate studies (summarized below) that address the future of native forest birds, including iiwi, in the face of the interactions between climate change and avian malaria.

Benning et al. (2002) concluded that under optimistic assumptions (i.e., 3.6 °F (2 °C) increase in temperature by the year 2100), malaria-susceptible Hawaiian forest birds, including iiwi, will lose most of their disease-free habitat in the three sites they considered in their projection of climate change impacts. For example, current disease-free habitat at high elevation within the Hakalau Forest National Wildlife Refuge (NWR) on the island of Hawaii (where the environment is still too cold for development of the malarial parasite) would be reduced by 96 percent by the end of the century.

Fortini et al. (2015) conducted a vulnerability assessment for 20 species of Hawaiian forest birds based on a projected increase of 6.1 °F (3.4 °C) under the A1B emissions scenario at higher elevations by 2100. Even under this relatively optimistic scenario, in which emissions decline after mid-century (IPCC 2007, p. 44), all species were projected to suffer range loss as the result of increased transmission of avian malaria at higher elevations with increasing temperature. Iiwi was predicted to lose 60 percent of its current range by the year 2100, and climate conditions suitable for the species will shift up in elevation, including into areas that are not currently forested, such as lava flows and high-elevation grasslands. Most of the remaining habitat for iiwi would be restricted to a single island, Hawaii Island.

Liao et al. (2015) generated temperature and precipitation projections under three alternative emissions scenarios and projected future malaria risk for Hawaiian forest birds. Irrespective of the scenario modeled, by mid-century (roughly 2040), malaria transmission rates and impacts to bird populations began increasing at high elevations. By 2100, the increased annual malaria transmission rate for iiwi was projected to result in population declines of 70 to 90 percent for the species, depending on the emissions scenario.

All three of these studies consistently predict a significant loss of disease-free habitat for iiwi with consequent severe reductions in population size and distribution by the year 2100, with significant changes likely to be observed as early as 2040. As the iiwi's numbers and distribution continue to decline, the remaining small, isolated populations become increasingly vulnerable to loss of ohia forest habitat from other stressors such as rapid ohia death, as well as other environmental catastrophes and demographic stochasticity, particularly should all remaining iiwi become restricted to a single island (Hawaii Island), as some scenarios suggest.

Climate change will likely exacerbate other stressors to iiwi in addition to disease. Changes in the amount and distribution of rainfall in Hawaii likely will affect the quality and extent of mesic and wet forests on which iiwi depend. However, changes in the trade wind inversion (which strongly influences rainfall) and other aspects of precipitation with climate change are difficult to model with confidence (Chu and Chen 2005, pp. 4,801-4,802; Cao et al. 2007, pp. 1,158-1,159; Timm et al. 2015, p. 107; Fortini et al. 2015, p. 5; Liao et al. 2015, p. 4,345). In addition, potential increases in storm frequency and intensity in Hawaii as a result of climate change may lead to an increase in direct mortality of individual iiwi and a decline in the species' reproductive success. Currently, no well-developed projections exist for these possible cumulative effects.

The natural susceptibility of native forest birds to introduced diseases, in combination with the observed restriction of Hawaiian honeycreepers to high-elevation forests, led Atkinson et al. (1995, p. S68) to predict two decades ago that a shift in the current mosquito distribution to higher elevations could be “disastrous for those species with already reduced populations.” Thus, climate change has significant implications for the future of Hawaiian forest birds, as predictions suggest increased temperatures may largely eliminate the high-elevation forest currently inhospitable to the transmission of mosquito-borne diseases (Benning et al. 2002, pp. 14,247-14,249; LaPointe et al. 2012, p. 219; Fortini et al. 2015, p. 9). Samuel et al. (2015, p. 15) predict further reductions and extinctions of native Hawaiian birds as a consequence, noting that the iiwi is particularly vulnerable due to its high susceptibility to malaria. Several independent studies project consistently significant negative impacts to the iiwi as a result of climate change and the increased exposure to avian malaria as disease-free habitats shrink. As iiwi are known to exhibit 95 percent mortality on average as a result of avian malaria, the current numbers of iiwi are of little consequence should all or most of the remaining individuals become exposed to the disease in the future.

