Federal Register Vol. 83, No.67,

This action, pursuant to 5 U.S.C. 553, proposes an amendment to regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This proposal is issued under Marketing Order No. 985, as amended (7 CFR part 985), regulating the handling of spearmint oil produced in the Far West. Part 985 (referred to as the “Order”) is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Committee locally administers the Order and is comprised of spearmint oil producers operating within the area of production, and a public member.

The Department of Agriculture (USDA) is issuing this proposed rule in conformance with Executive Orders 13563 and 13175. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review. Additionally, because this proposal does not meet the definition of a significant regulatory action, it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled `Reducing Regulation and Controlling Regulatory Costs' ” (February 2, 2017).

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This proposal is not intended to have retroactive effect. Under the Order now in effect, salable quantities and producer allotment percentages may be established for classes of spearmint oil produced in the Far West. This proposed rule would establish quantities and percentages for Class 1 (Scotch) and Class 3 (Native) spearmint oil for the 2018-2019 marketing year, which begins on June 1, 2018.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

Pursuant to §§ 985.50, 985.51, and 985.52, the Order requires the Committee to meet each year to consider supply and demand of spearmint oil and a marketing policy for the ensuing marketing year. When such considerations indicate a need to establish or maintain stable market conditions through volume regulation, the Committee recommends salable quantity limitations and producer allotments to regulate the quantity of Far West spearmint oil available to the market.

According to § 985.12, “salable quantity” is the total quantity of each class of oil that handlers may purchase from, or handle on behalf of, producers during a given marketing year. The total industry allotment base is the aggregate of all allotment bases held individually by producers as prescribed under § 985.53(d)(1). The total allotment base is generally revised each year on June 1 due to producer base being lost because of the bona fide effort production provision of § 985.53(e). The allotment percentage for each class of spearmint oil is derived by dividing the salable quantity by the total industry allotment base for that same class of oil. The allotment percentage is the percentage used to calculate each producer's prorated share of the salable quantity or their “annual allotment,” as defined in § 985.13.

The Committee met on October 25, 2017, to consider its marketing policy for the 2018-2019 marketing year. At that meeting, the Committee determined that, based on overall market and supply conditions, volume regulation for Classes 1 and 3 (Scotch and Native, respectively) spearmint oil would be necessary. With a unanimous vote, the Committee recommended the establishment of a salable quantity and allotment percentage for Class 1 (Scotch) and Class 3 (Native) spearmint oil of 760,660 pounds and 35 percent, and 1,307,947 pounds and 53 percent, respectively. The Committee also unanimously set its 2018-2019 marketing year trade demand estimate for Far West Scotch spearmint oil at 850,000 pounds, and for Far West Native spearmint oil at 1,306,605 pounds. Salable quantities and allotment percentages have been placed into effect each season since the Order's inception in 1980.

The Committee's recommended 2018-2019 marketing year salable quantity and allotment percentage for Far West Scotch spearmint oil represent a decrease from the previous year's volume restrictions. The proposed 2018-2019 salable quantity of 760,660 pounds is 13,985 pounds less than the 2017-2018 salable quantity of 774,645 pounds. The producer allotment, recommended at 35 percent for the 2018-2019 marketing year, is slightly less than the 36 percent in effect the previous year. The total estimated allotment base for the coming marketing year is estimated at 2,173,315 pounds. This figure represents a one-percent increase over the 2017-2018 total allotment base of 2,151,797.

The Committee considered several factors in making its recommendation, including the current and projected supply, estimated future demand, production costs, and producer prices. The Committee's recommendations also account for declining acreage of Far West Scotch spearmint oil, decreasing consumer demand, existing carry-in and reserve pool volume, and increasing production in competing markets.

According to the Committee, as costs of production have increased, many producers have forgone new plantings. This has resulted in a significant decline in production of Far West Scotch spearmint oil over past years. Production has decreased from 1,229,258 pounds produced in 2015, to 1,113,346 pounds produced in 2016 and, finally, to an estimated 817,857 pounds for 2017.

Industry reports also indicate that the relatively low trade demand for Far West spearmint oil is the result of decreased consumer demand for spearmint-flavored products, especially chewing gum in China and India. Far West Scotch spearmint oil sales have averaged 941,140 pounds per year over the last three years and 966,875 pounds over the last five years. For the 2017-2018 crop, the Committee estimated trade demand at 800,000 pounds.

In addition, increasing production of spearmint oil in competing markets, most notably Canada and the U.S. Midwest, has also put downward pressure on the Far West Scotch market.

Given the general decline in demand and anticipated market conditions for the coming year, the Committee decided it was prudent to anticipate 2018-2019 trade demand at 850,000 pounds. Should the proposed volume regulation levels prove insufficient to adequately supply the market, the Committee has the authority to recommend intra-seasonal increases, as in previous marketing years.

The Committee calculated the minimum salable quantity of Far West Scotch spearmint oil that would be required during the 2018-2019 marketing year by subtracting the estimated salable carry-in on June 1, 2018, (215,757) from the estimated trade demand (850,000), resulting in 634,243 pounds. This salable quantity represents the minimum amount of Scotch spearmint oil that may be needed to satisfy estimated demand for the coming year. The Committee then factored in a projected 2019-2020 carry-in of 126,417 pounds to arrive at a recommended 2018-2019 salable quantity of 760,660 pounds.

The recommended salable quantity of 760,660 pounds combined with an estimated 215,757 pounds of salable quantity (salable carry-in) from the previous year would yield a total available supply of 976,417 pounds Far West Scotch spearmint oil for the 2018-2019 marketing year. The recommended amount would adequately supply the Committee's estimated market demand of 850,000 pounds for the 2018-2019 marketing year and would result in a desired 2019-2020 carry-in of 126,417 pounds.

Salable carry-in is the primary measure of excess spearmint oil supply under the Order, as it represents overproduction in prior years that is currently available to the market without restriction. Under volume regulation, spearmint oil that is designated as salable continues to be available to the market until it is sold and may be marketed at any time at the discretion of the owner. Salable quantities established under volume regulation over the last three seasons have exceeded sales, leading to a gradual build of Far West Scotch spearmint oil salable carry-in.

The Committee estimates that there will be 215,757 pounds of salable carry-in of Scotch spearmint oil on June 1, 2018. If current market conditions are maintained and the Committee's projections are correct, salable carry-in will decrease to 126,417 pounds at the beginning of the 2019-2020 marketing year. This level would be slightly below the quantity that the Committee considers favorable (generally 150,000 pounds). However, the Committee believes that this lower salable carry-in will be manageable given the expected production level of Far West Scotch spearmint oil in the current marketing year and the quantity of oil held in the reserve pool.

Spearmint oil held in reserve is oil that has been produced in excess of a producer's marketing year allotment. Oil held in the reserve pool is a less reliable indicator of excess supply as it is not available to the market in the current marketing year without an increase in the salable quantity and allotment percentage.

Far West Scotch spearmint oil held in the reserve pool, which was completely depleted at the beginning of the 2014-2015 marketing year, has also been gradually increasing over the past four years. The Committee reported that there were 71,088 pounds of Far West Scotch spearmint oil held in the reserve pool as of May 31, 2017. The Committee estimates the reserve pool will increase to 114,274 pounds by May 31, 2018. This quantity of reserve pool oil should be an adequate buffer to supply the market, if necessary, if the industry experiences an unexpected increase in demand.

The Committee recommends a producer allotment percentage of 35 percent for the 2018-2019 marketing year. During its October 25, 2017, meeting, the Committee calculated an initial producer allotment percentage by dividing the minimum required salable quantity (634,243 pounds) by the total estimated allotment base (2,173,315 pounds), resulting in 29.2 percent. However, producers and handlers at the meeting indicated that the computed percentage (29.2 percent) might not adequately supply the potential 2018-2019 Scotch spearmint oil market demand or may result in inadequate carry-in for the subsequent marketing year. After deliberation, the Committee increased the targeted producer allotment percentage to 35 percent. The total estimated allotment base (2,173,315 pounds) for the 2018-2019 marketing year multiplied by the recommended salable allotment percentage (35 percent) yields 760,660 pounds, which is also the recommended salable quantity for the 2018-2019 marketing year.

The 2018-2019 marketing year computational data for the Committee's recommendations is further outlined below.

(A) Estimated carry-in of Scotch spearmint oil on June 1, 2018: 215,757 pounds. This figure is the difference between the 2017-2018 marketing year total available supply of 1,015,757 pounds and the 2017-2018 marketing year estimated trade demand of 800,000 pounds.

(B) Estimated trade demand of Far West Scotch spearmint oil for the 2018-2019 marketing year: 850,000 pounds. This figure was established at the Committee meeting held on October 25, 2017.

(C) Salable quantity of Scotch spearmint oil required from the 2018-2019 marketing year production: 634,243 pounds. This figure is the difference between the estimated 2018-2019 marketing year trade demand (850,000 pounds) and the estimated carry-in on June 1, 2018 (215,757 pounds). This salable quantity represents the minimum amount of Scotch spearmint oil production that may be needed to satisfy estimated demand for the coming year.

(D) Total estimated allotment base of Scotch spearmint oil for the 2018-2019 marketing year: 2,173,315 pounds. This figure represents a one-percent increase over the 2017-2018 total actual allotment base of 2,151,797 pounds as prescribed in § 985.53(d)(1). The one-percent increase equals 21,518 pounds of Scotch spearmint oil. This total estimated allotment base is generally revised each year on June 1 in accordance with § 985.53(e).

(E) Computed Scotch spearmint oil allotment percentage for the 2018-2019 marketing year: 29.2 percent. This percentage is computed by dividing the minimum required salable quantity (634,243 pounds) by the total estimated allotment base (2,173,315 pounds).

(F) Recommended Scotch spearmint oil allotment percentage for the 2018-2019 marketing year: 35 percent. This is the Committee's recommendation and is based on the computed allotment percentage (29.2 percent) and input from producers and handlers at the October 25, 2017, meeting. The recommended 35 percent allotment percentage reflects the Committee's belief that the computed percentage (29.2 percent) may not adequately supply anticipated 2018-2019 Scotch spearmint oil market demand.

(G) Recommended Scotch spearmint oil salable quantity for the 2018-2019 marketing year: 760,660 pounds. This figure is the product of the recommended salable allotment percentage (35 percent) and the total estimated allotment base (2,173,315 pounds) for the 2018-2019 marketing year.

(H) Estimated total available supply of Scotch spearmint oil for the 2018-2019 marketing year: 976,417 pounds. This figure is the sum of the 2018-2019 recommended salable quantity (760,660 pounds) and the estimated carry-in on June 1, 2018 (215,757 pounds).

For the reasons stated above, the Committee believes that the recommended salable quantity would adequately meet demand, would result in a reasonable carry-in for the following year, and would contribute to orderly marketing conditions as intended under the Order.

The Committee recommended a Native spearmint oil salable quantity of 1,307,947 pounds and an allotment percentage of 53 percent for the 2018-2019 marketing year. These figures are, respectively, 206,955 pounds and 9 percentage points less than the final levels established for the 2017-2018 marketing year after an intra-seasonal increase.

The Committee utilized handlers' anticipated sales estimates of Far West Native spearmint oil for the coming year, historical and current Native spearmint oil production, inventory statistics, and international market data obtained from consultants for the spearmint oil industry to arrive at these recommendations.

The Committee anticipates that 2017 production will total 1,462,976 pounds, down from 1,694,684 pounds in 2016. Committee figures show that declining production is the result of a 1,107-acre year-over-year reduction in total Native spearmint acres, and an average yield per acre drop from 166.2 pounds per acre in 2016 to 160.9 pounds per acre in 2017. Conversely, sales of Native spearmint oil have been increasing at about a 4 percent rate from the 2015-2016 season through the 2017-2018 marketing year.

The Committee expects that 57,968 pounds of salable Native spearmint oil from prior years will be carried into the 2018-2019 marketing year. This amount is down from the estimated 143,011 pounds of salable Native spearmint oil carried into the 2017-2018 marketing year, and 142,657 pounds carried into the 2016-2017 marketing year.

Further, the Committee estimates that there will be 1,237,237 pounds of Native spearmint oil in the reserve pool at the beginning of the 2018-2019 marketing year. This figure is 142,578 pounds higher than the quantity of reserve pool oil held by producers the previous year and is in line with the gradual increase in reserves over the past three marketing years.

Exports of Far West Native spearmint oil, as of July 2017, are above their five-year average. Canada, India, and China are the largest destination markets for Far West Native spearmint oil exports. As a common practice, large end users often buy spearmint oil to build reserve stocks when prices are low as a hedge against future price increases. End users of Native spearmint oil are expected to continue to rely on Far West production as their main source of high quality Native spearmint oil, but demand may be at lower quantities moving forward in response to long-term market factors. A sharp spike in demand for Far West Native spearmint oil was experienced by handlers late in the 2017-2018 marketing year, spurred by the popularity of a new product in the market. This sharp spike in demand caused the remaining available 2017-2018 salable quantity of Native oil to be depleted.

The Committee estimates the 2018-2019 marketing year Native spearmint oil trade demand to be 1,306,605 pounds. This figure is based on input provided by producers at six Native spearmint oil production area meetings held in mid-October 2017, as well as estimates provided by handlers and other meeting participants at the October 25, 2017, meeting. This figure represents an increase of 56,605 pounds from the previous year's initial estimate. The average estimated trade demand for Native spearmint oil from the six production area grower's meetings was 1,349,379 pounds, whereas the handlers' estimates ranged from 1,350,000 to 1,500,000 pounds. The average of Far West Native spearmint oil sales over the last three years is also 1,305,605 pounds. However, the quantity marketed over the most recent full marketing year, 2016-2017, was 1,287,691 pounds. The Committee chose to be slightly conservative in the establishment of its trade demand estimate for the 2018-2019 marketing year to avoid oversupplying the market.

The estimated 2018-2019 carry-in of 57,968 pounds of Native spearmint oil plus the recommended salable quantity of 1,307,947 pounds would result in an estimated total available supply of 1,365,915 pounds of Native spearmint oil during the 2018-2019 marketing year. With the corresponding estimated trade demand of 1,306,605 pounds, the Committee projects that 59,310 pounds of Native spearmint oil will be carried into the 2019-2020 marketing year, resulting in a slight increase of 1,342 pounds year-over-year. The Committee estimates that there will be 1,237,237 pounds of Native spearmint oil held in the reserve pool at the beginning of the 2018-2019 marketing year. Should the industry experience an unexpected increase in trade demand, Native spearmint oil in the reserve pool could be released to satisfy that demand.

The Committee recommends a producer allotment percentage of 53 percent for the 2018-2019 marketing year. During its October 25, 2017, meeting, the Committee calculated an initial producer allotment percentage by dividing the minimum required salable quantity (1,248,637 pounds) by the total estimated allotment base (2,467,825 pounds), resulting in 50.6 percent. However, producers and handlers at the meeting expressed that the computed percentage (50.6 percent) may not adequately supply the potential 2018-2019 Native spearmint oil market demand or result in adequate carry-in for the subsequent marketing year. After deliberation, the Committee increased the targeted producer allotment percentage to a recommended 53 percent. The total estimated allotment base (2,467,825 pounds) for the 2018-2019 marketing year multiplied by the recommended salable allotment percentage (53 percent) yields 1,307,947 pounds, which is also the recommended salable quantity for that year.

The 2018-2019 marketing year computational data for the Committee's recommendations is further outlined below.

(A) Estimated carry-in of Native spearmint oil on June 1, 2018: 57,968 pounds. This figure is the difference between the revised 2017-2018 marketing year total available supply of 1,657,968 pounds and the revised 2017-2018 marketing year estimated trade demand of 1,600,000 pounds.

(B) Estimated trade demand of Native spearmint oil for the 2018-2019 marketing year: 1,306,605 pounds. This estimate was established by the Committee at the October 25, 2017, meeting.

(C) Salable quantity of Native spearmint oil required from the 2018-2019 marketing year production: 1,248,637 pounds. This figure is the difference between the estimated 2018-2019 marketing year estimated trade demand (1,306,605 pounds) and the estimated carry-in on June 1, 2018 (57,968 pounds). This is the minimum amount of Native spearmint oil that the Committee believes would be required to meet the anticipated 2018-2019 marketing year trade demand.

(D) Total estimated allotment base of Native spearmint oil for the 2018-2019 marketing year: 2,467,825 pounds. This figure represents a one-percent increase over the 2017-2018 total actual allotment base of 2,443,391 pounds as prescribed in § 985.53(d)(1). The one-percent increase equals 24,434 pounds of Native spearmint oil. This estimate is generally revised each year on June 1, due to producer base being lost because of the bona fide effort production provisions of § 985.53(e).

(E) Computed Native spearmint oil allotment percentage for the 2018-2019 marketing year: 50.6 percent. This percentage is calculated by dividing the required salable quantity (1,248,637 pounds) by the total estimated allotment base (2,467,825 pounds) for the 2018-2019 marketing year.

(F) Recommended Native spearmint oil allotment percentage for the 2018-2019 marketing year: 53 percent. This is the Committee's recommendation based on the computed allotment percentage (50.6 percent) and input from producers and handlers at the October 25, 2017, meeting. The recommended 53 percent allotment percentage is also based on the Committee's belief that the computed percentage (50.6 percent) may not adequately supply the potential market for Native spearmint oil in the 2018-2019 marketing year.

(G) Recommended Native spearmint oil 2018-2019 marketing year salable quantity: 1,307,947 pounds. This figure is the product of the recommended allotment percentage (53 percent) and the total estimated allotment base (2,467,825 pounds). After completely depleting the remaining salable quantity for the 2017-2018 marketing year, to prevent this from happening again, the Committee recommended that the 2018-2019 salable quantity be set at a level slightly higher than the estimated trade demand for the same year (1,306,605 pounds).

(H) Estimated available supply of Native spearmint oil for the 2018-2019 marketing year: 1,365,915 pounds. This figure is the sum of the 2018-2019 recommended salable quantity (1,307,947 pounds) and the estimated carry-in on June 1, 2018 (57,968 pounds).

The Committee's recommended Scotch and Native spearmint oil salable quantities and allotment percentages of 760,660 pounds and 35 percent, and 1,307,947 pounds and 53 percent, respectively, would match the available supply of each class of spearmint oil to the estimated demand of each, thus avoiding extreme fluctuations in inventories and prices. This proposal, if adopted, would be similar to regulations issued in prior seasons.

The salable quantities in this proposal are not expected to cause a shortage of spearmint oil supplies. Any unanticipated or additional market demand for spearmint oil which may develop during the marketing year could be satisfied by an intra-seasonal increase in the salable quantity. The Order contains a provision in § 985.51 for intra-seasonal increases to allow the Committee the flexibility to respond quickly to changing market conditions.

Under volume regulation, producers who produce more than their annual allotments during the marketing year may transfer such excess spearmint oil to producers who have produced less than their annual allotment. In addition, on December 1 of each year, producers who have not transferred their excess spearmint oil to other producers must place their excess spearmint oil production into the reserve pool to be released in the future in accordance with market needs and under the Committee's direction.

In conjunction with the issuance of this proposed rule, USDA has reviewed the Committee's marketing policy statement for the 2018-2019 marketing year. The Committee's marketing policy statement, a requirement whenever the Committee recommends volume regulation, meets the requirements of §§ 985.50 and 985.51.

