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12–22–10 Vol. 75 No. 245 Wednesday Dec. 22_ 2010 Pages 80287–80672

VIEWS: 101 PAGES: 396

									                                                                                                                                        12–22–10                                   Wednesday
                                                                                                                                        Vol. 75  No. 245                           Dec. 22, 2010

                                                                                                                                        Pages 80287–80672
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                                                    II                             Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010

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                                                   Contents                                                                              Federal Register
                                                                                                                                         Vol. 75, No. 245

                                                                                                                                         Wednesday, December 22, 2010

                                                   Actuaries, Joint Board for Enrollment                                                 Economic Analysis Bureau
                                                   See Joint Board for Enrollment of Actuaries                                           RULES
                                                                                                                                         Direct Investment Surveys:
                                                   Antitrust Division                                                                      BE–11, Annual Survey of U.S. Direct Investment Abroad,
                                                   NOTICES                                                                                      80294–80296
                                                   National Cooperative Research and Production Act of 1993:
                                                    National Warheads and Energetics Consortium, 80536                                   Education Department
                                                    Vehicle Infrastructure Integration Consortium, 80536                                 NOTICES
                                                   Architectural and Transportation Barriers Compliance                                   Advisory Commission on Accessible Instructional
                                                       Board                                                                                   Materials in Postsecondary Education for Students
                                                                                                                                               with Disabilities, 80481–80482
                                                   Meetings, 80455                                                                       Energy Department
                                                                                                                                         See Federal Energy Regulatory Commission
                                                   Army Department                                                                       See Western Area Power Administration
                                                   NOTICES                                                                               RULES
                                                   Environmental Impact Statements; Availability, etc.:                                  Energy Conservation Program:
                                                     Disposal and Reuse of Fort McPherson, Georgia, 80480–                                 Energy Conservation Standards for Electric Motors,
                                                         80481                                                                                 80292–80293
                                                                                                                                         Energy Efficiency Program for Consumer Products:
                                                   Centers for Disease Control and Prevention                                              Waiver of Preemption of State Regulations Concerning
                                                   NOTICES                                                                                     Water Use or Water Efficiency of Showerheads, etc.,
                                                   Agency Information Collection Activities; Proposals,                                        80289–80292
                                                      Submissions, and Approvals, 80505–80508                                            NOTICES
                                                                                                                                         Application to Export Electric Energy:
                                                   Coast Guard                                                                            TransCanada Power Marketing Ltd., 80482–80483
                                                   Agency Information Collection Activities; Proposals,                                  Environmental Protection Agency
                                                      Submissions, and Approvals, 80512–80515                                            RULES
                                                   Meetings:                                                                             Approval and Promulgation of Implementation Plans:
                                                    National Boating Safety Advisory Council, 80515–80516                                  New Jersey; 8–hour Ozone Control Measures, 80340–
                                                   Commerce Department                                                                   Extension of Tolerances for Emergency Exemptions
                                                   See Economic Analysis Bureau                                                              (Multiple Chemicals), 80343–80346
                                                   See International Trade Administration                                                Implementation of OMB Guidance on Drug Free Workplace
                                                   See National Oceanic and Atmospheric Administration                                       Requirements, 80287–80289
                                                                                                                                         Pesticide Tolerances:
                                                   Commodity Futures Trading Commission                                                    Flutolanil, 80346–80350
                                                                                                                                         PROPOSED RULES
                                                   PROPOSED RULES
                                                                                                                                         Reasonable Further Progress Requirements for the 1997 8-
                                                   Business Conduct Standards for Swap Dealers and Major
                                                                                                                                             Hour Ozone National Ambient Air Quality Standard,
                                                       Swap Participants with Counterparties, 80638–80663
                                                   Core Principles and Other Requirements for Designated                                 NOTICES
                                                       Contract Markets, 80572–80636                                                     Pesticide Petitions Filed for Residues of Pesticide
                                                                                                                                              Chemicals in or on Various Commodities, 80489–80490
                                                   Defense Acquisition Regulations System                                                Pesticide Products; Registration Applications, 80490–80492
                                                   PROPOSED RULES                                                                        Petition For Rulemaking; Availability:
                                                   Defense Federal Acquisition Regulation Supplement:                                      To Establish Procedures Consistent with Section 1010 of
                                                     Reporting of Government-Furnished Property, 80426–                                         the 1988 Amendments to the Endangered Species
                                                         80430                                                                                  Act, 80492–80493
                                                                                                                                         Public Water System Supervision Program Approval:
                                                   Defense Department                                                                      State of Wisconsin, 80493–80494
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                                                   See Army Department                                                                   Registration Review Proposed Decisions:
                                                   See Defense Acquisition Regulations System                                              Busan 74 (HPMTS) and Nithiazine, 80494–80496
                                                                                                                                         Registration Review:
                                                   Drug Enforcement Administration                                                         Pesticide and Other Docket Actions, 80496–80498
                                                   NOTICES                                                                               Reports; Availability, etc.:
                                                   Meetings:                                                                               TSCA Interagency Testing Committee to the
                                                    Procedures for the Surrender of Unwanted Controlled                                         Administrator of the Environmental Protection
                                                         Substances by Ultimate Users, 80536–80538                                              Agency, 80666–80668

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                                                   IV                     Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Contents

                                                   Executive Office of the President                                                     Baseline Filings:
                                                   See Management and Budget Office                                                        American Midstream (Louisiana Intrastate), LLC; Atmos
                                                   See Presidential Documents                                                                    Energy – Kentucky/Mid-States Division, 80483–
                                                   Federal Aviation Administration                                                       Combined Filings, 80484–80485
                                                   RULES                                                                                 Compliance Filings:
                                                   Airworthiness Directives:                                                               ONEOK Field Services Co., 80486
                                                     Eurocopter France Model AS 350 B, BA, B1, B2, B3, and                               Filings:
                                                         D, and Model AS355 E, F, F1, F2, and N Helicopters,                               Corning Natural Gas Corp., 80486
                                                         80293–80294                                                                     Initial Market-Based Rate Filings Including Requests for
                                                   PROPOSED RULES                                                                             Blanket Section 204 Authorization:
                                                   Airworthiness Directives:                                                               Cambria CoGen Co., 80487
                                                     General Electric Co. GE90–76B; GE90–77B; GE90–85B;                                    Paradise Solar Urban Renewal, LLC, 80487
                                                        GE90–90B; and GE90–94B Turbofan Engines, 80370–                                    Sustainable Star, LLC, 80486–80487
                                                        80372                                                                            Preliminary Permit Drawings:
                                                   Amendments of Restricted Areas:                                                         Lock+ Hydro Friends Fund XLVIII, FFP Missouri 15,
                                                     R–2907A and R–2907B, Lake George, FL; and R–2910,                                           LLC, 80487–80488
                                                        Pinecastle, FL, 80372–80374                                                      Technical Conferences:
                                                   NOTICES                                                                                 Columbia Gulf Transmission Co., 80488
                                                   Agency Information Collection Activities; Proposals,
                                                        Submissions, and Approvals:                                                      Federal Maritime Commission
                                                     Air Carriers and Commercial Operators, 80567–80568
                                                     Aviation Maintenance Technical Schools, 80567                                       Agreements Filed, 80499
                                                   Meetings:                                                                             Ocean Transportation Intermediary Licenses; Applicants,
                                                     Proposed Modification of the Philadelphia, PA, Class B                                  80499–80500
                                                          Airspace Area; Correction, 80568                                               Ocean Transportation Intermediary Licenses; Revocations,
                                                   Petition for Exemption; Summaries of Petitions Received,                                  80500–80501
                                                        80568–80569                                                                      Federal Reserve System
                                                   Federal Communications Commission                                                     Formations of, Acquisitions by, and Mergers of Bank
                                                   RULES                                                                                    Holding Companies, 80501
                                                   Satellite Television Extension and Localism Act of 2010
                                                       and Satellite Home Viewer Extension and                                           Fiscal Service
                                                       Reauthorization Act of 2004, 80354–80363                                          RULES
                                                   PROPOSED RULES                                                                        Federal Government Participation in the Automated
                                                   Satellite Television Extension and Localism Act of 2010                                   Clearing House, 80335–80340
                                                       and Satellite Home Viewer Extension and                                           Management of Federal Agency Disbursements, 80315–
                                                       Reauthorization Act of 2004, 80425–80426                                              80335

                                                                                                                                         Fish and Wildlife Service
                                                   Federal Deposit Insurance Corporation
                                                                                                                                         Environmental Assessments; Availability, etc.:
                                                   Agency Information Collection Activities; Proposals,
                                                                                                                                           Watercress Darter National Wildlife Refuge, Jefferson
                                                      Submissions, and Approvals, 80498–80499
                                                                                                                                               County, AL, 80524–80525

                                                   Federal Election Commission                                                           General Services Administration
                                                   NOTICES                                                                               RULES
                                                   Meetings; Sunshine Act, 80499                                                         Federal Travel Regulations:
                                                                                                                                           Removal of Privately Owned Vehicle Rates; Privately
                                                   Federal Emergency Management Agency                                                         Owned Automobile Mileage Reimbursement, etc.;
                                                   RULES                                                                                       Correction, 80350–80351
                                                   Suspension of Community Eligibility, 80351–80354
                                                                                                                                         Geological Survey
                                                   Federal Energy Regulatory Commission                                                  Agency Information Collection Activities; Proposals,
                                                   RULES                                                                                    Submissions, and Approvals, 80525–80526
                                                   Oil Pipleline Pricing Index; Five-Year Review, 80300–80313
                                                   PROPOSED RULES                                                                        Health and Human Services Department
                                                   Electric Reliability Organization Interpretations of                                  See Centers for Disease Control and Prevention
                                                       Interconnection Reliability Operations, etc., 80391–                              See National Institutes of Health
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                                                       80396                                                                             NOTICES
                                                   Version One Regional Reliability Standards for Facilities                             Adjustments for Federal Medical Assistance Percentage
                                                       Design, Connections, and Maintenance:                                                 Rates, 80501–80503
                                                     Protection and Control; and Voltage and Reactive, 80397–                            Agency Information Collection Activities; Proposals,
                                                          80409                                                                              Submissions, and Approvals, 80503–80505
                                                   Applications:                                                                         Homeland Security Department
                                                    Tennessee Gas Pipeline Co., 80483                                                    See Coast Guard

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                                                                          Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Contents                                             V

