Federal Register Vol. 81, No.240,

Executive Order 12866

The Office of Management and Budget (OMB) has waived the review process required by Executive Order 12866 for this action.

This rule was reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have a retroactive effect. This action will not preempt any state or local laws, regulations, or policies unless they present an irreconcilable conflict with this rule. The Egg Research and Consumer Information Act (Act) [7 U.S.C. 2701 et seq.] provides that administrative proceedings be filed before parties may consider suit in court. Under section 14 of the Act [7 U.S.C. 2713], a person subject to the Egg Promotion and Research Order (Order) may file a petition with the Department of Agriculture (USDA) stating that the Order, any provision of the Order, or any obligation imposed in connection with the Order, is not in accordance with the law and request a modification of the Order or an exemption from the Order. The petitioner is afforded the opportunity for a hearing on the petition. After a hearing, USDA would rule on the petition. The Act provides that district courts of the U.S. in any district in which such person is an inhabitant, or has their principal place of business, has jurisdiction to review USDA's ruling on the petition, if a complaint for this purpose is filed within 20 days after the date of the entry of the ruling.

In accordance with the Regulatory Flexibility Act (RFA) [5 U.S.C. 601-612], the Agricultural Marketing Service (AMS) has determined that this rule will not have a significant economic impact on a substantial number of small entities as defined by RFA. The purpose of RFA is to fit regulatory action to scale on businesses subject to such action so that small businesses will not be disproportionately burdened. As such, these changes will not impose a significant impact on persons subject to the program.

According to the American Egg Board (Board), in 2015, approximately 181 egg producers were subject to the provisions of the Order, including paying assessments. Under the current Order, producers in the 48 contiguous States of the U.S. and the District of Columbia who own more than 75,000 laying hens currently pay a mandatory assessment of 10 cents per 30-dozen case of eggs sold. Egg handlers are responsible for collecting and remitting assessments to the Board. According to the Board, of those 181 egg producers, about 138 egg handlers collect assessments. Assessments under the program are used by the Board to finance promotion, research, and consumer information programs designed to increase consumer demand for eggs in domestic and international markets.

In 13 CFR part 121, the Small Business Administration (SBA) defines small agricultural producers as those having annual receipts of no more than $750,000 and small agricultural service firms as those having annual receipts of no more than $7 million. Under this definition, the vast majority of egg producers that would be affected by this rule would not be considered small entities. Producers owning 75,000 or fewer laying hens are eligible to be exempt from this program. This rule does not impose additional recordkeeping requirements on egg producers or handlers. There are no Federal rules that duplicate, overlap, or conflict with this rule.

In accordance with OMB regulation 5 CFR part 1320, which implements the Paperwork Reduction Act of 1995 [44 U.S.C. Chapter 35], the information collection and recordkeeping requirements that are imposed by the Order and Rules and Regulations have been approved previously under OMB control number 0581-0093. This rule does not result in a change to those information collection and recordkeeping requirements.

The Act established a national egg research and promotion program—administered by the Board—that is financed through industry assessments and subject to oversight by USDA's AMS. This program of promotion, research, and consumer information is designed to strengthen the position of eggs in the marketplace and to establish, maintain, and expand markets for eggs.

Under the current Regulations initially established in 1976, any IP financed by assessment funds or other revenues of the Board shall become property of the U.S. Government as represented by the Board. The language does not allow for alternative ownership arrangements. In addition, there is no explicit allowance for alternative ownership arrangements in cases where the Board is not providing all of the funding for a project. According to the Board, the current language in the Order has made negotiating contracts for shared ownership of IP rights with research entities difficult and in some cases impossible. Specifically, a majority of university policies typically reflect a requirement for the university to own any IP created under research projects they conduct, even if the project is funded with outside money. These university policies have made it difficult for the Board to contract with universities for research due to the IP ownership requirements contained in the Order.

As a result, USDA is amending § 1250.542 of the Regulations to incorporate language utilized by research and promotion boards created under the 1996 Act that would provide the Board with flexibility in negotiating over the ownership of IP rights. The research and promotion boards created under the 1996 Act have utilized this language to negotiate ownership rights over IP to effectively expend assessment funds to promote agricultural commodities.

AMS published the notice of proposed rulemaking in the Federal Register on March 16, 2016 [81 FR 14021]. The comment period ended on May 16, 2016. AMS received one timely comment from a university. The commenter expressed that it is the policy of the university to retain ownership of intellectual property generated through research funded by external parties and encouraged AMS to adopt policies and rules that closely follow the standard approaches articulated in Federal Government grants. However, the egg research and promotion program is not a grant program and is not subject to Federal grants policy. In addition, the Board does not receive Federal funding. All funds are received from egg producers required under the enabling legislation to pay an assessment to the Board to fund programs designed to increase demand for eggs and egg products both domestically and internationally. Accordingly, AMS did not incorporate the Federal grants policy into the final rule.

For the reasons set forth in the preamble, 7 CFR part 1250 is amended as follows:

Table of Contents I. Background A. FDA Food Safety Modernization Act and Section 808 of the Federal Food, Drug, and Cosmetics Act B. Third-Party Certification Regulation C. Purpose of This Rulemaking D. The Proposed Rule E. Public Comments II. Legal Authority III. Comments on Who Is Subject to a User Fee Under This Subpart (§ 1.700) IV. Comments on What User Fees Are Established Under This Subpart (§ 1.705) V. Comments on How Will FDA Notify the Public About the Fee Schedule (§ 1.710) VI. Comments on When a User Fee Required by This Subpart Must Be Submitted (§ 1.715) VII. Comments on Whether User Fees Under This Subpart Are Refundable (§ 1.720) VIII. Comments on the Consequences of Not Paying a User Fee Under This Subpart on Time (§ 1.725) IX. Comments on Possible Exemptions X. Economic Analysis of Impacts XI. Paperwork Reduction Act of 1995 XII. Analysis of Environmental Impact XIII. Federalism XIV. References I. Background A. FDA Food Safety Modernization Act and Section 808 of the Federal Food, Drug, and Cosmetics Act

FSMA (Pub. L. 111-353), signed into law by President Obama on January 4, 2011, is intended to allow FDA to better protect public health by helping to ensure the safety and security of the food supply. FSMA enables us to focus more on preventing food safety problems rather than relying primarily on reacting to problems after they occur. The law also provides new enforcement authorities to help achieve higher rates of compliance with risk-based, prevention-oriented safety standards and to better respond to and contain problems when they do occur. In addition, the law contains important new tools to better ensure the safety of imported foods and encourages partnerships with State, local, tribal, and territorial authorities and international collaborations with foreign regulatory counterparts.

FSMA added section 808 to the FD&C Act (21 U.S.C. 384d), which directs FDA to establish a program for accreditation of third-party certification bodies 1 to conduct food safety audits and to certify that eligible foreign entities (including registered foreign food facilities) and food produced by such entities meet applicable FDA food safety requirements. FSMA specifies two uses for the food and facility certifications issued by accredited third-party certification bodies under this program. First, facility certifications will be used by importers that want to establish eligibility for the Voluntary Qualified Importer Program (VQIP) under section 806 of the FD&C Act (21 U.S.C. 384b). VQIP offers participating importers expedited review and entry of food that is part of VQIP. Second, section 801(q) of the FD&C Act (21 U.S.C. 381(q)) gives FDA the authority to make a risk-based determination to require, as a condition of admissibility, that a food imported or offered for import into the United States be accompanied by a certification or other assurance that the food meets the applicable requirements of the FD&C Act. The authority to mandate import certification for food, based on risk, is one of the tools we can use to help prevent potentially harmful food from reaching U.S. consumers.

On November 27, 2015, FDA published in the Federal Register a final rule, “Accreditation of Third-Party Certification Bodies to Conduct Food Safety Audits and to Issue Certifications” (third-party certification regulation), to implement section 808 of the FD&C Act on accreditation of third-party certification bodies to conduct food safety audits of eligible foreign entities (including registered foreign food facilities) and to issue certifications of foreign food facilities and foods for humans and animals for purposes of sections 801(q) and 806 of the FD&C Act (80 FR 74570). The third-party certification regulation establishes the framework, procedures, and requirements for accreditation bodies and third-party certification bodies for purposes of the program under section 808 of the FD&C Act. It sets requirements for the legal authority, competency, capacity, conflict of interest safeguards, quality assurance, and records procedures that accreditation bodies must demonstrate that they have to qualify for recognition. Accreditation bodies also must demonstrate capability to meet the applicable program requirements of the third-party certification regulation that would apply upon recognition. Additionally, the regulation establishes requirements for the legal authority, competency, capacity, conflict of interest safeguards, quality assurance, and records procedures that third-party certification bodies must demonstrate that they have to qualify for accreditation. Third-party certification bodies also must demonstrate capability to meet the applicable program requirements of the third-party certification regulation that would apply upon accreditation.

Under FSMA section 307 (21 U.S.C. 384d), accredited third-party certification bodies must perform unannounced facility audits conducted under the third-party certification program, notify FDA upon discovering a condition that could cause or contribute to a serious risk to the public health, and submit to FDA reports of regulatory audits conducted for certification purposes. The regulation includes stringent requirements to prevent conflicts of interest from influencing the decisions of recognized accreditation bodies and accredited third-party certification bodies.

This rulemaking implements section 808(c)(8) of the FD&C Act to establish a reimbursement (user fee) program to assess fees and require reimbursement for the work we perform to establish and administer the third-party certification program. In this document, we amend the third-party certification regulation (21 CFR part 1, subpart M) to provide for the assessment of user fees on accreditation bodies that include application fees for accreditation bodies seeking FDA recognition and annual monitoring fees, once recognized. We also provide for the assessment of user fees that include application fees for only those third-party certification bodies that seek FDA direct accreditation and annual monitoring fees for any third-party certification body participating in FDA's program, whether accredited directly by FDA or by an FDA-recognized accreditation body.

FDA published a proposed rule titled “User Fee Program to Provide for Accreditation of Third-Party Auditors/Certification Bodies to Conduct Food Safety Audits and To Issue Certifications” on July 24, 2015 (80 FR 43987). The proposed rule on the third-party certification program user fees includes the following: (1) Who would be subject to a user fee; (2) how user fees would be computed; (3) how FDA would notify the public about annual fee rates; (4) how the user fee would be collected; and (5) what the consequences would be for not paying a user fee. The comment period closed on October 7, 2015.

FDA received comments from accreditation bodies, certification bodies, foreign governments, industry associations, consumer groups, and members of industry. In the remainder of this document, we describe the comments that are within the scope of this rulemaking, respond to them, and explain any revisions we made from the proposed rule.

Section 307 of FSMA, Accreditation of Third-Party Auditors, amends the FD&C Act to create a new provision, section 808, under the same name. Section 808 of the FD&C Act directs us to establish a new program for accreditation of third-party certification bodies conducting food safety audits and issuing food and facility certifications to eligible foreign entities (including registered foreign food facilities) that meet the applicable food safety requirements. Under this provision, we will recognize accreditation bodies to accredit third-party certification bodies, except for limited circumstances in which we may directly accredit third-party certification bodies to participate in the third-party certification program.

Our authority for this rule is derived in part from section 808(c)(8) of the FD&C Act, which requires us to establish by regulation a reimbursement (user fee) program by which we assess fees and require accredited third-party certification bodies and audit agents to reimburse us for the work performed to establish and administer the third-party certification program under section 808. Accordingly, section 808(c)(8) of the FD&C Act authorizes us to assess fees and require reimbursement from accreditation bodies applying for recognition under section 808, third-party certification bodies applying for direct accreditation under section 808, and recognized accreditation bodies and accredited third-party certification bodies participating in the third-party certification program under section 808.

Further, section 701(a) of the FD&C Act (21 U.S.C. 371(a)) authorizes us to issue regulations for the efficient enforcement of the FD&C Act, including this rule establishing a user fee program for the third-party certification program under section 808 of the FD&C Act. Thus, FDA has the authority to issue this rule under sections 808 and 701(a) of the FD&C Act.

We proposed in § 1.700 that four main groups would be subject to a user fee under the regulation: (a) Accreditation bodies submitting applications, including renewal applications, for recognition in the third-party certification program; (b) recognized accreditation bodies participating in the third-party certification program; (c) third-party certification bodies submitting applications, including renewal applications, for direct accreditation; and (d) accredited third-party certification bodies participating in the third-party certification program. On our own initiative, and consistent with the third-party certification regulation, in this final rule we are using the term “third-party certification body” rather than the term “third-party auditor/certification body” that was used in the proposed rule.

Additionally, in the proposed rule we noted that the proposed user fee program would not recover all costs associated with the establishment and administration of the third-party certification program, such as the costs of any work by FDA in reviewing requests for reconsideration and waivers, revoking recognition of accreditation bodies, or withdrawing accreditation of third-party certification bodies, where necessary (80 FR 43987 at 43989). We also identified some of FDA's initial startup costs that would not be fully recouped, such as for some previously incurred costs for training employees and developing the third-party certification program IT portal that will accept applications for recognition and for direct accreditation and submissions from recognized accreditation bodies and accredited third-party certification bodies. We solicited comment on whether the costs for activities other than application processing and monitoring (i.e., unaccounted for costs) should be paid for through user fees and if so, to whom should the fees be charged and how should the fees be calculated.

FDA received no adverse comments specific to our proposal to assess user fees on accreditation bodies submitting applications to FDA for recognition, third-party certification bodies submitting applications to FDA for direct accreditation, and recognized accreditation bodies and accredited third-party certification bodies participating in the program.

(Comment 1) In response to our request for comments on unaccounted for costs, some comments suggest that these costs should be recouped through fees paid by recognized accreditation bodies and accredited third-party certification bodies. Some comments opine that accreditation bodies should be responsible for paying any additional user fees related to maintenance of a database for recognized accreditation bodies and accredited certification bodies for the third-party certification bodies they accredit under the FDA program, as some accreditation bodies already invoice the certification bodies for these services. The comments do not address the feasibility of calculating or collecting such fees.

(Response 1) We decline the suggestion to assess additional fees on recognized accreditation bodies and accredited third-party certification bodies. Section 808(c)(8) of the FD&C Act requires us to establish a user fee program that assesses fees to reimburse FDA for the work in establishing and administering the third-party certification program. The statute further provides that FDA must not generate surplus revenue from the user fee program.

In implementing this provision, FDA is estimating the average costs of work it will perform to establish the program by recognizing accreditation bodies under section 808(b)(1) of the FD&C Act to accredit third-party certification bodies to participate in the third-party certification program (and, in limited circumstances under section 808(b)(1)(A)(ii), to directly accredit third-party certification bodies). Additionally, FDA is estimating the average costs of work it will perform in administering the program through monitoring, under section 808(f) of the FD&C Act, of recognized accreditation bodies and accredited third-party certification bodies, including through onsite audits of eligible entities issued certifications. The user fee program gives us flexibility to adjust estimates of the number of hours various activities will require and the hourly rates for performing the work, which will allow us to ensure that we are not generating a surplus.

We do not think it would be feasible at this time to accurately calculate and collect fees for all additional unaccounted for costs. For example, we do not have information on the number of, if any, waiver requests, revocations, and withdrawals we may get. It would be difficult to project a fee based on this limited information and assess it on accreditation bodies and certification bodies.

Additionally, it would be difficult to fairly distribute a fee for startup costs to future participants. We also do not want to disincentivize early participants from applying by imposing higher fees early on to cover initial program start-up costs related to setting up an IT portal or training employees.

(Comment 2) Some comments agree that both accreditation bodies and certification bodies are the appropriate parties to be assessed fees.

(Response 2) We agree and are finalizing § 1.700 as proposed, with conforming editorial changes as discussed previously.

Under the proposed user fee program we would assess user fees for two types of activities: (1) Application review; and (2) performance monitoring.

We proposed in § 1.705(a) that application fees would be assessed on accreditation bodies seeking FDA recognition or renewal of recognition and on third-party certification bodies seeking direct accreditation (and renewal of direct accreditation) by FDA. The application fees would be based on the estimated average cost of the work FDA performs in reviewing and evaluating each type of application. To calculate the estimated average cost of reviewing applications for recognition and for direct accreditation, we estimated the average number of hours it would take for FDA to conduct the relevant activities and multiplied that by the appropriate fully supported full time equivalent (FTE) hourly rate to derive flat rates for reviews of each of the following types of applications: (1) Initial applications for recognition of accreditation bodies; (2) applications for renewal of recognition; (3) initial applications for direct accreditation of third-party certification bodies; and (4) applications for renewal of direct accreditation.

We requested comment on an alternative approach for calculating application fees by tracking the actual number of hours it takes FDA staff to conduct relevant activities for each applicant, multiply that number by the fully supported FTE hourly rate calculated by the Agency for the applicable fiscal year, and then bill each applicant separately for the actual application costs attributable to it.

We requested comment on whether the proposed or alternative approach would create more favorable incentives for quality of the application. For the alternative approach, we specifically requested comment on possible consequences we should impose for not paying the application fee on time, since with this approach we would likely not be able to bill the applicant until after it learns whether it is accepted into the program. We also requested comment on whether we should adopt the alternative approach for a portion of the application review process (e.g., the onsite audit portion), while maintaining a flat fee for other portions (e.g., the paper application review).

Under proposed § 1.705(b), recognized accreditation bodies would be subject to an annual fee for the estimated average cost of the work FDA performs to monitor performance of recognized accreditation bodies under § 1.633. Under § 1.633(a), FDA will periodically evaluate the performance of each recognized accreditation body at least 4 years after the date of recognition for a 5-year term of recognition, or by no later than the mid-term point for a term of recognition of less than 5 years. We would estimate the average number of hours it would take for FDA to conduct relevant activities and multiply that by the appropriate fully supported FTE hourly rate for the applicable fiscal year. To calculate the annual fee for each recognized accreditation body, FDA would take the estimated average cost of work FDA performs to monitor performance of a single recognized accreditation body and annualize that over the average term of recognition (e.g., 5 years).

The proposed user fee program also would assess fees for the estimated average cost for the work FDA will perform in monitoring the performance of third-party certification bodies accredited by FDA-recognized accreditation bodies, and third-party certification bodies directly accredited by FDA. We estimated the average number of hours it would take for FDA to conduct relevant monitoring activities for each, including a representative sample of onsite audits, and multiplied that by the appropriate fully supported FTE hourly rate. We further proposed that these monitoring fees would be annualized over the length of the term of accreditation (e.g., 4 years).

In developing the proposed rule, we also considered annualizing the cost of application review over the length of the term of recognition (e.g., 5 years) or direct accreditation (e.g., 4 years), adjusting for inflation, and adding this to the annual fee funding FDA's monitoring activities. We tentatively concluded in the proposed rule that this alternative fee structure could potentially reimburse FDA less for work performed and could also lead to more lower-quality applications. We requested comment on the proposed annual fee structure, the alternative annual fee structure described in the proposed rule, and any other alternative fee structures that may be simpler or more consistent with industry practice.

(Comment 3) Some comments propose a different approach whereby FDA would establish one application fee for accreditation bodies which encompasses all of the anticipated costs (and specify what those costs are for each part of the assessment process) and then provide for reimbursements upon completion of the process for costs that were not incurred. The comment suggests that this would create incentives for an accreditation body to have a well-documented and implemented accreditation process and to cooperate fully to facilitate the assessment by FDA. Some comments request that we simplify the user fee program, but do not provide suggestions as to what changes would simplify the program.

(Response 3) We decline to accept the alternative approach, for a couple of reasons: First, we expect that the costs for reviewing applications for recognition will not vary significantly among the accreditation bodies, because we expect most, if not all, of the accreditation bodies that seek recognition under the third-party certification program will use documentation of their conformance with International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) 17011:2004, Conformity assessment—General requirements for accreditation bodies accrediting conformity assessment bodies (ISO/IEC 17011:2004) (Ref. 1) to support their applications. This will allow FDA to use a common approach in reviewing accreditation body applications and, as a result, will help keep the costs of application review fairly steady and predictable across applications, making the alternative approach unnecessary.

Second, in authorizing FDA to assess fees and recover the costs associated with establishing and administering the third-party certification program, section 808(c)(8) of the FD&C Act helps to ensure that FDA has a stable funding base for the program. The alternative approach would limit our ability to develop and execute program plans or to sustain program services and operations at predictable levels. Third, the alternative approach would be administratively burdensome and would generate new administrative costs associated with providing a series of reimbursements at various steps in the processing of a single application. The net result would be to drive up program costs, which would increase user fee rates.

With respect to the comments requesting that we simplify the user fee program, we decline to adopt a different approach absent any feasible suggestions as to what changes would simplify the program. Further, the approach we have established in this final rule limits the types of fees that are assessed to just application fees and annual fees. Our approach is designed to be simple. It is similar to the fee structure used by several accreditation bodies, who charge third-party certification bodies initial fees and annual fees (Ref. 2).

(Comment 4) Some comments recommend that the recognized accreditation bodies and accredited third-party certification bodies pay for monitoring as it is conducted. The comments note that for a recognized accreditation body this would assume that the level of monitoring would be related to its performance, the number of third-party certification bodies it accredited, and their performance. The comments further assert that the level of monitoring FDA performs for an accredited third-party certification body would be based on its performance, the number of clients that the accredited third-party certification body has certified, and their performance.

(Response 4) We disagree. As explained in Response 3, the user fee program is designed to provide FDA a stable funding base for operating the program. The proposed approach of paying for monitoring as it is conducted would not offer stability and predictability for FDA or for recognized accreditation bodies and accredited certification bodies. In addition, we note that the number of certification bodies the accreditation body has accredited under the program is only one of several factors we may consider in developing our plans for monitoring a recognized accreditation body. Under § 1.633(b) we may elect to observe a representative sample of certification bodies the recognized accreditation body accredited when conducting an assessment of its accreditation body. The size of the representative sample may depend on a number of factors including the scope of accreditation of the certification bodies accredited by the accreditation body, how many years the accreditation body has been in the program, how many prior assessments of the accreditation body we have performed, and the length of time since any prior assessments, in addition to the number of third-party certification bodies it has accredited. Similarly, when monitoring an accredited third-party certification body under § 1.662 we may elect to observe regulatory audits the accredited third-party certification body performs, and we will base our decision regarding how many onsite observations to conduct based on a number of factors such as how many years the certification body has been in the program, how many prior assessments we have performed and the length of time since the last assessment, in addition to the number of eligible entities the certification body certifies. Further, we do not anticipate that the cost of monitoring will vary greatly among accreditation bodies or among certification bodies. We note that the third-party certification regulations allow recognized accreditation bodies and accredited third-party certification bodies to use documentation of their conformance with applicable ISO/IEC standards, which we expect will allow FDA greater consistency and efficiency in conducting monitoring activities.

(Comment 5) Some comments recommend that FDA establish application and monitoring fees that relate to costs for the services by FDA and that these be paid in the years the services are provided, rather than annualized fees.

(Response 5) We decline the recommendation to change the fee structure from an estimated average cost to a pay-as-you go system. As explained in Response 3, the estimated average cost approach to the fee assessments provides prospective applicants, participants, and FDA predictability that allows for proper planning and budgeting. The monitoring fee is structured to annualize the payments for the total cost of monitoring recognized accreditation bodies and accredited third-party certification bodies, which provides predictability that helps accreditation bodies, third-party certification bodies, and FDA in planning and budgeting. Additionally, the recommended approach would be administratively burdensome and would generate new administrative costs associated with billing for various monitoring activities across the duration of each accreditation body's recognition and each third-party certification body's accreditation. The net result would be to drive up program costs, which would increase user fee rates. Further, we do not think that system suggested in the comment would be particularly beneficial to participants, since we do not anticipate that there will be much variability in the cost of monitoring services. We note that the user fee program is flexible. The fee rates are adjusted annually, as appropriate, so estimates regarding the cost of monitoring will be refined regularly.

We proposed to notify the public of the fee schedule annually prior to the beginning of the fiscal year for which the fees apply. We further proposed that each new fee schedule would be calculated based on the parameters in the proposed rulemaking and adjusted for improvements in the cost to FDA of performing relevant work for the upcoming year and inflation. At our own initiative, we revised proposed § 1.710 to create an exception to the requirement to provide notice prior to the start of the fiscal year for which the fees apply, in order to provide notice of the FSMA Third-Party Certification Program User Fee Rate for FY 2017, which is published elsewhere in this issue of the Federal Register. The notice for fiscal year (FY) 2017 sets the application fee rate for accreditation bodies applying for recognition. The rate will be effective on January 13, 2017, and will allow accreditation bodies to apply to participate in the third-party certification program prior to the start of FY 2018.

(Comment 6) Several comments address user fee costs. Some raise general concerns that user fees may serve as a disincentive to program participation by accreditation bodies and third-party certification bodies, especially during the initial phase of the program. One such comment characterized the estimated user fee amounts as “somewhat high.” Other comments noted the proposed fees were reasonably aligned with the third-party certification body fees assessed under the Global Food Safety Initiative (GFSI). (By way of background, a group of international retailers established GFSI in 2000 with the goal of reducing the need for duplicative third-party audits by benchmarking private food safety schemes against a harmonized set of criteria for food safety and management systems.)

(Response 6) With respect to the comments suggesting that user fees may serve as a disincentive to program participation by accreditation bodies and third-party certification bodies, we note that the FD&C Act requires us to establish by regulation a user fee program by which we assess fees and require accredited third-party auditors and audit agents to reimburse us for the work performed to establish and administer the third-party accreditation program under section 808 of the FD&C Act. With respect to comments suggesting that the estimated user fee rates in the proposed rule may be too high, we disagree. We have designed the proposed user fee program to be flexible—that is, we expect that the estimates of the number of FTE hours used to calculate the actual user fees for accreditation bodies and third-party certification bodies will be informed by FDA's experience with the program each year (80 FR 43987 at 43990). Once the program begins we will update the estimates used to calculate the annual user fees as appropriate on a yearly basis. For example, if we determine it takes less time, on average, for us to prepare written reports documenting our onsite assessments of recognized accreditation bodies, we will use that information to decrease the fee for the following year.

(Comment 7) Some comments contend that the third-party certification program user fees and the indirect costs of complying with the third-party certification regulation will be passed down to food firms, negatively impacting the number of foreign food facilities that will become certified under the program and resulting in further proliferation of the multitude of audit schemes.