The establishment of the proposed salable quantities and allotment percentages would allow for anticipated market needs. In determining anticipated market needs, the Committee considered historical sales, as well as changes and trends in production and demand. This proposal would also provide producers with information on the amount of spearmint oil that should be produced for the 2018-2019 season to meet anticipated market demand.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this proposed rule on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are approximately 43 producers and 94 producers of Scotch and Native spearmint oil, respectively, in the regulated production area and approximately seven spearmint oil handlers subject to regulation under the Order. Small agricultural service firms are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201).

The Committee reported that recent producer prices for spearmint oil range from $15.50 to $18.00 per pound. The National Agricultural Statistics Service (NASS) reported that the 2016 U.S. season average spearmint oil grower price per pound was $17.40. Multiplying $17.40 per pound by 2016-17 spearmint oil utilization of 2,168,257 million pounds yields a crop value estimate of about $37.7 million. Total 2016-17 spearmint oil utilization, reported by the Committee, is 958,711 pounds and 1,209,546 pounds for Scotch and Native spearmint oil, respectively.

Given the accounting requirements for the volume regulation provisions of the Order, the Committee maintains accurate records of each producer's production and sales. Using the $17.40 average spearmint oil price, and Committee production data for each producer, the Committee estimates that 38 of the 43 Scotch spearmint oil producers and 88 of the 94 Native spearmint oil producers could be classified as small entities under the SBA definition.

There is no third party or governmental entity that collects and reports spearmint oil prices received by spearmint oil handlers. However, the Committee estimates an average spearmint oil handling markup at approximately 20 percent of the price received by producers. Multiplying 1.20 by the 2016 producer price of $17.40 yields a handler f.o.b. price per pound estimate of $20.88.

Multiplying this handler f.o.b price by spearmint oil utilization of 2,168,257 pounds results in an estimated handler-level spearmint oil value of $45.3 million. Dividing this figure by the number of handlers (7) yields estimated average annual handler receipts of about $6.5 million, which is below the SBA threshold for small agricultural service firms.

Using confidential data on pounds handled by each handler, and the abovementioned handler price per pound, the Committee reported that it is likely that at least two of the seven handlers had 2016-2017 marketing year spearmint oil sales value that exceeded the SBA threshold.

Therefore, in view of the foregoing, the majority of producers and handlers of spearmint oil may be classified as small entities.

This proposed rule would establish the quantity of spearmint oil produced in the Far West, by class, which handlers may purchase from, or handle on behalf of, producers during the 2018-2019 marketing year. The Committee recommended this action to help maintain stability in the spearmint oil market by matching supply to estimated demand, thereby avoiding extreme fluctuations in supplies and prices. Establishing quantities that may be purchased or handled during the marketing year through volume regulations allows producers to coordinate their spearmint oil production with the expected market demand. Authority for this proposal is provided in §§ 985.50, 985.51, and 985.52.

The Committee estimated trade demand for the 2018-2019 marketing year for both classes of oil at 2,156,605 pounds and expects that the combined salable carry-in will be 273,725 pounds. The combined required salable quantity is 1,882,880 pounds. Under volume regulation, total sales of spearmint oil by producers for the 2018-2019 marketing year would be held to 2,342,332 pounds (the recommended salable quantity for both classes of spearmint oil of 2,068,607 pounds plus 273,725 pounds of carry-in). This total available supply of 2,342,332 pounds should be more than adequate to supply the 2,156,605 pounds of anticipated total trade demand for spearmint oil. In addition, as of May 31, 2017, the total reserve pool for both classes of spearmint oil stood at 1,067,138 pounds. Furthermore, that quantity is expected to rise over the course of the 2017-2018 marketing year. Should trade demand increase unexpectedly during the 2018-2019 marketing year, reserve pool spearmint oil could be released into the market to supply that increase in demand.

The recommended allotment percentages, upon which 2018-2019 producer allotments are based, are 35 percent for Scotch spearmint oil and 53 percent for Native spearmint oil. Without volume regulation, producers would not be held to these allotment levels, and could produce and sell unrestricted quantities of spearmint oil. The USDA econometric model estimated that the season average producer price per pound (from both classes of spearmint oil) would decline about $1.90 per pound because of the higher quantities of spearmint oil that would be produced and marketed without volume regulation. The surplus situation for the spearmint oil market that would exist without volume regulation in 2018-2019 also would likely dampen prospects for improved producer prices in future years because of the buildup in stocks.

The use of volume regulation allows the industry to fully supply spearmint oil markets while avoiding the negative consequences of over-supplying these markets. The use of volume regulation is believed to have little or no effect on consumer prices of products containing spearmint oil and would not result in fewer retail sales of such products.

The Committee discussed alternatives to the recommendations contained in this rule for both classes of spearmint oil. The Committee discussed and rejected the idea of not regulating any volume for either class of spearmint oil because of the severe, price-depressing effects that would likely occur without volume regulation. The Committee also discussed and considered salable quantities and allotment percentages that were above and below the levels that were ultimately recommended for both classes of spearmint oil. Ultimately, the action taken by the Committee was to decrease the salable quantity and allotment percentage for Class 1 (Scotch) spearmint oil, and to increase the salable quantity and allotment percentage Class 3 (Native) spearmint oil from the 2017-2018 marketing year levels.

As noted earlier, the Committee's recommendation to establish salable quantities and allotment percentages for both classes of spearmint oil was made after careful consideration of all available information including: (1) The estimated quantity of salable oil of each class held by producers and handlers; (2) the estimated demand for each class of oil; (3) the prospective production of each class of oil; (4) the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year; (5) the quantity of reserve oil, by class, in storage; (6) producer prices of oil, including prices for each class of oil; and (7) general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity.

Based on its review, the Committee believes that the salable quantities and allotment percentages recommended would achieve the objectives sought. The Committee also believes that, should there be no volume regulation in effect for the upcoming marketing year, the Far West spearmint oil industry would return to the pronounced cyclical price patterns that occurred prior to the promulgation of the Order. As previously stated, annual salable quantities and allotment percentages have been issued for both classes of spearmint oil since the Order's inception. The salable quantities and allotment percentages proposed herein are expected to facilitate the goal of maintaining orderly marketing conditions for Far West spearmint oil for the 2018-2019 and future marketing years.

Costs to producers and handlers, large and small, resulting from this proposal are expected to be offset by the benefits derived from a more stable market and increased returns. The benefits of this rule are expected to be equally available to all producers and handlers regardless of their size.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Order's information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0178, Specialty Crops Program. No changes are necessary in those requirements as a result of this action. Should any changes become necessary, they would be submitted to OMB for approval.

This proposed rule would establish the salable quantities and allotment percentages for Class 1 (Scotch) spearmint oil and Class 3 (Native) spearmint oil produced in the Far West during the 2018-2019 marketing year. Accordingly, this proposal would not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil producers or handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public-sector agencies.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.

In addition, the Committee's meeting was widely publicized throughout the spearmint oil industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the October 25, 2017, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

A 60-day comment period is provided to allow interested persons to respond to this proposal. All written comments timely received will be considered before a final determination is made on this matter.

For the reasons set forth in the preamble, 7 CFR part 985 is proposed to be amended as follows:

This proposal affecting 7 CFR part 1206 is authorized under the Commodity Promotion, Research, and Information Act of 1996 (1996 Act) (7 U.S.C. 7411-7425).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules and promoting flexibility. This action falls within a category of regulatory actions that the OMB exempted from Executive Order 12866 review. Additionally, because this rule does not meet the definition of a significant regulatory action it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled “Reducing Regulation and Controlling Regulatory Costs” (February 2, 2017).

This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation would not have substantial and direct effects on Tribal governments and would not have significant Tribal implications.

This proposal has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have a retroactive effect. Section 524 of the 1996 Act (7 U.S.C. 7423) provides that it shall not affect or preempt any other Federal or State law authorizing promotion or research relating to an agricultural commodity.

Under section 519 of the 1996 Act (7 U.S.C. 7418), a person subject to an order may file a written petition with USDA stating that an order, any provision of an order, or any obligation imposed in connection with an order, is not established in accordance with the law, and request a modification of an order or an exemption from an order. Any petition filed challenging an order, any provision of an order, or any obligation imposed in connection with an order, shall be filed within two years after the effective date of an order, provision, or obligation subject to challenge in the petition. The petitioner will have the opportunity for a hearing on the petition. Thereafter, USDA will issue a ruling on the petition. The Act provides that the district court of the United States for any district in which the petitioner resides or conducts business shall have the jurisdiction to review a final ruling on the petition, if the petitioner files a complaint for that purpose not later than 20 days after the date of the entry of USDA's final ruling.

This proposal invites comments on amending AMS' regulations regarding a fresh mango national research and promotion program to include frozen mangos as a covered commodity. The program is administered by the Board with oversight by USDA. This proposal would add definitions to the regulations for frozen mangos and foreign processor of frozen mangos; expand the Board's membership from 18 to 21 by adding two importers of frozen mangos and one foreign processor of frozen mangos; assess frozen mangos at a rate of $0.01 per pound; exempt from assessment importers who import less than 200,000 pounds of frozen mangos annually; and make clarifying and conforming changes to other provisions of the program. This action was recommended by the Board in November 2016 and would allow frozen mango stakeholders to participate in a coordinated effort to maintain and expand the market for frozen mangos. This proposal would also update the definition for the term “Board” to reflect current practices. Additionally, this proposal announces AMS' intent to request approval by the OMB of new information collection requirements necessary to include frozen mangos under the program.

The fresh mango research and promotion program took effect in November 2004 (69 FR 59120) and assessment collection began in January 2005. Under the current program, assessments are collected from first handlers and importers of 500,000 pounds or more of fresh mangos annually. Assessments are used by the Board for projects designed to maintain and expand existing markets for fresh mangos in the United States.

Table 1 below shows the volume, value and price per pound for fresh mango imports into the United States from 2005 through 2016.1 Imports of fresh mangos have increased from about 575 million pounds in 2005 (valued at about $169 million) to almost 985 million pounds in 2016 (valued at $420 million). The price per pound for fresh mango imports has increased from $0.29 in 2005 to $0.43 in 2016. In 2016, about 45 percent of the mangos imported into the United States were from Mexico, 22 percent were from Ecuador, and 18 percent were from Peru.

Assessment revenue under the fresh mango program increased from $3,293,825 2 in 2007 to $7,374,170 3 in 2016. In 2016, less than one percent of the total assessments were from domestic handlers as the vast majority of assessments were collected from importers. The assessment rate under the current program for fresh mangos is $0.0075 per pound, pursuant to § 1206.42(b).

Since 2008, the Board has invested over $34 million of industry funds to help increase mango consumption among U.S. consumers. The Board has funded promotional programs with consumers, retailers and restaurants within the United States. Retail stores of all sizes are promoting mangos all year round, while restaurants all over the country are offering their customers more mango dishes. Consumers are learning more about mangos from multiple media sources and the demand for mangos increased due to the Board's investments in educating consumers about the health benefits of eating mangos.

There have been two economic studies done since the program's inception in 2004 that assessed the effectiveness of the Board's programs. The studies were conducted by Dr. Ronald Ward at the University of Florida and published in 2011 and 2016 and are titled “Estimating the Impact of the National Mango Board's Programs on the U.S. Demand for Mangos.” The 2016 study built on the 2011 study and found that, for each dollar spent by the Board, approximately 11 to 12 times that was generated in sales. This return on investment indicates the program's success in moving the demand for mangos. The studies are available from USDA or the Board.

Table 2 below shows the volume, value and price per pound for frozen mango imports into the United States from 2005 through 2016.4 Imports of frozen mangos have increased from almost 32 million pounds in 2005 (valued at about $14 million) to almost 118 million pounds in 2016 (valued at $101 million). The price per pound for frozen mango imports has increased from $0.46 in 2005 to $0.86 in 2016. In 2016, over half of the imports of frozen mangos into the United States were from Mexico, 33 percent were from Peru, and 2 percent were from Guatemala.

Because of the current program's success for the fresh mango market, those who sell frozen mangos have been interested in becoming part of the program. Mango producers often sell their mangos for use by both the fresh and processed markets. Handlers and importers may include all mango product categories in their businesses. However, Board promotion efforts only support mangos for the fresh market.

Thus, the Board recommended amending part 1206 to include frozen mangos. This would allow frozen mango stakeholders to participate in a coordinated effort to maintain and expand the existing market for frozen mangos. These efforts would be accomplished through Board activities including promotion, research, consumer information, education and industry information. By collaborating within the existing national mango promotion program, frozen mango stakeholders could provide to consumers more information on the various uses and benefits of frozen mangos in order to increase demand for the commodity.

Accordingly, several changes to part 1206 would be necessary to expand the program to include frozen mangos. These changes are described in the following paragraphs. Authority for the Board to recommend changes to part 1206 is provided in § 1206.36(m).

The term “mangos” is defined in § 1206.11 to mean all fresh fruit of Mangifera indica L. of the family Anacardiaceae. The term would be revised to mean the fruit of Mangifera indica L. of the family Anacardiaceae and would include both fresh and frozen mangos. Separate definitions would be added in new paragraphs (a) and (b) of § 1206.11 for fresh and frozen mangos, respectively. “Fresh mangos” would mean mangos in their fresh form. “Frozen mangos” would mean mangos which are uncooked or cooked by steaming or boiling in water, and then frozen, whether or not containing added sugar or other sweetening agent.

A definition would be added to part 1206 for “foreign processor of frozen mangos.” Section 1206.8 which currently defines the term “foreign producer” would be redesignated as § 1206.8a, and a new § 1206.8 would define the term “foreign processor of frozen mangos” or “foreign processor” to mean any person: (a) Who is engaged in the preparation of frozen mangos for market to the United States and/or who owns or shares the ownership and risk of loss of such mangos; and (b) who exports frozen mangos to the United States. As described later in this document, a foreign processor would also have a seat on the Board.

Additionally, §§ 1206.6 and 1206.9 which define the terms “first handler” and “importer,” respectively, to mean entities that handle or import 500,000 pounds or more of mangos annually would be revised to remove the references to volume for the purpose of clarity. There are other sections in part 1206 that apply to all first handlers and importers regardless of the volume of mangos handled or imported (i.e., § 1206.61 regarding books and records and § 1206.62 regarding confidential treatment thereof). Thus, the definition of the terms “first handler” and “importer” would be revised to mean all such entities, regardless of the volume of mangos handled or imported. Other sections of part 1206 where the volume handled or imported is relevant would specify the applicable figure.

Section 1206.30(a) regarding establishment and membership of the Board specifies that the Board be composed of 18 members—8 importers, 1 first handler, 2 domestic producers and 7 foreign producers. This section would be revised to add three Board seats—two for importers of frozen mangos and one for a foreign processor of frozen mangos.

The Board's rationale for recommending the addition of three seats representing the frozen mango industry is based on a review of import data. Table 3 below shows fresh and frozen mango import data for 2014-2016.5 Fresh and frozen mango imports account for an average of 88 and 12 percent, respectively, of the total volume of imports for the 3-year period.

Imports of fresh mangos account for over 99 percent of the assessments under the current program. On the current 18-member Board, 15 out of the 18 seats (about 83 percent) are for importers and foreign producers. If three Board seats are added to represent frozen mango imports (two importers and one foreign processor), then 18 of the new 21-member Board (almost 87 percent) would represent foreign mangos. Further, 3 of the 18 foreign-product seats (importers and foreign producers) would represent frozen imported mangos (almost 17 percent) and the remaining 15 seats (over 83 percent) would represent fresh imported mangos. The Board's recommendation regarding frozen mango representation on the Board is reasonable and § 1206.30(a) would be revised accordingly.

Additionally, a sentence would be added to § 1206.30(a) to specify that first handler Board members must receive 500,000 pounds or more of fresh mangos annually from producers, and importer Board members must import 500,000 pounds or more of fresh mangos or 200,000 pounds or more of frozen mangos annually. These requirements are part of the current de minimis exemption for the program (see § 1206.43 Exemptions), added to the Establishment and Membership section in § 1206.30 for clarification as to who is covered under the program.

Section 1206.30(b) defines Customs Districts within the United States that are used for allocating importer Board seats based on the volume of mangos imported into each respective district. This section would be revised to state that the two Board seats for importers of frozen mangos shall be allocated for importers who import into any of the districts (or “at-large”) defined in paragraphs (1) through (4) of § 1206.30(b). The Board recommended that these two seats be at-large to allow nominees from all four districts. This could encourage participation on the Board from this new group regardless of their location.

Section 1206.31 prescribes procedures for nominating and appointing Board members. Board staff solicits nominees for first handler, fresh mango importer, and domestic producer member positions and voting is conducted by mail ballot. Nominees to fill the foreign producer member positions are solicited from foreign producers and from foreign producer organizations. From the nominations, the Secretary of Agriculture then selects the members of the Board.

This section would be revised to specify procedures for nominating foreign processors and importers of frozen mangos. The procedures would be similar to those in place for first handlers and importers of fresh mangos. Nominees to fill the foreign processor seat would be solicited from foreign mango organizations and from foreign processors. Foreign mango organizations would submit two nominees for each position, and foreign processors could submit their own name or the names of other foreign processors directly to the Board. The nominees would represent the major countries exporting frozen mangos to the United States.

Nominees to fill the two at-large seats on the Board would be solicited from all known importers of frozen mangos. The members from each district would select the nominees for the two at-large positions on the Board. Two nominees would be submitted for each position. The names of the nominees would be placed on a ballot that would be sent to importers of frozen mangos in each of the four districts for a vote. For each position, the nominee receiving the highest number of votes and the nominee receiving the second highest number of votes would be submitted to USDA as the first and second choice nominees.

Accordingly, in § 1206.31, paragraph (e) which prescribes nomination procedures for fresh mango importers, would be revised to clarify that the procedures pertain to fresh mango importers. Further, paragraph (h) would be redesignated as paragraph (k), a new paragraph (h) would be added to specify procedures for nominating foreign processors, and a new paragraph (i) would be added to specify procedures for nominating frozen mango importers.

A new paragraph (j) would be added to § 1206.31 to clarify that first handler nominees for a Board position must receive more than 500,000 pounds of fresh mangos annually from producers, and importers must import 500,000 pounds or more of fresh mangos annually or 200,000 pounds or more of frozen mangos annually.

Section 1206.32 specifies that Board members serve for a 3-year term of office. Members may serve a maximum of two consecutive 3-year terms. This section would be revised to include the new positions for importers of frozen mangos and foreign processors. Similar to the other Board members, the term of office for the new positions would be 3 years, and no member could serve on the Board for more than two consecutive 3-year terms.

Section 1206.34(a) specifies that a quorum for the current 18-member board consists of 10 members. The proposed rule would increase the number of Board seats from 18 to 21, which would necessitate an increase in quorum requirements. Therefore, this section would be revised to specify that it would be considered a quorum at a Board meeting when at least 11 of the 21 Board members were present.

Section 1206.42(b) specifies that the assessment rate is three quarters of a cent ($0.0075) per pound on all mangos (fresh). Pursuant to paragraph (d) of § 1206.42, import assessments are collected through U.S. Customs and Border Protection (Customs). Pursuant to paragraph (e) of that section, first handlers must submit their assessments to the Board on a monthly basis.

In its deliberations on the proposed assessment rate for frozen mangos, the Board considered the current assessment rate for fresh mangos of $0.0075 per pound. Board members took into account that it takes 2.5 pounds of fresh mangos to make one pound of frozen mangos.6 If the fresh equivalent assessment rate were applied to frozen mangos, frozen mango importers would pay an assessment of approximately $0.019 per pound, which is 2.5 times the fresh mango assessment rate. Additionally, according to the Board, manufacturing costs are higher for frozen mangos than for fresh mangos because the fruit has been processed.