                                                   See Federal Emergency Management Agency                                               Management and Budget Office
                                                   Housing and Urban Development Department                                              Agency Information Collection Activities; Proposals,
                                                   NOTICES                                                                                  Submissions, and Approvals:
                                                   Agency Information Collection Activities; Proposals,                                   Generic Clearance for the Collection of Qualitative
                                                      Submissions, and Approvals:                                                             Feedback on Agency Service Delivery, 80542–80543
                                                    Lender Qualifications for Multifamily Accelerated
                                                        Processing, 80516–80517                                                          Millennium Challenge Corporation
                                                    Multifamily Rental Project Closing Documents, 80517–                                 NOTICES
                                                        80524                                                                            Meetings; Sunshine Act, 80544
                                                   Interior Department
                                                                                                                                         National Credit Union Administration
                                                   See Fish and Wildlife Service
                                                                                                                                         PROPOSED RULES
                                                   See Geological Survey
                                                                                                                                         Sample Income Data to Meet the Low-Income Definition,
                                                   See National Park Service
                                                   International Trade Administration                                                    Share Insurance and Appendix, 80367–80370
                                                   Amended Final Results of Countervailing Duty                                          National Highway Traffic Safety Administration
                                                        Administrative Review Pursuant to Court Decision:                                PROPOSED RULES
                                                     Certain Hot-Rolled Carbon Steel Flat Products from India,                           Passenger Car and Light Truck Average Fuel Economy
                                                         80455–80456                                                                         Standards:
                                                   Export Trade Certificate of Review:                                                     Request for Product Plan Information; Model Years 2010–
                                                     ARC Industries Ltd., 80456–80457                                                          2025, 80430–80451
                                                   Extension of Time Limit for Preliminary Results of
                                                        Antidumping Duty New Shipper Review:                                             National Institutes of Health
                                                     Polyethylene Terephthalate Film, Sheet and Strip from                               NOTICES
                                                         India, 80457                                                                    Meetings:
                                                   Final Results of Sunset Review and Revocation of                                       Center for Scientific Review, 80508–80509, 80511
                                                        Antidumping Duty Order:                                                           National Cancer Institute, 80510
                                                     Superalloy Degassed Chromium from Japan, 80457–80458                                 National Human Genome Research Institute, 80509–
                                                   Preliminary Results of, etc., 15th Antidumping Duty                                         80510
                                                        Administrative Review:                                                            National Institute of Neurological Disorders and Stroke,
                                                     Fresh Garlic from the People’s Republic of China, 80458–                                  80510
                                                         80469                                                                            National Institute on Alcohol Abuse and Alcoholism,
                                                   International Trade Commission                                                         National Institute on Deafness and Other Communication
                                                   NOTICES                                                                                     Disorders, 80509
                                                   Countervailing Duty and Antidumping Investigations:                                    National Institute on Drug Abuse, 80511–80512
                                                     Aluminum Extrusions from China, 80527–80528                                          National Library of Medicine, 80512
                                                     Wooden Bedroom Furniture from China, 80528–80529                                    National Labor Relations Board
                                                                                                                                         PROPOSED RULES
                                                   Joint Board for Enrollment of Actuaries                                               Notification of Employee Rights under the National Labor
                                                   NOTICES                                                                                   Relations Act, 80410–80420
                                                   Privacy Act; Systems of Records, 80529–80535
                                                                                                                                         National Oceanic and Atmospheric Administration
                                                   Justice Department
                                                   See Antitrust Division
                                                   See Drug Enforcement Administration
                                                                                                                                           Gulf of Mexico Fishery Management Council, 80469–
                                                   Privacy Act; Implementation, 80313–80314                                                     80470
                                                                                                                                           Pacific Fishery Management Council, 80470
                                                   Labor Department                                                                      Permit Amendment Applications:
                                                   See Labor Statistics Bureau                                                             Marine Mammals; File No. 14335, 80470–80471
                                                   See Occupational Safety and Health Administration                                     Takes of Marine Mammals Incidental to Specified
                                                   NOTICES                                                                                   Activities:
                                                   Agency Information Collection Activities; Proposals,                                    St. George Reef Light Station Restoration and
                                                      Submissions, and Approvals:                                                               Maintenance at Northwest Seal Rock, Del Norte
                                                    Application for Approval of a Representative’s Fee in                                       County, CA, 80471–80480
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                                                        Black Lung Claim Proceedings, 80539–80540
                                                    Safety Defects; Examination, Correction, and Records,                                National Park Service
                                                        80538–80539                                                                      NOTICES
                                                   Labor Statistics Bureau                                                                Chesapeake and Ohio Canal National Historical Park
                                                   NOTICES                                                                                     Advisory Commission, 80526
                                                   Agency Information Collection Activities; Proposals,                                  National Register of Historic Places:
                                                      Submissions, and Approvals, 80540–80542                                             Pending Nominations and Related Actions, 80526–80527

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                                                   VI                     Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Contents

                                                   National Transportation Safety Board                                                  State Department
                                                   PROPOSED RULES                                                                        NOTICES
                                                   Practice in Air Safety Proceedings, etc., 80452–80454                                 Agency Information Collection Activities; Proposals,
                                                                                                                                            Submissions, and Approvals:
                                                   Nuclear Regulatory Commission                                                          Statement Regarding a Lost or Stolen Passport, 80565–
                                                   NOTICES                                                                                     80566
                                                   Application Withdrawals:                                                              Meetings:
                                                     Entergy Nuclear Operations, Inc., 80544                                              Overseas Schools Advisory Council, 80566
                                                   Draft Reports; Availability, etc.:
                                                     Confirmatory Thermal-Hydraulic Analysis to Support                                  Surface Transportation Board
                                                          Specific Success Criteria, etc., Surry and Peach                               NOTICES
                                                          Bottom, 80544–80545                                                            Agency Information Collection Activities; Proposals,
                                                   Environmental Assessments; Availability, etc.:                                           Submissions, and Approvals:
                                                     Carolina Power & Light Co., H. B. Robinson Steam                                     Disclosure of Rail Interchange Commitments, 80569–
                                                          Electric Plant, Unit 2, 80545–80546                                                 80570
                                                     Carolina Power & Light Co., Shearon Harris Nuclear                                  Tennessee Valley Authority
                                                          Power Plant, Unit No. 1, 80547–80549                                           NOTICES
                                                     FirstEnergy Nuclear Operating Co., Davis–Besse Nuclear                              Meetings:
                                                          Power Station, 80549–80551                                                      Regional Resource Stewardship Council, 80566–80567
                                                     Virginia Electric and Power Co., Surry Power Station
                                                          Unit Nos. 1 and 2, 80546–80547
                                                                                                                                         Transportation Department
                                                   Occupational Safety and Health Administration                                         See Federal Aviation Administration
                                                                                                                                         See National Highway Traffic Safety Administration
                                                   Compliance Directive for Fall Protection in Residential                               See Surface Transportation Board
                                                      Construction, 80315
                                                                                                                                         Treasury Department
                                                   Office of Management and Budget                                                       See Fiscal Service
                                                   See Management and Budget Office
                                                                                                                                         Western Area Power Administration
                                                   Presidential Documents                                                                NOTICES
                                                   PROCLAMATIONS                                                                         Environmental Impact Statements; Availability, etc.:
                                                   Special Observances:                                                                    Proposed NextGen Project Near Selby, Walworth County,
                                                     Wright Brothers Day (Proc. 8617), 80669–80672                                             SD.; Cancellation, 80488
                                                   Public Debt Bureau
                                                   See Fiscal Service
                                                                                                                                         Separate Parts In This Issue
                                                   Securities and Exchange Commission
                                                   RULES                                                                                 Part II
                                                   Extension of Filing Accommodation for Static-Pool                                     Commodity Futures Trading Commission, 80572–80636
                                                       Information in Filings with Respect to Asset-Backed
                                                       Securities, 80296–80300                                                           Part III
                                                   PROPOSED RULES                                                                        Commodity Futures Trading Commission, 80638–80663
                                                   Mine Safety Disclosure, 80374–80391
                                                   NOTICES                                                                               Part IV
                                                   Self-Regulatory Organizations; Proposed Rule Changes:                                 Environmental Protection Agency, 80666–80668
                                                     Chicago Board Options Exchange, Inc., 80560–80561
                                                     Chicago Mercantile Exchange Inc., 80551–80553                                       Part V
                                                     Financial Industry Regulatory Authority, Inc., 80556–                               Presidential Documents, 80669–80672
                                                     NYSE Amex LLC, 80553–80560

                                                   Small Business Administration                                                         Reader Aids
                                                   NOTICES                                                                               Consult the Reader Aids section at the end of this page for
                                                   Community Express Pilot Program, 80561–80562                                          phone numbers, online resources, finding aids, reminders,
                                                   Establishment of and Request for Nominations for Council                              and notice of recently enacted public laws.
                                                       on Underserved Communities, 80562–80563
                                                                                                                                         To subscribe to the Federal Register Table of Contents
                                                   Social Security Administration                                                        LISTSERV electronic mailing list, go to http://
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                                                   NOTICES                                                                      and select Online mailing list
                                                   Agency Information Collection Activities; Proposals,                                  archives, FEDREGTOC-L, Join or leave the list (or change
                                                      Submissions, and Approvals, 80563–80565                                            settings); then follow the instructions.

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                                                                                  Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Contents                                     VII

                                                    CFR PARTS AFFECTED IN THIS ISSUE

                                                    A cumulative list of the parts affected this month can be found in the
                                                    Reader Aids section at the end of this issue.

                                                    2 CFR                                                 Proposed Rules:
                                                    1536.................................80287            73.....................................80425
                                                    3 CFR                                                 48 CFR
                                                    Proclamations:                                        Proposed Rules:
                                                    8617.................................80671            211...................................80426
                                                    10 CFR                                                212...................................80426
                                                    430...................................80289           252...................................80426
                                                    431...................................80292           49 CFR
                                                    12 CFR                                                Proposed Rules:
                                                    Proposed Rules:                                       531...................................80430
                                                    701...................................80364           533...................................80430
                                                    745...................................80367           821...................................80452
                                                    14 CFR
                                                    Proposed Rules:
                                                    15 CFR
                                                    17 CFR
                                                    Proposed Rules:
                                                    18 CFR
                                                    Proposed Rules:
                                                    40 (2 documents) ...........80391,
                                                    28 CFR
                                                    29 CFR
                                                    Proposed Rules:
                                                    31 CFR
                                                    40 CFR
                                                    180 (2 documents) .........80343,
                                                    Proposed Rules:
                                                    41 CFR
                                                    Ch. 301 ............................80350
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                                                    44 CFR
                                                    47 CFR

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                                              Rules and Regulations                                                                                         Federal Register
                                                                                                                                                            Vol. 75, No. 245