(Response 7) The comments did not provide any data to support assertions regarding the indirect impacts of the proposed rule on dynamics of markets for third-party audits of foreign food facilities and private audit standards. Absent data or other information to support changes to the proposal, we are not modifying § 1.710 in anticipation of possible market forces on third-party audits and private audit schemes.

(Comment 8) Some comments discourage FDA from annually reviewing its fees for at least one 5-year cycle because fluctuations in the fees could significantly disadvantage accreditation bodies or third-party certification bodies that enter the program early.

(Response 8) We disagree with the suggestion to review fees less frequently than annually. Section 808(c)(8) of the FD&C Act provides that FDA shall not generate a surplus from the user fee program. By annually reviewing (and, if appropriate, adjusting) the fee rates, we can help ensure that we do not generate a surplus.

We proposed to require accreditation bodies applying for recognition and third-party certification bodies applying for direct accreditation to submit their application fees concurrently with submitting an application, including a renewal application. We also proposed that recognized accreditation bodies and accredited third-party certification bodies subject to an annual fee must submit payment within 30 days of receiving billing for the fee.

(Comment 9) Some comments support having initial and renewal application fees paid upon application. The comments also assert that FDA should not review any applications until payment has been received.

(Response 9) We agree and are maintaining these requirements in the final rule.

Under proposed § 1.720, user fees would not be refundable. We requested comment on whether we should consider refund requests under this program, and if so, under what circumstances.

At our own initiative, we are revising § 1.720 to clarify that we will not refund any fees accompanying completed applications or annual user fees. However, user fees submitted with applications will not be considered to have been accepted until the application is complete and ready for FDA review. Applications for recognition and direct accreditation will not be substantively reviewed by FDA until a completed submission with all of the required elements is received in accordance with §§ 1.631(a) and 1.671(a).

(Comment 10) Some comments recommend that FDA charge a flat fee for the application fees, but provide for refunds of portions of the initial application and renewal application fees if we do not incur all the anticipated costs during review of the application. This would ensure that FDA has adequate funding to cover costs up front without overburdening accreditation bodies or third-party certification bodies financially if we don't end up using all the costs.

(Response 10) We disagree with providing a refund as described by the comment. As noted in Response 3, we anticipate that costs for reviewing applications for recognition will not vary significantly among the accreditation bodies. In addition, it would be administratively burdensome to track and process refunds at various stages of the application process for each applicant and would potentially drive up the costs of the program.

In proposed § 1.725(a), we proposed that applications would not be considered complete until FDA receives the application fee. In proposed § 1.725(b), we proposed that a recognized accreditation body that fails to submit its annual user fee within 30 days of the due date would have its recognition suspended. We proposed that FDA would notify the accreditation body electronically that its recognition is suspended and would notify the public of the suspension on the Web site that lists the recognized accreditation bodies. We requested comment on our tentative conclusion that there is no reason for the process of notifying the accreditation body and the public of suspension to differ from the process of notifying the accreditation body and the public of revocation in these respects. We also requested comment on whether FDA should notify a certification body if the recognition of its accreditation body has been suspended.

We further proposed that while an accreditation body's recognition is suspended, it will not be able to accredit additional third-party certification bodies. However, we proposed that any certification bodies accredited by such accreditation body prior to the suspension would be unaffected by the suspension, as would any food or facility certification issued by such certification body. We also proposed that if payment is not received within 90 days of the payment due date, FDA would revoke the accreditation body's recognition and provide notice of such revocation in accordance with the procedures in § 1.634. Accordingly, we proposed to amend § 1.634(a)(4) by adding proposed § 1.634(a)(4)(iii), which would explicitly include failure to pay the annual user fee within 90 days of the payment due date as a basis for revoking an accreditation body's recognition.

In proposed § 1.725(c), we proposed that an accredited third-party certification body that fails to submit its annual user fee within 30 days of the due date would have its accreditation suspended. We proposed that FDA would electronically notify the certification body that its accreditation is suspended and would notify the public of the suspension on the Web site that lists the recognized accreditation bodies and accredited third-party certification bodies. While a certification body's accreditation is suspended, it would not be allowed to issue food or facility certifications as part of FDA's third-party certification program. However, we proposed that food or facility certifications issued by a certification body prior to the suspension of its accreditation would remain in effect. We proposed that if payment is not received within 90 days of the payment due date, FDA would withdraw the third-party certification body's accreditation under § 1.664(a), and provide notice of such withdrawal in accordance with the procedures in § 1.664. Accordingly, we proposed to amend § 1.664(a) by adding proposed § 1.664(a)(4), which would explicitly include failure to pay the annual user fee within 90 days of the payment due date as a basis for withdrawal of accreditation. We requested comment on whether the consequences of a third-party certification body failing to pay a user fee by the due date are appropriate.

(Comment 11) Some comments agree with FDA's proposal to suspend an accreditation body's recognition or a third-party certification body's accreditation if it fails to submit its annual user fee within 30 days of the payment due date and to revoke the accreditation body's recognition or withdraw a certification body's accreditation if it fails to submit its annual user fee within 90 days of the payment due date.

(Response 11) We agree and are retaining these provisions in the final rule.

(Comment 12) One comment recommends that notice of the suspension or revocation on FDA's Web site differentiate between suspension and revocation for financial reasons and suspension or revocation for failure to conform to requirements.

(Response 12) We agree with respect to notice of revocation or withdrawal. In accordance with §§ 1.634(f) and 1.664(h), FDA will provide the basis for revocation of recognition and for withdrawal of accreditation on its Web site, as applicable. With respect to suspension of recognition or accreditation by FDA, failure to pay the user fee would be the only reason for FDA suspension.

(Comment 13) One comment recommends that FDA should notify a third-party certification body if its accreditation body's recognition has been suspended and that FDA should notify an accreditation body if a third-party certification body accredited by that accreditation body is suspended.

(Response 13) At this time FDA has determined that, unlike notice of withdrawal of accreditation and notice of revocation of recognition, notice of suspension is not essential to the operation of an accredited certification body or a recognized accreditation body. For example, accredited certification bodies would remain accredited even if their accreditation body had their recognition suspended. Further, we note that FDA's electronic portal for the third-party certification program currently does not have the capability to provide notice of suspension. We will consider the feasibility of adding this capability as resources allow.

We did not propose a small business exemption or reduction in the proposed rule because no statutory requirement to establish or consider an exemption or reduction in user fees exists in section 808 of the FD&C Act. However, we requested comment on whether we should account for small businesses in other ways, including whether an exemption or fee reduction would be appropriate. We requested that comments in favor of an exemption or fee reduction for small businesses state who should be eligible for an exemption or fee reduction; if recommending a fee reduction, how much of a reduction should be granted; and why.

(Comment 14) Some comments recommend that there be no exemption or reduced fee for small businesses or entities because the costs to FDA for performing the work activities are not lower for small businesses or entities. Other comments recommend that the user fees for public-sector and private-sector accreditation bodies or third-party certification bodies be the same because the costs to FDA are not lower for one group compared to the other. Some comments recommend that the program offer reduced fees or exemptions for small businesses to be consistent with the principles embedded in FSMA. Other comments request a reduction in fees or an exemption for public-sector accreditation bodies or third-party certification bodies.

(Response 14) We agree that there be no exemptions or reduced fees for small businesses or entities or for public-sector entities. Section 808(c)(8) of the FD&C Act makes no distinction between public and private bodies for purposes of the user fee program, and, as noted previously, contains no requirement to establish or consider an exemption or reduction in user fees. As explained in Responses 3 and 4, we agree that the cost to FDA for performing the application review and monitoring will not vary greatly across entities participating in the third-party certification program, regardless of the entity's size or public versus private status. Moreover, creating exemptions or fee reductions would hinder FDA's ability to create a stable funding base for the third-party certification program.

We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). We believe that this final rule is not a significant regulatory action as defined by Executive Order 12866.

The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. This rule demonstrates how user fees will be calculated and assessed for different activities FDA conducts under FDA's third-party accreditation program. This rule does not require action by entities affected by the Third-Party Certification regulation; it merely provides additional information so that affected entities can make an informed decision on whether to participate in FDA's third-party certification program. FDA analyzed the costs and benefits of FDA's third-party certification program including imposition of user fees resulting from participating in the third-party certification program in the regulatory impact analysis of the Third-Party Certification final rule. Therefore because this rule does not require actions by affected entities, we certify that the final rule will not have a significant economic impact on a substantial number of small entities.

The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before issuing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $146 million, using the most current (2015) Implicit Price Deflator for the Gross Domestic Product. This final rule would not result in an expenditure in any year that meets or exceeds this amount.

The full analysis of the economic impacts of the Third-Party Certification regulation is available at https://www.regulations.gov under the docket number (FDA-2011-N-0146) for this final rule (Ref. 3) and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

This rule contains no collection of information. Therefore, clearance by OMB under the Paperwork Reduction Act of 1995 is not required.

We previously considered the environmental effects of this rule, as stated in the proposed rule “User Fee Program to Provide for Accreditation of Third-Party Auditors/Certification Bodies to Conduct Food Safety Audits and To Issue Certifications” published on July 24, 2015 (80 FR 43987). We stated that we had determined, under 21 CFR 25.30(h), that this action “is of a type that does not individually or cumulatively have a significant effect on the human environment” such that neither an environmental assessment nor an environmental impact statement is required. We have not received any new information or comments that would affect our previous determination.

We have analyzed this final rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, we conclude that the rule does not contain policies that have federalism implications as defined in the Executive order and, consequently, a federalism summary impact statement is not required.

The following references are on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fisher Lane, Rm. 1061, Rockville, MD 20852 and are available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they are also available electronically at https://www.regulations.gov. FDA has verified the Web site addresses, as of the date this document publishes in the Federal Register, but Web sites are subject to change over time.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 1 is amended as follows:

As provided in 21 CFR 1308.03, each controlled substance or basic class thereof is assigned a four digit Administration Controlled Substance Code Number (“Code number” or “drug code”) that is used to track quantities of the controlled substance imported and exported to and from the United States. Additionally, the DEA uses these code numbers in establishing aggregate production quotas for basic classes of controlled substances listed in Schedules I and II as required by 21 U.S.C. 826.

Consistent with the Controlled Substances Act (CSA), the schedules contained in DEA regulations include marihuana (drug code 7360) in Schedule I. 21 CFR 1308.11(d)(23). This listing includes (unless specifically excepted or unless listed in another schedule) any material, compound, mixture, or preparation, which contains any quantity of the substance, or which contains any of its salts, isomers, and salts of isomers that are possible within the specific chemical designation. Because the definition of marihuana in 21 U.S.C. 802(16) includes both derivatives and preparations of marihuana, the DEA until now has used drug code 7360 for extracts of marihuana. This final rule finalizes a July 5, 2011, Notice of Proposed Rulemaking (76 FR 39039) in which the DEA proposed that a new drug code 7350 be used for extracts of marihuana.

The United Nations Conventions on international drug control treats extracts from the cannabis plant somewhat differently than marihuana or tetrahydrocannabinols. The creation of a new drug code in the DEA regulations for marihuana extracts will allow for more appropriate accounting of such materials consistent with treaty provisions.

The Single Convention on Narcotic Drugs, 1961 (“Single Convention”) and the 1971 Convention on Psychotropic Substances (“Psychotropic Convention”) provide for the international control of marihuana constituents. Many of the CSA's provisions were drafted to comply with these Conventions. The CSA includes schemes of drug scheduling and procedures for adding, removing, and transferring drugs among the schedules that are similar, in some ways, to those in the Single Convention. With respect to those drugs that are subject to control under the Single Convention, the CSA mandates that DEA control such drugs in a manner that will ensure the United States meets its obligations under the Single Convention. 21 U.S.C. 811(d)(1).

Somewhat similar to the CSA, the Single Convention lists substances in four schedules. However, under the Single Convention, the drugs that are subject to the most stringent controls are in Schedule IV. Another difference between the CSA and the Single Convention is that, under the latter, a drug can be listed in more than one schedule. Cannabis and cannabis resin are listed in both Schedule IV and Schedule I of the Single Convention. Schedule I controls under the Single Convention include: Requirements for import and export authorization, licensing of manufacturers/distributors, recordkeeping requirements, a requirement for prescriptions for medical use, annual estimate of needs, quotas, annual statistical reporting, and a requirement that use be limited to medical and scientific purposes. Schedule II of the Single Convention is similar in controls to Schedule I with a few exceptions, and Schedule III is less restrictive. All substances listed in Schedule IV are also listed in Schedule I under the Single Convention in order to encompass the requirements mentioned above. In addition, as indicated, the Single Convention imposes certain heightened measures of control with respect to Schedule IV drugs. The placing of a drug into both Schedule I and Schedule IV, therefore imposes the most stringent controls under the Single Convention. Although cannabis and cannabis resin are listed in Schedules I and IV of the Single Convention, cannabis extracts are listed only in Schedule I.

In response to the July 5, 2011, Notice of Proposed Rulemaking (76 FR 39039), the DEA received six submissions from five commenters. Three of the comments raised issues relating to the medical use or legality of marihuana/cannabis; these comments were not germane to the issues addressed by this rulemaking. A fourth comment was merely a clarification of a comment previously submitted.

One comment requested clarification of whether the new drug code will be applicable to cannabidiol (CBD), if it is not combined with cannabinols.

DEA response: For practical purposes, all extracts that contain CBD will also contain at least small amounts of other cannabinoids.1 However, if it were possible to produce from the cannabis plant an extract that contained only CBD and no other cannabinoids, such an extract would fall within the new drug code 7350. In view of this comment, the regulatory text accompanying new drug code 7350 has been modified slightly to make clear that it includes cannabis extracts that contain only one cannabinoid.

Another comment from a pharmaceutical firm currently involved in cannabinoid research and product development praised DEA's efforts to establish a new drug code for marihuana extracts as a means to more accurately reflect the activities of scientific research and provide more consistent adherence to the requirements of the Single Convention. However, the comment expressed concerns that the proposed definition for the new drug code (i.e. “meaning extracts that have been derived from any plant of the genus Cannabis and which contain cannabinols and cannabidiols”) is too narrow. The comment suggested that the broader term “cannabinoids” be substituted for “cannabinols and cannabidiols.” The comment pointed out that other constituents of the marihuana plant may have therapeutic potential. The comment further clarified that the broader term “cannabinoid” includes both cannabinol-type compounds and cannabidiol-type compounds, as well as cannabichromene-type compounds, cannabigerol-type compounds, and other categories of compounds.

DEA response: DEA agrees with the commenter that the term “cannabinoid” would provide for a broader definition of marihuana extract; however, use of the term “cannabinoid” necessitates that the DEA clarify that the new marihuana extract category (drug code 7350) is not intended to include “cannabis resin” as defined in the U.N. Single Convention.

As discussed in the NPRM, a new drug code is necessary in order to better account for these materials in accordance with treaty obligations. The Single Convention placed “cannabis” and “cannabis resin” under both Schedule I and IV of the Convention, the most stringent level of control under the Convention. While “cannabis resin” is extracted from “cannabis,” the Single Convention specifically controls “extracts” separately. Extracts of cannabis are controlled only under Schedule I of the Convention, which is a lower level of control than “cannabis resin.”

Accordingly, it is the DEA's intent to define the term “marihuana extract” so as to exclude material referenced as “cannabis resin” under the Single Convention on Narcotics. “Cannabis resin” (regulated under the CSA as a resin of marihuana) contains a variety of “cannabinoids” and will continue to be regulated as marihuana under drug code 7360. The new drug code for marihuana extracts under 21 CFR 1308.11(d)(58) will exclude the resin. Cannabis resin and marihuana resin remain captured under the drug code for marihuana (drug code 7360), thus differentiating this material from marihuana extracts (new drug code 7350). This will maintain compliance with the Single Convention.

After careful consideration of all comments, the DEA is hereby amending 21 CFR 1308.11(d) to include a new subparagraph (58) which creates a new code number in Schedule I as follows:

The creation of this new drug code in the DEA regulations for marihuana extracts allows for more appropriate accounting of such materials consistent with treaty provisions. Such marihuana extracts remain in Schedule I. Entities registered to handle marihuana (under drug code 7360) that also handle marihuana extracts, will need to apply to modify their registrations to add the new drug code 7350 to their existing DEA registrations and procure quotas specifically for drug code 7350 each year.

This regulation has been drafted and reviewed in accordance with the principles of Executive Orders 12866 and 13563. This rule is not a significant regulatory action under Executive Order 12866.

This regulation meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate drafting errors and ambiguity, minimize litigation, provide a clear legal standard for affected conduct, and promote simplification and burden reduction.

This rulemaking does not have federalism implications warranting the application of Executive Order 13132. The rule does not have substantial direct effects on the States, on the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government.

This rule does not have tribal implications warranting the application of Executive Order 13175. It does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

The Administrator, in accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-602, has reviewed this rule and by approving it, certifies that it will not have a significant economic impact on a substantial number of small entities. This rule establishes a new drug code for marihuana extracts. DEA already registers persons handling marihuana extracts but within another already-established drug code. Thus, persons who handle these marihuana extracts have already met DEA's registration, security, and other statutory and regulatory requirements. The only direct effect to registrants who handle marihuana extracts will be the requirement to add the new drug code to their registration. Therefore, DEA has concluded that this rule will not have a significant effect on a substantial number of small entities.

On the basis of information contained in the “Regulatory Flexibility Act” section above, DEA has determined and certifies pursuant to the Unfunded Mandates Reform Act (UMRA) of 1995, 2 U.S.C. 1501 et seq., that this action would not result in any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted for inflation) in any one year. Therefore, neither a Small Government Agency Plan nor any other action is required under provisions of the UMRA of 1995.

This action does not impose a collection of information requirement under the Paperwork Reduction Act of 1995. 44 U.S.C. 3501-3521. This action would not impose recordkeeping or reporting requirements on State or local governments, individuals, businesses, or organizations. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996 (Congressional Review Act (CRA)). This rule will not result in: An annual effect on the economy of $100,000,000 or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of U.S.-based companies to compete with foreign based companies in domestic and export markets. However, pursuant to the CRA, the DEA has submitted a copy of this final rule to both Houses of Congress and to the Comptroller General.

For the reasons set out above, 21 CFR part 1308 is amended as follows:

The Moving Ahead for Progress in the 21st Century Act, Public Law 112-141, 126 Stat. 405, was enacted on July 6, 2012 and, among other things, funded surface transportation programs at over $105 billion for fiscal years 2013 and 2014. Section 31307 of the Act, codified at 49 U.S.C. 30171 and referred to throughout this rulemaking as MAP-21, prohibits motor vehicle manufacturers, parts suppliers, and dealerships from discharging or otherwise retaliating against an employee because the employee provided, caused to be provided or is about to provide information to the employer or the Secretary of Transportation relating to any motor vehicle defect, noncompliance, or any violation or alleged violation of any notification or reporting requirement of Chapter 301 of title 49 of the U.S. Code (Chapter 301); filed, caused to be filed or is about to file a proceeding relating to any such defect or violation; testified, assisted or participated (or is about to testify, assist or participate) in such a proceeding; or objected to, or refused to participate in, any activity that the employee reasonably believed to be in violation of any provision of Chapter 301, or any order, rule, regulation, standard or ban under such provision. Chapter 301 is the codification of the National Traffic and Motor Vehicle Safety Act of 1966, as amended, which grants the National Highway Traffic Safety Administration (NHTSA) authority to issue vehicle safety standards and to require manufacturers to recall vehicles that have a safety-related defect or do not meet federal safety standards. This final rule adopts, without change, the provisions in the IFR which established procedures for the handling of whistleblower complaints under MAP-21.

On March 16, 2016, OSHA published in the Federal Register an IFR establishing procedures for the handling of whistleblower retaliation complaints under MAP-21. 81 FR 13976. The IFR also requested public comments. The prescribed comment period closed on May 16, 2016. OSHA received one comment responsive to the IFR. The commenter, a private citizen, stated in full that:

OSHA is making no revisions to the MAP-21 rule in response to this comment. OSHA believes that the procedures in the IFR, see e.g., 29 CFR 1988.104(c), as supplemented by OSHA's whistleblower investigations manual, available at http://www.whistleblowers.gov, operate to give complainants adequate opportunities to review and respond to information submitted by the employer in a MAP-21 whistleblower investigation and to ensure adequate supervision of investigators. In addition, as provided in the rules, any party who objects to OSHA's findings has an opportunity to seek de novo review before an administrative law judge. Accordingly, this rule adopts as final, without change, the IFR published on March 16, 2016.

This rule contains a reporting provision (filing a retaliation complaint, Section 1988.103) which was previously reviewed and approved for use by the Office of Management and Budget (OMB) under the provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13). The assigned OMB control number is 1218-0236.

The notice and comment rulemaking procedures of Section 553 of the Administrative Procedure Act (APA) do not apply “to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C. 553(b)(A). This is a rule of agency procedure, practice, and interpretation within the meaning of that section. Therefore, publication in the Federal Register of a notice of proposed rulemaking and request for comments was not required for this rulemaking. Although this is a procedural and interpretative rule not subject to the notice and comment procedures of the APA, OSHA provided persons interested in the IFR 60 days to submit comments and considered the one comment pertinent to the IFR that it received in deciding to finalize without change the procedures in the IFR.

Furthermore, because this rule is procedural and interpretative rather than substantive, the normal requirement of 5 U.S.C. 553(d) that a rule be effective 30 days after publication in the Federal Register is inapplicable. OSHA also finds good cause to provide an immediate effective date for this final rule, which simply finalizes without change the procedures that have been in place since publication of the IFR. It is in the public interest that the rule be effective immediately so that parties may know what procedures are applicable to pending cases.

The Department has concluded that this rule is not a “significant regulatory action” within the meaning of Executive Order 12866, reaffirmed by Executive Order 13563, because it is not likely to: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866. Therefore, no economic impact analysis under Section 6(a)(3)(C) of Executive Order 12866 has been prepared. For the same reason, and because no notice of proposed rulemaking has been published, no statement is required under Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532. In any event, this rulemaking is procedural and interpretive in nature and is thus not expected to have a significant economic impact. Finally, this rule does not have “federalism implications.” The rule does not have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government” and therefore is not subject to Executive Order 13132 (Federalism).

The notice and comment rulemaking procedures of Section 553 of the APA do not apply “to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C. 553(b)(A). Rules that are exempt from APA notice and comment requirements are also exempt from the Regulatory Flexibility Act (RFA). See SBA Office of Advocacy, A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act, at 9; also found at: https://www.sba.gov/advocacy/guide-government-agencies-how-comply-regulatory-flexibility-act. This is a rule of agency procedure, practice, and interpretation within the meaning of 5 U.S.C. 553; and, therefore, the rule is exempt from both the notice and comment rulemaking procedures of the APA and the requirements under the RFA. Nonetheless OSHA, in the IFR, provided interested persons 60 days to comment on the procedures applicable to retaliation complaints under MAP-21 and considered the one comment pertinent to the IFR that it received in deciding to finalize without change the procedures in the IFR.

California Department of Transportation has requested a temporary change to the operation of the Tower Drawbridge, mile 59.0, over Sacramento River, at Sacramento, CA. The vertical lift bridge navigation span provides a vertical clearance of 30 feet above Mean High Water in the closed-to-navigation position. The draw operates as required by 33 CFR 117.189(a). Navigation on the waterway is commercial and recreational.

The drawspan will be secured in the closed-to-navigation position from 8:30 p.m. on December 31, 2016 to 12:15 a.m. on January 1, 2017, to allow the community to participate in the New Year's Eve fireworks. This temporary deviation has been coordinated with the waterway users. No objections to the proposed temporary deviation were raised.

Vessels able to pass through the bridge in the closed position may do so at any time. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.

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

In a document published in the Federal Register on May 25, 2016 (81 FR 33155), VA proposed to amend its medical regulations in part 17 of Title 38, Code of Federal Regulations (CFR) to permit full practice authority of four roles of VA advanced practice registered nurses (APRN) when they were acting within the scope of their VA employment. We provided a 60-day comment period, which ended on July 25, 2016. We received 223,296 comments on the proposed rule.

The Office of the Federal Register has prepared a document, A Guide to the Rulemaking Process, that states that an agency is not permitted to base its final rule on the number of comments received in support of the rule over those in opposition to it or vice versa. The document further states that an agency must base its reasoning and conclusions on the rulemaking record, which consists of the comments received, scientific data, expert opinions, and facts accumulated during the pre-rule and proposed rule stages. This final rule adheres to the guidance established by the Office of the Federal Register.

Section 7301 of title 38 United States Code (U.S.C.) establishes the Veterans Health Administration (VHA) within VA, and establishes that its primary function is to “provide a complete medical and hospital service for the medical care and treatment of veterans, as provided in this title and in regulations prescribed by the Secretary pursuant to this title.” To allow VA to carry out its medical care mission, Congress also established a comprehensive personnel system for certain medical employees in VHA, independent of the civil service rules. See Chapters 73 and 74 of title 38, U.S.C. As an integrated Federal health care system with the responsibility to provide comprehensive care under 38 U.S.C. 7301, it is essential that VHA wisely manage its resources and fully utilize the skills of its health care providers to the full extent of their education, training, and certification.

By permitting the three APRN roles, Certified Nurse Practitioner (CNP), Clinical Nurse Specialist (CNS), or Certified Nurse-Midwife (CNM), throughout the VHA system with a way to achieve full practice authority in order to provide advanced nursing services to the full extent of their professional competence, VHA furthers its statutory mandate to provide quality health care to our nation's veterans. This regulatory change to nursing policy permits three roles of APRNs to practice to the full extent of their education, training and certification, without the clinical supervision or mandatory collaboration of physicians. Standardization of APRN full practice authority, without regard for individual State practice regulations, helps to ensure a consistent delivery of health care across VHA by decreasing the variability in APRN practice that currently exists as a result of disparate State practice regulations. Certified Registered Nurse Anesthetists (CRNA) will not be included in VA's full practice authority under this final rule, but comment is requested on whether there are access issues or other unconsidered circumstances that might warrant their inclusion in a future rulemaking.