Our species status report identified rapid ohia death (ROD), a type of Ceratosystis spp. vascular wilt (fungal) disease, as a factor with the potential to exacerbate the impacts currently affecting iiwi habitat and reduce the amount of disease-free habitat remaining by destroying high-elevation ohia forest. ROD was first detected in 2012 as ohia trees began mysteriously dying within lowland forests of the Puna Region of Hawaii Island. In June 2015, researchers identified the disease as ROD with an estimated area at the time of 15,000 ac (6,070 ha) of infected ohia trees (Keith et al. 2015, pp. 1-2). ROD affects non-contiguous ohia forest stands ranging in size from <1 ac (<0.4 ha) up to 247 ac (100 ha) with nearly all trees in these areas infected. At present the disease remains restricted to Hawaii island, with the largest affected area within the Puna District, where infected trees have been observed within approximately 4,000 discontinuous acres (1,619 ha) (Hughes 2016, pers. comm.). Based upon the most recent research, ROD-infected stands of ohia often initially show greater than 50 percent mortality, and within 2 to 3 years nearly 100 percent of trees in a stand succumb to the disease (College of Tropical Agriculture and Human Resources 2016 (http://www2.ctahr.hawaii.edu/forestry/disease/ohia_wilt.html)).

Affected trees are found at elevations ranging from sea level up to approximately 5,000 ft (1,524 m), including at Wailuku Forest near Hakalau Forest NWR (Hughes 2016, pers. comm.), which contains a stable to increasing iiwi population (Paxton et al. 2013, p. 12). As of March 2016, the amount of forest area affected on Hawaii Island is estimated to be approximately 34,000 ac (13,759 ha) (Hughes 2016, pers. comm.). Two different strains of the virus appear to be responsible for ROD (Hughes 2016, pers. comm.). These estimates demonstrate that the amount of ohia forest on Hawaii Island infected by ROD more than doubled between 2015 and 2016. While ROD is presently reported only from the island of Hawaii, it has spread across a large portion of the island, which is home to 90 percent of the current iiwi population. In some areas, affected trees have been observed within the range of iiwi (Hughes 2016, pers. comm.). Hawaii Island is particularly important for the future of iiwi, as iiwi are predicted to be largely if not entirely restricted to that island under some future climate change projections (Fortini et al. 2015, p. 9, Supplement 6).

Our species status report evaluated several regulatory and other measures in place today that might address or are otherwise intended to ameliorate the stressors to iiwi. Our analysis concluded that forest habitat protection, conservation, and restoration has the potential to benefit iiwi by protecting and enhancing breeding and foraging areas for the species while simultaneously reducing the abundance of mosquito breeding sites, despite the disease vector's (Culex quinquefasciatus) 1-mi (1.6-km) dispersal ability (LaPointe et al. 2009, pp. 408; 411-412; LaPointe et al. 2012, p. 215).

Efforts to restore and manage large, contiguous tracts of native forests have been shown to benefit iiwi, especially when combined with fencing and ungulate removal (LaPointe et al. 2009, p. 412; LaPointe et al. 2012, p. 219). While forest restoration and ungulate management at the Hakalau Forest NWR on Hawaii Island are excellent examples of what is needed to increase iiwi abundance, many similar large-scale projects would be necessary rangewide to simply reduce mosquito abundance and protect the species from current habitat threats alone. However, even wide-scale landscape habitat management would be unable to fully address the present scope of the threat of disease, and sufficient high-elevation forest is not available to provide disease-free habitat for iiwi in the face of future climate change. Even if disease-free habitat within managed areas could be restored and protected now, much of this habitat will lose its disease-free status as avian malaria moves upward in elevation in response to warming temperatures, as is occurring already within the Alakai Wilderness on the island of Kauai.

New opportunities are emerging, such as large-scale vector control using new genetics technology, that have the potential to assist Hawaiian forest birds (LaPointe et al. 2009, pp. 416-417; Reeves et al. 2014, p. e97557; Gantz et al. 2015, pp. E6736-E6743). These tools include the potential introduction of sterile male mosquitoes and transgenic insect techniques that introduce new genetic material into mosquito populations, including self-sustaining genes that will help drive an increase of the new desirable trait, i.e., inability or decreased ability to transmit diseases throughout a mosquito population, thereby improving long-term transmission control. While promising, our report concludes that these new technologies for achieving large-scale control or eradication of mosquitoes in Hawaii are still in the research and planning stage and have yet to be implemented or proven effective.

