This rule has been received by the Office of Management and Budget and has been determined to be not significant for purposes of Executive Order 12866.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601et seq.), the AMS has considered the economic impact of this action on small entities. It has determined that its provisions will not have a significant economic impact on a substantial number of small entities.

The AMS provides, under the authority of the Agricultural Marketing Act (AMA) of 1946, a voluntary, user-fee funded seed testing and certification service to approximately 65 businesses per year. Many of the users of the testing and certification services would be considered small businesses under the criteria established by the Small Business Administration (13 CFR 121.201). Over ninety-five percent of the samples tested in this program represent seed and grain scheduled for export. Grain is examined for the presence of specified weed and crop seeds upon request of the USDA's Grain Inspection, Packers and Stockyards Administration. A Federal Seed Analysis Certificate, containing purity, germination, noxious-weed seed examination, and other test results is issued upon completion of the testing. The Federal Seed Analysis Certificate is required documentation for shipments of seed and grain from the United States entering certain countries.

The AMS regularly reviews its user fee financed programs to determine if the fees are adequate. The most recent review determined that the existing fee schedule will not generate sufficient revenues to cover program costs while maintaining an adequate reserve balance. Without a fee increase, FY 2002 revenues for seed testing and certification services are projected at $137,000, costs are projected at $172,000, and the trust fund balance is projected to be $47,000 or 3.28 months of operating reserve. With a fee increase, FY 2002 revenues are projected at $160,000, costs are projected at $174,000, and the trust fund balance is projected to be $68,000 or 4.69 months of operating reserve.

This action will raise the hourly rate charged to users of the seed testing and certification services. This fee increase is necessary to offset increased program operating costs resulting from: (1) Salary increases for all Federal employees in 2001 and 2002, (2) increases in rent, (3) increases in costs of supplies needed for testing samples, and (4) purchases of replacement equipment needed to provide the service.

The AMS estimates that this rule will yield an additional $22,000 during FY 2002. The hourly rate for seed testing and certification services will increase by approximately 17 percent. The costs to entities will be proportional to their use of the service, so that costs are shared equitably by all users. The increase in costs to individual firms will be, on average, approximately $13.00 per Federal Seed Analysis Certificate issued. There will also be an increase of $1.90 for each duplicate certificate issued. In addition, this action will establish a fee of $13.00 to recover the cost of issuing preliminary test reports.

This action has been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of this rule.

The information collection requirements that appear in part 75 of the regulations have been previously approved by OMB and assigned OMB Control Number 0581-0140 under the Paperwork Reduction Act (44 U.S.C. chapter 35).

The USDA is authorized by the AMA of 1946, as amended, 7 U.S.C. 1621et seq., to provide voluntary Federal seed testing and certification services to facilitate the orderly marketing of seed and grain and to enable consumers to obtain the quality of seed and grain they desire. The AMA provides that reasonable fees be collected from users of the program services to cover, as nearly as practicable, the costs of services rendered.

The AMS regularly reviews programs to determine if fees are adequate and if costs are reasonable. This action will increase the hourly fee rate and charges for voluntary seed testing and certification services provided to the seed and grain industries to reflect the costs currently associated with providing the services.

A recent review of the current hourly fee rate, effective March 1, 2001,revealed that anticipated revenue will not cover increased program costs. Without a fee increase, FY 2002 revenues for seed testing and certification services are projected at $137,000, costs are projected at $172,000, and the trust fund balance is projected to be $47,000 or 3.28 months of operating reserve. With a fee increase, FY 2002 revenues are projected at $160,000, costs are projected at $174,000, and the trust fund balance is projected to be $68,000 or 4.69 months of operating reserve.

The hourly fee for service is established by distributing the projected annual program operating costs over the estimated revenue hours of service provided to users of the service. Revenue hours include the time spent conducting tests, keeping sample logs, preparing Federal Seed Analysis Certificates and storing samples. As program operating costs continue to rise, the hourly fees must be adjusted to enable the program to remain financially self-supporting as required by law. Program operating costs include the salaries and fringe benefits of seed analysts, supervision, training, and all administrative costs of operating the program.

Employee salaries and benefits account for approximately 75 percent of the total budget. A general and locality salary increase of 3.81 percent for 2001 and 4.77 percent for 2002 for Federal employees involved in the seed testing and certification service became effective in January 2002 and will affect program costs.

This fee increase is necessary to offset increased program operating costs resulting from: (1) Salary increases for all Federal employees for 2002, (2) increases in rent, (3) increases in costs of supplies needed for testing samples, and (4) purchases of replacement equipment needed to provide the service.

In view of these increases in costs, the Agency is increasing the hourly rate charged to applicants for the service, including the issuance of Federal Seed Analysis Certificates from $44.40 to $52.00. The fee for issuing additional duplicate certificates is increasing from $11.10 to $13.00 and a fee of $13.00 is established for issuing preliminary reports.

This action will recover the costs associated with providing the voluntary testing service to the seed and grain industry. Although the user-fee increase will increase costs to individual firms, the cost for providing the seed testing and certification services will increase by an average of only $13.00 per Federal Seed Analysis Certificate and $1.90 for each duplicate certificate. It is estimated that the total revenue generated will increase by approximately $22,000 annually.

A notice of proposed rulemaking was published in theFederal Register(66 FR 53550) on October 23, 2001. No comments were received.

For the reasons set forth in the preamble, 7 CFR part 75 is amended as follows:

This final rule has been determined to be non-significant for the purposes of Executive Order 12866 by the Office of Management and Budget (OMB).

This final rule is effective January 2, 2002, to reflect the beginning of the application period specified in the proposed rule. Prompt notification of growers concerning their participation in the program and prompt tree removal are needed for the industry to achieve the expected program goals.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State and local governments and the private sector. Under section 202 of the UMRA, the Agricultural Marketing Service (AMS) generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State and local governments, in the aggregate, or by the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, Section 205 of the UMRA generally requires the AMS to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State and local governments or the private sector of $100 million or more in any one year. Therefore, this rule is not subject to the requirements of Sections 202 and 205 of the UMRA.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. The rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions, or which would otherwise impede its full implementation. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the reporting and recordkeeping provisions generated by this final rule were approved by the Office of Management and Budget (OMB). The Agricultural Marketing Service received emergency approval under OMB No. 0581-0201, California Prune/Plum Tree Removal Program—Section 32 (as amended 7 U.S.C. 612c). The emergency approval expires May 31, 2002. A regular submission will be sent to OMB requesting approval for three years.

Two forms are needed for the administration of the tree removal program. Growers wishing to participate in the program submitted an “Application for Prune Tree Removal Program” (FV-298). The proposed rule estimated that about 200 growers would submit applications. The application period ended January 31, 2002, and a total of 481 program applications have been submitted. It is estimated that each form took about 30 minutes to complete. Thus, the total burden for filing grower applications has increased from 100 to 240.5 hours. A total of 10 hours has been added to cover the recordkeeping burden on growers. Thus, the total burden hours for the program will be 250.5 hours. After removing their trees, growers will then have to sign a statement (FV-299) stating they wish payment. No additional burden has been estimated for this second form which would require only a signature. Finally, participants will be required to retain records pertaining to the tree removal program for two years after the year of removal.

This program is not subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V published at 48 FR 29115 (June 24, 1983).

It has been determined that this rule does not have sufficient Federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this rule will not have a substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various levels of government.

The program is intended to reestablish prune/plum farmers' purchasing power. Programs to reestablish farmers' purchasing power are authorized by clause (3) of Section 32 of the Act of August 24, 1935, as amended (7 U.S.C. 612c) (“Section 32”). This clause of Section 32 authorizes USDA to “* * * reestablish farmers” purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption.” Section 32 also authorizes USDA to use Section 32 funds “* * * at such times, and in such manner, and in such amounts, as USDA finds will effectuate substantial accomplishments of any one or more of the purposes of this section.” Furthermore, “Determinations by USDA as to what constitutes * * * normal production for domestic consumption shall be final.”

Production of prune/plums for marketing as dried plums is concentrated in California. Production of dried plums during the 2000 season increased for the second consecutive year, to nearly 219,000 tons (natural condition).

Changes in growing conditions have substantially altered the production outlook for 2001. Production was originally estimated to be 220,000 tons. However, due to a lighter crop-set in major producing areas, as well as freezing temperatures and hail, production for the 2001 crop year is now expected to range between 140,000 and 155,000 tons. This smaller crop somewhat alleviates the oversupply situation, but does not represent a change in the longer-term oversupply situation.

When the crop was estimated at 220,000 tons in the spring of 2001, the industry discussed the use of volume control authorized under the Federal marketing order. In addition, carryin inventories from the 2000 crop year were reported at 100,829 tons. With this level of inventories and crop, the total available supply would have been 320,829 tons.

With this estimated crop size, establishing a 48 percent reserve (52 percent free tonnage) was discussed. The industry does not have a history of establishing reserve percentages, and reserve percentages were last used in the 1970's. The fact that the marketing order committee even considered use of the reserve provisions indicates the gravity with which the industry views the oversupply problem. The use of marketing order reserve provisions is intended to help industries deal with surplus production and facilitate orderly marketing of their crops.

The Prune Bargaining Association (PBA) represents about 40 percent of the independent growers and negotiates a selling price for its members. With the large anticipated crop for the 2001 season and the large carryin inventory, the PBA had difficulty establishing a price with handlers. Even with the smaller crop of 155,000 tons, the PBA could only negotiate a price of $763 per ton. This compares to $845 for the 2000 season, or a decrease of 9.7 percent. Although the price has been set, not all handlers have signed the agreement. Even this lower price may be too high in the eyes of the non-signing handlers, given current supply conditions.

The smaller crop size for 2001 has provided the industry some relief in reducing total available supplies. However, there are still a large number of nonbearing acres (15,000) that will become productive over the next six years. In addition, there are many acres with older, less productive trees which could be replanted in the near future. A tree removal program will assist growers who are facing difficult replanting decisions by allowing them to receive funds for the removal of trees and, at the same time, prohibit those growers from replanting prune/plums in those orchards. Prune/plum growers also tend to be producers of almonds, walnuts, and cling peaches. Plantings of these crops could increase in future years as growers remove prune/plum acreage.

Bearing acreage expanded to a record 86,000 acres during the 2000 season and the average yield increased 19 percent. Yields are anticipated to increase further as more densely planted acresbecome productive over the next several years.

Nonbearing acreage, which is an indicator of future production levels, increased to an all-time high of 26,000 acres in 1998. This represented a 22-percent increase in the productive capacity of the industry. The non-bearing acres are more densely planted than in previous years which results in a higher yield per acre.

The dried plum industry faces a long-run surplus situation. For the 2000 crop year, bearing acres were 86,000 and non-bearing acres were 15,000. Bearing acres could exceed 100,000 in the near future. With yields in excess of 2.0 tons per acre, production could be expected to be above 200,000 tons in many crop years.

Total domestic shipments exceeded 100,000 tons for six seasons in the late 1980's and early 1990's, but have declined from a high of 108,085 processed tons in 1996. Per capita consumption has been steadily declining since 1980. Export shipments have been stagnant. As a result of these domestic and export trends, total shipments have never exceeded 190,000 processed tons.

Until recently, export shipments were a source of growth in the dried plum industry. In 2000, exports represented 47 percent of total shipments. However, the strong dollar and the downturn in the economies in Asia and Europe have significantly slowed export sales.

Due to the significant supply-demand imbalance, the industry anticipates several years in which the expected annual carryin inventories will exceed the industry's desirable carryin level of approximately 40,000 tons. If dried plum markets continue to be over-supplied with product, grower prices and grower relations with packers will deteriorate significantly. Even with the lower production estimate for the 2001 crop year, the carryout inventory is expected to exceed 76,000 tons.

High prices from 1992 through 1995, and a more balanced supply and demand situation, helped to stimulate investments in new acreage. This additional acreage came from a variety of sources, mainly rice and pasture land. Intensifying the anticipated surplus situation is the fact that new acres are more productive than existing acres, which causes output to grow more rapidly in proportion to acreage growth.

It takes dried plum trees 6 years to become fully productive. Many of the costs of producing plum trees are “sunk,” making it difficult to reverse decisions once those acres are planted. Because supply is slow to adjust to changing market conditions, the industry anticipates many years of production outpacing demand, resulting in continued distressed grower conditions.

From 1980 through 2000, the total cost per ton of producing dried plums exceeded the growers' season-average prices. Similarly, the total cost per acre exceeded revenue per acre.

However, it is also important to consider variable cost. In recent years, the total revenue per ton and per acre has been greater than the total variable cost per ton and per acre. Prices and revenues greater than variable costs provide some indication of why a dried plum producer continues to harvest and process a crop despite losing money.

The industry is requesting a voluntary tree removal program estimated to cost $17 million. The industry would like to remove a minimum of 20,000 bearing acres of prune/plum trees. With many of the current bearing acres reaching the age where replanting would be considered, the industry is trying to provide an incentive to growers to remove older trees, while ensuring that those orchards are not replanted with prune/plum trees.

To be eligible for the tree removal program, orchards must have a minimum yield of 1.5 tons of dried prune/plums per net-planted acre. With a minimum threshold yield of 1.5 tons of dried prune/plums per net-planted acre, sufficient land would be enrolled in the tree removal program to reduce annual production by approximately 30,000 tons. A net-planted acre is the actual acreage planted with prune/plum trees.

The industry has estimated that it will take $8 to $9 per tree to induce growers to participate in such a program. It is believed that financial institutions that provide growers operating funds would not allow them to participate if the payment per tree is below this level.

This type of one-time decrease in production would more closely align supply with demand, while assuring an adequate supply. This would allow the industry to concentrate their efforts on rebuilding demand for future years.

The industry has already undertaken a smaller-scale tree removal program. However, to finance this grower-initiated tree pull program, grower assessments for promotion were reduced from $50 per ton to $30 per ton. Less money is available for promotion, but growers felt that this re-direction of funds was necessary to help address the oversupply situation.

The tree removal program would be administered through the Agricultural Marketing Service (AMS) and the Prune Marketing Committee (Committee). The Committee is an administrative agency appointed by AMS to locally administer the terms of Federal Marketing Order No. 993.

Any prune/plum producer wishing to participate in the program filed an application with the Committee. The application period began January 2, and ended January 31, 2002.

Each applicant provided information needed by the Committee to operate the program. This included, for example, the number of trees the applicant wished to remove and their location. The applicant also will have to certify that he/she has not contracted to sell the land or otherwise already arranged to have the trees removed for commercial purposes (e.g.,shopping centers, housing developments, resorts, etc.). Applicants should note that under the regulations, they bear responsibility for ensuring that prune/plum trees are not replanted, whether by themselves or by successors to the land, until after June 30, 2004, and that if they fail to prevent such replanting, they must refund any USDA payment, with interest, made in connection with the tree removal program. The Committee will review each application for completeness, and make reasonable efforts to contact growers to obtain any missing information.

In order to be eligible to participate in the program, the orchards or blocks of trees being removed from production would have to have a minimum yield of 1.5 dried tons per net-planted acre during either the 1999 or 2000 crop years. A net-planted acre is the actual acreage planted with prune/plum trees. This means that abandoned orchards will not be eligible for participation. USDA considered establishing the minimum qualifying yield at 2.2 tons per acre, but determined that at that level, too many orchards would be ineligible for the program. A lower yield would not reduce production as much as the industry desires.

USDA has allocated $17 million for this program, including administrative costs. Applications would be approved until the level of available funding was reached. Each participating grower will have to then remove trees from production by June 30, 2002. Growers will be paid $8.50 for each eligible tree removed. This level of payment is deemed necessary for a significant number of growers to participate in the tree-removal program. It would cover most of the costs of removing the trees (bulldozing, cutting, etc.), and preparing the land for other uses. The costs vary depending on the number of acresremoved. Some cost savings may accrue with larger acreage removals.

Estimated costs for removing, piling, chipping, or other disposal methods range from $142-$225 per acre or from $1.29-$2.05 per tree. Costs for removing the roots and other debris are expected to range from $163-$289 per acre or from $1.48-$2.63 per tree. Leveling of the ground is expected to cost $161-$401 per acre or $1.46-$3.65 per tree. Fumigation of the tree holes is expected to cost $550 per acre or $5.00 per tree. This would amount to $9.23-$13.33 for each tree removed. The $8.50 payment under the program is expected to offset most of the grower's costs, but should be sufficient to encourage growers to participate in the program.

Each grower participating in the program will have to agree not to replant prune/plum trees on land cleared under this program through June 30, 2004. Because it takes new acres at least six years to be productive, acreage participating in the tree-removal program would not return to commercial prune/plum production for at least eight years and possibly nine years because plantings occur in January and February. Alternative crops could be planted. Additionally, the current economic conditions in the industry, specifically weak demand, reduced per capita consumption, stagnant domestic shipments and exports, and declining grower prices and revenues, would appear to limit the incentives for replanting acreage to prune/plum trees.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to actions in order that small businesses will not be unduly or disproportionately burdened.

There are approximately 1,250 producers of dried plums in California. Small agricultural producers have been defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000. An estimated 32 producers, or less than 13 percent of the 1,250 total producers, would be considered large producers with annual incomes over $750,000.

This final rule establishes a tree removal diversion program for California dried prune/plums. Authority for the program is provided in clause (3) of Section 32 of the act of August 24, 1935, as amended.

Participation in the diversion program is strictly voluntary, so individual producers, both small and large, can weigh the benefits and costs for their own operations before deciding whether to participate in the program.

To assess the impact a tree removal program would have on prices growers receive for their product, impacts on grower prices and inventories with a tree removal program and without a tree removal program were estimated. An econometric model was developed for the purpose of estimating nominal season average grower prices under both scenarios.

A tree removal program will directly reduce the number of bearing acres, but there will not be an impact until the 2002 crop year since harvesting of the 2001 crop is completed.

In 2000, there were still 15,000 non-bearing acres. The industry has indicated that no additional plantings of prune/plum trees for acreage expansion are occurring at this time. Therefore, after the 15,000 non-bearing acres come into production, the productive capacity of the industry is assumed to stay constant.

The tree removal analysis assumes that 20,000 acres are removed through the tree removal program, while 3,000 of the non-bearing acres become productive in 2002. This results in bearing acres being reduced from 86,000 in 2001 to 69,000 in 2002. Bearing acres increase by 3,000 acres in each of the subsequent years until 2007, rising to 72,000 in 2003, 75,000 in 2004, 78,000 in 2005, and 81,000 in 2006 and 2007.

At the time the analysis was performed, production for the 2001 crop year was estimated by the Department's National Agricultural Statistics Service (NASS) at 155,000 natural condition tons. Marketable production is generally 93 percent of total production, yielding an estimated 144,500 marketable tons for 2001. Carryin inventory for the 2001 crop year was computed by the marketing order committee at 100,829 tons as of June 30, 2001. These figures are used to derive an estimated total available supply of 244,979 tons for 2001. This level of supply accounts for the fact that a number of voluntary measures have been taken by the industry to reduce the level of production for the 2001 crop year, including crop abandonment and cutbacks on cultural practices.

Shipments are estimated to grow by 1 percent annually, which results in estimated total shipments of 165,932 tons for 2001. The one percent growth in shipments reflects decreased government surplus purchases and possible retail price effects.

For 2002, total shipments are estimated at 167,591 tons and the carryin inventory is estimated at 79,047 tons. With the tree removal diversion program reducing bearing acres to 69,000 for the 2002 crop year, total available supply is estimated at 257,440 tons. It should be noted that through 2001, carryin inventory does not exactly match the prior year's difference between total available supply and total shipments. This is due to shrinkage and other minor adjustments computed by the Federal marketing order committee. However, for this analysis, the estimated carryin from 2002 to 2007 is estimated to be the exact difference between estimated total supply and estimated shipments from the prior year.

The analysis also assumes that yields will fluctuate up and down, in keeping with the known “alternate bearing” tendency of prune/plum trees. Estimated production, computed by multiplying acreage times yield, fluctuates accordingly.

As carryin inventories are reduced, the total available supply moderates for crop years 2003 through 2007, relative to the situation without a tree removal program. This results in season average grower prices ranging from $845 to $1,084 during that same time span. It should be noted that the margin of error for these estimates becomes very large for future crop years.

Even though season-average grower prices per ton rise under the tree removal program, all product produced is not necessarily of marketable quantity. Costs are incurred on all the production, but revenue is received only on product actually marketed. Thus, the economic effect of the tree removal program on a per acre basis is to dramatically reduce losses and bring producer returns closer to a break-even level. With losses still being incurred by producers, there should be only a limited incentive to further expand production as a result of the tree removal program. It will remain for growers to control costs and to expand demand to ensure their longer-term economic stability.

Grower prices are a small component of the finished dried plum product and are not closely associated with movements in retail prices. However, the increases in grower prices estimated for crop years 2003 through 2007 may have an impact on retail prices. The extent of any retail price increases would depend on processor and retailermargins and the pricing and availability of substitute products, such as raisins or other dried fruits. It should be noted that dried plum prices are estimated to increase with or without a tree removal program, but the magnitude of the grower price increase is greater with the program.

Without a tree removal program, bearing acres are estimated to increase to 89,000 by the 2002 crop year. Production would be in excess of 200,000 tons, resulting in carryout inventories in excess of 100,000 tons in 2002. In addition, under this scenario, 2002 grower prices are estimated at $789 per ton. With high inventories and low grower prices, market forces are assumed to induce growers to remove less productive acres and the number of bearing acres is estimated to decline from 89,000 in 2002 to 84,000 in 2007. Even with the decline in bearing acres, production and inventories remain excessive from 2002 through 2007. However, in 2007, carryout inventories fall to an estimated 6,592 tons.

Under both scenarios, grower prices increase and inventories become more manageable. The difference is that, under a tree removal program, adjustments to inventories and prices occur more rapidly. This would accelerate benefits to growers, who would otherwise be struggling to break even in a depressed market, until market forces brought about a slow correction.

In addition to the direct impact on growers' prices and revenues that a tree removal program would have, there are also indirect impacts. A tree removal program will assist in decreasing burdensome (undesirable) carryout inventories. Without a tree removal program, large quantities of dried plums held in packers' inventories prevent grower pools from being closed, which delays grower payments. Large amounts of undesirable inventory lead to strained grower-packer relations. In an attempt to sell the excessive inventories, packers reduce f.o.b. prices, which in turn leads to market share battles and lower prices being passed back to producers. A more balanced supply and demand situation allows growers and packers to jointly continue developing markets in ways that benefit the entire industry.

The California dried plum industry has undertaken an initiative to reduce acreage and production. The industry implemented a pre-harvest tree removal program during the 2001 crop year. The industry collected about $3 million to support this effort by reducing assessments under their California State marketing order from $50 to $30 a ton. The $20 per ton reduced assessment was used to support the industry tree removal program.

The program was successful in removing about 2,500 acres. The effects of this industry self-help diversion are included in the analysis of the Federal program.

The industry also has taken measures to stimulate demand, including: (1) The development of new products and new uses for dried plums; (2) marketing efforts to attract younger customers; and (3) domestic and export market promotion programs under the California State marketing order and the Foreign Agricultural Service's Marketing Assistance Program (MAP). One of the most recent initiatives involved securing approval from the Food and Drug Administration to change the name “dried prunes” to “dried plums.” This has allowed the industry to redirect its generic marketing efforts to attract a new generation of consumers.

The economic assessment of the tree removal program indicates that it is expected to benefit producers, particularly small, under-capitalized producers, as well as the entire dried plum industry, including packers. The per ton sales price is projected to increase from 2002-2007, reducing losses and moving producer returns closer to break-even levels. The benefit to producers from reduced losses is projected to total approximately $93 million over the six-year period 2002-2007. The benefits over the six-year period would average nearly $15.5 million annually. The proposed rule incorrectly indicated that the benefit to producers from reduced losses would be about $128 million and that the benefits over the six-year period would average nearly $24 million annually.

The major cost of the program would be the payment to producers for removing their prune/plum trees. A total of $17 million, less Committee administrative costs, is available for the tree removal program. Committee administrative costs for reviewing applications and verifying tree removals are expected to be about $125,000. Major expense categories for administration include costs for salaries and benefits; vehicle rental and maintenance; insurance and overhead; and supplies.

Total producer costs associated with filing applications to participate in the program and maintaining records for the period specified after tree removal are expected to be about $2,500. These costs were estimated to be $1,000 in the proposed rule. The increased producer cost estimate is due to the increased number of applications and the addition of 10 hours to cover grower recordkeeping. The number of applications received was estimated to be 200 in the proposed rule and the actual number received was 481.

Payments made through this program could help prune/plum producers by addressing the oversupply problem that is adversely affecting the dried plum industry. A tree removal program is expected to allow supply to be adjusted downward more quickly. Market forces will also result in supplies being reduced, but this adjustment may occur more slowly, likely resulting in a number of farm failures. The tree-removal program may be beneficial in reducing the risk of loan default for lenders that financed prune/plum growers. This program will likely help small, under-capitalized producers to stay in business. These producers are often efficient, but do not have adequate resources to continue to operate given the current depressed conditions within their industry.

Reducing the level of unprofitability also should provide opportunities for the industry to engage in additional demand-enhancing activities, especially directed at the domestic market. Even a moderate increase in domestic per capita consumption will have a significant, positive impact on grower returns.

Costs for the program would include the $17 million to be paid growers and to the Committee for administration costs under the Federal tree removal diversion program. Additionally, growers would incur costs totaling about $2,500 to comply with the filing and record-keeping requirements of the program.

Benefits to growers under the tree removal program could total approximately $93 million. The first step in this calculation is to multiply marketable production for each of the six years (2002-2007) times the difference between grower price and variable cost, and to sum those figures. This is done for each of the two scenarios (with and without a tree pull program). The $93 million difference between those figures represents a conservative (low-end) estimate of program benefits resulting from reduced grower losses. This cost calculation assumes that the acreage on which trees are removed remains idle, and thatgrowers must therefore absorb all fixed costs on that acreage. To the extent that the land is put to other productive uses, growers would not be absorbing all fixed costs of producing prune/plums, and grower benefits would be higher.

If growers are earning more, it follows that processors and/or retailers beyond the farmgate would pay higher raw product costs to obtain the prune/plums from the growers. These higher costs could be passed on to consumers through higher retail prices or could be absorbed as reduced operating margins for other affected sectors of the economy—processors, wholesalers, or retailers. An estimate of these costs is obtained by multiplying the estimated grower price changes over each of the six years (2002-2007) times annual shipments (an average of the prune/plum shipments with the tree pull program and without the tree pull program). That figure, summed over the six years, is approximately $68 million. However, this $68 million cost is likely overstated due to the fact that grower prices are currently less than the cost of production. Adjustments in retail prices, and retailer and processor margins, are anticipated to change with or without a tree removal program.