                                                                                                                                                            Wednesday, December 22, 2010

                                              This section of the FEDERAL REGISTER                    the Public Reading Room. The Public                   66431, November 15, 2006]
                                              contains regulatory documents having general            Reading Room is open from 8:30 a.m. to                Governmentwide guidance on
                                              applicability and legal effect, most of which           4:30 p.m., Monday through Friday,                     nonprocurement suspension and
                                              are keyed to and codified in the Code of                excluding legal holidays. The telephone               debarment in 2 CFR part 180.
                                              Federal Regulations, which is published under           number for the Public Reading Room is                    As the next step in that process, OMB
                                              50 titles pursuant to 44 U.S.C. 1510.
                                                                                                      (202) 566–1744.                                       proposed for comment [73 FR 55776,
                                              The Code of Federal Regulations is sold by              FOR FURTHER INFORMATION CONTACT:                      September 26, 2008] and finalized [74
                                              the Superintendent of Documents. Prices of              Elizabeth January, Environmental                      FR 28149, June 15, 2009]
                                              new books are listed in the first FEDERAL               Protection Agency, 5 Post Office Square,              Governmentwide guidance with policies
                                              REGISTER issue of each week.                            Boston, MA 02109, by phone (617) 918–                 and procedures to implement drug-free
                                                                                                      8655 or by e-mail                                     workplace requirements for financial
                                                                                                      (                          assistance. The guidance requires each
                                              ENVIRONMENTAL PROTECTION                                                                                      agency to replace the common rule on
                                              AGENCY                                                  SUPPLEMENTARY INFORMATION:
                                                                                                                                                            drug-free workplace requirements that
                                                                                                      I. General Information                                the agency previously issued in its own
                                              2 CFR Part 1536                                                                                               CFR title with a brief regulation in 2
                                                                                                         Affected Entities: Entities that receive
                                                                                                      grants from EPA.                                      CFR adopting the Governmentwide
                                              40 CFR Part 36                                                                                                policies and procedures. One advantage
                                              [Docket No. EPA–HQ–OARM–2010–0922;                      II. Background                                        of this approach is that it reduces the
                                              FRL– 9242–2]                                               The Drug-Free Workplace Act of 1988                total volume of drug-free workplace
                                                                                                      [Pub. L. 100–690, Title V, Subtitle D; 41             regulations. A second advantage is that
                                              Environmental Protection Agency                         U.S.C. 701, et seq.] was enacted as a part            it collocates OMB’s guidance and all of
                                              Implementation of OMB Guidance on                       of omnibus drug legislation on                        the agencies’ implementing regulations
                                              Drug-Free Workplace Requirements                        November 18, 1988. Federal agencies                   in 2 CFR.
                                              AGENCY:  Environmental Protection                       issued an interim final common rule to                Conclusion
                                              Agency (EPA).                                           implement the act as it applied to grants
                                                                                                      [54 FR 4946, January 31, 1989]. The rule                 As the OMB guidance requires, the
                                              ACTION: Final rule.                                                                                           Environmental Protection Agency is
                                                                                                      was a subpart of the Governmentwide
                                              SUMMARY:   The Environmental Protection                 common rule on nonprocurement                         taking two regulatory actions. First, we
                                              Agency is removing its regulation                       suspension and debarment. The                         are removing the drug-free workplace
                                              implementing the Governmentwide                         agencies issued a final common rule                   common rule from 40 CFR part 36.
                                              common rule on drug-free workplace                      after consideration of public comments                Second, to replace the common rule, we
                                              requirements for financial assistance.                  [55 FR 21681, May 25, 1990].                          are issuing a brief regulation in 2 CFR
                                              This regulatory action implements the                      The agencies proposed an update to                 part 1536 to adopt the Governmentwide
                                              OMB’s initiative to streamline and                      the drug-free workplace common rule in                policies and procedures in the OMB
                                              consolidate into one title of the CFR all               2002 [67 FR 3266, January 23, 2002] and               guidance.
                                              federal regulations on drug-free                        finalized it in 2003 [68 FR 66534,                       Statutory and Executive Order
                                              workplace requirements for financial                    November 26, 2003]. The updated                       Reviews: OMB has determined under
                                              assistance. These changes constitute an                 common rule was redrafted in plain                    Executive Order 12866 (58 FR 51735,
                                              administrative simplification that would                language and adopted as a separate part,              October 4, 1993), that this action is not
                                              make no substantive change in                           independent from the common rule on                   a ‘‘significant regulatory action.’’
                                              Environmental Protection Agency                         nonprocurement suspension and                         Because this grants rule is not subject to
                                              policy or procedures for drug-free                      debarment. Based on an amendment to                   notice and comment requirements
                                              workplace.                                              the drug-free workplace requirements in               under the Administrative Procedure Act
                                                                                                      41 U.S.C. 702 [Pub. L. 105–85, div. A,                or any other statute, it is not subject to
                                              DATES:  This final rule is effective on                 title VIII, Sec. 809, Nov. 18, 1997, 111              the Regulatory Flexibility Act (5 U.S.C.
                                              December 22, 2010.                                      Stat. 1838], the update also allowed                  601 et.). Today’s rule contains no
                                              ADDRESSES: EPA has established a                        multiple enforcement options from                     Federal mandates (under the regulatory
                                              docket for this action under Docket ID                  which agencies could select, rather than              provisions of Title 2 of the Unfunded
                                              No. EPA–HQ–OARM–2010–0922. All                          requiring use of a certification in all               Mandates Reform Act of 1999 (UMRA))
                                              documents in the docket are listed in                   cases.                                                for State, local, or tribal governments or
                                              the index.                      When it established Title 2 of the CFR             the private sector that would subject the
                                              Although listed in the index, some                      as the new central location for OMB                   rule to Sections 202 and 205 of the
                                              information is not publicly available,                  guidance and agency implementing                      UMRA) (Pub. L. 104–4). The rule
                                              e.g., CBI or other information whose                    regulations concerning grants and                     imposes no enforceable duty on any
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                                              disclosure is restricted by statute.                    agreements [69 FR 26276, May 11,                      State, local, or Tribal governments or
                                              Certain other material, such as                         2004], OMB announced its intention to                 the private sector. In addition, this rule
                                              copyrighted material, is publicly                       replace common rules with OMB                         does not significantly or uniquely affect
                                              available only in hard copy. Publicly                   guidance that agencies could adopt in                 small governments. This action does not
                                              available docket materials are available                brief regulations. OMB began that                     have tribal implications, as specified in
                                              either electronically through http://                   process by proposing [70 FR 51863,                    Executive Order 13175 (65 FR 67249,
                                     or in hard copy at                  August 31, 2005] and finalizing [71 FR                November 9, 2000). This final rule is

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                                              80288        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              solely an administrative simplification                 the Federal Register. A major rule                    Subpart E—Violations of This Part and
                                              that would make no substantive change                   cannot take effect until 60 days after it             Consequences
                                              in Environmental Protection Agency                      is published in the Federal Register.                 1536.500 Who in the Environmental
                                              policy or procedures for drug-free                      This action is not a ‘‘major rule’’ as                    Protection Agency determines that a
                                              workplace. Thus, Executive Order                        defined by 5 U.S.C. 804(2). This rule                     recipient other than an individual
                                              13175 (63 FR 67249, November 9, 2000)                   will be effective on December 22, 2010.                   violated the requirements of this part?
                                              does not apply to this action. EPA                                                                            1536.505 Who in the Environmental
                                              interprets Executive Order 13045 (62 FR                 List of Subjects                                          Protection Agency determines that a
                                              19885, April 23, 1997) as applying only                                                                           recipient who is an individual violated
                                                                                                      2 CFR Part 1536
                                                                                                                                                                the requirements of this part?
                                              to those regulatory actions that concern
                                              health or safety risks, such that the                     Administrative practice and                           Authority: 41 U.S.C. 701–707.
                                              analysis required under section 5–501 of                procedure, Drug abuse, Grant programs,
                                                                                                      Reporting and recordkeeping                           § 1536.10   What does this part do?
                                              the Executive Order has the potential to
                                              influence the regulation. This action is                requirements.                                           This part requires that the award and
                                              not subject to Executive Order 13045                                                                          administration of Environmental
                                                                                                      40 CFR Part 36                                        Protection Agency grants and
                                              because it does not establish an
                                              environmental standard intended to                        Governmentwide requirements for                     cooperative agreements comply with
                                              mitigate health or safety risks. This rule              drug-free work-place (financial                       Office of Management and Budget
                                              will not have federalism implications,                  assistance).                                          (OMB) guidance implementing the
                                              as specified in Executive Order 13132                                                                         portion of the Drug-Free Workplace Act
                                                                                                        Dated: December 16, 2010.
                                              (64 FR 43255, August 10, 1999).                                                                               of 1988 (41 U.S.C. 701–707, as
                                                                                                      Howard Corcoran,                                      amended, hereafter referred to as ‘‘the
                                              Executive Order 12898 (59 FR 7629
                                              (February 16, 1994)) establishes Federal                Director, Office of Grants and Debarment.             Act’’) that applies to grants. It thereby—
                                              executive policy on environmental                       ■ Accordingly, for the reasons set forth                (a) Gives regulatory effect to the OMB
                                              justice. EPA has determined that this                   in the preamble, and under the                        guidance (Subparts A through F of 2
                                              rule will not have disproportionately                   authority of 5 U.S.C. 301, the                        CFR part 182) for the Environmental
                                              high and adverse human health or                        Environmental Protection Agency                       Protection Agency’s grants and
                                              environmental effects on minority or                    amends the Code of Federal                            cooperative agreements; and
                                              low-income populations because it is a                  Regulations, Title 2, Subtitle B, Chapter               (b) Establishes Environmental
                                              grant rule that does not affect the level               XV, Part 1536, and Title 40, Chapter I,               Protection Agency policies and
                                              of protection provided to human health                  Part 36, as follows:                                  procedures for compliance with the Act
                                              or the environment. This rule is not a                                                                        that are the same as those of other
                                              ‘‘significant energy action’’ as defined in             Title 2—Grants and Agreements                         Federal agencies, in conformance with
                                              Executive Order 13211, ‘‘Actions                                                                              the requirement in 41 U.S.C. 705 for
                                              Concerning Regulations That                             ■1. Add Part 1536 in Subtitle B,
                                                                                                                                                            Governmentwide implementing
                                              Significantly Affect Energy Supply,                     Chapter XV, to read as follows:
                                              Distribution, or Use’’ (66 FR 28355 (May                PART 1536—REQUIREMENTS FOR
                                              22, 2001)) because it is not likely to                                                                        § 1536.20   Does this part apply to me?
                                                                                                      DRUG-FREE WORKPLACE
                                              have a significant adverse effect on the                                                                        This part and, through this part,
                                                                                                      (FINANCIAL ASSISTANCE)
                                              supply, distribution, or use of energy.                                                                       pertinent portions of the OMB guidance
                                              Further, we have concluded that this                    Sec.                                                  in Subparts A through F of 2 CFR part
                                              rule is not likely to have any adverse                  1536.10 What does this part do?                       182 (see table at 2 CFR 182.115(b))
                                              energy effects. This rule does not                      1536.20 Does this part apply to me?                   apply to you if you are a—
                                              involve technical standards; thus, the                  1536.30 What policies and procedures must               (a) Recipient of a Environmental
                                              requirements of Section 12(d) of the                         I follow?                                        Protection Agency grant or cooperative
                                              National Technology Transfer and                        Subpart A—Purpose and Coverage                        agreement; or
                                              Advancement Act of 1995 (15 U.S.C.                      [Reserved.]                                             (b) Environmental Protection Agency
                                              272 note) do not apply. This rule does                                                                        awarding official.
                                                                                                      Subpart B—Requirements for Recipients
                                              not impose an additional information                    Other Than Individuals
                                              collection burden under the provisions                                                                        § 1536.30 What policies and procedures
                                              of the Paperwork Reduction Act of 1995                  1536.225 Whom in the Environmental                    must I follow?
                                                                                                          Protection Agency does a recipient other            (a) General. You must follow the
                                              (44 U.S.C. 3501 et seq.).
                                                                                                          than an individual notify about a
                                                 Congressional Review Act: The                                                                              policies and procedures specified in
                                                                                                          criminal drug conviction?
                                              Congressional Review Act, 5 U.S.C. 801                                                                        applicable sections of the OMB
                                              et seq., generally provides that before                 Subpart C—Requirements for Recipients                 guidance in Subparts A through F of 2
                                              certain actions may take effect, the                    Who Are Individuals                                   CFR part 182, as implemented by this
                                              agency promulgating the action must                     1536.300 Whom in the Environmental                    part.
                                              submit a report, which includes a copy                      Protection Agency does a recipient who              (b) Specific sections of OMB guidance
                                              of the action, to each House of the                         is an individual notify about a criminal          that this part supplements. In
                                              Congress and to the Comptroller General                     drug conviction?                                  implementing the OMB guidance in 2
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                                              of the United States. EPA will submit a                 Subpart D—Responsibilities of Agency                  CFR part 182, this part supplements
                                              report containing this rule and other                   Awarding Officials                                    four sections of the guidance, as shown
                                              required information to the U.S. Senate,                1536.400 What method do I use as an                   in the following table. For each of those
                                              the U.S. House of Representatives, and                      agency awarding official to obtain a              sections, you must follow the policies
                                              the Comptroller General of the United                       recipient’s agreement to comply with the          and procedures in the OMB guidance, as
                                              States prior to publication of the rule in                  OMB guidance?                                     supplemented by this part.

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                                                            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                             80289

                                                                                           Section in this
                                                   Section of OMB guidance                  part where                                          What the supplementation clarifies

                                              (1) 2 CFR 182.225(a) ..................             § 1536.225    Whom in the Environmental Protection Agency a recipient other than an individual must
                                                                                                                 notify if an employee is convicted for a violation of a criminal drug statute in the work-
                                              (2) 2 CFR 182.300(b) ..................             § 1536.300    Whom in the Environmental Protection Agency a recipient who is an individual must no-
                                                                                                                 tify if he or she is convicted of a criminal drug offense resulting from a violation occur-
                                                                                                                 ring during the conduct of any award activity.
                                              (3) 2 CFR 182.500 ......................            § 1536.500    Who in the Environmental Protection Agency is authorized to determine that a recipient
                                                                                                                 other than an individual is in violation of the requirements of 2 CFR part 182, as im-
                                                                                                                 plemented by this part.
                                              (4) 2 CFR 182.505 ......................            § 1536.505    Who in the Environmental Protection Agency is authorized to determine that a recipient
                                                                                                                 who is an individual is in violation of the requirements of 2 CFR part 182, as imple-
                                                                                                                 mented by this part.