Standardization of full practice authority to the three APRN roles also aids VA in making the most efficient use of VHA APRN staff capabilities, which increases VA's capacity to provide timely, efficient, and effective primary care services, as well as other services. This increases veteran access to needed VA health care, particularly in medically-underserved areas and decreases the amount of time veterans spend waiting for patient appointments. In addition, standardizing APRN practice authority enables veterans, their families, and caregivers to understand more readily the health care services that VA APRNs are authorized to provide. This preemptive rule increases access to care and reduces the wait times for VA appointments utilizing the current workforce already in place. VA's position to not include the CRNAs in this final rule does not stem from the CRNAs' inability to practice to the full extent of their professional competence, but rather from VA's lack of access problems in the area of anesthesiology.

To ensure that VA would have available highly qualified medical personnel, Congress mandated the basic qualifications for certain health care positions, including registered nurses. Sections 7401 through 7464 of title 38, U.S.C., grant VA authority to regulate the professional activities of such personnel. To be eligible for appointment as a VA employee in a health care position (other than Director) covered by section 7402(b), of title 38, U.S.C., a person must, among other requirements, be licensed, registered, or certified to practice their profession in a State. The standards prescribed in section 7402(b) establish only the basic qualifications necessary “[t]o be eligible for appointment” and do not limit the Secretary or Under Secretary for Health from establishing other qualifications for appointment, or additional rules governing such personnel. In particular, 38 U.S.C. 7403(a)(1) provides that appointments under Chapter 74 “may be made only after qualifications have been established in accordance with regulations prescribed by the Secretary, without regard to civil-service requirements.” As the head of VHA, the Under Secretary for Health has the duty to “prescribe all regulations necessary to the administration of the Veterans Health Administration,” subject to approval by the Secretary. See 38 U.S.C. 7304; see also 38 U.S.C. 501. Pursuant to this authority, the Under Secretary for Health is authorized to establish the qualifications and clinical practice standards of VHA's nursing personnel and to otherwise regulate their professional conduct.

To continue to provide high quality health care to veterans, this final rule will allow three roles of APRNs to practice to the full extent of their education, training, and certification when acting within the scope of their VA employment, regardless of State restrictions that limit such full practice authority, except for applicable State restrictions on the authority to prescribe and administer controlled substances.

The proposed rule stated that VA was proposing to grant full practice authority to four APRN roles. We received 104,256 comments against granting full practice authority to VA CRNAs. The American Society of Anesthesiologists lobbied heavily against VA CRNAs having full practice authority. They established a Web site that would facilitate comments against the CRNAs, which went as far as providing the language for the comment. These comments were not substantive in nature and were akin to votes in a ballot box. The main argument against the VA CRNAs was that by granting CRNAs full practice authority VA would be eliminating the team based concept of care in anesthesia, which is currently established in VA policy via VHA Handbook 1123, Anesthesia Service. Team based care was not addressed in the proposed rule because we consider it to be an integral part in addressing all of a veteran's health care needs. Establishing full practice authority to VA APRNs, including CRNAs, would not eliminate any well-established team based care. The second argument posed against granting full practice authority to VA CRNAs was that there is “no shortage of physician anesthesiologists in VA and the current system allows for sufficient flexibility to address the needs of all VA hospitals.” Again, most of these comments were not substantiated by evidence, though as discussed further below, VA does believe that evidence exists that there is not currently a shortage of anesthesiologists that critically impacts access to care, and therefore VA agrees with the sentiment of this argument.

We similarly received 45,915 comments in support of full practice authority for APRNs as a whole without specific mention of CRNAs. We received 9,613 comments in support of full practice authority for CRNAs. The CRNA-specific commenters stated that “CRNAs currently exercise their full scope of practice in 17 states and in the Army, Navy, Air Force, Combat Support Hospitals, Forward Surgical Teams, and the Indian Health Services, even in some VAs where CRNAs are the only anesthesia providers. Evidence shows that APRN provided care increases access, improves quality, and reduces costs for all Americans. By extending Full Practice authority to CRNAs and other APRNs at the VHA, we can help end delays to high-quality, safe, and cost-effective care for America's Veterans. Implement this well researched policy change promptly.” The commenters also stated that “APRN's and CRNAs practicing in a manner which they have been educated and trained to provide expert care has been backed by decades of research.” Several other commenters stated “Over 900 CRNAs provide every type of anesthesia care, as well as chronic pain management services, for our Veterans in the VHA. The safety of CRNA services has long been recognized by the VHA and underscored by peer-reviewed scientific studies, including a major study published in Health Affairs which found that anesthesia care by CRNAs was equally safe with or without physician supervision.” VA agrees with these comments, but has chosen not to include CRNAs in this final rule due to VA's lack of access problems in the area of anesthesiology.

Commenters raised anesthesia issues related to the RAND Assessment, which the public can view at http://www.va.gov/opa/choiceact/documents/assessments/Assessment_B_Health_Care_Capabilities.pdf. Specifically, the Department of Veterans Affairs Independent Assessment B, Appendix E-I reported on qualitative interviews with Chiefs of Staff at VA facilities; fourteen comments discussed lack of anesthesia service/support as a barrier to providing care, including for urgent and non-urgent cardiovascular surgeries (three comments), as well as colon cancer/gastrointestinal services such as endoscopy and colonoscopy (eleven comments).1 As discussed further below, VA understands that there are difficulties hiring and retaining anesthesia providers, but generally believes that this situation is improving. VA reviewed the qualitative interviews with Chiefs of Staff at VA facilities contained in the RAND Assessment but did not determine that data supported granting FPA to CRNAs to solve access issues. Nonetheless, VA is requesting further comments on whether advanced practice authority for CRNAs would bring further improvements.

We reviewed the Veterans Health Administration payroll data revealed that, as of August 31, 2016, VHA employs 940 Physician Anesthesiologists (physicians), 5,444 Nurse Practitioners, 937 CRNAs, and 386 Nurse Specialists. Nurse Practitioner is currently #3 in the top 5 difficult to recruit and retain nurse specialties. Additional workforce trend data is available in the Regulatory Impact Analysis.

In a 2015 independent survey of VA general facility Chief of Staffs conducted by the Rand Corporation, approx. 38% (43 of 111) reported problems recruiting or hiring advanced practice providers, such as Nurse Practitioners, and 50% reported problems recruiting or hiring nurses such as clinical specialists.2 The most commonly reported barriers to recruitment and hiring for these medical experts were: Non-competitive wages (72% of 43 responses for advanced practice providers; 64% of 56 responses percent for nurses), Human Resources process (42% for advanced practice providers; 45% for nurses), geographic location of facility (35% for advanced practice providers; 23% for nurses), and lack of qualified applicants (26% for advanced practice providers; 32% for nurses).3

Similarly, nearly 30% (33 of 111) of Chiefs of Staffs reported problems retaining advanced practice providers, such as NPs, and almost half reported problems retaining nurses, such as clinical specialists.4 The most commonly reported reasons for problems with retention of these medical experts were: Dissatisfaction with supervision/management support (61% of 31 responses for advanced practice providers; 57% of 49 responses percent for nurses) and dissatisfaction with pay (36% of advanced practice providers; 27% of nurses).5 Chiefs of Staff rarely selected lack of opportunity for professional growth/promotion as a top two reason for retention problems, only 6% selected this option for advanced practice providers and 8% for nurses. Lack of professional autonomy was also not viewed as a significant contributor to retention issues (3% for advanced practice providers, 0% for nurses).

In fiscal years 2011 through 2015, CRNAs were in the top 10 VHA Occupations of Critical Need, but dropped to 12th place in FY 2015. Despite the challenges discussed above, within VHA the occupation has grown approximately 27% between FY 2010 and FY 2014 (166 employees). Total loss rates decreased from 6.6% in FY 2013 to 6.2% in FY 2014, but have ranged from 9.4% to 6.2% between FY 2009 and FY 2014. Voluntary retirements decreased from 3.2% in FY 2013 to 2.7% in FY 2014. Quits increased from 1.9% in FY 2013 to 2.6% in FY 2014. VA has taken steps to improve recruitment of CRNAs, including partnering with the U.S. Army to educate interested and qualified VA registered nurses in the field of nurse anesthesia.6 Also, as previously stated in this rulemaking, VA CRNAs are a crucial part of the team based anesthesia care. VHA Handbook 1123, Anesthesia Service, states in paragraph 4.a. “In facilities with both anesthesiologists and nurse anesthetists, care needs to be approached in a team fashion taking into account the education, training, and licensure of all practitioners.”

Anesthesiology is not in the top 5 difficult to recruit and retain physician specialties. However, in a 2015 independent survey of VA general facility Chief of Staffs conducted by the Rand Corporation, 25% (27 of 111) reported problems recruiting or hiring anesthesiologists.7 The most commonly reported barriers to recruitment and hiring for these medical experts were: Non-competitive wages (78% of 27 respondents), Human Resources process (25%), and geographic location of facility (22.2%).8 Nearly 10% of Chiefs of Staff (11/111) reported difficulties retaining anesthesiologists.9 The most commonly reported reason for staff retention problems for these medical experts were: Dissatisfaction with supervision/management support (27%) and dissatisfaction with pay (55%).10 Despite these challenges, over the past 5 years, the number of anesthesiologists VHA hired increased from 87 in FY11 to 149 in FY15. The FY15 turnover rate for anesthesiologists is slightly lower than the turnover rate for physicians overall. VHA has had recent successes in hiring or contracting for Anesthesiology services.

Recruiting, hiring, and retention challenges, as reported by VA facility Chiefs of Staffs struggling with these issues, are similar among advanced practice or specialist nurses and anesthesiologists. These managers did not view lack of advancement opportunity or practice autonomy as significant barriers to retention, which may indicate that increased use of advanced practice authority is unlikely to fully resolve this challenge—both because it may not address the root causes of these problems and because similar challenges constrain hiring of both doctors and nurses. On the other hand, the perceptions of potential applicants and staff may not be fully reflected by a survey of facility management. Further, it is possible that resources might be available to address some of these underlying issues if efficiencies were realized as a result of advanced practice nursing authority. VA welcomes comment on whether lack of advanced practice authority is a hiring, recruitment, or retention barrier for CRNAs, as well as on the extent to which advanced practice authority could help to resolve these issues either directly or indirectly.

Based on this analysis, VHA believes that VA does not have immediate and broad access problems in the area of anesthesia care across the full VA health care system that require full practice authority for all CRNAs.

However, VA requests comment on the question of whether there are current anesthesia care access issues for particular states or VA facilities and whether permitting CRNAs to practice to the full extent of their advanced authority would resolve these issues. VA also requests comment on potential future anesthesia care access issues, particularly in light of projected increases in demand for VA care, including surgical care, in coming years.

We will, therefore, not finalize the provision including CRNAs in the rule as one of the APRN roles that may be granted full practice authority at this time. However, we request comment on this decision. If we learn of access problems in the area of anesthesia care in specific facilities or more generally that would benefit from advanced practice authority, now or in the future, or if other relevant circumstances change, we will consider a follow-up rulemaking to address granting full practice authority to CRNAs.

VA CRNAs that have already been granted full practice authority by their State license will continue to practice in VA in accordance with their State license and subject to credentialing and privileging by a VA medical facility's medical executive committee. VA will not restrict or eliminate these CRNAs' full practice authority.

This final rule uses the term “full practice authority” to refer to the APRN's authority to provide advanced nursing services without the clinical oversight of a physician when that APRN is working within the scope of their VA employment. Such full practice authority is granted by VA upon demonstrating that the advanced educational, testing, and licensing requirements established in this rulemaking are met and upon the recommendation and approval of the medical executive committee when the provider is credentialed and privileged.

In this rulemaking, VA is exercising Federal preemption of State nursing licensure laws to the extent such State laws conflict with the full practice authority granted to VA APRNs while acting within the scope of their VA employment. Preemption is the minimum necessary action for VA to allow APRNs full practice authority. It is impractical for VA to consult with each State that does not allow full practice authority to APRNs to change their laws regarding full practice authority.

The campaign in support of the proposed rule was not as extensive as the campaign against granting full practice authority to CRNAs. The main lobbyists in support of the proposed rule were the American Nurses Association and the American Association of Nurse Practitioners, who supported a letter campaign. We received 45,915 comments in support of the proposed rule. Of these 45,915, we received specific support of individual APRN roles as follows: 9,613 in support of CRNAs, 1,079 in support of CNM, and 495 in support of CNPs. These commenters agreed that the proposed rule aligns with the Institute of Medicine (IOM) of the National Academy of Sciences 2010 IOM Report in that the rule removes scope of-practice barriers and increases access to VA care. The commenters also agreed that the APRNs are highly skilled in their particular APRN role, as demonstrated by their education and hours of skilled training. Several commenters stated that “APRNs will deliver care to the full scope of their education and training and ensure that the VA has the flexibility to utilize all providers within the healthcare team, maximizing the effective use of resources and providing optimal care for the men and women who have served our country in uniform.” Other commenters supported the proposed rule by stating “this proposal supports the VHA team model of care and promotes efficiency in healthcare delivery by making smarter use of the 6,000 APRNs” that are employed by VA. “Most importantly, this proposal has the ability to make real and significant improvements to the availability of high-quality care for millions of Veterans.” The commenters also stated that “APRN full practice authority within the VA would create nationwide consistency, thereby improving upon the current patchwork of state regulations and making the most effective use of these health care professionals.” We thank the commenters for their support of the proposed rule.

We received a comment in support of the proposed rule from the Federal Trade Commission (FTC). The FTC focuses on the “impact of regulation on competition in the private sector and, ultimately, on consumers.” The FTC's main interest in the proposed rule was “the extent that the VA's actions may encourage entry into health care service provider markets, broaden the availability of health care services outside the VHA system, as well as within it, and yield information about new models of health care delivery.” The FTC believes that its experience “may inform and support the VA's endeavor.” The FTC staff supports the granting of full practice authority to APRNs, which will benefit “VA's patients and the institution itself, by improving access to care, containing costs, and expanding innovation in health care delivery.” VA's actions could also spur competition among “health care providers and generate additional data in support of safe APRN practice,” which could also spill into the private health care sector. We thank the FTC for their support of the proposed rule and make no edits based on this comment.

Several commenters stated that they were concerned with proposed § 17.415(d)(1)(i)(B), where we stated that a Certified Nurse Practitioner (CNP) may order, perform, or supervise laboratory studies. The commenters stated that the proposed language does not “adequately appreciate the levels of complexity involved in laboratory testing” and that there are rigid standards for laboratory tests that require rigorous academic and practical training, which are not part of the training for APRNs. Another commenter stated, “While the VHA uses the word `interpret' in reference to laboratory and imaging studies,” the commenter “. . . infers that the VA's intent is to grant the ability for CNPs to interpret laboratory and imaging results, not to interpret or report raw images or data.” The commenter suggested that VA amend the term “`interpret' and recommends instead to use `integrate results into clinical decision making,' or some other phrase” in order to avoid confusion between the duties of an APRN and those of a laboratory specialist. We agree with the commenter in that the proposed language might be construed as allowing CNPs the ability to perform laboratory studies. It is not VA's intent to have APRNs take over the role of laboratory specialists. These specialists perform a crucial role at VA medical facilities and are skillfully trained in performing the various testing techniques that allow health care professionals to properly treat a veteran's medical condition. We are amending proposed § 17.415(d)(1)(i)(B) to now state that a CNP may be granted full practice authority to “Order laboratory and imaging studies and integrate the results into clinical decision making.”

Other commenters were similarly concerned with the language in proposed § 17.415(d)(1)(i)(B), but as it refers to ordering, performing, supervising and interpreting imaging studies. The commenters stated that only trained radiologists, who undergo 10 years of comprehensive training to accurately interpret high-tech imaging exams and safely account for the radiation used in many scans should perform these duties. The commenters further stated that imaging exams should only be performed by registered radiological technologists. It is not VA's intent to replace our highly qualified radiologists or radiological technologists. VA is committed to providing high quality health care for our nation's veterans and is proud of the outstanding work performed by radiologists in our system. We note, however, that during the course of care, other health care providers may review radiology exams and make evaluations based upon the radiologist's findings. These health care providers include providers in emergency departments, primary care clinics, and specialty clinics throughout the VA health care system. All radiology studies are formally performed and read by individuals who are credentialed in radiology. This rulemaking will not change this practice. In order to avoid confusion, we are amending § 17.415(d)(1)(i)(B) by removing performing, supervising, and interpreting imaging studies and replacing it with “Order laboratory and imaging studies and integrate the results into clinical decision making.”

Some commenters were also concerned that CNPs “may order more imaging studies, which increases the total cost and the radiation dose to the patient.” One commenter cited a study that indicated that CNPs may order imaging more frequently than primary care physicians. However, the study defined advanced practice clinicians to include CNPs and physician assistants, and did not differentiate between these two different types of health care providers in the study. This rulemaking only addresses APRNs, and it is unclear how the study was influenced by including physician assistants. It's also unclear whether there is actually a significantly higher rate of ordering imaging among these groups. We found no other significant evidence provided by the commenters to support the claim that CNPs order more imaging studies than physicians. For these reasons, we make no changes based on this comment.

Several commenters were concerned that the value of team-based care would be undermined by granting full practice authority to APRNs. They stated that physicians and other members of a health care team bring unique value to patient care that is based on the individual member's education, skill, and training. The commenters argued that by eliminating team-based care, patients would be placed at risk. Team-based care is an integral part of VA health care and is used in a wide range of settings, which include polytrauma care, nutrition support, and primary care. VA will continue to provide the already established team-based care to properly treat the veteran's individual health care needs. The proposed rule only addressed the granting of full practice authority to APRNs and does not address team-based care. Any change to current VA team-based health care is beyond the scope of this rulemaking. We are not making any edits based on these comments.

Other commenters questioned an APRN's years of training versus those of a physician, citing an American Medical Association statement that “physicians typically receive a combined total of over 10,000 hours of training and patient experience prior to beginning practice, whereas the typical APRN receives less than 1,000 hours of training and patient experience.” The commenters added that trained physicians should be taking care of the veterans' medical needs as opposed to a nurse who has not received the same training and education as physicians. APRN education is competency based and APRNs must demonstrate that they have integrated the knowledge and skill to provide safe patient care. Entry into APRN practice is predicated on the requirement to attain national certification. APRNs are held to the same standard as physicians in measuring patient outcomes for safe and effective care. VHA acknowledges the fact there are differences in physician and APRN educational and training models and is not planning on replacing physicians with APRNs in any health care setting within VHA.

APRNs are valuable members of VA's health care system and provide a degree of much needed experience to alleviate the current access problems that are affecting VA. APRNs, like physicians, are required to maintain their State license and their health care skills are continuously assessed through the privileging process. As we stated in the proposed rule “APRNs would not be authorized to replace or act as physicians or to provide any health care services that are beyond their clinical education, training, and national certification” and an APRN will require approval of their credentials and privileges by the VA medical facility's medical executive committee. An APRN will refer patients to a physician for care that goes beyond that of the APRN's training. We will not make any edits based on these comments.

Several commenters stated that they would like all veterans to receive the best and safest medical care in VA and do not believe that granting APRNs full practice authority will lead to such care. As previously stated in this final rule, VHA's primary function is to “provide a complete medical and hospital service for the medical care and treatment of veterans” under 38 U.S.C. 7301(b). We also stated in the proposed rule that in carrying out this function, VHA has an obligation to ensure that patient care is appropriate and safe and its health care practitioners meet or exceed generally-accepted professional standards for patient care. The general qualifications for a person to be appointed as a VA nurse are found in 38 U.S.C. 7402(b)(3). In addition to these general qualifications, the proposed rule stated that APRNs would now be required to have “successfully completed a nationally-accredited, graduate-level educational program that prepares the advanced practice registered nurse in one of the four APRN roles; and to possess, and maintain, national certification and State licensure in that APRN role.” VA believes that these additional qualifications for APRNs ensure that VA has highly qualified health care personnel to provide safe health care to veterans. In addition, the VA medical facility's medical executive committee will be responsible for the quality and oversight of the health care provider. Additionally, the IOM Report states that “the contention that APRNs are less able than physicians to deliver care that is safe, effective, and efficient is not supported by the decades of research that has examined this question (Brown and Grimes, 1995; Fairman, 2008; Groth et al., 2010; Hatem et al., 2008; Hogan et al., 2010; Horrocks et al., 2002; Hughes et al., 2010; Laurant et al., 2004; Mundinger et al., 2000; Office of Technology Assessment, 1986). No studies suggest that care is better in states that have more restrictive scope-of-practice regulations for APRNs than in those that do not.” We will not make any edits based on these comments.

Several commenters stated that the proposed rule would undermine the State requirement that CNPs need to collaborate with or be supervised by physicians. They were also concerned that the rule would eliminate local control of licensing and regulation of physicians and health care providers, which would result in lower standard of care. We note that there may be discrepancies between State practice acts and this final rule which is why this regulation preempts conflicting state and local law. As we stated in the proposed rule, “In circumstances where there is a conflict between Federal and State Law, Federal law prevails in accordance with Article VI, clause 2, of the U.S. Constitution (Supremacy Clause).” We also stated “where there is conflict between State law and Federal law with regard to full practice authority of APRNs working within the scope of their federal VA employment, this regulation would control.” Again, we emphasize that this rule only preempts State law for VA employees practicing within the scope of their VA employment, and that as a result, any such infringement upon State authority would be limited. Further, this final rule does not eliminate the APRN's need to possess a license from a State licensing board in one of the recognized APRN roles. This is a requirement in proposed § 17.415(a)(3). Proposed § 17.415(a)(4) also requires an APRN to maintain both the national certification and licensure. In addition to these requirements, an APRN must demonstrate the knowledge and skills necessary to provide the services described in proposed § 17.415(d) without the clinical oversight of a physician, and is thus qualified to be privileged for such scope of practice by the medical executive committee. These measures will ensure that patients receive care from an APRN that is credentialed and privileged to perform the specified tasks and will promote patient safety. We will not make any edits based on these comments.

Several commenters were concerned that APRNs would be at a higher risk of malpractice, especially when the APRN's State license does not grant full practice authority. A commenter asserted that the APRN's defense would be diminished when the “state in which the APRN is practicing in deems an act beyond the provider's scope of practice, but the Federal government has given all APRNs the broadest rights available.” Under the Federal Tort Claims Act, 28 U.S.C. 1346(b), 2401(b), 2671-2680, and the Westfall Act, 28 U.S.C. 2679(b)-(d), employees furnishing medical care or services in the exercise of their duties for VHA are immune from personal liability for malpractice in the scope of their employment; the rule clarifies the intent of VA that APRNs will be acting within the scope of employment when performing their duties in the capacities set forth herein. The commenters further stated that the preemption of State law would create a discrepancy with VA policy in that VA states in the proposed rule that an APRN must be licensed by a State. As previously stated in this rulemaking, where there is conflict between State law and Federal law with regard to full practice authority of APRNs working within the scope of their Federal employment, this regulation would control. In doing so, VA is better able to protect the APRNs against any challenge of their State license when practicing within the scope of their VA employment. VA does not see a disconnect between preemption and the requirement that an APRN must have a State license. Such requirement is established in statute under 38 U.S.C. 7402 for the qualifications of appointment as a health care provider in VA. As we stated in the proposed rule, we are establishing “additional professional qualifications an individual must possess to be appointed as an APRN within VA.” These additional requirements go beyond the requirements of some State licenses and ensure consistency for health care provided within VA. We are not making any edits to the rule based on these comments.

One commenter indicated that the proposed rule stated “Section 4 of Executive Order 13132 requires that when an agency proposes to act through rulemaking to preempt state law, `the agency shall consult, to the extent practicable, with appropriate State and local officials in an effort to avoid such conflict.' ” [Emphasis added.] The commenter further stated that “VA did not provide affected state and local officials with such notice.” Specifically, “no state medical boards (whether osteopathic or allopathic) were consulted. By the very nature of the Notice of Proposed Rule Making (NPRM), these state medical boards, who are charged with overseeing independent medical practice and assuring patient safety, are `affected State officials.' ” Initially, we note that section 1(d) of the Executive Order defines State and local officials as including only elected officials, and we do not believe the officials overseeing State medical boards are elected. Additionally, section 4 of the Executive Order, as cited by the commenter, states that the “agency shall consult, to the extent practicable” with affected State and local officials (emphasis added). Because advanced practice registered nurses, particularly NPs, are typically regulated by state Boards of Nursing rather than by State medical board we believe they are most affected by this rule.11 Although VA did not specifically engage State medical boards, VA reached out to several medical associations, including the American College of Surgeons, American Academy of Family Practice Physicians, American Society of Anesthesiologists, American Medical Association, Association of American Medical Colleges, and, although not a medical association, The Joint Commission-Office of Accreditation and Certification. VA consulted with elected State officials, as required by Executive Order 13132, when it received numerous calls and correspondence from State and local officials in support of this proposed rule. Such State and local officials included State Senators from Georgia and Illinois, State Representatives from Florida, Ohio, Vermont, North Carolina, Georgia, and Illinois, County Commissioners from Nevada, Ohio, and North Carolina, and the State Comptroller and Secretary of State from Illinois, to name a few. We also consulted with the National Council of State Boards of Nursing. We believe that VA's efforts to consult with State and local officials meet the requirements of section 4(d) of Executive Order 13132. Furthermore, the proposed rule encouraged any comments regarding the granting of full practice authority, which afforded the “affected State and local officials notice and an opportunity for appropriate participation in the proceedings.” As we state in the Federalism paragraph in this rule, at least twelve States responded to VA's outreach efforts prior to publication of the proposed rule. It would have been impracticable for VA to have consulted with all State medical boards as an outreach effort prior to publication of the proposed rule. We are not making edits based on this comment.