Another cost of the tree removal program is the reduced economic activity due to the growers purchasing fewer inputs (labor, chemicals, etc.) from the reduction in prune/plum acres managed and harvested. Input producers (laborers and agricultural chemical firms) would see less revenue because of lowered purchases of these inputs. To the extent that acreage removed is replanted in other crops, those costs could be somewhat offset by purchases of inputs to produce the alternative crops. This cost of the tree removal program is difficult to quantify and is not included in this analysis.

Savings over the same period of up to $60 million could be realized through reduced surplus removal purchases of dried plum products for Federal feeding programs. These government savings would be used to purchase other commodities for use in school and other food assistance programs.

Historically, the dried plum industry has not relied heavily on the Federal surplus removal program. Since the 1991 season, the industry has requested and received surplus removal purchases in only 4 of the past 11 seasons. Should supplies be reduced as expected through the tree removal program, it would be unlikely that the dried plum industry would seek government assistance in the form of surplus removal purchases for several years to come.

Based on this information, USDA has determined that there is a surplus of dried plums, and that reestablishment of producers’ purchasing power would be encouraged by using Section 32 funds to reduce supplies under a Diversion Program for Dried Plums/Prunes consisting wholly of a tree-removal program. USDA has further determined that this program is expected to be a long-term solution to the oversupply situation that exists in the California dried plum industry, and that it will provide relief to growers.

Notice of this action was published in theFederal Registeron December 17, 2001. Interested persons were invited to submit comments until January 16, 2002. Eleven comments were received. Most of them supported the tree removal program and expressed appreciation to USDA for proposing to put the program in place. Other commenters requested changes or clarifications to the eligibility, removal, and replanting requirements, and several suggested alternatives to tree removal. One commenter did not support the proposed program.

One commenter suggested that USDA should buy the surplus production and distribute the dried plums to needy persons in the United States and outside the United States. Another suggested that USDA should arrange to have the trees removed and shipped to other countries so they could be replanted and possibly provide food for needy people. USDA generally purchases commodities requested by users in quantities which can be distributed quickly. Available storage space is limited and storage is quite expensive. The tree removal program, on the other hand, is designed to help the California dried plum industry by bringing supplies more closely in line with market needs, and by providing more lasting benefits. Consumers should benefit through a stabilized market and reduced fluctuation in supplies and prices. The idea of shipping trees as a gift to needy countries with compatible climates and growing conditions has merit. However, the cost of removal, packaging of the trees with their roots intact, and the shipment to various countries would be prohibitive and the survival rate of the trees would probably be quite low.

Six comments were received from individuals requesting changes or clarifications to the eligibility, replanting, and tree removal requirements of the program.

Comments from two representatives of the California raisin industry requested USDA to incorporate a provision into the tree removal program specifying that each grower participating in the tree removal program must agree not to replant raisin grape vines on land cleared under the tree removal program through June 30, 2004, to prevent harming the raisin industry. A prune/plum grower from the Santa Clara Valley suggested that the yield requirements be reduced from 1.5 to 1.2 tons per acre to recognize that yields in the Santa Clara Valley are traditionally lower than the yields in the Central Valley of California, where most of the prune/plums are grown.

Adding prohibitions on what could or could not be planted on land cleared under this program goes beyond the intended scope of the program and does not appear justified at this time. The limits placed on producers with respect to the trees involved in this program reflect that at a minimum prune/plum producers should not be allowed to accept the payment and, in the near future, recommit the same ground to prune/plum trees.

The program will assure that removal is not part of the normal process of tree replacement. The program directly affects land identified by the producer as prime prune/plum production land. Market conditions, moreover, would govern what producers will or will not plant. Producers are not likely to plant a crop which can be expected to be in surplus. In the end, USDA's desire was to have this program be as simple as possible.

With respect to changes in the yield per acre limit, the suggestion was not adopted because USDA desires program dollars to be used for removing higher yielding trees. The program is designed to benefit the industry by stabilizing supplies and prices of dried plums.

Two comments were received from the Executive Director of the Prune Marketing Committee. The commenter requested that an exception be made to the eligibility requirements specifying that the trees removed must have yielded at least 1.5 tons per net-planted acre during the 1999 or 2000 crop years. The commenter reported that some producers might not have the required production information because the producers did not harvest, or only harvested a portion of, their crops during the 1999 or 2000 crop years. The commenter indicated that these producers' crops generated little or no revenue because their handlers either pro-rated the quantity of dried plums they purchased or made no purchases of dried plums during 1999 or 2000.

The commenter further indicated that these producers should not be furtherdisadvantaged by declaring them ineligible to participate because they were not able to sell any of their fruit or only some of their fruit during the 1999 or 2000 crop years. The commenter requested that these producers be allowed to qualify if they sold production during the 2001 or 1998 crop years.

This comment was not adopted because expanding the eligibility base period could result in some growers gaining an advantage over other growers. While some producers could fare better than other producers under a broader base period, the point of the program is to achieve an overall reduction in the level of the commodity available for market. The simplest and most assured manner for achieving this goal is to limit producer eligibility to production from the 1999 or 2000 crop years as was proposed. Moreover, limiting eligibility to these two crop years will provide some measure of assurance of uniform treatment among producers and should help the public's understanding of the program.

This commenter also questioned a statement in the supplementary information section of the proposed rule that appeared on page 64920, first column, last paragraph of the December 17, 2001, issue of theFederal Register. The statement specified that the applicant would have to certify that he/she has not contracted to sell the land or otherwise already arranged to have the trees removed. The commenter indicated that the language implies that a grower cannot sell a prune orchard to another grower who agrees not to replant trees until after June 30, 2004, and could also exclude a grower who is in the process of buying a prune orchard.

It was not the intent of USDA to prevent participants from selling their orchards should they so choose after enrollment in the program. However, the owner who accepts the payment, or is the party of record for program purposes, will still be liable for ensuring that the two-year planting prohibition is followed even though the participant no longer owns the land. The non-planting promise is a guarantee by the participant that no one (not just the participant) will plant the property with prune/plum trees during the two-year non-planting period. Further, it was and remained the intent of USDA that only those persons who are the current owners of the property, and have not already contracted to sell the property or destroy the trees could participate. This is to avoid conflict where title to the property is already in transition—and where the new buyer may be expecting the trees to stay.

The certification that producer applicants are required to sign, guarantees that they have not made prior arrangements to sell the land or remove the trees for commercial purposes. That is, they guarantee that the land is not going to be commercially developed for shopping centers, housing developments, vacation resorts, or similar such purposes. It was determined that including such non-agricultural land in the program would not serve the purposes of the program.

The Chairman of the Prune Marketing Committee suggested that the application period be extended for an additional 15 to 30 days to give producers more time to apply. The commenter indicated that this would be extremely helpful to the industry in obtaining as many participants as possible. This commenter subsequently withdrew the request. An extension of the application period was considered but was found not to be necessary in light of producer program interest and the fact that no material changes were found appropriate or needed based on the comments received. Had a need for material change in the program been found warranted and appropriate based on the comments received, an extension or other action would have be taken to allow for the adjustment. Deadlines were set out clearly in the proposed rule and the program was widely publicized in the industry.

Another commenter raised questions regarding the definition of the term “removal” in § 81.3. In the proposed rule, the term was defined to mean that the prune/plum trees are no longer standing and capable of producing a crop. The provision states that the producer can accomplish removal by any means the producer desires. The commenter contends that grafting other fruit stock to a prune/plum tree should be considered removal under the proposed definition. The commenter states that the prune/plum trees would no longer be standing, nor will they be able to produce a crop of prune/plums. In fact, no part of the prune/plum tree would be left.

This procedure would advance the likelihood of the production of other crops, and it is preferred that the program be neutral in that respect. Also, this would add unneeded complication to the program. Given that producer interest in the program is very high without this allowance, there does not appear to be any need to increase the attractiveness of the program. Moreover, the intent of the program is to remove prune/plum trees and the roots of those trees. Grafting is not consistent with the intent of the program. Therefore, the definition of removal has been clarified to exclude grafting as a method of removal and to specify that “removal” means that the prune/plum trees are no longer standing and capable of producing a crop, and that the roots of trees have been removed.

A final commenter indicated that he was opposed to the program. He stated that the industry got itself into the oversupply situation and should not look to the government to get itself out of it. This program is a valid exercise of the authority granted USDA under section 32. USDA is monitoring this program very closely to ensure that program objectives are attained. The majority of the industry supports this program having considered a number of less effective alternatives to balance supplies and demand.

All of the comments received have been thoroughly reviewed. Some adjustments have been made in the rule for clarity and to assure accomplishment of the goals of the program as set out in the proposed rule and as set out in this final rule.

After consideration of all relevant matter presented, including the comments received, and other information, it is found that this final rule, as hereinafter set forth, will tend to effectuate the policy of 7 U.S.C. 612c.

Pursuant to 5 U.S.C. 553, it is also found that no good cause existed for delaying the effective date of this rule. Such delay would be contrary to the public interest because prune/plum producers needed to know immediately whether they would be accepted into the program by February 14, 2002. Eligible producers wanted to begin removing the prune/plum trees. In addition, further delay could have jeopardized the ability of the program to accomplish its goal of reducing the supply of dried plums. As a technical matter, the rule has been made retroactive to January 2, 2002, for the reasons given. In fact, however, no obligations were undertaken until February 14, 2002. If for any reason January 2, 2002, is considered inappropriate as an effective date, then the effective date will be considered February 14, 2002, which was well after the close of the comment period. Program issues were open until that date.

This rule is issued under Marketing Agreement Nos. 124 and 85, and Marketing Order Nos. 916 and 917 (7 CFR parts 916 and 917) regulating the handling of nectarines and peaches grown in California, respectively, hereinafter referred to as the “orders.” The orders are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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.

This rule continues in effect the modification of the reporting requirements under the orders' rules and regulations by establishing an exemption from filing mandatory monthly destination reports for handlers who handle less than 50,000 containers or container equivalents of nectarines, peaches, and plums. While nectarines and peaches are regulated under the Federal marketing orders, plums are regulated under a California state marketing order. Most handlers,however, handle and report on a combination of these fruit.

Under this modification, handlers who shipped less than 50,000 containers or container equivalents of any combination of nectarines, peaches, and plums in the 2000 season will be exempted from filing monthly destination reports in subsequent seasons, provided their shipments continue to total less than 50,000 containers or container equivalents of these fruit in the previous season.

Handlers who begin operation during or after the 2001 season will also be exempt from filing monthly destination reports during their first year of operation. These handlers will continue to be exempt from such reporting requirements as long as their shipments of these tree fruit total less than 50,000 containers or container equivalents, in the previous season.

Handlers who are not exempt, but in some subsequent year ship less than 50,000 containers or container equivalents, will be exempt the following season and will be exempt in subsequent seasons, provided their shipments continue to total less than 50,000.

Under the orders, reporting requirements are established in §§ 916.60 and 917.50 for fresh shipments of California nectarines and peaches, respectively. Prior to publication of the interim final rule, such reports were to be filed with the committees by all handlers. The information required includes: (1) The name of the shipper and the shipping point; (2) the car or truck license number (or name of the trucker), and identification of the carrier; (3) the date and time of departure; (4) the number and type of containers in the shipment; (5) the quantities shipped, showing separately the variety, grade, and size of the fruit; (6) the destination; and (7) the identification of the inspection certificate or waiver pursuant to which the fruit was handled. Other information may be requested by the committees, with the approval of the Secretary, to enable the committees to carry out their duties.

Sections 916.160 and 917.178 of the orders' rules and regulations specify the reporting procedures for handlers of nectarines and peaches, which include the requirements related to destination reports.

Information from destination reports is utilized by the NAC and PCC to determine the quantities of nectarines and peaches shipped to various markets. Such information permits the committees to target marketing research and promotion efforts more effectively, giving the committees the flexibility to direct their limited marketing funds to open new markets or expand existing markets.

The more accurate the information obtained from handlers, the more precisely the committees can address their marketing research and promotion efforts. However, this information collection comes at a cost to the committees and to handlers, especially smaller handlers who generally lack the staff to prepare such reports.

The NAC and PCC, which are responsible for local administration of the orders, met on May 3, 2001, and unanimously recommended that these reporting requirements be revised, beginning with the 2001 season, which began April 1. However, because the season had already begun, the relaxation in report requirements was implemented as of the effective date of the interim final rule.

At three subcommittee meetings prior to the May 3, 2001 committee meetings, discussions on the merits of the exemption were held. The Management Services Committee met on January 18, 2001, and discussed a request from a small handler to review the destination report requirements. It was reported that destination information from small handlers is not always accurate since the reporting handlers do not necessarily know the final destination of their fruit sold at terminal markets. It was also noted that the burden of filing destination reports is often a complaint of small handlers.

The Management Services Committee then directed the committee staff to review the destination report requirements and procedures, and make recommendations based upon their review at the following Management Services Committee meeting.

The Management Services Committee met again on March 6, 2001, and discussed the destination report information provided by the committee staff. The members also discussed changes to the destination report requirements, as well as the effect of the revision on handlers in the industry and on information gathering conducted by the committees.

A review of destination report records by the staff revealed that approximately 160 handlers shipped less than 50,000 containers of all three tree fruit during the 2000 season. As a percentage of total shipments, these handlers represent approximately 3 percent of all shipments of nectarines, peaches, and plums. The committees' staff spends a portion of their time administering the collection of this relatively small amount of additional information. The committees believe that exempting information from handlers who represent approximately 3 percent of all tree fruit shipments would not have a significant effect on overall destination information, and may actually improve the accuracy of destination information. These handlers are small entities, and such a relaxation will reduce the reporting burden on them. In addition, the committees' administrative costs associated with destination reports may be reduced.

Finally, the Management Services Committee met on April 18, 2001, to review destination report summaries from the 2000 season. Based on all the information considered, the members voted unanimously to recommend to the NAC and PCC that handlers who ship less than 50,000 containers or container equivalents of tree fruit (including nectarines, peaches, and plums) should be exempted from filing monthly destination reports.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

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

There are approximately 300 California nectarine and peach handlers subject to regulation under the orders covering nectarines and peaches grown in California, and about 1,800 producers of these fruits in California. Small agricultural service firms, which includes handlers, are defined by the Small Business Administration [13 CFR 121.201] as those whose annual receipts are less than $5,000,000. Small agricultural producers are defined by the Small Business Administration as those having annual receipts of less than $750,000. A majority of these handlers and producers may be classified as small entities. Since the interim final rule was published, the small business producer standards were changed from $500,000 to $750,000.

The committees' staff has estimated that there are less than 20 handlers of nectarines and peaches in the industrywho could be defined as other than small entities. In the 2000 season, the average handler price received was $9.00 per container or container equivalent of nectarines or peaches. A handler would have to ship at least 555,556 containers of nectarines and peaches to have annual receipts of $5,000,000. Given data on shipments maintained by the committees' staff and the average handler price received during the previous season, the committees' staff estimates that small handlers of nectarines and peaches represent approximately 94 percent of the handlers within the industry.

The committees' staff has also estimated that approximately 20 percent of the nectarine and peach producers in the industry could be defined as other than small entities. In the 2000 season, the average producer price received was $5.50 per container or container equivalent for nectarines, and $5.25 per container or container equivalent for peaches. A producer would have to produce at least 136,364 containers of nectarines and 142,858 containers of peaches to have annual receipts of $750,000. Given data maintained by the committees' staff and the average producer price received during the 2000 season, the committees' staff estimates that small producers represent approximately 80 percent of the nectarine and peach producers within the industry.

This rule continues in effect the revision of §§ 916.160 and 917.178 of the orders' administrative rules and regulations to relax the requirement that all handlers file monthly destination reports. Under that revision, handlers who shipped less than 50,000 containers or container equivalents of tree fruit during the 2000 season will be exempted from filing monthly destination reports in subsequent seasons, as long as their shipments total less than 50,000 containers or container equivalents of tree fruit in the previous season.

Handlers who begin operations during or after the 2001 season will also be exempt from filing monthly destination reports during their first season of operation. Such handlers will continue to be exempt in subsequent seasons as long as their shipments total less than 50,000 containers or container equivalents of tree fruit in the previous season.

The NAC and PCC met on May 3, 2001, and unanimously recommended these changes to the reporting requirements for the 2001 season, which began April 1. This action was recommended to the committees by a subcommittee charged with review and discussion of the changes.

The Management Services Committee met on January 18, 2001, to discuss a request from a small handler concerning destination report requirements. At that time, the members reviewed the request and directed the staff to research the destination report requirements and procedures. At the March 6, 2001, meeting, the Management Services Committee reviewed a staff recommendation to relax the destination reporting requirements for small handlers. The members also considered two alternatives to this action at that meeting.

First, the committee considered not establishing any exemption for small handlers. This alternative was rejected because the members felt that small handlers should be provided an exemption from the destination reporting requirements. Second, they considered establishing a filing exemption for handlers who shipped less than 10,000 containers of tree fruit during the 2000 season. The committee estimated that this exemption would affect approximately 100 handlers only and one percent of total shipments. The Management Services Committee rejected that alternative because they believed that more handlers should be exempted from the requirement for filing destination reports. After some discussion, it was determined and recommended by the Management Services Committee that handlers who ship less than 50,000 containers or container equivalents of tree fruit should be exempted from filing monthly destination reports.

At a subsequent Management Services Committee meeting on April 18, 2001, the members reviewed destination report summaries from the 2000 season and voted unanimously to recommend to the NAC and PCC that handlers who ship less than 50,000 containers or container equivalents of tree fruit be exempted from filing monthly destination reports.

The committees make recommendations regarding all the revisions in reporting requirements after considering all available information, including comments of persons at committee and subcommittee meetings, and comments received in writing or verbally by committee staff. Such subcommittees include the Management Services Committee.

At the meetings, the impact of and alternatives to these recommendations are deliberated. These subcommittees, like the committees themselves, frequently consist of individual producers (and handlers, where authorized) with many years' experience in the industry, who are familiar with industry practices. Like all committee meetings, subcommittee meetings are open to the public and comments, both in person and in writing, are widely solicited.

This relaxation is expected to have an impact on small handlers by reducing the time and related costs of filing monthly destination reports. The committees estimate that approximately 160 peach and nectarine handlers would be exempt from filing destination reports. Each handler files an average of four reports each season. The time each handler spends preparing the monthly report has been estimated at 45 minutes. Therefore, in terms of reporting burden time, each qualified respondent handler will save an average of three hours each season as a result of this exemption. In total, this exemption could save the qualified industry respondents approximately 480 hours annually each for peach handlers and nectarine handlers.

This rule is also expected to have an impact on the committees by decreasing hours of staff time currently utilized to collect, reconcile, and assimilate destination report data received from small handlers.

This rule does not impose any additional reporting and recordkeeping requirements on either small or large handlers. In fact, as noted previously, this rule will reduce reporting and recordkeeping requirements on qualified handlers, as well as on the committees themselves. 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, such as effectuated by this rule.

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

In addition, the committees' meetings are widely publicized throughout the nectarine and peach industries and all interested parties are encouraged to attend and participate in committee deliberations on all issues. The committees routinely schedule meetings bi-annually during the last week of November or first week of December, and the last week of April or first week of May. Like all committee meetings, the May 3, 2001, meetings were public meetings, and all entities, large and small, were encouraged to express views on these issues.

In addition, the committees have a number of appointed subcommittees to review certain issues and makerecommendations to the NAC and PCC. For this action, three subcommittee meetings were held prior to the May 3, 2001, meeting at which these regulations were reviewed and discussed.

An interim final rule concerning this action was published in theFederal Registeron July 31, 2001 (66 FR 39406). Copies of the rule were provided to all committee members and handlers. In addition, the rule was made available through the Internet by the Office of the Federal Register. That rule provided for a 60-day comment period which ended October 1, 2001. No comments were received.

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/fv/moab.html.Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in theFOR FURTHER INFORMATION CONTACTsection.

After consideration of all relevant matters presented, the information and recommendations submitted by the committees, and other information, it is found that finalizing the interim final rule, without changes, as published in theFederal Register(66 FR 39406, July 31, 2001), will tend to effectuate the declared policy of the Act.

This rule is issued under Marketing Order No. 920, as amended (7 CFR part 920), regulating the handling of kiwifruit grown in California, hereinafter referred to as the “order.” 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.”

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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 the Secretary 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 the 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.

This rule continues to allow handlers to pack more individual pieces of fruit per 8-pound sample for seven size designations, continues the elimination of one size designation, and the addition of two new size designations. These changes were unanimously recommended by the Committee and are expected to increase grower returns and enable handlers to compete more effectively in the marketplace.

Under the terms of the order, fresh market shipments of kiwifruit grown in California are required to be inspected and meet grade, size, maturity, pack, and container requirements. Section 920.52 authorizes the establishment of pack requirements. Section 920.302(a)(4) of the order's administrative rules and regulations outlines pack requirements for fresh shipments of California kiwifruit.

Section 920.302(a)(4)(iii) establishes a maximum number of fruit per 8-pound sample for each numerical count size designation for fruit packed in bags, volume fill, or bulk containers.

The amount of kiwifruit supplied to the domestic market by California handlers has declined 40 percent since the 1992-93 season. In addition, grower prices have steadily declined in spite ofa continuous increase in the U.S. per capita consumption of kiwifruit. When the order was implemented in 1984, the average Free-on-Board (FOB) value was $1.14 per pound. In 1997-1998, the Committee reviewed FOB values and determined that the average FOB value for the 1992-93 season through the 1997-98 season was $0.55 per pound.

The Committee met on July 8, 1998, and decided to address the confusion in the marketplace and the differences in size designations between California kiwifruit and imported kiwifruit, by revising the numerical counts per size designation. Section 920.302(a)(4)(iv) of the order's administrative rules and regulations was revised by an interim final rule issued on September 3, 1998 (63 FR 46861). A final rule published on July 30, 2001, redesignated § 920.302(a)(4)(iv) as (a)(4)(iii)(66 FR 39267).

While this rule increased the number of fruit that could be packed in size designations 30 through 42, experience has shown that further refinement of the California kiwifruit size designations was needed to help California handlers compete more effectively with imported fruit in the marketplace. Handlers want to better meet buyer preferences and buyers generally prefer to purchase containers with a greater number of pieces of fruit in the box. The continued relaxation of pack requirements will permit handlers to pack more individual pieces of fruit in an 8-pound sample for various size designations, and, thus, better meet buyer preferences.

During the spring of 2001, the production area was hit with a severe frost, heavy winds and hail storms. A shortened bloom period in late spring reduced the pollination of the crop and resulted in less fruit development and growth. Unusually hot temperatures during the summer months added further stress to the vines.

On July 11, 2001, the Committee considered the impact of the severe weather conditions, and estimated the 2001-2002 crop would be 6.5 million tray equivalents. During September the Committee staff conducted a pre-harvest check for sizing, quality, and maturity and found the crop was not sizing as expected. Based on the more recent observations, the field staff estimated that the amount of packable fruit would be approximately 5 million tray equivalents, versus the 6.5 million estimated at the July 11, 2001, meeting.

Because of these factors, the Committee called an emergency meeting on September 19, 2001, to discuss the marketing of the short crop and smaller-sized fruit. As previously mentioned, the rules and regulations specify a maximum number of fruit per 8-pound sample for each numerical count size designation for kiwifruit packed in bags, volume fill, or bulk containers. To enable the industry to better market the short 2001 crop, the Committee unanimously recommended relaxing the pack regulations under § 920.302(a)(4)(iii) by increasing the maximum number of fruit per 8-pound sample for size designations 42 through 25, eliminating size designation 21, and adding new size designations 20 and 23. These changes are shown in the following chart:

This chart is commonly referred to as the “Size Designation Chart” in the industry. Increasing the maximum number of fruit per 8-pound sample will allow some smaller-sized fruit to be packed into a larger-size category. This rule continues to allow one more piece of fruit to be packed per 8-pound sample in size designations 42 and 39, three more pieces of fruit to be packed in size designation 36, seven more pieces of fruit to be packed in size designation 33, and five more pieces of fruit to be packed in size designations 27/28 and 25, respectively.

Additionally, handlers have the option of packing fruit as size designation 23, 20, or 45. This rule continues to reduce the percentage of fruit packed in the 40 series and continues to increase the percentage of fruit packed in the 20 and 30 series. The Committee estimated that increasing the maximum number of fruit per 8-pound sample for size designation 39 would move approximately 600,000 pounds of kiwifruit from the former size designation 42 into the new size 39 designation. Increasing the maximum number of fruit per 8-pound sample for size designation 33 will allow handlers to pack approximately 2,500,000 pounds more kiwifruit into new size designation 33. Thus, handlers will be better able to meet the needs of buyers, because kiwifruit sells by the piece, and buyers desire as much fruit in each container as the container can comfortably hold. This change does not affect the minimum size and will not allow fruit currently considered “undersized” to be shipped. The Committee further believes that increasing the maximum number of fruit in the 8-pound sample will help reduce the sizing differences between California and imported kiwifruit. This should help California handlers compete more effectively in the marketplace.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business 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. Thus, both statutes have small entity orientation and compatibility.

There are approximately 50 handlers of California kiwifruit subject to regulation under the marketing order and approximately 360 growers in the production area. Small agricultural service firms are defined by the Small Business Administration as those whose annual receipts are less than $5,000,000, and small agricultural growers are defined by the Small Business Administration (13 CFR 121.201) as those whose annual receipts are less than $750,000. None of the 50 handlers subject to regulation have annual kiwifruit sales of at least $5,000,000. In addition, 354 of the 360 growers subject to regulation have annual sales less than $750,000. Therefore, a majority of the kiwifruit handlers and growers may be classified as small entities.

This rule continues to allow handlers to pack more individual pieces of fruit per 8-pound sample for seven size designations, continues the elimination of one size designation, and the addition of two new size designations. These changes were unanimously recommended by the Committee and are expected to increase grower returns and enable handlers to compete more effectively in the marketplace. Authority for this action is provided in § 920.52 of the order.