                                                 (c) Sections of the OMB guidance that                 you must include the following term or                 DEPARTMENT OF ENERGY
                                              this part does not supplement. For any                   condition in the award:
                                              section of OMB guidance in Subparts A                                                                           10 CFR Part 430
                                                                                                         Drug-free workplace. You as the recipient
                                              through F of 2 CFR part 182 that is not                  must comply with drug-free workplace                   [Docket No. EERE–2010–BT–STD–WAV–
                                              listed in paragraph (b) of this section,                 requirements in Subpart B (or Subpart C, if            0045]
                                              Environmental Protection Agency                          the recipient is an individual) of 2 CFR
                                              policies and procedures are the same as                  Subtitle B, Chapter XV, Part 1536, which               Energy Efficiency Program for
                                              those in the OMB guidance.                               adopts the Governmentwide implementation               Consumer Products: Waiver of Federal
                                                                                                       (2 CFR part 182) of sec. 5152–5158 of the              Preemption of State Regulations
                                              Subpart A—Purpose and Coverage                                                                                  Concerning the Water Use or Water
                                                                                                       Drug-Free Workplace Act of 1988 (Pub. L.
                                              [Reserved.]                                                                                                     Efficiency of Showerheads, Faucets,
                                                                                                       100–690, Title V, Subtitle D; 41 U.S.C. 701–
                                                                                                       707).                                                  Water Closets and Urinals
                                              Subpart B—Requirements for
                                              Recipients Other Than Individuals                                                                               AGENCY:  Office of Energy Efficiency and
                                                                                                       Subpart E—Violations of This Part and                  Renewable Energy, Department of
                                              § 1536.225 Whom in the Environmental                     Consequences                                           Energy.
                                              Protection Agency does a recipient other                                                                        ACTION: Final rule.
                                              than an individual notify about a criminal               § 1536.500 Who in the Environmental
                                              drug conviction?                                         Protection Agency determines that a
                                                                                                                                                              SUMMARY:   The U.S Department of
                                                A recipient other than an individual                   recipient other than an individual violated
                                                                                                                                                              Energy (DOE) waives the general rule of
                                                                                                       the requirements of this part?
                                              that is required under 2 CFR 182.225(a)                                                                         Federal preemption for energy
                                              to notify Federal agencies about an                        The EPA Administrator or designee is                 conservation standards under 42 U.S.C.
                                              employee’s conviction for a criminal                     the official authorized to make the                    6297(c) with respect to any State
                                              drug offense must notify the EPA award                   determination under 2 CFR 182.500.                     regulation concerning the water use or
                                              official from each Environmental                                                                                water efficiency of faucets,
                                              Protection Agency office from which it                   § 1536.505 Who in the Environmental                    showerheads, water closets and urinals
                                              currently has an award.                                  Protection Agency determines that a                    if such State regulation is: More
                                                                                                       recipient who is an individual violated the            stringent than Federal regulation
                                              Subpart C—Requirements for                               requirements of this part?                             concerning the water use or water
                                              Recipients Who Are Individuals                             The EPA Administrator or designee is                 efficiency for that same type or class of
                                              § 1536.300 Whom in the Environmental                     the official authorized to make the                    product; and applicable to any sale or
                                              Protection Agency does a recipient who is                determination under 2 CFR 182.505.                     installation of all products in that
                                              an individual notify about a criminal drug                                                                      particular type or class.
                                              conviction?                                              Title 40—Protection of Environment                     DATES: Effective Date: This rule is
                                                 A recipient who is an individual and                  Chapter I                                              effective December 22, 2010.
                                              is required under 2 CFR 182.300(b) to                                                                           ADDRESSES: The public may review
                                              notify Federal agencies about a                          PART 36—[REMOVED]                                      copies of all materials related to this
                                              conviction for a criminal drug offense                                                                          rulemaking at the U.S. Department of
                                              must notify the EPA award official from                  ■   2. Remove Part 36.                                 Energy, Resource Room of the Building
                                              each Environmental Protection Agency                     [FR Doc. 2010–32134 Filed 12–21–10; 8:45 am]           Technologies Program, 950 L’Enfant
                                              office from which it currently has an                                                                           Plaza, SW., Suite 600, Washington, DC,
                                                                                                       BILLING CODE 6560–50–P
                                              award.                                                                                                          (202) 586–2945, between 9 a.m. and
                                                                                                                                                              4 p.m., Monday through Friday, except
                                              Subpart D—Responsibilities of Agency                                                                            Federal holidays. Please call Ms. Brenda
                                              Awarding Officials                                                                                              Edwards at the above telephone number
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                                              § 1536.400 What method do I use as an                                                                           for additional information regarding
                                              agency awarding official to obtain a                                                                            visiting the Resource Room.
                                              recipient’s agreement to comply with the                                                                        FOR FURTHER INFORMATION CONTACT:
                                              OMB guidance?                                                                                                   Lucas Adin, U.S. Department of Energy,
                                                To obtain a recipient’s agreement to                                                                          Office of Energy Efficiency and
                                              comply with applicable requirements in                                                                          Renewable Energy, Building
                                              the OMB guidance at 2 CFR part 182,                                                                             Technologies Program, EE–2J, 950

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                                              80290         Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              L’Enfant Plaza, SW., Washington, DC                     publish a final rule waiving preemption               to review under that Executive Order by
                                              20585–0121, (202) 287–1317, e-mail:                     for Federal standards under 42 U.S.C.                 the Office of Information and Regulatory
                                                                      6297(c) with respect to any State                     Affairs (OIRA) of the Office of
                                                Jennifer Tiedeman, Esq., GC–71, U.S.                  regulation concerning the water use or                Management and Budget (OMB).
                                              Department of Energy, Office of the                     water efficiency of such type or class of             B. Administrative Procedure Act
                                              General Counsel, 1000 Independence                      showerhead, faucet, water closet or
                                              Avenue, SW., Washington, DC 20585,                      urinal if such State regulation meets the                The Department of Energy finds good
                                              (202) 287–6111, e-mail:                                 following two conditions. First, the                  cause to waive prior notice and an
                                                               State regulation concerning water use or              opportunity for public comment on
                                                                                                      water efficiency for a particular type or             these regulations pursuant to 5 U.S.C.
                                              SUPPLEMENTARY INFORMATION:
                                                                                                      class of showerhead, faucet, water closet             533(b)(B), because such procedures are
                                              Table of Contents                                       or urinal must be more stringent than                 unnecessary. EPCA imposes a non-
                                                                                                      the Federal regulation concerning water               discretionary duty on DOE to waive
                                              I. Authority and Background                             use or water efficiency for that same                 Federal preemption in a defined factual
                                              II. Procedural Requirements                                                                                   circumstance. That circumstance has
                                                 A. Executive Order 12866
                                                                                                      type or class of showerhead, faucet,
                                                                                                      water closet or urinal. 42 U.S.C.                     occurred. Therefore, this rule is
                                                 B. Administrative Procedure Act                                                                            necessary for DOE to implement this
                                                 C. National Environmental Policy Act of              6295(j)(3)(C)(i), 6295(k)(3)(C)(i). Second,
                                                                                                      the State regulation concerning the                   statutorily-imposed obligation. Public
                                                 D. Regulatory Flexibility Act                        water use or water efficiency for a                   comment on DOE’s implementation of
                                                 E. Paperwork Reduction Act                           particular type or class of showerhead,               this legal mandate would serve no
                                                 F. Unfunded Mandates Reform Act of 1995              faucet, water closet or urinal must be                useful purpose. For the same reason,
                                                 G. Treasury and General Government                   applicable to any sale or installation of             DOE finds good cause, pursuant to 5
                                                    Appropriations Act, 1999                          all products in that particular type or               U.S.C. 553(d)(3), to waive the 30-day
                                                 H. Executive Order 13132
                                                                                                      class. 42 U.S.C. 6295(j)(3)(C)(ii),                   delay in effective date for this rule.
                                                 I. Executive Order 12988                                                                                   Therefore, these regulations are being
                                                 J. Treasury and General Government                   6295(k)(3)(C)(ii).
                                                                                                         The provisions in 42 U.S.C.                        published as final regulations and are
                                                    Appropriations Act, 2001                                                                                effective December 22, 2010.
                                                 K. Executive Order 13211                             6295(j)(3)(C) and 6295(k)(3)(C) represent
                                                 L. Executive Order 12630                             a choice by Congress to deviate from the              C. National Environmental Policy Act of
                                                 M. Section 32 of the Federal Energy                  general rule of Federal preemption,                   1969
                                                    Administration Act of 1974                        where the relevant industry consensus
                                                 N. Congressional Notification                                                                                 DOE has determined that this rule
                                                                                                      body has failed to act to improve water
                                              III. Approval of the Office of the Secretary                                                                  falls into a class of actions that are
                                                                                                      efficiency for a significant period of
                                                                                                                                                            categorically excluded from review
                                              I. Authority and Discussion                             time. ASME/ANSI last made a
                                                                                                                                                            under the National Environmental
                                                                                                      substantive amendment to its standards
                                                 Title III, Part B of the Energy Policy                                                                     Policy Act of 1969 (NEPA; 42 U.S.C.
                                                                                                      regarding the water efficiency
                                              and Conservation Act (EPCA), Public                                                                           4321 et seq.) and DOE’s implementing
                                                                                                      requirements for showerheads and
                                              Law 94–163 (42 U.S.C. 6291–6309, as                                                                           regulations at 10 CFR part 1021. This
                                                                                                      faucets on May 29, 1996 (ASME/ANSI
                                              codified), established the Energy                                                                             rule at most amends an existing rule
                                                                                                      A112.18.1M–1996), and for water
                                              Conservation Program for ‘‘Consumer                                                                           without changing its environmental
                                                                                                      closets and urinals on April 19, 1996
                                              Products Other Than Automobiles.’’ 1                                                                          effect, and, therefore, is covered by the
                                                                                                      (ASME/ANSI A112.19.6–1995). Both of
                                              The consumer products subject to this                                                                         Categorical Exclusion A5 found in
                                                                                                      these standards were incorporated by
                                              program (hereafter ‘‘covered products’’)                                                                      appendix A to subpart D, 10 CFR part
                                                                                                      reference into the Code of Federal
                                              include faucets, showerheads, water                                                                           1021. Accordingly, neither an
                                                                                                      Regulations in a final rule issued by
                                              closets and urinals, the subjects of                                                                          environmental assessment nor an
                                                                                                      DOE on March 18, 1998. 63 FR 13308.
                                              today’s notice. Under EPCA, the overall                                                                       environmental impact statement is
                                                                                                      Because more than five years have
                                              program consists essentially of testing,                                                                      required. Moreover, a State’s
                                                                                                      passed since ASME/ANSI last amended
                                              labeling, and Federal energy                                                                                  promulgation of a regulation concerning
                                                                                                      the water efficiency requirements in
                                              conservation standards, including water                                                                       water use or water efficiency for a
                                                                                                      either of these standards, DOE must
                                              conservation standards for faucets,                                                                           particular type or class of showerhead,
                                                                                                      issue this final rule waiving the
                                              showerheads, water closets and urinals.                                                                       faucet, water closet or urinal is not a
                                                                                                      provisions of 42 U.S.C. 6297(c) with
                                              National standards for these water-using                                                                      Federal action subject to NEPA.
                                                                                                      respect to any State regulation
                                              products are based on the American                      concerning the water use or water                     D. Regulatory Flexibility Act
                                              Society of Mechanical Engineers                         efficiency of a particular type or class of
                                              (ASME)/American National Standards                                                                               The Regulatory Flexibility Act (5
                                                                                                      showerhead, faucet, water closet or                   U.S.C. 601 et seq.) requires preparation
                                              Institute (ANSI) standards A112.18.1M,                  urinal that is both more stringent than
                                              for showerheads and faucets, and                                                                              of an initial regulatory flexibility
                                                                                                      the relevant Federal regulation and is                analysis for any rule that must be
                                              A112.19.6, for water closets and urinals.               applicable to any sale or installation or
                                              42 U.S.C. 6295(j), (k).                                                                                       proposed for public comment, unless
                                                                                                      all products in that particular type or               the agency certifies that the rule will
                                                 42 U.S.C. 6295(j)(3)(C) and
                                                                                                      class.                                                have no significant economic impact on
                                              6295(k)(3)(C) requires that, not later
                                              than six months after the conclusion of                 II. Procedural Requirements                           a substantial number of small entities.
                                              a five-consecutive-year period during                                                                         As required by Executive Order 13272,
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                                                                                                      A. Executive Order 12866                              ‘‘Proper Consideration of Small Entities
                                              which the ASME/ANSI has not
                                              amended these faucet, showerhead,                          Today’s regulatory action is not a                 in Agency Rulemaking,’’ 67 FR 53461
                                              water closet or urinal standards in order               ‘‘significant regulatory action’’ under               (August 16, 2002), DOE published
                                              to improve water efficiency, DOE must                   section 3(f) of Executive Order 12866,                procedures and policies on February 19,
                                                                                                      ‘‘Regulatory Planning and Review,’’ 58                2003, to ensure that the potential
                                                1 For editorial reasons, upon codification in the     FR 51735 (October 4, 1993).                           impacts of its rules on small entities are
                                              U.S. Code, Part B was re-designated Part A.             Accordingly, this action was not subject              properly considered during the