The Board also considered assessment revenue as a percentage of value. Board members refer to this computation as the “Mango Reinvestment Rate” or MRR. To compute this for fresh mangos, assessment revenue is divided by the value of imported fresh product. The 3-year average for 2014-2016 for fresh mangos is 1.71 percent. The computation is shown in Table 4 below.

I. Request for Comments

FHFA invites comments on all aspects of this proposed rule. After considering all comments, FHFA intends to issue a final rule. FHFA will post on the FHFA website at http://www.fhfa.gov all public comments it receives without change, including any personal information you provide, such as your name, address, email address, and telephone number. In addition, copies of all comments received will be available for examination by the public through the electronic rulemaking docket for this proposed rule also located on the FHFA website.

FHFA previously consolidated and relocated the regulations of its predecessor agencies, the Federal Housing Finance Board (Finance Board) and the Office of Federal Housing Enterprise Oversight, that pertained to the responsibilities of boards of directors, corporate practices, and corporate governance matters into a new regulation at 12 CFR part 1239. 80 FR 72327 (November 19, 2015). The FHFA regulation is organized such that some parts apply to all of FHFA's regulated entities and other parts, because of differences in their corporate structure or business models, apply only to the Federal Home Loan Banks (Banks), or only to Fannie Mae and Freddie Mac (Enterprises).

The current regulation requires each Bank's board of directors to have in effect at all times a strategic business plan that describes how the business activities of the Bank will achieve the mission of the Bank, consistent with the Federal Home Loan Bank Act (Bank Act), 12 U.S.C. 1421 et seq. The current regulation also requires a Bank's board of directors periodically to review and re-adopt the Bank's strategic business plan, establish management reporting requirements, and monitor implementation of the strategic business plan. 12 CFR 1239.31.

FHFA proposes to adopt a similar requirement for the Enterprises. Strategic planning is an organization's process of defining its direction and making decisions on allocating its resources to pursue this direction. The result of this process is the organization's strategy—a guiding vision of what the organization intends to accomplish and key initiatives or action plans for achieving the vision. It is necessarily forward-looking, actionable, and measurable, and it should be updated periodically to reflect, among other things, changing risks, business environments, and corporate direction. A strategic plan is adopted by an organization's board of directors and executed by its senior management on behalf of its stakeholders.

The proposed rule would replace the existing Bank-only strategic business plan provision currently at 12 CFR 1239.31 with a new provision, to be located at 12 CFR 1239.14. The new provision would adapt the current Bank-only strategic business plan requirements to cover the Enterprises, and make adjustments and conforming changes as needed to reflect the requirements of the Banks and the Enterprises. The most significant change would be to bring the Enterprises within the scope of the strategic business plan requirement currently required only of the board of directors at each Bank. The proposed rule would also include a new requirement for each regulated entity to identify current and emerging risks in its strategic business plan. Apart from that provision, the proposed rule would not impose any new requirements on the Banks' strategic business plans. The proposed rule would also repeal an existing provision relating to quantitative performance goals for Bank products related to multifamily housing and to community financial institution collateral, and a related existing reporting provision.

The proposed rule would require the board of directors at each regulated entity to adopt and have in effect at all times a strategic business plan for the regulated entity. The regulated entity's strategic business plan adopted by the board of directors must meet certain minimum requirements pertaining to operating goals, credit needs and market opportunities, new activities, supporting analyses, and current and emerging risks. As noted above, all of these requirements, except for the current and emerging risks, already apply to the Banks. The proposed rule would also require the board of directors at each regulated entity to review the regulated entity's strategic business plan at least annually, to re-adopt the strategic business plan for the regulated entity at least every three years, to establish management reporting requirements, and to monitor implementation of the strategic business plan, as set forth in proposed § 1239.14(b).

The Enterprises are congressionally chartered entities established to advance certain statutory purposes. These statutory purposes include providing stability in the secondary market for residential mortgages, responding appropriately to the private capital market, providing ongoing assistance (by facilitating liquidity and distribution of investment capital) to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families), and promoting access to mortgage credit throughout the nation. 12 U.S.C. 1716 et seq. (Fannie Mae); 12 U.S.C. 1451 note (Freddie Mac). Their public purposes also include other, more-specific statutory or regulatory obligations including, for example, an Enterprise's obligations to meet its affordable housing goals, and its duty to serve specified underserved markets. See Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), 12 U.S.C. 4501 et seq.

Similarly, the Banks are entities established under federal law to serve a housing finance and community lending mission. 12 U.S.C. 1430 and 1430b. For example, in addition to advances, Bank core mission activities include debt or equity investments that primarily benefit households having a targeted income level or living in areas targeted for redevelopment, by supporting housing, economic development, community services, permanent jobs, or area revitalization or stabilization. 12 CFR 1265.3(e). Like the Enterprises, the Banks have affordable housing goals, but only to the extent that they purchase mortgages from their members. 12 U.S.C. 1430c.

Paragraph 1239.14(a)(1)(i) of the proposed rule would replace the requirement to enumerate operating goals and objectives with a requirement to articulate measurable operating goals and objectives. The change is intended to clarify that goals and objectives are to be described, rather than simply listed, in a manner to allow the board of directors to monitor and hold management accountable for successful execution of the strategic business plan. A regulated entity's board could articulate measurable goals and objectives by specifying quantitative requirements or qualitative requirements. The proposed rule does not prescribe the specific ways in which operating goals and objectives must be articulated, so long as such operating goals and objectives are articulated in a measurable manner necessary to support a regulated entity's board of director's review and monitoring responsibilities under proposed § 1239.14(b), and to allow the board of directors to evaluate and hold management accountable for successful implementation of the strategic business plan.

Proposed § 1239.14(a)(1)(i) would require each Bank's strategic business plan to articulate measurable operating goals and objectives for each significant business activity and all authorized new business activities, which must include plans for maximizing activities that further the Bank's housing finance and community lending mission. This provision is much the same as the existing regulation, but includes several proposed changes to coordinate with the Enterprise requirement, including the reference to “significant business activity,” a proposed change from the existing reference to “major business activity.”

The proposed rule would also require a Bank's strategic business plan to articulate measurable operating goals and objectives for all “authorized new business activities.” FHFA regulations currently provide for agency review and action on a Bank's “new business activity” before a Bank may commence with the new business activity. 12 CFR part 1272. That regulation authorizes a Bank to commence a new business activity absent affirmative approval if FHFA does not take action within the timeframes established under 12 CFR part 1272. The proposed requirement to articulate operating goals and objectives would not apply to new business activities that are denied, are pending FHFA action, or are not yet submitted to FHFA, but only to those new business activities that have been authorized under the new business activities regulation.

The proposed rule would retain the existing requirement that a Bank's strategic plan “include plans for maximizing activities that further the Bank's housing finance and community lending mission, consistent with part 1265 of this chapter.” Retaining this clause would reiterate the priority the Banks should continue to place on their core mission activities to further their housing finance and community lending mission, consistent with 12 CFR part 1265.

For the Enterprises, proposed § 1239.14(a)(1)(ii) would similarly require each Enterprise's strategic business plan to “articulate measurable operating goals and objectives for each significant existing activity and all authorized new activities.” The Enterprises do not have a core mission activity regulation comparable to that of the Banks, so, a requirement analogous to that for the Banks described above is not included in the Enterprise provisions. However, proposed § 1239.14(a)(1)(ii) would achieve an outcome for the Enterprises similar to that for the Banks under § 1239.14(a)(1)(i). It does so by generally requiring the strategic business plan to describe “how the [Enterprise's] business activities . . . will achieve [its] mission and public purposes,” consistent with its charter act and the Safety and Soundness Act. It also does so by requiring the Enterprise's strategic business plan to articulate “measurable operating goals and objectives” in achieving the Enterprise's statutory purposes. Describing how the Enterprise's business activities will achieve its mission and public purposes, and articulating measurable goals and objectives for significant existing activities, would help to enable an Enterprise's board of directors to monitor, review, and hold management accountable for successful execution of the strategic business plan.

Proposed § 1239.14(a)(1)(ii) would reference “authorized new activities” in its “measurable operating goals and objectives” requirement. FHFA regulations currently provide for agency review and action on an Enterprise's “new activity” before the Enterprise may commence with the new activity. 12 CFR part 1253. The term “authorized new activities” is used because the current regulation for considering new activities authorizes an Enterprise to engage in a new activity absent affirmative approval. This could occur where FHFA does not take action within 15 days from receipt of a complete new activity notice. 12 CFR 1253.3(d). As a result, § 1239.14(a)(1)(ii) requires articulation of measurable operating goals and objectives for all “authorized new activities,” which could include both new activities that were affirmatively approved by FHFA and those authorized by passage of time. Proposed § 1239.14(a)(1)(ii) would not require a strategic business plan to articulate measurable goals and objectives for new activities that are denied, pending FHFA action, or not yet submitted to FHFA.

Proposed § 1239.14(a)(2) would require each regulated entity's strategic business plan to discuss how the regulated entity will address credit needs and market opportunities identified through ongoing market research and stakeholder consultations. In the case of the Banks, stakeholders would include members, housing associates, and public and private organizations. In the case of the Enterprises, stakeholders would include mortgage market participants and public and private organizations, including those that advocate for access to credit. The purpose of § 1239.14(a)(2) is similar to that currently in effect for the Banks, that is, to require regulated entity board engagement with market research and stakeholder consultations to identify areas of credit needs and market opportunities to further the regulated entity's public purposes.

Proposed § 1239.14(a)(3) would require a regulated entity's strategic business plan to describe “significant activities in which the regulated entity is planning to be engaged,” including any changes to business strategy or approach that the regulated entity is planning to undertake, and discuss how such activities further the regulated entity's public purposes. FHFA considered whether to retain the existing language in 12 CFR 1239.31(a)(4), which requires a regulated entity's strategic business plan to describe any “proposed new business activities or enhancements of existing activities.” However, the language of the existing requirement is unclear as to whether activities in various stages of development are covered.

Specifically, the existing regulatory language referring to “proposed new business activities or enhancements of existing activities” in § 1239.31(a)(4) may be ambiguous in that it could be interpreted to include those activities that are in the planning or development process within a Bank, but not yet submitted as a new business activity. Alternatively, it could be interpreted to refer to only those new business activities submitted to and pending approval with FHFA. Rather than referring to proposed new business activities and enhancements of existing activities, FHFA proposes to modify the existing language for the Banks and apply the same requirement to the Enterprises.

Proposed § 1239.14(a)(3) would eliminate the need, in the context of the strategic business plan requirement, to determine whether an activity is a new business activity in the case of a Bank, or a new activity in the case of an Enterprise, for purposes of the respective regulation, and whether it has been submitted or approved as such. The focus of the requirement would be on significant activities in which the regulated entity is planning to be engaged and how these planned activities would further the regulated entity's public purposes. To the extent the significant activities described would affect the future financial condition or risk profile of the regulated entity, the strategic business plan should address such risks.

For the Banks, proposed § 1239.14(a)(3) would clarify the existing regulatory language in 12 CFR 1239.31(a)(4) for each Bank's strategic business plan to describe any “proposed new business activities or enhancements of existing activities.” Instead, the proposed change would require the plan to describe any “significant activities in which the regulated entity is planning to be engaged.”

Proposed § 1239.14(a)(4)(i) would continue to require a Bank strategic business plan to be supported by appropriate and timely research and analysis of relevant market developments and member and housing associate demand for Bank products and services. This is the same as the existing requirement for the Banks. In addition, the existing reference to “associate” would be revised to “housing associate.”

Similarly, § 1239.14(a)(4)(ii) would require an Enterprise's strategic business plan to be supported by appropriate and timely research and analysis of relevant market developments. This Enterprise requirement is consistent with the existing requirement for the Banks, and does not include the Bank-specific reference to member and housing associate demand for Bank products and services.

Proposed § 1239.14(a)(5) would require a regulated entity's strategic business plan to identify current and emerging risks, including such current and emerging risks associated with the regulated entity's existing activities or new activities, and discuss how the regulated entity plans to further its public purposes and mission in a safe and sound manner.

Emerging risks are risks that are potentially significant but which may not be fully known or understood, and could be associated with new or existing activities. This requirement would be a new requirement for the Banks.

Proposed § 1239.14(b) would require each regulated entity's board of directors to review the strategic business plan at least annually, re-adopt the plan at least every three years, and to establish reporting requirements and monitor implementation of the strategic business plan. The substance of this provision is identical to that of the existing Bank strategic business plan provision.

The proposed rule would repeal the provision from the existing regulation at 12 CFR 1239.31(a)(3) that requires the Banks to include in their strategic business plans quantitative performance goals for Bank products related to multifamily housing and to community financial institution (CFI) collateral. The Finance Board added this requirement to the strategic business plan regulation shortly after Congress first authorized the Banks to accept CFI collateral. When doing so, the Finance Board explained that it wanted to make clear that providing financing for multifamily lending and for advances secured by the newly authorized CFI collateral is a part of the Banks' mission. In the 17 years that have passed since the Finance Board adopted this requirement, FHFA has monitored the Banks' acceptance of CFI collateral and has determined that this is very much a member-driven practice. There is considerable variation among the Banks as to the extent to which the Banks' members pledge CFI collateral, which FHFA believes is driven by the different types of loans made by the members in different Bank districts. Some Banks have significant numbers of members that make loans for small farm, small agribusiness, small business, or community development purposes, while other Banks have fewer members engaged in making those types of loans. Moreover, CFI collateral is no longer new, and decisions about what type of collateral to pledge are ultimately made by the individual members, based on their particular business needs. FHFA does not require Banks to set quantitative goals for the other types of collateral that members may pledge. In light of all of those factors, FHFA believes that there is no longer any need for the strategic business plans to address these categories of collateral. The proposed rule would repeal this provision, as well as a separate provision at 12 CFR 1239.31(c) that requires the Banks to report annually on their progress towards meeting those goals.

The proposed rule would also make a conforming change to a reference contained in § 1273.8(d)(2) relating to the Office of Finance board of directors' duty to approve a strategic business plan, to reference the proposed new provision at § 1239.14.

As FHFA noted when it most recently adopted its corporate governance regulation, the regulation is not intended to address conservatorship matters. 80 FR at 72328. Instead, the corporate governance regulation is intended to address matters of corporate practice and governance at the regulated entities. FHFA, as conservator, currently possesses ultimate authority over all operations of the Enterprises. Pursuant to its conservatorship authority, FHFA has provided for Enterprise boards to exercise the functions of management oversight that exist under applicable law and regulation, including FHFA's corporate governance regulation, while reserving for itself decision making authority to establish conservatorship direction.

Accordingly, under the proposed rule, as part of their corporate governance requirements, the board of directors at each Enterprise would be required to adopt a strategic business plan. Each Enterprise's strategic business plan should describe, at a minimum, how the business activities of the Enterprise will achieve its public purposes as set forth under its respective statutory charter and the Safety and Soundness Act. Although the Enterprises remain in conservatorship, their boards of directors have been operating under FHFA regulations, including the standards set forth in FHFA's corporate governance regulation at 12 CFR part 1239, that govern board members outside of conservatorship, except as modified by the conservator. Such duties include establishing strategic objectives that incorporate the priorities of the conservator while achieving the Enterprise's statutory purposes in a safe and sound manner.

When promulgating regulations that relate to the Banks, section 1313(f) of the Safety and Soundness Act requires FHFA to consider the differences between the Banks and the Enterprises with respect to the Banks': Cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; and joint and several liability. 12 U.S.C. 4513(f). In developing the proposed rule, FHFA has considered these areas of differences between the Banks and the Enterprises, and has determined that the proposed rule is unlikely to adversely affect the Banks in these areas of differences. FHFA is requesting public comment on whether differences related to these factors should result in a revision of the proposed rule as it relates to the Banks.

The proposed rule does not contain any collections of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). Therefore, FHFA has not submitted any information to the Office of Management and Budget for review.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an agency to analyze a regulation's impact on small entities if the regulation is expected to have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). FHFA has considered the impact of this proposed rule and the General Counsel of FHFA certifies that the proposed rule, if adopted as a final rule, is not likely to have a significant economic impact on a substantial number of small entities because it applies only to the regulated entities and the Office of Finance, which are not small entities for purposes of the Regulatory Flexibility Act. Therefore, an initial regulatory flexibility analysis is not required.

Accordingly, for reasons stated in the Supplementary Information, FHFA hereby proposes to amend 12 CFR parts 1239 and 1273 as follows:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would amend Class D airspace at Richard Lloyd Jones Jr. Airport, Tulsa, OK, to support instrument flight rule operations.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2018-0094/Airspace Docket No. 18-ASW-4.” The postcard will be date/time stamped and returned to the commenter.

All communications received before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this notice may be changed in light of the comments received. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at http://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Federal Aviation Administration, Air Traffic Organization, Central Service Center, Operations Support Group, 10101 Hillwood Parkway, Fort Worth, TX 76177.

This document proposes to amend FAA Order 7400.11B, Airspace Designations and Reporting Points, dated August 3, 2017, and effective September 15, 2017. FAA Order 7400.11B is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11B lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is proposing an amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 by amending Class D airspace extending upward from the surface to and including 3,100 feet MSL within a 4-mile radius of Richard Lloyd Jones Jr. Airport, and within 1.0 miles each side of the 190° radial from the airport RWY 01L-LOC extending from the 4-mile radius to 4.1 miles south of the airport (reduced from 1.3 miles each side of the 350° radial of the Glenpool VOR extending from the 4-mile radius to 4.7 miles south of the airport). This action is necessary due to the decommissioning of the Glenpool VOR as part of the VOR MON Program and cancellation of the associated instrument procedures.

This action also adjusts the geographic coordinates of the airport to be in concert with the FAA's aeronautical database. Additionally, this action would make an editorial change to the Class D airspace legal description replacing “Airport/Facility Directory” with “Chart Supplement.”

Also, an editorial change would be made removing the airport name from the airspace designation, and removing the word “Tulsa” from the airport name, to comply with a change to FAA Order 7400.2L, Procedures for Handling Airspace Matters, dated October 12, 2017.

Class D airspace designations are published in paragraph 5000 of FAA Order 7400.11B, dated August 3, 2017, and effective September 15, 2017, which is incorporated by reference in 14 CFR 71.1. The Class D airspace designation listed in this document will be published subsequently in the Order.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

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

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

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

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

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

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

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

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

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

TTB received a petition from George Cushnie, co-owner of Thistle Gate Vineyard, submitted on behalf of himself and a second vineyard owner, proposing to expand the established “Monticello” AVA. The Monticello AVA (27 CFR 9.48) was established by T.D. ATF-164, which published in the Federal Register on January 23, 1984 (49 FR 2757). The Monticello AVA covers approximately 1,320 square miles in Albemarle, Green, Nelson, and Orange Counties in Virginia. The Monticello AVA and the proposed expansion area are not located within any other AVA.

The proposed expansion area is adjacent to the southeastern portion of the established AVA and encompasses approximately 166 square miles of Fluvanna County between the James River and the Rivanna River. There are 2 vineyards covering a total of approximately 15 acres within the proposed expansion area. The petition included a letter from the president of the Jeffersonian Wine Grape Growers Society, an organization of over 30 wineries within the Monticello AVA, supporting the proposed expansion. Unless otherwise noted, all information and data pertaining to the proposed expansion area contained in this document come from the petition and its supporting exhibits.