The Committee unanimously recommended relaxing the pack requirements by increasing themaximum number of fruit per 8-pound sample for size designations 42 through 25, eliminating size designation 21, and adding size designations 20 and 23 as shown in the following chart:

This chart is commonly referred to as the “Size Designation Chart” in the industry. Increasing the maximum number of fruit per 8-pound sample will allow some smaller-sized fruit to be packed into a larger-size category. This rule continues to allow one more piece of fruit to be packed per 8-pound sample in size designations 42 and 39, three more pieces of fruit to be packed in size designation 36, seven more pieces of fruit to be packed in size designation 33, and five more pieces of fruit to be packed in size designations 27/28 and 25.

Additionally, handlers have the option of packing fruit as size designation 23, 20, or size designation 45. This rule continues to reduce the percentage of fruit packed in the 40 series and continues to increase the percentage of fruit packed in the 20 and 30 series. The Committee estimated that increasing the maximum number of fruit per 8-pound sample for size designation 39 would move approximately 600,000 pounds of kiwifruit from the former size designation 42 into the new size 39 designation. U.S. retailers prefer size 33 kiwifruit. Increasing the maximum number of fruit per 8-pound sample for size designation 33 will allow handlers to pack approximately 2,500,000 pounds more kiwifruit into new size designation 33. Thus, handlers will be better able to meet the needs of buyers, because kiwifruit sells by the piece, and buyers desire as much fruit in each container as the container can comfortably hold. This change does not affect the minimum size and will not allow fruit currently considered undersized to be shipped. Imports from Europe have increased 1,409 percent since 1992-1993. During the 2000-01 season approximately 3.2 million tray equivalents were imported from Europe.

The Committee further believes that relaxing the pack requirements to permit more individual pieces of fruit in an 8-pound sample for various size designations will reduce the sizing differences between California and imported kiwifruit. Reducing the size differences should help California handlers compete more effectively in the marketplace, as buyers apparently choose to purchase containers with more pieces of fruit per container, and this relaxation permits increases in the number of pieces of fruit in bags, volume-fill, and bulk containers. The Committee has estimated that utilizing the new size designations will yield the California kiwifruit industry $24,407,981 in FOB value versus the $22,442,648 received for the 2000-2001 season. This is an additional $2.0 million in FOB value for the 2001-2002 season.

The Committee wants to maintain the reputation California has established for uniformly packed containers of kiwifruit and believes that these changes will not significantly impact uniformity. The increase in the maximum number of fruit per 8-pound sample is not so significant that consumers or retailers will notice a visual size difference in the fruit being offered. The California Kiwifruit Commission, which administers a State program utilized to promote kiwifruit grown in California, conducted kiwifruit-sizing studies several years ago. These studies show that there is only an average of3/32-inch to4/32-inch difference in fruit length between sizes, and2/32-inch to3/32-inch difference in fruit width. These differences are indistinguishable to the eye.

These changes continue to address the marketing and shipping needs of the kiwifruit industry and are in the interest of growers, handlers, buyers, and consumers. The impact of these changes is expected to be beneficial to all growers and handlers regardless of size. There is widespread agreement in the industry to relax the pack requirements.

The Committee considered other alternatives to relaxing packing requirements but determined that these suggestions will not adequately address the industry problems.

One suggestion was to change the minimum size. The Committee did not adopt this suggestion because it believes that lowering the minimum size will diminish the quality image of California kiwifruit.

Another suggestion presented was to leave the size designation chart unchanged. The Committee did not adopt this suggestion because it believes that handlers would benefit from the size designation changes.

After considering these alternatives, the Committee recommended relaxing the pack requirements for seven size designations, eliminating one size designation, and adding two new size designations. Small and large growers and handlers are expected to benefit from this relaxation. It is estimated that grower returns will increase by approximately $1.00 per box.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large kiwifruit 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.

In addition, as noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout the kiwifruit industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the September 19, 2001, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue.

An interim final rule concerning this action was published in theFederal Registeron October 29, 2001 (66 FR 54411). Copies of the rule were mailed by the Committee staff to all Committee members and kiwifruit handlers. In addition, the rule was made available through the internet by the Office of the Federal Register and USDA. That rule provided a 60-day comment period which ended December 28, 2001. No comments were received. A correction concerning this action was published in theFederal Registeron January 11, 2002. (67 FR 1413). The interim final rule, as published, contained an error in the amendatory instructions affecting 7 CFR part 920. The amendatory instructions incorrectly indicated that the revised table in § 920.302 appears at the end of paragraph (a)(4)(iv). The revised table actually appears at the end of paragraph (a)(4)(iii) of that section and appropriate corrections were made to the interim final rule.

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/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentionedaddress in theFOR FURTHER INFORMATION CONTACTsection.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that finalizing the interim final rule, which was published in theFederal Register(66 FR 54411, October 29, 2001) and corrected in theFederal Register(67 FR 1413, January 11, 2002) will tend to effectuate the declared policy of the Act.

This rule is issued under Marketing Agreement and Order No. 925, both as amended (7 CFR part 925), regulating the handling of grapes grown in a designated area of southeastern California, hereinafter referred to as the “order.” 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 Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, California grape handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable grapes beginning on January 1, 2002, and continue until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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. Such 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.

This rule increases the assessment rate established for the Committee for the 2002 and subsequent fiscal periods from $0.01 to $0.015 per 18-pound lug of grapes.

The grape marketing order provides authority for the Committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are producers and handlers of California grapes. They are familiar with the Committee's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 1997 and subsequent fiscal periods, the Committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA.

The Committee met on November 5, 2001, and estimated a January 2002 beginning reserve of approximately $124,800, and unanimously recommended expenditures of $195,215 and an assessment rate of $0.015 per 18-pound lug of grapes for the 2002 fiscal period. In comparison, last year's budgeted expenditures were $186,023. The assessment rate of $0.015 is $0.005 higher than the rate currently in effect. The higher assessment rate is needed to offset increases in salaries and to keep the operating reserve at an adequate level.

The expenditures recommended by the Committee for the 2002 fiscal period include $100,000 for research, $28,200 for compliance activities, $41,000 for salaries, and $26,015 for other expenses. Budgeted expenses for these items in 2001 were $100,000, $35,200, $15,000, and $35,823, respectively.

The assessment rate recommended by the Committee was chosen because it will provide $142,500 in assessment income (9.5 million lugs x $.015 per lug) and, when $2,000 in interest income and $50,715 of its reserves are used forapproved expenses, allow the Committee to end the 2002 fiscal period with a $74,085 reserve. The current rate of $.01 per lug would generate $95,000 in assessment income, and require the Committee to use the $2,000 in interest and $98,215 of its reserves to cover its anticipated expenses. This will result in an ending reserve of $26,585, which was not acceptable to the Committee. The December 2002 ending reserve funds (estimated to be $74,085) with the new assessment rate will be kept within the maximum permitted by the order, approximately one fiscal period's expenses (§ 925.42).

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2002 budget and those for subsequent fiscal periods would be reviewed and, as appropriate, approved by USDA.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business 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. Thus, both statutes have small entity orientation and compatibility.

There are approximately 80 producers of grapes in the production area and approximately 26 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000.

Last year, about 69 percent of the handlers could be considered small businesses under SBA's definition and about 31 percent could be considered large businesses. It is estimated that about 88 percent of the producers have annual receipts less than $750,000. Therefore, the majority of handlers and producers of grapes may be classified as small entities.

This rule increases the assessment rate established for the Committee and collected from handlers for the 2002 and subsequent fiscal periods from $0.01 to $0.015 per 18-pound lug of grapes. The Committee unanimously recommended expenditures of $195,215 and an assessment rate of $0.015 per 18-pound lug of grapes for the 2002 fiscal period. The assessment rate of $0.015 is $0.005 higher than the 2001 rate. The volume of assessable grapes is estimated at 9.5 million 18-pound lugs. Thus, the $0.015 rate should provide $142,500 in assessment income. Income derived from handler assessments, along with interest income and funds from the Committee's authorized reserve should be adequate to cover budgeted expenses.

The expenditures recommended by the Committee for the 2002 fiscal period include $100,000 for research, $28,200 for compliance activities, $41,000 for salaries, and $26,015 for other expenses. Budgeted expenses for these items in 2001 were $100,000, $35,200, $15,000, and $35,823, respectively.

Prior to arriving at this budget the Committee considered alternative expenditure levels, but ultimately decided that the recommended levels were reasonable to properly administer the order. The assessment rate recommended by the Committee was derived by the following formula: Anticipated expenses ($195,215), plus the desired 2002 ending reserve ($74,085), minus the 2002 beginning reserve ($124,800), minus the anticipated interest income ($2,000), divided by the total estimated 2002 shipments (9.5 million 18-pound lugs). This calculation results in the $0.015 assessment rate. This rate will provide sufficient funds in combination with interest and reserve funds to meet the anticipated expenses of $195,215 and results in a December 2002 ending reserve of $74,085, which is acceptable to the Committee. The December 2002 ending reserve funds (estimated to be $74,085) will be kept within the maximum permitted by the order, approximately one fiscal periods' expenses (§ 925.41).

A review of historical information and preliminary information pertaining to the 2002 fiscal period indicates that the on-vine grower price for the 2002 season could range between $5.00 and $9.00 per 18-pound lug of grapes. Therefore, the estimated assessment revenue for the 2002 fiscal period as a percentage of total grower revenue could range between 0.2 and 0.3 percent.

This action increases the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs are offset by the benefits derived by the operation of the marketing order.

In addition, the Committee's meeting was widely publicized throughout the grape production area and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the November 5, 2001, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

This rule imposes no additional reporting or recordkeeping requirements on either small or large production area grape 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.

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

A proposed rule concerning this action was published in theFederal Registeron January 10, 2002 (67 FR 1315). Copies of the proposed rule were also mailed or sent via facsimile to all grape handlers. Finally, the proposed rule was made available through the Internet by the Office of the Federal Register and USDA. A 30-day comment period ending February 11, 2002, was provided for interested persons to respond to the proposal. No comments were received. However, the provisions of proposed § 925.215 have been modified in this action to add specific reference to an 18-pound lug for purposes of clarity.

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/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentionedaddress in theFOR FURTHER INFORMATION CONTACTsection.

After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in theFederal Registerbecause: (1) The 2002 fiscal period began on January 1, 2002, and the marketing order requires that the rate of assessment for each fiscal period apply to all assessable grapes handled during such fiscal period; (2) the Committee needs to have sufficient funds to pay its expenses which are incurred on a continuous basis; and (3) handlers are aware of this action which was unanimously recommended by the Committee at a public meeting and is similar to other assessment rate actions issued in past years; and (4) a 30-day comment period was provided for in the proposed rule, and no comments were received.

This rule is issued under Marketing Agreement No. 143 and Order No. 959, both as amended (7 CFR part 959), regulating the handling of onions grown in South Texas, hereinafter referred to as the “order.” 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 Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, South Texas onion handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable onions beginning August 1, 2001, and continuing until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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. Such 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.

This rule increases the assessment rate established for the Committee for the 2001-02 and subsequent fiscal periods from $0.03 to $0.05 per 50-pound container or equivalent of onions handled.

The South Texas onion marketing order provides authority for the Committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are producers and handlers of South Texas onions. They are familiar with the Committee's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 2000-01 and subsequent fiscal periods, the Committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscalperiod to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA.

The Committee met on June 12, 2001, and unanimously recommended 2001-02 expenses of $115,189.85 for personnel, office, compliance, and partial promotion expenses. The assessment rate and specific funding for research and promotion projects were to be recommended at a later Committee meeting.

The Committee subsequently met on October 10, 2001, and recommended 2001-02 expenditures of $449,189 and an assessment rate of $0.05 per 50-pound container or equivalent of onions. Ten of the 11 Committee members present voted in support of the $0.02 per 50-pound container equivalent increase. One Committee member abstained from voting. In comparison, last year's budgeted expenditures were $306,740. The Committee recommended the increased rate to fund a major market development program to promote the consumption of South Texas onions, without having to draw a large amount from reserves. Without the increase, the Committee's reserve fund would drop to $52,576. The Committee believes that a reserve that low is not adequate for its operations.

The major expenditures recommended by the Committee for the 2001-02 fiscal period include $75,190 for administrative expenses, $30,000 for compliance, $254,000 for promotion, and $90,000 for research projects. Budgeted expenses for these items in 2000-01 were $87,109, $27,498, $39,500, and $122,200, respectively. In addition, $30,435 was expended for a retirement package for the outgoing Committee manager.

The assessment rate recommended by the Committee was derived by dividing anticipated expenses by expected shipments of South Texas onions. Onion shipments for the fiscal period are estimated at 7.5 million 50-pound equivalents, which should provide $375,000 in assessment income. Income derived from handler assessments, along with interest income and funds from the Committee's authorized reserve, should be adequate to cover budgeted expenses. Funds in the reserve (currently $276,705) will be kept within the maximum permitted by the order (approximately two fiscal periods' expenses, § 959.43).

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2001-02 budget has been approved and those for subsequent fiscal periods will be reviewed and, as appropriate, approved by USDA.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business 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. Thus, both statutes have small entity orientation and compatibility.

There are approximately 78 producers of onions in the production area and approximately 40 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000.

Most of the handlers are vertically integrated corporations involved in producing, shipping, and marketing onions. For the 2000-01 marketing year, the industry's 40 handlers shipped onions produced on 15,166 acres with the average and median volume handled being 208,700 and 177,377 fifty-pound bag equivalents, respectively. In terms of production value, total revenues for the 40 handlers were estimated to be $73,879,800, with average and median revenues being $1,846,995 and $1,569,786, respectively.

The South Texas onion industry is characterized by producers and handlers whose farming operations generally involve more than one commodity, and whose income from farming operations is not exclusively dependent on the production of onions. Alternative crops provide an opportunity to utilize many of the same facilities and equipment not in use when the onion production season is complete. For this reason, typical onion producers and handlers either produce multiple crops or alternate crops within a single year.

Based on the SBA's definition of small entities, the Committee estimates that all of the 40 handlers regulated by the order would be considered small entities if only their spring onion revenues are considered. However, revenues from other production enterprises would likely push a large number of these handlers above the $5,000,000 annual receipt threshold. All of the 78 producers may be classified as small entities based on the SBA definition if only their revenue from spring onions is considered. When revenues from all sources are considered, a majority of the producers would not be considered small entities because receipts would exceed $750,000.

This rule increases the assessment rate established for the Committee and collected from handlers for the 2001-02 and subsequent fiscal periods from $0.03 to $0.05 per 50-pound container equivalent of onions. The Committee recommended 2001-02 expenditures of $449,189 and an assessment rate of $0.05 per 50-pound container or equivalent. The assessment rate of $0.05 is $0.02 higher than the 2000-01 rate. The quantity of assessable onions for the 2001-02 fiscal period is estimated at 7.5 million 50-pound equivalents. Thus, the $0.05 rate should provide $375,000 in assessment income. Income derived from handler assessments, along with interest income and funds from the Committee's authorized reserve, should be adequate to cover budgeted expenses. Funds in the reserve (currently $276,705) will be kept within the maximum permitted by the order (approximately two fiscal periods' expenses, § 959.43).

The major expenditures recommended by the Committee for the 2001-02 fiscal period include $75,190 for administrative expenses, $30,000 for compliance, $254,000 for promotion, and $90,000 for research projects. Budgeted expenses for these items in 2000-01 were $87,109, $27,498,$39,500, and $122,200, respectively. In addition, $30,435 was expended for a retirement package for the outgoing Committee manager.

The Committee recommended the increased rate to fund a major market development program to promote the consumption of South Texas onions, without having to draw a large amount from reserves. Without the increase, the Committee's reserve fund would drop to $52,576. The Committee believes that a reserve that low is not adequate for its operations.

The Committee reviewed and recommended 2001-02 expenditures of $449,189, which included an increase in its promotion program. Prior to arriving at this budget, the Committee considered information from various sources, including the Committee's Executive Committee, the Research Subcommittee, and the Market Development Subcommittee. Alternative expenditure levels were discussed by these groups, based upon the relative value of various research and promotion projects to the onion industry. The assessment rate of $0.05 per 50-pound equivalent of assessable onions was then determined by dividing the total recommended budget by the quantity of assessable onions, estimated at 7.5 million 50-pound equivalents for the 2001-02 fiscal period. This is approximately $74,190 below the anticipated expenses, which the Committee determined to be acceptable.

A review of historical information and preliminary information pertaining to the 2002 shipping season indicates that the grower price for the 2001-02 fiscal period could range between $6 and $11 per 50-pound equivalent of onions. Therefore, the estimated assessment revenue for the 2001-02 fiscal period as a percentage of total grower revenue could range between 0.45 and 0.83 percent.

This action increases the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs are offset by the benefits derived by the operation of the marketing order. In addition, the Committee's meeting was widely publicized throughout the South Texas onion 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 10, 2001, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

This rule imposes no additional reporting or recordkeeping requirements on either small or large South Texas onion 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.

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

A proposed rule concerning this action was published in theFederal Registeron January 10, 2002 (67 FR 1317). Copies of the proposed rule were also mailed or sent via facsimile to all onion handlers. Finally, the proposal was made available through the Internet by the Office of the Federal Register and USDA. A 30-day comment period ending February 11, 2002, was provided for interested persons to respond to the proposal. No comments were received.

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/fv/moab.html.Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in theFOR FURTHER INFORMATION CONTACTsection.

After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in theFederal Registerbecause the 2001-02 fiscal period began August 1, 2001, and the marketing order requires that the rate of assessment for each fiscal period apply to all assessable onions handled during such fiscal period. In addition, the Committee needs to have sufficient funds to pay its expenses, which are incurred on a continuous basis. Further, handlers are aware of this rule which was recommended by the Committee at a public meeting and is similar to other assessment rate actions issued in past years. Also, a 30-day comment period was provided for in the proposed rule, and no comments were received.

This rule is issued under Marketing Agreement No. 156 and Order No. 979 (7 CFR part 979), regulating the handling of melons grown in South Texas, hereinafter referred to as the “order.” 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 Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, South Texas melon handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable melons beginning October 1, 2001, and continuing until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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. Such 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.

This rule increases the assessment rate established for the Committee for the 2001-02 and subsequent fiscal periods from $0.05 to $0.06 per carton of melons handled.

The South Texas melon marketing order provides authority for the Committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are growers and handlers of South Texas melons. They are familiar with the Committee's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 1999-2000 and subsequent fiscal periods, the Committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA.

The Committee met on September 25, 2001, and unanimously recommended 2001-02 expenses of $90,888 for personnel, office, compliance, and partial market development expenses. The assessment rate and specific funding for research and promotion projects were to be recommended at a later Committee meeting.

The Committee subsequently met on November 8, 2001, and unanimously recommended 2001-02 expenditures of $314,388 and an assessment rate of $0.06 per carton of melons. In comparison, last year's budgeted expenditures were $241,460. The Committee recommended the increased rate to fund a major market development program to promote the consumption of South Texas melons, without having to draw a large amount from reserves. Without the increase, the Committee's reserve fund would drop to $194,687, which is lower than what the Committee needs for operations. This amount is derived by taking the current reserve ($327,200), adding the $166,875 in assessment income based on the old rate (3,337,500 cartons x $0.05 per carton) and anticipated interest totaling $15,000, and then subtracting the 2001-02 budget of $314,388. With the new rate, $200,250 in assessment income would be generated, and the reserve fund would only drop to $228,062.

The major expenditures recommended by the Committee for the 2001-02 fiscal period include $60,888 for administrative expenses, $20,000 for compliance, $137,000 for market development, and $96,500 for research projects. Budgeted expenses for these items in 2000-01 were $70,351, $21,604, $25,000, and $96,500, respectively.

The assessment rate recommended by the Committee was derived by considering anticipated expenses, expected shipments of South Texas melons, anticipated interest income, and the amount of funds in the Committee's operating reserve. Melon shipments for the fiscal period are estimated at 3,337,500 cartons, which should provide $200,250 in assessment income at the $0.06 per carton rate. Income derived from handler assessments, along with interest income and funds from the Committee's authorized reserve, should be adequate to cover budgeted expenses for the 2001-02 fiscal period. Funds in the reserve (currently $327,200) will be kept within the maximum permitted by the order (approximately two fiscal periods' expenses, § 979.44).

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2001-02 budget has been approved and those for subsequent fiscal periods will be reviewed and, as appropriate, approved by USDA.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in orderthat 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. Thus, both statutes have small entity orientation and compatibility.

There are approximately 33 growers of melons in the production area and approximately 22 handlers subject to regulation under the marketing order. Small agricultural growers are defined by the Small Business Administration (SBA)(13 CFR 121.201) as those having annual receipts less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000.

Most of the handlers are vertically integrated corporations involved in growing, shipping, and marketing melons. For the 2000-01 marketing year, the industry's 22 handlers shipped melons produced on 6,979 acres with the average and median volume handled being 192,450 and 84,532 cartons, respectively. In terms of production value, total revenue for the 22 handlers was estimated to be $37,478,447, with the average and median revenues being $1,703,566 and $748,273, respectively.

The South Texas melon industry is characterized by growers and handlers whose farming operations generally involve more than one commodity, and whose income from farming operations is not exclusively dependent on the production of melons. Alternative crops provide an opportunity to utilize many of the same facilities and equipment not in use when the melon production season is complete. For this reason, typical melon growers and handlers either double-crop melons during other times of the year or produce alternate crops, like onions.

Based on the SBA's definition of small entities, the Committee estimates that half of the 22 handlers regulated by the order would be considered small entities if only their spring melon revenues are considered. However, revenues from other productive enterprises would likely push a large number of these handlers above the $5,000,000 annual receipt threshold. Of the 33 growers within the production area, few have sufficient acreage to generate sales in excess of $750,000; therefore, the majority of growers may be classified as small entities.

This rule increases the assessment rate established for the Committee and collected from handlers for the 2001-02 and subsequent fiscal periods from $0.05 to $0.06 per carton of melons. The Committee unanimously recommended 2001-02 expenditures of $314,388 and an assessment rate of $0.06 per carton of melons. In comparison, last year's budgeted expenditures were $241,460. The assessment rate of $0.06 is $0.01 higher than the rate currently in effect. At the rate of $0.06 per carton and an estimated 2001-02 melon production of 3,337,500 cartons, the projected income derived from handler assessments ($200,250), along with interest and funds from the Committee's authorized reserve, should be adequate to cover budgeted expenses. Funds in the reserve (currently $327,200) will be kept within the maximum permitted by the order (approximately two fiscal periods' expenses; § 979.44).

The major expenditures recommended by the Committee for the 2001-02 fiscal period include $60,888 for administrative expenses, $20,000 for compliance, $137,000 for market development, and $96,500 for research projects. Budgeted expenses for these items in 2000-01 were $70,351, $21,604, $25,000, and $96,500, respectively.

The Committee recommended the increased rate to fund a major market development program to promote the consumption of South Texas melons, without having to draw a large amount from reserves. Without the increase, the Committee's reserve fund would drop to $194,687, which is lower than what the Committee needs for operations. With the increased rate, the reserve fund would drop to $228,062.

The Committee voted to increase its assessment rate because the current rate would reduce the Committee's reserve funds beyond the level acceptable to the Committee. Assessment income, along with interest and funds from the Committee's authorized reserve, will provide the Committee with adequate funds to meet its 2001-02 fiscal period's expenses.

The Committee reviewed and unanimously recommended 2001-02 expenditures of $314,388, which included an increase in its market development program. Prior to arriving at this budget, the Committee considered information from various sources, including the Research and the Market Development Subcommittee. Alternative expenditure levels were discussed by these groups, based upon the relative value of various research and market development projects to the melon industry. The assessment rate of $0.06 per carton of assessable melons was then determined by considering the total recommended budget, the quantity of assessable melons estimated at 3,337,500 cartons for the 2001-02 fiscal period, anticipated interest income, and the funds in the Committee's operating reserve. The recommended rate will generate $200,250, which is $114,138 below the anticipated expenses. The Committee found this acceptable because interest and reserve funds will be used to make up the deficit.

A review of historical information and preliminary information pertaining to the 2002 shipping season indicates that the grower price for the 2001-02 fiscal period could range between $7 and $11 per carton of cantaloupes and between $6 and $10 per carton of honeydew melons. Therefore, the estimated assessment revenue for the 2001-02 fiscal period as a percentage of total grower revenue could range between 0.9 and 0.5 percent for cantaloupes and between 1.0 and 0.6 percent for honeydew melons.

This action increases the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to growers. However, these costs are offset by the benefits derived by the operation of the marketing order. In addition, the Committee's meeting was widely publicized throughout the South Texas melon industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the November 8, 2001, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

This rule imposes no additional reporting or recordkeeping requirements on either small or large South Texas melon 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.

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

A proposed rule concerning this action was published in theFederal Registeron January 10, 2002 (67 FR 1319). Copies of the proposed rule were also mailed or sent via facsimile to all melon handlers. Finally, the proposal was made available through the Internet by the Office of the Federal Register and USDA. A 30-day comment period ending February 11, 2002, was provided for interested persons to respond to the proposal. No comments were received.

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/fv/moab.html.Any questions about thecompliance guide should be sent to Jay Guerber at the previously mentioned address in theFOR FURTHER INFORMATION CONTACTsection.

After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in theFederal Registerbecause the 2001-02 fiscal period began on October 1, 2001, and the marketing order requires that the rate of assessment for each fiscal period apply to all assessable melons handled during such fiscal period. In addition, the Committee needs to have sufficient funds to pay its expenses, which are incurred on a continuous basis. Further, handlers are aware of this rule which was unanimously recommended by the Committee at a public meeting and is similar to other assessment rate actions issued in past years. Also, a 30-day comment period was provided for in the proposed rule, and no comments were received.

This rule is issued under Marketing Agreement No. 115 and Marketing Order No. 982, both as amended (7 CFR part 982), regulating the handling of hazelnuts grown in Oregon and Washington, hereinafter referred to as the “order.” 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 Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is intended that this action apply to all merchantable hazelnuts handled during the 2001-2002 marketing year (July 1, 2001, through June 30, 2002). This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

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 filednot later than 20 days after the date of the entry of the ruling.

This rule establishes marketing percentages which allocate the quantity of inshell hazelnuts that may be marketed in domestic markets. The Board is required to meet prior to September 20 of each marketing year to compute its marketing policy for that year, and compute and announce an inshell trade demand if it determines that volume regulations would tend to effectuate the declared policy of the Act. The Board also computes and announces preliminary free and restricted percentages for that year.

The inshell trade demand is the amount of inshell hazelnuts that handlers may ship to the domestic market throughout the marketing season. The order specifies that the inshell trade demand be computed by averaging the preceding three “normal” years” trade acquisitions of inshell hazelnuts, rounded to the nearest whole number. The Board may increase the three-year average by up to 25 percent, if market conditions warrant an increase. The Board's authority to recommend volume regulations and the computations used to determine the percentages are specified in § 982.40 of the order.