Our species status report also evaluated several regulations and agreements pertaining to climate change. Although the United States and some other countries have passed some regulations specifically intended to reduce the emission of greenhouse gases that contribute to climate change, the scope and effect of such regulations are limited. Indeed, during the United Nations Framework Convention on Climate Change (UNFCCC) meeting in December 2015, the UNFCCC indicated that, even if all the member countries' intended contributions to greenhouse gas reductions were fully implemented and targets met, the goal of limiting the increase in global average temperature to 2 °C (3.6 °F) by the year 2100 would not be achieved.

Many of the efforts to tackle the primary stressors to iiwi are still in the research and development stage, or are implemented only on a small or limited scale. Because the primary stressor, avian malaria, continues to have negative impacts, and these impacts are exacerbated by climate change, we must conclude that no current conservation measures or regulations are sufficient to offset these impacts to the species.

We have reviewed the best scientific and commercial data available regarding iiwi populations and the stressors that affect the species. This information includes, notably, a recent comprehensive analysis of iiwi abundance, distribution, and population trends (Paxton et al. 2013); numerous studies that provide information on the particularly high mortality of iiwi in response to avian malaria; and recent models examining the current relationship between climate and malaria, as well as the likely future consequences of climate change for iiwi and other Hawaiian forest birds (including Benning et al. 2002, Fortini et al. 2013, and Liao et al. 2015). Our review also reflects the expert opinion of the species' status report team members, and input provided by specialists familiar with avian malaria and iiwi genetics. We direct the reader to the draft iiwi species status report for our detailed evaluation of the biological status of the iiwi and the influences that may affect its continued existence.

Once one of the most common of the native Hawaiian forest birds, the iiwi has declined across large portions of its range, has been extirpated or nearly so from some islands, and many of the few remaining populations are declining. The iiwi's range is contracting upslope in most areas, and population declines and range contraction are concurrent with increasing prevalence of avian malaria. Clear evidence exists that the iiwi is highly susceptible to avian malaria, and that the prevalence of this disease is moving upslope in Hawaiian forests correlated with temperature increases associated with global climate change. The evidence suggests this disease and its trend of increasing prevalence at increasing elevation are the chief drivers of observed iiwi population declines and range contraction. Although habitat management to reduce breeding habitat for mosquitoes may have slowed the decline of iiwi and other forest birds to some degree in a few locations, no landscape-scale plans or strategies exist for eradicating mosquitoes or otherwise reducing the risk posed by avian malaria to iiwi and other susceptible Hawaiian bird species.

The documented trend of temperature increase, which is greatest at high elevation, is projected to continue at least through the 21st century. The transmission of avian malaria is currently limited or absent at higher elevations, where temperatures are too cool for the development of the malaria parasite. However, multiple independent modeling efforts consistently project that the prevalence of avian malaria will continue to increase upslope with increasing temperature, eventually eliminating most or all remaining disease-free habitat in the islands. These models, which incorporate data on the distribution of forest birds and on disease transmission, project moderate to high avian malaria transmission at the highest elevations of the iiwi's current range by the end of this century, with some significant effects predicted within the next few decades. As a consequence, significant declines in iiwi populations are projected, on the order of 70 to 90 percent by 2100, depending on the future climate scenario.

The impacts of other stressors to iiwi, such as loss or degradation of native forest by nonnative species (disturbance or destruction by feral ungulates; invasion by nonnative plants; impacts from nonnative pathogens such as ROD), predation by rats and other nonnative predators, and small-population stressors such as demographic stochasticity and loss of genetic diversity, have not been well documented or quantified. However, any stressors that result in further degradation or fragmentation of the forests on which the iiwi relies for foraging and nesting, or result in increased mortality or reduced reproductive success, are likely to exacerbate the impacts of disease on the species. The effects of climate change are likely to exacerbate these other stressors to iiwi as well.

As the number and distribution of iiwi continue to decline, the remaining small, isolated populations become increasingly vulnerable to environmental catastrophes and demographic stochasticity; this will particularly be the case should all remaining iiwi become restricted to Hawaii Island, as some modeling scenarios suggest. Ninety percent of the rangewide iiwi population is already restricted to Hawaii Island, where ROD has recently emerged as a fast-moving threat to the already limited ohia forest habitat required by iiwi.