The expansion petition provides evidence that the proposed expansion area is historically associated with “Monticello,” the home of Thomas Jefferson, as is the land currently within the Monticello AVA boundaries. For example, the Rivanna River, which forms the northern boundary of the proposed expansion area, was the primary means of transporting agricultural products from Jefferson's lands in the region to the James River, where the goods were then transported to other areas of Virginia. The Rivanna River is frequently referred to as “Mr. Jefferson's river,” due to Thomas' Jefferson's efforts to make the river navigable by building dams, locks, and canals.1 The river was so important to Jefferson and the functioning of Monticello and the surrounding agricultural lands, including agricultural lands in the proposed expansion area, that he listed his improvements to the river as a greater personal achievement than writing the Declaration of Independence.2 Additionally, Jefferson played an active role in the establishment of Fluvanna County, where the proposed expansion area is located, and he drew the map for the proposed new county. The petition states that these pieces of historical evidence demonstrate that the region of the proposed expansion area held special significance for Jefferson and was important to the workings of his plantation at Monticello. As explained in the final rule that first established the Monticello AVA, the name “Monticello” is associated with the region in large part due to the historic connection with Thomas Jefferson, which as discussed above, also applies to the proposed expansion area.

The petition also provided evidence that the name “Monticello” is currently associated with the proposed expansion area. A lake in the proposed expansion area is called Lake Monticello. The “Monticelloman Olympic Triathlon” and “Monticelloman Half Triathlon” are annual athletic events held within the proposed expansion area. The Monticello Area Community Action Agency and Head Start-Monticello Area are two community assistance organizations that serve the residents of the proposed expansion area. Businesses within the proposed expansion area that use the name “Monticello” include Monticello Mulch, Monticello Mattress & More, Monticello Country Realtors, and Century 21 Monticello Properties.

The established Monticello AVA is a roughly oval shaped region with a northeast-southwest alignment. The James River and the shared Albemarle-Fluvanna County line form the southeastern and eastern boundaries, respectively. The proposed expansion area is adjacent to the eastern boundary of the established AVA and is located entirely within Fluvanna County. No portion of Fluvanna County is currently within the Monticello AVA.

The proposed expansion area is roughly shaped like a triangle, with its apex pointing east, its base adjacent to the eastern edge of the established AVA, and the Rivanna and James Rivers forming the two sides. The apex of the proposed expansion area is at the confluence of the two rivers, near the town of Columbia. The proposed expansion area's boundary begins at the intersection of the Rivanna River and the Albemarle-Fluvanna County line, along the eastern edge of the established AVA. Instead of continuing to follow the Albemarle-Fluvanna County line south, as the current AVA boundary does, the proposed expansion area continues southeasterly along the Rivanna River to its confluence with the James River. The proposed boundary then follows the James River southwesterly and then northwesterly to the Albemarle-Fluvanna County line, where the proposed expansion area boundary rejoins the current AVA boundary.

The petition states that the climate and soils of the proposed expansion area are similar to those of the established Monticello AVA. TTB notes that T.D. ATF-164, which established the Monticello AVA, does not provide a detailed discussion of the distinguishing features of the AVA. However, the original petition to establish the AVA contains more information. A copy of the original Monticello AVA petition was included as part of the proposed expansion petition package and is included in Docket No. TTB-2018-0004.

The original Monticello AVA petition stated that the Blue Ridge Mountains, to the west of the AVA, shelter the AVA from cold air flowing from the northwest. However, there are two major gaps in the mountains: one near Front Royal, Virginia, to the north of the Monticello AVA; and another near Roanoke, Virginia, to the south of the AVA. According to the original Monticello AVA petition, these two gaps divide cold air masses into two “rivers of cold air” that bypass the AVA and rejoin farther to the east, in the lower elevations and plains of the Piedmont region. Because the cool air bypasses the Monticello AVA, the petition stated that temperatures within the AVA are typically warmer than temperatures to the west of the AVA in the Blue Ridge Mountains and to the east of the AVA in the Piedmont region.

A map in the original Monticello AVA petition shows that the average growing season length of the AVA ranges from 220 to 250 days, whereas the region east of the AVA averages between 150 and 175 days. The petition also included a 1979 plant hardiness zone map prepared by the Office of the Virginia State Climatologist that shows the AVA in zone 7, meaning that minimum winter temperature is typically between 5 and 10 degrees Fahrenheit (F). By contrast, the same map classifies the areas to the east and west of the AVA as zone 6, which ranges from -5 degrees to 5 degrees F.

The petition for the proposed expansion area included a current USDA plant hardiness zone map. Although the climate zones for the Monticello AVA, the proposed expansion area, and the surrounding regions have changed according to the new map, the established AVA and the proposed expansion area are still in a warmer zone than the region to the west. The new map places the Monticello AVA into zone 7a, where minimum winter temperatures ranges from 0 to 5 degrees F. The confluence of the Rivanna River and the James River, which is the location of the proposed expansion area, is shown on this map and is also in zone 7a, as is the entire region east of both the AVA and the proposed expansion area, as far east as Richmond. The region west of both the AVA and the proposed expansion area, within the Blue Ridge Mountains, is a cooler zone 6b, with minimum winter temperatures between -5 and 0 degrees F.

Although the plant hardiness zone map indicates that the zone for the Monticello AVA and the proposed expansion area extends eastward to Richmond, the petitioner provided other climate evidence to distinguish the proposed expansion area from the region to the east. For instance, the proposed expansion petition provides a higher-resolution of the map that was used in the original AVA petition to show the length of the growing season within the AVA and the surrounding areas. The higher resolution map shows that the far northeastern portion of the Monticello AVA, in Orange County, extends eastward beyond the 200-day contour, though not far enough east to reach the 175-day contour. The expansion petition estimates that, based on the higher resolution map, the Orange County portion of the AVA has a growing season between 190 and 200 days. When the proposed expansion area is drawn onto this high-resolution map, it also appears to have a growing season of between 190 and 200 days. Similar to the existing AVA, the proposed expansion area does not extend into the 175-day contour, which is slightly farther to the east. Therefore, according to the proposed expansion petition, the higher-resolution map shows that the proposed expansion area has a growing season length similar to that of the Orange County portion of the Monticello AVA. The higher-resolution map also shows that the region to the east of both the Monticello AVA and the proposed expansion area has a shorter growing season.

Finally, the proposed expansion petition provided a higher-resolution version of the map used in the original Monticello petition to show the path that the “rivers of cold air” take around the AVA. The higher-resolution map shows that the Orange County portion of the Monticello AVA extends between the 15 degree contour and the 13 degree contour, meaning that the minimum January temperature for this portion of the Monticello AVA is between 13 and 15 degrees F. The “rivers of cold air” converge farther east, between the 13 degree contour and the 11 degree contour. When drawn on this map, the proposed expansion area also extends beyond the 15 degree contour, but not into the 13 degree contour. The proposed expansion petition states that this higher-resolution map demonstrates that January temperatures within the proposed expansion area are more similar to those of the Orange County portion of the Monticello AVA than those of the cooler region farther to the east of the established AVA where the “rivers of cold air” converge.

The proposed expansion petition states that climate affects viticulture within the Monticello AVA and the proposed expansion area. According to the petition, the recommended minimum growing season length for most varietals of wine grapes in Virginia is 180 days, although a few very-early ripening varietals such as some Muscat varietals and Viognier can ripen in as few as 155 days.3 The 190- to 200-day growing season length in the proposed expansion area is long enough to grow many varietals of wine grapes, including Cabernet Franc, Malbec, Chardonnay, Merlot, and Pinot Gris. The proposed expansion petition states that these varietals are also all grown within the established Monticello AVA.

The original petition to establish the Monticello AVA described the soils of the AVA as a mixture of clay and loam. The soils are generally deep and well-drained. The predominant soil series found within the AVA are Buchanan, Davidson, Dyke, Nason, and Rapidan. Neither the original AVA petition nor T.D. ATF-164 describes the soils surrounding the Monticello AVA.

The proposed expansion petition states that modern internet-based soil mapping tools provide a more detailed and accurate description of the soil series of the proposed AVA than the paper soil maps used in the original Monticello AVA petition. The expansion petition included a table comparing the major soil series found in the proposed expansion area, located in Fluvanna County, and the counties currently within the Monticello AVA. The data was compiled using the USDA's Websoils tool.4 The data shows that the proposed expansion area shares four of the five major soil series found within the Monticello AVA.

According to the proposed expansion petition, the soils found within the proposed expansion area are well-suited for viticulture, particularly soils of the Nason and Manteo series. These two soils are described as well-drained silty loams. Well-drained soils prevent boggy conditions, which restrict root growth and respiration. The soils also have low to moderate levels of organic content. The proposed expansion petition states that soils with high levels of organic content are not generally desirable for viticulture because the abundance of nutrients promotes overly vigorous shoot and leaf growth at the expense of fruit production and quality.

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

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

To document the existing and proposed boundaries of the Monticello AVA, the petitioner provided a copy of the required 1971 1:250,000-scale Roanoke, Virginia USGS quadrangle map.

Part 4 of the TTB regulations prohibits any label reference on a wine that indicates or implies an origin other than the wine's true place of origin. For a wine to be labeled with an AVA name, at least 85 percent of the wine must be derived from grapes grown within the area represented by that name, and the wine must meet the other conditions listed in § 4.25(e)(3) of the TTB regulations (27 CFR 4.25(e)(3)). If the wine is not eligible for labeling with an AVA name and that name appears in the brand name, then the label is not in compliance and the bottler must change the brand name and obtain approval of a new label. Similarly, if the AVA name appears in another reference on the label in a misleading manner, the bottler would have to obtain approval of a new label. Different rules apply if a wine has a brand name containing an AVA name that was used as a brand name on a label approved before July 7, 1986. See § 4.39(i)(2) of the TTB regulations (27 CFR 4.39(i)(2)) for details.

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

TTB invites comments from interested members of the public on whether it should expand the Monticello AVA as proposed. TTB is specifically interested in receiving comments on the similarity of the proposed expansion area to the established Monticello AVA, as well as the differences between the proposed expansion area and the areas outside the Monticello AVA. TTB is particularly interested in any viticulture that occurs in the eastern watershed of Fluvanna County and how it relates to the boundary evidence discussed above and presented in the expansion petition. Please provide specific information in support of your comments.

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

• Federal e-Rulemaking Portal: You may send comments via the online comment form posted with this notice within Docket No. TTB-2018-0004 on “Regulations.gov,” the Federal e-rulemaking portal, at http://www.regulations.gov. A direct link to that docket is available under Notice No. 173 on the TTB website at https://www.ttb.gov/wine/wine-rulemaking.shtml. Supplemental files may be attached to comments submitted via Regulations.gov. For complete instructions on how to use Regulations.gov, visit the site and click on the “Help” tab.

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

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

Please submit your comments by the closing date shown above in this notice. Your comments must reference Notice No. 173 and include your name and mailing address. Your comments also must be made in English, be legible, and be written in language acceptable for public disclosure. TTB does not acknowledge receipt of comments, and TTB considers all comments as originals.

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

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

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

TTB will post, and you may view, copies of this notice, selected supporting materials, and any online or mailed comments received about this proposal within Docket No. TTB-2018-0004 on the Federal e-rulemaking portal, Regulations.gov, at http://www.regulations.gov. A direct link to that docket is available on the TTB website at https://www.ttb.gov/wine/wine_rulemaking.shtml under Notice No. 173. You may also reach the relevant docket through the Regulations.gov search page at http://www.regulations.gov. For information on how to use Regulations.gov, click on the website's “Help” tab.

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

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

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

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

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

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

Background on Viticultural Areas TTB Authority

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

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

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

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

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

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

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

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

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

TTB received a petition from Ann Hougham, owner of the Mesa del Sol Vineyards, proposing to expand the established “Arroyo Seco” AVA. The Arroyo Seco AVA (27 CFR 9.59) was established by T.D. ATF-131, which published in the Federal Register on April 15, 1983 (48 FR 16245). The Arroyo Seco AVA covers approximately 18,240 acres in Monterey County, California, and is located within the established Monterey AVA (27 CFR 9.98) and the larger, multi-county Central Coast AVA (27 CFR 9.75).

The proposed expansion area contains approximately 90 acres and is adjacent to the far southwestern corner of the Arroyo Seco AVA. The proposed expansion area is located on an upland terrace on the northern bank of a creek known as the Arroyo Seco, which is Spanish for “dry creek.” There is one vineyard covering a total of approximately 14 acres within the proposed expansion area. The petition included a copy of an email from the Arroyo Seco Winegrowers, stating that the proposed expansion was shared with its members and received no objections. Unless otherwise noted, all information and data pertaining to the proposed expansion area contained in this document come from the petition and its supporting exhibits.

The petition provides evidence that the proposed expansion area is associated with the name “Arroyo Seco.” The petitioner states that the address of her vineyard is Arroyo Seco Road, which also runs through the Arroyo Seco AVA. The creek known as the Arroyo Seco forms the southern and eastern boundary of the proposed expansion area and also flows through the established Arroyo Seco AVA. Two maps were included in the petition as evidence that the proposed expansion area is part of the larger region referred to as the “Arroyo Seco.” The first map was created by the State of California and shows proposed dam sites in the “Arroyo Seco watershed.” The confluence of Piney Creek and the Arroyo Seco, which is the location of the proposed expansion area, appears on this map. The second map is a wildlife survey study map that was produced by California State University-Monterey Bay and is titled “Aquatic Life and Habitat in the Arroyo Seco Watershed.” The bend in the Arroyo Seco where the proposed expansion area is located is shown on the map, and symbols on the map indicate that the region was included as part of the Arroyo Seco watershed aquatic life survey.

The petition also includes evidence that the proposed expansion area has historically been associated with the name “Arroyo Seco.” An excerpt from a book that chronicles the history of the region states, “From April 15, 1880, when the first tract of 80 acres was patented to a George M. Moore, until August 22, 1924, * * * a total of 316 homesteads were granted in the Arroyo Seco area.” 1 A second excerpt, from the memoirs of local resident Fred Weybret, Jr., describes his childhood in the region from 1928 to 1933 and notes, “There was no electricity in the Arroyo Seco at that time * * * ” 2 The petition also included the ownership history of the petitioner's property, obtained from a title company, which shows that her property was once part of the land mentioned in the book as belonging to Mr. Moore and was owned by the Weybret family from 1928 to 1945.

The Arroyo Seco AVA is located along the sloping bench lands surrounding the Arroyo Seco, which flows into the Salinas River near Soledad. The Arroyo Seco AVA is irregularly shaped, with the main portion of the AVA roughly resembling a triangle with its apex pointing to the southwest. A long, narrow “panhandle” extends from the apex of the triangle and is aligned west to east. The “panhandle” is formed by a series of straight lines that follow the southern boundaries of several sections on the USGS Sycamore Flat quadrangle map. The 90-acre proposed expansion area is a roughly triangular area adjacent to the southern edge of the “panhandle,” near the confluence of Piney Creek and the Arroyo Seco.

The proposed expansion area boundary begins at the intersection of Arroyo Seco Road, Carmel Valley Road, and the southwestern corner of section 22 of the USGS Sycamore Flat quadrangle map. This intersection is also the beginning point for southern boundary of the “panhandle” portion of the current AVA boundary. Instead of proceeding east along the southern boundary of section 22, as the current boundary does, the proposed expansion area boundary proceeds southwesterly along Arroyo Seco Road to Piney Creek. The proposed boundary then proceeds southeasterly (downstream) along Piney Creek to its confluence with the Arroyo Seco. The proposed boundary then proceeds northeasterly (downstream) along the Arroyo Seco and rejoins the current AVA boundary at the intersection of the Arroyo Seco with the southern boundary of section 22.

The proposed expansion area is bordered to the north by the established Arroyo Seco AVA. The petition states that the land surrounding the proposed expansion area in the other directions is mostly unavailable for commercial viticulture. Due south of the proposed expansion area, along the southern bank of the Arroyo Seco, is a large parcel of land owned by the Big Sur Land Trust to be kept as open space in perpetuity. To the west, southwest, and southeast of both the proposed expansion area and the Big Sur Land Trust property is the Ventana Wilderness portion of the Los Padres National Forest. Because of its status as a Federally-protected wilderness within a National Forest, this land is largely unavailable for commercial purposes. Although the Sycamore Flat USGS quadrangle map shows several inholdings (privately-held lands) within the National Forest, the petition describes the forest as a largely roadless, mountainous area with little land suitable for viticulture, even in the inholdings where commercial viticulture might be permitted.

The petition states that the soils and topography of the proposed expansion area are similar to those of the established Arroyo Seco AVA.

T.D. ATF-131 described the soils of the Arroyo Seco AVA as gravelly and fine sandy loams with low lime content. The principal soil series within the AVA are Mocho, Lockwood, Arroyo Seco, Rincon, Elder, and Chular. The soils are described as well-drained. T.D. ATF-131 did not describe the soils of the regions surrounding the Arroyo Seco AVA.

The proposed expansion petition included a soil report generated from the USDA Natural Resources Conservation Service website, as well as a report from a soil analysis performed on the petitioner's property by an agricultural testing service. The testing service's report shows that the three sample sites from within the proposed expansion area all have low levels of lime, similar to the soils within the Arroyo Seco AVA. The USDA soil report concludes that approximately 96 percent of the soils within the proposed expansion area are from the Lockwood series, and that minor amounts of soils from the Elder and Mocho series are also present. The results from both reports indicate that the soils within the proposed expansion area are very similar to the soils found within the established AVA.

The soils within both the proposed expansion area and the established AVA affect viticulture. Vines planted in soils with low levels of lime are typically slightly acidic and are better able to absorb key nutrients, such as iron and phosphorous, than vines planted in soils with high levels of lime. Well-drained soils reduce the risk of fungal disease and rot.

T.D. ATF-131 states that the Arroyo Seco AVA consists of sloping bench land surrounding the Arroyo Seco. Slope angles within the AVA are described as between 0 and 9 percent. According to T.D. ATF-131, elevations are highest within the far western portion of the AVA, where elevations can reach over 600 feet in the foothills of the Santa Lucia Mountains. The sloping elevations allow cold air to drain from the vineyards, reducing the risk of frost.

According to the USGS topographic map included in the petition, elevations within the proposed expansion area are similar to those of the adjacent region that is within the Arroyo Seco AVA, which range from approximately 600 feet along the banks of the Arroyo Seco to an unnamed peak with an elevation of 1,110 feet. For comparison, elevations within the proposed expansion area are highest within the northern portion, adjacent to the established AVA's southern boundary, at approximately 700 feet. Elevations in the southern portion of the proposed expansion area, adjacent to the Arroyo Seco, are approximately 600 feet. The USDA soil report included with the proposed expansion petition states that the slope angles within the proposed expansion area are between 0 and 9 percent, which is the same as the range of slope angles attributed to the established AVA in T.D. ATF-131. The USDA soil report also states that the principal landforms of the proposed expansion area are terraces and alluvial fans, which is similar to the topography of the established AVA. Finally, a USGS geologic map of the Salinas River Valley and the Arroyo Seco shows that the terrace formation on which the proposed expansion area is located extends into the Arroyo Seco AVA.