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                         80291

                                              rulemaking process. 68 FR 7990. DOE                     Policymaking Assessment for any rule                  extent permitted by law, this rule meets
                                              has made its procedures and policies                    that may affect family well-being.                    the relevant standards of Executive
                                              available on the Office of the General                  Today’s rule would have no impact on                  Order 12988.
                                              Counsel’s Web site at http://                           the autonomy or integrity of the family
                                                                                                                                                            J. Treasury and General Government
                                     Because a notice of                     as an institution. Accordingly, DOE has
                                                                                                                                                            Appropriations Act, 2001
                                              proposed rulemaking is not required                     concluded that it is unnecessary to
                                              under the Administrative Procedure Act                  prepare a Family Policymaking                            The Treasury and General
                                              or other applicable law, the Regulatory                 Assessment.                                           Government Appropriations Act, 2001
                                              Flexibility Act does not require                                                                              (44 U.S.C. 3516 note) provides for
                                                                                                      H. Executive Order 13132
                                              certification or the conduct of a                                                                             agencies to review most disseminations
                                              regulatory flexibility analysis for this                  Executive Order 13132, ‘‘Federalism,’’              of information to the public under
                                              rule.                                                   64 FR 43255 (August 4, 1999) imposes                  guidelines established by each agency
                                                                                                      certain requirements on agencies                      pursuant to general guidelines issued by
                                              E. Paperwork Reduction Act                              formulating and implementing policies                 OMB. OMB’s guidelines were published
                                                This rulemaking imposes no new                        or regulations that preempt State law or              at 67 FR 8452 (February 22, 2002), and
                                              information or recordkeeping                            that have Federalism implications. The                DOE’s guidelines were published at 67
                                              requirements. Accordingly, OMB                          executive order requires agencies to                  FR 62446 (October 7, 2002). DOE has
                                              clearance is not required under the                     examine the constitutional and statutory              reviewed today’s notice under the OMB
                                              Paperwork Reduction Act. (44 U.S.C.                     authority supporting any action that                  and DOE guidelines and has concluded
                                              3501 et seq.)                                           would limit the policymaking discretion               that it is consistent with applicable
                                                                                                      of the States and to carefully assess the             policies in those guidelines.
                                              F. Unfunded Mandates Reform Act of
                                                                                                      necessity for such actions. DOE has
                                                                                                      examined this final rule and determined               K. Executive Order 13211
                                                 Title II of the Unfunded Mandates                    that it would not preempt State law; in
                                              Reform Act of 1995 (UMRA) (Pub. L.                                                                               Executive Order 13211, ‘‘Actions
                                                                                                      fact, this rule waives preemption of
                                              104–4) requires each Federal agency to                  State law and has no negative impact on               Concerning Regulations That
                                              assess the effects of Federal regulatory                any State. Executive Order 13132                      Significantly Affect Energy Supply,
                                              actions on State, local, and Tribal                     requires no further action.                           Distribution, or Use,’’ 66 FR 28355 (May
                                              governments and the private sector. For                                                                       22, 2001), requires Federal agencies to
                                              proposed regulatory actions likely to                   I. Executive Order 12988                              prepare and submit to OMB a Statement
                                              result in a rule that may cause                            With respect to the review of existing             of Energy Effects for any proposed
                                              expenditures by State, local, and Tribal                regulations and the promulgation of                   significant energy action. A ‘‘significant
                                              governments, in the aggregate, or by the                new regulations, section 3(a) of                      energy action’’ is defined as any action
                                              private sector, of $100 million or more                 Executive Order 12988, ‘‘Civil Justice                by an agency that promulgates or is
                                              (adjusted annually for inflation), section              Reform,’’ 61 FR 4729 (February 7, 1996),              expected to lead to promulgation of a
                                              202 of UMRA requires a Federal agency                   imposes on Federal agencies the general               final rule, and that (1) is a significant
                                              to publish estimates of the resulting                   duty to adhere to the following                       regulatory action under Executive Order
                                              costs, benefits, and other effects on the               requirements: (1) Eliminate drafting                  12866, or any successor order; and (2)
                                              national economy. (2 U.S.C. 1532(a), (b))               errors and ambiguity, (2) write                       is likely to have a significant adverse
                                              The UMRA also requires a Federal                        regulations to minimize litigation,                   effect on the supply, distribution, or use
                                              agency to develop an effective process                  (3) provide a clear legal standard for                of energy; or (3) is designated by the
                                              to permit timely input by elected                       affected conduct rather than a general                Administrator of OIRA as a significant
                                              officers of State, local, and Tribal                    standard, and (4) promote simplification              energy action. For any proposed
                                              governments on a proposed ‘‘significant                 and burden reduction. Regarding the                   significant energy action, the agency
                                              intergovernmental mandate.’’ UMRA                       review required by section 3(a), section              must give a detailed statement of any
                                              also requires an agency plan for giving                 3(b) of Executive Order 12988                         adverse effects on energy supply,
                                              notice and opportunity for timely input                 specifically requires that Executive                  distribution, or use should the proposal
                                              to small governments that may be                        agencies make every reasonable effort to              be implemented, and of reasonable
                                              affected before establishing a                          ensure that the regulation (1) clearly                alternatives to the action and their
                                              requirement that might significantly or                 specifies the preemptive effect, if any;              expected benefits on energy supply,
                                              uniquely affect them. On March 18,                      (2) clearly specifies any effect on                   distribution, and use. Today’s regulatory
                                              1997, DOE published a statement of                      existing Federal law or regulation;                   action is not a significant regulatory
                                              policy on its process for                               (3) provides a clear legal standard for               action under Executive Order 12866 or
                                              intergovernmental consultation under                    affected conduct while promoting                      any successor order; would not have a
                                              UMRA (62 FR 12820) (also available at                   simplification and burden reduction;                  significant adverse effect on the supply,
                                     Today’s final                   (4) specifies the retroactive effect, if any;         distribution, or use of energy; and has
                                              rule contains neither an                                (5) adequately defines key terms; and                 not been designated by the
                                              intergovernmental mandate nor a                         (6) addresses other important issues                  Administrator of OIRA as a significant
                                              mandate that may result in the                          affecting clarity and general                         energy action. Accordingly, DOE has not
                                              expenditure of $100 million or more in                  draftsmanship under any guidelines                    prepared a Statement of Energy Effects.
                                              any year, so these requirements do not                  issued by the Attorney General. Section               L. Executive Order 12630
                                              apply.                                                  3(c) of Executive Order 12988 requires
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                                                                                                      Executive agencies to review regulations                 Pursuant to Executive Order 12630,
                                              G. Treasury and General Government                      in light of applicable standards in                   ‘‘Governmental Actions and Interference
                                              Appropriations Act, 1999                                sections 3(a) and 3(b) to determine                   with Constitutionally Protected Property
                                                Section 654 of the Treasury and                       whether they are met or it is                         Rights,’’ 53 FR 8859 (March 15, 1988),
                                              General Government Appropriations                       unreasonable to meet one or more of                   DOE has determined that this rule
                                              Act, 1999 (Pub. L. 105–277) requires                    them. DOE has completed the required                  would not result in any takings that
                                              Federal agencies to issue a Family                      review and determined that, to the                    might require compensation under the

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                                              80292        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              Fifth Amendment to the U.S.                             ACTION:   Final rule; technical correction.           2007, by replacing the nominal full load
                                              Constitution.                                                                                                 efficiency of ‘‘94.5’’ with ‘‘95.4.’’
                                                                                                      SUMMARY:   The U.S. Department of
                                              M. Section 32 of the Federal Energy                     Energy (DOE) published a final rule on                II. Need for Correction
                                              Administration Act of 1974                              March 23, 2009, promulgating energy                      As published, the nominal full load
                                                Under section 301 of the Department                   conservation standards for certain                    efficiency table at 10 CFR 431.25(f)
                                              of Energy Organization Act (Pub. L. 95–                 electric motors as prescribed in the                  contains three values that deviate from
                                              91), the Department of Energy must                      Energy Policy and Conservation Act, as                the requirements established by EPCA,
                                              comply with section 32 of the Federal                   amended by the Energy Independence                    as amended by EISA 2007. To correct
                                              Energy Administration Act of 1974                       and Security Act. This document is                    this error, DOE is amending 10 CFR
                                              (Pub. L. 93–275), as amended by the                     being issued to correct the energy                    431.25(f) to replace the current table
                                              Federal Energy Administration                           efficiency levels that DOE promulgated                with a corrected table of values. In light
                                              Authorization Act of 1977 (Pub. L. 95–                  for NEMA Design B general purpose                     of the statutory requirement, the change
                                              70). (15 U.S.C. 788) Section 32 provides                electric motors that, due to a drafting               addressed by today’s document is
                                              that where a proposed rule authorizes or                error, are not consistent with statutory              technical in nature. In addition, because
                                              requires use of commercial standards,                   requirements.                                         DOE does not have the discretion to
                                              the notice of proposed rulemaking must                                                                        deviate from these statutorily-prescribed
                                                                                                      DATES: This technical correction is
                                              inform the public of the use and                                                                              requirements, DOE finds that there is
                                                                                                      effective as of December 22, 2010.
                                              background of such standards. In                                                                              good cause under 5 U.S.C. 553(b)(B) to
                                              addition, section 32(c) requires DOE to                 FOR FURTHER INFORMATION CONTACT: Mr.
                                                                                                      James Raba, U.S. Department of Energy,                not issue a separate notice to solicit
                                              consult with the Department of Justice                                                                        public comment on the changes
                                              and the Federal Trade Commission                        Office of Energy Efficiency and
                                                                                                      Renewable Energy, Building                            contained in this document. Issuing a
                                              concerning the impact of the
                                                                                                      Technologies Program, EE–2J, 1000                     separate notice to solicit public
                                              commercial or industry standards on
                                                                                                      Independence Avenue, SW.,                             comments would be impractical,
                                              competition. This final rule to waive the
                                                                                                      Washington, DC 20585–0121.                            unnecessary, and contrary to the public
                                              provisions of 42 U.S.C. 6297(c) in
                                                                                                      Telephone: (202) 586–8654. E-mail:                    interest.
                                              certain circumstances is not a proposed
                                              rule and does not authorize or require                                          List of Subjects in 10 CFR part 431
                                              the use of any commercial standards.                       In the Office of the General Counsel,
                                              Therefore, no consultation with either                                                                          Administrative practice and
                                                                                                      contact Ms. Ami Grace-Tardy, U.S.
                                              DOJ or FTC is required.                                                                                       procedure, Energy conservation,
                                                                                                      Department of Energy, Office of the
                                                                                                                                                            Reporting and recordkeeping
                                              N. Congressional Notification                           General Counsel, GC–71, 1000
                                                                                                      Independence Avenue, SW.,
                                                 As required by 5 U.S.C. 801, DOE will                Washington, DC 20585. Telephone:                        Issued in Washington, DC, on December
                                              report to Congress on the promulgation                  (202) 586–5709. E-mail: Ami.Grace-                    15, 2010.
                                              of today’s rule. The report will state that                                        Cathy Zoi,
                                              it has been determined that the rule is                                                                       Assistant Secretary, Energy Efficiency and
                                              not a ‘‘major rule’’ as defined by 5 U.S.C.             SUPPLEMENTARY INFORMATION:                            Renewable Energy.
                                              804(2).                                                 I. Background                                         ■ For the reasons stated in the preamble,
                                              III. Approval of the Office of the                         The Energy Policy and Conservation                 DOE amends 10 CFR Part 431 as set
                                              Secretary                                               Act (EPCA), as amended by section                     forth below.
                                                 The Secretary of Energy has approved                 313(b)(1)(B) of the Energy Independence
                                              publication of this final rule.                         and Security Act (EISA 2007), requires                PART 431—ENERGY EFFICIENCY
                                                                                                      each National Electrical Manufacturers                PROGRAM FOR CERTAIN
                                                Issued in Washington, DC, on December                                                                       COMMERCIAL AND INDUSTRIAL
                                              15, 2010.                                               Association (NEMA) Design B, general
                                                                                                      purpose electric motor with a power                   EQUIPMENT
                                              Cathy Zoi,
                                              Assistant Secretary, Energy Efficiency and              rating of more than 200 horsepower, but               ■ 1. The authority citation for part 431
                                              Renewable Energy.                                       not greater than 500 horsepower,                      continues to read as follows:
                                              [FR Doc. 2010–32116 Filed 12–21–10; 8:45 am]            manufactured (alone or as a component
                                                                                                      of another piece of equipment) after                      Authority: 42 U.S.C. 6291–6317.
                                              BILLING CODE 6450–01–P
                                                                                                      December 19, 2010, to have a nominal                  ■ 2. Section 431.25 is amended by
                                                                                                      full load efficiency that is not less than            revising paragraph (f) to read as follows:
                                              DEPARTMENT OF ENERGY                                    the values in NEMA Standard MG–1
                                                                                                      (2006) Table 12–11. (42 U.S.C.                        § 431.25 Energy conservation standards
                                              10 CFR Part 431                                         6313(b)(2)(D)) DOE codified this                      and effective dates.