Another commenter stated that the proposed rule “will directly affect many individuals and will directly affect small entities.” The commenter further stated that the rule should not be exempt from the initial regulatory flexibility analysis as stated in the Regulatory Flexibility Act (5 U.S.C. 603 and 604), will not maximize net benefits and equity and will raise novel and legal policy issues. Another comment emphasizes only that “some private-sector anesthesiology services” are provided by small physician practices, which “may” include nurse anesthetists. It further notes that in a “limited” number of states, there is a “possibility” that private sector anesthetists could be induced to work at VA instead of in the private sector. None of these claims demonstrate that the regulation would have a significant economic effect on a substantial number of small entities; VA found no such effect would result in its proposed rule, and certified this finding as required by 5 U.S.C. 605(b). We further note that private sector providers are not subject to the proposed regulation, which would only regulate the activities of VA employees, and hence would be outside the scope of a required analysis under the Regulatory Flexibility Act. See, e.g., Mid-Tex Electric Cooperative v. FERC, 773 F.2d 327, 342-3 (D.C. Cir. 1985); Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 868-9 (D.C. Cir. 2001); and Aeronautical Repair Station Ass'n v. F.A.A., 494 F.3d 161, 174-7. We are not making any edits based on these comments.

Another commenter was in support of the proposed rule, but had concerns regarding prescriptive authority, namely that in some States the prescriptive authority regulations “are linked to scope of practice laws which would create confusion in VA facilities operating within those states.” The commenter further stated that “collaborative agreements may limit the scope of practice of the advanced practice registered nurse and inhibit full practice authority.” VA understands that the proposed change could create confusion, and as a result, VA will train and educate its APRNs in their authorities based upon this rule to reduce the potential for confusion and to ensure they can practice to the full extent of their authority. We make no edits based on this comment.

A commenter stated a belief that there is a distinction “between the ability of APRNs to perform tasks autonomously and their ability to practice independently. The former is a well-established practice, while the latter is controversial.” The commenter distinguished “ `autonomy' from `independence,' the latter referring to practitioners acting alone and not in a team-based model.” The commenter stated that they support “highly trained APPs who are part of a care team practicing autonomously within the scope and ability of their licensure. This is generally accomplished with collaborative practice between a collaborating physician and APPs on the care team.” We previously stated in this final rule that team-based care was not addressed in the proposed rule. Team-based care is an integral part of VA health care, and we will continue to adhere to the already established team-based models of care within VA. We are not making any edits based on this comment.

Several commenters stated that VA should include physician assistants (PA) in the final rule and grant them full practice authority as well. Other commenters were opposed to the granting of full practice authority to PAs. We similarly received comments requesting that we include pharmacist practitioners in the rule. The granting of full practice authority to PAs and pharmacist practitioners was not addressed in the proposed rule and granting such authority in this final rule is beyond the scope of the proposed rule. VA would only be able to address the granting of full practice authority to PAs and pharmacist assistants in a future rulemaking.

One commenter opposed the proposed rule and urged VA “to instead focus on ways to improve access to care provided to veterans in community settings through the Choice Program. This would reduce wait times for appointments for all veterans, and free up VA clinicians to care for sicker and more complex patients in VA facilities prepared to address their unique needs.” The Veterans Choice Program is authorized by section 101 of the Veterans Access, Choice, and Accountability Act of 2014. The program is implemented in 38 CFR 17.1500 through 17.1540. The proposed rule did not address the Veterans Choice Program, and in no way affects the Veterans Choice Program. This comment is beyond the scope of this rulemaking. We are not making any edits based on this comment.

One commenter suggested that VA amend its application process for hiring physicians citing that there are delays in the usajobs.gov job portal that often leads physicians to remove themselves from job contention. The application process for physician positions was not addressed in the proposed rule, and this issue is beyond the scope of this rulemaking. We are not making any edits based on this comment.

VA received many comments that expressed general support or opposition to this rulemaking and raised various issues related to administration of the VA health care system or VA benefits that are beyond the scope of this rulemaking. We make no changes based on these comments.

We are making a minor typographical edit by adding a comma in proposed § 17.415(e) to correct an error in the proposed rule. We are also amending the last sentence of the paragraph to now read “Any State or local law, or regulation pursuant to such law, is without any force or effect on, and State or local governments have no legal authority to enforce them in relation to, activities performed under this section or decisions made by VA under this section.” The proposed rule inadvertently did not include the phrase “activities performed under”. We are now adding this clarifying language.

Based on the rationale set forth in the Supplementary Information to the proposed rule and in this final rule, VA is amending the proposed rule with the edits stated in this final rule.

Section 4 of Executive Order 13132 (titled “Federalism”) requires an agency that is publishing a regulation that preempts State law to follow certain procedures. Section 4(b) of the Executive Order requires agencies to “construe any authorization in the statute for the issuance of regulations as authorizing preemption of State law by rulemaking only when the exercise of State authority directly conflicts with the exercise of Federal authority under the Federal statute or there is clear evidence to conclude that the Congress intended the agency to have the authority to preempt State law.” Section 4(d) of the Executive Order requires that when an agency proposes to act through rulemaking to preempt State law, “the agency shall consult, to the extent practicable, with appropriate State and local officials in an effort to avoid such a conflict.” Section 4(e) of the Executive Order requires that when an agency proposes to act through rulemaking to preempt State law, “the agency shall provide all affected State and local officials notice and an opportunity for appropriate participation in the proceedings.”

Section 6(c) of Executive Order 13132 states that “no agency shall promulgate any regulation that has federalism implications and that preempts State law, unless the agency, prior to the formal promulgation of the regulation, (1) consulted with State and local officials early in the process of developing the proposed regulation; (2) in a separately identified portion of the preamble to the regulation as it is to be issued in the Federal Register, provides to the Director of the Office of Management and Budget a federalism summary impact statement, which consists of a description of the extent of the agency's prior consultation with State and local officials, a summary of the nature of their concerns and the agency's position supporting the need to issue the regulation, and a statement of the extent to which the concerns of State and local officials have been met; and (3) makes available to the Director of the Office of Management and Budget any written communications submitted to the agency by State and local officials.”

Because this regulation addresses preemption of certain State laws, VA conducted prior consultation with State officials in compliance with Executive Order 13132. Such State officials include State Senators from Georgia and Illinois, State Representatives from Florida, Ohio, Vermont, North Carolina, Georgia, and Illinois, County Commissioners from Nevada, Ohio, and North Carolina, and the State Comptroller and Secretary of State from Illinois, to name a few. Although not necessarily required by the Executive Order, VA sent a letter to the National Council of State Boards of Nursing to state VA's intent to allow full practice authority to VA APRNs and for the National Council of State Boards of Nursing (NCSBN) to notify every State Board of Nursing of VA's intent and to seek feedback from such Boards of Nursing. In response to its request for comments, VA received correspondence from the Executive Director and other relevant staff members within NCSBN, which agreed with VA's position that this rulemaking properly identifies the areas in VA regulations that preempt State laws and regulations.

VA additionally engaged other relevant external groups on the proposed changes in this rulemaking, including the American Association of Nurse Anesthetists, American Association of Nurse Practitioners, American College of Surgeons, American Academy of Family Practice Physicians, American Society of Anesthesiologists, American Medical Association, Association of American Medical Colleges, The Joint Commission-Office of Accreditation and Certification, American Association of Retired Persons, American Legion, Blinded Veterans Association, Vietnam Veterans of America, American Women Veterans, Disabled American Veterans, Paralyzed Veterans of America, and Veterans of Foreign Wars. VA also engaged the Senate and House Veterans' Affairs Committees and the Senate and House Armed Services Committees.

Many external stakeholders expressed general support for VA's positions taken in the proposed rule, particularly with respect to full practice authority of APRNs in primary health care. However, we also received comments opposing full practice authority for CRNAs when providing anesthetics. To aid in VA's full consideration to this issue, VA encouraged any comments regarding the proposed full practice authority. In this way, VA provided all affected State and local officials notice and an opportunity for appropriate participation in the proceedings.

VA's promulgation of this regulation complies with the requirements of Executive Order 13132 by (1) in the absence of explicit preemption in the authorizing statute, identifying where the exercise of State authority conflicts with the exercise of Federal authority under Federal statute; (2) limiting the preemption to only those areas where we find a conflict exists; (3) restricting the regulatory preemption to the minimum level necessary to achieve the objectives of the statute; (4) receiving and considering input from State and local officials as indicated above; and (5) providing opportunity for comment through this rulemaking.

Title 38 of the Code of Federal Regulations, as revised by this final rulemaking, represents VA's implementation of its legal authority on this subject. Other than future amendments to this regulation or governing statutes, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance must be read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This final rule directly affects only individuals and would not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” requiring review by the Office of Management and Budget (OMB), unless OMB waives such review, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined, and it has been determined to be a significant regulatory action under Executive Order 12866 because it is likely to result in a rule that may raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's Web site at http://www.va.gov/orpm/, by following the link for “VA Regulations Published From FY 2004 Through Fiscal Year to Date.”

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This final rule has no such effect on State, local, and tribal governments, or on the private sector.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are: 64.007, Blind Rehabilitation Centers; 64.008, Veterans Domiciliary Care; 64.009, Veterans Medical Care Benefits; 64.010, Veterans Nursing Home Care; 64.011, Veterans Dental Care; 64.012, Veterans Prescription Service; 64.013, Veterans Prosthetic Appliances; 64.014, Veterans State Domiciliary Care; 64.015, Veterans State Nursing Home Care; 64.018, Sharing Specialized Medical Resources; 64.019, Veterans Rehabilitation Alcohol and Drug Dependence; 64.022, Veterans Home Based Primary Care; and 64.024, VA Homeless Providers Grant and Per Diem Program.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Robert D. Snyder, Chief of Staff, Department of Veterans Affairs, approved this document on September 2, 2016, for publication.

For the reasons set forth in the preamble, we amend 38 CFR part 17 as follows:

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

The background for this action is discussed in detail in our September 27, 2016, (81 FR 66240) proposal. In that document, we proposed to determine that the HGB area failed to attain the 2008 ozone NAAQS by the applicable attainment deadline of July 20, 2016,1 and to reclassify the area as Moderate. We also proposed that Texas must submit to us the SIP revisions to address the Moderate ozone nonattainment area requirements of the CAA section 182(b), as interpreted by 40 CFR part 51 Subpart AA, by January 1, 2017. We received comments on the proposal from one commenter. Our response to comments are presented below.

Under APA section 553(d)(3), 5 U.S.C. 553(d)(3), an agency may make a rule immediately effective “for good cause found and published with the rule.” The EPA believes that there is “good cause” to make this rule effective upon publication in the Federal Register in order to avoid an impractical outcome and to provide time for the state to meet the relevant statutory and regulatory deadlines. Specifically, for any areas classified as Moderate nonattainment for the 2008 ozone NAAQS, the EPA has interpreted CAA section 182, in conjunction with 40 CFR 51.1108(d) and 51.1112(a)(3), to require states to submit their Moderate area SIP revisions and comply with RACT implementation requirements by January 1, 2017. While EPA acknowledges and addresses comments related to the compressed timeline associated with this action elsewhere in this notice, the agency believes that establishing an effective date of this action simultaneous with the date of publication will reconcile the competing statutory interests by eliminating a potentially impractical outcome in which the area might otherwise be subject to Moderate nonattainment area statutory and regulatory deadlines that would already have passed prior to the normal 30 days post-publication effective date. EPA made clear in the action providing the initial extension for this area that absent a second extension, a state would be under a tight deadline to develop an acceptable attainment plan. See 81 FR 26703. When 2015 monitoring data became available earlier this year showing that the HGB area would not be eligible for a second one-year extension, the state had every reason to anticipate and prepare for reclassification. In addition, EPA published its proposed rule for this reclassification on September 27, 2016 and is providing direct notice to the state of this final action simultaneous with signature of this rule. Accordingly, the EPA finds that the preparation time actually available to the state and the need to reconcile the statutory interest in reclassification with the deadlines for submission of Moderate area SIP revisions and compliance with RACT implementation requirements, constitute good cause under 5 U.S.C. 553(d)(3) to make this final action effective upon publication.

The EPA published the proposed rule for this action on September 27, 2016, (81 FR 66240), and started a public comment period that ended on October 27, 2016. We received one set of comments from one commenter, Texas Commission on Environmental Quality (TCEQ) during this period. The comments received from TCEQ can be found in the electronic docket for this action.

Comment 1: TCEQ stated that the proposed SIP submittal deadline of January 1, 2017 for the HGB area is unreasonable, not consistent with previous practice, and the EPA's lack of timely notification of the abbreviated schedule resulted is an undue burden on the state and stakeholders in the HGB area. Instead EPA staff communicated to the State and local stakeholders on several occasions that these SIP revisions would be due one year from final reclassification by the EPA. TCEQ also requested a clarification on how the EPA is working with them to support submittal of the required moderate nonattainment SIP by the proposed January 1, 2017.

EPA Response: EPA greatly appreciates the State's commitment to meet the January 1, 2017 submittal deadline and we understand the significant effort involved in preparing an attainment SIP revision. TCEQ states that they have in the past received a year to submit SIP revisions once reclassified and they should have been given more notice that the time frame for this reclassification's submittal date would be shorter. In fact, as early as 2015 EPA stated we would be linking the submittal due date for Moderate areas to the ozone season of 2017. EPA explained this in our August 27, 2015 (80 FR 51992 at 51999) proposal in relation to reclassifying 11 Marginal nonattainment areas. When that proposal was finalized at 81 FR 26697, (May 4, 2016) we established a submittal due date for those Moderate areas as expeditiously as practicable, but no later than January 1, 2017, so control measures could be in place no later than the ozone season preceding the attainment year. This provided approximately 9 months for these reclassified areas to submit an attainment plan, clearly not a year. In addition, we stated in the May 4, 2016, final rule that Marginal areas like Sheboygan County, Wisconsin that received a 1-year extension based on certified 2012-2014 air quality data would not likely attain or receive a second 1-year attainment date extension as indicated by preliminary 2015 air quality data, and that the area should begin preparing for that possibility. We also stated that “we expect Wisconsin to be taking the necessary steps to achieve timely attainment . . .” 81 FR 26697, 26703. The HGB area also met the criteria of CAA section 181(a)(5), as interpreted in 40 CFR 51.1107, similarly to the results of Sheboygan County area and received a 1-year attainment date extension from July 20, 2015 to July 20, 2016. This request for an extension was granted by EPA as part of the May 4, 2016 final action. See, 81 FR 26697 at 26701. Additionally, similar to Sheboygan County, preliminary HGB area air quality data trends for 2015 were not supporting attainment of the July 20, 2016 attainment date or the possibility of EPA granting a second 1-year attainment date extension.

The attainment period (to attain by July 20, 2016) for the HGB area is based on the most recent three full years of ozone available data (which in the case of the HGB area after the first 1-year extension would be 2013-2015 data). The 2015 preliminary air quality data indicated that HGB area would not likely attain the July 20, 2016 attainment date. On April 25, 2016, TCEQ submitted quality assured and certified data with no changes from preliminary data for 2015 air quality data. In addition, the design values TCEQ submitted to EPA on December 2015, demonstrated that Texas was aware they would not attain by the July 20, 2016, date or be eligible for a second 1-year extension and that EPA would propose to reclassify the HGB area as Moderate. Our longstanding policy, as stated in the 1994 EPA Berry Memorandum,2 cautions states to consider whether an attainment date extension will ultimately be helpful if the area is not likely to attain the NAAQS by the extended attainment date.

As stated in the 1994 Berry Memo, EPA's policy regarding attainment date extensions and reclassifications of marginal areas explicitly cautions: “When requesting an extension, States should consider the consequences of eventually not attaining the NAAQS. Although areas can request two 1-year extensions, those that ultimately fail to attain the NAAQS will be bumped up to at least a moderate classification. Consequently, areas that are bumped up will be under very tight timeframes to implement the new SIP requirements, in addition to achieving the reductions to meet the new attainment date.”

Region 6 staff regularly participates in monthly calls with TCEQ, including the April/May 2016 timeframe where TCEQ insisted on the impossibility of submitting a SIP revision for a reclassified HGB area by January 1, 2017. Region 6 notified TCEQ in a May 2016 monthly call that if we didn't get the green light to proceed with a later SIP submittal deadline as they requested, our proposal would be published with a January 1, 2017, SIP submittal deadline and require Reasonable Available Control Technology (RACT) implementation by the same deadline. Ultimately, the January 1, 2017, SIP submission deadline was chosen as being consistent and reasonable based on the information discussed above.

Also, EPA has offered assistance to states as they consider the most appropriate course of action for Marginal areas that may be at risk for failing to meet the NAAQS within the three-year timeframe. States can choose to adopt additional controls for such areas or they can seek a voluntary reclassification to a higher classification category (as Texas did for the HGB area with regard to the 1997 ozone standard). See, 73 FR 56983, October 1, 2008. Also we will continue to offer assistance as we have in the past during the monthly calls regarding the TCEQ Dallas-Fort Worth and HGB 2008 Ozone nonattainment areas. A regular topic on the meetings' agenda is to discuss any issues/updates/actions with TCEQ and offer, assistance/guidance on any issues requested by TCEQ. As TCEQ knows, the determination of how to reach attainment is a state decision. It's up to EPA to determine whether the plan submitted meets the requirements of the CAA. EPA's ability to extend deadlines for areas being reclassified as required by CAA section 181(b)(2) is governed by section 182(i) of the CAA, which directs that the state shall meet the new requirements according to the schedules prescribed in those requirements, but provides “that the Administrator may adjust any applicable deadlines (other than attainment dates) to the extent such adjustment is necessary or appropriate to assure consistency among the required submissions.” CAA section 182(b), as interpreted by 40 CFR 51.1100 et seq., describes the required SIP revisions and associated deadlines for a nonattainment area classified as moderate at the time of the initial designations. Accordingly, EPA proposed to exercise its discretion under CAA section 182(i) to adjust the moderate SIP submittal deadlines for the HGB area.

In determining an appropriate deadline for the moderate area SIP revisions for the HGB area, EPA had to consider that pursuant to 40 CFR 51.1108(d), the state must provide for implementation of all control measures needed for attainment no later than the beginning of the attainment year ozone season. The attainment year ozone season is the complete ozone season immediately preceding a nonattainment area's attainment date. In the case of nonattainment areas classified as moderate for the 2008 ozone NAAQS, the attainment year ozone season is the 2017 ozone season (40 CFR 51.1100(h)). Because an extension of the attainment date is not appropriate here, and control measures for other moderate areas are to be implemented no later than the beginning of the 2017 ozone season, EPA determined it would not be appropriate to adjust the attainment date beyond the beginning of the 2017 ozone season for the HGB area. Further, because ozone seasons begin as early as January 1, EPA determined that a SIP submission deadline of January 1, 2017, is the latest submittal deadline that allows all states to meet 40 CFR 51.1108(d) requirements, and thus assures consistency as directed by 182(i).

We believe based on the facts discussed above that TCEQ was aware of the likelihood of a January 1, 2017 submission deadline, which lines up with the deadlines of the Marginal areas reclassified as Moderate in the 81 FR 26697, (May 4, 2016) action. In that action, we stated that we recognized the value of providing states as much time as possible to develop an attainment demonstration, however, we also recognized the value in establishing a single due date for Moderate area SIP submissions—including RACT—that would not extend beyond the deadline for implementing such controls. We believe the area was provided adequate notice that time to develop and submit a moderate area attainment plan was likely to be short given that the moderate area attainment year ozone season is the 2017 ozone season for the 2008 ozone NAAQS and that other moderate areas were also required to submit their plans in January 2017.

Comment 2: The TCEQ disagrees with the proposed January 1, 2017 RACT compliance deadline for the reclassified HGB area and recommends adjusting this deadline to allow affected entities to comply with RACT no later than July 20, 2018, the Moderate attainment deadline.

EPA Response: In the 2008 ozone NAAQS SIP Requirements Rule, the EPA promulgated that areas must implement RACT measures as expeditiously as practicable, but no later than January 1 of the 5th year after the effective date of nonattainment designation.3 Nonattainment designation for all areas of the country were effective July 20, 2012,4 RACT measures (for areas where they are required) must be implemented by January 1, 2017. We retained the statutory timeframe and the SIP submission deadline of January 1, 2017, in large part, because it occurs no later than the statutory deadline for RACT implementation. In the 2008 ozone NAAQS SIP Requirements Rule, we did state that EPA would set new SIP submission and RACT compliance dates on a reasonable schedule when reclassifying areas. In the May 4, 2016, final rule that made determinations of attainment, provided first 1-year attainment date extensions and reclassified some areas,5 we recognized the value in establishing a single due date for Moderate area SIP submissions—including RACT—that does not extend beyond the deadline for implementing such controls. Thus the EPA set the SIP revision and the RACT compliance deadline to be as expeditiously as practicable, but no later than January 1, 2017. This approach aligns the SIP submittal deadline with the deadline for implementing RACT pursuant to 40 CFR 51.1112(a)(3), for each area, and would ensure that SIPs requiring control measures needed for attainment, including RACM, would be submitted concurrent to when those controls are required to be implemented. This treats states consistently, in keeping with CAA section 182(i). For the reasons discussed in this preamble, we believe this time frame is reasonable and consistent with prior actions included in our May 2016 final action when we reclassified 11 areas from Marginal to Moderate.6

While the commenter objected to the deadline, citing the need to accelerate schedules and expend added resources to have RACT implemented by the proposed deadline, the state, nonetheless, committed to have their state requirements in place by the deadline proposed by EPA. We acknowledge that the timeline for submitting SIP revisions and implement RACT requirements is compressed, yet, the state has not been prohibited from beginning development of Moderate area SIP revisions prior to finalization of this reclassification. In fact, although reclassification of the HGB area is being finalized in this rule, Texas has been aware that EPA would propose to reclassify the HGB area as Moderate from the time that 2015 monitoring data became available showing that the Houston area would not be eligible for an additional 1-year extension. For further discussion of this issue, please see EPA's response to Comment 1 above. Additionally, Texas has experience in developing air quality planning requirements since the HGB area has been previously designated nonattainment for both the 1979 1-hour ozone standard and the 1997 8-hour ozone standard, receiving a classification of Severe for both NAAQS. The EPA has consistently encouraged states to begin working on Moderate area SIP revision requirements ahead of finalization of the reclassification required by the CAA.

A review of the State's SIP revision proposal of September 21, 2016,7 indicates that the state did not specifically propose any additional or new RACT requirements in the 2018 attainment demonstration, yet, simply proposed expanded coverage of a list of existing sources. TCEQ's expansion was stated as follows:

In addition, the EPA notes that after a state's SIP revisions are submitted to EPA, the agency has 6 months to determine completeness of the SIP. Within that timeframe, the state may submit updates or revisions to their SIP submission. After 6 months, if the EPA has not determined the SIP to be complete, the SIP submission is deemed complete by operation of law. There will also be a time span before EPA initiates action to provide notice and comment on EPA's action to approve/disapprove the state's attainment plan. When EPA approves a SIP revision, it becomes federally enforceable at that time. The EPA believes these timeframes provide adequate time for all affected entities to have implemented RACT.

We are determining that the HGB area failed to attain the 2008 ozone NAAQS by the attainment deadline date of July 20, 2016, and to reclassify the area as Moderate. Texas must submit to us the SIP revisions to address the Moderate ozone nonattainment area requirements of the CAA by January 1, 2017. This action is being taken under section 181(b)(2) of the Act. The requirements of this final action is effective immediately upon publication. See, 5 U.S.C. 553(d)(3).

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget for review.

This final action does not impose an information collection burden under the PRA because it does not contain any information collection activities.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action merely determines that the HGB area failed to meet an ozone NAAQS attainment deadline, reclassifies the area, and sets the date when a revised SIP is due to EPA.

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

This action does not have tribal implications as specified in Executive Order 13175. This action does not apply on any Indian reservation land, any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, or non-reservation areas of Indian country. Thus, Executive Order 13175 does not apply to this action.

EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it merely determines that the HGB area failed to meet an ozone NAAQS attainment deadline, reclassifies the area, and sets the date when a revised SIP is due to EPA.

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

This rulemaking does not involve technical standards.

EPA believes the human health or environmental risk addressed by this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations. This action merely determines that the HGB area failed to meet an ozone NAAQS attainment deadline, reclassifies the area, and sets the date when a revised SIP is due to EPA.

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 13, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

40 CFR part 81 is amended as follows:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will be also available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

End-Stage Renal Disease (ESRD) is a kidney impairment that is irreversible and permanent. Dialysis is a process for cleaning the blood and removing excess fluid artificially with special equipment when the kidneys have failed. People with ESRD require either a regular course of dialysis or kidney transplantation in order to live.

Given the high costs and absolute necessity of transplantation or dialysis for people with failed kidneys, Medicare provides health care coverage to qualifying individuals diagnosed with ESRD, regardless of age, including coverage for kidney transplantation, maintenance dialysis, and other health care needs. The ESRD benefit was established by the Social Security Amendments of 1972 (Pub. L. 92-603). This benefit is not a separate program, but allows qualifying individuals of any age to become Medicare beneficiaries and receive coverage. Under the statute, individuals under 65 who are entitled to Medicare through the ESRD program, or individuals over age 65 who are diagnosed with ESRD while in Original Medicare, generally cannot enroll in Medicare Advantage. Additionally, as access to Medigap policies is generally governed by state law, individuals under age 65 who are entitled to Medicare through the ESRD program cannot sign up for a Medigap policy in many States.1

The ESRD Amendments of 1978 (Pub. L. 95-292), amended title XVIII of the Social Security Act (the Act) by adding section 1881 of the Act. Section 1881(b)(1) of the Act further authorizes the Secretary of the Department of Health and Human Services (the Secretary) to prescribe additional requirements (known as conditions for coverage or CfCs) that a facility providing dialysis and transplantation services to dialysis patients must meet to qualify for Medicare payment.

Medicare pays for routine maintenance dialysis provided by Medicare-certified ESRD facilities, also known as dialysis facilities. To gain certification, the State survey agency performs an on-site survey of the facility to determine if it meets the ESRD CfCs at 42 CFR part 494. If a survey indicates that a facility is in compliance with the conditions, and all other Federal requirements are met, CMS then certifies the facility as qualifying for Medicare payment. Medicare payment for outpatient maintenance dialysis is limited to facilities meeting these conditions. The ESRD CfCs were first adopted in 1976 and comprehensively revised in 2008 (73 FR 20369). There are approximately 6,737 Medicare-certified dialysis facilities in the United States, providing dialysis services and specialized care to people with ESRD.