The Monterey AVA was established by T.D. ATF-177, which was published in the Federal Register on June 15, 1984 (49 FR 24714). The Monterey AVA is located in Monterey County, California, south and southeast of the city of Salinas, and covers approximately two-thirds of the county. Elevations within the Monterey AVA are generally below 1,000 feet. The soils of the Monterey AVA are described as having low levels of lime and salt, with pH levels between 5.1 and 8.4, as well as very low levels of organic matter.

The proposed Arroyo Seco AVA expansion area has elevations and soils similar to the Monterey AVA. Within the proposed expansion area, the highest elevations are between 600 and 700 feet. The soils of the proposed expansion area are also low in lime and salt and have pH levels of between 6.2 and 6.6. However, the soil analysis provided in the expansion petition shows that the soils of the proposed expansion area have medium-to-high levels of organic matter, compared to the very low levels of organic matter that characterize the Monterey AVA. Additionally, the expansion petition provided evidence that the proposed expansion area is frequently described as being in an area referred to as the “Arroyo Seco,” rather than being described with the broader County name of “Monterrey.”

The large, 1 million-acre Central Coast AVA was established by T.D. ATF-216, which was published in the Federal Register on October 24, 1985 (50 FR 43128). The Central Coast viticultural area encompasses the California counties of Alameda, Contra Costa, Monterey, San Benito, San Francisco, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, and Santa Cruz, and it contains 39 established AVAs. T.D. ATF-216 describes the Central Coast viticultural area as extending from Santa Barbara to the San Francisco Bay area, and east to the California Coastal Ranges. The only distinguishing feature of the California Coast AVA addressed in T.D. ATF-216 is that all of the included counties experience marine climate influence due to their proximity to the Pacific Ocean.

The Arroyo Seco AVA and the proposed expansion area are both located within the Central Coast AVA. Cool marine breezes enter the established AVA and the proposed expansion area from Monterey Bay via the Salinas River and the Arroyo Seco. However, because of their locations east of the Santa Lucas Mountains, neither the Arroyo Seco AVA nor the proposed expansion area are as exposed to the marine air and fog as the more western regions of the Central Coast AVA that are closer to the ocean. Additionally, due to its much smaller size, the topographical features of the proposed expansion area are more uniform than the diverse features of the large, multicounty Central Coast AVA, and are more similar to the topographical features of the Arroyo Seco AVA, which is located on the same sloping bench lands and terraces along the Arroyo Seco as the proposed expansion area.

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

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

To document the existing and proposed boundaries of the Arroyo Seco AVA, the petitioner provided a copy of the required map, and it is listed below in the proposed regulatory text.

Part 4 of the TTB regulations prohibits any label reference on a wine that indicates or implies an origin other than the wine's true place of origin. For a wine to be labeled with an AVA name, at least 85 percent of the wine must be derived from grapes grown within the area represented by that name, and the wine must meet the other conditions listed in § 4.25(e)(3) of the TTB regulations (27 CFR 4.25(e)(3)). If the wine is not eligible for labeling with an AVA name and that name appears in the brand name, then the label is not in compliance and the bottler must change the brand name and obtain approval of a new label. Similarly, if the AVA name appears in another reference on the label in a misleading manner, the bottler would have to obtain approval of a new label. Different rules apply if a wine has a brand name containing an AVA name that was used as a brand name on a label approved before July 7, 1986. See § 4.39(i)(2) of the TTB regulations (27 CFR 4.39(i)(2)) for details.

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

TTB invites comments from interested members of the public on whether it should expand the Arroyo Seco AVA as proposed. TTB is specifically interested in receiving comments on the similarity of the proposed expansion area to the established Arroyo Seco AVA, as well as the differences between the proposed expansion area and the areas outside the Arroyo Seco AVA. Please provide specific information in support of your comments.

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

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

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

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

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

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

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

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

TTB will post, and you may view, copies of this notice, selected supporting materials, and any online or mailed comments received about this proposal within Docket No. TTB-2018-0003 on the Federal e-rulemaking portal, Regulations.gov, at http://www.regulations.gov. A direct link to that docket is available on the TTB website at https://www.ttb.gov/wine/wine_rulemaking.shtml under Notice No. 172. You may also reach the relevant docket through the Regulations.gov search page at http://www.regulations.gov. For information on how to use Regulations.gov, click on the website's “Help” tab.

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

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

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

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

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

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

Background on Viticultural Areas TTB Authority

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

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

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

Section 4.25(e)(2) of the TTB regulations (27 CFR 4.25(e)(2)) outlines the procedure for proposing an AVA and provides that any interested party may petition TTB to establish a grape-growing region as an AVA. Section 9.12 of the TTB regulations (27 CFR 9.12) prescribes the standards for petitions for the establishment or modification of AVAs. Petitions to establish an AVA must include the following:

• Evidence that the area within the proposed AVA boundary is nationally or locally known by the AVA name specified in the petition;

• An explanation of the basis for defining the boundary of the proposed AVA;

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

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

• An explanation of the proposed AVA is sufficiently distinct from an existing AVA so as to warrant separate recognition, if the proposed AVA is to be established within, or overlapping, an existing AVA; and

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

TTB received a petition from Mr. Jeff Havlin, the owner of Havlin Vineyard and chair of the Van Duzer Corridor AVA Committee, on behalf of himself and other local grape growers and vintners, proposing the establishment of the “Van Duzer Corridor” AVA.

The proposed Van Duzer Corridor AVA is located in Oregon and covers portions of Yamhill and Polk Counties which are north-northwest of the city of Salem and northeast of the city of Dallas. The proposed AVA lies entirely within the established Willamette Valley AVA (27 CFR 9.90) and does not overlap any other existing or proposed AVA. The proposed Van Duzer Corridor AVA covers approximately 59,871 acres and contains 6 wineries and 17 commercially-producing vineyards that cover a total of approximately 1,000 acres.

The distinguishing features of the proposed Van Duzer Corridor AVA are its topography, climate, and soils. Unless otherwise noted, all information and data pertaining to the proposed AVA contained in this document are from the petition for the proposed Van Duzer Corridor AVA and its supporting exhibits.

The proposed Van Duzer Corridor AVA takes its name from a natural break in Oregon's Coastal Ranges which border the western side of the Willamette Valley.1 Although the Coastal Ranges create a barrier to air moving inland, this gap creates a wind corridor by providing an opening for cool, moist Pacific Ocean air to flow eastward into the Willamette Valley. An Oregon real estate site notes that temperatures in the Willamette Valley are cooled by breezes moving through “the Van Duzer Corridor, which runs from Lincoln City on the coast to Salem in the Valley.” 2 The dining and culinary page of a travel site dedicated to the Salem area encourages readers to “[h]ead west along Highway 22 to loop through the Van Duzer Corridor. Here vines get the benefit of temperate afternoon breezes and cool evenings—perfect growing conditions for exceptional Pinot noir.” 3 TTB notes that State Highway 22 forms the southern and southwestern boundaries of the proposed Van Duzer Corridor AVA.

The term “Van Duzer Corridor” also is commonly used by local wine industry members to describe the region of the proposed AVA. For example, an article about Johan Vineyards, which is within the proposed AVA, describes the vineyard's location as “in the southwestern corner of the Van Duzer Corridor.” 4 A local entertainment blog posted a story about two wineries within the proposed AVA and stated that the wineries “lie within the Van Duzer Corridor, the gap in the coastal hills bordering Salem * * * .” 5 An article featuring Pinot noir wines of the proposed AVA notes, “The influence of the Van Duzer Corridor extends inland to the McMinnville and Eola-Amity Hills appellations as well as the vineyards in the Dallas area of the Willamette Valley.” 6 TTB notes that the proposed Van Duzer Corridor AVA is located just north of Dallas, Oregon. Additionally, the established McMinnville AVA (27 CFR 9.181) is due north of the proposed AVA, and the established Eola-Amity Hills AVA (27 CFR 9.202) is adjacent to the proposed AVA's eastern boundary. The website for the St. Innocent Winery, which is located in the established Eola-Amity Hills AVA east of the proposed AVA, states that the Willamette Valley “is affected by winds blowing from the Pacific Ocean through the Van Duzer Corridor eastward. * * * The Eola-Amity Hills AVA is 15 miles due east from the mouth of the Van Duzer Corridor.” 7 A map on the St. Innocent Winery's website shows the wine regions of Oregon, and an arrow pointing to the region of the proposed AVA is marked as “Van Duzer Corridor.” Finally, a wine blog that features the wines of the Pacific Northwest and western Canada includes an article on the Van Duzer Vineyard, which is located in the proposed AVA, and notes that the vineyard “is planted smack dab at the mouth of the Van Duzer Corridor * * *.” 8

The proposed Van Duzer Corridor AVA is a roughly triangular region of low, rolling hills east of the Oregon Coastal Ranges. Each of the proposed AVA's boundaries is drawn to delineate the low elevations of the proposed AVA from the surrounding higher elevations. The proposed northern boundary follows a straight line drawn between marked points on USGS quadrangle maps and separates the proposed AVA from the established McMinnville AVA, which is due north of the proposed AVA but does not share a boundary. The eastern boundary of the proposed AVA is concurrent with the western boundary of the established Eola-Amity Hills AVA and follows a series of roads and the 200-foot elevation contour. The proposed southern boundary runs east-west along a State highway north of the city of Dallas and the community of Rickreall. The proposed western boundary follows a north-south road to separate the proposed AVA from the higher elevations of the Coastal Ranges.

The distinguishing features of the proposed Van Duzer Corridor AVA are its soils, topography, and climate.

The soils of the proposed Van Duzer Corridor AVA are primarily uplifted marine sedimentary loams and silts with alluvial overlay, as well as some uplifted basalt. The soils are typically shallow, well-drained, and have a bedrock of siltstone. The primary soil series within the proposed AVA include Helmick, Steiwer, Hazelair, Chehulpum, Helvetia, and Santiam.

According to the petition, the high silt and clay levels cause the soils to be “buffered,” meaning that the soils can absorb increased amounts of added acidic or alkaline substances without affecting the overall pH level of the soil. An increase or decrease in soil pH can affect the way plant roots absorb minerals and nutrients, so the ability of the soils to maintain a stable pH level is beneficial to vineyards within the proposed AVA. The petition also states that the sediments in the soil quickly absorb and “lock up” rainfall, so the vines are less able to uptake water. As a result, if heavy rains occur near harvest time, the grapes are less likely to swell and split due to an excessive uptake of water. The vines are also less prone to excessive growth or leaf production than vines planted in soils that allow for more uptake of water. According to the petition, a thinner leaf canopy allows more sunlight to reach the ripening fruit, inhibits the growth of mildew and mold by promoting air circulation.

The soils immediately outside the northern and western boundaries of the proposed AVA contain uplifted marine sediments, similar to the soils of the proposed AVA. However, the soils are primarily from different soil series, including Yamhill, Nekia, and Peavine. Moving farther north and west, the soils begin to contain higher concentrations of basalt and other volcanic materials. East of the proposed AVA, within the Eola-Amity Hills AVA, the soils also contain larger amounts of volcanic materials than are found within the proposed AVA, including soils of the Nekia, Jory, and Ritner series. South of the proposed AVA, the soils contain large concentrations of Ice Age loess, which is not commonly found in the proposed AVA.

Within the wind corridor known as the “Van Duzer Corridor,” the topography is characterized by low elevations and gently rolling hills. The low elevations allow cool breezes to flow relatively unimpeded from the Pacific Ocean, through the Coastal Ranges, and into the proposed AVA. For most of its length, the wind corridor known as the “Van Duzer Corridor” is narrow, squeezed by high elevations to the north and south, and there is little room for suitable vineyard sites within this portion of the corridor.

The eastern end of the wind corridor, where the proposed Van Duzer Corridor AVA is located, has the same low elevations and rolling hills as the western portion. However, because the wind corridor widens at its eastern end, there is more room for vineyards. Elevations within the proposed Van Duzer Corridor AVA range from approximately 180 feet to a high point of 589 feet, as shown on the USGS quadrangle maps included with the petition. Because the elevations within the proposed AVA are too low to impede the eastward-flowing marine air, wind speeds are higher within the proposed AVA and temperatures are typically cooler than within the surrounding regions that have higher elevations. Wind speed and temperature and their effects on viticulture will be discussed in more detail later in this document.

To the north of the proposed Van Duzer Corridor AVA, within the established McMinnville AVA, elevations reach up to 1,000 feet. East of the proposed AVA, the higher elevations of the established Eola-Amity Hills AVA form the eastern edge of the wind corridor, reducing the wind speeds and preventing the Pacific air from travelling farther east. Elevations within the Eola-Amity Hills AVA can reach approximately 1,160 feet. South of the proposed Van Duzer Corridor AVA, elevations reach over 700 feet, as shown on the USGS Dallas, Oregon quadrangle map. In the Coastal Ranges west of the proposed AVA, elevations can rise close to 3,000 feet.

The petition to establish the proposed Van Duzer Corridor AVA included information about the region's climate, in particular the wind speed and cumulative growing degree days (GDDs).9 According to the petition, wind speed and GDD data were not available for the regions to the west and south-southwest of the proposed AVA due to a lack of publicly accessible weather stations.

Wind speed: Because the proposed Van Duzer Corridor AVA is located within a wind corridor, the petition states that wind speeds within the proposed AVA are typically higher than in the surrounding regions, where higher elevations block the wind and slow its movement inland. According to the petition, consistently high wind speeds contribute to thicker grape skins, which increase the levels of phenolic compounds in the fruit. Phenolic compounds contribute to the taste, aroma, and mouthfeel of wines. The petition also states that wines made from thicker-skinned grapes often have a darker, richer color than wines made from grapes with thin skins.

The following table summarizes the average growing season 10 wind speeds for a vineyard in the center of the proposed AVA, as well as from McMinnville Municipal Airport (north of the proposed AVA) and the Salem Municipal Airport (south-southeast of the proposed AVA).

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

On July 10, 2012 (77 FR 40521), the Coast Guard Captain of the Port, Sector Puget Sound, published a final rule that became effective Aug. 1, 2012; the Seattle's Seafair Fleet Week Moving Vessels security zone. That final rule establishes a security zone around designated participating vessels that are not protected by the Naval Vessel Protection Zone in Seattle's Seafair Fleet Week Parade of Ships. Designated participating vessels are named by the Coast Guard each year prior to the event in a Federal Register notice, as well as the Local Notice to Mariners. These security zones are necessary to help ensure the security of the vessels from sabotage or other subversive acts.

The purpose of this rulemaking is to amend the information required in the Notice of Enforcement published in the Federal Register and Local Notice to Mariner and add the requirement to publish the names of participating vessel in a Broadcast Notice to Mariners before the scheduled event. The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1231.

The Captain of the Port Puget Sound proposes to amend the provisions in 33 CFR 165.1333 regarding information published in the notice of enforcement for the annual security zone for Seattle's Seafair Fleet Weeks Parade of Ships. Currently, the Coast Guard publishes the names of the vessels participating in the Parade of Ships, in a notice of enforcement at least 3 days prior to the beginning of Seattle's Seafair. These are military vessels. In past years, some vessels participating in the Parade of Ships changed their plans due to operational needs, and as a result, the changes precluded the Coast Guard from providing sufficient notice in the Federal Register. This proposed amendment is necessary because the changing schedules of vessels sometimes makes it impossible to know which vessels will ultimately participate in the Parade of Ships and also provide timely notice in the Federal Register.

The Coast Guard proposes to amend the information required in the notice of enforcement to only include the date and time of the Parade of Ships, and not the names of the vessels. In order to provide notice to the public regarding the vessels requiring the security zone, the Coast Guard will provide notice to the public of the designated participating vessels by issuing a Broadcast Notice to Mariners before and during the event. In addition, the security zone will be enforced with actual notice during the Seattle Seafair Fleet Week each year. The regulatory text we are proposing appears at the end of this document.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.

This regulatory action determination is based on the fact that this rule would only change the mean in which the public will be notified about the security zone.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the security zone may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

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

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

We have analyzed this proposed rule under Department of Homeland Security Directive 023-01, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves amending the way in which the Coast Guard will notify the public which vessels are designated participants in Seattle's Seafair Fleet Week. Normally such actions are categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 01. A preliminary Record of Environmental Consideration supporting this determination is available in the docket where indicated under ADDRESSES. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

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

We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, visit http://www.regulations.gov/privacyNotice.

Documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that website's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

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

The VA Office of the Secretary provides centralized management and coordination of VA's rulemaking process through its Office of Regulation Policy and Management (ORPM). ORPM oversaw VA's Regulation Rewrite Project (the Project) to improve the organization and clarity of VA's adjudication regulations, which are in current 38 CFR part 3. These regulations govern the adjudication of claims for VA's monetary benefits (including compensation, pension, dependency and indemnity compensation, and burial benefits), which are administered by the Veterans Benefits Administration (VBA).

The Project responded to a recommendation made by the VA Claims Processing Task Force in its October 2001 “Report to the Secretary of Veterans Affairs” and to criticisms of VA regulations by the U.S. Court of Appeals for Veterans Claims. The Task Force recommended that VA reorganize its regulations in a logical, coherent manner. The Court referred to the current regulations as a “confusing tapestry” and criticized VA for maintaining substantive rules in its Adjudication Procedures Manual (manual). Accordingly, the Project reviewed the manual to identify provisions that might be substantive and proposed to incorporate those provisions in a complete rewrite of part 3 that would be located at a new part 5. To be clear, the goal was never to substantively alter the law pertaining to VA monetary benefits, but to convey this law (to include current regulations, VA General Counsel opinions, court decisions, and substantive manual provisions) in readable language and an organized format. 78 FR at 71,042; see also 79 FR 57,660, 57,678 (Sep. 25, 2014) (commenting on the scope of the Rewrite Project).

VA published the rewritten material in 20 Notices of Proposed Rulemaking (NPRMs) and gave interested persons 60 days to submit comments after each publication. These NPRMs addressed specific topics, programs, or groups of regulatory material organized under the following Rulemaking Identifier Numbers (RIN):

VA received numerous comments to the 20 NPRMs and on November 27, 2013, proposed amendments to the 20 NPRMs in one document, RIN 2900-AO13. 78 FR at 71,042. VA received additional comments on AO13, from private individuals and several Veterans Service Organizations, and VA thanks the commenters for the time they invested and their input.

As noted in RIN 2900-AO13, in 2012, the Veterans Benefits Administration (VBA) formulated a Transformation Plan to improve the delivery of benefits to veterans and their dependents and survivors. 78 FR at 71,043. VA acknowledged that, to ensure successful implementation of the plan, a final rule with regard to the Rewrite Project would not be published in the near future and would ultimately require an evaluation of the feasibility of a one-time implementation of proposed Part 5. Id. In the interim, VA assured, Part 3 regulations would be updated and improved as needed, to include the type of readability changes proposed for Part 5. Id.

Over the past five years, such updates have occurred, see, e.g., 79 FR 32,653 (June 6, 2014) (implementing improvements sourced in RIN 2900-AL72), and VA proposes to continue this current rulemaking approach—updating Part 3 and Part 4 as needed—but at an accelerated pace designed to also incorporate needed changes from proposed Part 5 for clarity and simplicity. Thus, it will not be adopting a one-time implementation of proposed Part 5. This will avoid the inevitable confusion caused by two co-existing sets of regulations and manuals that may or may not be applicable depending on the date of the claim. It will avoid the delays and decreases in productivity inherent in any transition where adjudicators have to familiarize themselves with all new sections and provisions. It will also ease programming complexity and allow VBA to manage the risk associated with the transition to revised regulations. VA has already undertaken a review to identify and prioritize the needs and expectations for incorporating proposed Part 5 improvements, where possible, into the current Part 3 and Part 4.