In consideration of all of this information, we conclude that avian malaria, as exacerbated by the ongoing effects of climate change, poses a threat to iiwi, and the action of these stressors places the species as a whole at an elevated risk of extinction. Because the vast majority of the remaining iiwi population is restricted to the island of Hawaii, we consider rapid ohia death to pose a threat to the future viability of iiwi as well, as it may result in major loss of forest within the iiwi's remaining range on that island.

Section 4 of the Act (16 U.S.C. 1533), and its implementing regulations in title 50 of the Code of Federal Regulations at 50 CFR part 424, set forth the procedures for adding species to the Federal Lists of Endangered and Threatened Wildlife and Plants. Under section 4(a)(1) of the Act, we may list a species based on (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) Overutilization for commercial, recreational, scientific, or educational purposes; (C) Disease or predation; (D) The inadequacy of existing regulatory mechanisms; or (E) Other natural or manmade factors affecting its continued existence. Listing actions may be warranted based on any of the above threat factors, singly or in combination.

We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the iiwi. As described in the species status report, in considering the five listing factors, we evaluated many potential stressors to iiwi, including but not limited to: Stressors that may affect the extent or quality of the bird's ohia forest habitat (ohia dieback, ohia rust, ROD, drought, fires, volcanic eruptions, nonnative plants, and feral ungulates), introduced diseases, predation by introduced mammals, competition with nonnative birds, ectoparasites, climate change, and the effects of small population size. Based on our assessment, disease—particularly avian malaria—is the primary driver in the ongoing declines in abundance and range of iiwi, and climate change substantially exacerbates the impact of disease on the species and will continue to do so into the future.

The greatest current threat to iiwi comes from exposure to introduced diseases carried by nonnative mosquitoes (Factor C). Avian malaria in particular has been clearly demonstrated to result in extremely high mortality of iiwi; avian pox may have significant effects on iiwi as well, although the evidence is not as clear or measurable. These diseases have resulted in significant losses of the once ubiquitous iiwi, which remains highly susceptible and, as of present, shows no clear indication of having developed substantial resistance or tolerance. Exposure to these diseases is ongoing, and is expected to increase as a consequence of the effects of climate change (Factor E).

Several climate model projections predict that continued increases in temperature due to climate change will greatly exacerbate the impacts of avian diseases upon iiwi due to loss of disease-free habitat. Several iiwi populations, including those on Molokai, Kauai, West Maui, and possibly Oahu—all lower in elevation than East Maui and Hawaii Island—are already extremely small in size or are represented by only a few occasional individuals, probably owing to the loss of disease-free habitat. Iiwi may face extirpation in these places due to the inability to overcome the effects of malaria. The species is expected to first become restricted to Hawaii Island, perhaps by the year 2040. By the end of the century, the existence of iiwi is uncertain due to the ongoing loss of disease-free habitat; the potential impacts to ohia forests from ROD and other stressors could increase the risk to iiwi as well. These threats to iiwi are ongoing, most are rangewide, are expected to increase in the future, and are significant because they will likely result in increased mortality of iiwi and loss of remaining populations, as well as further decreases in the availability and amount of disease-free habitat at high elevation. As discussed above, current regulatory mechanisms are not sufficient to address these threats (Factor D).

Some of the other stressors contributed to past declines in iiwi, or negatively affect the species or its habitat today; however, of the additional stressors considered, we found no information to suggest that any is currently a key factor in the ongoing declines in abundance and range of iiwi, although they may be contributing or exacerbating factors. Habitat loss and alteration (Factor A) caused by nonnative plants and ungulates is occurring rangewide, has resulted in degraded ohia forest habitat, and is not likely to be reduced in the future. While ohia forests still comprise the majority of native forest cover on most of the main Hawaiian Islands, climate change and its likely effects, such as increased drought frequency, are expected to further affect ohia forest habitat and compound other impacts, including the spread of invasive plants and perhaps the severity and frequency of ohia diseases. In particular, the rapidly spreading and highly lethal disease, rapid ohia death, poses an increasing risk to the native forest habitat of iiwi on Hawaii Island, where 90 percent of remaining iiwi occur. This emerging factor has the potential to exacerbate avian disease and other stressors in the future by accelerating the loss and degradation of iiwi's habitat. If this disease becomes widespread, it could further increase the vulnerability of the iiwi by eliminating the native forest it requires for foraging and nesting.

