[Federal Register Volume 78, Number 119 (Thursday, June 20, 2013)]
[Rules and Regulations]
[Pages 37404-37408]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14712]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG44


Small Business Size Standards: Support Activities for Mining

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The United States Small Business Administration (SBA) is 
increasing the small business size standards for three of the four 
industries in North American Industry Classification System (NAICS) 
Subsector 213, Support Activities for Mining, that are based on average 
annual receipts. As part of its ongoing comprehensive size standards 
review, SBA evaluated the four receipts based standards in NAICs 
Subsector 213 under NAICS Sector 21, Mining, Quarrying, and Oil and Gas 
Extraction, to determine whether the current size standards should be 
retained or revised. Within NAICS Sector 21, only NAICS Subsector 213 
has receipts based size standards. The rest of the industries in that 
Sector have employee based size standards which SBA will review in the 
near future with other employee based size standards.

DATES: This rule is effective July 22, 2013.

FOR FURTHER INFORMATION CONTACT: Carl Jordan, Program Analyst, Office 
of Size Standards, by phone at (202) 205-6618 or by email at 
sizestandards@sba.gov.

SUPPLEMENTARY INFORMATION: 

Introduction

    In an effort to eliminate possible public confusion, SBA would like 
to explain the changes made to the title of this rule. When SBA 
initially announced in the Fall 2012 Unified Agenda of Federal 
Regulatory and Deregulatory Actions, 78 FR 1636 at 1639 (January 8, 
2013) (Item 390) that it intended to propose this rule, it was 
titled ``Small Business Size Standards: Mining, Quarrying, and Oil and 
Gas Extraction'' under Regulatory Information Number (RIN) 3245-AG44. 
This title was based on the one for Sector 21 of the Small Business 
Size Standards by NAICS Industry. However, SBA later concluded that 
this title was a misnomer since this rule only covers the four revenue 
based size standards under Subsector 213, Support Activities for Mining 
and not the entire Sector 21. The rest of the size standards in NAICS 
Sector 21 are employee-based size standards and will be addressed in a 
separate rule. As a result, the title of the proposed rule was 
clarified to read: ``Small Business Size Standards: Support Activities 
for Mining.'' 77 FR 72766 (December 6, 2012). We believed that this 
title change would make it easier for affected parties to recognize the 
rule when it was published, understand the scope of its coverage, and 
also engender more public comment and involvement.
    To determine eligibility for Federal small business assistance 
programs, SBA establishes small business size definitions (referred to 
as size standards) for private sector industries in the United States. 
SBA's current size standards use two primary measures of business 
size--average annual receipts and average number of employees. 
Financial assets, electric output and refining capacity are used as 
size measures for a few specialized industries. In addition, SBA's 
Small Business Investment Company (SBIC), 7(a), and the Certified 
Development Company (CDC or 504) Loan Programs determine small business 
eligibility using either the industry based size standards or 
alternative net worth and net income based size standards. At the start 
of the current comprehensive size standards review, there were 41 
different size levels, covering 1,141 NAICS industries and 18 sub-
industry activities (i.e., ``exceptions'' in SBA's table of size 
standards). Of these, 31 were based on average annual receipts,

[[Page 37405]]