The quantity to be marketed is broken down into free and restricted percentages to make available hazelnuts which may be marketed in domestic inshell markets (free) and hazelnuts which must be exported, shelled or otherwise disposed of by handlers (restricted). Prior to September 20 of each marketing year, the Board must compute and announce preliminary free and restricted percentages. The preliminary free percentage releases 80 percent of the inshell trade demand to the domestic market. The purpose of releasing only 80 percent of the inshell trade demand under the preliminary percentage is to guard against an underestimate of crop size. The preliminary free percentage is expressed as a percentage of the total supply subject to regulation (supply) and is based on the preliminary crop estimate.

The National Agricultural Statistics Service (NASS) has estimated hazelnut production at 48,000 tons for the Oregon and Washington area. The majority of domestic inshell hazelnuts are marketed in October, November, and December. By November, the marketing season is well under way.

The Board adjusted the crop estimate down to 44,588 tons by taking into consideration the average crop disappearance over the preceding three years (7.12 percent) and the undeclared carry-in (6 tons.) Disappearance is the difference between orchard-run production (crop estimate) and the available supply of merchantable product available for sale by handlers. This difference or disappearance consists of unharvested hazelnuts, cull product that is harvested and delivered to handlers but later discarded, or product used on the farm, sold locally, or otherwise disposed of by producers. The Board computed the adjusted inshell trade demand of 2,201 tons by taking the difference between the average of the past three years' sales (3,473 tons) and the declared carry-in from last year's crop (1,272 tons.)

The Board computed and announced preliminary free and restricted percentages of 3.9495 percent and 96.0505 percent, respectively, at its August 30, 2001, meeting. The Board computed the preliminary free percentage by multiplying the adjusted trade demand by 80 percent and dividing the result by the adjusted crop estimate (2,201 tons x 80 percent/44,588 tons = 3.9495 percent.) The preliminary free percentage thus initially released 1,761 tons of hazelnuts from the 2001 supply for domestic inshell use, and the restricted percentage withheld 42,804 tons for the export and kernel market.

Under the order, the Board must meet again on or before November 15 to recommend interim final and final percentages. The Board uses current crop estimates to calculate interim final and final percentages. The interim final percentages are calculated in the same way as the preliminary percentages and release the remaining 20 percent (to total 100 percent of the inshell trade demand) previously computed by the Board. Final free and restricted percentages may release up to an additional 15 percent of the average of the preceding three years' trade acquisitions to provide an adequate carryover into the following season (i.e., desirable carry-out). The order requires that the final free and restricted percentages shall be effective 30 days prior to the end of the marketing year, or earlier, if recommended by the Board and approved by USDA. Revisions in the marketing policy can be made until February 15 of each marketing year, but the inshell trade demand can only be revised upward, consistent with § 982.40(e).

The Board met on November 15, 2001, and reviewed and approved an amended marketing policy and recommended the establishment of interim final and final free and restricted percentages. The interim final free and restricted percentages were recommended at 4.9363 percent free and 95.0637 percent restricted. Final percentages, which included an additional 15 percent of the average of the preceding three-years' trade acquisitions for desirable carry-out, were recommended at 6.1048 percent free and 93.8952 percent restricted effective May 31, 2002. The final free percentage releases 2,722 tons of inshell hazelnuts from the 2001 supply for domestic use.

The final marketing percentages are based on the Board's final production estimate and the following supply and demand information for the 2001-2002 marketing year:

In addition to complying with the provisions of the order, the Board also considered USDA's 1982 “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” (Guidelines) when making its computations in the marketing policy. This volume control regulation provides a method to collectively limit the supply of inshell hazelnuts available for sale in domestic markets. The Guidelines provide that the domestic inshell market has available a quantity equal to 110 percent of prior years' shipments before allocating supplies for the export inshell, export kernel, and domestic kernel markets. This provides for plentiful supplies for consumers and for market expansion, while retaining the mechanism for dealing with oversupply situations. The established final percentages will make available an additional 521 tons for desirable carry-out effective May 31, 2002. The total free supply for the 2001-2002 marketing year is 3,994 tons of hazelnuts, which is the sum of the final trade demand of 3,473 tons and the 521 ton desirable carry-out. This amount is 115 percent of prior years' sales and exceeds the goal of the Guidelines.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action 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 business 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. Thus, both statutes have small entity orientation and compatibility.

Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those having annual receipts of less than $5,000,000. There are approximately 800 producers of hazelnuts in the production area and approximately 19 handlers subject to regulation under the order. Average annual hazelnut revenue per producer is approximately $35,700, computed by dividing National Agriculture Statistics Service (NASS) figures for the average value of production for 1999 and 2000 ($28.563 million) by the number of producers. The level of sales of other crops by hazelnut producers is not known. In addition, based on Board records, about 95 percent of the handlers ship under $5,000,000 worth of hazelnuts on an annual basis. In view of the foregoing, it can be concluded that the majority of hazelnut producers and handlers may be classified as small entities.

Board meetings are widely publicized in advance of the meetings and are held in a location central to the production area. The meetings are open to all industry members and other interested persons who are encouraged to participate in the deliberations and voice their opinions on topics under discussion. Thus, Board recommendations can be considered to represent the interests of small business entities in the industry.

Currently, U.S. hazelnut production is allocated among three market outlets: inshell domestic, inshell export, and shelled (kernel) markets. Handlers and growers receive the highest return on inshell domestic, less for inshell export, and the least for kernels (shelled). Based on Board records of average shipments for 1997-2000, the percentage going to each of those markets was 13 percent (domestic inshell), 46 percent (export inshell) and 41 percent (kernels).

The inshell market can be characterized as having limited demand and being prone to oversupply and low grower prices in the absence of supply restrictions. This volume control regulation provides a method for the U.S. hazelnut industry to limit the supply of domestic inshell hazelnuts available for sale in the continental U.S. On average, 76 percent of domestic inshell hazelnut shipments occur between October 1 through November 30, primarily to supply holiday nut demand.

Many years of marketing experience led to the development of the current volume control procedures. These procedures have helped the industry address its marketing problems by keeping inshell hazelnut supplies in balance with domestic needs. Volume controls fully supply the domestic inshell market while preventing an oversupply of that market. The Board's authority to recommend volume regulations and the computations used to determine the percentages are specified in § 982.40 of the order.

This rule implements volume control procedures for the 2001-2002 marketing year by establishing marketing percentages (free and restricted percentages) which determine the quantity of inshell hazelnuts that may be marketed in domestic markets. The free quantity may be marketed in domestic inshell markets and the restricted quantity must be exported, shelled, or otherwise disposed of by handlers. The computations for 2001-2002 are explained herein.

The Board is required to meet prior to September 20 of each marketing year to establish its marketing policy for that year. At its marketing policy meeting, the Board computes and announces its estimate of inshell trade demand, which is the quantity of inshell hazelnuts that handlers typically ship to the domestic market throughout the marketing season. If it determines that volume regulations would tend to effectuate the declared policy of the Act, the Board also computes and announces the preliminary free and restricted percentages for that year. At subsequent meetings, the Board determines interim final percentages and final percentages, which may be the same as, or higher than, the preliminary percentages.

The order specifies that the inshell trade demand be computed by averaging the preceding three “normal” years’ trade acquisitions of inshell hazelnuts, rounded to the nearest whole number. If market conditions warrant, the Board may increase the three-year average by up to 25 percent.

Establishing the preliminary free percentage releases 80 percent of the inshell trade demand to the domestic market. The purpose of releasing only 80 percent is to guard against an underestimate of crop size. The preliminary free percentage is expressed as a percentage of the total supply subject to regulation and is based on the preliminary crop estimate. NASS has estimated hazelnut production at 48,000 tons for the Oregon and Washington area.

At its November 2001 meeting, the Board computed the available supply ofmerchantable product for sale by handlers by subtracting the average crop disappearance over the preceding three years (7.12 percent) from the 48,000-ton hazelnut crop estimate. Disappearance consists of (1) unharvested hazelnuts, (2) culled product (nuts that are harvested and delivered to handlers but later discarded), or (3) product used on the farm, sold locally, or otherwise disposed of by producers. Subtracting an additional 6 tons (the undeclared carryin) yielded the adjusted crop estimate of 44,588 tons.

The Board computed the adjusted inshell trade demand of 2,201 tons by taking the difference between the average of the past three years' sales (3,473 tons) and the declared carry-in from last year's crop (1,272 tons.)

The Board computed and announced preliminary free and restricted percentages of 3.9495 percent and 96.0505 percent, respectively, at its August 30, 2001, meeting. The Board computed the preliminary free percentage by multiplying the adjusted inshell trade demand by 80 percent and dividing the result by the adjusted crop estimate: (2,201 tons × 80 percent)/44,588 tons = 3.9495 percent. Establishing the 3.9495 percent preliminary free percentage allowed the initial release of 1,761 tons of hazelnuts from the 2001 supply for domestic inshell use. Establishing the 96.0505 percent restricted percentage had the effect of allocating 42,804 tons to the export and kernel markets.

Under the order, the Board must meet again on or before November 15 each year to recommend interim final and final percentages, using current crop estimates. The interim final percentages are calculated in the same way as the preliminary percentages. Computing and announcing the interim final percentage allows the release of the remaining 20 percent (to total 100 percent) of the inshell trade demand previously computed by the Board. In establishing final free percentage and restricted percentages, the Board may release up to an additional 15 percent of the average of the preceding three years' trade acquisitions, to provide an adequate carryover into the following season (i.e., desirable carry-out).

The order requires that the final free and restricted percentages shall be effective 30 days prior to the end of the marketing year, or earlier, if recommended by the Board and approved by USDA. Revisions in the marketing policy can be made until February 15 of each marketing year, but the inshell trade demand can only be revised upward, consistent with § 982.40(e).

The Board met on November 15, 2001, and reviewed and approved an amended marketing policy and recommended the establishment of interim final and final free and restricted percentages. The recommended interim final free and restricted percentages were 4.9363 percent free and 95.0637 percent restricted. Recommended final percentages, which included an additional 15 percent of the average of the preceding three-years' trade acquisitions for desirable carry-out, were 6.1048 percent free and 93.8952 percent restricted, effective May 31, 2002. Establishing the final free percentage releases for domestic use the full amount of the adjusted inshell trade demand of inshell hazelnuts from the 2001 supply (2,722 tons).

The final marketing percentages are based on the Board's final production estimate and the following supply and demand information for the 2001-2002 marketing year:

In addition to complying with the provisions of the order, the Board also considered USDA's 1982 “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” (Guidelines) when making its computations in the marketing policy. This volume control regulation provides a method to collectively limit the supply of inshell hazelnuts available for sale in domestic markets. The Guidelines provide that the domestic inshell market has available a quantity equal to at least 110 percent of prior years' shipments before allocating supplies for the export inshell, export kernel, and domestic kernel markets. This provides for plentiful supplies for consumers and for market expansion, while retaining the mechanism for dealing with oversupply situations. The established final percentages will make available an additional 521 tons for desirable carry-out effective May 31, 2002. The total free supply for the 2001-2002 marketing year is 3,994 tons of hazelnuts, which is the sum of the final trade demand of 3,473 tons (average trade acquisitions for three prior years) and the 521 ton desirable carry-out. This amount is 115 percent of prior years' sales and exceeds the 110 percent goal of the Guidelines.

The high level of production and carryin were key market factors leading to the 6.1048 percent final free percentage. Hazelnut production in 2001 is estimated to be an all-time record, 1,000 tons higher than the previous record set in 1997. Even if carryin had been zero, the amount that handlers typically ship into the domestic inshell market (i.e., average trade acquisitions of 3,473 tons) equals about 8 percent of the supply (44,588 tons subject to regulation). However, thefree tonnage carryin level of 1,272 tons was also high (37 percent of the quantity of inshell hazelnuts that handlers typically ship), meaning that even less of the new production was needed to fully supply the 2001-2002 domestic inshell market. Although the domestic inshell market is a relatively small proportion of total sales (13 percent of total shipments), it remains a profitable market segment. The volume control provisions of the marketing order are designed to avoid oversupplying this particular market segment, because that would likely lead to substantially lower grower prices. The other market segments, inshell exports and kernels, are expected to continue to provide good outlets for US hazelnut production.

Since low production years typically follow high production years (a consistent pattern for hazelnuts), lower production is expected in 2002, and burdensome carryin levels will likely be significantly reduced.

Recent production and price data reflect the stabilizing effect of the volume control regulations. Industry statistics show that total hazelnut production has varied widely over the ten year period between 1991 and 2000, from a low of 16,500 tons (inshell) in 1998 to a high of 47,000 tons in 1997. Production in the shortest crop year and the biggest crop year were 55 percent and 157 percent, respectively, of the 10-year average tonnage of 29,880. The coefficient of variation (a standard statistical measure of variability; “CV”) for hazelnut production over the ten-year period is 0.35. In contrast, the coefficient of variation for hazelnut grower prices is 0.16, less than half the CV for production. The considerably lower variability of prices versus production provides an illustration of the order's price-stabilizing impacts.

Comparing grower revenue to cost is useful in highlighting the impact on growers of recent product and price levels. A recent hazelnut cost of production study from Oregon State University estimated cost of production per acre to be approximately $1,340 for a typical 100-acre hazelnut enterprise. Average hazelnut grower revenue per bearing acre (based on NASS acreage and value of production data) equaled or exceeded that typical cost level twice between 1995 and 2000. Average grower revenue was below typical costs in the other years. Without the stabilizing impact of the order, growers may have lost more money. The volume regulations contribute to orderly marketing and market stability, and help moderate the variation in returns for all producers and handlers, both large and small.

While the level of benefits of this rulemaking is difficult to quantify, the stabilizing effects of the volume regulations impact both small and large handlers positively by helping them maintain and expand markets even though hazelnut supplies fluctuate widely from season to season. This regulation provides equitable allotment of the most profitable market, the domestic inshell hazelnut market. That market is available to all handlers, regardless of size.

As an alternative to this regulation, the Board discussed not regulating the 2001-2002 hazelnut crop. However, without any regulations in effect, the Board believes that the industry would oversupply the inshell domestic market. Section 982.40 of the order establishes a procedure and computations for the Board to follow in recommending to USDA release of preliminary, interim final, and final quantities of hazelnuts to be released to the free and restricted markets each marketing year. The program results in plentiful supplies for consumers and for market expansion while retaining the mechanism for dealing with oversupply situations.

Hazelnuts produced under the order comprise virtually all of the hazelnuts produced in the U.S. This production represents, on average, less than 5 percent of total U.S. production for other tree nuts, and less than 5 percent of the world's hazelnut production.

Last season, 82 percent of the kernels were marketed in the domestic market and 18 percent were exported. Domestically produced kernels generally command a higher price in the domestic market than imported kernels. The industry is continuing its efforts to develop and expand other markets with emphasis on the domestic kernel market. Small business entities, both producers and handlers, benefit from the expansion efforts resulting from this program.

Inshell hazelnuts produced under the order compete well in export markets because of quality. Europe has historically been the primary export market for U.S. produced inshell hazelnuts, with a ten-year average of 5,452 tons out of total average exports of 10,236 tons. Recent years have seen a significant shift in export destinations. Last season, inshell shipments to Europe totaled 3,986 tons, representing 28 percent of exports, with the largest share going to Germany. Inshell shipments to Southwest Pacific countries, and Hong Kong in particular, have increased dramatically in the past few years, rising to 58 percent of total exports of 14,400 tons in 2000. The industry continues to pursue export opportunities.

There are some reporting, recordkeeping, and other compliance requirements under the order. The reporting and recordkeeping burdens are necessary for compliance purposes and for developing statistical data for maintenance of the program. The information collection requirements have been previously approved by the Office of Management and Budget under OMB No. 0581-0178. The forms require information which is readily available from handler records and which can be provided without data processing equipment or trained statistical staff. 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. This rule does not change those requirements. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Further, the Board's meetings were widely publicized throughout the hazelnut industry and all interested persons were invited to attend the meetings and participate in Board deliberations. Like all Board meetings, those held on August 31, and November 15, 2001, were public meetings and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit information on 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/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in theFOR FURTHER INFORMATION CONTACTsection.

This rule invites comments on the establishment of interim final and final free and restricted percentages for the 2001-2002 marketing year under the hazelnut marketing order. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material presented, including the Board's recommendation, and other information, it is found that this interim final rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest togive preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this action until 30 days after publication in theFederal Registerbecause: (1) The 2001-2002 marketing year began July 1, 2001, and the percentages established herein apply to all merchantable hazelnuts handled from the beginning of the crop year; (2) handlers are aware of this rule, which was recommended at an open Board meeting, and need no additional time to comply with this rule; and (3) interested persons are provided a 60-day comment period in which to respond, and all comments timely received will be considered prior to finalization of this action.

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

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. Section 11 of the Act provides that nothing in the Act may be construed to preempt or supersede any other program relating to beef promotion organized and operated under the laws of the United States or any State. There are no administrative proceedings that must be exhausted prior to any judicial challenge to the provisions of this rule.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 United States Code (U.S.C.) 601et seq.). The Administrator of AMS has considered the economic effect of this action on small entities and has determined that this final rule will not have a significant economic impact on a substantial number of small entities. The purpose of RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly burdened.

In the January 26, 2001, issue of “Cattle,” USDA's National Agricultural Statistics Service (NASS) estimates that in 2000 the number of cattle operations in the United States totaled about 1.1 million. The majority of these operations subject to the Order, 7 CFR 1260.101et seq., are considered small businesses under the criteria established by the Small Business Administration.

This final rule imposes no new burden on the industry. It only adjusts representation on the Board to reflect changes in domestic cattle inventory and cattle and beef imports. This action will adjust representation on the Board, established under the Act. The adjustments are required by the Order and will result in a decrease in Board membership from 110 to 108.

The Board was initially appointed August 4, 1986, pursuant to the provisions of the Act (7 U.S.C. 2901et seq.) and the Order issued thereunder. Domestic representation on the Board is based on cattle inventory numbers, and importer representation is based on the conversion of the volume of imported cattle, beef, or beef products into live animal equivalencies.

Section 1260.141(b) of the Order provides that the Board shall be composed of cattle producers and importers appointed by USDA from nominations submitted by certified producer organizations. A producer may only be nominated to represent the unit in which that producer is a resident.

Section 1260.141(c) of the Order provides that at least every 3 years and not more than every 2 years, the Board shall review the geographic distribution of cattle inventories throughout the United States and the volume of imported cattle, beef, and beef products and, if warranted, shall reapportion units and/or modify the number of Board members from units in order to reflect the geographic distribution of cattle production volume in the United States and the volume of cattle, beef, or beef products imported into the United States.

Section 1260.141(d) of the Order authorizes the Board to recommend to USDA modifications in the number of cattle per unit necessary for representation on the Board.

Section 1260.141(e)(1) provides that each geographic unit or State thatincludes a total cattle inventory equal to or greater than 500,000 head of cattle shall be entitled to one representative on the Board. Section 1260.141(e)(2) provides that States that do not have total cattle inventories equal to or greater than 500,000 head shall be grouped, to the extent practicable, into geographically-contiguous units, each of which have a combined total inventory of not less than 500,000 head. Such grouped units are entitled to at least one representative on the Board. Each unit that has an additional one million head of cattle within a unit qualifies for additional representation on the Board as provided in § 1260.141(e)(4). As provided in § 1260.141(e)(3), importers are represented by a single unit, with the number of Board members based on a conversion of the total volume of imported cattle, beef, or beef products into live animal equivalencies.

The initial Board appointed in 1986 was composed of 113 members. Reapportionment based on a 3-year average of cattle inventory numbers and import data, reduced the Board to 111 members in 1990 and 107 members in 1993 before the Board was increased to 111 members in 1996. The Board was decreased to 110 members in 1999 and will be decreased to 108 members with appointments for terms effective early in 2003.

The current Board representation by States or units has been based on an average of the January 1, 1996, 1997, and 1998 inventory of cattle in the various States as reported by NASS of USDA. Current importer representation has been based on a combined total average of the 1995, 1996, and 1997 live cattle imports as published by the Foreign Agricultural Service of USDA and the average of the 1995, 1996, and 1997 live animal equivalents for imported beef products.

Recommendations concerning Board reapportionment were approved by the Board at its August 9, 2001, meeting. In considering reapportionment, the Board reviewed cattle inventories as well as cattle, beef, and beef product import data for the period January 1, 1998, to January 1, 2001. The Board recommended that a 3-year average of cattle inventories and import numbers should be continued. The Board determined that an average of the January 1, 1999, 2000, and 2001 USDA cattle inventory numbers will best reflect the number of cattle in each State or unit since publication of the 1999 reapportionment rule.

The Board reviewed the February 28, 2001, USDA's Economic Research Service circular, “Livestock, Dairy and Poultry Situation and Outlook,” to determine proper importer representation. The Board recommended the use of a combined total of the average of the 1998, 1999, and 2000 cattle import data and the average of the 1998, 1999, and 2000 live animal equivalents for imported beef products. The method used to calculate the total number of live cattle equivalents was the same as that used in the previous reapportionment of the Board. The recommendation for importer representation is based on the most recent 3-year average of data available to the Board at its August 9, 2001, meeting to be consistent with the procedures used for domestic representation.

On October 19, 2001, AMS published in theFederal Register(66 FR 53124) for public comment a proposed rule providing for the adjustment in Board membership. The proposed rule was published with a request for comments to be submitted to USDA by December 18, 2001.

USDA received one comment concerning the proposed rule for Board reapportionment. The comment was from a cattle producer and supported the reapportionment plan.

Thus, the reapportionment of the Board in this final rule is unchanged from the proposed rule. This final rule decreases the number of representatives on the Board from 110 to 108. Five States—Alabama, Illinois, Kentucky, New York, and Wisconsin—lose one member each; two States and one unit—New Mexico, Wyoming, and Importer unit—gain one member each. In addition, because South Carolina no longer has sufficient cattle inventory to qualify for a position on the board independently, South Carolina will be merged with Georgia, a contiguous State that has only one member, to form a Southeast unit. The combined cattle inventory of South Carolina and Georgia will entitle the Southeast unit to two members on the Board, thus enabling both States to be represented. The States and units affected by the reapportionment plan and the current and revised member representation per unit are as follows:

Board representation for the entire 40 units is shown in the revised § 1260.141(a) contained herein.

The 2001 nomination and appointment process was in progress while the Board was developing its recommendations. Thus, the Board reapportionment as provided for under the rulemaking will be effective with 2002 nominations and appointments that will be effective early in the year 2003.

This action makes final the provisions of the proposed rule published at 66 FR 53124 on October 19, 2001.

On October 31, 2001, FSIS published a direct final rule “Use of Transglutaminase Enzyme and Pork Collagen as Binders in Certain Meat and Poultry Products” (66 FR 54912). This direct final amended the Federal meat inspection regulations to permit the use of pork collagen and TG enzyme, in limited amounts, as binders in certain standardized meat food products and amended the poultry products inspection regulations to permit the use of TG enzyme, in limited amounts, in certain standardized poultry products. This direct final rule also amended the meat and poultry products inspection regulations to require that, when TG enzyme is used to fabricate or reform cuts of meat or poultry, the resulting product bear labeling to indicate that it has been formed from pieces of whole muscle meat, or that it has been reformed from a single cut. This direct final was in response to petitions submitted to the Agency by Ajinomoto, U.S.A., Inc. and AMPC, Corp.

On December 3, 2001, FSIS received a comment from Hogan Hartson, L.L.P. on behalf of Ajinomoto USA, Inc., in response to the rulemaking. The commenter, also one of the petitioners, requested that FSIS provide clarification on the scope of the direct final rule. Specifically, Ajinomoto requested that FSIS clarify that the Agency intended to allow the use of TG enzyme in cured pork products under 9 CFR 319.104 when it published the direct final rule. The commenter noted that in its petition it had specifically requested that the standard of identity for cured pork products under 9 CFR 319.104 be amended to provide for the use of TG enzyme as a binder and provided data in support of this request. The commenter also expressed full support for the rule and stated that the comment was not intended to be an adverse comment but rather a clarification on the scope of the final rule.

When it began development of the direct final rule, FSIS had determined that, based on the data submitted by Ajinomoto, TG enzyme was suitable for use as a binder in sausages as provided under part 319 of title 9. While the rule was under development, Ajinomoto submitted additional data to support the use of TG enzyme in other standardized products, including cured pork products under 9 CFR 319.140. Upon review of the additional data, FSIS determined that, in addition to sausages as provided under part 319, TG enzyme was suitable for use in restructured meats (9 CFR 319.15(d)), roast beef parboiled and steam roasted (9 CFR 319.104) cooked sausages (9 CFR 319.180) and poultry rolls (9 CFR 381.159), and incorporated these findings into the direct final rule. However, when it incorporated these products in the direct final rule, the Agency was still reviewing the data submitted on the use of TG enzyme in cured pork products defined under 9 CFR 319.104. Thus, the direct final rule does not provide for the use of TG enzyme in these products. FSIS ultimately determined that TG enzyme is suitable for use as a binder in cured pork products under 9 CFR 319.104. In response to the commenter's request to clarify the scope of the direct final rule,the rule, as published, is not intended to provide for the use of TG enzyme in cured pork products under 9 CFR 319.104. However, because FSIS ultimately found that TG enzyme is suitable for use as a binder in these standardized products, the Agency intends to publish another direct final rule to permit such a use.

Because FSIS did not receive any adverse comments or notice of intent to submit adverse comments in response to the direct final rule, the effective date remains as December 31, 2001.

Public awareness of all segments of rulemaking and policy development is important. Consequently, in an effort to better ensure that minorities, women, and persons with disabilities are aware of this notice, FSIS will announce the meeting and provide copies of thisFederal Registerpublication in the FSIS Constituent Update. FSIS provides a weekly FSIS Constituent Update, which is communicated via fax to over 300 organizations and individuals. In addition, the update is available on-line through the FSIS web page located athttp://www.fsis.usda.gov.The update is used to provide information regarding FSIS policies, procedures, regulations,Federal Registernotices, FSIS public meetings, recalls, and any other types of information that could affect or would be of interest to our constituents/stakeholders. The constituent fax list consists of industry, trade, and farm groups, consumer interest groups, allied health professionals, scientific professionals, and other individuals that have requested to be included. Through these various channels, FSIS is able to provide information to a much broader, more diverse audience. For more information and to be added to the constituent fax list, fax your request to the Congressional and Public Affairs Office, at (202) 720-5704.

