[Federal Register Volume 79, Number 196 (Thursday, October 9, 2014)]
[Rules and Regulations]
[Pages 60951-60953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24190]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 79, No. 196 / Thursday, October 9, 2014 /
Rules and Regulations
[[Page 60951]]
DEPARTMENT OF TRANSPORTATION
14 CFR Part 398
[Docket No.: DOT-OST-2014-0061]
Essential Air Service Enforcement Policy
AGENCY: Office of Aviation Analysis (X50), Department of Transportation
(DOT).
ACTION: Final notice of enforcement policy.
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SUMMARY: This notice of enforcement policy announces how the Department
of Transportation (DOT or Department) will enforce compliance with the
requirements of the Department of Transportation and Related Agencies
Appropriations Act, 2000, which prohibits the Department from
subsidizing Essential Air Service (EAS) to communities located within
the 48 contiguous States receiving per passenger subsidy amounts
exceeding $200, unless the communities are located more than 210 miles
from the nearest large or medium hub airport. All communities receiving
subsidized EAS have until September 30, 2015, based on data from
October 1, 2014 through September 30, 2015, to ensure compliance with
the $200 subsidy cap or face termination of subsidy eligibility. After
September 30, 2015, the Department will enforce the $200 subsidy cap on
an annual basis based on data compiled at the end of every fiscal year.
Consistent with established procedures, DOT will issue a show-cause
order to each EAS community that has been identified as failing to meet
the $200 per passenger subsidy requirement. Each such community will
have a fair and reasonable opportunity to demonstrate compliance with
the $200 subsidy cap prior to a final decision by DOT. In addition, any
community that is deemed ineligible under the $200 subsidy cap
provision may petition the Secretary for a waiver. After receiving a
community's petition for a waiver, the Secretary may waive the subsidy
cap for a limited period of time, on a case-by-case basis, and subject
to the availability of funds. To provide the Department with sufficient
time to evaluate the FY 2015 data for potentially affected communities,
DOT does not intend to issue any show-cause orders concerning
compliance with the $200 subsidy cap until 2016.
DATES: This enforcement policy is effective November 10, 2014.
FOR FURTHER INFORMATION CONTACT: For technical questions concerning
this action, contact Kevin Schlemmer, Chief, Essential Air Service and
Domestic Analysis Division, Office of Aviation Analysis, Department of
Transportation, 1200 New Jersey Avenue SE., Room W86-309, Washington,
DC 20590; telephone: (202) 366-3176; [email protected]. For legal
questions concerning this action, contact Claire McKenna, Attorney,
Office of the General Counsel, Department of Transportation, 1200 New
Jersey Avenue SE., Room 96-309; telephone: (202) 366-0365; email:
[email protected].
SUPPLEMENTARY INFORMATION:
Background
The Airline Deregulation Act, passed in 1978, gave airlines
significant flexibility to determine which markets to serve
domestically and what fares to charge for that service. The United
States Congress (Congress) established the EAS program to guarantee
that small communities that were served by certificated air carriers
before deregulation would maintain at least a minimum level of
scheduled air service after airline deregulation. Since its inception,
the EAS program has provided a vital link for eligible small
communities to the National Airspace System (NAS). Indeed, this program
ensures that small communities across America can tap into the economic
and quality of life benefits that scheduled air services offer.
Over the years, Congress has made a number of statutory changes to
the program (most recently in 2011 and 2012), but the fundamental
purpose of the program remains unchanged. Given the socio-economic
importance of this program, DOT remains committed to preserving the EAS
program for eligible communities and ensuring the sustainability of the
program for the future.
This enforcement policy concerns the statutory mandate that
prohibits DOT from providing EAS funds to any carrier to serve any
community in the 48 contiguous states that requires a per-passenger-
subsidy in excess of $200 unless the community is located more than 210
miles from the nearest large or medium airport. Congress first imposed
a $200 subsidy per passenger cap for communities in the 48 contiguous
States in Fiscal Year 1990 appropriations language. Such language was
repeated in several later appropriations acts throughout the 1990s, and
was made permanent by the Department of Transportation and Related
Agencies Appropriations Act, 2000, Public Law 106-69, 113 Stat. 986
(Oct. 9, 1999). Specifically, the Act provides that:
Hereafter, notwithstanding 49 U.S.C. 41742, no essential air service
subsidies shall be provided to communities in the 48 contiguous
States that are located fewer than 70 highway miles from the nearest
large or medium hub airport, or that require a rate of subsidy per
passenger in excess of $200 unless such point is greater than 210
miles from the nearest large or medium hub airport.