In addition to Medicare, Medicaid provides coverage for some people with ESRD. Many individuals enrolled in Medicare may also qualify for full benefits under the Medicaid program on the basis of their income, receipt of Supplemental Security Income, being determined medically-needy, or other eligibility categories under the State Plan. In addition, low income individuals enrolled in Medicare may qualify for the Medicare Savings Program under which the state's Medicaid program covers some or all of the individual's Medicare premiums and, for some individuals, Medicare cost-sharing. Finally, some individuals who are not eligible for enrollment in Medicare may qualify for Medicaid.

According to data published by the United States Renal Data System (USRDS), Medicare is the predominant payer of ESRD services in the United States, covering (as primary or secondary payer) about 88 percent of the United States ESRD patients receiving hemodialysis in 2014. Among those enrolled in Medicare on the basis of ESRD and receiving hemodialysis in 2015, CMS has determined 41 percent were enrolled in both Medicare and Medicaid (including full and partial duals). Among those enrolled in Medicare on the basis of ESRD under age 65, 51 percent were dual enrollees.

The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010. The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised several provisions of the Patient Protection and the Affordable Care Act, was enacted on March 30, 2010. In this interim final rule with comment, we refer to the two statutes collectively as the “Affordable Care Act.”

The Affordable Care Act reorganizes and amends the provisions of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets. The Affordable Care Act enacted a set of reforms to make health insurance coverage more affordable and accessible to millions of Americans. These reforms include the creation of competitive marketplaces called Affordable Insurance Exchanges, or “Exchanges” through which qualified individuals and qualified employers can purchase health insurance coverage.

In addition, many individuals who enroll in qualified health plans (QHPs) through individual market Exchanges are eligible for advance payments of the premium tax credit (APTC) to make health insurance premiums more affordable, and cost-sharing reduction (CSR) payments to reduce out-of-pocket expenses for health care services. Individuals enrolled in Medicare or Medicaid are not eligible for APTC or CSRs. The Affordable Care Act also established a risk adjustment program and other measures that are intended to mitigate the potential impact of adverse selection and stabilize the price of health insurance in the individual and small group markets.

The Public Health Service Act, as amended by the Affordable Care Act, generally prohibits group health plans and health insurance issuers offering group or individual health insurance coverage from imposing any preexisting condition exclusions. Health insurers can no longer charge different cost sharing or deny coverage to an individual because of a pre-existing health condition. Health insurance issuers also cannot limit benefits for that condition. The pre-existing condition provision does not apply to “grandfathered” individual health insurance policies.

Beginning January 1, 2014, the Affordable Care Act prohibited insurers in the individual and group markets (with the exception of grandfathered individual plans) from imposing pre-existing condition exclusions. The Affordable Care Act's prohibition on pre-existing condition exclusions enables consumers to access necessary benefits and services, beginning from their first day of coverage. The law also requires insurance companies to guarantee the availability and renewability of non-grandfathered health plans to any applicant regardless of his or her health status, subject to certain exceptions. It imposes rating restrictions on issuers prohibiting non-grandfathered individual and small group market insurance plans from varying premiums based on an individual's health status. Issuers of such plans are now only allowed to vary premiums based on age, family size, geography, or tobacco use.

In previous rulemaking, CMS outlined major provisions and parameters related to many Affordable Care Act programs. This includes regulations at 45 CFR 156.1250, which require, among other things, that issuers offering individual market QHPs, including stand-alone dental plans, and their downstream entities, accept premium payments made on behalf of QHP enrollees from the following third party entities (in the case of a downstream entity, to the extent the entity routinely collects premiums or cost sharing): (1) A Ryan White HIV/AIDS Program under title XXVI of the PHS Act; (2) an Indian tribe, tribal organization, or urban Indian organization; and (3) a local, state, or Federal government program, including a grantee directed by a government program to make payments on its behalf. This regulation made clear that it did not prevent issuers from contractually prohibiting other third party payments. The regulation also reiterated that CMS discouraged premium payments and cost sharing assistance by certain other entities, including hospitals and other health care providers, and discouraged issuers from accepting premium payments from such providers.2 Regulations at 45 CFR 156.1240 require issuers offering individual market QHPs to accept payment from individuals in the form of paper checks, cashier's checks, money orders, EFT, and all general-purpose pre-paid debit cards. Regulations at 45 CFR 147.104 and 156.805 prohibit issuers from discriminating against or employing marketing practices that discriminate against individuals with significant health care needs.

Individuals who are already covered by Medicare generally cannot become concurrently enrolled in coverage in the individual market. Section 1882(d)(3) of the Act makes it unlawful to sell or issue a health insurance policy (including policies issued on and off Exchanges) to an individual entitled to benefits under Medicare Part A or enrolled under Medicare part B with the knowledge that the policy duplicates the health benefits to which the individual is entitled. Therefore, while an individual with ESRD is not required to apply for and enroll in Medicare, once they become covered by Medicare it is unlawful for them to be sold a commercial health insurance policy in the individual market if the seller knows the individual market policy would duplicate benefits to which the individual is entitled.3 CMS has, moreover, solicited comments in a recent proposed rulemaking about whether it is unlawful in most or all cases to knowingly renew coverage under the same circumstances.4

I. Background:

NASA published an interim rule in the Federal Register at 81 FR 63143 on September 14, 2016, to amend the NASA Federal Acquisition Regulation Supplement (NFS) to implement revisions to the voucher submittal and payment process.

There were no public comments submitted in response to the interim rule. The interim rule has been converted to a final rule, without change.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

NASA does not expect this final rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. A final regulatory flexibility analysis has been performed and is summarized as follows:

The purpose of this rule is to implement revisions to the NASA voucher submittal and payment process. These revisions are necessary due to section 893 of the National Defense Authorization Act for Fiscal Year 2016 (Pub. L. 114-92) prohibiting DCAA from performing audit work for non-Defense Agencies. This rule removes an outdated NFS payment clause and its associated prescription relative to the NASA voucher submittal and payment process and replaces it with a new clause that revises NASA's current cost voucher submission and payment process to ensure the continued prompt payment to its suppliers.

No comments were received in response to the initial regulatory flexibility analysis.

This rule applies to contractors requesting payment under cost reimbursement contracts. An analysis of data in the Federal Procurement Data System (FPDS) revealed that cost reimbursement contracts are primarily awarded to large businesses. FPDS data compiled over the past three fiscal years (FY 2013 through FY 2015) showed an average of 311 active cost reimbursement NASA contracts, of which 141 (approximately 45%) were awarded to small businesses. However, there is no significant economic or administrative cost impact to small or large businesses because the rule does not impose any additional burden and will have a positive benefit in the way of fewer voucher rejections, rework, and payment delays.

There are no new reporting requirements or recordkeeping requirements associated with this rule. Further, there are no significant alternatives that could further minimize the already minimal impact on businesses, small or large.

The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35); however, these changes to the NFS do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 9000-0070, entitled Payments—FAR Sections Affected: 52.232-1 thru 52.232-4 and 52.232-6 thru 52.232-11.

Section 12 of the Surface Transportation Board Reauthorization Act of 2015, Public Law 114-110, 129 Stat. 2228 (2015) (STB Reauthorization Act or Act) (see 49 U.S.C. 11701) authorizes the Board to investigate, on its own initiative, issues that are “of national or regional significance” and are subject to the Board's jurisdiction under 49 U.S.C. Subtitle IV, Part A. Under Section 12, the Board must issue rules implementing this investigative authority not later than one year after the date of enactment of the STB Reauthorization Act (by December 18, 2016).

By decision served on May 16, 2016, the Board issued a Notice of Proposed Rulemaking (NPRM) in which the Board proposed rules for investigations conducted on the Board's own initiative pursuant to Section 12 of the STB Reauthorization Act. The proposed rules were published in the Federal Register, 81 FR 30,510 (May 17, 2016), and comments were submitted in response to the NPRM.1

After consideration of parties' comments, the Board is adopting final rules, to be set forth at 49 CFR part 1122, that establish the procedures for Board investigations conducted pursuant to Section 12 of the STB Reauthorization Act. These final rules do not apply to other types of investigations that the Board may conduct.

The STB Reauthorization Act provides a basic framework for conducting investigations on the Board's own initiative, as follows:

Within 30 days after initiating an investigation, the Board must provide notice to parties under investigation stating the basis for such investigation. The Board may only investigate issues that are of national or regional significance. Parties under investigation have a right to file a written statement describing all or any facts and circumstances concerning a matter under investigation. The Board should separate the investigative and decisionmaking functions of Board staff to the extent practicable.

Investigations must be dismissed if they are not concluded with administrative finality within one year after commencement.2 In any such investigation, Board staff must make available to the parties under investigation and the Board Members any recommendations made as a result of the investigation and a summary of the findings that support such recommendations. Within 90 days of receiving the recommendations and summary of findings, the Board must either dismiss the investigation if no further action is warranted, or initiate a proceeding to determine whether a provision of 49 U.S.C. Subtitle IV, Part A has been violated. Any remedy that the Board may order as a result of such a proceeding may only be applied prospectively.

The STB Reauthorization Act further requires that the rules issued under Section 12 comply with the requirements of 49 U.S.C. 11701(d) (as amended by the STB Reauthorization Act), satisfy due process requirements, and take into account ex parte constraints.

In the NPRM, the Board proposed a three-stage process, consisting of (1) Preliminary Fact-Finding, (2) Board-Initiated Investigations, and (3) Formal Board Proceedings. Having considered the comments, the Board will adopt this three-stage process in the final rules, subject to certain modifications from what was proposed in the NPRM. Below we address the comments received in response to the NPRM pertaining to each stage, as well as other related issues, and the Board's responses, including modifications from the NPRM. The final rules are below.

As proposed in the NPRM, Preliminary Fact-Finding refers to the process in which Board staff would conduct, at their discretion, an initial, informal, nonpublic inquiry regarding an issue. The purpose of the Preliminary Fact-Finding would be to determine if there is enough information to warrant a request for authorization to open a Board-Initiated Investigation into whether there may be a potential violation of 49 U.S.C. Subtitle IV, Part A, of national or regional significance. In this section, we address parties' comments on (1) whether the Board should adopt a time limit for Preliminary Fact-Finding, (2) whether Preliminary Fact-Finding should be confidential, (3) how the Board should decide to commence Preliminary Fact-Finding, and (4) fact-gathering.

Time Limit for Preliminary Fact-Finding. In the NPRM, the Board did not impose a time limit on Preliminary Fact-Finding. Because Board staff would be solely determining whether a matter merits seeking authorization to pursue a Board-Initiated Investigation, and would not be able to issue subpoenas to compel testimony or the production of information or documents, the Board does not consider this stage to be part of the one-year period for an investigation. Some commenters, however, contend that the statutorily-mandated one-year time limit for investigations should include Preliminary Fact-Finding. Other commenters disagree with including Preliminary Fact-Finding in the statutorily-mandated one-year time limit for investigations, arguing that the Board should instead impose a “reasonable time limit” on Preliminary Fact-Finding.

In particular, AAR asserts that the one-year time limit for investigations should apply to Preliminary Fact-Finding because an “open-ended, limitless Preliminary Fact-Finding phase” would undermine the “purpose of the statutory scheme” and would force parties to “endure the burdens and uncertainty of an open-ended inquiry that could last for years.” 3 (AAR Comment 4.)

NSR asserts two arguments in support of including Preliminary Fact-Finding in the one-year time limit. First, NSR states that the plain language of the statute “expressly provides that the Board has one year to conclude any `investigation' with administrative finality.” Therefore, the Board's proposed “Preliminary Fact-Finding phase is a blatant attempt to buy itself more time to conduct an investigation than afforded” by Section 12 of the STB Reauthorization Act. (NSR Comment 5.) Second, NSR argues that Preliminary Fact-Finding should be included in the statutorily-mandated one-year time limit so that the Board's proposed investigatory process is subject to “durational restraints” in accordance with other agencies' best practices. According to NSR, “other administrative agencies do not permit indefinite `pre-investigation' phases” and the Securities Exchange Commission requires that its “pre-investigation” phase, called “Matters Under Inquiry,” be completed within 60 days. (NSR Comment 5-6.)

NGFA and NITL disagree with including Preliminary Fact-Finding in the statutorily-mandated one-year time limit for investigations, but argue that the Board should instead impose a reasonable time limit on Preliminary Fact-Finding. NGFA supports the Board imposing a time limit of 60 days. (NGFA Reply 5.) NITL supports a 45-day deadline for Preliminary Fact-Finding. (NITL Comment 2.)

SMART-TD argues that “there is always `preliminary' work” before an “official” agency action and, therefore, the Board should delete the provision for Preliminary Fact-Finding from the final rules. (SMART-TD Comment 11.)

Although 49 U.S.C. 11701 requires that the Board dismiss any investigation that is not concluded with administrative finality within one year, Preliminary Fact-Finding does not constitute part of an investigation; rather, it is the Board's informal process of determining whether an investigation should be commenced. The Board must have a mechanism to gather information on a preliminary basis to determine whether an investigation is warranted. The Preliminary Fact-Finding period is intended to allow the Board to dismiss unfounded complaints without unnecessarily expending limited Board or party resources. This approach is in the best interest of our stakeholders, as the Board would be able to more effectively allocate its resources to only investigate potential violations of sufficient gravity to warrant Board action. This approach would also alleviate the burden on parties potentially subject to Board-Initiated Investigations by limiting such investigations only to situations where, in the Board's discretion, investigation into a matter of national or regional significance is warranted. Although SMART-TD argues that the Board should delete the concept of Preliminary Fact-Finding from the rules and merely conduct any such preliminary work without making it an official part of the process, the Board finds that it is in the public interest that our regulations notify stakeholders of the existence of this stage. Accordingly, in the interest of transparency, the Board will not delete this provision from the regulations.

Although there is no limitation in the statute as to how long Preliminary Fact-Finding should occur, the Board understands the concern from the parties that the Board not allow the Preliminary Fact-Finding phase to continue “indefinitely.” The final rules, accordingly, require that Preliminary Fact-Finding be concluded within a reasonable period of time. As a matter of policy, we determine “a reasonable period of time” to be approximately 60 days from the date the Board notifies the party subject to Preliminary Fact-Finding that Preliminary-Fact Finding has commenced. See 49 CFR 1122.5(a).

Confidentiality. The NPRM proposed that Preliminary Fact-Finding generally would be nonpublic and confidential, subject to certain exceptions. Several commenters oppose this proposal and request that all of, or certain parts of, Preliminary Fact-Finding be made public.

Jersey City requests that the Board publish notice of commencement of Preliminary Fact-Finding in the Federal Register, make information submitted by parties during Preliminary Fact-Finding publicly available, and publish Board staff's findings from Preliminary Fact-Finding so that third parties may comment on such information. (Jersey City Comment 13.) NITL asks that the Board publish notice of commencement of Preliminary Fact-Finding—which should include a “high level summary” of the issue being investigated—as well as Board staff's conclusions from Preliminary Fact-Finding. (NITL Comment 2.) Similarly, NGFA asks that the Board publish on its Web site, or in the Federal Register, a description of any issues subject to Preliminary Fact-Finding, and the outcomes of such inquiries, with any sensitive information such as party names redacted. (NGFA Comment 6; NGFA Reply 3.)

AAR opposes making Preliminary Fact-Finding public, stating that to do so would make parties “reluctant to volunteer information” and subject to “unwarranted reputational damage or other harm.” (See AAR Reply 1-2, 4.) Moreover, AAR states that a publicly available description of an issue subject to Preliminary Fact-Finding, even one in which sensitive information is redacted, would be insufficient to protect a railroad's identity given the nature of the industry. (AAR Reply 4-5.) AAR further notes that shippers' justifications for making Preliminary Fact-Finding public—namely, transparency and public participation—could be satisfied during a Formal Board Proceeding, if one were opened. (AAR Reply 2.)

The Board will adopt the proposal in the NPRM to keep the Preliminary Fact-Finding confidential, subject to certain limited exceptions (discussed below). Having considered the parties' arguments, we are not convinced the potential benefits of making Preliminary Fact-Finding public outweigh the risks. During Preliminary Fact-Finding, Board staff would only be ascertaining whether a matter warrants an investigation by the Board. Preliminary Fact-Finding would not be a formal, evidence-gathering process, and, if the Board were to make Preliminary Fact-Finding public, parties subject to Preliminary Fact-Finding could possibly be subject to unwarranted reputational damage or other harm. NGFA suggests that concerns about confidentiality could be avoided by redacting the parties' names, but even a general description of the issues subject to Preliminary Fact-Finding might effectively disclose the identity of involved parties, regardless of whether the name(s) of the parties were redacted. Therefore, the final rules presume that Preliminary Fact-Finding would be nonpublic and confidential, unless the Board otherwise finds it necessary to make certain information related to, or the fact of, Preliminary Fact-Finding public.

As previously proposed in the NPRM, the final rules would continue to allow the Board to make aspects of Preliminary Fact-Finding public. See section 1122.6(a)(1). In instances where the Board chooses to exercise this discretion, the Board would weigh, on a case-by-case basis, potential harm to innocent parties, markets, or the integrity of the inquiry and subsequent investigation. However, because of the risks associated with making Preliminary Fact-Finding public, we will not adopt a mechanism through which a party may request that Preliminary Fact-Finding be made public pursuant to section 1122.6(a)(1). The same reasoning applies to confidentiality of Board-Initiated Investigations, as discussed later.

Commencement. The NPRM proposed that Board staff would commence Preliminary Fact-Finding, at its discretion, to determine if an alleged violation could be of national or regional significance and subject to the Board's jurisdiction under 49 U.S.C. Subtitle IV, Part A, and warrant a Board-Initiated Investigation. AAR proposes three modifications to the Board's regulations. We discuss each in turn.

First, AAR asserts that the Board or the Director of the Office of Proceedings, as opposed to Board staff, should approve commencement of Preliminary Fact-Finding, “given the potentially significant consequences on regulated parties” from Preliminary Fact-Finding, or from a Board-Initiated Investigation or Formal Board Proceeding opened as a result of Preliminary Fact-Finding. (AAR Comment 6.) We decline to incorporate the suggestion that the Board or the Director of the Office of Proceedings should approve commencement of Preliminary Fact-Finding. The Board must gather information concerning potentially qualifying violations to determine whether it should commence a Board-Initiated Investigation. For the reasons discussed earlier,4 such activities are informal and preliminary, and, thus, we find that the initiation of Preliminary Fact-Finding does not merit a formal Board action or finding, although the Board would be aware of the commencement of Preliminary Fact-Finding.

Second, AAR suggests that the Board should notify parties subject to Preliminary Fact-Finding that Preliminary Fact-Finding has commenced. AAR argues that, without such notice, railroads may not be willing to coordinate and share information with the Board's Office of Public Assistance, Governmental Affairs, and Compliance (OPAGAC) out of concern that such information could be used by Board staff in Preliminary Fact-Finding against them. (AAR Comment 7-8.) To address AAR's concerns regarding OPAGAC, we are modifying section 1122.3 to include a requirement that Board staff notify parties subject to Preliminary Fact-Finding that Preliminary Fact-Finding has commenced. See section 1122.3 (stating that “Board staff shall inform the subject of Preliminary Fact-Finding that Preliminary Fact-Finding has commenced”). The Board finds that it is necessary to maintain railroad confidence in OPAGAC, as OPAGAC's Rail Customer and Public Assistance Program (RCPA) provides a valuable informal venue for the private-sector resolution of shipper-railroad disputes, and, without railroad participation, RCPA would be less effective at facilitating communication among the various segments of the rail-transportation industry and encouraging the resolution of rail-shipper operational or service issues. Thus, the final rules incorporate AAR's request that the Board provide notice to parties subject to Preliminary Fact-Finding that Preliminary Fact-Finding has commenced.

Third, AAR argues that section 1122.3 should use the terminology “warranted” or “not warranted” (instead of “appropriate” or “not appropriate”), as both the NPRM's preamble and the statute use the word “warranted.” (AAR Comment 9 n.3.) The final rules incorporate this suggestion, adopting the terminology of “warranted” or “not warranted,” instead of “appropriate” or “not appropriate.” See 49 CFR 1122.3.

Fact Gathering. The NPRM proposed that, during Preliminary Fact-Finding, Board staff could request that parties voluntarily provide testimony, information, or documents to assist in Board staff's informal inquiry, but could not issue subpoenas to compel the submission of evidence. In response to this proposal, AAR, NITL, and NGFA suggest that certain clarifications are needed regarding the collection of information during Preliminary Fact-Finding. We address these comments below.

AAR seeks clarification that (1) the production of documents during Preliminary Fact-Finding is voluntary, (2) the requirement to certify a production of documents applies to Preliminary Fact-Finding, (3) the Board retains its right to demand to inspect and copy any record of a rail carrier pursuant to 49 U.S.C. 11144(b) during Preliminary Fact-Finding, and (4) the information submitted during Preliminary Fact-Finding will be “subject to disclosure in any subsequent Board-Initiated Investigation on the same terms as other materials gathered during Board-Initiated Investigations.” (AAR Comment 5, 7-8.)

In response to AAR's comments, the Board provides the following clarifications. First, the production of documents during Preliminary Fact-Finding would be voluntary. See section 1122.9 (granting Investigating Officer(s) the right to compel the submission of evidence only in Board-Initiated Investigations). Second, parties that choose to voluntarily produce documents during Preliminary Fact-Finding would not be required to certify such productions. Whereas the NPRM proposed to require a producing party to submit a statement certifying that such person made a diligent search for responsive documents “[w]hen producing documents under this part,” the final rules at section 1122.12(a) now limit that to “[w]hen producing documents under section 1122.4,” the regulation governing Board-Initiated Investigations only. Third, as a matter of policy, the Board would not demand to inspect and copy any record—relating to the subject of Preliminary Fact-Finding—of a rail carrier pursuant to 49 U.S.C. 11144(b) during Preliminary Fact-Finding by Board staff. Finally, information submitted during Preliminary Fact-Finding would be subject to disclosure in any subsequent Board-Initiated Investigation on the same terms as materials gathered during Board-Initiated Investigations. This is provided for in the final rules at section 1122.6, which states that all information and documents obtained under section 1122.3 (referring to Preliminary Fact-Finding) or section 1122.4 (referring to Board-Initiated Investigations) whether or not obtained pursuant to a Board request or subpoena, shall be treated as nonpublic by the Board and its staff, subject to the exceptions described in section 1122.6(a)-(c).

NITL and NGFA state that the Board should provide staff the “appropriate tools” to obtain information needed during Preliminary Fact-Finding. (NITL Comment 2; NGFA Reply 5-6.) NGFA also suggests that the Board should adopt deadlines for a party subject to Preliminary Fact-Finding to submit evidence to the Board. (NGFA Reply 6.)

The Board declines to give Board staff additional authority to obtain information during Preliminary Fact-Finding. As previously noted, Preliminary Fact-Finding is an initial, informal inquiry to determine whether a Board-Initiated Investigation is warranted. The Board, thus, has intentionally limited Board staff's authority to collect evidence in order to prevent undue burden on anyone. However, during Preliminary Fact-Finding, Board staff would be able to request that parties produce information and documents on a voluntary basis and request that any evidence submitted be provided by a certain deadline. Although Board staff would not be able to issue subpoenas to compel the production of evidence during Preliminary Fact-Finding, parties would have an incentive to provide information or documents to show that a Board-Initiated Investigation is not warranted. For these reasons, the Board declines to grant Board staff any further authority to obtain information during Preliminary Fact-Finding.

As proposed in the NPRM, Board-Initiated Investigation refers to an investigation, conducted in accordance with Section 12 of the STB Reauthorization Act, to decide whether to recommend to the Board that it open a proceeding to determine if a violation of 49 U.S.C. Subtitle IV, Part A occurred. The NPRM stated that a Board-Initiated Investigation would begin with the Board issuing an Order of Investigation and providing a copy of the order to the parties under investigation within 30 days of issuance. The NPRM also provided that Board-Initiated Investigations would be nonpublic and confidential, subject to certain exceptions, to protect both the integrity of the process and the parties under investigation from any unwarranted reputational damage or other harm. Finally, the NPRM stated that parties who are not the subject of the investigation would not be able to intervene or participate as a matter of right in Board-Initiated Investigations.

In this section, we address parties' comments on (1) the standard for opening a Board-Initiated Investigation, (2) the definition of “national or regional significance,” (3) timing of providing the Order of Investigation to parties under investigation, (4) confidentiality of Board-Initiated Investigations, (5) parties' requests for the right to intervene in Board-Initiated Investigations, (6) railroads' request for access to exculpatory evidence, (7) parties' comments relating to the collection of information and documentation, and (8) the process for providing Board staff's recommendations and summary of findings to a party under investigation.5

Standard for Opening a Board-Initiated Investigation. The NPRM stated that the Board could commence a Board-Initiated Investigation of any matter of national or regional significance that is subject to the jurisdiction of the Board under 49 U.S.C. Subtitle IV, Part A when it appears that the statute may have been violated. The NPRM further stated that, in instances where Preliminary Fact-Finding had been conducted,6 in order to seek authorization to commence a Board-Initiated Investigation, Board staff would have to determine that (1) a violation of 49 U.S.C. Subtitle IV, Part A subject to the Board's jurisdiction may have occurred and (2) that the potential violation may be of national or regional significance warranting the opening of an investigation.

In comments, AAR asks the Board to clarify the standard for commencing a Board-Initiated Investigation and require that (1) “the issue [be] of national or regional significance” and (2) “there [be] reasonable cause to believe that there may be a violation of 49 U.S.C. Subtitle IV, Part A.” (AAR Comment 9-11.) (emphasis added.) Under 49 U.S.C. 11701, however, the Board may begin an investigation of alleged violations of 49 U.S.C. Subtitle IV, Part A as long as the issue is of national or regional significance. As a result, AAR's proposal would require a higher standard for commencing a Board-Initiated Investigation than imposed by the statute—i.e., by requiring “reasonable cause to believe” that a violation under 49 U.S.C. Subtitle IV, Part A occurred. Accordingly, we decline to adopt AAR's proposed standard and will maintain in the final rules the statutory standard, which provides that the Board may, in its discretion, commence a Board-Initiated Investigation of any matter of national or regional significance that is subject to the jurisdiction of the Board under 49 U.S.C. Subtitle IV, Part A. See section 1122.4.