This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.

The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.

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. 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. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Hazardous air pollutants are defined in the Clean Air Act (Act) as pollutants that threaten human health through inhalation or other type of exposure. These pollutants are commonly referred to as “air toxics” and are listed in Section 112(b)(1) of the Act.

National Emission Standards for Hazardous Air Pollutants (NESHAPs) control emissions of hazardous air pollutants from specific source categories and implement the requirements of Section 112 of the Act. These standards are found in 40 CFR parts 61 and 63.

Section 112(l) of the Act enables EPA to approve state and local air toxics programs or rules such that these agencies can accept delegation of authority for implementing and enforcing the NESHAPs. Typically, a state or local agency requests delegation based on federal rules adopted unchanged into state or local rules.

Pursuant to the authority of Section 112(l) of the Act, EPA previously delegated authority to Ecology, BCAA, NWAPA, PSCAA, and SCAPCA through a formal rule-making process. At the time of delegation, EPA also approved streamlined procedures for requesting and approving delegation of new or updated NESHAPs.

The streamlined process for updating delegation is as follows: (1) The requesting agency sends a letter to EPA asking for delegation of new and/or revised NESHAPS that have been adopted unchanged into their regulations; (2) EPA sends a letter of response granting this delegation request (or explaining why it cannot be granted); (3) the agency does not need to send a response back to EPA; (4) if EPA does not receive a negative response from the requesting agency within 10 days of the signature date of EPA's letter, then the updated delegation becomes final 10 days after the date of EPA's letter.

The Consolidated Federal Air Rule (CAR) is a pilot rulemaking originating from President Clinton's March 16, 1995 initiative to reinvent environmental regulations. This rule consolidates major portions of the following New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP) applicable to storage vessels, process vents, transfer operations, and equipment leaks within the Synthetic Organic Chemical Manufacturing Industry (SOCMI): 40 CFR part 60, subparts A, Ka, Kb, VV, DDD, III, NNN, and RRR; 40 CFR part 61, subparts A, V, Y, and BB; and 40 CFR part 63, subparts A, F, G, and H.

The CAR gathers together applicable Federal SOCMI rules to form oneintegrated set of rules. It is an optional compliance alternative for SOCMI sources; sources may choose to comply with the consolidated rule or simply continue to comply with existing applicable rules. The intent of this consolidation is to improve understandability, reduce burden, clarify requirements, and improve implementation and compliance.

The CAR is not a new rule per se, but a repackaging of existing rules. It requires a separate delegation because it consists of new subparts in a new part of the CFR. Because it consolidates and streamlines existing rules—which may already be delegated—EPA can delegate the CAR with no additional burden other than notification. Consequently, EPA approved Ecology, BCAA, and SCAPCA's CAR delegation requests using the same streamlined approval procedures described above.

One of the goals of the Clean Air Act is to place state and local governments in positions of leadership for air pollution prevention and control. Consistent with the Act, the NESHAP program and the CAR allow EPA to transfer primary implementation and enforcement responsibility to state and local agencies, provided they request delegation and demonstrate adequate resources, procedures, and authority. As with all delegations, EPA retains authority under Section 113 of the Act to implement and enforce any federal air quality standard if needed, including NESHAPs and the CAR.

In the past, EPA delegated authority to implement and enforce certain NESHAPs to Ecology, BCAA, NWAPA, PSCAA, and SCAPCA through formal rule-making. (For Ecology, BCAA, and SCAPCAsee66 FR 35115 and 66 FR 48221; for NWAPA and PSCAAsee63 FR 66054, 63 FR 7793, 64 FR 19719, 65 FR 10391, and 66 FR 14320) These delegations were based on EPA's determination that they have adequate resources and authority to carry-out this responsibility in a manner comparable to EPA.

Recently, all these agencies requested updated delegation of NESHAPs and some requested delegation of the CAR based on implementation of state or local rules that adopt new or more current federal rules by reference. EPA approved these requests because these agencies continue to meet the requirements for delegation.

The purpose of this notice is to notify the public of actions already taken by EPA to delegate new and more current NESHAP standards to Ecology, BCAA, NWAPA, PSCAA, SCAPCA and the CAR to Ecology, BCAA, and SCAPCA. These actions were taken by letter approval as follows:

Ecology—Letter from Ms. Barbara McAllister, Director, EPA, Region 10, Office of Air to Ms. Mary Burg, Program Manager, Air Quality Program, Ecology, signed February 8, 2002, effective February 18, 2002.

BCAA—Letter from Ms. Barbara McAllister, Director, EPA, Region 10, Office of Air to Dr. David Lauer, Executive Director, BCAA, signed February 8, 2002, effective February 18, 2002.

NWAPA—Letter from Ms. Barbara McAllister, Director, EPA, Region 10, Office of Air Quality to Mr. James Randles, Director, NWAPA, signed February 8, 2002, effective February 18, 2002.

PSCAA—Letter from Ms. Barbara McAllister, Director, EPA, Region 10, Office of Air to Mr. Dennis McLerran, Air Pollution Control Officer, PSCAA, signed February 8, 2002, effective February 18, 2002.

SCAPCA—Letter from Ms. Barbara McAllister, Director, EPA, Region 10, Office of Air to Mr. Eric P. Skelton, Director, SCAPCA, signed February 8, 2002, effective February 18, 2002.

These delegations were effective ten days after the signature date. If an agency did not agree to the terms of their delegation, they could submit a written Notice of Objection within 10 days and EPA would withdraw the delegation. No agency submitted a Notice of Objection.

Ecology'supdated delegation of authority covers standards promulgated and revised as of the dates specified in WAC-173-400-075, amended on August 15, 2001. These are as follows: 40 CFR part 61 and Appendices in affect on February 20, 2001, except Subparts B, H, I, K, Q, R, T, W and M as it applies to nonmajor sources; 40 CFR part 63 and Appendices in effect on February 20, 2001, except Subparts C, E, and M as it applies to nonmajor sources; 40 CFR part 63 subpart MM in effect on March 13, 2001; and 40 CFR part 65 in effect December 14, 2000. New or revised NESHAP and CAR subparts that become effective after the dates cited here are not delegated to Ecology; these remain the responsibility of EPA.

BCAA'supdated delegation of authority covers standards promulgated and revised as of the dates specified in WAC-173-400-075, amended on August 15, 2001. These are as follows: 40 CFR part 61 and Appendices in effect on February 20, 2001, except Subparts B, H, I, K, Q, R, T, and W; 40 CFR part 63 and Appendices in effect on February 20, 2001, except Subparts C, E, S, LL and M as it applies to nonmajor sources; 40 CFR part 65 in effect December 14, 2000. New or revised NESHAP and CAR subparts that become effective after the dates cited here are not delegated to BCAA; these remain the responsibility of EPA.

NWAPA'supdated delegation of authority covers standards promulgated and revised before July 1, 2000, except as specified in NWAPA's Regulation Section 104.2, amended on June 14, 2001. The delegation excludes: 40 CFR part 61, Subparts B, H, I, K, Q, R, T, and W; and 40 CFR part 63, Subparts LL and S as it applies to Kraft and Sulfite Pulping Mills. New or revised NESHAPs that become effective after July 1, 2001 are not delegated to NWAPA; these remain the responsibility of EPA.

PSCAA'supdated delegation of authority covers standards promulgated and revised prior to July 1, 2001 as specified in PSCAA Regulation I, Section 6.11, amended on September 13, 2001. The delegation excludes: 40 CFR part 61, Subparts B, H, I, K, Q, R, T, and W; and 40 CFR part 63, Subparts LL and S as it applies to Kraft and Sulfite Pulping Mills. New or revised NESHAPs that become effective after July 1, 2001 are not delegated to PSCAA; these remain the responsibility of EPA.

SCAPCA'supdated delegation of authority covers standards promulgated and revised as of the dates specified in WAC-173-400-075, amended on August 15, 2001. These are as follows: 40 CFR part 61 and Appendices in effect on February 20, 2001, except Subparts B, H, I, K, Q, R, T, and W; 40 CFR part 63 and Appendices in effect on February 20, 2001 except Subparts C, E, LL, M as it applies to nonmajor sources, and S as it applies to Kraft and Sulfite Pulping Mills; 40 CFR part 65 in effect December 14, 2000. New or revised NESHAP and CAR subparts that become effective after the dates cited here are not delegated to SCAPCA; these remain the responsibility of EPA.

These delegations are subject to all federal law, policy, guidance anddeterminations pursuant to 40 CFR parts 61, 63, and 65. Some authorities cannot be delegated and are retained by EPA. These include: (1) certain authorities in the General Provisions of Parts 61 and 63; (2) specific provisions within some Part 61 and 63 subparts; and (3) for those agencies receiving delegation of the CAR, 40 CFR part 65, § 65.8 and § 65.46 of subpart C, and § 65.102 of subpart F.

In general, EPA does not delegate any authorities that require implementation through formal rulemaking or where Federal overview is the only way to ensure national consistency in the application of the standards or requirements of the Act. Examples of the types of authorities EPA retains are: equivalency determinations, approval of alternative test methods, decisions where federal oversight is needed to ensure national consistency, and decisions that require rulemaking to implement. The authorities listed in the table below are the specific General Provision authorities that cannot be delegated to any state or local agency and are retained by EPA

The reader should refer to 40 CFR 63.90 as well as each agency's original delegation for more information about which General Provisions are delegated and which are reserved by EPA. For information about specific exclusions within a particular standard, the reader should refer to that specific subpart in 40 CFR parts 61, 63, and 65.

Ecology, BCAA, NWAPA, PSCAA, and SCAPCA are the primary implementation and enforcement authority for delegated standards. They are the recipient of notifications and reports and the point of contact for most questions and compliance issues. They work directly with owners and operators of affected facilities subject to delegated standards to ensure all required information is submitted to them. EPA ensures that this information is submitted to EPA upon request.

EPA requests that these agencies meet certain reporting requirements. For example, EPA requires submission of source data, compliance information, copies of determinations, copies of notifications pertaining to continuous opacity monitoring use, and copies of information about changes to test methods and monitoring. More detail about these requirements are provided in Ecology, BCAA, NWAPA, PSCAA, and SCAPCA's original delegations.

Sources who are subject to delegated NESHAPs or the CAR will send notifications and reports to their respective agency, except for notifications, reports, and requests that pertain to authorities that are not delegated. The later should be sent to EPA. (see above, “What are the conditions of these delegations?”)

This document provides public notice of updates to NESHAP and CAR delegations for Ecology, BCAA, NWAPA, PSCAA, and SCAPCA. These delegations are already final and were granted by letter approval from the Director, Office of Air Quality, EPA, Region 10, to the air program directors at Ecology, BCAA, NWAPA, PSCAA, and SCAPCA. These delegations are subject to all Federal law, policy, guidance and determinations issued pursuant to 40 CFR parts 61, 63, and 65. Copies of delegation letters can be obtained by contacting EPA at the address above.

The Office of Management and Budget (OMB) has exempted this regulatory action from review under Executive Order 12866, entitled “Regulatory Planning and Review.”

This rule is not subject to Executive Order 13045, entitled, “Protection of Children from Environmental Health Risks and Safety Risks,” because it is not an “economically significant” action under Executive Order 12866.

Federalism (64 FR 43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by state and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by state and local governments, or EPA consults with state and local officials early in the process of developing the proposed regulation. The EPA also may not issue a regulation that has federalism implications and that preempts state law unless the Agency consults with state and localofficials early in the process of developing the proposed regulation.

This rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because it merely approves a state program and rules implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. Thus, Executive Order 13132 does not apply to this rule.

Although Section 6 of the Executive Order does not apply to this rule, EPA did consult with representatives of state government in developing this rule, and this rule is in response to the State's delegation request.

Under Executive Order 13084, EPA may not issue a regulation that is not required by statute, that significantly or uniquely affects the communities of Indian tribal governments, and that imposes substantial direct compliance costs on those communities, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by the tribal governments. If the mandate is unfunded, EPA must provide to the Office of Management and Budget, in a separately identified section of the preamble to the rule, a description of the extent of EPA's prior consultation with representatives of affected tribal governments, a summary of the nature of their concerns, and a statement supporting the need to issue the regulation. In addition, Executive Order 13084 requires EPA to develop an effective process permitting elected and other representatives of Indian tribal governments “to provide meaningful and timely input in the development of regulatory policies on matters that significantly or uniquely affect their communities.”

This rule does not significantly or uniquely affect the communities of Indian tribal governments. This action does not involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Section 3(b) of Executive Order 13084 do not apply to this rule.

Under the Regulatory Flexibility Act (RFA), 5 U.S.C. 600et seq., EPA must prepare a regulatory flexibility analysis assessing the impact of any rule on small entities. 5 U.S.C. 603 and 604. Alternatively, EPA may certify that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small government entities with jurisdiction over populations of less than 50,000.

Delegation of authority to implement and enforce unchanged federal standards under Section 112(l) of the CAA does not create any new requirements but simply transfers primary implementation authorities to the state (or local) agency. Therefore, because this action does not impose any new requirements, I certify that it does not have a significant impact on any small entities affected.

Under Section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated annual costs to state, local, or tribal governments in the aggregate, or to private sector, of $100 million or more. Under Section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that the delegation action promulgated does not include a Federal mandate that may result in estimated annual costs of $100 million or more to either state, local, or tribal governments in the aggregate, or to the private sector. This Federal action approves pre-existing requirements under state or local law, and imposes no new Federal requirements. Accordingly, no additional costs to state, local, or tribal governments, or to the private sector, result from this action.

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

Under Section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 13, 2002. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (seeSection 307(b)(2)).

In theFederal Registerof February 8, 2002, in FR Doc. 02-3098, under the “PART 300—[AMENDED]” caption, make the following correction:

In furtherance of its leadership role in real property asset management, the Office of Governmentwide Policy, Office of Real Property, conducted a comprehensive review of the policies contained in Federal Property Management Regulations (FPMR) Part 101-3 (41 CFR part 101-3), entitled “Annual Real Property Inventories.” This review was based on a collaborative effort with Federal real property holding agencies that utilize the Worldwide Inventory of Federal Real Property.

Representatives from the Department of the Interior, the Department of Energy, and the Army Corps of Engineers participated with GSA in conducting the initial steps of the comprehensive review of the policies in FPMR part 101-3 (41 CFR part 101-3). The review focused on improvements to make the real property inventory program more useful and to enable Federal agencies to more effectively manage their real property inventories. In addition, we have rewritten these regulations in plain language format. These regulations are being transferred from the FPMR to the FMR to enable the Government to better focus on implementing statutory requirements, Executive Orders, and governmentwide policies rather than on detailed operating procedures.

An interim rule was published in theFederal Registeron November 2, 2001 (66 FR 55593). No comments were received in response to the interim rule.

GSA has determined that this final rule is not a significant regulatory action for the purposes of Executive Order 12866 of September 30, 1993.

This final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612 because it applies solely to matters concerning agency management and personnel.

The Paperwork Reduction Act does not apply because this final rule does not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors, or members of the public which require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501,et seq.

This final rule is exempt from Congressional review prescribed under 5 U.S.C. 801 since it relates solely to agency management and personnel.

This is a summary of the Report and Order (“RO”) in WT Docket No. 01-32, FCC 02-9, adopted January 16, 2002 and released January 28, 2002. The complete text is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street, SW, Washington, DC and also may be purchased from the Commission's copy contractor, Qualex International, 445 12th Street, SW, Room CY-B402, Washington, DC 20554. The document is also available via the Internet athttp://www.fcc.gov/Bureaus/Wireless/Orders/2001/fcc02-9.pdf.

1. The RO contains no proposed information collection.

2. In theNotice of Proposed Rule Makingin this proceeding (NPRM), 66 FR 14104 (March 9, 2001), the Commission proposed rules for awarding licenses for four cellular Rural Service Areas (RSAs) that remain unlicensed because the initial lottery winner was disqualified or has otherwise withdrawn its application.

3. There are currently four cellular RSA markets that remain unlicensed because the initial lottery winner was disqualified. These markets are: 332A—Polk, AR; 582A—Barnes, ND; 672A—Chambers, TX ; and 727A—Ceiba, PR. Three additional markets (370A—Monroe, FL; 492A—Goodhue, MN; and 615A—Bradford, PA) were the subject of recent Congressional action in which the Commission was directed to reinstate the original lottery winner in each of the three markets to tentative selectee status and proceed with processing the selectee's application for authority to operate.SeeDistrict of Columbia Appropriations Act of FY 2001, Public Law 106-553, Title X, 1007, 114 Stat. 2762, Launching Our Communities' Access to Local Television Act of 2000 (2000) (D.C. Appropriations Act of FY 2001);Public Notice,Wireless Telecommunications Bureau Grants Rural Cellular Licenses, 16 FCC Rcd 5601 (2001) (not published in theFederal Register), recon. denied, In the Matter of Applications of Great Western Cellular Partners, L.L.C., Monroe Telephone Services, L.L.C., and Futurewave Partners, L.L.C.,Memorandum Opinion and Order,DA 01-2443 (CWD rel. Oct. 19, 2001) (application for review pending). Underthe Balanced Budget Act of 1997 (1997 Budget Act), the Commission is now required, with certain exceptions not applicable here, to resolve mutually exclusive applications for initial licenses by competitive bidding.SeeBalanced Budget Act of 1997, Public Law 105-33, 3002(a), 111 Stat. 251, 258-60 (1997); 1997 Budget Act, Section 3002(a)(1)(A),codifiedat 47 U.S.C. 309(j)(1), (2); 1997 Budget Act, Section 3002(a)(2)(B),codifiedat 47 U.S.C. 309(i)(5). Based on the record compiled in this proceeding the Commission has decided to implement the proposals put forth in theNPRM,namely, to: (1) Allow all eligible parties to apply for these initial licenses; (2) license these markets on an RSA basis under our part 22 rules; and (3) use our part 1 competitive bidding rules to auction these licenses.

4. The Commission has been awarding cellular licenses since 1982. Under the original cellular licensing rules, one of the two cellular channel blocks in each market (the B block) was awarded to a local wireline carrier, while the other block (the A block) was awarded competitively to a carrier other than a local wireline incumbent. After awarding the first thirty Metropolitan Statistical Area (MSA) licenses pursuant to comparative hearing rules, the Commission adopted rules in a 1984Report and Order,49 FR 23628 (June 7, 1984), and a 1986First Report and Order,51 FR 26895 (July 28, 1986), to award the remaining cellular MSA and RSA licenses through lotteries. On January 31, 2001, the Commission adopted aNotice of Proposed Rulemaking,66 FR 14101 (March 9, 2001), acknowledging that in four RSA markets no initial licensee had been granted.

5. In the Omnibus Budget Reconciliation Act of 1993 (1993 Budget Act), Congress added Section 309(j) to the Communications Act, authorizing the Commission to resolve mutually exclusive applications for use of the electromagnetic spectrum by auction. Omnibus Budget Reconciliation Act of 1993, Public Law 103-66, Title VI, 6002(a), 107 Stat. 312, 387-92 (1993). In addition, Section 6002(e) of the 1993 Budget Act provided that: “[t]he Federal Communications Commission shall not issue any license or permit [by lottery] after the date of enactment of this Act unless . . . one or more applications for such license were accepted for filing by the Commission before July 26, 1993.” This provision left to the Commission's discretion whether to use auctions or lotteries for applications filed before July 26, 1993. Beginning in 1994, the Commission, in aMemorandum Opinion and Order,59 FR 37163 (July 21, 1994), exercised its discretion and used lotteries, rather than auctions, to resolve already-pending mutually exclusive applications for cellular unserved areas filed prior to July 26, 1993.

6. On August 5, 1997, the 1997 Budget Act was signed into law, modifying the Commission's auction authority by amending Section 309(j) of the Communications Act to require that all mutually exclusive applications for initial licenses or construction permits be auctioned, with certain exceptions not applicable here. 1997 Budget Act, Public Law 105-33, 3002(a), 111 Stat. 251, 258-60 (1997) (amending 47 U.S.C. 309(j)). The 1997 Budget Act expressly repealed Section 6002(e) of the 1993 Budget Act,id.at 3002(a)(4), and terminated the Commission's authority to award licenses through random selection, even in the case of applications filed prior to July 26, 1993, except for licenses for noncommercial educational and public broadcast stations,id.at 3002(a)(2)(B). The Commission had found in theCompetitive Bidding Second Report and Orderthat mutually exclusive applications for initial licenses to provide cellular service were auctionable under the auction authority provided by the 1993 Budget Act. Implementation of Section 309(j) of the Communications Act—Competitive Bidding,Second Report and Order,59 FR 22980 (May 4, 1994), (Competitive Bidding Second Report and Order). Because the 1997 Budget Act terminated the Commission's remaining lottery authority, the Bureau dismissed all pending RSA lottery applications.SeeIn the Matter of Certain Cellular Rural Service Area Applications,Order,14 FCC Rcd 4619 (WTB 1999) (not published in theFederal Register) (dismissing applications in RSAs 332A (Polk, AR), 370A (Monroe, FL), 492A (Goodhue, MN), 582A (Barnes, ND), 615A (Bradford, PA), and 727A (Ceiba, PR)); In the Matter of Certain Cellular Rural Service Area Applications in Market Nos. 599A and 672A,Order,DA 99-814 (CWD rel. Apr. 29, 1999) (dismissing applications in RSAs 599A (Nowata, OK) and 672A (Chambers, TX)); In the Matter of Certain Rural Service Area Applications in Market Nos. 599A and 672A,Order on Reconsideration,DA 99-1426 (CWD rel. July 21, 1999) (reinstating applications of tentative selectees in those markets—Zephyr Tele-Link in RSA 599A and Alee in RSA 672A); In the Matter of Zephyr Tele-Link Application for a Construction Permit to Establish a Cellular System Operating on Frequency Block A in the Domestic Public Cellular Radio Telecommunications Service To Serve the Oklahoma 4-Nowata Rural Service Area, Market No. 599A,Order15 RCC Rcd 4247 (CWD 2000) (granting application of Zephyr Tele-Link); In the Matter of Application of Alee Cellular Communications for Authorization to Construct Nonwireline Cellular System in Texas RSA 21 Market 672,Memorandum Opinion and Order,15 FCC Rcd 2831(2000) (not published in theFederal Register) (recon. pending) (dismissing application of Alee) (Alee Cellular). Several of the applicants sought reconsideration of the Bureau's dismissal of the RSA applicants, and the Bureau declined to reconsider its actions. In the Matter of Certain Cellular Rural Service Area Applications,Order,16 FCC Rcd 4619 (WTB 2001) (not published in theFederal Register) (affirming dismissals) (March 2, 2001 Order). Ranger Cellular and Miller Communications, Inc. have sought further reconsideration of the Bureau's dismissal of the applications, and High Tower Communications, Inc. has sought Commission review of the Bureau's action. Consolidated Petition for Reconsideration of Ranger Cellular and Miller Communications, Inc. (filed Mar. 30, 2001); Application for Review of High Tower Communications, Inc. (filed Apr. 2, 2001).

7. In the first dismissal order cited above, the Bureau also dismissed as moot CCPR's Petition requesting that we award licenses for the remaining RSA markets through competitive bidding. CCPR's Petition specifically requested that market 727A—Ceibo, Puerto Rico, be awarded through competitive bidding rather than through a second lottery. However, the CCPR Petition raised certain issues concerning the broader applicability of the use of competitive bidding for all markets where an initial lottery was held and the winner was disqualified. The Commission therefore treated the CCPR Petition as a petition for rulemaking and requested comment on awarding cellular licenses through competitive bidding for all remaining unlicensed RSAs. Although the Commission dismissed CCPR's Petition as moot because we are required by the 1997 Budget Act to award licenses through competitive bidding, we have considered, and are incorporating into the record of this proceeding, all comments and reply comments submitted in response to the CCPR Petition.

8. The four markets for which no initial license has been granted are:332A—Polk, AR; 582A—Barnes, ND; 727A—Ceiba, PR; and 672A—Chambers, TX. These four markets are the subject of thisReport and Order.

9. Congress enacted the Balanced Budget Act of 1997, which requires the Commission to resolve mutually exclusive applications for initial licenses through competitive bidding instead of random selection, with certain exceptions not applicable here. Accordingly, the Commission initiated this rulemaking in order to adopt rules for the granting of initial cellular RSA authorizations by means of competitive bidding. The Commission's objective in this rulemaking proceeding is to establish, for cellular RSA markets for which a tentative selectee has been disqualified, the applicable competitive bidding and licensing rules. Such rules are necessary in order to determine the classes of eligible entities as well as determine what policies, if any, should be adopted to promote participation by small business entities, consistent with the Commission's statutory obligation under Section 309 of the Communications Act of 1934, as amended, 47 U.S.C. 309.

10. No comments were submitted specifically in response to the IRFA. Some of the comments responding to the proposals contained in theNPRM,however, discussed issues that could affect small businesses. Two of the three commenters that addressed eligibility for the four cellular RSA licenses at issue generally supported permitting all eligible entities to apply for the licenses.See Report and Orderat ¶¶ 8-21. The third commenter opposed such open eligibility (which would encompass small businesses), instead arguing that only entities that had filed lottery applications for these licenses in 1988 and 1989andhad appealed the dismissal of their lottery applications should be permitted to apply for these licenses (which would mean only three entities would be potentially eligible).See Report and Orderat ¶¶ 8-21.

11. One commenter supported the proposals contained in theNPRMto provide bidding credits to small businesses to encourage them to bid on and win the cellular RSA licenses.See Report and Orderat ¶¶ 27-33. Another commenter opposed adoption of such bidding credits on the basis that such credits would unfairly and uneconomically skew the auction in favor of smaller entities.See Report and Orderat ¶¶ 27-33.

12. Regarding eligibility for the four cellular RSA licenses, the Commission determined in theReport and Order,that any entity otherwise qualified under the rules would be permitted to apply for any of the four RSA licenses.See Report and Orderat ¶¶ 8-21. As explained in greater detail in theReport and Orderand in Section Einfra,the Commission concluded that permitting broad-based eligibility would best further the public interest as well as facilitate participation by small businesses.

13. Regarding the adoption of bidding credits for certain categories of small businesses, the Commission concluded that including such bidding credits as part of the cellular RSA application and bidding process would help to promote opportunities for small businesses.See Report and Orderat ¶¶ 27-33. As explained in greater detail in theReport and Orderand Section Einfra,implementation of bidding credits facilitates the ability of small businesses to compete against larger entities and promotes economic opportunities for those small businesses.

14. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted.See5 U.S.C. 603(b)(3). The RFA defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisidiction.”Id. 601(6). The term “small business” has the same meaning as the term “small business concern” under section 3 of the Small Business Act.Id. 601(3) (incorporating by reference the definition of “small business concern” in 15 U.S.C. 632). Pursuant to the RFA, the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in theFederal Register.” 5 U.S.C. 601(3). A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA at 15 U.S.C. 632.

15. A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” 5 U.S.C. 601(4). Nationwide, as of 1992, there were approximately 275,801 small organizations. 1992 Economic Census, U.S. Bureau of the Census, Table 6 (special tabulation of data under contract to Office of Advocacy of the U.S. Small Business Administration). “Small governmental jurisdiction” generally means “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000.” 5 U.S.C. 601(5). As of 1992, there were approximately 85,006 such jurisdictions in the United States. 1992 Census of Governments, U.S. Bureau of the Census, U.S. Department of Commerce. This number includes 38,978 counties, cities, and towns; of these, 37,566, or 96 percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, the Commission estimate that 81,600 (91 percent) are small entities. According to SBA reporting data, there were 4.44 million small business firms nationwide in 1992.

16. According to recent telecommunications industry revenue data, 808 carriers reported that they were engaged in the provision of either cellular service or Personal Communications Services (PCS), which are placed together in that data. Trends in Telephone Service, Table 19.3 (March 2000). This data does not indicate how many of these 808 carriers fall within each of the revenue tiers defined by the Commission for the purpose of receiving bidding credits as some form of small business or entrepreneur.See Report and Orderat ¶¶ 29-33. As described in theReport and Orderand Section Einfra,the Commission defined an “entrepreneur” as an entity with average annual gross revenues not exceeding $40 million for the preceding three years and provided a 15 percent bidding credit; a “small business” as an entity with average annual gross revenues not exceeding $15 million for the preceding three years and provided a 25 percent bidding credit; and a “very small business” as an entity with average annual gross revenues not exceeding $3 million for the preceding three years and provided a 35 percent bidding credit.

17. The Commission is required to estimate in this FRFA the number of small entities to which any new rules would apply, provide a description of such entities, and assess the impact of the rule on such entities. The rules adopted in theReport and Orderwillapply to all entities that seek to obtain the subject licenses, including small entities. The number of entities that may apply to participate in these future auctions is unknown. Moreover, these entities might already be providers of cellular service or PCS or other wireless services, or they may have no current involvement in the wireless industry. To the extent that existing cellular or PCS operators would apply for the subject authorizations, the applicable NAICS code is 513322. Existing paging carriers, which might also be interested in these authorizations, fall under NAICS code 513321. Resellers of paging and cellular services are identified by NAICS code 51333.

18. The number of small businesses that have participated in prior auctions has varied. Small businesses, as defined under the Commission's rules in the context of various auctions for authorizations in specific services, have accounted for 1,667 out of a total of 2,096 qualified bidders in all prior auctions, not including broadcast auctions. As provided in Section 1.2110(c)(1) of the Commission's rules, and in conformity with the Small Business Act and the regulations of the Small Business Administration, the Commission establishes small business definitions for purposes of its auctions on a service-specific basis.See47 CFR 1.2110(c)(1); 15 U.S.C. 632(c)(2)(c); 13 CFR 121.902(b). Statistics for broadcast license auctions are not available, and would be less relevant to the licenses at issue here. Given these statistics, the Commission expects a large percentage of participants in our auctions program generally to be small businesses in the future, although this may not be the case in this individual auction.

19. The Commission imposes no new reporting, recordkeeping, or other compliance requirements in theReport and Order.The only projected reporting and recordkeeping requirements that will apply in any auctions for the four cellular RSA authorizations are those that are already established by Commission regulations. Nothing in this rulemaking changes those regulations. The Commission will accept new license applications and use our general Part 1 competitive bidding rules to conduct the auction. These rules require all applicants to electronically submit FCC Form 175 in order to participate in the auction and, at the conclusion of the auction, all high bidders to electronically submit FCC Form 601 to apply for a license.See47 CFR 1.2105(a), 1.2107(a). The purposes of these forms are to ensure that applicants are eligible to participate in the auction and that high bidders are eligible to hold the cellular RSA licenses at issue. The Office of Management and Budget has already approved both of these forms. FCC Form 175, OMB Control No. 3060-0600 (effective until Apr. 30, 2004); FCC Form 601, OMB Control No. 3060-0798 (effective until Mar. 31, 2002). In addition, under our Part 1 rules, any entity wishing to receive a bidding credit for serving qualifying tribal lands must comply with 47 CFR 1.2110(f)(3), an obligation also approved by the Office of Management and Budget.See47 CFR 1.2110(f)(3).

20. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities. 5 U.S.C. 603(c)(1)-(4).

21. In theReport and Order,the Commission adopts rules to permit us to grant initial licenses in four cellular RSAs. In adopting these rules, the Commission considered the potential significant economic impact of the rules on small entities. Specifically, the Commission considered the impact of its eligibility definition on the ability of small businesses even to apply for the licenses at issue in this proceeding and to participate in the associated auctions. The Commission also considered the effect of the proposed bidding credits for three categories of small businesses on the ability of small businesses to compete successfully in the auctions and to build out a system should such businesses be awarded any of the licenses. As described in theReport and Orderand Section Einfra, the Commission defined an “entrepreneur” as an entity with average annual gross revenues not exceeding $40 million for the preceding three years and provided a 15 percent bidding credit; a “small business” as an entity with average annual gross revenues not exceeding $15 million for the preceding three years and provided a 25 percent bidding credit; and a “very small business” as an entity with average annual gross revenues not exceeding $3 million for the preceding three years and provided a 35 percent bidding credit.

22. Also, in proposing to apply the Commission's existing Part 1 competitive bidding rules to any auctions for these licenses, the Commission took into account their effect on small businesses.

23. The rules adopted by theReport and Orderwill affect all small entities that seek to acquire any of the four cellular RSA licenses discussed herein. The Commission believes that permitting all eligible entities to apply for the four licenses—instead of restricting eligibility to three applicants that filed lottery applications in 1988 and 1989—will promote opportunities for participation by small businesses. A greater number of small businesses will have the chance to seek the authorizations at issue.

24. The Commission has sought to promote small business ownership by defining three tiers of small businesses for the purposes of providing bidding credits to small entities: an “entrepreneur” is an entity with average annual gross revenues not exceeding $40 million for the preceding three years; a “small business” is an entity with average annual gross revenues not exceeding $15 million for the preceding three years; and a “very small business” is an entity with average annual gross revenues not exceeding $3 million for the preceding three years. The Small Business Administration approved these proposed small business definitions on January 30, 2001.SeeLetter from Fred P. Hochberg, Acting Administrator, Small Business Administration, to Margaret W. Wiener, Chief, Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, Federal Communications Commission, dated Jan. 30, 2001 (SBA Letter).See alsoLetter from Margaret W. Wiener, Chief, Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, Federal Communications Commission, to Gary M. Jackson, Assistant Administrator, Small Business Administration, dated Sept. 21, 2001. The bidding credits are 15 percent for entrepreneurs, 25 percent for small businesses, and 35 percent for very small businesses. The Commission specifically rejected arguments in opposition to the use of bidding credits for small businesses. As explained in theReport and Order, adoption of bidding credits for small businesses provides them with an opportunity to compete successfully against larger, well-financed bidders.Report and Order at ¶ 32. The Commission believes the bidding credits it has adopted will benefit a range of small businesses.

25. The Commission will apply its Part 1 competitive bidding rules equally to all applicants for the licenses, including small businesses. Our Part 1 competitive bidding rules have been designed to ensure that small businesses are not placed at a disadvantage and have a full and fair opportunity to compete in fair auction proceedings. While these rules require small businesses to submit application forms in order to participate in the auctions for the subject licenses, the Commission believes that equitably applying the same rules to all entities helps to promote fairness in the process and to ensure that the auction is effective. Fair and effective auction proceedings benefit small businesses as well as all other participants.

26.Background.In theNPRM,the Commission proposed to allow all eligible entities to participate in an auction for the four cellular RSA licenses at issue in this proceeding. The Commission noted that the competitive bidding program seeks to award each license to the applicant that values it most highly and that is, therefore, most likely to offer valued service to the public. The Commission explained that excluding potential applicants that were not previously lottery applicants would be inconsistent with that goal. The Commission also recognized that, because nearly twelve years have passed since the closing of the original RSA filing window, a number of commenters that have expressed interest in participating in RSA auctions would not have had the opportunity to file applications, while some applicants that did file lottery applications may no longer exist. Finally, the Commission reasoned that, to the extent former lottery applicants continue to have an interest in applying for these markets, open eligibility allows them to do so.

27. In each of the four unlicensed RSAs, the Commission has granted interim operating authority to one or more cellular operators to provide cellular service on the Channel A block pending the ultimate permanent licensing of these RSAs. The Commission also specifically proposed to permit cellular operators that have been granted interim operating authority (IOA) in the four unlicensed RSAs to participate in the RSA auction. The Commission noted that although IOAs confer no interest or expectation of receiving a cellular license, IOA holders might have a substantial interest in bidding for permanent authorizations in markets where they may have been providing interim cellular service.

28.Discussion.After careful consideration, the Commission concludes that it is in the public interest to allow all entities, including current IOA holders and former lottery applicants, to participate in the RSA auction. In recent years, the Commission has generally favored open eligibility because the Commission believes that maximizing the pool of auction applicants helps to ensure that licenses are awarded to entities that value them most highly and are, therefore, most likely to offer prompt service to the public.See, e.g., Competitive Bidding Second Report and Order, 59 FR 22980 (May 4, 1994); Amendment of the Commission's Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands, Implementation of Section 309(j) of the Communications Act—Competitive Bidding, 37.0-38.6 GHz and 38.6-40.0 GHz,Report and Order and Second Notice of Proposed Rulemaking, 12 FCC Rcd 18600, 18617-20, ¶¶ 30-35 (1997) (not published in theFederal Register); Implementation of Sections 309(j) and 337 of the Communications Act of 1934 as Amended, Promotion of Spectrum Efficient Technologies on Certain Part 90 Frequencies, Establishment of Public Service Radio Pool in the Private Mobile Frequencies Below 800 MHz,Report and Order, 15 FCC Rcd 22709, 22736-37, ¶¶ 54-56 (2000) (BBA Report and Order) (not published in theFederal Register).But see, e.g., BBA Report and Order, 15 FCC Rcd at 22737, ¶ 56 (not published in theFederal Register) (the Commission has authority to restrict eligibility in particular cases if such restrictions are consistent with our spectrum management responsibilities under Section 309(j)). The Commission has found that this approach to auction participation best fulfills the public interest objectives set forth in Section 309(j)(3) of the Communications Act. 47 U.S.C. 309(j)(3)(A)-(D). Further, the Commission does not believe that there are any compelling reasons to exclude potential participants in the upcoming RSA auction.

29. A number of commenters support open eligibility, particularly current IOA holders and entities that did not previously file lottery applications. With respect to eligibility, two of the four commenters that responded to theNoticesupport open eligibility. In addition, several commenters that responded to the CCPR Petition favored open eligibility. Cingular argues that permitting open eligibility will ensure that licenses are awarded to applicants that value them the most highly. Cingular specifically insists that the Commission allow IOA holders in the subject markets to apply for licenses. ALLTEL also supports the Commission's proposal to permit open eligibility. BANM asserts that open eligibility will expedite cellular service to the RSA markets. WWC urges the Commission to give all interested applicants an opportunity to provide cellular service in the RSAs. Century contends that the number of potential service providers has increased in the years since the closing of the original RSA filing window and that broadening auction participation would permit the best qualified and most highly motivated entities to compete.

30. Several commenters oppose open eligibility. Some of these commenters, such as Ranger and Miller, seek to restrict eligibility to former lottery applicants who continue to contest dismissal of their applications. One commenter responding to theNoticecontends that the auction should be restricted to former lottery applicants. Commenters in response to theCCPR Petitionalso argue that the Commission should limit the auction to former lottery applicants. Other commenters argue that IOA holders should be barred from participating in the cellular RSA auction. These commenters generally contend that it is the Commission's policy, when it grants a party's application for IOA service, to dismiss that party's pending application for permanent authority for the subject market. AALA claims that an IOA holder would have an advantage over other applicants in an auction because it would have a “unique ability” to calculate the value of the license. In contrast, BANM and CCPR argue that the Commission's policy for excluding IOAs was implemented to avoid unfair advantage in the comparative hearing process and thus is not relevant when licenses are assigned by competitive bidding.

31. Several commenters cite toAshbacker Radio Corp. v.FCC, 326 U.S. 327 (1945). See, e.g., AALA Comments at 14 (to allow one applicant to operate in a market under temporary authority poses a severe threat to the principles set forth inAshbacker). We note that short-form applications to participate in competitive bidding are governed by Section 309(j), and not the procedural requirements of Sections 309(a), 309(b), or 309(e), or theAshbackerdoctrine, which requires a comparative hearing when competing applicants file conflicting license or constructionpermit applications for the same authorization. See Elleron Oil Co. and WVI Partners, Inc. Petition for Reconsideration of Dismissal of Short-Form Applications for Interactive Video and Data Service Auction,Order, 13 FCC Rcd 17246, 17251-52, ¶ 9 (WTB 1998) (not published in theFederal Register). Section 309(j) does not require the Commission to use a notice and cut-off procedure or establish “cut-off dates” to invite mutually exclusive applications for a particular license.See id. at 17250, ¶ 8.

32. In determining eligibility for auction participation, the Commission is required by Section 309(j)(3) to promote certain public interest objectives. Those objectives include rapid deployment of new technologies and services to the public, promotion of economic opportunity and competition, recovery for the public of a portion of the value of the spectrum, and efficient and intensive use of the spectrum. 47 U.S.C. 309(j)(3)(A)-(D). The Commission believes that a policy of unrestricted eligibility in the RSA auction will best fulfill our public interest goals. Here, open eligibility has a higher probability of promoting the rapid delivery of services to the public than limited eligibility. This is because open eligibility increases the likelihood that all entities who have an interest in putting the license to use will participate in the auction. Among these, the bidder who is willing to pay the most will be highly motivated to rapidly put the license to a use that the public finds valuable because only such a use will make its investment worthwhile. Importantly, no commenter has presented evidence in this case that there are entities with market power whose participation might allow them to limit or reduce competition by their entry. In such a situation, permitting as many qualified bidders as possible allows competition and economic opportunity to flourish by reducing one barrier to market entry, potentially resulting in a more competitive applicant pool. In the absence of evidence of market failure, the market, and not regulation, should determine participation in competitive bidding here, and the Commission should allow the maximum number and types of bidders to participate in the auctions.

33. An important factor in our decision to permit open eligibility is that the licenses at issue in this proceeding will cover rural areas. Under Section 309(j)(4)(B), the Commission is required to encourage the rapid deployment of services specifically to rural areas. 47 U.S.C. 309(j)(4)(B). BANM also highlights the need for the provision of service in rural markets, stating that, “[w]hile many urban markets have enjoyed cellular service for as long as thirteen years, these rural service areas have remained without a permanent nonwireline cellular licensee.” The Commission believes that open eligibility will encourage participation in the RSA auction by entities that are most likely to be interested in, and capable of, serving rural areas.

34. Our decision to permit open eligibility in the RSA auction includes the participation of current IOA holders in the four unlicensed RSAs. The Commission's policy to dismiss applications for permanent status filed by IOA holders originated in the context of comparative hearings, based on the concern that the decision to grant a license in a comparative hearing would be biased in favor of an IOA holder because it had incurred substantial expenses in its temporary operations.SeeIn re Applications of La Star Cellular Telephone Co. and New Orleans CGSA, Inc,Memorandum Opinion and Order, 4 FCC Rcd 3777 (1989) (not published in theFederal Register),aff'd, 899 F.2d 1233 (D.C. Cir 1990).See Community Broadcasting Co.v.FCC, 274 F.2d 753 (D.C. Cir. 1960) (an interim operator's expenditure of sizeable funds on its temporary operation would inevitably influence the Commission's final decision, no matter how much the Commission tried to eliminate this factor). The Commission declines to extend that policy to the competitive bidding process. IOA holders will not have an advantage over other bidders as they once had over other applicants in comparative hearings because, in an auction, licenses are assigned to the highest bidder, regardless of prior operating status.SeeImplementation of Section 309(j) of the Communications Act—Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses,Memorandum Opinion and Order, 14 FCC Rcd 8724, 8737-39, ¶¶ 23-26 (1999) (not published in theFederal Register) (the Commission rejected arguments that holders of interim authority have a comparative advantage in an auction process). As the Commission stated in theNPRM, although IOAs confer no entitlement to, or expectation of, receiving a cellular license, IOA holders may have a substantial interest in bidding for permanent authorizations in markets where they have been providing interim cellular service. Given our previously adopted policies and the record in this proceeding, the Commission concludes that current IOA holders should not be excluded from participating in the auction of licenses for the unlicensed RSAs on an equal basis with other applicants.

35. Joint commenters Ranger and Miller raise a variety of statutory and equitable arguments against open eligibility, none of which the Commission find persuasive. First, Ranger and Miller argue that Section 309(l) of the Communications Act of 1934, as amended, restricts eligibility for cellular radio licenses to lottery applicants that filed their applications prior to July 1997 and whose applications allegedly are “unresolved.” Section 309(l) provides in pertinent part that, with respect to competing applications for initial licenses for “commercial radio and television stations” that were filed with the Commission before July 1, 1997, the Commission shall treat the persons filing such applications as the only persons eligible to be qualified bidders. Public Law 105-33, 3002(a)(3), 111 Stat. 251, 260 (1997) (codified at 47 U.S.C. 309(l)). Ranger and Miller contend that the Commission's rules define cellular radio as a “commercial mobile radio service” and that, therefore, the reference to “commercial radio” in Section 309(l) includes cellular radio. Cingular disagrees with Ranger and Miller, asserting that the Commission should not view “commercial radio” and “television stations” as distinct, unrelated terms. Cingular maintains that the term “commercial” was intended to excludenoncommercial educational radio and televisionapplications from the scope of Section 309(l) and from competitive bidding under Section 309(j)(2)(C).

36. The Commission agrees with Cingular's interpretation of the statutory language, which is plain on its face. The statute does not use “commercial radio” and “television stations” as distinct terms. Rather, the reference in the statute to “commercial radio and television stations” clearly refers to broadcast facilities. Where Congress has referred to wireless services like cellular in other provisions of the Communications Act of 1934, as amended, it has clearly used the term “commercial mobile services.”See, e.g., 47 U.S.C. 253(e), 274(i)(2)(B), 332(c)(1), 332(d)(1). As the Supreme Court has explained, “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”Russellov.United States,464 U.S. 16, 23 (1983) (internal quotation marks omitted), citingUnited Statesv.Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972). The legislative history also confirms that Section 309(l) applies only to commercial broadcast radio and television applications. The Conference Report specifically states that “[n]ew section 309(l) of the Communications Act requires the Commission to use competitive bidding to resolve any mutually exclusive applications forradio or television broadcast licensesthat were filed with the Commission prior to July 1, 1997.” H.R. Conf. Rep. No. 217, 105th Cong., 1st Sess. at 573 (1997) (Conference Report) (emphasis added). The Commission has applied Section 309(l) only to pending comparative broadcast licensing cases.SeeImplementation of Section 309(j) of the Communications Act “ Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses,First Report and Order, 63 FR 48615 (Sept. 30, 1998) (Broadcast First Report and Order); recon. denied, 14 FCC Rcd 8724 (1999) (not published in theFederal Register); modified, 14 FCC Rcd 12541 (1999) (not published in theFederal Register);SeeIn the Matter of Amendment of Section 73.202(B), FM Table of Allotments, FM Broadcast Stations,Memorandum Opinion and Order, 16 FCC Rcd 2272 (2001) (not published in theFederal Register).

37. Contrary to the claim of Ranger and Miller,Bachow Communications, Inc.v.FCCdoes not support the notion that Section 309(l) applies to cellular RSA applications as well as broadcast license applications.Bachow Communications, Inc.v.FCC, 237 F.3d 683 (D.C. Cir. 2001) (Bachow).Bachow'scentral holding instead is that license applications for 39 GHz service filed under a comparative hearing licensing scheme could be dismissed when the Commission shifted to an auction licensing scheme.Bachow, 237 F.3d at 686-688 (recognizing the “Commission's authority to change license assignment allocation (sic) procedures midstream” even though it disrupts expectations and alters the competitive balance among applicants). Ranger and Miller also cite the D.C. Circuit's opinion inMcElroyto support their argument that the Commission cannot make the RSA licenses available to new applicants.McElroy Electronics Corp.v.FCC, 86 F.3d 248 (D.C. Cir. 1996) (McElroy).McElroyholds that when the Commission decides to process timely-filed applications, it generally may not also process competing applications filed out of time.McElroy, 86 F.3d at 253-259. Because we will permit open eligibility for the subject licenses, and all applications to participate in the auction will be newly filed, theMcElroydecision is inapposite.

38. Ranger and Miller also offer up a litany of equitable arguments that they contend support artificially limiting eligibility. They argue that the Commission should limit the RSA applicant pool because the number of unresolved lottery applicants is small, the applications have been pending for thirteen years, the service rules for RSA licenses have not changed, and the lottery applicants did not have notice when they filed their applications that competitive bidding, rather than lotteries, might be used to assigned licenses. In addition, Ranger and Miller oppose open eligibility on the grounds that the Commission did not refund their lottery application filing fees, and that open eligibility will lead to delay and litigation.

39. Ranger and Miller fail to show how the public interest would be served by limiting the RSA auction to only three former lottery applicants. In fact, it is well-established that, regardless of when an application is filed, an applicant has no vested right to a continuation of the licensing procedures in effect at the time its application was filed.See, e.g., Bachow, 237 F.3d at 687-688; Revision of Part 22 and Part 90 of the Commission's Rules To Facilitate Future Development of Paging Systems,Memorandum Opinion and Order on Reconsideration and Third Report and Order, 64 FR 33762 (June 24, 1999);Broadcast First Report and Order, 13 FCC Rcd at 15937, ¶ 44 (not published in theFederal Register); Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band,Third Order on Reconsideration, 13 FCC Rcd 4856, 4941, ¶ 195 (1998) (not published in theFederal Register), citingChadmoore Communications, Inc.v.FCC, 113 F.3d 235, 240-41 (D.C. Cir. 1997). Moreover, there is no logical nexus between the length of time the applications were pending and the rationale for restricting eligibility to bid in the RSA auction. Similarly, the claim that the lottery applicants did not have any notice of possible rule changes at the time they filed their applications provides no reasonable rationale for the proposed narrowing of eligibility. The Commission's action declining to refund application filing fees neither gives the applications continued “life” nor justifies restrictions on eligibility. Finally, the Commission necessarily is guided by the public interest objectives set forth in Section 309(j)(3)(A)-(D) in setting application eligibility and not by concerns over the prospects of litigation and appeals. 47 U.S.C. 309(j)(3)(A)-(D).

40. Ranger and Miller Comments at 9, 12-13. Ranger and Miller argue that the Commission should restrict eligibility because Miller helped the Commission determine that a cellular RSA licensee was unqualified to hold a RSA license. Ranger and Miller Comments at 10-12. We disagree. Any action by Miller that may have led the Commission to such a determination is irrelevant to our decision whether we should, as a general rule, adopt open eligibility with respect to the four cellular RSA markets. We are obligated to promote the public interest, not individual applicants.

41. Ranger and Miller totally disregard the equities of other parties potentially interested in seeking the subject authorizations, as well as equitable considerations relevant to the public interest. As the Commission found above, adopting open eligibility—the antithesis of the licensing plan promoted by Ranger and Miller—for these licenses has a greater probability than limited eligibility of resulting in the rapid deployment of new technologies and services to the public, the possibility of competition and economic opportunity, and the efficient and intensive use of the spectrum. Such a result would promote the public interest, and therefore, open eligibility is warranted. In addition, it is important to recognize that there may be parties interested in providing cellular service in these markets, and qualified to do so, that did not even exist at the time the lottery applications were filed.

42. Finally, Ranger and Miller argue that an open eligibility policy in this context must necessarily be based on the potential for increased revenue to the Treasury. Section 309(j)(7)(B) does not preclude the Commission from adopting eligibility rules based on other considerations, even though such rules may also result in increased federal revenues. The purpose of open eligibility is not to maximize the amount of revenues raised in an auction but to ensure that licenses are awarded to those that value them most highly and that, therefore, will be most likely to provide rapid and efficient service to the public. Indeed, by asserting that auction revenues will be greater if they are forced to compete with a larger number of bidders, Ranger and Miller may be suggesting that they value the RSA licenses less highly than their potential competitors. Our determination to permit open eligibility in the RSA auction is based on our statutory obligations to promotecompetition and rapid deployment of services to rural areas, not to enhance the Federal Treasury.

43.Background.In theNPRM,the Commission sought comment on whether the markets for which licenses are to be awarded through competitive bidding should be based on RSAs, or whether alternative licensing models should be considered. The Commission received two comments that supported licensing the markets on an RSA basis, and no party expressed opposition to that proposal.

44.Discussion.The Commission concludes that the remaining unlicensed cellular RSA markets should be licensed on an RSA basis under our Part 22 rules. As the Commission observed in theNPRM,the initial lotteries for the unlicensed markets were for RSAs as defined in 47 CFR 22.909 of our rules. To employ another market model for these RSAs would be potentially disruptive to adjacent cellular operations, as well as possibly impede the cost-effective buildout of facilities to serve the residents of these areas as well as transient users. The Commission also will, pursuant to 47 CFR 22.947, subject licenses awarded for these markets to the same construction and operational rules as licenses granted to prior RSA lottery winners, including the exclusive right of the auction winner to expand its system within that market for a period of five years. After the expiration of the five-year expansion period, any areas within the RSA that remained unserved would be available for licensing pursuant to 47 CFR 22.949 of our rules which governs unserved areas Phase I and Phase II filing procedures.