The Department has always expected communities less than 210 miles from
a large or medium hub airport \1\ to work together with air carriers
providing EAS to keep the subsidy per passenger below the $200 cap or
risk termination of eligibility for EAS subsidy. DOT has also routinely
provided notice of this statutory mandate to communities that were or
appeared to be at risk of exceeding the cap, and a number of EAS
communities have lost their eligibility as a result of this
requirement.
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\1\ Consistent with longstanding practice, DOT calculates the
shortest driving distance between an EAS community and a large or
medium hub airport from the center of the EAS community to the
entrance of the nearest large or medium hub airport as determined by
the Federal Highway Administration.
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Although the $200 subsidy cap is a longstanding statutory
provision, in 2012, Congress added a provision that allows the
Secretary to grant waivers in limited circumstances. To effectuate that
new provision and to ensure the fair and consistent treatment of all
EAS communities subject to the $200 subsidy cap prospectively, DOT
published a notice of proposed enforcement policy on May 1, 2014,
[[Page 60952]]
seeking public comments on a proposed policy to enforce the $200
subsidy cap. Comments on the proposal were due June 30.
The Department received seven comments on the proposed policy. All
of the commenters noted that the $200 subsidy cap established by the
Department of Transportation and Related Agencies Appropriations Act,
2000, Public Law 106-69, 113 Stat. 986 (Oct. 9, 1999), has not kept up
with the pace of inflation, and that enforcement of the cap would
impose a hardship on EAS communities and be contrary to the EAS
program's objectives (to ensure these communities have air service). We
recognize these comments; however, the requirements of the statute do
not provide us with discretion to adjust the subsidy cap amount or
refrain from enforcement.
One commenter offered several suggested changes to the proposed
enforcement policy, such as: (1) The subsidy cap should be calculated
based on actual subsidy paid, not the estimates provided in the
carrier's proposal that form the basis of the subsidy award in the
selection order; (2) enforcement of the subsidy cap should be based on
the contract term, not the fiscal year--so as to not disadvantage
carriers and communities that will be mid-contract at the time of the
enforcement action in 2016 (and each year after that); and (3)
communities should be permitted to refund funds to the Department, or
contribute funds to carriers so that the Federal Government's share of
the subsidy is below the subsidy cap. We appreciate these suggestions.
First, regarding the suggestion that the calculation be based on
actual subsidy paid, the method of calculating per passenger subsidy
described in the Notice of Proposed Enforcement Policy reflects the
Department's long standing practice. This method formed the basis of
the enforcement actions taken under this provision since it first
appeared in appropriations language in 1990. Carriers and communities
are familiar with the use of this methodology and we do not, at this
time, believe that a change is warranted. Moreover, if a community were
over the $200 per passenger cap based on the Department's traditional
application, but under $200 based on actual subsidy payments, the
community could object to a tentative finding in the show-cause order
or raise this point in a petition for waiver, and the Department would
then assess those arguments on a case-by-case basis.
Second, with respect to the comment on enforcement by contract
term, rather than fiscal year, the Department believes it has given all
of the affected parties ample time to come into compliance with the
subsidy cap by delaying enforcement until 2016. In addition, while most
EAS subsidy contracts have a two-year term, there are several that are
for four-year, or even five-year, terms. The Department believes it
would not be fiscally prudent, or fair to communities operating under a
two year contract, to permit communities with subsidy caps well in
excess of $200 per passenger to be essentially excused from this
statutory requirement for many years simply because they are operating
under longer EAS contracts. While we recognize that there may be some
drawbacks to enforcement on a fiscal year basis, there are also
drawbacks to a contract-based approach, as noted in the preceding
sentence. With this in mind, the Department will move forward with the
fiscal year based approach described in the Notice of Proposed
Enforcement Policy. We believe that this approach is the most fair to
communities, given the variety of contract terms, and is consistent
with the practice for enforcement of other EAS eligibility
requirements, such as the requirement that EAS communities enplane ten
or more passengers per day. 49 U.S.C. 41731(a)(1)(B). The Department
intends to publish quarterly calculations of per passenger subsidies at
EAS communities on its Web site. We believe that this will further
support communities in their efforts to remain below the subsidy cap by
providing them with on-going notice of their per passenger subsidy
amounts that will hopefully facilitate proactive discussions between
communities and carriers to address potential threats to their
continued eligibility well in advance of any enforcement action by the
Department.