seven based on number of employees, and three based on other measures. 
Presently, there are a total of 1,031 size standards, 516 of which are 
based on average annual receipts, 499 on number of employees, 10 on 
megawatt hours, and six on average assets.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the economy, in particular the changes 
in the Federal contracting marketplace and industry structure. The last 
comprehensive review of size standards occurred during the late 1970s 
and early 1980s. Since then, most reviews of size standards were 
limited to a few specific industries in response to requests from the 
public and Federal agencies. SBA also makes periodic inflation 
adjustments to its monetary based size standards. The latest inflation 
adjustment to size standards was published in the Federal Register on 
July 18, 2008 (73 FR 41237).
    SBA recognizes that changes in industry structure and the Federal 
marketplace since the last comprehensive size standards review have 
rendered existing size standards for some industries no longer 
supportable by current data. Accordingly, in 2007, SBA began a 
comprehensive review of its size standards to determine whether 
existing size standards have supportable bases relative to the current 
data, and to revise them, where necessary.
    In addition, on September 27, 2010, the President of the United 
States signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs 
Act directs SBA to conduct a detailed review of all size standards and 
to make appropriate adjustments to reflect market conditions. 
Specifically, the Jobs Act requires SBA to conduct a detailed review of 
at least one-third of all size standards during every 18-month period 
from the date of its enactment and review all size standards no less 
frequently than once every 5 years thereafter. Reviewing existing small 
business size standards and making appropriate adjustments based on 
current data is also consistent with Executive Order 13563 on improving 
regulation and regulatory review.
    Rather than review all size standards at one time, SBA is reviewing 
a group of related industries on a Sector by Sector basis.
    As part of SBA's comprehensive size standards review, the Agency 
evaluated the four industries with receipts based size standards in 
NAICS Subsector 213, Support Activities for Mining within NAICS Sector 
23, to determine whether their existing size standards should be 
retained or revised. After its evaluation, on December 6, 2012, SBA 
published a proposed rule in the Federal Register (77 FR 72766) seeking 
public comment on its proposal to increase three of the four receipts 
based size standards in that Subsector. The comment period ended on 
February 4, 2013. The proposed rule was one of the rules that will 
examine industries grouped by a NAICS Sector.
    In conjunction with the current comprehensive size standards 
review, SBA developed a ``Size Standards Methodology'' for 
establishing, reviewing, and modifying size standards, where necessary. 
SBA published the document on its Web site at www.sba.gov/size for 
public review and comment, and included it as a supporting document in 
the electronic docket of the December 6, 2012 proposed rule at  
www.regulations.gov.
    In evaluating an industry's size standard, SBA examines its 
characteristics (such as average firm size, startup costs, industry 
competition, and distribution of firms by size) and the level and small 
business share of Federal contract dollars in that industry. SBA also 
examines the potential impact a size standard revision might have on 
its financial assistance programs and whether a business concern under 
a revised size standard would be dominant in its industry. To develop 
the proposed rule, SBA analyzed the characteristics of each industry in 
NAICS Subsector 213, mostly using a special tabulation obtained from 
the U.S. Bureau of the Census from its 2007 Economic Census (the latest 
available). To examine the Federal marketplace, SBA evaluated the level 
and small business share of Federal contract dollars in each of those 
industries using the data from the Federal Procurement Data System--
Next Generation (FPDS-NG) for fiscal years 2008 to 2010. To evaluate 
the impact of changes to size standards on its loan programs, SBA 
analyzed internal data on its guaranteed loan programs for fiscal years 
2009 to 2011.
    SBA's ``Size Standards Methodology'' provides a detailed 
description of analyses of various industry and program factors and 
data sources, and how the Agency uses the results to derive size 
standards. In the proposed rule, SBA detailed how it applied its ``Size 
Standards Methodology'' to review, and modify, where necessary, the 
existing standards for industries in NAICS Subsector 213. SBA sought 
comments from the public on a number of issues about its ``Size 
Standards Methodology,'' such as whether there are alternative 
methodologies that SBA should consider; whether there are alternative 
or additional factors or data sources that SBA should evaluate; whether 
SBA's approach to establishing small business size standards makes 
sense in the current economic environment; whether SBA's applications 
of anchor size standards are appropriate in the current economy; 
whether there are gaps in SBA's methodology because of the lack of 
complete data; and whether there are other facts or issues that SBA 
should consider.
    SBA sought comments on its proposal to increase the size standards 
for three industries and retain the existing size standard for the 
remaining one industry in NAICS Subsector 213. Specifically, SBA 
requested comments on whether the size standards should be revised as 
proposed and whether the proposed revisions are appropriate. SBA also 
invited comments on whether its proposed eight fixed levels for 
receipts based size standards are appropriate.