Phased implementation allows for incremental assessment and development of the required system modifications. Controlling the rate of rewrite implementation allows VBA to retain, plan for, and mitigate adverse system impacts and development needs by reordering phases as necessary. The plan also affords VBA flexibility in scaling personnel and other resource allocations to each new phase, if necessary. One-time implementation would require extensive training for personnel, as well as costs associated with IT equipment, installation, maintenance, support, and system updates. Even though the proposed rules were not intended to alter substantive law, they would alter the terminology, section numbers, and organization of the current regulations upon which current VA systems, applications, forms, and tools are based. Thus, one-time implementation would involve a rework of numerous computer-based processing applications, claims-related training tools and materials, quality assurance tools, claims-related forms, and the Adjudication Procedures Manual. It would syphon resources from existing modernization priorities, such as improvements to the Veterans Benefits Management System and National Work Queue. This phased rollout minimizes disruption of these major IT modernization projects, as well as other VA initiatives requiring substantial personnel or training.

Changes in Part 3 and Part 4 regulations, to include incorporation of proposed Part 5 improvements, where appropriate, can be achieved over a number of years. Some of these changes are already underway, with VA's modernized Part 4, VA Schedule for Rating Disabilities, slated for publication in the near future. This multi-year approach minimizes disruption on field operations (and ultimately claim production and accuracy), as well as VBA Central Office staffing required to implement the revised regulations.

For the above reasons, VA is withdrawing RIN 2900-AO13.

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. Jacquelyn Hayes-Byrd, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on April 3, 2018, for publication.

Title 38, United States Code (U.S.C.), section 1710(b)(2) authorizes VA to provide needed domiciliary care to veterans whose annual income does not exceed the applicable maximum annual rate of VA pension and to veterans who have no adequate means of support. The term “domiciliary care” is currently defined at 38 Code of Federal Regulations (CFR) 17.30(b) as the furnishing of a home to a veteran, embracing the furnishing of shelter, food, clothing and other comforts of home, including necessary medical services, as well as travel and incidental expenses pursuant to 38 CFR 70.10. Veterans must meet eligibility criteria found in § 17.46(b) as well as § 17.47(b)(2) and (c) to receive domiciliary care.

The domiciliary program was authorized to provide eligible veterans with a home and coordinated ambulatory medical care as needed. Typically, domiciliaries are co-located with VA medical centers or exist as designated bed-settings within the centers. By law, eligible veterans include only: Those whose annual income does not exceed the maximum annual rate of pension payable to a Veteran in need of regular aid and attendance; or (2) those who have no adequate means of support, as this phrase is defined in 38 CFR 17.47(b)(2), who can perform the activities specified in 38 CFR 17.46(b) but who suffer from a chronic disability, disease, or defect that results in the veteran being unable to earn a living for a prospective period. See 38 CFR 17.47 (b)(2) and (c).

VA domiciliaries served initially as “Soldiers' Homes” for economically-disadvantaged Veterans with chronic medical needs that can be addressed on an outpatient basis. Domiciliary care provides services to economically-disadvantaged veterans, and VA remains committed to serving that group. Historically, domiciliary care in VA has primarily been focused on delivering care to older residents who cannot live independently but who do not require admission to a nursing home. However, “domiciliary care” has expanded to also provide services to veterans who require residential rehabilitation treatment for mental health or substance use issues. While the above-referenced statutory definitions and eligibility criteria still apply as do the regulatory criteria of §§ 17.46(b) and 17.47(b)(2), the scope of services furnished under the program has evolved significantly, requiring revision of § 17.30(b) and § 17.47(c). We propose to amend the definition of domiciliary care to reflect that change.

The scope of clinical services available to VA domiciliary residents has necessarily become specialized over time due to the characteristics of the patient populations served by the residential rehabilitation treatment model. In 2005, VA administratively designated all MH RRTP facilities as domiciliary care facilities to fully integrate mental health; residential rehabilitation; and treatment and domiciliary care. VA established the first MH RRTP in 1995. MH RRTPs provide comprehensive supervised treatment and rehabilitative services to veterans with mental health or substance use disorders, and coexisting medical or psychosocial needs such as homelessness and unemployment. MH RRTPs identify and address goals of rehabilitation, recovery, health maintenance, improved quality of life, and community integration in addition to specific treatment of medical conditions, mental illnesses, addictive disorders, and homelessness. The residential component emphasizes incorporation of clinical treatment gains into a lifestyle of self-care and personal responsibility. MH RRTPs provide a 24 hours-per-day, 7 days-per-week structured and supportive residential environment similar to that in traditional domiciliary care. However, there are differences in the type of care delivered. The goals of care for residential rehabilitation treatment reflect a stronger emphasis on rehabilitative services, including professional, counseling, and guidance services as well as treatment programs. Rehabilitative services are designed to facilitate the process of recovery from injury, illness, or disease. These services are intended to restore, to the maximum extent possible, the physical, mental, and psychological functioning of veterans receiving residential rehabilitation treatment.

Since 2010, domiciliary care has been included as part of VA's MH RRTP, which began in 1995. VA domiciliaries are used currently for VA's Domiciliary Residential Rehabilitation Treatment Programs; Domiciliary Care for Homeless Veterans Program; Health Maintenance Domiciliary Beds Program; General Domiciliary or Psychosocial Residential Rehabilitation Treatment Program; Domiciliary Substance Abuse Programs; and Domiciliary Post-Traumatic Stress Disorder Programs. These are the patient populations currently residing in our domiciliaries. VA therefore proposes to update the definition of domiciliary care in § 17.30(b) to reflect the scope of clinically intensive rehabilitation services included in the program.

Current § 17.30(b) defines domiciliary care as the furnishing of a home to a veteran, embracing the furnishing of shelter, food, clothing and other comforts of home, including necessary medical services. We would amend this definition by stating that domiciliary care means a “temporary home” rather than “home.” This is consistent with VA's long-standing practice of providing domiciliary care as a non-permanent living arrangement for eligible veterans. This proposed change would not alter VA's commitment to ensure extended or geriatric care is available to older veterans eligible for VA domiciliary care, that is, those who cannot live independently but who do not require admission to a nursing home. These veterans receive their domiciliary care through State Veterans Homes Domiciliary Programs and VA pays half of the cost of that care through per diem payments. We would define domiciliary care to also mean a day hospital program consisting of intensive supervised rehabilitation and treatment provided in a therapeutic residential setting for residents with mental health or substance use disorders, and co-occurring medical or psychosocial needs such as homelessness and unemployment.

Current § 17.47 addresses considerations applicable in determining eligibility for hospital care, medical services, nursing home care, or domiciliary care. Current paragraph (c) clarifies that “domiciliary care, as the term implies, is the provision of a home, with such ambulant medical care as is needed.” For the reasons stated above, we would amend this paragraph to reflect that domiciliary care provides a temporary home.

The CFR, as proposed to be revised by this proposed rule, would represent the exclusive legal authority on this subject. No contrary rules or procedures are authorized. All VA guidance will be read to conform with this proposed rulemaking if possible or, if not possible, such guidance will be superseded by this rulemaking.

This proposed 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 proposed rule would 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 proposed rule would directly affect only individuals treated within VA and would not affect any small entities. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

Executive Orders (E.O.) 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). E.O. 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. E.O. 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 not to be a significant regulatory action under E.O. 12866. 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 website at http://www.va.gov/orpm/, by following the link for “VA Regulations Published From FY 2004 Through Fiscal Year to Date.”

This proposed rule is not expected to be an E.O. 13771 regulatory action because this proposed rule is not significant under E.O. 12866.

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 proposed rule would have 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. Gina S. Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on February 27, 2018, for publication.

For the reasons stated in the preamble, Department of Veterans Affairs proposes to amend 38 CFR part 17 as follows:

As explained below, the EPA is proposing various actions on Colorado's proposed revisions to its SIP that it submitted to the EPA on May 5, 2013, and May 31, 2017. Specifically, we are proposing to approve Colorado's 2017 attainment demonstration for the 2008 8-hour ozone NAAQS. In addition, we propose to approve the MVEBs contained in the State's submittal. We also propose to approve all other aspects of the submittal, except for certain area source categories and major source RACT, which we will be acting on at a later date. We propose to approve the revisions to Colorado's Reg. 11 and 7, except for Section X.E of Reg. 7, which we will be acting on at a later date. We propose to approve the revisions to Colorado Reg. 7 Sections I, II, VI, VII, VIII, and IX from the State's May 5, 2013 submittal.

The specific bases for our proposed actions and our analyses and findings are discussed in this proposed rulemaking. Technical information that we rely upon in this proposal is contained in the docket, available at http://www.regulations.gov, Docket No. EPA-R08-OAR-2017-0567.

On March 12, 2008, the EPA revised both the primary and secondary NAAQS for ozone to a level of 0.075 parts per million (ppm) (based on the annual fourth-highest daily maximum 8-hour average concentration, averaged over 3 years) to provide increased protection of public health and the environment (73 FR 16436, March 27, 2008). The 2008 ozone NAAQS retains the same general form and averaging time as the 0.08 ppm NAAQS set in 1997, but is set at a more protective level. Specifically, the 2008 8-hour ozone NAAQS is attained when the 3-year average of the annual fourth-highest daily maximum 8-hour average ambient air quality ozone concentrations is less than or equal to 0.075 ppm. See 40 CFR 50.15.

Effective July 20, 2012, the EPA designated as nonattainment any area that was violating the 2008 8-hour ozone NAAQS based on the three most recent years (2008-2010) of air monitoring data (77 FR 30088, May 21, 2012). With that rulemaking, the DMNFR area was designated nonattainment and classified as Marginal. Ozone nonattainment areas are classified based on the severity of their ozone levels. This is determined using the area's design value. The design value is the 3-year average of the annual fourth highest daily maximum 8-hour average ozone concentration at a monitoring site. See 40 CFR part 50, Appendix I. The DMNFR nonattainment area includes Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson Counties, and portions of Larimer and Weld Counties. See 40 CFR 81.306. Areas that were designated as Marginal nonattainment were required to attain the 2008 8-hour ozone NAAQS no later than July 20, 2015, based on 2012-2014 monitoring data.

On May 4, 2016, the EPA published its determination that the DMNFR, among other areas, had failed to attain the 2008 8-hour ozone NAAQS by the attainment deadline, and that the DMNFR was accordingly reclassified to a Moderate ozone nonattainment area (81 FR 26697; see 40 CFR 81.306). Moderate areas are required to attain the 2008 8-hour ozone NAAQS by no later than 6 years after the effective date of designation, which for the DMNFR nonattainment area is July 20, 2018. See 40 CFR 51.903.

CAA Section 182, 42 U.S.C. 7511a, outlines SIP requirements applicable to ozone nonattainment areas in each classification category. Moderate area classification triggers additional state requirements established under the provisions of the EPA's ozone implementation rule for the 2008 8-hour ozone NAAQS. See 40 CFR part 51, subpart AA. Examples of these requirements include submission of a modeling and attainment demonstration, RFP, RACT, and RACM. Moderate nonattainment areas had a submission deadline of January 1, 2017 for these SIP revisions (81 FR 26697, 26699, May 4, 2016).

Colorado submitted revisions to its SIP to the EPA on May 31, 2017, to meet the requirements of a Moderate area classification for the DMNFR nonattainment area and attain the 2008 8-hour ozone NAAQS. Colorado's proposed SIP revisions consist of the parts listed below.

• 8-Hour Ozone Attainment Plan (OAP), which includes monitoring information, emission inventories, an RFP demonstration, an attainment demonstration using photochemical grid modeling, a weight of evidence analysis, a RACT analysis, a RACM analysis, a motor vehicle emissions I/M program, NNSR program certification, contingency measures, and 2017 MVEBs for transportation conformity.

• Revisions to Reg. No. 7.

• Revisions to Reg. No. 11.

The Reg. No. 7 revisions in the 2017 submission include rule revisions related to the Moderate ozone nonattainment classification and revisions that address the EPA's concerns with previous SIP submittals. In this action, we are also acting on Reg. No. 7 revisions from a May 5, 2013 SIP submission. Reg. No. 11 revisions remove “state-only” references in Part A, regarding Larimer and Weld counties, thereby making the entire motor vehicle inspection and maintenance program federally enforceable.

The provisions we propose to approve meet the requirements of the CAA and our regulations. The specific bases for our proposed actions and our analyses and findings are discussed in this proposed rulemaking. Technical information that we rely on in this proposal is contained in the docket, available at http://www.regulations.gov, Docket No. EPA-R08-OAR-2017-0567.

The CAA requires that states meet certain procedural requirements before submitting SIP revisions to the EPA. Specifically, section 110(a)(2) of the CAA, 42 U.S.C. 7410(a)(2), requires that states adopt SIP revisions after reasonable notice and public hearing. For the May 5, 2013 submittal, the Colorado Air Quality Control Commission (AQCC) provided notice in the Colorado Register on September 21, 2012, and held a public hearing on December 20, 2012. The Colorado AQCC adopted the SIP revisions on December 20, 2012. The SIP revisions became state-effective on February 15, 2013. For the May 31, 2017 submission, the Colorado AQCC provided notice in the Colorado Register on July 29 and August 29, 2016 and held a public hearing on the SIP revisions on November 17, 2016. The Colorado AQCC adopted the SIP revisions on November 17, 2016. The SIP revisions became state-effective on January 14, 2017. Colorado met the CAA's procedural requirements for reasonable notice and public hearing.

Ozone monitoring data are used as a basis for photochemical grid modeling in the attainment demonstration. The EPA requirements for ambient monitoring are in 40 CFR part 58. Colorado collected ozone monitoring data in accordance with these requirements and with the EPA's “Quality Assurance Handbook for Air Pollution Measurement Systems, Vol. II—Ambient Air Quality Monitoring Program”; 1 the Colorado Air Pollution Control Division's (APCD) Quality Management Plan 2 and Quality Assurance Project Plan; 3 and Colorado's monitoring network plan.4

The monitoring section of Colorado's OAP includes:

• Information on the location of ozone monitors in Colorado, from southern Metropolitan Denver to northern Fort Collins (including Rocky Mountain National Park);

• 4th-maximum monitored 8-hour ozone values from 2006 through 2015, including levels recorded above the 75 parts per billion (ppb) 2008 ozone NAAQS; 5

• A description of the State's ambient air quality data assurance program; and

• Relevant 8-hour-average ozone monitoring data and recovery rates from 2006 through September 2015.

CAA section 172(c)(3), 42 U.S.C. 7502(c)(3), requires that each SIP include a “comprehensive, accurate, current inventory of actual emissions from all sources of the relevant pollutant or pollutants in [the] area.” The accounting required by this section provides a “base year” inventory that serves as the starting point for attainment demonstration air quality modeling, for assessing RFP, and for determining the need for additional SIP control measures. An attainment year inventory is a projection of future emissions and is necessary to show the effectiveness of SIP control measures. Both the base year and attainment year inventories are necessary for photochemical modeling to demonstrate attainment. Section D includes additional discussion on how these inventories are used in the attainment modeling.

Colorado's DMNFR area attainment plan includes a 2011 base year inventory and a 2017 attainment year inventory. The inventories catalog NOX and VOC emissions, because these pollutants are precursors to ozone formation, across all source categories during a typical summer day, when ozone formation is pronounced. Carbon monoxide (CO) emissions are reported as well, because they also impact ozone chemistry.

In our 2008 ozone NAAQS implementation rule, the EPA recommends using 2011 as the baseline year (80 FR 12264, 12272). In addition, analysis of meteorological conditions in the DMNFR area leads to the conclusion that the summer of 2011 was a “typical” ozone season from a meteorological standpoint. The modeling analysis uses a base year of 2011 to develop the modeling inputs for the base year modeling analysis and model performance evaluation.

The 2011 base year emissions inventory and the 2017 attainment year emissions inventory were developed using EPA-approved guidelines for stationary, mobile, and area emission sources. Stationary source emissions data for 2011 were self-reported to the State by individual sources; the State then used the submitted 2011 information to project stationary source emissions for 2017. On-road and non-road mobile source emissions were calculated using the EPA's MOVES2014 model combined with local activity inputs including vehicle miles traveled (VMT) and average speed data, as well as local fleet, age distribution, meteorology, and fuels information. Area sources include many categories of emissions. The EPA finds that these sources (including those in the oil and gas sector) were adequately accounted for in the emissions inventory. The methodology used to calculate emissions for each respective category followed relevant EPA guidance; 6 7 as applicable, employed approved emission factors and National Emissions Inventory (NEI) data; and was sufficiently documented in the SIP and in the State's technical support documents (TSD).8

Projected future emissions in 2017 were based on anticipated growth, technological advancements, and expected emissions controls that were to be implemented by the 2017 ozone season. Table 1 shows the emissions by source category from the 2011 base year and 2017 attainment year emission inventories.

Details of Colorado's emissions inventory development are in Colorado's supporting TSD.10 The inventories in the SIP are based on the most current and accurate information available to the State and the Regional Air Quality Council (RAQC) at the time the SIP was being developed. Additionally, the inventories comprehensively address all source categories in the DMNFR nonattainment area, and were developed consistent with the relevant EPA inventory guidance. For these reasons, we propose to approve the 2011 baseline emissions inventory as meeting the requirements of CAA section 172(c)(3), 42 U.S.C. 7502(c)(3). The EPA also finds that the 2017 inventory, which will be used to meet RFP and attainment demonstration requirements, was developed consistent with relevant EPA Emissions Inventory Guidance and MOVES Guidance. Further discussion on RFP and attainment demonstration is provided in their respective sections.

Section 182(b)(1) of the CAA, 42 U.S.C. 7511a(b)(1), and the EPA's 2008 Ozone Implementation Rule require each 8-hour ozone nonattainment area designated Moderate and above to submit an RFP demonstration for review and approval into its SIP that describes how the area will achieve actual VOC and NOX emissions reductions from a baseline emissions inventory. Section 182(b)(1), 42 U.S.C. 7511a(b)(1), which is part of the ozone-specific requirements of Subpart 2 of the CAA's nonattainment plan requirements, requires RFP to demonstrate a 15% reduction in VOC emissions. This requirement applies before the more general Subpart 1 RFP requirements of CAA Section 172(c)(2), 42 U.S.C. 7502(c)(2), which permits a combination of VOC and NOX emission reductions to show RFP. Colorado has not previously submitted a 15% RFP SIP under Section 182(b)(1). Therefore, on May 31, 2017, the State submitted an RFP demonstration showing VOC emission reductions greater than 15% within six years after the 2011 base year inventory (between 2012-2017).

RFP plans must also include an MVEB, which provides the allowable on-road mobile emissions an area can produce while still demonstrating RFP. The State's RFP submittal included MVEBs for the DMNFR area for the year 2017 (see Chapter 11 of the State's OAP). The MVEBs are discussed in detail in Section M of this notice.

To demonstrate compliance with RFP requirements, the State compared its 2011 base year VOC emissions inventory against its projected 2017 VOC emissions inventory and demonstrated that the projected milestone year inventory (2017) emissions of VOC will be at least 15% below the 2011 base year inventory. Colorado projects a 32.7% reduction in VOC emissions from 2011-2017 (see OAP, Table 25 on page 4-21). As discussed above in section IV.B., the EPA reviewed the procedures Colorado used to develop its projected inventories and found them to be reasonable.