                                              [Docket Number EERE–2008–BT–TP–0008]                    requirement at 10 CFR 431.25(f). 74 FR                *      *    *     *    *
                                                                                                      12058 (March 23, 2009)                                   (f) Each NEMA Design B general
                                              RIN 1904–AB71                                              It was recently discovered that the                purpose electric motor with a power
                                                                                                      efficiency levels under 10 CFR 431.25(f),             rating of more than 200 horsepower, but
                                              Energy Conservation Program: Energy
                                                                                                      for NEMA Design B, six-pole open                      not greater than 500 horsepower,
                                              Conservation Standards for Electric
                                                                                                      motors rated 250, 300, and 350                        manufactured (alone or as a component
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                                                                                                      horsepower are not consistent with the                of another piece of equipment), on or
                                              AGENCY: Office of Energy Efficiency and                 EISA 2007 levels as prescribed. Today’s               after December 19, 2010, shall have a
                                              Renewable Energy, Department of                         final rule conforms these efficiency                  nominal full load efficiency that is not
                                              Energy.                                                 levels with EPCA, as amended by EISA                  less than the following:

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                                                                Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                                               80293

                                                                              FULL-LOAD EFFICIENCIES OF NEMA DESIGN B GENERAL PURPOSE ELECTRIC MOTORS
                                                                                                                                                          Nominal full load efficiency

                                                                                                                          Open motors                                                                        Enclosed motors
                                                    Motor horsepower                                                    (number of poles)                                                                   (number of poles)

                                                                                                  8                      6                    4                   2                    8                      6               4          2

                                              250   ...................................                94.5                   95.4                95.4                  94.5                94.5                   95.0           95.0       95.4
                                              300   ...................................   ....................                95.4                95.4                  95.0   ....................                95.0           95.4       95.4
                                              350   ...................................   ....................                95.4                95.4                  95.0   ....................                95.0           95.4       95.4
                                              400   ...................................   ....................   ....................             95.4                  95.4   ....................   ....................        95.4       95.4
                                              450   ...................................   ....................   ....................             95.8                  95.8   ....................   ....................        95.4       95.4
                                              500   ...................................   ....................   ....................             95.8                  95.8   ....................   ....................        95.8       95.4

                                              *       *         *         *         *                                    other respects, the original document                                 October 22, 2010), requires replacing all
                                              [FR Doc. 2010–32119 Filed 12–21–10; 8:45 am]                               remains the same.                                                     servo-controls that are identified in the
                                              BILLING CODE 6450–01–P                                                     DATES: This final rule is effective                                   Applicability section, Table 1, of the
                                                                                                                         December 22, 2010. The effective date                                 AD.
                                                                                                                         for AD 2010–22–08 remains November                                       As published, two part numbers
                                              DEPARTMENT OF TRANSPORTATION                                               26, 2010.                                                             shown in Table 1 on Federal Register
                                                                                                                         ADDRESSES: You may examine the AD                                     page 65224, under item 2. of PART 39—
                                              Federal Aviation Administration                                                                                                                  AIRWORTHINESS DIRECTIVES section,
                                                                                                                         docket on the Internet at http://
                                                                                                               ; or in person at the                              are incorrect. The first incorrect part
                                              14 CFR Part 39                                                                                                                                   number (P/N) is ‘‘5084;’’ the correct
                                                                                                                         Docket Management Facility between
                                              [Docket No. FAA–2010–0611; Directorate                                     9 a.m. and 5 p.m., Monday through                                     P/N is ‘‘SC5084.’’ The second incorrect
                                              Identifier 2009–SW–18–AD; Amendment 39–                                    Friday, except Federal holidays. The AD                               P/N is ‘‘5084–1;’’ the correct P/N is
                                              16487; AD 2010–22–08]                                                      docket contains this AD, the regulatory                               ‘‘SC5084–1.’’ The other P/Ns shown in
                                              RIN 2120–AA64                                                              evaluation, any comments received, and                                Table 1 remain unchanged.
                                                                                                                         other information. The address for the                                   No other part of the preamble or
                                              Airworthiness Directives; Eurocopter                                       Docket Office (phone: 800–647–5527) is                                regulatory information has been
                                              France Model AS 350 B, BA, B1, B2,                                         Document Management Facility, U.S.                                    changed; therefore, only Table 1 of the
                                              B3, and D, and Model AS355 E, F, F1,                                       Department of Transportation, Docket                                  final rule is being published in the
                                              F2, and N Helicopters                                                      Operations, M–30, West Building                                       Federal Register.
                                                                                                                         Ground Floor, Room W12–140, 1200                                         The effective date of this AD is
                                              AGENCY:  Federal Aviation                                                  New Jersey Avenue, SE., Washington,                                   November 26, 2010.
                                              Administration (FAA), Department of                                        DC 20590.
                                              Transportation (DOT).                                                                                                                            Correction of Regulatory Text
                                                                                                                         FOR FURTHER INFORMATION CONTACT:
                                              ACTION: Final rule; correction.                                                                                                                  § 39.13       [Corrected]
                                                                                                                         DOT/FAA Southwest Region, Matt
                                              SUMMARY:    The FAA is correcting an                                       Wilbanks, ASW–111, Aviation Safety                                    ■ In the Federal Register document
                                              airworthiness directive (AD) that was                                      Engineer, Rotorcraft Directorate,                                     2010–26565, filed October 21, 2010 and
                                              published in the Federal Register. That                                    Regulations and Policy Group, 2601                                    published on October 22, 2010 (75 FR
                                              AD applies to the specified model                                          Meacham Blvd., Fort Worth, Texas                                      65222), on pages 65223 and 65224,
                                              helicopters. Table 1 of the AD has two                                     76137, telephone (817) 222–5051, fax                                  Table 1 containing the part numbers
                                              part numbers that do not contain the                                       (817) 222–5961.                                                       5084 and 5084–1 without the correct
                                              ‘‘SC’’ prefix. This document adds the                                      SUPPLEMENTARY INFORMATION: This AD,                                   prefix ‘‘SC’’ is corrected to read as
                                              prefix and corrects that error. In all                                     Amendment 39–16487 (75 FR 65222,                                      follows:

                                                                                                                                                   TABLE 1
                                                                         Component                                                      Part No. (P/N)                                                     Serial No. (S/N)

                                              Main rotor servo-control .....................................              P/N     SC5083 ............................    S/N   270M, 272M, 409M, 423M, 452M, or 1573.
                                                                                                                          P/N     SC5083–1 ........................      S/N   2902 through 2921, inclusive.
                                                                                                                          P/N     SC5084 ............................    S/N   30, 84, 104, 186, 438, 575, or 695.
                                                                                                                          P/N     SC5084–1 ........................      S/N   1462 through 1481, inclusive.
                                              Tail rotor servo-control .......................................            P/N     SC5072 ............................    S/N   222M, 306M, or 309.
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                                              80294        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                Issued in Fort Worth, Texas, on December              the BE–11 annual survey of U.S. direct                BEA will also expand the use of
                                              10, 2010.                                               investment abroad.                                    sampling to help align the data
                                              Lance T. Gant,                                             BEA, U.S. Department of Commerce,                  collection program with resources.
                                              Acting Manager, Rotorcraft Directorate,                 conducts the BE–11 survey under the                      Beginning with the 2010 annual
                                              Aircraft Certification Service.                         authority of the International                        survey, U.S. Reporters will report data
                                              [FR Doc. 2010–31964 Filed 12–21–10; 8:45 am]            Investment and Trade in Services                      on all their foreign affiliates, regardless
                                              BILLING CODE 4910–13–P                                  Survey Act (22 U.S.C. 3101–3108),                     of industry, on one of four foreign
                                                                                                      hereinafter, ‘‘the Act.’’ Section 4(a) of the         affiliate forms—BE–11B, BE–11C, BE–
                                                                                                      Act (22 U.S.C. 3103(a)) requires that,                11D, or BE–11E. Data on foreign
                                                                                                      with respect to United States direct                  affiliates of U.S. Reporters that are
                                              DEPARTMENT OF COMMERCE
                                                                                                      investment abroad, the President shall,               banks, bank holding companies, or
                                              Bureau of Economic Analysis                             to the extent he deems necessary and                  financial holding companies will be
                                                                                                      feasible, conduct a regular data                      collected on the same survey forms as
                                              15 CFR Part 806                                         collection program to secure current                  data on other foreign affiliates. All U.S.
                                                                                                      information on international capital                  Reporters will report data on all
                                              [Docket No. 100217100–0608–02]                          flows and other information related to                domestic operations, on a fully
                                                                                                      international investment and trade in                 consolidated basis, on Form BE–11A,
                                              RIN 0691–AA74
                                                                                                      services, including (but not limited to)              Report for U.S. Reporter. Also, U.S.
                                              Direct Investment Surveys: BE–11,                       such information as may be necessary                  Reporters with total assets, sales or gross
                                              Annual Survey of U.S. Direct                            for computing and analyzing the United                operating revenues, or net income less
                                              Investment Abroad                                       States’ balance of payments, the                      than or equal to $300 million will be
                                                                                                      employment and taxes of United States                 required to report only certain items on
                                              AGENCY:  Bureau of Economic Analysis,                   parent companies and their affiliates,                Form BE–11A.
                                              Commerce.                                               and the international investment and                     Additionally, BEA will require U.S.
                                              ACTION: Final rule.                                     trade in services position of the United              Reporters to file reports annually for
                                                                                                      States.                                               foreign affiliates in which they own a 10
                                              SUMMARY:    This final rule amends                         The BE–11 survey is a sample survey                to 20 percent voting interest. These
                                              regulations of the Bureau of Economic                   that collects information on a variety of             affiliates, some of which are very large,
                                              Analysis (BEA), Department of                           measures of the overall operations of                 fall under both U.S. and international
                                              Commerce, to set forth the reporting                    U.S. parent companies and their foreign               definitions for foreign direct investment
                                              requirements for the BE–11, Annual                      affiliates, including total assets, sales,            and must be represented in the
                                              Survey of U.S. Direct Investment                        net income, employment and employee                   statistics, but in the past they have been
                                              Abroad. BEA conducts the survey                         compensation, research and                            required to be reported in the annual
                                              annually and obtains sample data on                     development expenditures, and exports                 survey only in the third year following
                                              financial and operating data covering                   and imports of goods. The sample data                 a benchmark survey. Annual reporting
                                              the overall operations of U.S. parent                   are used to derive universe estimates in              will ensure that the activities of these
                                              companies and their foreign affiliates.                 nonbenchmark years from similar data                  affiliates are accurately reflected in the
                                              BEA is modifying and deleting items on                  reported in the BE–10, Benchmark                      statistics derived from the survey.
                                              the survey forms and changing the                       Survey of U.S. Direct Investment                         The four foreign affiliate forms are—
                                              reporting criteria. The changes include                 Abroad, which is taken every five years.                 (a) Form BE–11B—report for majority-
                                              a change in the reporting criteria for                  The data are needed to measure the size               owned foreign affiliates with total
                                              foreign affiliates with U.S. Parent (U.S.               and economic significance of direct                   assets, sales or gross operating revenues,
                                              Reporter) ownership between 10 and 20                   investment abroad, to measure the                     or net income greater than $60 million,
                                              percent. BEA is also making changes to                  changes in such investment, and to                    positive or negative; filing of additional
                                              bring the BE–11 forms and instructions                  assess their impact on the U.S. and                   items would be required for affiliates
                                              into conformity with the 2009 BE–10,                    foreign economies. The data are                       with assets, sales, or net income greater
                                              Benchmark Survey of U.S. Direct                         disaggregated by country and industry                 than $300 million, positive or negative;
                                              Investment Abroad.                                      of the foreign affiliate and by industry                 (b) Form BE–11C—report for
                                              DATES: This final rule will be effective
                                                                                                      of the U.S. parent. The BE–11 survey is               minority-owned foreign affiliates with
                                              January 21, 2011.                                       a mandatory annual survey of U.S.                     total assets, sales or gross operating
                                                                                                      direct investment abroad conducted by                 revenues, or net income greater than $60
                                              FOR FURTHER INFORMATION CONTACT:                                                                              million, positive or negative;
                                                                                                      BEA under the Act. BEA sends survey
                                              David H. Galler, Chief, Direct                          forms to potential respondents in March                  (c) Form BE–11D—schedule for
                                              Investment Division (BE–50), Bureau of                  of each year; responses are due by May                foreign affiliates established or acquired
                                              Economic Analysis, U.S. Department of                   31.                                                   by the U.S. Reporter during the current
                                              Commerce, Washington, DC 20230;                                                                               reporting year with total assets, sales or
                                              e-mail or phone                    Description of Changes                                gross operating revenues, or net income
                                              (202) 606–9835.                                            The changes revise the regulations for             greater than $25 million, positive or
                                              SUPPLEMENTARY INFORMATION: On                           the BE–11 survey and bring the BE–11                  negative, but for which no one of these
                                              September 20, 2010, BEA published a                     forms and instructions into conformity                items is greater than $60 million,
                                              notice of proposed rulemaking that set                  with the 2009 BE–10, Benchmark                        positive or negative; and
                                              forth revised reporting criteria for the                Survey of U.S. Direct Investment                         (d) Form BE–11E—report for foreign
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                                              BE–11, Annual Survey of U.S. Direct                     Abroad. These revisions include                       affiliates selected by BEA to be reported
                                              Investment Abroad (75 FR 57217–                         changes in reporting thresholds and                   on this form in lieu of Form BE–11B.
                                              57220). No comments on the proposed                     data items collected, as well as changes              BEA will statistically divide into panels,
                                              rule were received. Thus the proposed                   in form design. Several of these                      affiliates with total assets, sales or gross
                                              rule is adopted without change. This                    revisions are part of a larger program to             operating revenues, and net income
                                              final rule amends 15 CFR Part 806.14 to                 align the data collection program for                 (positive or negative) between $60
                                              set forth the reporting requirements for                multinationals with available resources.              million and $300 million. At the