We do not have any information that overutilization for commercial, recreational, scientific, or educational purposes (Factor B) poses a threat to iiwi.

The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.” We considered whether the iiwi meets either of these definitions, and find that the iiwi meets the definition of a threatened species for the reasons described below.

We considered whether the iiwi is presently in danger of extinction and determined that proposing endangered status is not appropriate. Although the species has experienced significant reductions in both abundance and range, at the present time the species is still found on multiple islands and the species as a whole still occurs in relatively high numbers. Additionally, disease-free habitat currently remains available for iiwi in high-elevation ohia forests with temperatures sufficiently cool to prevent the development of the malarial parasite. For these reasons, we do not consider the iiwi to be in imminent danger of extinction, although this formerly common species has experienced threats of such severity and magnitude that it has now become highly vulnerable to continued decline and local extirpation, such that the species is likely to become endangered within the foreseeable future, as explained below.

Based on our review of the best scientific and commercial data available, we expect that additional iiwi population declines will be observed range-wide within the next few decades, and indications are that declines are already taking place on Kauai and in some Maui and Hawaii Island populations as a result of increasing temperatures and consequent exposure to avian malaria at some elevations where the disease is uncommon or absent today. Iiwi has a very high observed mortality rate when exposed to avian malaria, and the warming effects of climate change will result in increased exposure of the remaining iiwi populations to this disease, especially at high elevation. Peer-reviewed results of modeling experiments project that malaria transmission rates and effects on iiwi populations will begin increasing at high elevations by mid-century, and result in population declines of 70 to 90 percent by the year 2100. We thus conclude that the iiwi is likely to become in danger of extinction throughout all of its range within the foreseeable future. Because the iiwi is not in imminent danger of extinction, but is likely to become in danger of extinction within the foreseeable future, it meets the definition of a threatened species. Therefore, on the basis of the best available scientific and commercial information, we propose listing the iiwi as threatened in accordance with sections 3(20) and 4(a)(1) of the Act.

Under the Act and our implementing regulations, a species may warrant listing if it is endangered or threatened throughout all or a significant portion of its range. Because we have determined that the iiwi is threatened throughout all of its range, no portion of its range can be “significant” for purposes of the definitions of “endangered species” and “threatened species.” See the Final Policy on Interpretation of the Phrase “Significant Portion of Its Range” in the Endangered Species Act's Definitions of “Endangered Species” and “Threatened Species” (79 FR 37577; July 1, 2014).

Conservation measures provided to species listed as endangered or threatened species under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition from listing will result in public awareness and conservation by Federal, State, Tribal, and local agencies, private organizations, and individuals. The Act encourages cooperation with the States and other countries and calls for recovery actions to be carried out for listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below.

The primary purpose of the Act is the conservation of endangered and threatened species and the ecosystems upon which they depend. The ultimate goal of such conservation efforts is the recovery of these listed species, so that they no longer need the protective measures of the Act. Subsection 4(f) of the Act calls for the Service to develop and implement recovery plans for the conservation of endangered and threatened species. The recovery planning process involves the identification of actions that are necessary to halt or reverse the species' decline by addressing the threats to its survival and recovery. The goal of this process is to restore listed species to a point where they are secure, self-sustaining, and functioning components of their ecosystems.

Recovery planning includes the development of a recovery outline shortly after a species is listed and preparation of a draft and final recovery plan. The recovery outline guides the immediate implementation of urgent recovery actions and describes the process to be used to develop a recovery plan. Revisions of the plan may be done to address continuing or new threats to the species, as new substantive information becomes available. The recovery plan also identifies recovery criteria for review of when a species may be ready for downlisting or delisting, and methods for monitoring recovery progress. Recovery plans also establish a framework for agencies to coordinate their recovery efforts and provide estimates of the cost of implementing recovery tasks. Recovery teams (composed of species experts, Federal and State agencies, nongovernmental organizations, and other qualified persons) are often established to develop recovery plans. When completed, the recovery outline, draft recovery plan, and the final recovery plan for iiwi will be available on our Web site (http://www.fws.gov/endangered), or from our Pacific Islands Fish and Wildlife Office (see FOR FURTHER INFORMATION CONTACT). The public will have an opportunity to comment on the draft recovery plan, and the Service will consider all information presented during the public comment period prior to approval of the plan.