Summary of Comments

    SBA received only one comment to the proposed rule. The commenter 
suggested that $7 million should be the limit of a small business 
definition and anything larger than that, such as that SBA's proposed 
$35.5 million size standard for NAICS 213112 (Support Activities for 
Oil and Gas Operations) should be treated as a large business. The 
commenter did not provide any supporting data or analysis for his 
argument.
    SBA disagrees with the commenter's suggestion for two reasons. 
First, the Small Business Act (15 U.S.C. 632(a)) (Act) requires that 
small business size definitions vary to reflect industry differences. 
Thus, a single size standard of $7 million or less across the board 
would be inconsistent with the Act. Second, SBA's analyses of relevant 
industry and Federal market data using its ``Size Standards 
Methodology'' show significant differences among industries, supporting 
a $7 million or lower size standard for some industries and higher size 
standards for others. Therefore, SBA is adopting the size standards 
increases in NAICS Subsector 213, as proposed.
    The comment to the proposed rule is available for public review at 
http://www.regulations.gov.
    Conclusion:
    Based on the analyses of relevant industry and program data and 
evaluation of one public comment it received on the proposed rule, as 
discussed above, SBA has decided to increase the small business size 
standards for the three industries in

[[Page 37406]]

NAICS Subsectors 213, as proposed. These industries and their revised 
size standards are in Table 1, Summary of Revised Size Standards in 
NAICS Subsector 213, below.

                        Table 1--Summary of Revised Size Standards in NAICS Subsector 213
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                                                                                   Current size    Proposed size
        NAICS  code                          NAICS industry title                  standard  ($    standard  ($
                                                                                     million)        million)
----------------------------------------------------------------------------------------------------------------
213112.....................  Support Activities for Oil and Gas Operations......            $7.0           $35.5
213113.....................  Support Activities for Coal Mining.................            $7.0           $19.0
213114.....................  Support Activities for Metal Mining................            $7.0           $19.0
----------------------------------------------------------------------------------------------------------------

    SBA is retaining the $7 million size standard for NAICS 213115, 
Support Activities for Nonmetallic Minerals (except Fuels). NAICS 
Subsector 213 has one industry, namely NAICS 213111 (Drilling Oil and 
Gas Wells), that has an employee based size standard, which SBA will 
review later with other employee based size standards in Sector 21. 
Until then the current 500-employee size standard will remain valid for 
that industry.

Compliance With Executive Orders 12866, 13563, 12988, and 13132, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
final rule is not a ``significant regulatory action'' for purposes of 
Executive Order 12866. To help explain the need of this rule and the 
rule's potential benefits and costs, SBA is providing below a Cost 
Benefit Analysis. This is also not a ``major'' rule, under the 
Congressional Review Act, 5 U.S.C. 801, et. seq.

Cost Benefit Analysis

1. Is there a need for the regulatory action?

    SBA believes that the changes to small business size standards for 
three industries in NAICS Subsector 213, Support Activities for Mining 
within NAICS Sector 23, reflect changes in the economic characteristics 
of small businesses and the Federal procurement market in these 
industries. SBA's mission is to aid and assist small businesses through 
a variety of financial, procurement, business development, and advocacy 
programs. To assist the intended beneficiaries of these programs, SBA 
establishes distinct definitions to determine which businesses are 
small and eligible for them. The Small Business Act delegated to SBA's 
Administrator the responsibility for establishing small business size 
definitions (15 U.S.C. 632(a)). The Act also requires that small 
business size definitions vary to reflect industry differences. The 
Jobs Act requires the Administrator to review at least one-third of all 
size standards within each 18-month period from the date of its 
enactment, and review all size standards at least every five years 
thereafter. The supplementary information sections of the December 6, 
2012 proposed rule and this final rule explained the SBA's methodology 
for analyzing a size standard for a particular industry.