Under the 2008 Ozone Implementation Rule, Moderate ozone nonattainment areas are required to demonstrate attainment using “photochemical modeling or another equivalent analytical method that is determined to be at least as effective. . . .” 80 FR at 12268. The EPA explained that “photochemical modeling is the most scientifically rigorous technique to determine NOX and/or VOC emissions reductions needed to show attainment of the NAAQS.” Id. at 12269. Consistent with the 2015 Ozone Implementation Rule, the SIP includes photochemical grid modeling with supplemental analyses to demonstrate that the emissions control strategy leads to attainment of the NAAQS by 2017. The modeling effort was led by the RAQC in coordination with the Colorado Department of Public Health and Environment (CDPHE). The RAQC first developed a modeling protocol 11 that describes the model configuration, domain, input data, and analyses to be performed for the SIP. As described in the protocol, the RAQC selected summer 2011 for the attainment demonstration base case model simulation using the 2011 base year emissions inventory. The modeling platform used the Weather Research and Forecasting Model (WRF) 12 to simulate meteorological data fields, and the Comprehensive Air Quality Model with Extensions (CAMx) as the photochemical air quality model. The modeling platform used a high resolution 4-km grid for the State of Colorado, nested within a western U.S. 12-km grid and a 36-km North America CAMx simulation developed by the Western Air Quality Study.13 Day-specific boundary conditions for the 36-km CAMx simulation were derived from a 2011 simulation of the MOZART model.14 The Sparse Matrix Operating Kernel Emissions (SMOKE) model 15 was used to process emissions data, and the Model of Emissions of Gases and Aerosols from Nature (MEGAN) 16 was used to estimate biogenic emissions of VOC and NOX. The anthropogenic precursor emissions data were based on the 2011 NEI 17 with updates in key source categories, including oil and gas emissions,18 mobile and area source emissions,19 and point source emissions.20 The EPA reviewed each of the modeling documents listed above and determined that the modeling is consistent with the recommendations in the relevant EPA guidance.21

EPA guidance recommends that model performance be evaluated by comparing model-simulated concentrations to observed concentrations. Model performance evaluation is used to evaluate the model for historical ozone episodes in the base year and to assess the model's reliability in projecting future year ozone concentrations. Using meteorological and emissions data from a historical base period, ozone and other species concentrations predicted by the model are compared to monitored concentrations to evaluate model performance. EPA modeling guidance emphasizes the use of graphical and diagnostic evaluation techniques to ensure that the modeling captures the correct chemical regimes and emission sources causing high ozone. Consistent with the guidance, Colorado's model performance evaluation included a comprehensive suite of graphical and diagnostic evaluation techniques, such as time-series plots of modeled and observed ozone at key monitoring sites, spatial plots of ozone, tabulations of model bias and error metrics, and diagnostic model simulations using sensitivity and source apportionment techniques. The WRF and CAMx configuration and MPE are described in Ramboll Environ's 2011 base case modeling and model performance evaluation report,22 which used both quantitative (model performance statistics) and qualitative (graphical displays) MPE approaches. At the four key monitoring sites in the Denver nonattainment area, the model achieved typical performance goals for model bias and error. However, as to the Chatfield monitor, which had the highest ozone design value, the model was biased low for some days in May and June and biased high for some days in July and August. While the model achieved the performance goal, it failed to accurately simulate some of the days with the highest monitored ozone.23

Because of concerns with model underestimates of ozone on some of the highest days at the Chatfield monitor and other monitoring sites, Colorado performed additional weight of evidence (WOE) analysis to assess model performance and the effect of model performance on the model attainment demonstration, as discussed in Sections E and F below.

In the modeled attainment demonstration, emissions inventories are developed for the attainment year (here, 2017) that reflect emissions control measures adopted in the SIP as well as other emissions reductions expected to be achieved through federally enforceable national programs, such as reduced tailpipe emissions for mobile sources. The Colorado 2017 emissions inventory is described in the RAQC's model attainment demonstration report.24 The photochemical model is then used to simulate air quality using the projected 2017 emissions. Because of the concerns with bias and error in the model performance discussed in the previous section, absolute model results are not used to evaluate attainment. Instead, the model is used in a relative sense by calculating the ratio of the model's future (here, 2017) to base case (here, 2011) predictions at ozone monitors in the nonattainment area. We call these ratios “Relative Response Factors” (RRFs). Future ozone concentrations are then estimated at existing monitoring sites by multiplying the modeled RRF at locations near each monitor by the observation-based, monitor-specific, baseline design value. The resulting predicted future concentrations are then compared with the 2008 8-hour average ozone NAAQS of 75 ppb. If the predicted future concentrations of ozone are lower than 76 ppb at all monitors, attainment is demonstrated.25 The EPA's “Model Attainment Test Software” (MATS, Abt., 2014 26 ) is used to calculate RRFs and to perform the attainment demonstration.

Table 2 summarizes Colorado's 2011 base case design values, the RRFs from the 2017 control measure case modeling, and the projected 2017 future design values. Table 2 shows results for two different approaches for calculating the model RRF. EPA guidance recommends that the RRFs be calculated using the maximum modeled ozone in a 3x3 matrix of grid cells surrounding each monitor. The 3x3 matrix is used because of the possibility that errors in model inputs or physics can result in under predictions in the grid cell with the monitor, and because of the possibility that emissions point sources could be located close to the edges of grid cells, as discussed in more detail in the modeling guidance (EPA, 2014, pp. 102-103).

Using the 3x3 RRFs, the maximum projected 8-hour ozone design values for the 2017 control measure case are 76 ppb at the Chatfield and the Rocky Flats North monitoring sites. Thus, the primary model attainment demonstration did not project NAAQS-attaining future design values (that is, less than 76 ppb) at all monitor sites. When the primary model attainment demonstration is close to but fails to attain the NAAQS, EPA guidance recommends that states consider whether it is appropriate to perform an attainment demonstration using a WOE demonstration. Colorado performed a WOE attainment demonstration as described in Section F below.

As noted above, the primary model attainment demonstration predicted future design values of 76 ppb at two monitors (Rocky Flats North and Chatfield), and thus these two monitors are not projected to attain the 75 ppb NAAQS by 2017. EPA guidance recommends a WOE analysis in cases for which future design values are close to the NAAQS, using the following criteria for a WOE attainment demonstration:

• A fully-evaluated, high-quality modeling analysis that projects future values that are close to the NAAQS;

• A description of each of the individual supplemental analyses, preferably from multiple categories. Analyses that use well-established analytical procedures and are grounded with sufficient data should be weighted higher; and

• A written description as to why the full set of evidence leads to a conclusive determination regarding the future attainment status of the area that differs from the results of the modeled attainment test alone.

The WOE analysis can include monitoring and emissions inventory trend analysis; review of the conceptual model for ozone formation in the nonattainment area; additional modeling metrics; alternative attainment test methods; and assessment of the efficacy of SIP-approved regulations, state-only regulations, and voluntary control measures. Considering this information and applying the criteria described in the guidance, the WOE analysis is then used to assess whether the planned emissions reductions will result in attainment of the NAAQS at the monitors that modeled ozone future design values of 76 ppb or higher.

As part of its WOE analysis, Colorado evaluated the model attainment demonstration using a 7x7 matrix of grid cells around each monitor site, because the model performed better in simulating the 2011 period when monitored concentrations were compared to model results in the 7x7 matrix.27 This performance difference may be a result of challenges in accurately simulating meteorological data in Colorado's complex terrain combined with the use of a high resolution 4-km grid in the Colorado modeling platform. It is possible that small errors in wind speed or wind direction could result in model-simulated plumes being offset by more than 4 km from a monitoring site. When using a 7x7 matrix of grid cells, the monitored concentration is compared to modeled concentrations up to 12 km from the monitor site to assess whether the model more accurately simulated the observed ozone in grid cells close to the monitor site. Table 2 shows that when the model attainment test is performed using the 7x7 matrix, all monitor sites are projected to attain the 75 ppb NAAQS.

Colorado also evaluated high ozone days from 2009 to 2013 that were likely influenced by atypical activities such as wildfire or stratospheric intrusion, but were included in the calculation of the 2011 baseline ozone design value (see Table 3; CDPHE, 2016d 28 ). While Colorado did not submit formal demonstrations under the Exceptional Events Rule (40 CFR 50.14) for these days because they do not affect the attainment status, which is evaluated based on 2015-2017 monitoring data, these days do affect the baseline design value and thus affect the model projected future design value for 2017. Table 4 shows the revised 2011 baseline design value when the data likely influenced by atypical activities are excluded, and Table 4 also shows the results of the model attainment demonstration using both the 3x3 and 7x7 matrices for calculating the model RRF. All future design values are below the 75 ppb NAAQS using both approaches when data possibly influenced by atypical activities are excluded in the calculation of the 2011 design values.

The EPA concurs with Colorado's assessment that the model was properly configured, met EPA performance requirements, and was appropriately used in its application. The EPA finds that the WOE analysis supports a determination that the area will attain the 75 ppb ozone NAAQS by 2017.

The EPA guidance recommends that an “unmonitored area analysis” (UAA) be performed to examine ozone concentrations in unmonitored areas. The UAA is intended to be a means for identifying high ozone concentrations outside of traditionally monitored locations, particularly in nonattainment areas where modeling or other data analyses have indicated potential high concentration areas of ozone outside of the existing monitoring network. This review can help ensure that a control strategy leads to reductions in ozone at other locations that could have base case (and future) design values exceeding the NAAQS were a monitor deployed there. The UAA uses a combination of model output and ambient data to identify areas that might exceed the NAAQS but that are not currently monitored. Colorado used the MATS to perform the UAA and found estimated 2011 ozone DVBs in excess of 76 ppb to the south, west, and northwest of Denver, stretching to Fort Collins and then west of Fort Collins. Colorado also found that the projected DVFs for 2017 showed all areas have values below 76 ppb. The maximum 2017 estimated design value was 75.9 ppb near the Jefferson/Boulder County border.

Section 172(c)(1) of the CAA, 42 U.S.C. 7502(c)(1), requires that SIPs for nonattainment areas “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology).” The EPA has defined RACT as the lowest emissions limitation that a particular source is capable of meeting by the application of control technology that is reasonably available, considering technological and economic feasibility (44 FR 53761, Sep. 17, 1979).

The EPA provides guidance concerning what types of controls could constitute RACT for a given source category by issuing Control Techniques Guidelines (CTG) and Alternative Control Techniques (ACT) documents.30 States must submit a SIP revision requiring the implementation of RACT for each source category in the area for which the EPA has issued a CTG, and for any major source in the area not covered by a CTG.31

For a Moderate, Serious, or Severe area a major stationary source is one that emits, or has the potential to emit, 100, 50, or 25 tons per year (tpy) or more, respectively, of VOCs or NOX (see CAA sections 182(b), 42 U.S.C. 7511a(b); 182(c), 42 U.S.C. 7511a(c); 182(d), 42 U.S.C. 7511a(d); and 302(j), 42 U.S.C. 7602(j)). For the DMNFR Moderate nonattainment area, a major stationary source is one that emits, or has the potential to emit, 100 tpy or more of VOCs or NOX. RACT can be adopted in the form of emission limitations or “work practice standards or other operation and maintenance requirements,” as appropriate.32 The Division identified 51 major sources in the DMNFR area, operated by 32 companies. The EPA will be acting on Colorado's major stationary source RACT submission in a separate action. Colorado did not rely on any emission reductions from major stationary sources in their 2017 modeling analysis. The remainder of this section will address Colorado's RACT submission related to CTG sources.

As part of its May 31, 2017 submittal, the Division conducted a RACT analysis to demonstrate that the RACT requirements for CTG sources in the DMNFR 2008 8-hour ozone nonattainment area have been fulfilled. The Division conducted its RACT analysis for VOC and NOX by: (1) Identifying all categories of CTG and major non-CTG sources of VOC and NOX emissions within the DMNFR nonattainment area; (2) Listing the state regulation that implements or exceeds RACT requirements for that CTG or non-CTG category; (3) Detailing the basis for concluding that these regulations fulfill RACT through comparison with established RACT requirements described in the CTG guidance documents and rules developed by other state and local agencies; and (4) Submitting negative declarations when there are no CTG or major non-CTG sources within the DMNFR area.

The EPA has reviewed Colorado's new and revised VOC rules for the source categories covered by the CTGs for the 2008 8-hour ozone NAAQS listed in Tables 5 and 6 and proposes to find that these rules are consistent with the control measures, definitions, recordkeeping, and test methods in these CTGs and applicable EPA RACT guidance.33 Tables 5 and 6 contain a list of CTG source categories, EPA reference documents, and the corresponding sections of Reg. No. 7 that fulfill the applicable RACT requirements for EPA-issued CTGs.34 Colorado's Reg. No. 7, Control of Ozone Via Ozone Precursors and Control of Hydrocarbons Via Oil and Gas Emissions, contains SIP-approved provisions (see 76 FR 47443, Aug. 4, 2011) that meet RACT requirements for the source categories listed in Table 5. Reg. No. 7 also contains general RACT provisions for the CTG source category listed in Table 6. To meet RACT requirements for the source category in Table 6, Colorado submitted several changes to Reg. No. 7 for adoption into its SIP (see Section N of this notice).

The Division also reviewed four ACT VOC source categories to determine if additional VOC reductions could be achieved (see section 6.2.4 of the OAP):

1. Organic Waste Process Vents (EPA 1990, ACT);

2. Bakery Ovens (EPA 1992, ACT);

3. Industrial Wastewater Alternative Control Technology (EPA 1994, ACT); and

4. Control of Volatile Organic Compound Emissions from Batch Processes (EPA 1994, ACT).

These four categories were evaluated because they are not addressed by a CTG, federal consumer product rule, or directly by a New Source Performance Standard (NSPS) or National Emission Standard for Hazardous Air Pollutant (NESHAP) and are not included in a State source-specific RACT provision. Colorado found in its analysis that there are more recent NSPS and NESHAPs that cover the source categories, and that the State has incorporated by reference in Reg. No. 6 and implements. Additionally, Reg. No. 7 establishes work practices and disposal practices similar to the ACTs. Accordingly, Colorado did not identify any additional requirements to include in their RACT analysis through their review of the ACTs.

We have reviewed the emission limitations and control requirements for the above source categories (Tables 5 and 6 in Reg. No. 7) and compared them against the EPA's CTG and ACT documents, available technical information, and guidelines. The emission limitations and control requirements in Reg. No. 7 for the above source categories are consistent with our guidance.

Based on available information, we find that the corresponding sections in Reg. No. 7 provide for the lowest emission limitation through application of control techniques that are reasonably available considering technological and economic feasibility. For more information, see the EPA TSD prepared in conjunction with this action. Therefore, we propose to find that the control requirements for the source categories identified in Tables 5 and 6 are RACT for all affected sources in the DMNFR area under the 2008 8-hour ozone NAAQS.

States are not required to adopt RACT limits for source categories for which no sources exist in a nonattainment area, and can submit a negative declaration to that effect. Colorado has reviewed its emissions inventory and determined that there are no subject sources for source categories listed in Table 7 in the DMNFR area. We are also unaware of any such facilities operating in the DMNFR nonattainment area, and thus we propose to approve the negative declarations made for the source categories in Table 7 for the DMNFR area under the 2008 8-hour ozone NAAQS.

With the attainment demonstration, Colorado submitted a demonstration that the DMNFR area has adopted all RACM necessary to demonstrate attainment as expeditiously as practicable, as required by CAA section 172(c)(1), 42 U.S.C. 7502(c)(1), and 40 CFR 51.912(d). The EPA interprets the CAA RACM provision to require a demonstration that: (1) The state has adopted all reasonable measures (including RACT) to meet RFP requirements and to demonstrate attainment as expeditiously as possible; and (2) no additional measures that are reasonably available will advance the attainment date or contribute to RFP for the area. States should consider all available measures, including those being implemented in other areas, but must adopt measures for an area only if those measures are economically and technologically feasible and will advance the attainment date or are necessary for RFP.

The EPA provided guidance interpreting the RACM requirements of section 172(c)(1) in the General Preamble for Implementation of Title I of the CAA of 1990.37 The EPA explained that states should consider all potentially available measures to determine whether they are reasonably available for implementation in the area, and whether they will advance the attainment date. Id. Potentially available measures that would not advance the attainment date for an area are not considered RACM; likewise, states can reject potential RACM if adopting them would cause substantial widespread and long-term adverse impacts. Id. Local conditions, such as economics or implementation concerns, may also be considered. To allow the EPA to determine whether the RACM requirement has been satisfied, states should provide in the SIP submittals a discussion of whether measures “within the arena of potentially reasonable measures” are in fact reasonably available.38 If the measures are reasonably available, they must be adopted as RACM.

To demonstrate that the area meets the RACM requirement, Colorado identified potentially available control measures with input from stakeholders and analyzed whether the measure would be considered a RACM measure. In 2011, the RAQC issued a Report to the Governor that identified and evaluated potential control strategies. Later in 2011, the RAQC and CDPHE evaluated control measures for all source categories that could be implemented over the next five years and included them in a report to the RAQC Board in November 2011. Since 2011, Colorado has adopted oil and gas regulations, implemented Clean Air—Clean Jobs Act 39 controls through the Regional Haze SIP, and continued alternative fuels, transportation, and land use programs. In May 2015, the RAQC reconvened discussions with the CDPHE and other partners to review control strategies for the 2008 ozone SIP as well as future SIPs. Three subcommittees made up of RAQC Board members were assembled. Areas of analysis included stationary/areas sources, mobile sources/fuels, and transpiration/land use/pricing/outreach. Subcommittee meetings were open to the public, and stakeholders provided input on the topics discussed.

Colorado determined that all control measures necessary to demonstrate attainment are currently being implemented. Table 43 of Colorado's OAP lists control measures included in Colorado's SIP as they relate to the State's 2017 emissions inventory, photochemical modeling in the attainment demonstration, and weight of evidence analysis. As discussed in Chapter 7.3.2 of the OAP, the AQCC adopted modifications to Reg. No. 11 to incorporate the portions of Larimer and Weld Counties that are within the DMNFR nonattainment area into Colorado's I/M program. This change was submitted as a SIP revision and is being acted on in this action (see section J of this notice). Additionally, Chapter 7.3.5.1. describes SIP-strengthening revisions made to Colorado's oil and gas control program in Reg. No. 7 (see section N of this notice). These revisions include adoption of two “state-only” provisions into the Ozone SIP, pertaining to (1) auto-igniter requirements for combustion devices; and (2) audio, visual, and olfactory inspection of storage tanks and associated equipment.

As part of the RACM analysis, CDPHE examined emission reduction measures (see Table 44 of the OAP) being implemented in the DMNFR area that are not included in the SIP modeling and emissions inventory because they are voluntary or difficult to quantify. Non-federally-enforceable emission reduction measures were evaluated for stationary and mobile sources, lawn and garden, outreach and education, and the transportation system. Additionally, Colorado evaluated CAA 108(f), 42 U.S.C. 7408(f) transportation measures (see Table 48 of the OAP) to determine whether sources have applied RACM.