45.Background.In thePart 1 Third Report and Order,the Commission streamlined its auction procedures by adopting general competitive bidding rules set forth in Part 1, Subpart Q, of the Commission's rules applicable to all auctionable services. Amendment of Part 1 of the Commission's Rules—Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use,Third Report and Order and Second Further Notice of Proposed Rule Making,62 FR 13540 (March 21, 1997) (modified by Erratum, DA 98-419 (rel. March 2, 1998))(Part 1 Third Report and Order).The Commission clarified and amended these general competitive bidding procedures. Amendment of Part 1 of the Commission's Rules—Competitive Bidding Procedures,Order on Reconsideration of the Third Report and Order, Fifth Report and Order, and Fourth Further Notice of Proposed Rule Making,65 FR 52323 (Aug. 29, 2000) (modified by Erratum, DA 00-2475, 65 FR 52401 (rel. Aug. 29, 2000))(Part 1 Order on Reconsideration)(recons. pending). More recently, the Commission adopted modifications to Section 1.2105(c) of the Commission's rules, the competitive bidding “anti-collusion rule.” Amendment of Part 1 of the Commission's Rules—Competitive Bidding Procedures, WT Docket No. 97-82,Seventh Report and Order,66 FR 54447 (Oct. 29, 2001).See also47 CFR 1.2101et seq.In theNPRM, the Commission proposed to conduct the auction of cellular RSA licenses in conformity with the general competitive bidding rules, including any amendments adopted in thePart 1 Order on Reconsideration, Fifth Report and Order, and Fourth FNPRM,65 FR 52323 (August 29, 2000) proceeding. Specifically, the Commission proposed to employ the Part 1 rules governing competitive bidding design, designated entities, application and payment procedures, reporting requirements, collusion issues, and unjust enrichment. The Commission further stated that winning bidders would be eligible to obtain a bidding credit for serving qualifying tribal lands.See47 CFR 1.2110(f)(3). A tribal land bidding credit is in addition to, and separate from, any other bidding credit for which a winning bidder may qualify. Unlike other bidding credits that are requested prior to the auction, a winning bidder applies for the tribal land bidding credit after winning the auction when it files its long-form application. In this regard, we note that only one RSA subject to these proposals—RSA 582A-Barnes, ND—contains any federally recognized tribal lands. Finally, theNPRMcontemplated that auction-related procedural matters such as the appropriate competitive bidding design for the RSA auction, as well as minimum opening bids and reserve prices, would be determined by the Bureau pursuant to its delegated authority prior to the start of the cellular RSA auction.See47 CFR 0.131(c), 0.331, and 0.332;see alsoAmendment of Part 1 of the Commission's Rules—Competitive Bidding Procedures,Order, Memorandum Opinion and Order, and Notice of Proposed Rule Making,62 FR 13540 (March 21, 1997).

46.Discussion.The Commission adopts the proposal to conduct the auction for initial licenses in the four cellular RSAs in conformity with the general competitive bidding rules set forth in Part 1, Subpart Q, of the Commission's rules. The Commission believes that this decision to conduct the RSA auction in conformity with the standardized Part 1 rules will increase the efficiency of the competitive bidding process and provide specific guidance to auction participants.

47. Although the Commission received few comments on this issue, none of the commenters opposed the application of the general competitive bidding rules. One commenter, Cingular, favors application of the general competitive bidding rules to the RSA auction. In its comments, Cingular also requests that the bidding design ultimately selected not include combinatorial bidding, (Combinatorial bidding design allows for bids on combinations or packages of licenses.) arguing that it is inappropriate where no “synergies” exist among the markets in question. As indicated in theNPRM, the Bureau will seek comment by Public Notice on auction-related procedural issues, including the appropriate competitive bidding design, prior to the start of the cellular RSA auction. This approach will provide the Bureau with an opportunity to weigh the benefits and disadvantages of combinatorial bidding design, among other auction-specific issues.

48.Background.In theNPRM,the Commission proposed to adopt special provisions for small businesses that participate in the auction for cellular RSA licenses. The Commission noted that the markets at issue could attract a wide range of entities and the adoption of bidding credits will help us meet our Congressional mandate to promote competition and to disseminate licenses among a wide variety of applicants. Accordingly, the Commission proposed to define an entrepreneur as an entity with average annual gross revenues for the preceding three years not exceeding $40 million, a small business as an entity with average annual gross revenues for the preceding three years not exceeding $15 million, and a very small business as an entity with average annual gross revenues for the preceding three years not exceeding $3 million. The entrepreneur and small business definitions are consistent with the small business definitions we established for the broadband Personal Communications Services C and F blocks. We also proposed the definition of very small business for the RSAauction because smaller businesses may be interested in acquiring licenses to provide service in these markets. The Small Business Administration approved these proposed small business definitions on January 30, 2001.See SBA Letter.The Commission further proposed, as provided in Section 1.2110(f)(2) of our rules, to offer entrepreneurs a bidding credit of 15 percent, small businesses a bidding credit of 25 percent, and very small businesses a bidding credit of 35 percent.

49. The Commission sought comment on whether the characteristics and capital requirements of cellular service call for a different approach. The Commission also asked commenters, to the extent that they propose additional provisions to ensure participation by businesses owned by minorities and women, to address how such provisions should be crafted to meet the relevant standards of judicial review.

50.Discussion.As the Commission tentatively concluded in theNPRM,it will adopt the following small business definitions and bidding credits: (1) An “entrepreneur” with average annual gross revenues for the preceding three years not exceeding $40 million will be eligible for a 15 percent bidding credit; (2) a “small business” with average annual gross revenues for the preceding three years not exceeding $15 million will be eligible for a 25 percent bidding credit; and (3) a “very small business” with average annual gross revenues for the preceding three years not exceeding $3 million will be eligible for a 35 percent bidding credit.

51. The Commission is not persuaded that large carriers are necessarily better suited to provide cellular RSA service. In any case, the Commission does not prescreen applicants' relative qualifications. Further, the Commission believes that competition between large and small entities will benefit subscribers in the rural markets. Also, the Commission is not persuaded that the adoption of bidding credits will, in any way, impede service to these areas. To the extent that, as ALLTEL suggests, cellular service is a national “mature” service dominated by large carriers, our decision to adopt bidding credits should help eliminate barriers to entry for small businesses, consistent with our statutory mandate.See47 U.S.C. 309(j)(3)(B).

52. Finally, ALLTEL contends that the auction will be skewed toward smaller entities that receive an overly generous bidding credit, which will distort market valuation. While the Commission agrees that bidding credits provide small businesses with an advantage, Congress, in Section 309(j), specifically directed the Commission to promote economic opportunities for small businesses. The Commission further notes that bidding credits alone do not guarantee success; rather, they provide small businesses with an opportunity to successfully compete against larger, well-financed bidders.SeeRevision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging Systems, Implementation of Section 309(j) of the Communications Act—Competitive Bidding,Second Report and Order and Further Notice of Proposed Rulemaking,62 FR 11616 (March 12, 1997). Because bidding credits are the best tool the Commission has to promote these opportunities, the Commission concludes that it is appropriate to adopt the special provisions for small businesses.

53. The Commission does adopt special preferences for entities owned by minorities or women. As the Commission did not receive any comments on this issue, the Commission does not have an adequate record to support such special provisions under the current standards of judicial review.See Adarand Constructorsv.Peña,515 U.S. 200 (1995) (requiring a strict scrutiny standard of review for Congressionally mandated race-conscious measures);United Statesv.Virginia,518 U.S. 515 (1996) (applying an intermediate standard of review to a state program based on gender classification). The Commission believes the bidding credits adopted here for small businesses will further our objective of disseminating licenses among a wide variety of applicants. Furthermore, minority and women-owned entities that qualify as small businesses may take advantage of the special provisions.

54. In its comments, Alee has requested that RSA 672A (Texas 21—Chambers) not be included in any upcoming auction pending the outcome of its petition for reconsideration of an order denying its application in that market. For the reasons stated below, the Commission denies Alee's request and includes the Texas 21 RSA authorization among the markets to be subject to auction rules.

55. Alee requests that, if the Commission includes the Texas 21 authorization in the contemplated auction, the Commission gives notice to any potential bidder that any license won in that market would be subject to Alee's claim. If Alee ultimately prevails in the hearing process, the license will be awarded accordingly. If Alee does not prevail, then the Commission will have the necessary licensing rules and policies in place for the Texas 21 authorization without having to conduct another rulemaking proceeding. The Commission will ensure that interested parties are fully informed to the extent that Alee's claim remains unresolved.

56.Background.Under the terms of each of the existing IOAs, the IOA operator must cease operations immediately upon initiation of service by the new licensee, provided that the new licensee gives at least 30 days written notice of its intent to provide service. The IOA condition specifically provides that “[t]he interim operator must fully cooperate with the permanent licensee in effectuating a smooth transition to the provision of service in the market by the permanent licensee withoutdisruptionof service to the public. The interim operator must cease operations in the market on the date of initiation of permanent service or within 30 days of written notice by the permanent permittee to the interim operator of the day and time that it intends to initiate service, whichever date occurs later.” In order to prevent unnecessary interruption of service to existing cellular customers, the Commission proposed in theNPRMthat, in the event that any of the current IOA holders do not obtain the RSA license for their markets, they should be allowed to continue providing service on a temporary basis subject to these conditions,i.e.,until the auction winner provides the required notice and is prepared to commence service. Minimizing such interruptions while the auction winner establishes its service will also help to retain 911 access in the IOA service area. Cingular requests that the Commission clarify its rules to provide that interim operators may continue to operate until the auction winner is prepared to commence service in that particular part of the market where the IOA holder is operating in order to avoid disruption in service to the public.

57.Discussion.Because of the nature of these markets and carrier buildout practices, the Commission anticipates the auction winner will not initially provide coverage throughout the entire market. As a result, the auction winner may or may not initiate service in the area where the public currently is receiving service from the IOA holder. The Commission will require the IOA holder to “pull back” its service area boundaries (SAB) to eliminate any overlap with the auction winner's ownSAB, and to terminate service in the RSA upon notice from the auction winner that the latter is extending coverage into the area served under the IOA. The Commission feels that this will best serve the public interest by preventing localized disruptions in service during the transition period.

58. As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in theNotice of Proposed Rule Makingin this docket.See5 U.S.C. 603. The RFA,see5 U.S.C. 601et seq., has been amended by the Contract with America Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). The Commission sought written public comment on the proposals in theNPRM,including comment on the IRFA. The comments received are discussed above. This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.See5 U.S.C. 604.

59. Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 603, the Final Regulatory Flexibility Analysis (FRFA) is set forth above. The Commission's Consumer Information Bureau, Reference Information Center, will send a copy of thisReport and Order,including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with the Regulatory Flexibility Act.

60.Report to Congress:The Commission will include a copy of theReport and Order,including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act.See5 U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of theReport and Order,including this FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of theReport and Orderand FRFA (or summaries thereof) will also be published in theFederal Register.See5 U.S.C. 604(b).

61. Pursuant to 4(i), 303(r) and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r) and 309(j), Part 22, 47 CFRis Amendedas specified in the rule changes and the auctions for Markets 322A—Polk, AR, 592A—Barnes, ND, 727A—Ceiba, PR, and 672A—Chambers, TX be conducted under Part 1, Subpart Q of the Commission's rules, 47 CFR 1.2101et seq.,and that all eligible parties be permitted to participate in the bidding.

62. The rules and policies adopted in this Report and Order shall become effective April 15, 2002.

63. The Commission's Consumer Information Bureau, Reference Information Center, shall send a copy of thisReport and Order,including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

This rule implements Section 807 of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398). Section 807 adds women-owned small businesses to the types of concerns that may participate as protege firms in the DoD Pilot Mentor-Protege Program. This rule also clarifies that business concerns owned and controlled by an Indian tribe or a Native Hawaiian organization are eligible to participate as protege firms in the Program.

DoD published an interim rule at 66 FR 47108 on September 11, 2001. DoD received one comment on the interim rule. The comment did not recommend any change to the rule. Therefore, DoD is converting the interim rule to a final rule without change.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD has prepared a final regulatory flexibility analysis. Interested parties may obtain a copy of the analysis from the point of contact specified herein. The analysis is summarized as follows: This rule permits women-owned small businesses to participate as protege firms in the DoD Pilot Mentor-Protege Program. The objective of the rule is to provide an opportunity for women-owned small businesses to enhance their capabilities and increase their participation in Government and commercial contracts. Presently, there are 3,471 women-owned small business concerns that do business with DoD. Since the inception of the Mentor-Protege Program, 160 mentor firms and 509 protege firms have participated in the Program. Each protege firm must provide annual data to its mentor firm, for submission to the Government, regarding the progress of the protege firm in employment, revenues, and participation in DoD contracts. DoD received no comments in response to the initial regulatory flexibility analysis.

The information collection requirements of the DoD Pilot Mentor-Protege Program have been approved by the Office of Management and Budget under Control Number 0704-0332, for use through March 31, 2004.

A partnership agreement between DoD and SBA, dated February 1, 2002, permits DoD to award 8(a) contracts directly to 8(a) concerns, on behalf of SBA. The partnership agreement replaced a memorandum of understanding, which also permitted direct award of 8(a) contracts, and which was implemented in DFARS Subpart 219.8. This interim rule amends DFARS Subpart 219.8 to reflect the provisions of the new partnership agreement. The amendments include the following:

1. Emphasis that SBA remains the prime contractor on all 8(a) contracts, continues to determine eligibility of concerns for contract award, and retains appeal rights under Section 19.810 of the Federal Acquisition Regulation. SBA delegates to DoD only the authority to sign contacts on its behalf.

2. For negotiated acquisitions, authorization for the contracting officer to submit a request for an eligibility determination on all firms in the competitive range if discussions are to be conducted, or on all firms with a realistic chance of award if no discussions are to be conducted. Previously, the contracting officersubmitted eligibility determinations on no more than three of the most highly rated offerors.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,et seq., because the rule affects only the administrative procedures used for award of contracts under the 8(a) Program. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2001-D016.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501,et seq.

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule implements a partnership agreement between DoD and SBA. The agreement streamlines procedures for awards under SBA's 8(a) Program by authorizing DoD to award contracts directly to 8(a) concerns. The partnership agreement became effective on February 1, 2002. Comments received in response to this interim rule will be considered in the formation of the final rule.

The restriction on acquisition of vessel propellers at DFARS 225.7020 implements Section 8064 of the DoD Appropriations Act for Fiscal Year 2001 (Public Law 106-259). Section 8064 provides that no funds appropriated in fiscal year 2000 or 2001 may be used for the procurement of vessel propellers other than those produced by a domestic source and of domestic origin. The DoD Appropriations Act for Fiscal Year 2002 (Public Law 107-117) contains no such provision. Therefore, this final rule amends DFARS 225.7020 to clarify that the restriction applies only to DoD contracts that use fiscal year 2000 or 2001 funds.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

This rule will not have a significant cost or administrative impact on contractors or offerors, or a significant effect beyond the internal operating procedures of DoD. Therefore, publication for public comment is not required. However, DoD will consider comments from small entities concerning the affected DFARS subpart in accordance with 5 U.S.C. 610. Such comments should cite DFARS Case 2002-D006.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501,et seq.

This final rule amends DFARS 226.7103 to clarify policy pertaining to preferences for local businesses in acquisitions that support a base closure or realignment. The present policy permits award under the Section 8(a) Program if “the 8(a) contractor” is located in the vicinity of the base to be closed or realigned. This rule amends the text to permit use of 8(a) procedures if “at least one eligible 8(a) contractor” is located in the vicinity. This change clarifies the intent of the policy, which is to permit both competitive and noncompetitive 8(a) acquisitions in support of a base closure or realignment. A similar clarifying amendment is made to the text pertaining to set-asides for small business concerns.

DoD published a proposed rule at 66 FR 47158 on September 11, 2001. DoD received no comments on the proposed rule. Therefore, DoD is adopting the proposed rule as a final rule without change.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,et seq., because the rule merely clarifies existing policy pertaining to acquisitions made in support of a base closure or realignment.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501,et seq.

10 U.S.C. 2465 prohibits DoD from entering into contracts for the performance of firefighting or security-guard functions at military installations or facilities, unless certain exceptions apply. Section 1010 of the USA Patriot Act (Public Law 107-56) adds another exception to this prohibition, to apply during the period of time that United States armed forces are engaged in Operation Enduring Freedom and 180 days thereafter. The exception permits award of contracts for security functions to proximately located local and State governments. This interim rule amends DFARS 237.102-70 to implement Section 1010 of Public Law 107-56.

This rule was not subject to Office of Management and Budget review underExecutive Order 12866, dated September 30, 1993.

DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,et seq., because the rule applies only to military installations and facilities and proximately located local and State governments. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subpart in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2001-D018.

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501,et seq.

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 1010 of the USA Patriot Act (Public Law 107-56). Section 1010 permits DoD to enter into contracts for the performance of security functions at military installations and facilities during the period of time that United States armed forces are engaged in Operation Enduring Freedom and 180 days thereafter. Section 1010 became effective on October 26, 2001. Comments received in response to this interim rule will be considered in the formation of the final rule.

EPA's Office of Acquisition Management established a Procurement Guidance Work Group to assess EPA acquisition policies and recommend changes where appropriate. Among the recommendations were two changes to the EPAAR to eliminate requirements which either: (1) Duplicate other Federal Regulations, or (2) outline unnecessary procedural requirements for EPA contracting officers. Specifically, EPAAR 1515.308-71 provides procedural requirements for documentation in source selection decisions over and above those required by Federal Acquisition Regulation (FAR) 15.308. The EPA Procurement Guidance Work Group determined these additional procedural requirements are not necessary, and therefore should be removed from the EPAAR. The Procurement Guidance Work Group also determined that EPAAR 1533.212, Contracting Officer's duties upon appeal, essentially duplicate procedures set forth in 43 CFR part 4 (Department of Interior Board of Contract Appeals Regulations) and should therefore be removed from the EPAAR.

In addition, technical amendments are being made to the solicitation provision at EPAAR 1552.219-71, Procedures for Participation in the Mentor-Protege Program, in order to bring the provision into compliance with statutory language. Specifically, since Pub. L. 102-389 (EPA's 1993 Appropriations Act) did not require certain restrictions on the mentor-protege program previously specified in the provision, these restrictions have been eliminated.

This is not a significant regulatory action for the purposes of Executive Order 12866; therefore, no review is required by the Office of Information and Regulatory Affairs, within the Office of Management and Budget (OMB).

The Paperwork Reduction Act does not apply because this rule does not contain information collection requirements that require the approval of OMB under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

The RFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impact of today's rule on small entities, small entity is defined as: (1) A small business that meets the definition of a small business found in the Small Business Act and codified at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; or (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the proposed rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. This rule streamlines agency internal operating procedures and will therefore not have a significant economic impact on small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess their regulatory actions on State, local, and Tribal governments, and the private sector. This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in one year. Any private sector costs for this action relate to paperwork requirements and associated expenditures that are far below the level established for UMRA applicability. Thus, the rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is determined to be economically significant as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

This rule is not subject to Executive Order 13045 because it is not an economically significant rule as defined by Executive Order 12866, and because it does not involve decisions on environmental health or safety risk.

Executive Order 13132 entitled “Federalism” (64 FR 43255, August 10, 1999) requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” are defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

Under Section 6 of Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law, unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and tribal input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive Order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.”

This direct final rule does not have tribal implications. It will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, as specified in Executive Order 13175. The rule in an acquisition regulation that is technical and administrative in nature. Thus, Executive Order 13175 does not apply to this rule.

EPA will use voluntary consensus standards, as directed by section 12(d) of the National Technology Transfer andAdvancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note), in its procurement activities when applicable. The NTTAA directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This rulemaking does not involve technical standards. Therefore, EPA is not considering use of any voluntary consensus standards. EPA welcomes comments on this aspect of the rule making, and, specifically, invites the public to identify potentially applicable voluntary consensus standards and to explain why such standards should be used in this regulation.

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001) because it is not a significant regulatory action under Executive Order 12866.

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

Yermo xanthocephaluswas discovered by Wyoming botanist Robert Dorn while conducting field work in the Beaver Rim area of central Wyoming in 1990. Dorn discovered a small population of an unusual species of Composite (Asteraceae). Dorn's closer examination revealed that the species was unknown to science and represented a new genus. Dorn (1991) named his discoveryY. xanthocephalus, or literally “desert yellowhead.”

Yermo xanthocephalusis a tap-rooted, glabrous (hairless) perennial herb with leafy stems to 30 centimeters (cm) (12 inches (in)) high. The leathery leaves are alternate, lance-shaped to oval, 4 to 25 cm (1.5 to 10 in) long and often folded along the midvein. Leaf edges are smooth or toothed. Flower heads are many (25 to 180) and crowded at the top of the stem. Each head contains four to six yellow disk flowers (ray flowers are absent) surrounded by five yellow, keeled involucre (whorled) bracts (small leaves beneath the flower). The pappus (the outer whorl of flowering parts) consists of many white bristles.

The species is restricted to shallow deflation hollows in outcrops of Miocene sandstones of the Split Rock Formation (Van Houten 1964). These wind-excavated hollows accumulate drifting snow and may be more mesic (moist) than surrounding areas. The vegetation of these sites is typically sparse, consisting primarily of low-cushion plants and scattered clumps of Indian ricegrass (Stipa hymenoides).

Dorn observed approximately 500 plants within 1 hectare (2.5 acres) in 1990 on Federal land managed by the Bureau of Land Management (BLM). Surveys conducted since 1990 by Richard Scott, Curator of the Central Wyoming College Herbarium in Riverton, have failed to locate additional populations on outcrops of the White River, Wagon Bed, and Wind River formations in the Beaver Rim area. The estimate of the plant population's size has increased from 500 in 1990 to 11,967 plants in 2001. However, Dorn's original estimate of 500 plants was a visual estimate and did not include 2 nearby subpopulations, while Scott has been counting all plants in all 3 subpopulations using a monitoring grid. Therefore, the difference in estimates may be largely the result of different techniques used over differing acreages and cannot be assumed to show a significantly increasing trend in population size between 1990 and 2001. Based upon Scott's data collected from 1995 through 2001, the actual population count has increased from 9,293 in 1995 to 11,967 in 2001, possibly in response to higher than normal precipitation over the study period (R. Scott, Central Wyoming College, pers. comm., 2001).

In the plant notice of review published on September 30, 1993 (58 FR 51144), we designatedYermo xanthocephalusa Category 2 species for potential listing under the Endangered Species Act (Act) of 1973, as amended (16 U.S.C. 1531et seq.). At that time, Category 2 species were those for which data in our possession indicated listing was possibly appropriate, but for which substantial data on biological vulnerability and threats were not currently known or on file to support a proposed rule. On February 28, 1996, we published a Notice of Review in theFederal Register(61 FR 7596) that discontinued the designation of Category 2 species as candidates, and this species was upgraded to candidate status at that time. A candidate is a species for which we possess substantial information on biological vulnerability and threats to support preparation of a listing proposal.

On November 24, 1997, we received a petition from the Biodiversity Legal Foundation and Biodiversity Associates alleging thatYermo xanthocephaluswarranted emergency listing. On December 22, 1997, we notified the petitioners that emergency listing was not appropriate because BLM regulations provided some conservation measures for the species, and current exploratory oil and gas activities near the known occupied habitat ofY. xanthocephaluswere being coordinated with our staff in the Wyoming Field Office. In addition, we notified the petitioners that petitions for candidate species are considered second petitions, because candidate species are species for which we have already decided that listing is warranted. Therefore, no 90-day finding was required for Biodiversity Legal Foundation's petition.

The proposed rule to listYermo xanthocephalusas threatened was published in theFederal Registeron December 22, 1998 (63 FR 70745). With aFederal Registerpublication on September 5, 2000 (65 FR 53691), we reopened the comment period. In the same publication, we sought comments regarding a draft conservation agreement, assessment, and strategy submitted by BLM for our consideration when making this listing decision. The conservation agreement, assessment, and strategy was never finalized or signed and has not been considered as a firm commitment to perform the actions when assessing conservation commitments in making this listing decision.

On August 9, 1999, BLM segregated (proposed withdrawal of) 3,759.12 acres surrounding the population ofYermo xanthocephalusfor 2 years from location and entry under the General Mining Act of 1872, and from settlement, sale, location, and entry under the general land laws (64 FR 43209). However, this segregation expired on August 9, 2001, with no finalized withdrawal in place.

On November, 12, 2001, Biodiversity Legal Foundation, Biodiversity Associates, Center for Native Ecosystems, and Wyoming Outdoor Council filed a complaint in the U.S. District Court of Colorado alleging that the Service failed to make a timely final listing determination and critical habit designation forYermo xanthocephalus.

In the December 22, 1998, proposed rule (63 FR 70745) we requested that all interested parties submit factual reports and information that might contribute to the development of this final rule. The comment period for the proposed rule was open from December 22, 1998, through February 22, 1999. On September 5, 2000, the comment period was reopened (65 FR 53691) to accommodate the public notice requirement of the Act, consider any new scientific information, and allow for comments on the draft conservation agreement submitted by BLM. We published legal notices in the “Casper Star Tribune” on September 5, 2000, and in the “Riverton Ranger” and the “Lander Journal” on September 6, 2000. The reopened comment period closed October 5, 2000.

During the initial comment period, 12 sets of comments were received. During the reopened comment period, we received 3 sets of comments regarding the proposed listing action. Additionally, 4 sets of comments were received by BLM regarding its draft conservation agreement, assessment, and strategy. We had no requests for a public hearing during either comment period. Of the comments we received, 8 supported, 3 opposed, and 4 were neutral regarding the proposed threatened status forYermo xanthocephalus.

We updated the final rule to reflect comments and information we received during the comment period. We address opposing comments and other substantive comments concerning the rule below.

Issue 1: Yermo xanthocephaluswarrants endangered status, not threatened status.

Response:As mentioned above, the population of Yermo xanthocephalus has increased from 9,293 individuals in 1995 to 11,967 individuals in 2001. The future existence of the species is threatened by potential oil and gas development and other factors, including its extremely limited range. Although we believe the species is likely to become endangered in the foreseeable future if the threats to the habitat are realized, the population has shown stability since 1995. Additionally, the population occurs on Federal land and BLM is cooperating with interested parties to conserve the plant. A monitoring and research program is being implemented as well. As a result,Y. xanthocephalusdoes not meet the definition of an endangered species under the Act because it is not in imminent danger of extinction in the foreseeable future. Therefore, listing as threatened is appropriate.

Issue 2:Listing ofYermo xanthocephalusis not warranted since the population has increased from 500 plants in 1990 to an estimated 15,000 plants in 1998.