2. What are the potential benefits and costs of this regulatory action?

    The most significant benefit to businesses obtaining small business 
status because of this rule is gaining eligibility for Federal small 
business assistance programs. These include SBA's financial assistance 
programs and Federal procurement programs reserved for small 
businesses. Federal small business programs provide targeted 
opportunities for small businesses under SBA's business development 
programs, such as 8(a), Small Disadvantaged Businesses (SDB), small 
businesses located in Historically Underutilized Business Zones 
(HUBZone), women-owned small businesses (WOSB), economically 
disadvantaged women-owned small businesses (EDWOSB), and service-
disabled veteran-owned small businesses (SDVOSB). These programs assist 
small businesses to become more knowledgeable, stable, and competitive. 
Other Federal agencies may also use SBA's size standards for a variety 
of other regulatory and program purposes. In the three industries in 
NAICS Subsector 213 for which SBA is increasing size standards, more 
than 475 firms that are above the current size standards will become 
small under the revised size standards and eligible for these programs. 
That number is about 8.5 percent of total firms that are classified as 
small under the current size standards in all industries in NAICS 
Subsector 213. SBA estimates this will increase the small business 
share of total industry receipts in those industries from about 13 
percent under the current size standards to nearly 25 percent under the 
revised size standards.
    Three groups will benefit from the revised size standards in NAICS 
Subsector 213 in the following ways: (1) Some businesses that are above 
the current size standards may gain small business status under the 
higher size standards, becoming eligible to participate in Federal 
small business assistance programs; (2) growing small businesses that 
are close to exceeding the current size standards will be able to 
retain their small business status under the higher size standards, 
being able to continue their participation in the programs; and (3) 
Federal agencies will have a larger pool of small businesses from which 
to draw for their small business procurement programs.
    Because of limited Federal contracting activities in those 
industries, the revised increases in size standards in the three 
industries in NAICS Subsector 213 will cause very minimal impact on 
Federal contracting programs under SBA's small business, 8(a), SDB, 
HUBZone, WOSB, EDWOSB and SDVOSB Programs, and other unrestricted 
procurements.
    Under SBA's 7(a) and 504 Loan Programs, based on the 2009-2011 
data, SBA estimates about five additional loans totaling about $2 
million to $3 million in Federal loan guarantees could be made to these 
newly defined small businesses under the revised size standards. 
Increasing the size standards will likely result in more small business 
guaranteed loans to businesses in these industries, but it is be 
impractical to try to estimate exactly the number and total amount of 
loans. There are two reasons for this: (1) Under the Jobs Act, SBA can 
now guarantee substantially larger loans than in the past; and, (2) the 
Jobs Act established an alternative size standard ($15 million in 
tangible net worth and $5 million in net income after income taxes) for 
business concerns that do not meet the size standards for their

[[Page 37407]]

industry. Therefore, SBA finds it difficult to quantify the actual 
impact of these revised size standards on its 7(a) and 504 Loan 
Programs.
    Newly defined small businesses will also benefit from SBA's 
Economic Injury Disaster Loan (EIDL) Program. The EIDL program is 
contingent on the occurrence and severity of one or more disasters and 
SBA cannot make a meaningful estimate of this impact.
    The revisions to the existing size standards for three industries 
in NAICS Subsector Sector 21, Support Activities for Mining are 
consistent with SBA's statutory mandate to assist small businesses. 
This regulatory action promotes the Administration's objectives. One of 
SBA's goals in support of the Administration's objectives is to help 
individual small businesses succeed through fair and equitable access 
to capital and credit, Government contracts, and management and 
technical assistance. Reviewing and modifying size standards, when 
appropriate, ensures that intended beneficiaries have access to small 
business programs designed to assist them.