Third, regarding the suggestion that communities be able to remit
funds to the Department to lower its subsidy per passenger, section 323
of Public Law 106-69 (Oct. 9, 1999) states that ``no [EAS] subsidies
shall be provided'' to communities that require a rate of subsidy in
excess of $200 per passenger. The Department has consistently construed
this not as a limit on the Department's ability to pay more than $200
per passenger, but rather, as an overall limitation on any subsidy
payment for EAS service when the required subsidy is in excess of $200
per passenger. See DOT Order 89-12-52 (Dec. 29, 1989) (finding that the
subsidy cap ``was a disqualification for any subsidy at a point that
exceeded'' the cap). Thus, we do not believe that the statute permits
this approach.
Having carefully considered the comments received and the statutory
requirements for eligibility, we are finalizing the enforcement policy
proposed in the Notice of Proposed Enforcement Policy, as follows:
Enforcement Policy
The Department will begin enforcement of the $200 subsidy cap in
2016, based on data compiled from October 1, 2014, through September
30, 2015, as described in this policy. The Department will continue
enforcement of the $200 subsidy cap on an annual basis based on data
compiled at the end of every fiscal year and submitted to DOT after the
close of the most recent fiscal year.
If after September 30, 2015 (and each September 30 thereafter for
the preceding fiscal year), a particular community's subsidy per
passenger is above $200 (as measured on an annual basis) and its
location is less than 210 miles from a large or medium hub airport, the
Department will initiate proceedings, consistent with 49 U.S.C.
41733(f) and Public Law 112-95 (Feb. 14, 2012), Section 426(c),
directing interested persons to show cause why the Department should
not terminate the eligibility of the community in question under the
EAS Program. This process will provide each potentially affected
community with a fair and reasonable opportunity to demonstrate
compliance with the $200 subsidy cap prior to a final decision by DOT.
Communities are reminded that the EAS program contains certain
statutory protections that may be invoked by an EAS community adversely
affected by the $200 per passenger subsidy cap. First, in the event
that DOT determines that a community is ineligible because it exceeds
the $200 subsidy cap provision in a given fiscal year, the community
may petition the U.S. Transportation Secretary for a waiver pursuant to
Public Law 112-95, Sec. 426(c) (Feb. 14, 2012). Under this provision,
``[s]ubject to the availability of funds, the Secretary may waive, on a
case-by-case basis, the subsidy-per-passenger cap.'' The law further
provides: ``A waiver . . . shall remain in effect for a limited period
of time, as determined by the Secretary.'' Second, a community that is
deemed ineligible for subsidy based on the $200 subsidy cap may submit
a proposal to the Secretary for restoration of subsidy. Upon receipt of
a proposal, the Department will restore the community's subsidy
eligibility if the Secretary determines that the rate of the per
passenger
[[Page 60953]]
subsidy under the proposal does not exceed $200, and the proposal is
likely to result in an average of more than 10 enplanements per day and
is consistent with the EAS program's other legal and regulatory
requirements. 49 U.S.C. 41733(g).
Consistent with past practice and the Department's obligations
under 49 U.S.C. 41733(f)(2), DOT encourages potentially affected
communities to work with air carriers providing subsidized EAS to
maximize use of the service awarded under their respective carrier-
selection orders to avoid exceeding the $200 subsidy cap.
Issued in Washington, DC, on October 2, 2014.
Brandon M. Belford,
Deputy Assistant Secretary for Aviation and International Affairs.
[FR Doc. 2014-24190 Filed 10-8-14; 8:45 am]
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