Implementation of recovery actions generally requires the participation of a broad range of partners, including other Federal agencies, States, Tribes, nongovernmental organizations, businesses, and private landowners. Examples of recovery actions include habitat restoration (e.g., restoration of native vegetation), research, captive propagation and reintroduction, and outreach and education. The recovery of many listed species cannot be accomplished solely on Federal lands because their range may occur primarily or solely on non-Federal lands. To achieve recovery of these species requires cooperative conservation efforts on private, State, and Tribal lands. If this species is listed, funding for recovery actions will be available from a variety of sources, including Federal budgets, State programs, and cost-share grants for non-Federal landowners, the academic community, and nongovernmental organizations. In addition, pursuant to section 6 of the Act, the State of Hawaii would be eligible for Federal funds to implement management actions that promote the protection or recovery of the iiwi. Information on our grant programs that are available to aid species recovery can be found at: http://www.fws.gov/grants.

Although the iiwi is only proposed for listing under the Act at this time, please let us know if you are interested in participating in recovery efforts for this species. Additionally, we invite you to submit any new information on this species whenever it becomes available and any information you may have for recovery planning purposes (see FOR FURTHER INFORMATION CONTACT).

Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as an endangered or threatened species and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in destruction or adverse modification of proposed critical habitat. If a species is listed subsequently, section 7(a)(2) of the Act requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of the species or destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into consultation with the Service.

Federal agency actions within the iiwi's habitat that may require a conference or consultation or both as described in the preceding paragraph, include but are not limited to, management and any other landscape-altering activities on Federal lands administered by the U.S. Fish and Wildlife Service, U.S. Forest Service, and National Park Service; actions within the jurisdiction of the Natural Resources Conservation Service, the U.S. Army Corps of Engineers, the U.S. Fish and Wildlife Service, and branches of the Department of Defense (DOD); and activities funded or authorized under the Federal Highway Administration, Partners for Fish and Wildlife Program, and DOD construction activities related to training or other military missions.

Under section 4(d) of the Act, the Service has discretion to issue regulations that we find necessary and advisable to provide for the conservation of threatened species. We are not proposing to issue a special rule pursuant to section 4(d) for this species. Therefore, the provisions of 50 CFR 17.31(a) and (b) would apply. These regulatory provisions apply the prohibitions of section 9(a)(1) of the Act to threatened wildlife and make it illegal for any person subject to the jurisdiction of the United States to take (which includes harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect; or to attempt any of these) threatened wildlife within the United States or on the high seas. In addition, it is unlawful to import; export; deliver, receive, carry, transport, or ship in interstate or foreign commerce in the course of commercial activity; or sell or offer for sale in interstate or foreign commerce any listed species. It is also illegal to possess, sell, deliver, carry, transport, or ship any such wildlife that has been taken illegally. Certain exceptions apply to employees of the Service, the National Marine Fisheries Service, other Federal land management agencies, and State conservation agencies.

We may issue permits to carry out otherwise prohibited activities involving threatened wildlife under certain circumstances. Regulations governing permits are codified at 50 CFR 17.32. With regard to threatened wildlife, a permit may be issued for the following purposes: For scientific purposes, to enhance the propagation or survival of the species, or for incidental take in connection with otherwise lawful activities. There are also certain statutory exemptions from the prohibitions, which are found in sections 9 and 10 of the Act.

It is our policy, as published in the Federal Register on July 1, 1994 (59 FR 34272), to identify to the maximum extent practicable at the time a species is listed, those activities that would or would not constitute a violation of section 9 of the Act. The intent of this policy is to increase public awareness of the effect of a proposed listing on proposed and ongoing activities within the range of the species proposed for listing. Based on the best available information, actions that may result in a violation of section 9 include but are not limited to:

(1) Development of land or the conversion of native ohia forest, including the construction of any infrastructure (e.g., roads, bridges, railroads, pipelines, utilities) in occupied iiwi habitat;

(2) Unauthorized collecting, handling, possessing, selling, delivering, carrying, or transporting of the species, including import or export across State lines and international boundaries, except for properly documented antique specimens of this species at least 100 years old, as defined by section 10(h)(1) of the Act;

(3) Introduction of nonnative species that compete with or prey upon the iiwi, such as the new introduction of nonnative predators or competing birds to the State of Hawaii; and

(4) Certain research activities: Collection and handling of iiwi for research that may result in displacement or death of individuals.