AAR further asks that the Board require that any Order of Investigation issued state that “the matter at issue `is' of national or regional significance” (instead of “may be” of national or regional significance). (AAR Comment 9.) Relatedly, NSR asks that the Board clarify that any issue subject to a Board-Initiated Investigation must “remain of national or regional significance throughout the Board-Initiated Investigation and related Formal Board Proceeding.” (NSR Comment 3.)

The final rules will continue to require that an alleged violation subject to a Board-Initiated Investigation be of national or regional significance. See section 1122.4. Section 12 of the STB Reauthorization Act permits the Board to investigate issues that “are of national or regional significance.” We interpret this language to mean that an alleged violation of 49 U.S.C. Subtitle IV, Part A that is of national or regional significance upon commencement of the investigation may continue to be subject to Board-Initiated Investigation even if the conduct that created the alleged violation ceases. Similarly, conduct underlying an alleged violation does not have to be of ongoing national or regional significance so long as the Board determines that the alleged violation created an issue of national or regional significance at the time the investigation was initiated. Otherwise, conduct that is capable of repetition could create future crises without redress. The final rules thus will adopt the language proposed in the NPRM. See section 1122.4.

Definition of “National or Regional Significance.” In the NPRM, the Board did not define the phrase “of national or regional significance.” As a result, some commenters request that the Board define this phrase or provide examples of issues that would be considered of national or regional significance.

In particular, AAR states that the Board should define “national or regional significance” as “widespread and significant effects on transportation service or markets in a region or across the nation.” AAR also asks that the Board clarify that issues of national or regional significance do not include individual rate disputes or disputes involving a single shipper. (AAR Comment 10.) Similarly, Jersey City states that the Board should define “national or regional significance” in order to avoid litigation on jurisdictional issues stemming from this phrase. (Jersey City Comment 11-12.)

We decline to adopt a definition of “national or regional significance.” The Board finds that AAR's proposed definition does not provide significantly more insight than the phrase itself as to what constitutes a matter “of national or regional significance.” In addition, there is no need to expressly exclude rate disputes in these rules—such disputes are not subject to Board-Initiated Investigation under the statute (whether or not they are of national or regional significance). Section 11701(a) of Title 49 of the United States Code states that the Board may begin an investigation on its own initiative, “[e]xcept as otherwise provided in this part.” Rate disputes are governed by 49 U.S.C. 10704, which specifically states that rate disputes may only be commenced “on complaint.” 49 U.S.C. 10704(b). Therefore, rate disputes fall outside the purview of the investigatory authority conferred to the Board under Section 12 of the STB Reauthorization Act.

As to disputes involving a single shipper, the Board declines to adopt a blanket approach as to whether such issues are of national or regional significance. Such a determination would be fact-dependent and require the Board to make a determination based on the specific situation and various factors (such as the dispute's impact on national or regional rail traffic), which are discussed further below.

NSR and NGFA also ask that the Board provide clarification related to the definition of “national or regional significance.” Specifically, NSR asks the Board to explain how it “intends to apply the jurisdictional standard of `national or regional significance.' ” (NSR Comment 3.) NGFA requests that the Board “provide a discussion of the types of rail practices or issues the Board would consider to be of national or regional significance.” (NGFA Comment 3-4; NGFA Reply 6.)

Under the final rules, the Board would apply the jurisdictional standard of national or regional significance on a case-by-case basis, considering, for instance, the extent of the impacts of the potential violation on national or regional rail traffic, customers, or third parties, or the geographic scope of the alleged violation. Examples of recent matters that the Board might consider to be of national or regional significance include (but are not limited to): Fertilizer shipment delays; rail car supply issues that impact grain shipments; or extensive congestion at strategic interchange points such as Chicago, Ill.

Confidentiality. As with Preliminary Fact-Finding, the NPRM proposed that Board-Initiated Investigations generally would be nonpublic and confidential, subject to certain exceptions,7 in order to protect the integrity of the process and to protect parties under investigation from possibly unwarranted reputational damage or other harm.

In comments, NGFA asks that the Board publish Orders of Investigation in the Federal Register or on the Board's Web site, so that third parties may request access to documents produced during a Board-Initiated Investigation, and NGFA and Jersey City ask the Board to inform the public as to the outcome of a Board-Initiated Investigation.8 (NGFA Comment 6-7.) Similarly, NITL asks that the Board make the Order of Investigation available to the public, and SMART-TD asks the Board to delete the “automatic `nonpublic' process.” (NITL Comment 3; SMART-TD Comment 11.) On reply, AAR opposes making Board-Initiated Investigations public for the same reasons it opposes making Preliminary Fact-Finding public.9 (AAR Reply 4-5.) For instance, AAR states that public disclosure of the subject of a Board-Initiated Investigation could cause “unwarranted reputational damage or other harm” and that “the threat of public disclosure w[ould] create the incentive to be less cooperative in the discovery process.” (AAR Reply 4.)

We find that the risks of making Board-Initiated Investigations public outweigh the potential benefits, absent extraordinary circumstances.10 If, after conducting a Board-Initiated Investigation, the Board believes that a Formal Board Proceeding should be commenced to determine if a qualifying violation occurred, the Board would open such a proceeding. At that time, any Formal Board Proceeding would be public, subject to the Board's existing rules protecting confidential information. See 49 CFR 1104.14. However, if the Board determines that no further action is warranted and therefore dismisses the Board-Initiated Investigation with no further action, the Board generally would seek to maintain the confidentiality of the party subject to the Board-Initiated Investigation, in order to prevent the party from being subject to any stigma that may be associated with having been investigated. For these reasons, the final rules maintain that Board-Initiated Investigations are presumptively nonpublic and confidential.

With respect to confidentiality, AAR asks that the Board clarify that it is “not claiming unbounded discretion to make confidential information and documents public” and that it revise the NPRM's confidentiality provision to include the protections provided by 49 CFR 1001.4, which governs predisclosure notification procedures for confidential commercial information. (AAR Comment 17-18.) NSR also asks that the Board “create a reasonable opportunity for the person claiming confidentiality to respond to the Board's denial of a request for confidential treatment prior to any public disclosure of the purportedly confidential information.” (NSR Comment 4, 28-29.)

The Board will grant these requests to clarify that parties will be given notice and the ability to respond to the potential disclosure of confidential commercial information prior to its release. Specifically, the final rules at section 1122.6(a)(1) now expressly incorporate 49 CFR 1001.4(c), (d) and (e), which require that the Board notify the person claiming confidential treatment prior to publicly disclosing any purportedly confidential commercial information and provide such persons an opportunity to object to the disclosure. The Board's final rules at section 1122.7 also continue to require that, if a Freedom of Information Act (FOIA) request seeks information that a party has claimed constitutes trade secrets and commercial or financial information within the exception in 5 U.S.C. 552(b)(4), the Board shall give the party an opportunity to respond pursuant to 49 CFR 1001.4.

Order of Investigation. As proposed in the NPRM, the Board would issue an Order of Investigation in order to commence a Board-Initiated Investigation. The Board then would provide a copy of the Order of Investigation to the party under investigation within 30 days of issuance.

In its comments, AAR asks that the Board instead provide a copy of the Order of Investigation to the parties under investigation within 10 days of its issuance. (AAR Comment 12.) Similarly, NGFA asks that the Board provide a copy of the Order of Investigation to the public within 10 or 15 days of its issuance. (NGFA Reply 7.)

Under 49 U.S.C. 11701(d)(1), the Board is required to provide written notice to the parties under investigation by not later than 30 days after initiating the investigation. Although in practice the Board intends to provide copies of the Order of Investigation to parties within a shorter timeframe as requested by AAR and NGFA, the Board declines to adopt regulations that are stricter than the requirements of Section 12 of the STB Reauthorization Act. The final rules therefore maintain the statutory requirement of providing notice to parties under investigation within 30 days.

Intervention. The NPRM provided that third parties, who are not the subject of a Board-Initiated Investigation, may not intervene or participate as a matter of right in any Board-Initiated Investigation. Commenters, mostly shippers, ask that the Board either permit third parties to intervene in Board-Initiated Investigations or comment on an ongoing investigation. These commenters assert, among other arguments, that third parties have a statutory right to intervene and that intervention would promote transparency and assist Board staff in compiling a more complete record. (NITL Comment 3; NGFA Comment 5-7; NGFA Reply 4, 8; Jersey City Comment 15; SMART-TD 11.) AAR opposes allowing third parties to intervene in Board-Initiated Investigations. (AAR Reply 2, 9.)

We decline to permit third parties to intervene or participate as a matter of right in Board-Initiated Investigations. Although NGFA and Jersey City argue that interventions could increase transparency and assist Investigative Officers in developing a more complete record and determining whether a qualifying violation occurred, a final, binding determination in that regard is not made during a Board-Initiated Investigation. (See NGFA Comment 7; Jersey City Comment 15.) Rather, that decision would be made during the Formal Board Proceeding, where, as AAR notes, third parties could move to intervene and participate in a proceeding. Therefore, shippers' objectives in intervening in Board-Initiated Investigations would be satisfied during a Formal Board Proceeding. In addition, there is a statutory one-year time limitation on Board-Initiated Investigations. Allowing third parties to intervene as of right could make it difficult for the Board to complete its investigation in the required time frame.11

Finally, we disagree with Jersey City's argument that 28 U.S.C. 2323 grants interested “[c]ommunities, associations, firms, and individuals” a right to intervene in any Board-Initiated Investigation. As AAR points out, section 2323 applies only to federal court proceedings arising from challenges to Board rulemakings or attempts to enforce Board orders. (AAR Reply 9.) For these reasons, the final rules continue to prohibit intervention or participation by third parties in any Board-Initiated Investigation.

Information and Documentation Collection. Parties raise several concerns with respect to the production of documents and testimony under the proposed rules. In the NPRM, the Board proposed that, if any transcripts were taken of investigative testimony, they would be recorded by an official reporter or other authorized means. In comments, AAR asks that parties under investigation be given full access to transcripts of their testimony, while NSR asks that subpoenaed witnesses be able to obtain copies of their evidence and transcripts of their testimony. (AAR Comment 14; NSR Comment 22.) AAR also asks that the Board revise the proposed regulation governing transcripts to always require a transcript of investigative testimony. (AAR Comment 14.) AAR further requests that Investigating Officers be limited in the amount of information and documents that they can request of parties and also limited to requesting “documents that are likely to be directly relevant to the investigation.” (AAR Comment 15.) NSR asks that the Board “ensure that subpoenas are issued only where they are likely to lead to admissible evidence regarding the investigated issue . . . and are otherwise limited in scope, specific in directive, and in good faith.” (NSR Comment 4.)

In response to AAR and NSR's comments pertaining to transcripts, the Board declines to always require a transcript of investigative testimony, but will require that witnesses be given access to any transcript of their investigative testimony—either by receiving a copy of the transcript or by inspecting the transcript. Specifically, the final rules now provide that “[a] witness who has given testimony pursuant to [part 1122 of the regulations] shall be entitled, upon written request, to procure a transcript of the witness' own testimony or, upon proper identification, shall have the right to inspect the official transcript of the witness' own testimony.” See section 1122.10.

As to Investigating Officers' right to request documents, we will adopt AAR's suggestion that Investigating Officers be limited to request documents that are likely to be directly relevant to the investigation. (AAR Comment 15.) Thus, we have modified the language of section 1122.9 to state that Investigating Officer(s) may interview or depose witnesses, inspect property and facilities, and request and require the production of any information, documents, books, papers, correspondence, memoranda, agreements, or other records, in any form or media, “that are likely to be directly relevant to the issues of the Board-Initiated Investigation.” This change also sufficiently addresses NSR's concern that Investigating Officers' requests for evidence be “limited in scope, specific in directive, and in good faith.” (NSR Comment 4.) The Board declines to otherwise limit the Investigating Officers' right to request evidence.

AAR and NSR also ask that the Board provide parties under investigation the right to seek discovery.12 (See AAR Comment 14; NSR Comment 4, 35-37.) On reply, NGFA opposes the railroads' request that parties under investigation be provided the right to seek discovery, stating that the “final rules should not impose complex requirements and associated legal and other costs on rail customers.” (NGFA Reply 3.) NGFA adds that, if the Board were to allow railroads to conduct discovery in Board-Initiated Investigations, such discovery “should be limited to entities that elect to become parties by formally intervening in the proceeding.” (NGFA Reply 3, 8.) We agree with NGFA that permitting parties under investigation to seek discovery could impose unnecessary legal and other costs on parties that are not subject to investigation, and we find that permitting such discovery, even of materials gathered by the Board, also could unnecessarily obstruct and delay a Board-Initiated Investigation, which must be concluded within a specific timeline. We therefore decline to permit parties under investigation the right to seek discovery. In the event a party under investigation believes that a third party has information likely to be directly relevant to the investigation, the party under investigation should convey that to the Investigating Officer(s), who may then request that information from the relevant third parties.

Finally, AAR and NSR request that the Board eliminate or add certain other provisions related to the Board's collection of information and documentation during a Board-Initiated Investigation. First, AAR asks that the Board entirely eliminate the proposed regulation (proposed in the NPRM as 49 CFR 1122.11) titled “Certifications and false statements,” including subparagraph (b), which requires a party from whom documents are sought to submit a list of all documents withheld due to privilege, and subparagraph (c), which sets forth the criminal penalty for perjury. (AAR Comment 16-17.) Alternatively, AAR asks the Board to revise the “Certifications and false statements” provision to “require the person [producing documents] to confirm that it produced all responsive, non-privileged documents located after reasonable search and subject to any agreed-upon protocols regarding reduction of duplicative documents.” (AAR Comment 16.) AAR claims its language would allow a party to only have to produce one copy of a document, even if duplicative digital versions exist. Its language would also require a party to perform a “reasonable” search, rather than a “diligent” search, as proposed in the NPRM. Additionally, AAR asks that the Board adopt a “witness rights” provision in accordance with other agencies' practices. (AAR Comment 17.) NGFA opposes AAR's request to remove the “Certifications and false statements” provision. (NGFA Reply 8.)

We decline to eliminate the “Certifications and false statements” provision in its entirety, or its subparagraph (b) relating to the privilege log requirements. Subparagraphs (a) and (b) are necessary, as they would be the Investigating Officers' primary means of ensuring that parties under investigation have conducted their due diligence and provided the Board with the information requested. However, we will grant AAR's request regarding agreed-upon protocols for duplicative documents. Accordingly, the final rules now expressly subject the “Certifications and false statements” provision to any search protocols that the Investigating Officer(s) and producing parties may agree upon. See section 1122.12. We also will change the description of the search from “diligent” to “reasonable.” In addition, at AAR's suggestion (AAR Comment 16-17), we will remove the criminal penalty for perjury provision, as it is redundant in light of already-applicable federal law, see 18 U.S.C. 1001, 1621, and add a witness rights provision, which is included in the final rules at section 1122.11, in order to clarify the rights and responsibilities of witnesses. See also section 1122.10 (addressing the right of a witness to review his or her transcript).

Second, AAR and NSR request that the Board remove the attorney disqualification provision, proposed in the NPRM as section 1122.9(b), in which the Board would have the authority to exclude a particular attorney from further participation in any Board-Initiated Investigation in which the attorney is obstructing the Board-Initiated Investigation. (AAR Comment 18; NSR Comment 26-27.) After considering the comments, we will remove the attorney disqualification provision from the final rules, as the Board's current rules governing attorney conduct sufficiently protect the integrity of any investigation. See e.g., 49 CFR 1103.12.

Exculpatory Evidence. AAR and NSR ask that the Board adopt in its final rules a mandatory disclosure provision, modeled after Brady v. Maryland, 373 U.S. 83, 88 (1963), to provide a party subject to investigation exculpatory and potentially exculpatory evidence. (AAR Comment 13; NSR Comment 4, 32-35.) In Brady, the United States Supreme Court, in criminal proceedings, held that the Due Process clause of the Fifth Amendment requires the prosecutor to disclose exculpatory evidence material to guilt or punishment, known to the government but not known to the defendant. Currently, no statute or case law mandates the application of the Brady Rule to administrative agencies,13 though some agencies such as the Securities and Exchange Commission and the Commodities Futures Trading Commission have adopted varying versions of the Brady Rule.

The Board recognizes the merits of the Brady Rule and expects to employ the practice of disclosing exculpatory evidence if the Board were to open a Formal Board Proceeding following the conclusion of a Board-Initiated Investigation involving any criminal provisions of 49 U.S.C. Subtitle IV, Part A. However, because (1) most Board-Initiated Investigations will not likely involve any such criminal provisions, (2) Board-Initiated Investigations only determine if the Board should open a Formal Board Proceeding, and (3) any remedy that may result from an investigation must be prospective only, the Brady Rule does not appear directly applicable, and the Board will not codify it in the final rules adopted here.

Recommendations and Summary of Findings. As proposed in the NPRM, Investigating Officer(s) would be required to conclude the Board-Initiated Investigation no later than 275 days after issuance of the Order of Investigation and, at that time, submit to the Board and parties under investigation any recommendations made as a result of the Board-Initiated Investigation and a summary of findings that support such recommendations.

The NPRM also provided an optional process whereby Investigating Officer(s), in their discretion and time permitting, could present (orally or in writing) their recommendations and/or summary of findings to parties under investigation prior to submitting this information to the Board Members. The NPRM stated that, in such cases, the Investigating Officer(s) would be required to permit the parties under investigation to submit a written response to the recommendations and/or summary of findings. The Investigating Officer(s) would then submit their recommendations and summary of findings, as well as any response from the parties under investigation, to the Board members and parties under investigation.

In response, AAR and NSR request that the Board make this optional process mandatory.14 (AAR Comment 19; NSR Comment 4, 23-25.) Alternatively, AAR asks that if the Board does not make this process mandatory, the Board require Investigating Officer(s) to provide their recommendations and summary of findings to parties at the same time they are submitted to Board Members.

The Board intends that Investigating Officer(s), when possible, will utilize the optional process of presenting their recommendations and summary of findings to parties under investigation prior to submitting them to the Board Members. However, given the one-year deadline for concluding Board-Initiated Investigations, the Board will not make this process mandatory, as there may be circumstances in which Investigating Officer(s) cannot complete their recommendations and summary of findings sufficiently in advance of the one-year deadline to allow them to be presented to the party under investigation prior to submission to the Board. In such cases, the Investigating Officer(s) will provide their recommendations and summary of findings to parties at the same time they are submitted to the Board Members. This is provided for in the final rules at section 1122.5(c), which states that the Investigating Officer(s) must submit their recommendations and summary of findings to the Board and parties under investigation within 275 days.

With respect to parties' responses to Investigating Officers' recommendations and summary of findings, AAR also requests that the Board clarify that parties have the right to submit arguments in their response to Board staff's recommendations and summary of findings. AAR also argues that the Board should increase the 15-page limit for parties' responses to Board staff's recommendations and summary of findings, but if not, then clarify that the party's supporting data, evidence, and verified statements would not count towards the 15-page limit. We will grant AAR's requests, as they would provide the Board with more information in determining whether further action is warranted following a Board-Initiated Investigation. The final rules now provide that: parties have the right to submit arguments in their response to Board staff's recommendations and summary of findings; supporting data, evidence, and verified statements do not count towards the page limit of such responses; and parties may submit written statements responding to the Investigating Officers' recommendations and summary of findings of up to 20 pages. See App. A to Pt. 1122 (stating “parties under investigation may submit a written statement . . . [that] shall be no more than 20 pages, not including any supporting data, evidence, and verified statements that may be attached . . . setting forth the views of the parties under investigation of factual or legal matters or other arguments relevant to the commencement of a Formal Board Proceeding”).

As proposed in the NPRM, the Formal Board Proceeding refers to a public proceeding that may be instituted by the Board pursuant to an Order to Show Cause after a Board-Initiated Investigation has been conducted. With respect to the Formal Board Proceeding phase, commenters express concerns relating to (1) the duration of the Formal Board Proceeding, (2) the standard for commencing a Formal Board Proceeding, and (3) the Order to Show Cause.

Duration of the Formal Board Proceeding. As proposed in the NPRM, there are no time limits for the Formal Board Proceeding. However, NSR argues that the Formal Board Proceeding should be included in the statutorily-mandated one-year time limit on investigations, based on the plain language of Section 12 of the STB Reauthorization Act, federal court precedent interpreting administrative finality, and other provisions in the Board's governing statute. (NSR Comment 6-8.) We address each of NSR's arguments in turn.

According to NSR, because 49 U.S.C. 11701(d)(6) states that the Board must “dismiss any investigation that is not concluded by the Board with administrative finality within 1 year after the date on which it was commenced,” the Board must either dismiss the Board-Initiated Investigation or decide on the merits of the Formal Board Proceeding within one year of opening the Board-Initiated Investigation. (NSR Comment 6-7.) However, such an interpretation directly contradicts the Senate Report for the STB Reauthorization Act, which clearly excludes the Formal Board Proceeding from the statute's one-year deadline on Board-Initiated Investigations, stating:

NSR nonetheless states that the Senate Report “is trumped by the unambiguous new section 11701(d)(6),” arguing that “administrative finality” is “a known term of art with a specific definition, thus precluding any need to rely on legislative history.” As support, NSR, among other cases, compares the Board's proposed investigation process to Newport Galleria Group v. Deland, 618 F. Supp. 1179 (D.C. Cir. 1985), in which the court found that the Environmental Protection Agency's commencement of an investigation did not constitute final agency action. (NSR Comment 6-7.) 15 In Newport Galleria Group, however, the question was whether judicial review of the initiation of an investigation was proper. Newport Galleria Group, 618 F. Supp. at 1185. Here, under 49 U.S.C. 11701(d)(6), the question is whether the Board's conclusion of an investigation and opening of a Formal Board Proceeding—as opposed to the initiation of an investigation—constitutes administratively final action for purposes of Section 12 of the STB Reauthorization Act.

Moreover, under 49 U.S.C. 11701(d)(7), which immediately follows the requirement that the Board conclude a Board-Initiated Investigation with administrative finality within one year, the Board's options for concluding the Board-Initiated Investigation, and thus satisfying the requirement in section 11701(d)(6), are to “dismiss the investigation if no further action is warranted” or “initiate a proceeding to determine if a provision under this part has been violated.” We read section 11701(d)(6), in conjunction with section 11701(d)(7), as stating that the Board must dismiss investigations that have not been concluded within a year (i.e., concluded either by dismissal because no further action is warranted, or by the opening of a Formal Board Proceeding). While the meaning of “administrative finality” within section 10701(d)(6) may need to be defined in the future, the language of the statute and the Senate Report support not including the Formal Board Proceeding in the one-year deadline for concluding the Board-Initiated Investigation pursuant to Section 12(b) of the STB Reauthorization Act.

Additionally, NSR states that “other provisions of the Board's governing statute reinforce that administrative finality occurs only with [a] Board decision.” (NSR Comment 8.) Specifically, NSR cites 49 U.S.C. 11701(e)(7), which “permits judicial review upon conclusion of the Formal Board Proceeding,” and 49 U.S.C. 722(d),16 which states that “an action of the Board under this section is final on the date on which it is served,” for the proposition that “administrative finality occurs only with the Board decision” issued upon conclusion of the Formal Board Proceeding. (NSR Comment 8.) However, the relevant governing statutory provisions for concluding a Board-Initiated Investigation—which are more specific to the process at issue than those cited by NSR—are 49 U.S.C. 11701(d)(6) & (7), which, as previously explained, provide that the Board conclude an investigation with administrative finality within one year by either “dismiss[ing] the investigation if no further action is warranted” or “initiat[ing] a proceeding to determine if a provision under this part has been violated.” The final rules, therefore, continue to impose no time limit on Formal Board Proceedings. See sections 1122.1(b) & 1122.5(e).

Standard for Opening a Formal Board Proceeding. AAR asks the Board to clarify the standard for commencing a Formal Board Proceeding, specifically requesting that the Board require that there be “reasonable cause” to believe that a violation of 49 U.S.C. Subtitle IV, Part A occurred.17 (AAR Comment 20-21.) As discussed above,18 the Board declines to adopt this “reasonable cause” standard for initiating a Board-Initiated Investigations because it would require a higher standard than imposed by the statute. For that same reason, the Board declines to adopt this standard for opening a Formal Board Proceeding. The final rules therefore maintain, in accordance with Section 12 of the STB Reauthorization Act, that the Board shall dismiss a Board-Initiated Investigation if no further action is warranted, or shall initiate a Formal Board Proceeding to determine whether any provision of 49 U.S.C. Subtitle IV, Part A has been violated.

Order to Show Cause. With respect to the Order to Show Cause, AAR asks that the Board clarify that the burden of proof remains on the agency to prove that a violation of 49 U.S.C. Subtitle IV, Part A occurred. (AAR Comment 20-21.) We affirm that the Order to Show Cause does not change the burden of proof from the requirements of Section 12 of the STB Reauthorization Act for proving that a violation of 49 U.S.C. Subtitle IV, Part A occurred.

Additionally, NSR asks that the Board require that the Order to Show Cause state the issues to be considered in the Formal Board Proceeding. (NSR Comment 4, 30-32.) We find this request to be reasonable, as a party subject to a Formal Board Proceeding should have notice as to the issues that will be publicly considered by the Board. Based on NSR's comment, the final rules include a requirement that the Order to Show Cause state the issues to be considered during the Formal Board Proceeding. See section 1122.5(e) (stating “[t]he Order to Show Cause shall state the basis for, and the issues to be considered during, the Formal Board Proceeding and set forth a procedural schedule”).

Separation of Investigative and Decisionmaking Functions. In the NPRM, the Board proposed to separate the investigative and decisionmaking functions of Board staff to the extent practicable, in accordance with the requirements of Section 12 of the STB Reauthorization Act. Although NGFA supports the Board's proposal, AAR requests that the “rules expressly state that the Board will separate investigative and decisionmaking functions of staff” and NSR requests that the Board remove from the final rules the phrase “to the extent practicable.” (AAR Comment 11-12; NSR Comments 13, 20.)