Response:The proposed rule did indicate that the population contained an estimated 15,000 plants. The actual population size (based upon counting of all plants) was 11,635. The population has fluctuated between 9,293 and 13,244 since 1995, with the 2001 population being comprised of 11,927 individual plants. However, a meaningful comparison of the recent numbers with Dorn's initial estimate is not possible. The 1990 estimate of 500 plants made by Dorn was based purely on a visual estimate of 1 subpopulation within 1 hectare (2.5 acres). Subsequent surveys since 1995 by Dick Scott have involved counting all plants in all three subpopulations. It is not possible to make trend estimates comparing such different survey methods implemented on disparate acreages.

Issue 3:ListingYermo xanthocephaluswill draw attention to its location and increase the risk of harm through vandalism or collection. Similarly, critical habitat designation is not prudent because it will increase these risks.

Response:We remain concerned that publication of precise maps and descriptions of critical habitat in theFederal Registerand local newspapers could increase the vulnerability of this plant to incidents of collection, general vandalism, and trampling by curiosity-seekers. However, we do not believe the listing ofYermo xanthocephalusincreases the likelihood of such activities. The general location ofY. xanthocephalusis widely known bymany citizens. At this time we have no specific evidence of taking, vandalism, collection or trade of this species. We do not believe listing the species will increase this threat. Additionally, in the absence of specific evidence, we cannot conclude that designation of critical habitat would not be prudent based on increased threat. See the Critical Habitat section below for more detailed discussion of this issue.

Issue 4:Livestock use of the area and associated potential adverse effects toYermo xanthocephalusare not characterized correctly.

Response:We have adjusted our description of livestock use in the area to better reflect information provided during the comment period. We acknowledge that livestock grazing may not currently be resulting in significant adverse effects to theYermo xanthocephaluspopulation. However, we believe a low level of adverse effect is occurring with the potential to become more significant in the future.

Issue 5:The existing data contain significant gaps and the Service should complete studies prior to making a listing determination.

Response:We thoroughly reviewed all scientific data available onYermo xanthocephalusin preparing the proposed rule. We contacted experts and reviewed data collected since intensive population monitoring began in 1995. We based our opinion on the best scientific and commercial data available, as required by section 4(b)(1) of the Act. We have reviewed this information and any new information available since the date of the proposed rule in making this final listing decision.

In accordance with our peer review policy published on July 1, 1994 (59 FR 34270), we requested the expert opinions of three independent specialists regarding pertinent scientific or commercial data and assumptions relating to supportive biological and ecological information in the proposed rule. The purpose of such review is to ensure that the listing decision is based on scientifically sound data, assumptions, and analyses, including input of appropriate experts and specialists. Two of the specialists responded with comments. We have incorporated their comments into the final rule, as appropriate, and summarized their observations below.

One reviewer questioned the adequacy of the Act to appropriately protectYermo xanthocephaluswithout making it more vulnerable to collectors and vandals. Additionally, the reviewer believed that certain land use changes (such as restriction of cattle and wildlife grazing) might be detrimental to the plant.

The second reviewer believed the evidence supported listingYermo xanthocephalusas either threatened or endangered. The reviewer provided information regarding unsuccessful attempts to locateY. xanthocephalusin other suitable habitat and indicated it is unlikely other populations ofY. xanthocephaluswill be found. This reviewer expressed concerns regarding the likelihood that adequate funding and commitment will be provided to implement the BLM conservation strategy for the species. Additionally, the reviewer indicated a need for captive propagation and establishment of new populations as necessary conservation measures that should be implemented.

Section 4 of the Act and regulations (50 CFR part 424) promulgated to implement the listing provisions of the Act set forth the procedures for adding species to the Federal lists. A species may be determined endangered or threatened due to one or more of the five factors described in section 4(a)(1). These factors and their application toYermo xanthocephalus(desert yellowhead) are as follows:

A.The present or threatened destruction, modification, or curtailment of its habitat or range:The entire known range ofYermo xanthocephalusconsists of an area of 20 hectares (50 acres) in southern Fremont County, Wyoming. Surveys conducted since 1990 have failed to find additional populations, although there are a number of sites with similar soils, drainage and plant associations in the area. Surveys conducted since 1995 by Dr. Ron Hartman in similar potential habitat within the North Platte watershed, Washakie basin, Great Divide basin, and Green River basin have proved equally unsuccessful in locating additional populations (W. Fertig, University of Wyoming,in litt., 1999). The plant is easily recognized during its summer flowering season, so it seems likely that surveys would have found additional populations if they exist. Therefore, the species is vulnerable to extinction from even small-scale habitat degradation due to its small population size and limited geographic range.

The known population is threatened by surface disturbances associated with recreation, oil and gas development, mineral extraction, trampling by livestock, and soil compaction by vehicles (Fertig 1995). Recreational off-road vehicle use presents a threat toYermo xanthocephalusthrough the crushing of plants and compaction or erosion of soil. This threat is greatest in the spring and summer when plants are in flower or heavy with fruit. No physical barriers prevent vehicle use in the immediate area of theY. xanthocephaluspopulation. The known population is several miles from Wyoming State Highway 135 and other maintained roads. In 1996, Highway 135 had an estimated daily traffic of 360 vehicles (Wyoming Department of Transportation 1996). A two-track, four-wheel drive trail leading to an abandoned oil well bisects the population, and is open to hunters or other recreationists using four-wheel drive trucks and other smaller all-terrain vehicles (ATVs). The most common activities that attract users to the area are hunting, rock collecting, and searching for human artifacts (such as arrowheads). The population is a few miles north of the Sweetwater Crossing on the Oregon-California Trail, which is a popular tourist attraction. There has been no significant surface disturbance caused by vehicles during the past 6 years that the site has been under study (R. Scott, Central Wyoming College, pers. comm., 2001). However, Scott (2000) has noted light vehicular traffic and fresh tire tracks in the site. The BLM Resource Management Plan limits vehicle use to existing roads (including established two-tracks), but the potential for habitat and plant destruction by ATVs remains a threat.

Oil and gas development also threaten the known population. In 1997, BLM leased for oil and gas development a 1,160-acre tract (designated WYW140702) that encompasses theYermo xanthocephaluspopulation. An adjacent lease (WYW138846) consisting of 2,080 acres was purchased by the same operator in May 1996. Both leases are for a 10-year period, and no specific lease stipulations were included to protect the plant. Construction of well pads, access roads, and pipelines through occupied habitat would result in direct destruction or crushing of plants and soil compaction and erosion. The 1920 Mineral Leasing Act promotes maximum recovery of Federal mineral resources. However, the 1987 Amendments to the Mineral Leasing Act (30 U.S.C. 226(g)) require lessees to have an approved operating plan that protects surface resources prior to submitting Applications for Permission to Drill. The BLM regulations provide thatspecies that are candidates for listing under the Act be afforded protection.

The current lessee is aware that the plant exists in the area, and has been very cooperative with BLM staff. The current drilling plan proposes exploration in locations that should not pose a threat toYermo xanthocephalus, but the current operator is free to sell its leases to other companies that could revise the drilling plan. An existing two-track road leading to an abandoned oil well currently bisects the only population ofY. xanthocephalus. Redrilling of abandoned wells in search of producing formations that may have been previously overlooked is a common technique used during oil and gas exploration. Permits to drill can be conditioned by BLM to provide some protection to sensitive species by requiring a proposed drill pad be relocated up to 200 meters (656 feet). Candidate, proposed, and listed species can be protected by prohibiting surface occupancy in known populations.

Although the current oil and gas exploratory wells pose no threat toYermo xanthocephalus,the discovery of an oil or gas pool on the lease areas would precipitate field developments that would introduce new threats to the plant and its habitat. In-field development could involve up to eight wells per section, depending on the characteristics of the producing formations. This intensified drilling activity would result in a new network of additional roads and well pads, and more human intrusion into what is now a remote area.

Seismic explorations for oil and gas producing formations also present a threat toYermo xanthocephalusand its habitat through use of explosives, direct trampling, and soil compaction. However, these activities were carried out in the lease area during the early 1990s, so a permit application for further exploration is not likely. In addition, seismic explorations on BLM surface now require environmental analysis prior to permitting, and BLM will protect occupiedY. xanthocephalushabitat from damage if a request for further exploration is received (J. Kelly, BLM, pers. comm., 1998).

The knownYermo xanthocephaluspopulation is located in an area managed by BLM's Lander Field Office, and locatable mineral resources, such as gold and uranium, are known to exist in that part of Wyoming. Private parties can stake a mining claim, explore for, and extract locatable minerals in accordance with the 1872 General Mining Law, and such activity could jeopardize the known population ofY. xanthocephalus.Uranium and zeolites, a locatable mineral with properties useful in water softening, manufacturing of catalysts, and pollution control, are found in the Beaver Rim area. Zeolites also may have marketability for use in processes to remove radioactive products from radioactive wastes (Bureau of Land Management 1986). The BLM's authority to regulate mineral claims under the 1872 General Mining Law is limited, although mining activities in areas with 5 or more acres of surface disturbance of unpatented BLM land are required to have an approved operating plan under 43 CFR 3809. Although the staking of locatable mineral claims on or near the plant's habitat is not likely, official withdrawal of the area from locatable mineral claims would remove this threat.

Livestock grazing also may present a threat toYermo xanthocephalushabitat, which is within an existing grazing allotment. Although Fertig (1995) indicated livestock appear to use theY. xanthocephalushabitat primarily as a travel corridor between adjacent sagebrush-grassland pastures, the area is actually a large pasture and livestock trampling of plants occurs only as cattle casually move along “cow trails” or two-tracks while grazing or moving to water. Scott (2000) noted signs of moderate horse traffic adjacent to the site. There are no existing barriers to prevent livestock access to the habitat. Fencing of the area would protect the plants from this threat, but also would probably result in a change in the associated plant community in the habitat. This change could result in unanticipated adverse impacts to the survival ofY. xanthocephalus.

B.Overutilization for commercial, recreational, scientific, or educational purposes: Yermo xanthocephalusis vulnerable to over-collecting conducted for scientific or educational purposes because of its small extant population size and habitat. The leaves ofY. xanthocephaluscontain a chemical that produces a mild numbing sensation in the human mouth when even tiny portions are tasted (R. Scott, pers. comm., 1998). This could indicate potential medicinal qualities that could prove attractive to pharmaceutical companies, but the potential for this to be a threat to the existing population is currently unknown.

C.Disease or predation:Cattle graze in the immediate vicinity of occupied Yermo xanthocephalus habitat, but observation on the site indicate that the plant is not palatable to grazers. Tracks reveal that domestic and wild animals grazing the area spit outY. xanthocephalusleaves and flowers after tasting (R. Scott, pers. comm., 1998). Predation ofY. xanthocephalusfruit by insects does occur, and in 1990 fruit production appeared low because of insect predation. However, it is unknown whether or not the extent of current predation differs from historical levels. Therefore, the degree of threat that this factor poses to the species is unknown.

D.The inadequacy of existing regulatory mechanisms:The State of Wyoming has no endangered species act or other laws to provide protection to plant species. The current BLM Lander Resource Management Plan (RMP), which covers the known population ofYermo xanthocephalus,was approved in 1987, 3 years prior to the species' discovery. Therefore, the plan does not specifically mention the species. The RMP protects special status plant species in general across the entire Resource Area, and provides no-surface-occupancy restrictions for threatened and endangered species impacted by oil and gas development. AsY. xanthocephalusis not currently listed, and no specific stipulations were included with the current oil and gas leases, attempts by BLM to restrict activities by imposing conditions during the application to drill stage are appealable by the operator. On April 9, 2001, BLM approved a list of sensitive species occurring on BLM properties in Wyoming. The list is intended to heighten awareness of the conservation needs of the species and encourage protective measures where possible. However, there are no protective measures mandated for the species. Additionally,Y. xanthocephalusis not currently on the sensitive species list and would have to be officially added.

E.Other natural or manmade factors affecting its continued existence:Species with small population size and restricted distribution are vulnerable to extinction by natural processes and human disturbance (Levin et al. 1996). Random events causing population fluctuations or population extirpations become a serious concern when the number of individuals or the geographic distribution of the species is very limited. A single human-caused or natural environmental disturbance could destroy the entire population ofYermo xanthocephalus.

This species physically occupies an area of 3.37 hectares (8.33 acres), and while the total number of plants known to exist through actual counting of each plant has increased from 9,293 in 1995 to 11,967 in 2001 (with a high of 13,244 in 2000), this increase may be due to higher than normal precipitation during study years (R. Scott, Central WyomingCollege, pers. comm., 2001). The establishment of this species is probably episodic and dependent on suitable spring and summer moisture conditions (Fertig 1995). Total fruit production appeared low due to heavy herbivory by insects and drought-induced abortion in 1990 (Dorn 1991). Dorn further speculated that in typical years recruitment of seedlings is probably extremely low or nil. However, observations since then have not supported that reproduction is necessarily low or that heavy herbivory by insects causes low reproduction. Drought-induced abortion has not been studied (Bureau of Land Management 1998). A decrease in population size from 12,099 plants in 1997 to 11,635 plants in 1998 may have been due to overall decreased precipitation (R. Scott, Central Wyoming College, pers. comm., 2001). A similar decrease in population size from 13,244 plants in 2000 to 11,967 in 2001 was noted and seems to have coincided with decreased precipitation. Therefore, a series of drought years could result in a severe reduction in population size and eventual extinction.

As described by Fertig (1995), the species is characterized by a long-lived perennial growth form, adaptation to severe habitats, and low annual reproductive output. This low reproductive output makes the species increasingly vulnerable to extinction due to chance events as population size declines, because it is unlikely that the species will exhibit a high rate of population growth, even if environmental conditions improve after such an event.

In addition to the above factors, threats toYermo xanthocephalusare increased when people use the occupied area for recreational purposes. For example, erosion or trampling of plants is possible due to hikers or off-road vehicle use. The species occurs on barren sites with less than 25 percent total vegetative cover, and may be intolerant of competition (Fertig 1995). Competition from plants not native to the area would pose a greater threat than competition from species with whichY. xanthocephalushas evolved. Non-native plants that might outcompeteY. xanthocephaluscould be introduced to the area if their seeds are carried in on the footwear or clothing of recreationists.

An additional threat that affectsYermo xanthocephalusis that posed by its small population size. Populations of plants that remain very small for several generations or that have gone through a past episode of rapid population decline may lose much of their previous genetic variability (Godt et al. 1996). When a population's genetic variability falls to low levels, its long-term persistence may be jeopardized because its ability to respond to changing environmental conditions is reduced. In addition, the potential for inbreeding depression increases, which means that fertility rates and survival rates of offspring may decrease. Although environmental and demographic factors usually supercede genetic factors in threatening species viability, inbreeding depression and the low genetic diversity may enhance the probability of extinction of rare plant species (Levin et al. 1996).

We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats toYermo xanthocephalusin determining to issue this final rule. Based on this evaluation, the preferred action is to listY. xanthocephalusas threatened. Although the population has increased since 1995, the future existence of the species is still threatened by potential oil and gas in-field development and by its extremely limited habitat and population size. While not in immediate danger of extinction,Y. xanthocephalusis likely to become an endangered species in the foreseeable future if the threats to the habitat are realized and if present threats posed by small population size and limited geographic range continue to exist. We have determined that threatened status would provide adequate protection from the described threats. As the species occurs only on Federal surface, a classification as endangered, if warranted, would provide no additional level of protection.

Critical habitat is defined in section 3 of the Act as—(i) the specific areas within the geographical area occupied by a species, at the time it is listed in accordance with the Act, on which are found those physical or biological features (I) essential to the conservation of the species and (II) that may require special management considerations or protection; and (ii) specific areas outside the geographical area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. “Conservation” means the use of all methods and procedures needed to bring the species to the point at which listing under the Act is no longer necessary.

Section 4(a)(3) of the Act, as amended, and implementing regulations (50 CFR 424.12) require that, to the maximum extent prudent and determinable, the Secretary designate critical habitat at the time the species is determined to be endangered or threatened. Our regulations (50 CFR 424.12(a)(1)) state that designation of critical habitat is not prudent when one or both of the following situations exist—(1) The species is threatened by taking or other human activity, and identification of critical habitat can be expected to increase the degree of threat to the species, or (2) such designation of critical habitat would not be beneficial to the species.

Critical habitat receives consideration under section 7 of the Act with regard to actions carried out, authorized, or funded by a Federal agency (see Available Conservation Measures section). As such, designation of critical habitat may affect activities on Federal lands and may affect activities on non-Federal lands where such a Federal nexus exists. Under section 7 of the Act, Federal agencies are required to ensure that their actions do not jeopardize the continued existence of a species or result in destruction or adverse modification of critical habitat. However, both jeopardizing the continued existence of a species and adverse modification of critical habitat often have similar standards and thus similar thresholds for violation of section 7 of the Act.

Critical habitat designation, in some situations, may provide some value to the species by identifying areas important for species conservation and calling attention to those areas in special need of protection. Critical habitat designation of unoccupied habitat also may benefit these species by alerting permitting agencies to potential sites for reintroduction and allowing them the opportunity to evaluate proposals that may affect those areas.

In the proposed rule, we found that the designation of critical habitat forYermo xanthocephaluswas not prudent because the minimal benefits of such designation would be far outweighed by the increase of threats from over collection or other human activities. We believed critical habitat designation would provide no additional benefit to the species beyond that conferred under sections 7 and 9 of the Act by listing. We indicated protection ofY. xanthocephaluswould be most effectively addressed through the recovery process under section 4 of the Act and the consultation process under section 7 of the Act, and the current interagency coordination processes.

Given the extremely limited range ofYermo xanthocephalus,we believed any case of adverse modification of its habitat also would constitute jeopardyfor the taxon. The designation of critical habitat for the purpose of informing Federal agencies of the location of occupiedY. xanthocephalushabitat was not thought to be necessary because BLM currently permits the surveys and monitoring of the only extant population.Yermo xanthocephalusis not known to have previously existed on any other sites. If future management actions include unoccupied habitat, the Service believed any benefit provided by designation of such habitat as critical would be conferred more effectively and efficiently through the current coordination process.

In the proposed rule, we indicated vandalism and unauthorized collection ofYermo xanthocephaluscould be a significant threat to the species' survival and recovery, because of the plant's rarity and the fact that it is a monotypic genus. Critical habitat designation would require publication of the legal description of the 20 hectares (50 acres) habitat site in theFederal Register, providing information that might encourage collectors.

We received two comments agreeing with our prudency determination based upon possible adverse effects from collecting if the location of the plant is disclosed. Two commenters also expressed concern that the listing alone may draw attention to the plant's location and possibly lead to adverse effects from collection or vandalism.

Recent court decisions (e.g., Natural Resources Defense Councilv.U.S. Department of the Interior113 F. 3d 1121 (9th Cir. 1997);Conservation Council for Hawaiiv.Babbitt,2 F. Supp. 2d 1280 (D. Hawaii 1998)) have forced us to reevaluate our “not prudent” finding. TheConservation Councilruling is particularly relevant to our determination. In that case, the court held that in order to conclude that designation would increase the risk to the species, the Service must have evidence of specific threats (such as instances of collection and vandalism) that would be increased by designation of critical habitat. The court said that without species-specific evidence, the fact that there are few plants and that even a single taking could cause the species to become extinct was not sufficient justification for a “not prudent” finding based on increased threat.

We remain concerned that publication of precise maps and descriptions of critical habitat in theFederal Registerand local newspapers could increase the vulnerability of this plant to incidents of collection, general vandalism, and trampling by curiosity-seekers. Due to the relatively low numbers of individuals, small area covered by the population, and the inherent transportability of plants,Yermo xanthocephalusis vulnerable to collection and other disturbance. However, at this time we have no specific evidence of taking, vandalism, collection or trade of this species. This may be due to its fairly recent description as a new species to science and its remote location. Nonetheless, in the absence of specific evidence, we cannot conclude that designation would not be prudent based on increased threat.

Without a finding that critical habitat would increase threats to a species, then designation would be prudent if it would provide any benefits to the species. As to benefits of designation on Federal land, the court ruled inConservation Council of Hawaiiv.Babbittthat if even as a general rule an action that would adversely modify critical habitat was likely to jeopardize the continued existence of the species, the Service must consider the adverse modification/jeopardy relationship for each species individually. The court also ruled that designation of critical habitat on any type of land serves to educate the public and government officials that this habitat is essential to the protection of the species.

With this taxon, designation of critical habitat may provide some minor benefits. The primary regulatory effect of critical habitat designation is to require Federal agencies to consult before taking any action that could destroy or adversely modify critical habitat. A critical habitat designation for habitat currently occupied by this species would not be likely to change the section 7 consultation outcome, because an action that destroys or adversely modifies such critical habitat also would be likely to result in jeopardy to the species. However, there may be instances where section 7 consultation would be triggered only if critical habitat is designated. Examples could include designated unoccupied habitat or occupied habitat that may become unoccupied in the future. No such habitat is known at this time, but some may be found in the future. Additionally, there will be educational or informational benefits from designating critical habitat.

Reevaluating our prudency determination under the standards mandated by court decisions, we find that designation of critical habitat forYermo xanthocephalusis prudent. However, our budget for listing activities is currently insufficient to allow us to immediately complete all the listing actions required by the Act. ListingY. xanthocephalusas threatened without designation of critical habitat will allow us to concentrate our limited resources on other listing actions that must be addressed, while allowing us to invoke the protections needed for the conservation of this species without further delay. This is consistent with section 4(b)(6)(C)(i) of the Act, which states that final listing decisions may be issued without critical habitat designations when it is essential that such determinations be promptly published. We will prepare a critical habitat designation in the future at such time when our available resources and priorities allow.

Conservation measures provided to a species listed as endangered or threatened under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing encourages and results in conservation actions by Federal, State, local and private agencies, groups, and individuals. The Act provides for possible land acquisition, cooperation with the States, and requires that recovery actions be carried out for all listed species. The protection required of Federal agencies and the prohibitions against certain activities impacting listed plants are discussed, in part, below.

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

Thus, the Act will require BLM to evaluate potential impacts toYermo xanthocephalusthat may result from activities it authorizes or permits, such as oil and gas development, grazing, andrecreational use. No special land management designations or conservation agreements currently exist to provide special protection forY. xanthocephalus.Section 43 U.S.C. 1712(c)(3) allows BLM to protect tracts as Areas of Critical Environmental Concern (ACEC). Designation of the plant's habitat as an ACEC is a long process and would not, in itself, afford the species protection, unless a management plan for the ACEC identified the protective measures to be put in place. The BLM has prepared a draft conservation agreement, assessment, and strategy which outlines management, inventory, and monitoring actions to be taken to ensure the conservation of this species. However, the draft has not been finalized or signed.

The Act and its implementing regulations set forth a series of general prohibitions and exceptions that apply to all threatened plants. All prohibitions of section 9(a)(2) of the Act, implemented by 50 CFR 17.71, apply. These prohibitions, in part, make it illegal for any person subject to the jurisdiction of the United States to import or export, transport in interstate or foreign commerce in the course of a commercial activity, sell or offer for sale in interstate or foreign commerce, or remove and reduce the species to possession from areas under Federal jurisdiction. In addition, for plants listed as endangered, the Act prohibits the malicious damage or destruction on areas under Federal jurisdiction and the removal, cutting, digging up, or damaging or destroying of such plants in knowing violation of any State law or regulation, including State criminal trespass law. Section 4(d) of the Act allows for the provision of such protection to threatened species through regulation. This protection may apply to this species in the future if regulations are promulgated. Seeds from cultivated specimens of threatened plants are exempt from these prohibitions provided that their containers are marked “Of Cultivated Origin.” Certain exceptions to the prohibitions apply to agents of the Service and State conservation agencies.

The Act and 50 CFR 17.72 also provide for the issuance of permits to carry out otherwise prohibited activities involving threatened plants under certain circumstances. Such permits are available for scientific purposes and to enhance the propagation or survival of the species. For threatened plants, permits also are available for botanical or horticultural exhibition, educational purposes, or special purposes consistent with the purposes of the Act. We anticipate that few trade permits will ever be sought or issued forYermo xanthocephalusbecause the species is not in cultivation or common in the wild. Requests for copies of the regulations regarding listed species and inquiries about prohibitions and permits may be addressed to U.S. Fish and Wildlife Service, P.O. Box 25486, Denver Federal Center, Denver, Colorado 80225 (telephone (303) 236-7400, facsimile (303) 236-0027).

We adopted a policy on July 1, 1994 (59 FR 34272), to identify to the maximum extent practicable at the time a species is listed those activities that would or would not constitute a violation of section 9 of the Act. The intent of this policy is to increase public awareness of the effect of the listing on future and ongoing activities within a species' range. We believe that based upon the best available information, the actions listed below would not result in a violation of section 9 of the Act provided these activities are carried out in accordance with existing regulation and permit requirements:

(1) Activities authorized, funded, or carried out by Federal agencies (e.g., grazing management, agricultural conversions, range management, rodent control, mineral development, road construction, human recreation, pesticide application, controlled burns) and construction/maintenance of facilities (e.g., fences, power lines, pipelines, utility lines) when such activity is conducted according to any reasonable and prudent measures given by the Service in a consultation conducted under section 7 of the Act; and

(2) Casual, dispersed human activities on foot (e.g.,bird watching, sightseeing, photography, and hiking).

The actions listed below may potentially result in a violation of section 9 of the Act; however, possible violations are not limited to these actions alone:

(1) Unauthorized collecting of the species on Federal Lands;

(2) Interstate or foreign commerce and import/export without previously obtaining an appropriate permit. Permits to conduct activities are available for purposes of scientific research and enhancement of propagation or survival of the species.

Questions regarding whether specific activities, such as changes in land use, will constitute a violation of section 9 should be directed to the Wyoming Field Office (seeADDRESSESsection).

We have determined that Environmental Assessments and Environmental Impact Statements, as defined under the authority of the National Environmental Policy Act of 1969, need not be prepared concerning regulations adopted pursuant to section 4(a) of the Endangered Species Act of 1973, as amended. A notice outlining our reasons for this determination was published in theFederal Registeron October 25, 1983 (48 FR 49244).

This rule does not contain any new requests or requirements for collection of information, other than those associated with permits, already approved under the Paperwork Reduction Act, 44 U.S.C. 3501et seq., and assigned Office of Management and Budget control number 1018-0094, which is valid through July 31, 2004. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information, unless it displays a currently valid control number. For additional information concerning permit and associated requirements for threatened species, see 50 CFR 17.32.

The primary author of this proposed rule is Mary Jennings of the Wyoming Field Office (seeADDRESSESsection).