Executive Order 13563

    A description of the need for this regulatory action and benefits 
and costs associated with this action including possible distributional 
impacts that relate to Executive Order 13563 are included above in the 
Cost Benefit Analysis.
    In an effort to engage interested parties in this regulatory 
action, SBA presented its methodology (discussed above under 
Supplementary Information in this final rule and detailed in December 
6, 2012 proposed rule) to various industry associations and trade 
groups. SBA also met with various industry groups to get their feedback 
on its methodology and other size standards issues. In addition, SBA 
presented its size standards methodology to businesses in 13 cities in 
the U.S. and sought their input as part of Jobs Act tours. The 
presentation included information on the latest status of the 
comprehensive size standards review and how interested parties can 
provide SBA with input and feedback on size standards review. Moreover, 
SBA also presented the same information to Department of Defense (DoD) 
contracting personnel at their annual training session. It included 
updates on what size standards rules SBA was currently reviewing and 
plans to review in the future.
    Additionally, SBA sent letters to the Directors of the Offices of 
Small and Disadvantaged Business Utilization (OSDBU) at several Federal 
agencies with considerable procurement responsibilities requesting 
their feedback on how the agencies use SBA's size standards and whether 
current standards meet their programmatic needs (both procurement and 
non-procurement). SBA gave appropriate consideration to all input, 
suggestions, recommendations, and relevant information obtained from 
industry groups, individual businesses, and Federal agencies in 
preparing the proposed rule and this final rule for NAICS Subsector 
213.
    The review of the four receipts based size standards in NAICS 
Subsector 213, Support Activities for Mining, is consistent with 
Executive Order 13563, Section 6, calling for retrospective analyses of 
existing rules. The last overall review of size standards occurred 
during the late 1970s and early 1980s. Since then, except for periodic 
adjustments for monetary based size standards, most reviews of size 
standards were limited to a few specific industries in response to 
requests from the public and Federal agencies. SBA recognizes that 
changes in industry structure and the Federal marketplace since the 
last overall review have rendered existing size standards for some 
industries no longer supportable by current data. Accordingly, in 2007, 
SBA began a comprehensive review of all size standards to ensure that 
existing size standards have supportable bases and to revise them, 
where necessary. In addition, the Jobs Act requires SBA to conduct a 
detailed review of all size standards and to make appropriate 
adjustments to reflect market conditions. Specifically, the Jobs Act 
requires SBA to conduct a detailed review of at least one-third of all 
size standards during every 18-month period from the date of its 
enactment and review all size standards not less frequently than once 
every 5 years thereafter.

Executive Order 12988

    This regulatory action meets applicable standards set forth in 
Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice 
Reform, to minimize litigation, eliminate ambiguity, and reduce burden. 
The action does not have retroactive or preemptive effect.

Executive Order 13132

    For the purposes of Executive Order 13132, Federalism, SBA has 
determined that this final rule will not have substantial, direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Therefore, SBA 
has determined that this final rule has no federalism implications 
warranting preparation of a federalism assessment.

Paperwork Reduction Act

    For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this final rule will not impose any new 
reporting or record keeping requirements.

Final Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this final rule may 
have a significant impact on a substantial number of small entities in 
NAICS Subsector 213, Support Activities for Mining. As described above, 
this rule may affect small entities seeking Federal contracts, SBA's 
7(a), 504 and economic injury disaster loans, and various small 
business benefits under other Federal programs.
    Immediately below, SBA sets forth an final regulatory flexibility 
analysis (RFA) of this final rule addressing the following questions: 
(1) What are the need for and objective of the rule? (2) What are SBA's 
description and estimate of the number of small businesses to which the 
rule will apply? (3) What are the projected reporting, record keeping, 
and other compliance requirements of the rule? (4) What are the 
relevant Federal rules that may duplicate, overlap, or conflict with 
the rule? and (5) What alternatives will allow the Agency to accomplish 
its regulatory objectives while minimizing the impact on small 
entities?