The NPRM's proposed language expressly tracked 49 U.S.C. 11701(d)(5), which states that in any investigation commenced on the Board's own initiative, the Board must “to the extent practicable, separate the investigative and decisionmaking functions of staff.” Although AAR argues that this is insufficient, as it is merely a “ritualistic incantation of [the] statutory language,” the NPRM also proposed that the Order of Investigation would identify the Investigating Officer(s) and provided that parties subject to investigation could submit written materials to the Board Members at any time. As a result, parties that feel that the investigative and decisionmaking functions of staff are not properly separated may express their concerns in writing directly to the Board during the course of a Board-Initiated Investigation or Formal Board Proceeding. See section 1122.13. Moreover, the Board declines to remove the phrase “to the extent practicable” from the final rules because doing so would not be in full compliance with the statutory language of Section 12 of the STB Reauthorization Act.

AAR further asks that the Board explain “any instances where it may not be practicable to separate these functions.” AAR also requests that the Board include in the final rules provisions ensuring the separation of investigatory and decisionmaking functions, such as requirements that the Board “[i]dentify all staff who work in an investigation, not just the Investigating Officers” and “[n]otify Board Members, decisional staff within the Board, and parties subject to investigation who has been designated investigation staff for any particular Board-Initiated Investigation.” (AAR Comment 11-12.)

The Board declines to describe instances where it may not be practicable to separate these functions. Based on AAR's comment, however, we clarify that our intent is that any Board staff substantively working on a Board-Initiated Investigation would be identified as an Investigating Officer. To better reflect this intent, the final rules now require that the Order of Investigation “identify all Board staff who are authorized to conduct the investigation as Investigating Officer(s).” See section 1122.4. Additionally, Board Members would be notified regarding who has been designated as investigative staff for any particular Board-Initiated Investigation because Board Members would have to issue an Order of Investigation, which, according to the final rules at section 1122.4, would include the names of the Investigating Officers.

Ex Parte Communications. Section 12(c)(3) of the STB Reauthorization Act requires the Board, in issuing rules implementing its investigatory authority, to take into account ex parte constraints. Consistent with analogous ex parte constraints in other proceedings at the Board, the NPRM proposed that, as a matter of policy, the Board Members would not engage in off-the-record verbal communications concerning the matters under investigation with parties subject to Board-Initiated Investigations. However, the NPRM provided that parties under investigation would have the right to submit written statements to the Board at any time.

Jersey City and NSR ask the Board to revise the NPRM's approach to ex parte communications. First, Jersey City asks that the Board remove the NPRM's provision allowing any party subject to a Board-Initiated Investigation to submit to the Board written statements at any time during the Board-Initiated Investigation. (Jersey City Comment 16.) Second, NSR requests that the Board restrict ex parte communications between Investigating Officers and Board staff conducting Preliminary-Fact Finding and other Board staff, as well as Board Members involved in the Formal Board Proceeding. Finally, NSR states that, should such communications occur, Section 5 and Section 12 of the STB Reauthorization Act should apply. (NSR Comment 3, 20-21.)

The Board declines to adopt Jersey City's and NSR's proposals regarding ex parte communications. As explained above, the final rules require the Board to identify in the Order of Investigation (which would be voted on by the Board Members) all Board staff conducting a Board-Initiated Investigation. Therefore, Board Members and their staffs would know with whom to restrict their communications to avoid ex parte issues. Additionally, the final rules continue to provide parties under investigation with the ability to notify the Board in writing of any facts or circumstances relating to the investigation, including potentially prohibited ex parte communications. See 49 CFR 1122.13. As such, the Board would address any ex parte issues that may arise on a case-by-case basis as raised by the parties subject to investigation.

Settlement. The NPRM proposed that, during Board-Initiated Investigations, the Investigating Officer(s) would be able to engage in settlement negotiations with parties under investigation and that, if at any time during the investigation, the Investigating Officer(s) and parties under investigation were to reach a tentative settlement agreement, the Investigating Officer(s) would submit the settlement agreement as part of their proposed recommendations to the Board Members for approval or disapproval, along with the summary of findings supporting the proposed agreement. As proposed in the NPRM, the Board would then decide whether to approve the agreement and/or dismiss the investigation or open a Formal Board Proceeding in accordance with the NPRM's proposed procedural rules. In response to this proposal, NGFA comments that the settlement process is too “nontransparent.” However, for the reasons provided above with respect to confidentiality,19 the Board declines to require that the settlement process be public or to permit third-party involvement in the process. Therefore, as a matter of policy, the Board maintains the settlement process as proposed in the NPRM.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, generally requires a description and analysis of new rules that would have a significant economic impact on a substantial number of small entities. In drafting a rule, an agency is required to: (1) Assess the effect that its regulation will have on small entities; (2) analyze effective alternatives that may minimize a regulation's impact; and (3) make the analysis available for public comment. 5 U.S.C. 601-604. Under section 605(b), an agency is not required to perform an initial or final regulatory flexibility analysis if it certifies that the proposed or final rules will not have a “significant impact on a substantial number of small entities.”

Because the goal of the RFA is to reduce the cost to small entities of complying with federal regulations, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when a rule directly regulates those entities. In other words, the impact must be a direct impact on small entities “whose conduct is circumscribed or mandate” by the proposed rule. White Eagle Coop. Ass'n v. Conner, 553 F.3d 467, 478, 480 (7th Cir. 2009). An agency has no obligation to conduct a small entity impact analysis of effects on entities that it does not regulate. United Distrib. Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996).

In the NPRM, the Board certified under 5 U.S.C. 605(b) that the proposed rule would not have a significant economic impact on a substantial number of small entities within the meaning of the RFA. The Board explained that the proposed rule would not place any additional burden on small entities, but rather clarify an existing obligation. The Board further explained that, even assuming for the sake of argument that the proposed regulation were to create an impact on small entities, which it would not, the number of small entities so affected would not be substantial. No parties submitted comments on this issue. A copy of the NPRM was served on the U.S. Small Business Administration (SBA).

The final rule adopted here revises the rules proposed in the NPRM. However, the same basis for the Board's certification of the proposed rule applies to the final rules adopted here. The final rules would not create a significant impact on a substantial number of small entities, as the regulations would only specify procedures related to investigations of matters of regional or national significance conducted on the Board's own initiative and do not mandate or circumscribe the conduct of small entities. Therefore, the Board certifies under 5 U.S.C. 605(b) that the final rules will not have a significant economic impact on a substantial number of small entities within the meaning of the RFA. A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration, Washington, DC 20416.

It is ordered:

1. The final rules set forth below are adopted and will be effective on January 13, 2017.

2. A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration.

3. This decision is effective on January 13, 2017.

Atlantic sharks are directly managed under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), and the authority to issue regulations has been delegated from the Secretary of Commerce to the Assistant Administrator (AA) for Fisheries, NOAA. NMFS published in the Federal Register (71 FR 59058) final regulations, effective November 1, 2006 implementing the 2006 Consolidated Highly Migratory Species (HMS) Fishery Management Plan (FMP), which details management measures for Atlantic HMS fisheries. The implementing regulations for the 2006 Consolidated HMS FMP and its amendments are at 50 CFR part 635. This final rule establishes a commercial retention limit of eight blacknose sharks per trip in the Atlantic region south of 34°00′ N. latitude.

NMFS published a proposed rule on August 3, 2016 (81 FR 51165), outlining the alternatives analyzed in the Draft EA, identifying the preferred alternative, and soliciting public comments on the measures, which would impact the blacknose shark and non-blacknose SCS fisheries in the Atlantic region. Specifically, the proposed rule proposed establishing a commercial retention limit of eight blacknose sharks in the Atlantic region south of 34°00′ N. latitude but also considered alternatives that would establish a commercial retention limit of non-blacknose SCS for shark directed access permit holders in the Atlantic region south of 34°00′ N. latitude once the blacknose shark quota is reached, as well as two other alternatives regarding potential commercial retention limits for blacknose sharks. The full description of the management and conservation measures considered is included in both the Final EA and the proposed rule and is not repeated here. The comment period for the Draft EA and proposed rule ended on September 20, 2016. The comments received, and responses to those comments, are summarized below under the heading labeled Response to Comments.

This final rule establishes a commercial retention limit of eight blacknose sharks for all Atlantic shark limited access permit holders in the Atlantic region south of 34°00′ N. latitude. This rulemaking only focuses on the Atlantic region south of 34°00′ N. latitude since NMFS prohibited the retention and landings of blacknose sharks in the Gulf of Mexico and north of 34°00′ N. latitude in 2015. This final action should reduce discards of non-blacknose SCS while increasing the utilization of available Atlantic non-blacknose SCS quota and aid in rebuilding and ending overfishing of Atlantic blacknose sharks.

Finally, this rule makes administrative changes to existing regulatory text. Specifically, in two locations in § 635.24(a), the regulations make reference to paragraphs (a)(4)(iv) through (vi); those cross-references are unnecessary because the Commercial Caribbean Small Boat permit under (a)(4)(iv) is a separate permit from the shark limited access permits and there is no (a)(4)(v) and (a)(4)(vi) regulations. This final rule implements changes to the regulations in 50 CFR part 635 to correct those regulatory cross-references.

During the proposed rule stage, NMFS received 15 written and oral comments. NMFS also received feedback from: The HMS Advisory Panel on September 8, 2016; constituents who attended the conference call/webinar held on August 16, 2016; and constituents who attended the public hearing on August 24, 2016, in Cocoa Beach, FL. Additionally, NMFS consulted with the South Atlantic Fishery Management Council on September 15, 2016. A summary of the comments received on the proposed rule during the public comment period is provided below with NMFS' responses. All written comments submitted during the comment period can be found at http://www.regulations.gov by searching for NOAA-NMFS-2016-0095.

Comment 1: NMFS received a number of comments regarding the preferred retention limit of eight blacknose sharks per trip within the Atlantic region south of 34°00′ N. latitude. The South Atlantic Fishery Management Council, a number of HMS Advisory Panel members, and other commenters supported the preferred retention limit of eight blacknose sharks per trip within the Atlantic region south of 34°00′ N. latitude. Some commenters were concerned that the preferred retention limit was not low enough and would still result in the early closure of the non-blacknose SCS fishery. Some commenters suggested that the preferred retention limit of eight blacknose sharks per trip should apply only to directed shark limited access permit holders and that incidental shark limited access permit holders should not be allowed to land blacknose sharks or should have a lower retention limit. Lastly, other commenters suggested that NMFS should adjust the blacknose shark retention limit on an inseason basis, similar to what is done in the large coastal shark fishery.

Response: In this final action, NMFS is establishing a commercial retention limit of eight blacknose sharks per trip because the retention limit would have moderate beneficial ecological impacts on blacknose sharks, neutral ecological impacts on non-blacknose SCS, and minor beneficial socioeconomic impacts for SCS fishermen because they would be able to continue utilizing the non-blacknose SCS quota. Based on the analyses conducted, NMFS believes this retention limit would allow between 40 and 96 lb dw blacknose sharks to be landed per trip, depending on the average weight of blacknose sharks used. Using these weights landed per trip, the full blacknose shark quota could be landed in approximately 395 to 948 trips. This result is more than double and could be as high as 10 times the number of trips that harvested the blacknose quota from the 2011 to 2015 average. As such, the final retention limit of eight blacknose sharks per trip should allow for the blacknose and non-blacknose SCS quotas to remain open throughout the year and not cause the fisheries to close early. Because the retention limit should allow for the fisheries to remain open and because incidental shark permit holders by definition do not target sharks, NMFS does not believe it is necessary to consider separate blacknose retention limits by permit type. Regarding the comment about inseason adjustments to the retention limit, NMFS did not consider establishing an adjustable retention limit for blacknose sharks because this species should only be landed at incidental levels in order to allow for rebuilding and the final action to establish an eight blacknose shark retention limit should prevent early closure of the SCS fishery. NMFS may revisit inseason adjustments to the blacknose shark retention limit in the future as warranted.

Comment 2: NMFS received a comment suggesting that the average dressed weight for blacknose sharks should be increased from the 5 lb dw used in the latest stock assessment to 10 to 20 lb dw because larger blacknose sharks are more typically landed in the fishery.

Response: In all the calculations in the proposed rule, NMFS used an average dressed weight of 5 lb for blacknose sharks. This average weight is the average weight that was derived for the 2011 stock assessment using a length-weight conversion function. However, based on these public comments, NMFS reviewed data from observed bottom longline and gillnet trips that landed blacknose sharks in the years 2013 through 2015 and found that these data indicate that fishermen are landing blacknose sharks with an average weight of 12 lb dw. As a result, NMFS provided information on both weights in the final EA and final rule. Based on data analysis, using either average weight would support using an eight blacknose shark retention limit and accomplish the goals of the rulemaking.

Comment 3: NMFS received a comment requesting the removal of the quota linkage between the blacknose shark and the South Atlantic non-blacknose SCS quotas so that fishermen would not have to discard non-blacknose SCS after the blacknose quota is filled.

Response: The objectives of this action are to continue rebuilding the Atlantic blacknose shark stock; to aid in ending overfishing of the Atlantic blacknose shark stock; to aid in achieving optimum yield in the blacknose and non-blacknose-SCS fisheries; and to reduce dead discards of small coastal sharks. The quota linkage was established to prevent further overfishing and aid in rebuilding blacknose sharks. Without the quota linkage, fishermen would lose an important incentive for avoiding blacknose sharks, thus jeopardizing the rebuilding plan for blacknose sharks and potentially increasing overfishing of blacknose sharks.

Comment 4: NMFS received a comment suggesting that the SCS season open in September instead of January.

Response: The final action does not reanalyze the overall start date for SCS, which was analyzed in the 2006 Consolidated HMS FMP and its amendments. NMFS could consider this in a future rulemaking.

Comment 5: NMFS received a comment requesting that the 80-percent threshold closure policy for shark fisheries be changed.

Response: NMFS' goal is to allow shark fishermen to harvest the full quota without exceeding it in order to maximize economic benefits to stakeholders while achieving conservation goals, including preventing overfishing. The 80-percent threshold closure policy refers to NMFS calculating that the overall, regional, and/or sub-regional landings for any species and/or management group has reached or is projected to reach 80 percent of the available overall, regional, and/or sub-regional quota and NMFS closing the species and/or management groups for the rest of the season. Based on current experiences with monitoring quotas for all shark species and management groups, NMFS believes that the 80-percent threshold allows for all or almost the entire quota to be harvested without exceeding the quota. As such, NMFS expects that, in general, the quotas would be harvested between the time that the 80-percent threshold is reached and the time that the season actually closes. In addition, NMFS must also account for late reporting by shark dealers even with the improved electronic dealer system and provide a buffer to include landings received after the reporting deadline in an attempt to avoid overharvests. NMFS will continue to evaluate the 80-percent threshold and may consider changes in a future rulemaking.

Comment 6: NMFS received a comment suggesting that an Atlantic blacknose update stock assessment be performed in 2019 along with the Atlantic blacktip benchmark assessment.

Response: Most of the domestic shark stock assessments follow the Southeast Data, Assessment Review (SEDAR) process. This process is also used by the South Atlantic, Gulf of Mexico, and Caribbean Fishery Management Councils and is designed to provide transparency throughout the stock assessment. With regard to the timing of upcoming shark stock assessments, NMFS aims to conduct a number of shark stock assessments every year and to regularly reassess these stocks. The number of species that can be assessed each year depends on whether assessments are establishing baselines or are only updates to previous assessments. Assessments also depend on ensuring there are data available for a particular species. In addition to the shark assessments being conducted by the International Commission for the Conservation of Atlantic Tunas (ICCAT), NMFS intends to conduct, through the SEDAR process, a sandbar shark benchmark assessment in 2017, a Gulf of Mexico blacktip shark update assessment in 2018, and an Atlantic blacktip benchmark assessment in 2019. NMFS will continue to monitor options for future stock assessments, including an assessment for Atlantic blacknose sharks.

The NMFS Assistant Administrator has determined that the final rule is necessary for the conservation and management of the Atlantic shark fisheries and that it is consistent with the Magnuson-Stevens Act and other applicable laws.

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

A Final Regulatory Flexibility Analysis (FRFA) was prepared for this rule pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 604 (c)(1)-(4)). The FRFA incorporates the Initial Regulatory Flexibility Analysis (IRFA), a summary of the significant issues raised by the public comments in response to the IRFA, NMFS responses to those comments, and a summary of the analyses completed to support the action. The full FRFA and analysis of economic and ecological impacts are available from NMFS (see ADDRESSES). A summary of the FRFA follows.

Under Section 604(a)(1) of the RFA, the management goals and objectives of the preferred alternative are to provide for the sustainable management of SCS species under authority of the Secretary consistent with the requirements of the Magnuson-Stevens Act and other statutes which may apply to such management, including the Endangered Species Act, Marine Mammal Protection Act, and Atlantic Tunas Convention Act. The Magnuson-Stevens Act mandates that the Secretary provide for the conservation and management of HMS through development of an FMP for species identified for management and to implement the FMP with necessary regulations. In addition, the Magnuson-Stevens Act directs the Secretary, in managing HMS, to prevent overfishing of species while providing for their optimum yield on a continuing basis and to rebuild fish stocks that are considered overfished. The management objective of the preferred alternative is to implement management measures for the Atlantic SCS fishery that will further the objective of preventing overfishing while achieving (on a continuing basis) optimum yield, and aid in rebuilding overfished shark stocks.

Section 604(a)(2) of the RFA requires a summary of the significant issues raised by the public comments in response to the IRFA, a summary of the Agency's assessment of such issues, and a statement of any changes made in the rule as a result of such comments. NMFS received several comments on the proposed rule and Draft EA during the public comment period. Summarized public comments and NMFS' responses to them are included in Appendix A of this document. Section 604(a)(3) of the RFA requires the Agency to respond to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA) in response to the proposed rule, and a detailed statement of any change made in the rule as a result of such comments. NMFS did not receive any comments from the Chief Counsel for Advocacy of the SBA nor the public in response to this document.

Section 604(a)(3) of the RFA requires agencies to provide an estimate of the number of small entities to which the rule would apply. The Small Business Administration (SBA) has established size criteria for all major industry sectors in the United States, including fish harvesters. Provision is made under SBA's regulations for an agency to develop its own industry-specific size standards after consultation with Advocacy and an opportunity for public comment (see 13 CFR 121.903(c)). Under this provision, NMFS may establish size standards that differ from those established by the SBA Office of Size Standards, but only for use by NMFS and only for the purpose of conducting an analysis of economic effects in fulfillment of the agency's obligations under the RFA. To utilize this provision, NMFS must publish such size standards in the Federal Register (FR), which NMFS did on December 29, 2015 (80 FR 81194, December 29, 2015). In this final rule, effective on July 1, 2016, NMFS established a small business size standard of $11 million in annual gross receipts for all businesses in the commercial fishing industry (NAICS 11411) for RFA compliance purposes (80 FR 81194, December 29, 2015). NMFS considers all HMS permit holders to be small entities because they have average annual receipts of less than $11 million for commercial fishing.

This final rule would apply to the 499 commercial shark permit holders in the Atlantic shark fishery, based on an analysis of permit holders as of November 2015. Of these permit holders, 224 have directed shark permits and 275 hold incidental shark permits. Not all permit holders are active in the fishery in any given year. Active directed permit holders are defined as those with valid permits that landed one shark based on 2015 HMS electronic dealer reports. Of the 499 permit holders, only 27 permit holders landed SCS in the Atlantic region and of those only 13 landed blacknose sharks. NMFS has determined that the final rule would not likely affect any small governmental jurisdictions.

Section 604(a)(4) of the RFA requires Agencies to describe any new reporting, record-keeping and other compliance requirements. The action does not contain any new collection of information, reporting, or record-keeping requirements. The alternatives considered would adjust the commercial retention limits for the SCS fisheries, which would mean new compliance requirements for the shark fishery participants in the Atlantic region south of 34°00′ N. latitude, but which are similar to other compliance requirements the fishermen already follow.

Section 604(a)(5) of the RFA requires a description of the steps the Agency has taken to minimize any significant economic impact on small entities consistent with the stated objectives of applicable statutes. Additionally, the RFA lists four general categories of “significant” alternatives that would assist an agency in the development of significant alternatives. These categories of alternatives are: (1) Establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) Clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) Use of performance rather than design standards; and (4) Exemptions from coverage of the rule, or any part thereof, for small entities.

In order to meet the objectives of this final rule, consistent with the Magnuson-Stevens Act and the Endangered Species Act, NMFS cannot establish differing compliance requirements for small entities or exempt small entities from compliance requirements. Thus, there are no alternatives discussed that fall under the first and fourth categories described above. NMFS does not know of any performance or design standards that would satisfy the aforementioned objectives of this rulemaking while, concurrently, complying with the Magnuson-Stevens Act. As described below, NMFS analyzed several different alternatives in this final rulemaking and provides rationales for identifying the preferred alternatives to achieve the desired objectives.

The alternatives considered and analyzed are described below. The FRFA assumes that each vessel will have similar catch and gross revenues to show the relative impact of the final action on vessels.

Alternative 1, the No Action alternative, would not implement any new retention limits for blacknose sharks or non-blacknose SCS in the Atlantic region south of 34°00′ N. latitude beyond those already in effect for current Atlantic shark limited access permit holders. NMFS would continue to allow fishermen with a direct limited access permit to land unlimited sharks per trip and allow fishermen with an incidental permit to land 16 combined SCS and pelagic sharks per vessel per trip. In 2010, Amendment 3 to the 2006 Consolidated HMS FMP established, among other things, a quota for blacknose sharks separate from the SCS quota. The 2011 blacknose shark stock assessment determined that separate stocks of blacknose sharks existed in the Gulf of Mexico and the Atlantic. Amendment 5a to the 2006 Consolidated HMS FMP established, among other things, regional quotas for non-blacknose SCS and blacknose sharks in the Gulf of Mexico and the Atlantic in 2013. These blacknose shark and non-blacknose SCS quotas are linked by region and the regional SCS fishery closes when the blacknose quota is reached. This linkage has resulted in the early closure of the entire SCS fishery due to high abundance of blacknose shark landings. Closure of the fishery as a result of Atlantic blacknose rapid harvest leaves the non-blacknose shark SCS quota underutilized. Between 2014 and 2015, the Atlantic non-blacknose SCS quota was underutilized by an average of 314,625 lb dw, or 54 percent of the quota. This represents an average annual ex-vessel loss of $298,583 for the fishery, assuming an average value for 2014-2015 of $0.74/lb dw for meat and $4.18/lb dw for fins. Based on the 27 vessels that landed SCS in the Atlantic, the individual vessel impact would be an approximate loss of $11,059 per year.

Alternative 2a would remove the quota linkage to blacknose sharks for shark directed limited access permit holders in the Atlantic region south of 34°00′ N. latitude once the blacknose shark quota is reached and would implement a commercial retention limit of 50 non-blacknose SCS per trip at that point. Additionally, this alternative would adjust the blacknose shark quota to 15.0 mt dw (33,069 lb dw) assuming a 5 lb dw carcass, or 11.8 mt dw (26,089 lb dw) assuming a 12 lb dw carcass. Reduction of the blacknose shark quota would result in an average ex-vessel revenue loss of $5,275 for the fishery assuming a 5 lb dw carcass, or $12,660 assuming a 12 lb dw carcass. Conversely, increased landings of non-blacknose SCS would result in an overall estimated average ex-vessel revenue gain of $34,470 for the fishery. NMFS estimates that this bycatch retention limit would result in a net gain of $21,810 to $29,195 in average ex-vessel revenue for the fishery per year depending on the average carcass weight of blacknose sharks, or $808 to $1,081 per vessel for the 27 vessels that targeted non-blacknose SCS in 2015.

Alternative 2b would remove the quota linkage to blacknose sharks for shark directed limited access permit holders in the Atlantic region south of 34°00′ N. latitude once the blacknose shark quota is reached and would implement a commercial retention limit of 150 non-blacknose SCS per trip at that point. Additionally, this alternative would adjust the blacknose shark quota to 10.5 mt dw (23,148 lb dw) assuming a 5 lb dw carcass, or 1.1 mt dw (2,521 lb dw) assuming a 12 lb dw carcass. Reduction of the blacknose shark quota would result in an average ex-vessel revenue loss of $15,783 for the fishery assuming a 5 lb dw carcass, or $37,878 assuming a 12 lb dw carcass. Conversely, increased landings of non-blacknose SCS would result in an overall estimated average ex-vessel revenue gain of $65,139 for the fishery. NMFS estimates that this bycatch retention limit would result in a net gain of $27,261 to $49,357 in average ex-vessel revenue for the fishery per year depending on the average carcass weight of blacknose sharks, or approximately $1,010 to $1,828 per vessel for the 27 vessels that targeted non-blacknose SCS in 2015.

Alternative 2c would remove the quota linkage to blacknose sharks for shark directed limited access permit holders in the Atlantic region south of 34°00′ N. latitude once the blacknose shark quota is reached and would implement a commercial retention limit of 250 non-blacknose SCS per trip at that point. This alternative would also adjust the blacknose shark quota to 6.1 mt dw (13,448 lb dw) assuming a 5 lb dw carcass, or 0.0 mt dw (0.0 lb dw) assuming a 12 lb dw carcass. Reduction of the blacknose shark quota would result in an average ex-vessel revenue loss of $26,295 for the fishery assuming a 5 lb dw carcass, or $40,575 assuming a 12 lb dw carcass. Conversely, increased landings of non-blacknose SCS would result in an estimated average ex-vessel revenue gain of $80,339 for the fishery. NMFS estimates that this bycatch retention limit would result in a net gain of $39,764 to $54,044 in average ex-vessel revenue for the fishery per year depending on the average carcass weight of blacknose sharks, or approximately $1,473 to $2,002 per vessel for the 27 vessels that targeted non-blacknose SCS in 2015.