Questions regarding whether specific activities would constitute a violation of section 9 of the Act should be directed to the Pacific Islands Fish and Wildlife Office, Ecological Services Field Office (see FOR FURTHER INFORMATION CONTACT).

We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(1) Be logically organized;

(2) Use the active voice to address readers directly;

(3) Use clear language rather than jargon;

(4) Be divided into short sections and sentences; and

(5) Use lists and tables wherever possible.

If you feel that we have not met these requirements, send us comments by one of the methods listed in ADDRESSES. To better help us revise the rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that are unclearly written, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (NEPA; 42 U.S.C. 4321 et seq.), need not be prepared in connection with listing a species as an endangered or threatened species under the Endangered Species Act. We published a notice outlining our reasons for this determination in the Federal Register on October 25, 1983 (48 FR 49244).

A complete list of references cited in this rulemaking is available on the Internet at http://www.regulations.gov at Docket No. FWS-R1-ES-2016-0057 and upon request from the Pacific Islands Fish and Wildlife Office (see FOR FURTHER INFORMATION CONTACT).

The primary authors of this proposed rule are the staff members of the Pacific Islands Fish and Wildlife Office.

Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:

The Mid-Atlantic and the New England Fishery Management Councils have initiated an amendment to allow for industry-funded monitoring in all of the fishery management plans managed by the Councils. The industry-funded monitoring would be used to assess the amount and type of catch, more precisely monitor annual catch limits, and provide other information for management. This increased monitoring would be above coverage required under the standardized bycatch reporting methodology, the Endangered Species Act, or the Marine Mammal Protection Act. The amount of available Federal funding to support additional monitoring and legal constraints associated with sharing the costs of industry-funded monitoring between NMFS and the fishing industry have recently prevented NMFS from approving proposals for industry-funded monitoring in some fisheries.

The Omnibus Alternatives consider the following for new industry-funded monitoring programs: (1) Standard cost responsibilities associated with industry-funded monitoring for NMFS and the fishing industry; (2) a process for fishery management plan-specific industry-funded monitoring to be implemented via a future framework adjustment action; (3) standard administrative requirements for industry-funded monitoring service providers; (4) a process to prioritize industry-funded monitoring programs in order to allocate available Federal resources across all fishery management plans; and (5) a process for monitoring set-aside programs to be implemented via a future framework adjustment action.

This amendment also includes industry-funded monitoring coverage target alternatives for the Atlantic herring and mackerel fisheries. Specifically, this amendment considers a variety of monitoring types and coverage targets to address the following goals: (1) Accurate estimates of catch (retained and discarded); (2) accurate catch estimates for incidental species for which catch caps apply; and (3) effective and affordable monitoring for the herring and mackerel fisheries.

The dates and locations of the public hearings are as follows.

• Tuesday, October 4, 2016, 6-8 p.m., Greater Atlantic Regional Fisheries Office, 55 Great Republic Drive, Gloucester, MA 01930, telephone: (978) 281-9300;

• Monday, October 17, 2016, 5-7 p.m., Internet webinar, connection information to be available at (http://mafmc.adobeconnect.com/ifm-hearing/) or by contacting NMFS or either Council at the above addresses.

• Thursday, October 20, 2016, 6-8 p.m., Double Tree by Hilton Hotels, 363 Maine Mall Road, Portland, ME 04106, telephone: (207) 775-6161;

• Thursday, October 27, 2016, 5-7 p.m., Congress Hall, 200 Congress Place, Cape May, NJ 08204, telephone: (888) 944-1816;

• Tuesday, November 1, 2016, 6-8 p.m., Corless Auditorium, Watkins Building University of Rhode Island Graduate School of Oceanography, 218 Ferry Road, Narragansett, RI 02874.

These public hearings are accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aid should be directed to Dr. Fiona Hogan (NEFMC) at [email protected], (978) 465-0492 (x121), or Jason Didden (MAFMC) at [email protected], (302) 526-5254, at least 5 days prior to the meeting date.