1. What are the need for and objective of the rule?

    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions may 
have changed the structure of many industries within NAICS Subsector 
213. Such changes can be sufficient to support revisions to current 
size standards for some industries. Based on the analysis of the latest 
data available, SBA believes that the revised size standards in this 
final rule more appropriately reflect the size of businesses in those 
industries that need Federal assistance. Additionally, the Jobs Act 
requires SBA to review all size standards and make appropriate 
adjustments to reflect current data and market conditions.

[[Page 37408]]

2. What are SBA's description and estimate of the number of small 
entities to which the rule will apply?

    SBA estimates that more than 475 firms, not small under the current 
size standards, will become small because of increases in size 
standards in three industries in NAICS Subsector 213. That represents 
8.5 percent of total firms that are small under current size standards 
in all industries within NAICS Subsector 21. This will result in an 
increase in the small business share of total industry receipts for 
those industries from about 13 percent under the current size standard 
to nearly 25 percent under the revised size standards. The new size 
standards will enable more small businesses to retain their small 
business status for a longer period. Many businesses may have lost 
their eligibility and be finding it difficult to compete at current 
size standards with companies that are significantly larger than they 
are. SBA believes the competitive impact will be positive for existing 
small businesses and for those that exceed the size standards but are 
on the very low end of those that are not small. They might otherwise 
be called or referred to as mid-sized businesses, although SBA only 
defines what is small; other entities are other than small.

3. What are the projected reporting, record keeping and other 
compliance requirements of the rule?

    Revising size standards does not impose any additional reporting or 
record keeping requirements on small entities. However, qualifying for 
Federal procurement and a number of other programs requires that 
entities register in the SAM database and certify in SAM at least once 
annually that they are small. Therefore, businesses opting to 
participate in those programs must comply with SAM requirements. There 
are no costs associated with either SAM registration or certification. 
Revising size standards alters the access to Federal programs that 
assist small businesses, but does not impose a regulatory burden 
because they neither regulate nor control business behavior.

4. What are the relevant Federal rules which may duplicate, overlap, or 
conflict with the rule?

    Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 
632(a)(2)(c), Federal agencies must use SBA's size standards to define 
a small business, unless specifically authorized by statute to do 
otherwise. In 1995, SBA published in the Federal Register a list of 
statutory and regulatory size standards that identified the application 
of SBA's size standards as well as other size standards used by Federal 
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any 
Federal rule that would duplicate or conflict with establishing size 
standards.
    However, the Small Business Act and SBA's regulations allow Federal 
agencies to establish different size standards if they believe that 
SBA's size standards are not appropriate for their programs, with the 
approval of SBA's Administrator (13 CFR 121.903). The Regulatory 
Flexibility Act authorizes an Agency to establish an alternative small 
business definition, after consultation with the Office of Advocacy of 
the U.S. Small Business Administration (5 U.S.C. 601(3)).

5. What alternatives will allow the Agency to accomplish its regulatory 
objectives while minimizing the impact on small entities?

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the existing 
system of numerical size standards. The possible alternative size 
standards considered for the individual industries within NAICS 
Subsector 213 are discussed in the supplementary information to the 
proposed rule and this final rule.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons set forth in the preamble, SBA amends 13 CFR part 
121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 662, and 694a(9).


0
2. In Sec.  121.201, in the table, revise the entries for ``213112'', 
``213113'', and ``213114'' to read as follows:


Sec.  121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                               Size standards    Size standards
        NAICS codes                     NAICS U.S. industry title              in millions of     in number of
                                                                                   dollars          employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
213112.....................  Support Activities for Oil and Gas Operations..             $35.5  ................
213113.....................  Support Activities for Coal Mining.............             $19.0  ................
213114.....................  Support Activities for Metal Mining............             $19.0  ................
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------


    Dated: June 13, 2013.
Karen G. Mills,
Administrator.
[FR Doc. 2013-14712 Filed 6-19-13; 8:45 am]
BILLING CODE 8025-01-P