Alternative 3a would establish a commercial retention limit of 50 blacknose sharks per trip for shark directed limited access permit holders in the Atlantic region south of 34°00′ N. latitude and maintain the quota linkage between blacknose sharks and non-blacknose SCS. This alternative would have minor beneficial to neutral economic impacts as a retention limit of this size would allow an average of 250 to 600 lb dw blacknose sharks per trip and would take an estimated 63 to 152 trips for fishermen to land the full blacknose shark quota. This alternative will prevent targeted take of blacknose sharks as the per trip value of 50 blacknose sharks would range between $270 ($218 for meat and $52 for fins) assuming an average weight of 5 lb dw per blacknose shark, and $642 ($522 for meat and $120 for fins) assuming an average weight of 12 lb dw for the estimated 13 vessels that land blacknose sharks in the Atlantic. Based on 2015 eDealer reports, 106 trips landed blacknose sharks, and between 14 and 33 percent landed blacknose sharks in excess of a commercial retention limit of 50 blacknose sharks depending on the average trip weight used in the calculations (250-600 lb dw). This alternative would likely increase the number of trips needed to fill the blacknose shark quota when compared to the average from 2010 through 2015 under Alternative 1. A retention limit of 50 blacknose sharks could potentially cause the SCS fisheries to close as early as June or July if every trip landing blacknose sharks landed the full retention limit but, since few fishermen land that many blacknose sharks per trip now, NMFS believes a change in behavior as a result of this alternative is unlikely.

Alternative 3b would establish a commercial retention limit of 16 blacknose sharks per trip for all Atlantic shark limited access permit holders in the Atlantic region south of 34°00′ N. latitude and maintain the quota linkage between blacknose sharks and non-blacknose SCS. This alternative would have minor beneficial economic impacts as a retention limit of this size would allow an average of 80 to 192 lb dw blacknose sharks per trip and would take an estimated 198 to 474 trips for fishermen to land the full blacknose shark quota. Based on 2015 eDealer reports, 38 to 55 percent of the overall number of trips landed blacknose sharks in excess of a commercial retention limit of 16 blacknose sharks depending on the average trip weight used in the calculations (80-192 lb dw). This alternative would dramatically increase the number of trips needed to fill the blacknose shark quota when compared to the yearly averages under Alternative 1. Currently, the linkage between the blacknose shark quota and the non-blacknose SCS quota causes the closure of both fisheries once the lower blacknose shark quota is attained. NMFS expects that, under this alternative, the blacknose shark quota would not be filled and the SCS fisheries in the South Atlantic region would not close early. Thus, this alternative would have minor beneficial economic impacts to the Atlantic SCS fisheries as it would allow for the potential full-utilization of the non-blacknose SCS quota, and potentially increase total ex-vessel revenue by as much as $298,583 a year. However, given the low monthly trip rates occurring to harvest SCS in the Atlantic, the non-blacknose SCS quota is likely to remain underutilized. Using calculations based on observed trip and landings rates of non-blacknose SCS in 2015, a more likely result of this alternative would be additional landings of 104,962 lb dw of non-blacknose SCS valued at $98,664, or approximately $3,654 per vessel for the 27 vessels that participated in the fishery in 2015. Any financial losses due to underutilization of the blacknose shark quota would be minimal in comparison.

Alternative 3c, the preferred alternative, would establish a commercial retention limit of eight blacknose sharks per trip for all Atlantic shark limited access permit holders in the Atlantic region south of 34°00′ N. latitude and maintain the quota linkage between blacknose sharks and non-blacknose SCS. Because this retention limit would be less than the current retention limit for shark incidental limited access permit holders, the retention limit for shark incidental limited access permit holders would need to change slightly. The adjusted retention limit for incidental permit holders would still allow fishermen to land a total of 16 pelagic or small coastal sharks per trip but, of those sharks, no more than eight could be blacknose sharks. This alternative would have moderate beneficial economic impacts as a retention limit of this size would allow an average of 40 to 96 lb dw blacknose sharks per trip and would take an estimated 395 to 948 trips to land the full blacknose shark quota. Based on 2015 eDealer reports, 55 to 70 percent of the overall number of trips landed blacknose sharks in excess of the commercial retention limit of eight blacknose sharks depending on the average trip weight used in the calculations (40-96 lb dw). This alternative would dramatically increase the number of trips needed to fill the blacknose shark quota when compared to the yearly averages under Alternative 1. Currently, the linkage between the blacknose shark quota and the non-blacknose SCS quota causes the closure of both fisheries once the lower blacknose shark quota is attained. NMFS expects that, under this alternative, the blacknose shark quota would not be filled and the SCS fisheries in the South Atlantic region would not close early. Thus, this would have moderate beneficial economic impacts as the fishermen would still be allowed to land blacknose sharks and the fishery would remain open for a longer period of time, significantly increasing non-blacknose SCS revenues by as much as $298,583 a year on average if the non-blacknose SCS quota is fully utilized. However, given current monthly trip rates in the Atlantic the non-blacknose SCS quota is likely to remain underutilized. Using calculations based on observed trip and landings rates of non-blacknose SCS in 2015, a more likely result of this alternative would be additional landings of 104,962 lb dw of non-blacknose SCS valued at $98,664, or approximately $3,654 per vessel for the 27 vessels that participated in the fishery in 2015. Any financial losses due to underutilization of the blacknose shark quota would be minimal in comparison.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, a listserv notice to permit holders that also serves as small entity compliance guide (the guide) was prepared. Copies of this final rule are available from the HMS Management Division (see ADDRESSES), and the guide, i.e., the listserv notice, will be sent to all fishermen who hold commercial shark limited access permits. The guide and this final rule will be available upon request.

For the reasons set out in the preamble, 50 CFR part 635 is amended as follows:

Background

On January 16, 2013, the Council published a Notice of Intent (NOI) to prepare an Environmental Impact Statement (78 FR 3401) for Amendment 16 to the Atlantic Mackerel, Squid, and Butterfish Fishery Management Plan (FMP) to consider measures to protect deep-sea corals from the impacts of commercial fishing gear in the Mid-Atlantic. The Council conducted scoping meetings during February 2013 to gather public comments on these issues. Following further development of Amendment 16 through 2013 and 2014, the Council conducted public hearings in January 2015. Following public hearings, and with disagreement about the boundaries of the various alternatives, the Council held a workshop with various stakeholders on April 29-30, 2015, to further refine the deep-sea coral area boundaries. The workshop was an example of effective collaboration among fishery managers, the fishing industry, environmental organizations, and the public to develop management recommendations with widespread support. The Council adopted Amendment 16 on June 10, 2015, and submitted Amendment 16 on August 15, 2016, for final review by NMFS, acting on behalf of the Secretary of Commerce. NMFS published a Notice of Availability (NOA) announcing its review of Amendment 16 on September 2, 2016 (81 FR 60666), and a proposed rule including implementing regulations on September 27, 2016 (81 FR 66245). The public comment period for both the NOA and proposed rule ended on November 1, 2016.

The Council developed the action, and the measures described in this notice, under the discretionary provisions for deep-sea coral protection in section 303(b) of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). This provision gives the Regional Fishery Management Councils the authority to:

(A) Designate zones where, and periods when, fishing shall be limited, or shall not be permitted, or shall be permitted only by specified types of fishing vessels or with specified types and quantities of fishing gear;

(B) Designate such zones in areas where deep-sea corals are identified under section 408 (this section describes the deep-sea coral research and technology program), to protect deep-sea corals from physical damage from fishing gear or to prevent loss or damage to such fishing gear from interactions with deep-sea corals, after considering long-term sustainable uses of fishery resources in such areas; and

(C) With respect to any closure of an area under the Magnuson-Stevens Act that prohibits all fishing, ensure that such closure:

(i) Is based on the best scientific information available;

(ii) Includes criteria to assess the conservation benefit of the closed area;

(iii) Establishes a timetable for review of the closed area's performance that is consistent with the purposes of the closed area; and

(iv) Is based on an assessment of the benefits and impacts of the closure, including its size, in relation to other management measures (either alone or in combination with such measures), including the benefits and impacts of limiting access to: Users of the area, overall fishing activity, fishery science, and fishery and marine conservation.

Consistent with these provisions, the Council recommended the measures in Amendment 16 to balance the impacts of measures implemented under this discretionary authority with the management objectives of the Mackerel, Squid, and Butterfish FMP and the value of potentially affected commercial fisheries.

This final rule creates a deep-sea coral protection area in Mid-Atlantic waters. It consists of a broad zone that starts at a depth contour of approximately 450 meters (m) and extends to the U.S. Exclusive Economic Zone (EEZ) boundary, and to the north and south to the boundaries of the Mid-Atlantic waters (as defined in the Magnuson-Stevens Act). In addition, the deep-sea coral protection area includes 15 discrete zones that outline deep-sea canyons on the continental shelf in Mid-Atlantic waters. The deep-sea coral area, including both broad and discrete zones, is one continuous area.

The broad coral zone is precautionary in nature and is intended to freeze the footprint of fishing to protect corals from future expansion of fishing effort into deeper waters. The broad coral zone has a landward boundary drawn between the 400 m and 500 m contours with the intention to approximate the 450 m depth contour as closely as possible, minimizing the number of vertices in the boundary line. In areas where there is conflict or overlap between this broad zone and any designated discrete zone boundaries, the discrete zone boundaries are prioritized. From the landward boundary, the broad zone boundaries extends along the northern and southern boundaries of the Mid-Atlantic management region, and to the edge of the EEZ as the eastward boundary.

The discrete coral zones are specific submarine canyons and slope areas located in Mid-Atlantic waters. The boundaries were developed collaboratively by participants at the Council's April 29-30, 2015, Deep-sea Corals Workshop in Linthicum, MD. Participants included the Council's Squid, Mackerel, and Butterfish Advisory Panel, the Ecosystems and Ocean Planning Advisory Panel, members of the Deep-sea Corals Fishery Management Action Team, invited deep-sea coral experts, additional fishing industry representatives, and other interested stakeholders. The canyons and slope areas were identified as areas with observed coral presence or highly likely coral presence indicated by modeled suitable habitat. Therefore, prohibiting bottom-tending fishing gear in these areas prevents interaction with and damage to deep-sea corals that either are known through observation to live in these areas or that are likely to live there. The discrete coral zones are: Block Canyon; Ryan and McMaster Canyons; Emery and Uchupi Canyons; Jones and Babylon Canyons; Hudson Canyon; Mey-Lindenkohl Slope; Spencer Canyon; Wilmington Canyon; North Heyes and South Wilmington Canyons; South Vries Canyon; Baltimore Canyon; Warr and Phoenix Canyon Complex; Accomac and Leonard Canyons; Washington Canyon; and Norfolk Canyon.

This action prohibits the use of bottom-tending commercial fishing gear within the designated deep-sea coral area, including: Bottom-tending otter trawls; bottom-tending beam trawls; hydraulic dredges; non-hydraulic dredges; bottom-tending seines; bottom-tending longlines; sink or anchored gill nets; and pots and traps except those used to fish for red crab and American lobster. The prohibition on these gears will protect deep-sea corals from interaction with and damage from bottom-tending fishing gear.

Vessels can transit the deep-sea coral area protection area provided the vessels bring bottom-tending fishing gear onboard the vessel, and reel bottom-tending trawl gear onto the net reel. The Council proposed these slightly less restrictive transiting provisions because the majority of transiting will be through the very narrow canyon heads (i.e., the narrow tips of the canyons that extend landward of the broad coral zone landward boundary). The Council determined that the normal gear stowage requirements, and requirements that gear be unavailable for immediate use, (at 50 CFR 648.2) would be too burdensome for commercial vessels within the narrow areas of some of the discrete coral zones.

Vessels issued an Illex squid moratorium permit are required to have a vessel monitoring system (VMS) installed, and operators of these vessels would have to declare Illex squid trips on which 10,000 lb (4.53 mt) or more of Illex squid would be harvested. By requiring Illex squid vessels to have VMS and declare Illex fishing trips prior to leaving port, this measure facilitates enforcement of the deep-sea coral area and gear restrictions. NMFS notes that all Illex vessels currently have VMS installed and that all of these vessels are already required to declare trips. Therefore, this provision does not create any new operational requirement for Illex squid vessel owners or operators.

This action expands the framework adjustment provisions in the FMP to facilitate future modifications to the deep-sea coral protection measures. The framework measures include:

• Modifications to coral zone boundaries via framework action;

• Modifications to the boundaries of broad or discrete deep-sea coral zones through a framework action;

• Modification of management measures within deep-sea coral protection areas. This provides the Council the option to modify fishing restrictions, exemptions, monitoring requirements, and other management measures within deep-sea coral zones through a framework action. It includes measures directed at gear and species not currently addressed in the FMP to further the FMP's goal of protecting deep-sea corals from physical damage from fishing gear or to prevent loss or damage to such fishing gear from interactions with deep-sea corals. This would also include the ability to add a prohibition on anchoring in deep-sea coral protection areas;

• Addition of discrete coral zones; and

• Implementation of special access program for deep-sea coral protection area. This provides the Council the option to design and implement a special access program for commercial fishery operations in deep-sea coral zones through a framework action.

The Council recommended that the deep-sea coral protection area should be named in honor of the late Senator Frank R. Lautenberg. Senator Lautenberg was responsible for several important pieces of ocean conservation legislation and authored several provisions included in the most recent reauthorized Magnuson-Stevens Act (2007), including the discretionary provision for corals. Therefore, this final rule implements the deep-sea coral protection area as the “Frank R. Lautenberg Deep-Sea Coral Protection Area.”

We received 10 comments on the proposed rule and NOA (8 in general support of the action and 2 against the action), including letters from five individuals, the Garden State Seafood Association, the Maryland Department of Natural Resources, and the Wildlife Conservation Society's New York Aquarium. We also received a joint comment from Oceana, Wildlife Conservation Society's New York Aquarium, Conservation Law Foundation, Earthjustice, Great Egg Harbor Watershed Association, Natural Resource Defense Council, Pew Charitable Trusts, Tycoon Tackle Inc., and Wild Oceans. Supporting this joint comment was a comment the PEW Charitable Trust submitted to the Council prior to final action on Amendment 16. This comment was included to convey the strong and broad public support for the protection of deep-sea corals (including 12,201 signatures). The comment specific to the Amendment 16 proposed rule was supportive of the action. The following summarizes the issues raised in the comments and NMFS's responses.

Comment 1: Garden State Seafood Association opposes the expansion of framework adjustment provisions as currently allowed by the fishery management plan.

Response: In general, the framework alternatives are primarily administrative and intended to simplify and improve the efficiency of future actions related to deep-sea coral protections. The purpose of modifying the list of “frameworkable items” in the FMP is to demonstrate that the concepts included on the list have previously been considered in an amendment (i.e., they are not novel) and the applicable measures are included in the fishery management plan or regulations. Adjustment of the measures through the framework process allows for modification of the measures already included in the fishery management plan(s). The effects of any proposed action or future change through the framework adjustment process will be analyzed through a separate NEPA process and developed with public input through the Council process.

Comment 2: The joint comment letter (from Oceana, Wildlife Conservation Society's New York Aquarium, Conservation Law Foundation, Earthjustice, Great Egg Harbor Watershed Association, Natural Resource Defense Council, PEW Charitable Trusts, Tycoon Tackle Inc., and Wild Oceans) requested that the exemptions for lobster and crab pots and traps provided in the action be reexamined in a future action to ensure that they are justified and that the final rule provide a full explanation of how the Council and NOAA will approach reconsideration of the exemption, including evaluation criteria and a detailed description of the information that will be collected over the 2-year period in order to make a better informed decision. The letter requested that NMFS and the Council establish a process to jointly assess the effectiveness in protecting deep-sea corals in the Coral Area, and that the chosen metrics be reviewed periodically to make adjustments.

Response: The Council developed this action under the discretionary provisions for deep-sea coral protection in section 303(b) of the Magnuson-Stevens Act. This provision gives the Council the authority to establish a timetable for review of the closed area's performance that is consistent with the purposes of the closed area. Although the Council did not establish a formal review process for the areas, it clearly indicated its intent to allow review and modification through the framework provisions it included in the amendment. Because the process is not included, and it is not required, NMFS cannot impose a timeline or process on the Council. However, NMFS will continue to work with the Council and remind it of the need to adjust these measures as necessary as new information becomes available.

Comment 3: The joint comment letter recommended that the Council and NMFS consider expanding the boundaries of the discrete zones to better protect deep-sea corals, including stony corals (Scleractinia) and sea pens (Pennatulacea).

Response: The Council can consider additional action to further expand the protection of deep-sea corals through the framework measures and process it included in this amendment.

Comment 4: The joint comment letter recommended that the transit provision require the full gear stowage provisions as opposed to the slightly less restrictive requirements proposed.

Response: The action allows slightly less restrictive transiting provisions because the majority of transiting will be through the very narrow canyon heads (i.e., the narrow tips of the canyons that extend landward of the broad coral zone landward boundary). The normal gear stowage requirements, and requirements that gear be unavailable for immediate use, (at 50 CFR 648.2), would be burdensome for commercial vessels within the narrow areas of some of the discrete coral zones. The less restrictive gear stowage requirement still prohibits vessels from fishing in the areas and they must have gear onboard; the more restrictive measures would not reduce the potential for fishing.

Comment 5: The joint comment letter requested that the Council consider future prohibitions on mid-water trawl gear.

Response: The Council has the option to consider additional gear prohibitions in the area through a framework.

Comment 6: The joint comment letter opposed the implementation of a special access program for commercial fishing operations in the coral area via framework action. They feel there should be a full amendment to create such a program.

Response: The framework alternatives are primarily administrative and intended to simplify and improve the efficiency of future actions related to deep-sea coral protections. The purpose of modifying the list of frameworkable items in the FMP is to demonstrate that the concepts included on the list have previously been considered in an amendment. Any proposed action or future change will be analyzed through a separate NEPA process and would be developed by the Council through a public process, including Council, Committee, and Advisory Panel meetings that are all open to public participation.

Comment 7: One commenter requested that a large portion of the deep-sea coral protection area be set aside as a permanently protected no-take reserve, to both preserve biodiversity and ensure sustainable fisheries into the future.

Response: The Council did not consider measures that would establish “no-take reserves.” Rather, the measures approved as part of this amendment, and the alternatives the Council considered, were meant to prevent fishing in some areas and prevent expansion of fisheries into areas where corals are known or believed to exist. The Council balanced the desire to close these areas under the Magnuson-Stevens Act's discretionary deep-sea coral provision with the need to promote sustainable fisheries as the primary requirement under the Magnuson-Stevens Act. However, if the Council wants to consider expanded protection of biodiversity through no-take reserves or similar measures, it can take an additional action to further expand the protection of deep-sea corals.

Comment 8: One commenter stated that during the development of this action the Council led the fishing industry to believe that all existing fisheries operating in the areas protected under this action would be allowed to continue and that no new fisheries would be allowed to use the area, (i.e., the action would freeze the footprint of fishing). He stated that removing all bottom tending mobile gear from these areas will have “devastating impacts on current fisheries that have historically taken place near/in the coral zones.”

Response: We disagree that the Council misled the fishing industry. The Council held a workshop with various stakeholders (including fishing industry participants) because of disagreement about how to set the coral protection area boundaries so that it would limit fishing but not have a high negative impact on fisheries. Environmental advocates, and deep-sea coral experts, as well as the Atlantic Mackerel, Squid, and Butterfish Advisory Panel and the Ecosystems and Ocean Planning Advisory Panel attended the workshop. The workshop resulted in stakeholders working together to compromise on a set of boundaries for the 15 discrete deep-sea coral zones, which the Council subsequently selected as its preferred alternative. During the workshop to refine boundaries for coral zones, advisors assisted in developing boundaries that would allow for continued fishing just outside the gear restricted areas. As a result, the Council determined the economic impacts of this action will result in overall neutral to moderate negative economic impacts for fishing businesses, depending on the fishery and assuming vessels will redistribute effort to offset impacts of the prohibition on fishing in some areas where they traditionally fished.

Comment 9: One commenter stated that the Council has never provided any justification for the decision to allow fixed gear in the area when data show that fixed gear poses a greater threat to deep-sea coral than mobile gear.

Response: The Council recommended the exemption for the red crab fishery because of the small size of the red crab fleet (three vessels) and because all red crab effort takes place at depths entirely within all of the proposed broad zone areas. Prohibiting red crab fishing in the coral protection area would have severely limited the red crab fishery and would have had excessively high negative economic impacts on red crab vessels.

Comment 10: One commenter stated that there should be names on all fishing equipment assigned to fishing boats and loss of such equipment should require a fine of a million dollars if equipment is lost because it is causing massive marine death.

Response: Lobster and red crab gear are already required to be marked to identify the vessel. Further, both of these gears are required to be compliant with the Atlantic Large Whale Take Reduction Plan to reduce injuries and deaths of large whales due to incidental entanglement in fishing gear. Details on the Atlantic Large Whale Take Reduction Plan can be found here: https://www.greateratlantic.fisheries.noaa.gov/Protected/whaletrp/.

There are no changes from the proposed rule.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this final rule is consistent with the FMP, other provisions of the Magnuson-Stevens Act, and other applicable law.

The Office of Management and Budget (OMB) has determined that this final rule is not significant according to Executive Order (E.O.) 12866.

This final rule does not contain policies with federalism or “takings” implications, as those terms are defined in E.O. 13132 and E.O. 12630, respectively.

This action does not contain any collection-of-information requirements subject the Paperwork Reduction Act (PRA).

NMFS, pursuant to section 604 of the Regulatory Flexibility Act (RFA), has completed a final regulatory flexibility analysis (FRFA) in support of Amendment 16 in this final rule. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA, NMFS responses to those comments, a summary of the analyses completed in the Amendment 16 EA, and this portion of the preamble. A summary of the IRFA was published in the proposed rule for this action and is not repeated here. A description of why this action was considered, the objectives of, and the legal basis for this rule is contained in Amendment 16 and in the preamble to the proposed and this final rule, and is not repeated here. All of the documents that constitute the FRFA are available from NMFS and a copy of the IRFA, the Regulatory Impact Review (RIR), and the EA are available upon request (see ADDRESSES).

There were no specific comments on the IRFA. The Comments and Responses section summarizes the comments that highlight concerns about the economic impacts and implications of impacts on small businesses (i.e., comment 8). No comments were received from the Office of Advocacy for the Small Business Administration.

On December 29, 2015, NMFS issued a final rule establishing a small business size standard of $11 million in annual gross receipts for all businesses primarily engaged in the commercial fishing industry (NAICS 11411) for RFA compliance purposes only (80 FR 81194; December 29, 2015). The $11 million standard became effective on July 1, 2016, and is to be used in place of the U.S. Small Business Administration's (SBA) current standards of $20.5 million, $5.5 million, and $7.5 million for the finfish (NAICS 114111), shellfish (NAICS 114112), and other marine fishing (NAICS 114119) sectors of the U.S. commercial fishing industry in all NMFS rules subject to the RFA after July 1, 2016 (Id. at 81194).

The Council prepared the IRFA under the SBA standards and submitted the action for initial NMFS review in March 2016, prior to the July 1, 2016, effective date of NMFS' new size standard for commercial fishing businesses, under the assumption that the proposed rule would also publish prior to the July 1, 2016, effective date. However, NMFS has reviewed the analyses prepared for this regulatory action in light of the new size standard. The new size standard could result in some of the large businesses being considered small, but, as explained below, this does not affect the conclusions of the analysis. The following summarizes the IRFA using the SBA definitions of small businesses.

The deep-sea coral zones measures in association with other management measures within the coral zones could affect any business entity that has an active Federal fishing permit and fishes in the zone/gear restricted areas. In order to identify firms, vessel ownership data, which have been added to the permit database, were used to identify all the individuals who own fishing vessels. With this information, vessels were grouped together according to common owners. The resulting groupings were then treated as a fishing business (firm, affiliate, or entity), for purposes of identifying small and large firms. According to the ownership database, a total of 113 finfish firms (all small entities) fished in the Council's preferred broad and discrete zones during 2014. Also in 2014, there were 184 small and 16 large shellfish entities. The ownership database shows that small finfish firms that operated in the Council's preferred broad and discrete zones generated average revenues that ranged from $18,344 (in 2013) to $21,055 (in 2014). The ownership database shows that small shellfish firms that operated in the Council's preferred broad and discrete zones generated average revenues that ranged from $35,276 (in 2014) to $58,723 (in 2012). The ownership database shows that large shellfish firms that operated in the Council's preferred broad and discrete zones generated average revenues that ranged from $146,901 (in 2013) to $314,223 (in 2012).

This action contains no new collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). This action requires Illex squid vessels to install and operate VMS, and to declare Illex squid trips. However, NMFS has determined that all Illex squid vessels that will be affected by this action already have VMS. Because every Illex vessel has VMS, they are already required to enter a trip declaration for every trip. Therefore, there is no additional reporting burden imposed by this action.

During the development of Amendment 16, the Council considered several alternatives to the deep-sea coral protection measures it ultimately recommended. While some alternatives would have closed less area (smaller discrete zone areas and broad zone area starting at a deeper depth) and other alternatives would have allowed more fishing (an exemption for tilefish gear), NMFS has does not have the authority to implement measures that were not recommended by the Council as part of its preferred action. Rather, NMFS can only approve or disapprove Council recommendations in an amendment. NMFS, therefore, is implementing the Council's preferred action, but the action includes some measures that reduce the economic impact inherent in closing areas to fishing. Specifically, this final rule exempts red crab pot gear from the prohibition on fishing with bottom-tending fishing gear in the deep-sea coral protection area. The red crab fishery exists entirely within the boundaries of the deep-sea coral protection area in the Mid-Atlantic. The exemption allows the fishery to continue to operate in the Mid-Atlantic and gain revenue from its catch. In addition, vessels are allowed to transit the deep-sea coral protection area, which is particularly important at the heads of the discrete zone canyons (where the boundaries come to a point). Because vessels fish with bottom-tending gear along the edges of the canyons, they would have to transit around them to fish on both sides of the canyon. This would cost fuel and could ultimately impact trip duration and catch if vessel operators would have had to spend time transiting around the canyon heads rather than across them. Both the red crab pot gear exemption and the transiting provision therefore reduces cost and time and minimizes the economic impact of the measures implemented under this final rule.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. The preamble to the proposed rule (81 FR 66245, September 27, 2016) and the preamble to this final rule serve as the small entity compliance guide. This final rule does not require any additional compliance from small entities that is not described in the preamble to the proposed rule and this final rule. Copies of the proposed rule and this final rule are available from NMFS at the following Web site: https://www.greateratlantic.fisheries.noaa.gov/sustainable/species/scallop/.

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