Emission measures that were evaluated but determined not to be RACM are discussed in Chapter 7.5 of the OAP. Colorado used the following criteria to determine whether measures were considered RACM:

• Necessary to demonstrate attainment;

• Technologically or economically feasible;

• Implemented successfully in other Moderate areas;

• Could be implemented by January 1, 2017; and

• Could qualify as SIP measures by being quantifiable, enforceable, permanent, and surplus.

Emission reduction measures evaluated for RACM were broken into area sources, on-road mobile sources, non-road mobile sources, fuels, transportation, alternative transportation, and land use categories. Tables 50 and 51 of the OAP summarizes the measures evaluated and Colorado's RACM determination for each measure. Colorado also reviewed the EPA's Menu of Control Measures for NAAQS Implementation 40 and voluntary and mandatory control measures in other ozone nonattainment areas. Table 53 of the OAP lists control measures identified, and indicates which measures were included in the State's RACM review. Although Colorado's analysis demonstrated that none of the additional measures identified met the criteria for RACM, the State plans to continue evaluating strategies in various areas including fuels, on- and off-road vehicles, and land use.

In its analysis, Colorado evaluated all source categories that could contribute meaningful emission reductions, and identified and evaluated an extensive list of potential control measures. To determine reasonableness and availability, the State considered the time needed to develop and adopt regulations, and the time it would take to see the benefit from these measures. The EPA has reviewed the RACM analysis and finds that there are no additional RACM that would advance the Moderate area attainment date of 2018 for the DMNFR nonattainment area. Therefore, the EPA proposes to approve Colorado's Moderate area RACM SIP for the DMNFR Moderate nonattainment area.

As a Moderate ozone nonattainment area, Colorado is required to implement an I/M program. Colorado's Reg. No. 11 is entitled “Motor Vehicle Emissions Inspection Program” and addresses the implementation of the State's I/M program. Under Reg. No. 11 and state law (5 CCR 1001-13), all eligible automobiles registered in the Automobile Inspection and Readjustment (AIR) program area (the current nine-county AIR program area is depicted in Chapter 8, Figure 27, page 8-3 of the OAP) are subject to periodic emissions inspection. Currently there is an exemption from emissions inspection requirements for the first seven model years. Thereafter, an On-Board-Diagnostics (OBD) vehicle computer inspection is conducted during the first two inspection cycles (vehicles 8 through 11 model years old). Vehicles older than 11 model years are given a dynamometer-based IM240 test for 1982 and newer light-duty gasoline vehicles 41 and a two-speed idle test (TSI) 42 for 1981 and older light-duty gasoline vehicles. To improve motorist convenience and reduce program implementation costs, the State also administers a remote sensing-based “Clean Screen” program component of the I/M program. Remote sensing is a method for measuring vehicle emissions, while simultaneously photographing the license plate, when a vehicle passes through infrared or ultraviolet beams of light. Owners of vehicles meeting the Clean Screen criteria are notified by the respective County Clerk that their vehicle has passed the motor vehicle inspection process and are exempt from their next regularly scheduled IM240 test.43

The AIR program and Reg. No. 11 were expanded into portions of Larimer and Weld counties in the Colorado 2009 Legislative session, with the passage of Senate Bill 09-003. The startup date of the I/M program in these two counties was November 1, 2010. The purpose of this expansion of the AIR program and Reg. No. 11 into portions of Larimer and Weld counties was to further reduce vehicle emissions of NOX and VOC ozone precursors in the 2008 8-hour ozone nonattainment area. The DMNFR was then only classified as a Marginal ozone nonattainment area, and an I/M program was not required in Larimer and Weld counties. Therefore, the State decided to make this portion of the I/M program, for these two counties, a “State-only” provision, and not to submit it as a SIP revision.

With the reclassification of the DMNFR nonattainment area to Moderate for the 2008 8-hour ozone NAAQS, and in light of the associated CAA requirements, the State chose to submit the I/M program in Larimer and Weld counties into the federal SIP. Adding these requirements into the federal SIP required several minor revisions, which were adopted by the Colorado AQCC on November 17, 2016, and submitted to the EPA on May 31, 2017. These revisions involved changes to “PART A: General Provisions, Area of Applicability, Schedules for Obtaining Certification of Emissions Control, Definitions, Exemptions, and Clean Screening/Remote Sensing.” Specifically, definition number 43 was modified to remove the notation that the “North Front Range Area” was a State-only program and not included in the SIP. In addition, Part A, section V, “Expansion of The Enhanced Emissions Program to the North Front Range Area,” was modified to remove the notation that the I/M program was only a State-only program for portions of Larimer and Weld counties and not part of the SIP. By making these changes to Part A of Reg. No. 11, and submitting them for approval by the EPA into the federal SIP, the State made the I/M program in portions of Larimer and Weld counties federally enforceable. Incorporating the formerly State-only portions of the I/M program into the SIP permitted Colorado to include the motor vehicle emissions reductions received from operation of the AIR program in these areas of Larimer and Weld counties in the DMNFR attainment demonstration.

Based on our review and as discussed above, we propose approval of the submitted Reg. No. 11 SIP revisions.

This rulemaking is issued under the authority of the Office of Federal Procurement Policy (OFPP) Act, which provides the authority for an agency head to issue agency acquisition regulations that implement or supplement the FAR.

VA is proposing to revise the VAAR to add new policy or regulatory requirements and to remove any redundant guidance and guidance that is applicable only to VA's internal operating processes or procedures. Codified acquisition regulations may be amended and revised only through rulemaking. All amendments, revisions, and removals have been reviewed and concurred with by VA's Integrated Product Team of agency stakeholders.

The VAAR uses the regulatory structure and arrangement of the FAR and headings and subject areas are consistent with FAR content. The VAAR is divided into subchapters, parts (each of which covers a separate aspect of acquisition), subparts, sections, and subsections.

When Federal agencies acquire supplies and services using appropriated funds, the purchase is governed by the FAR, set forth at Title 48 Code of Federal Regulations (CFR), chapter 1, parts 1 through 53, and the agency regulations that implement and supplement the FAR. The VAAR is set forth at Title 48 CFR, chapter 8, parts 801 to 873.

The VA proposes to make the following changes to the VAAR in this phase of its revision and streamlining initiative. For procedural guidance cited below that is proposed to be deleted from the VAAR, each section cited for removal has been considered for inclusion in VA's internal agency operating procedures in accordance with FAR 1.301(a)(2). Similarly, delegations of authorities that are removed from the VAAR will be included in the VA Acquisition Manual (VAAM) as internal agency guidance. The VAAM is being created in parallel with these revisions to the VAAR and is not subject to the rulemaking process as they are internal VA procedures and guidance. The VAAM will not be finalized until corresponding VAAR parts are finalized and therefore the VAAM is not yet available on line.

We propose to revise the authority citations under Parts 831, 833, and 871 to include a reference to 41 U.S.C. 1121(c)(3) which is from Title 41, Public Contracts, Positive Law codification that speaks to the authority of an executive agency under another law to prescribe policies, regulations, procedures, and forms for procurement that are subject to the authority conferred in the cited section, as well as other sections of Title 41 as shown therein. For parts 831 and 871, we also propose to replace the 38 U.S.C. 501 citation with 41 U.S.C. 1702 which addresses the acquisition planning and management responsibilities of Chief Acquisition Officers and Senior Procurement Executives, to include implementation of unique procurement policies, regulations and standards of the executive agency. 38 U.S.C. 501 is a more general authority for the Secretary to utilize to prescribe all rules and regulations. The title 41 authority is more appropriate to cite when publishing the VAAR. Any other proposed changes to authorities are shown under the individual parts below.

In addition to the changes in authority cited earlier in this preamble, we propose to revise the authority citations under Part 831 to add 38 U.S.C. chapter 31, which is the basic statute for providing training and rehabilitation for veterans with service-connected disabilities.

In subpart 831.70, we propose to revise the title of this subpart to more accurately reflect the subject matter and because it duplicated the title for part 831. We propose to revise the title for subpart 831.70 from “Contract Cost Principles and Procedures,” to “Contract Cost Principles and Procedures for Veterans Services under 38 U.S.C. Chapter 31.”

In section 831.7000, Scope of subpart, we propose to revise the section to clarify that the cost principles apply to the negotiation of prices under fixed-price contracts as well as to costs under cost reimbursement contracts, and to contracts with educational institutions as well as those with commercial and non-profit organizations.

We propose to add a new section 831.7000-1 titled “Definitions,” to provide definitions for four terms used in the part.

In section 831.7001, we propose to revise the title from “Allowable costs under cost reimbursement vocational rehabilitation and education contracts or agreements” to read “Allowable costs and negotiated prices under vocational rehabilitation and education contracts” to more accurately describe the subject matter of the section.

In section 831.7001-1, Tuition, we propose to amend the text to simplify the limitations on tuition and enrollment fees that may be paid under the chapter 31 program, and to standardize throughout the part the term “Veteran student” for the beneficiary of the chapter 31 programs.

In section 831.7001-2, Special services or courses, we propose minor revisions to clarify terms for services or courses that are supplementary to those customarily provided to similarly circumstanced non-Veteran students.

In section 831.7001-3, Books, supplies, and equipment required to be personally owned, we propose to amend the text to clarify the limitations on fees that may be paid for these and other miscellaneous items under the chapter 31 program, and to further reorganize the section by combining limits that apply to several items or categories. We propose to move and combine certain paragraphs where appropriate, to fall under more applicable category headings, to streamline the language under revised paragraphs (a) through (e), and to remove paragraphs (f) through (k).

In section 831.7001-4, Medical services and hospital care, we propose to revise the text to make minor edits to clarify some terms.

In section 831.7001-6, Consumable instructional supplies, we propose to revise the number of the section to 831.7001-5, and to make two other minor edits.

In section 831.7001-7, Reimbursement for other supplies and services, we propose to revise the number of the section to 831.7001-6, and to make one other minor edit.

We propose to amend the authority citation for part 833 to add the reference to the positive law codification of Title 41, United States Code, pertaining to the general authority of an executive agency under another law to prescribe policies, regulations, procedures, and forms for procurement subject to the authority conferred in 41 U.S.C. 1121(c)(3). We also propose to add the Title 41, chapter 71 authority pertaining to contract disputes, to include alternate means of dispute resolution.

We propose to delete the existing language in section 833.102, General, since it contains guidance that is internal operational procedures of the VA and will be in the VA Acquisition Manual (VAAM).

We propose to delete outdated information in section 833.103, Protests to VA, and renumber the section 833.103-70 in accordance with FAR drafting guidelines to reflect information that appropriately supplements the FAR. We propose to add new language in paragraph (a) that: (1) Would update information for where an interested party may protest to the contracting officer; or, (2) as an alternative, may request independent review above the level of the contracting officer to the Executive Director, Office of Acquisition and Logistics (ED/OAL), supported by the Office of Risk Management and Compliance Service (RMCS); or (3) where in the VA interested parties may appeal a contracting officer's decision on a protest. This new unified approach would streamline VA protest management by combining responsibilities previously shared between the Office of Construction and Facilities Management (CFM) and the former Deputy Assistant Secretary for Acquisition and Materiel Management. Some of the duties formerly assigned to this old entity would be subsumed by a new organizational entity—the ED/OAL and one of its subordinate activities, RMCS, which handles protests on behalf of the ED. A new email address [email protected] was secured by RMCS to be used exclusively for purposes of electronic submission of protest related documents by offerors/bidders.

In the renumbered section 833.103-70, Protests to VA, we also propose to add new language in a newly designated paragraph (b) that would revise slightly the language, but would retain the current types of protests that may be dismissed by VA without consideration of the merits, or may be forwarded to another agency for appropriate action. This proposed revision would renumber the paragraphs using standard numbering and format, and would make other minor edits including the following:

Paragraph (4)(i), we propose to renumber the paragraph to (b)(1) and to update the current positive law codified reference to the Contract Disputes statute, 41 U.S.C. chapter 71.

Paragraphs (4)(ii) through (viii) are proposed to be renumbered (b)(2) through (8), respectively.

In paragraph (b)(2), we propose to add language that states that pursuant to Public Law 114-328, the Small Business Administration (SBA) will also hear cases related to size, status, and ownership and control challenges under the VA Veterans First Contracting Program.

The newly renumbered proposed paragraph (b)(6), Contracts for materials, supplies, articles, and equipment exceeding $15,000, would provide that challenges of the legal status of a firm as a regular dealer or manufacturer be determined solely by the procuring agency, the SBA (if a small business is involved), and the Secretary of Labor.

In the newly renumbered proposed paragraph (b)(7), Subcontractor protests, the language would be revised to clarify that VA will not consider subcontractor protests except where VA determines it is in the interest of the Government. The phrase “except where VA determines it is in the interest of the Government” would be added to further clarify the sentence in lieu of the phrase “by or for the Government.”

We propose to renumber the existing paragraph (b), which would encourage the use of Alternative Dispute Resolution (ADR) at any stage, to paragraph (c).

We propose to renumber paragraph (f), which details the new agency appellate review process for contracting officer's protest decision to be performed solely by the Executive Director, Office of Acquisition and Logistics, to paragraph (d).

We propose to delete section 833.104, Protests to GAO, since it contains procedural guidance that is internal to VA and will be in the VA Acquisition Manual (VAAM) and the FAR provides adequate notice to potential offerors.

We propose to renumber section 833.106, Solicitation provisions, as 833.106-70 to comport with FAR drafting guidelines and to reflect it supplements the FAR. The section would provide that the contracting officer shall insert the provision at 852.233-70, Protest content/alternative dispute resolution and the provision at 852.233-71, Alternate protest procedure, in solicitations expected to exceed the simplified acquisition threshold. The updated provision would include a new centralized alternate review and appeal process rather than the previous bifurcated CFM/OAL approach. It also would include a new dedicated email address to facilitate electronic protest submissions.

In subpart 833.2, Disputes and Appeals, section 833.209, Suspected fraudulent claims, we propose to revise the text to clarify that the contracting officer may not initiate any collection, recovery, or other settlement action concerning suspected fraudulent claims reported to the Office of the Inspector General (OIG), and referred to the Department of Justice, without first obtaining the concurrence of the U.S. Attorney concerned, through the OIG.

We propose to delete paragraphs (a) and (b) of the existing language in section 833.211, Contracting officer's decision, as the language is redundant to the FAR and is adequately covered in FAR 33.211. We propose to revise the language in the existing paragraph (c) and renumber it as (a) to align with the FAR in order to clarify that for purposes of appealing a VA contracting officer's final decision, the cognizant Board of Contract Appeals is the Civilian Board of Contract Appeals (CBCA).

We propose to delete section 833.212, Contracting officer's duties upon appeal, since it contains procedural guidance that is internal to VA and will be updated and moved to the VA Acquisition Manual (VAAM). The cognizant FAR part that this implements provides adequate notice to potential offerors.

We propose to revise section 833.213, Obligation to continue performance. Paragraph (a) would be revised to make one grammatical correction by adding “FAR” at the beginning of the second sentence in front of the FAR clause. Paragraph (b) would be revised to clarify that, in the event of a dispute not arising under, but relating to, the contract, if the contracting officer directs continued performance and considers providing financing for such continued performance, the contracting officer shall contact OGC for advice prior to requesting higher level approval for or authorizing such financing. It would also require the contracting officer to document in the contract file any required approvals and to explain how the Government's interest would be properly secured with respect to such financing.

We propose to revise section 833.214, Alternative dispute resolution (ADR), to clarify that guidance for ADR procedures may be obtained at the U.S. Civilian Board of Contract Appeals website http://www.cbca.gsa.gov. This section would retain the requirement that contracting officers and contractors are encouraged to use ADR procedures.

We propose to revise the language in the existing section 833.215, Contract clause, and rename it “Contract clauses” as this would implement the FAR section with the same title. This would retain existing language to provide that the contracting officer shall use the clause at 52.233-1, Disputes, with its Alternate I (see 833.213). This is necessary to reconcile the FAR requirement with recent updates to the dispute statutes.

We propose to revise the VAAR title for subpart 852.2 to “Text of Provisions and Clauses” in lieu of “Texts of Provisions and Clauses” to comport with the FAR title to which the VAAR's subpart corresponds.

We propose to revise two provisions—852.233-70, Protest Content/Alternative Dispute Resolution, and 852.233-71, Alternate Protest Procedure. In the current version of the VAAR both of these provisions are prescribed in section 833.106. We propose to change the prescription for each provision: 852.233-70 would now be prescribed in 833.106-70(a) and 852.233-71 would now be prescribed in 833.106-70(b). The language in 852.233-71 would be revised to reorganize the existing single and unlettered paragraph by adding paragraphs (a) and (b). Paragraph (a) would provide the address where to file an alternate protest to other than the contracting officer and would provide a new VA email address to address the protest to the Risk Management and Compliance Service: [email protected]. At paragraph (b), the provision would state that a protest will not be considered if the interested party has a protest on the same or similar issue(s) pending with the contracting officer.

We propose to revise the authority citations for Part 871 to add 38 U.S.C. Chapter 31, which is the basic statute for providing training and rehabilitation for veterans with service-connected disabilities.

In section 871.201-1, Requirements for the use of contracts, we propose to revise the introductory paragraph to clarify the language before the two conditions in paragraphs (a) and (b). We propose to revise paragraph (b), Special services or special courses, to comport with the revision of that term in section 831.7001-2.

Title 48, Federal Acquisition Regulations System, Chapter 8, Department of Veterans Affairs, of the Code of Federal Regulations, as proposed to be revised by this rulemaking, would represent VA's implementation of its legal authority and publication of the Department of Veterans Affairs Acquisition Regulation (VAAR) for the cited applicable parts. Other than future amendments to this rule or governing statutes for the cited applicable parts, or as otherwise authorized by approved deviations or waivers in accordance with Federal Acquisition Regulation (FAR) subpart 1.4, Deviations from the FAR, and as implemented by VAAR subpart 801.4, Deviations from the FAR or VAAR, no contrary guidance or procedures would be authorized. All existing or subsequent VA guidance would be read to conform with the rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking as pertains to the cited applicable VAAR parts.

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. E.O. 12866, Regulatory Planning and Review, defines “significant regulatory action” to mean 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.”

VA has examined the economic, interagency, budgetary, legal, and policy implications of this regulatory action, and it has been determined not to be a significant regulatory action under E.O. 12866 because it does not 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 website at http://www.va.gov/orpm by following the link for VA Regulations Published from FY 2004 Through Fiscal Year to Date. This proposed rule is not expected to be an E.O. 13771 regulatory action because this proposed rule is not significant under E.O. 12866.

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

This proposed 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. The overall impact of the proposed rule would be of benefit to small businesses owned by Veterans or service-disabled Veterans as the VAAR is being updated to remove extraneous procedural information that applies only to VA's internal operating procedures. VA is merely adding existing and current regulatory requirements to the VAAR and removing any guidance that is applicable only to VA's internal operation processes or procedures. VA estimates no cost impact to individual business would result from these rule updates. This rulemaking does not change VA's policy regarding small businesses, does not have an economic impact to individual businesses, and there are no increased or decreased costs to small business entities. On this basis, the proposed rule would not have an economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b), this regulatory action is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

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 proposed rule will have no such effect on State, local, and tribal Governments or on the private sector.

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. Gina S. Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on August 25, 2017, for publication.

For the reasons set out in the preamble, VA proposes to amend 48 CFR, chapter 8, parts 831, 833, 852 and 871 as follows:

This rulemaking is issued under the authority of the Office of Federal Procurement Policy (OFPP) Act, which provides the authority for an agency head to issue agency acquisition regulations that implement or supplement the FAR.