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                           80295

                                              direction of BEA, U.S. Reporters will                   Executive Order 13132                                 to the Chief Counsel for Advocacy,
                                              alternate reporting these affiliates on                   This final rule does not contain                    Small Business Administration (SBA),
                                              Form BE–11B and Form BE–11E.                            policies with Federalism implications                 under the provisions of the Regulatory
                                                 A Form BE–11B, BE–11C, or BE–11E                     sufficient to warrant preparation of a                Flexibility Act, 5 U.S.C. 605(b), that this
                                              must be filed for a foreign affiliate of the            Federalism assessment under E.O.                      final rule will not have a significant
                                              U.S. Reporter that owns another non-                    13132.                                                economic impact on a substantial
                                              exempt foreign affiliate even if the                                                                          number of small entities. The factual
                                              foreign affiliate parent is otherwise                   Paperwork Reduction Act                               basis for the certification was published
                                              exempt. That is, all affiliates upward in                  The collection of information in this              in the proposed rule and is not repeated
                                              the chain of ownership must be                          final rule has been submitted to the                  here. No comments were received
                                              reported.                                               Office of Management and Budget                       regarding the certification or the
                                                                                                      (OMB) under the Paperwork Reduction                   economic impact of the rule more
                                                 In addition to the changes in the
                                                                                                      Act (PRA). OMB approved the                           generally. No final regulatory flexibility
                                              reporting criteria, BEA adds, combines,
                                                                                                      information collection under control                  analysis was prepared.
                                              or deletes some items on the annual
                                              survey forms. BEA will no longer collect                number 0608–0053.                                     List of Subjects in 15 CFR Part 806
                                              selected balance sheet items as separate                   Notwithstanding any other provisions
                                                                                                                                                              Economic statistics, Multinational
                                              items. BEA also will discontinue                        of the law, no person is required to
                                                                                                                                                            corporations, Penalties, Reporting and
                                              collecting a breakdown of the number of                 respond to, nor shall any person be
                                                                                                                                                            recordkeeping requirements, U.S.
                                              employees and amount of employee                        subject to a penalty for failure to comply
                                                                                                                                                            investment abroad.
                                              compensation by occupational                            with, a collection-of-information subject
                                              classification; the composition of                      to the requirements of the PRA unless                    Dated: November 29, 2010.
                                              external finances; and wholesale and                    that collection displays a currently valid            J. Steven Landefeld,
                                              retail trade items (specifically, the cost              OMB control number.                                   Director, Bureau of Economic Analysis.
                                              of goods purchased for resale and                          The BE–11 survey is expected to                    ■ For the reasons set forth in the
                                              inventory of goods purchased for                        result in the filing of reports from                  preamble, BEA amends 15 CFR Part 806
                                              resale).                                                approximately 1,750 respondents,                      as follows:
                                                                                                      which is an increase from the 1,550
                                                 BEA also adds several items to be
                                                                                                      respondents that were required to file                PART 806—DIRECT INVESTMENT
                                              collected in the surveys. First, BEA adds
                                                                                                      reports for the 2008 BE–11 annual                     SURVEYS
                                              an item on Form BE–11C to collect
                                                                                                      survey. The respondent burden for this
                                              information about respondents’ total                                                                          ■ 1. The authority citation for 15 CFR
                                                                                                      collection of information will vary from
                                              liabilities. BEA also adds an item on                                                                         Part 806 continues to read as follows:
                                                                                                      one company to another, but is
                                              Form BE–11E to collect property, plant,                                                                         Authority: 5 U.S.C. 301; 22 U.S.C. 3101–
                                                                                                      estimated to average 86 hours per
                                              and equipment expenditure                                                                                     3108; E.O. 11961 (3 CFR, 1977 Comp., p. 86),
                                                                                                      response, including time for reviewing
                                              information, and adds a schedule on                                                                           as amended by E.O. 12318 (3 CFR, 1981
                                                                                                      instructions, searching existing data
                                              Form BE–11B to collect a list of foreign                                                                      Comp., p. 173) and E.O. 12518 (3 CFR, 1985
                                                                                                      sources, gathering and maintaining the
                                              affiliates in which the affiliate being                                                                       Comp., p. 348).
                                                                                                      data needed, and completing and
                                              reported has a direct equity interest, but
                                                                                                      reviewing the collection of information.              ■  2. Amend § 806.14 by revising
                                              which are not fully consolidated into
                                                                                                      The total respondent burden of the                    paragraphs (b)(1) and(f)(3) to read as
                                              the reported foreign affiliate.
                                                                                                      survey is estimated at 150,550 hours,                 follows:
                                              Completion of this list will be required                                                                         806.14 U.S. direct investment
                                                                                                      which is a decrease from the 153,800
                                              only for foreign affiliates with total                                                                        abroad.
                                                                                                      hours estimated for the 2008 BE–11
                                              assets, sales or gross operating revenues,
                                                                                                      annual survey. The reduction in burden                *      *     *     *     *
                                              or net income greater than $300 million
                                                                                                      is due to a decrease in the estimated                    (b) * * *
                                              at the end of, or for, the fiscal year.
                                                                                                      average hours per response that resulted                 (1) The affiliates are in the same BEA
                                                 The changes to the BE–11A, U.S.                      from the changes in reporting                         4-digit industry as defined in the Guide
                                              Reporter annual survey form, largely                    requirements. Written comments                        to Industry Classifications for
                                              parallel the above-described changes to                 regarding the burden-hour estimates or                International Surveys, 2007; or
                                              the foreign affiliate forms. For the BE–                any other aspects of the collection-of-               *      *     *     *     *
                                              11A, BEA will no longer collect the                     information requirements contained in                    (f) * * *
                                              breakdown of number of employees and                    the final rule should be sent both to the                (3) BE–11—Annual Survey of U.S.
                                              amount of employee compensation by                      Bureau of Economic Analysis via mail                  Direct Investment Abroad: A report,
                                              occupational classification and no                      to U.S. Department of Commerce,                       consisting of Form BE–11A and Form(s)
                                              longer collect wholesale and retail trade               Bureau of Economic Analysis, Office of                BE–11B, BE–11C, BE–11D and/or BE–
                                              items (specifically, the cost of goods                  the Chief, Direct Investment Division,                11E, is required of each U.S. Reporter
                                              purchased for resale and inventory of                   BE–50, Washington, DC 20230; via                      that, at the end of the Reporter’s fiscal
                                              goods purchased for resale). BEA also                   e-mail at; or by                 year, had a foreign affiliate reportable on
                                              adds a question to Form BE–11A asking                   FAX at (202) 606–5311, and to the                     Form BE–11B, BE–11C, BE–11D or BE–
                                              if the Reporter is a bank, and will add                 Office of Management and Budget,                      11E. Forms required and the criteria for
                                              questions to collect information on                     O.I.R.A., Paperwork Reduction Project                 reporting on each are as follows:
                                              assets, liabilities, and interest receipts              0608–0053, Attention PRA Desk Officer                    (i) Form BE–11A (Report for U.S.
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                                              and payments that are related to                        for BEA, via e-mail at                                Reporter) must be filed by each U.S.
                                              banking activities.                           , or by FAX at (202)                 person having a foreign affiliate
                                              Executive Order 12866                                   395–7245.                                             reportable on Form BE–11B, BE–11C,
                                                                                                                                                            BE–11D or BE–11E. If the U.S. Reporter
                                                This final rule has been determined to                Regulatory Flexibility Act                            is a corporation, Form BE–11A is
                                              be not significant for purposes of E.O.                   The Chief Counsel for Regulation,                   required to cover the fully consolidated
                                              12866.                                                  Department of Commerce, has certified                 U.S. domestic business enterprise.

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                                              80296        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                 (A) If for a U.S. Reporter any one of                greater than $60 million (positive or                 with respect to asset-backed securities
                                              the following three items—total assets,                 negative), but for which no one of these              filed on or before June 30, 2012.
                                              sales or gross operating revenues                       items was greater than $300 million                   DATES: Effective Date: December 31,
                                              excluding sales taxes, or net income                    (positive or negative), at the end of, or             2010.
                                              after provision for U.S. income taxes—                  for, the affiliate’s fiscal year. At the              FOR FURTHER INFORMATION CONTACT: Jay
                                              was greater than $300 million (positive                 direction of BEA, U.S. Reporters would                Knight, Attorney-Adviser, Division of
                                              or negative) at the end of, or for, the                 alternate reporting these affiliates on               Corporation Finance, at (202) 551–3370,
                                              Reporter’s fiscal year, the U.S. Reporter               Form BE–11B and Form BE–11E.                          U.S. Securities and Exchange
                                              must file a complete Form BE–11A. It                       (iii) Based on the preceding, an                   Commission, 100 F Street, NE.,
                                              must also file a Form BE–11B, BE–11C,                   affiliate is exempt from being reported               Washington, DC 20549–3720.
                                              BE–11D or BE–11E, as applicable, for                    if none of the three items listed in
                                                                                                                                                            SUPPLEMENTARY INFORMATION: We are
                                              each nonexempt foreign affiliate.                       paragraph (f)(3)(ii)(A) of this section
                                                 (B) If for a U.S. Reporter no one of the                                                                   adopting an amendment to Rule 312 1 of
                                                                                                      exceeds $60 million (positive or
                                              three items listed in paragraph                                                                               Regulation S–T.2
                                                                                                      negative). However, affiliates that were
                                              (f)(3)(i)(A) of this section was greater                established or acquired during the year               I. Background and Discussion of the
                                              than $300 million (positive or negative)                and for which at least one of the items               Amendment
                                              at the end of, or for, the Reporter’s fiscal            was greater than $25 million but not                     In December 2004, we adopted new
                                              year, the U.S. Reporter is required to file             over $60 million must be listed, and key              and amended rules and forms to address
                                              on Form BE–11A only items 1 through                     items reported, on schedule-type Form                 the registration, disclosure and
                                              26 and Part IV. It must also file a Form                BE–11D.                                               reporting requirements for asset-backed
                                              BE–11B, BE–11C, BE–11D, or BE–11E as                       (iv) Notwithstanding paragraph                     securities (‘‘ABS’’) under the Securities
                                              applicable, for each nonexempt foreign                  (f)(3)(iii) of this section, a Form BE–11B,           Act of 1933 3 (the ‘‘Securities Act’’) and
                                              affiliate.                                              BE–11C, or BE–11E must be filed for a
                                                 (ii) Forms BE–11B, BE–11C, BE–11D,                                                                         the Securities Exchange Act of 1934 4
                                                                                                      foreign affiliate of the U.S. Reporter that           (the ‘‘Exchange Act’’).5 As part of this
                                              and BE–11E (Report for Foreign                          owns another non-exempt foreign
                                              Affiliate).                                                                                                   rulemaking, we adopted Regulation
                                                                                                      affiliate of that U.S. Reporter, even if the          AB,6 a new principles-based set of
                                                 (A) Form BE–11B must be reported for
                                                                                                      foreign affiliate parent is otherwise                 disclosure items forming the basis for
                                              each majority-owned foreign affiliate,
                                                                                                      exempt. That is, all affiliates upward in             disclosure with respect to ABS in both
                                              whether held directly or indirectly, for
                                                                                                      the chain of ownership must be                        Securities Act registration statements
                                              which any one of the following three
                                                                                                      reported.                                             and Exchange Act reports. Compliance
                                              items—total assets, sales or gross
                                              operating revenues excluding sales                      *       *     *      *    *                           with the revised rules was phased in;
                                              taxes, or net income after provision for                [FR Doc. 2010–32027 Filed 12–21–10; 8:45 am]          full compliance with the revised rules
                                              foreign income taxes—was greater than                   BILLING CODE 3510–06–P                                became effective January 1, 2006. One of
                                              $60 million (positive or negative) at the                                                                     the significant features of Regulation AB
                                              end of, or for, the affiliate’s fiscal year,                                                                  is Item 1105, which requires, to the
                                              unless the foreign affiliate is selected to                                                                   extent material, static pool information
                                                                                                      SECURITIES AND EXCHANGE
                                              be reported on Form BE–11E.                                                                                   to be provided in the prospectus
                                                 (B) Form BE–11C must be reported for                                                                       included in registration statements for
                                              each minority-owned foreign affiliate,                  17 CFR Part 232                                       ABS offerings.7 While the disclosure
                                              whether held directly or indirectly, for                                                                      required by Item 1105 depends on
                                              which any one of the three items listed                 [Release No. 33–9165; File No. S7–18–10]              factors such as the type of underlying
                                              in paragraph (f)(3)(ii)(A) of this section                                                                    asset and materiality, the information
                                                                                                      RIN 3235–AK70                                         required to be disclosed can be
                                              was greater than $60 million (positive or
                                              negative) at the end of, or for, the                                                                          extensive. For example, a registrant may
                                                                                                      Extension of Filing Accommodation for                 be required to disclose multiple
                                              affiliate’s fiscal year.                                Static Pool Information in Filings With
                                                 (C) Form BE–11D must be reported for                                                                       performance metrics in periodic
                                                                                                      Respect to Asset-Backed Securities                    increments for prior securitized pools of
                                              each majority- and minority-owned
                                              foreign affiliate, whether held directly                AGENCY:  Securities and Exchange                      the sponsor for the same asset type in
                                              or indirectly, established or acquired                  Commission.                                           the last five years.8
                                              during the year for which any one of the                ACTION: Final rule.                                     1 17 CFR 232.312.
                                              three items listed in paragraph                                                                                 2 17 CFR 232.10 et seq.
                                              (f)(3)(ii)(A) of this section was greater               SUMMARY:   The Commission is adopting                   3 15 U.S.C. 77a et seq.
                                              than $25 million (positive or negative),                an amendment to Rule 312 of                             4 15 U.S.C. 78a et seq.
                                              but for which no one of these items was                 Regulation S–T to further extend its                    5 See Asset-Backed Securities, Release No. 33–

                                              greater than $60 million (positive or                   application for eighteen months. Rule                 8518 (Dec. 22, 2004) [70 FR 1506] (adopting release
                                              negative), at the end of, or for, the                   312 provides a temporary filing                       related to Regulation AB and other new rules and
                                                                                                                                                            forms related to asset-backed securities)
                                              affiliate’s fiscal year. Form BE–11D is a               accommodation for filings with respect                (hereinafter, the ‘‘2004 Adopting Release’’).
                                              schedule; a U.S. Reporter would submit                  to asset-backed securities that allows                  6 17 CFR 229.1100 et seq.

                                              one or more pages of the form                           static pool information required to be                  7 See Form S–1 (17 CFR 239.11) and Form S–3 (17

                                              depending on the number of affiliates                   disclosed in a prospectus of an asset-                CFR 239.13) under the Securities Act. Static pool
                                              that are required to be filed on this form.             backed issuer to be provided on an                    information indicates how groups, or static pools,
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                                                                                                                                                            of assets, such as those originated at different
                                                 (D) Form BE–11E must be reported for                 Internet Web site under certain                       intervals, are performing over time. By presenting
                                              each foreign affiliate that is selected by              conditions. Under this rule, such                     comparisons between originations at similar points
                                              BEA to be reported on this form in lieu                 information is deemed to be included in               in the assets’ lives, the data allows the detection of
                                              of Form BE–11B. BEA statistically                       the prospectus included in the                        patterns that may not be evident from overall
                                                                                                                                                            portfolio numbers and thus may reveal a more
                                              divides into panels, affiliates for which               registration statement for the asset-                 informative picture of material elements of portfolio
                                              any one of the three items listed in                    backed securities. As a result of the                 performance and risk.
                                              paragraph (f)(3)(ii)(A) of this section was             extension, the rule will apply to filings               8 17 CFR 229.1105.

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                                                            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                  80297

                                                 As described in the 2004 Adopting                    accommodation.13 In the adopting                      Regulation S–T for eighteen months so
                                              Release, in response to the                             release for the extension (‘‘2009 Static              that it would apply to filings with
                                              Commission’s proposal to require                        Pool Extension Adopting Release’’), we                respect to ABS filed on or before June
                                              material static pool information in                     noted the staff’s experience with the                 30, 2012.16 We received three comment
                                              prospectuses for ABS offerings, many                    rule and that a vast majority of                      letters that addressed the proposed
                                              commentators representing both ABS                      residential mortgage-backed security                  extension.17 All three commentators
                                              issuers and investors requested                         issuers and a significant portion of ABS              expressed support for the Rule 312
                                              flexibility in the presentation of such                 issuers in other asset classes have relied            filing accommodation and the proposed
                                              information. In particular,                             on the accommodation provided by the                  extension.18 The ASF cited the strong
                                              commentators noted that the required                    rule to disclose static pool information              preference among both its issuer and
                                              static pool information could include a                 on an Internet Web site. We also noted                investor members for Web-based
                                              significant amount of statistical                       that the staff of the Division of                     presentation of static pool information
                                              information that would be difficult to                  Corporation Finance was, at the time,                 due to its utility and effectiveness and
                                              file electronically on EDGAR as it                      engaged in a broad review of the                      the current lack of an adequate filing
                                              existed at that time and difficult for                  Commission’s regulation of ABS                        alternative.19 SIFMA and CNH Capital
                                              investors to use in that format.                        including disclosure, offering process,               agreed that a long-term solution for
                                                                                                      and reporting of ABS issuers and that                 providing static pool disclosure would
                                              Commentators accordingly requested
                                                                                                      along with this review, the staff of the              be better considered together with other
                                              the flexibility for ABS issuers to provide
                                                                                                      Division of Corporation Finance was                   proposals to revise the regulations
                                              static pool information on an Internet
                                                                                                      continuing to explore whether it was                  governing the offer and sale of ABS.20
                                              Web site rather than as part of an                      feasible to provide a filing mechanism                With regard to the duration of an
                                              EDGAR filing.9 In response to these                     for static pool information that fulfills             extension, ASF requested that the filing
                                              comments, we adopted Rule 312 of                        the Commission’s objectives. We also                  accommodation be made permanent or,
                                              Regulation S–T, which permits, but                      stated our belief that a proposal for a               in the alternative, extended for five
                                              does not require, the posting of the                    longer-term solution for providing static             years; 21 CNH Capital requested that the
                                              static pool information required by Item                pool disclosure would be better                       duration of the extension be
                                              1105 on an Internet Web site under the                  considered together with other                        synchronized with the timing of
                                              conditions set forth in the rule.10 We                  proposals on the regulations relating to              implementation of the other disclosure
                                              recognized at the time that a Web-based                 the offer and sale of ABS.                            requirements that were proposed in the
                                              approach might allow for the provision                     On April 7, 2010, we proposed                      2010 ABS Proposing Release but have
                                              of the required information in a more                   significant revisions to Regulation AB                not yet been adopted; 22 and SIFMA
                                              efficient, dynamic and useful format                    and other rules regarding the offering                supported the Commission’s proposal to
                                              than was currently feasible on the                      process, disclosure and reporting for                 extend the temporary accommodation
                                              EDGAR system. At the same time, we                      asset-backed securities (the ‘‘2010 ABS               for the filing of static pool information
                                              explained that we continued to believe                  Proposals’’).14 In that release, we                   for eighteen months.23
                                              at some point for future transactions the               proposed to revise Rule 312 to remove                    We are adopting as proposed an
                                              information should also be submitted                    the temporary accommodation set to                    eighteen-month extension to the
                                              with the Commission in some fashion,                    expire on December 31, 2010. In lieu                  temporary filing accommodation
                                              provided investors continue to receive                  thereof, under the proposal, ABS issuers              provided by Rule 312. As we stated in
                                              the information in the form they have                   would be required to file all static pool             the Proposing Release, we believe a
                                              requested. Accordingly, we adopted                      information on EDGAR; however, we                     proposal for a long-term solution for
                                              Rule 312 as a temporary filing                          proposed to allow that such information               providing static pool disclosure would
                                              accommodation applicable to filings                     be filed in Portable Document Format                  be better considered together with other
                                              filed on or before December 31, 2009.11                 (PDF).15 Also, in lieu of providing the               proposals to revise the regulations
                                              We explained that we were directing                     static pool information in the                        governing the offer and sale of ABS.
                                              our staff to consult with the EDGAR                     prospectus, we proposed to allow                      Additionally, on July 21, 2010,
                                              contractor, EDGAR filing agents, issuers,               issuers to file the disclosure on Form 8–             President Obama signed the Dodd-Frank
                                                                                                      K and incorporate it by reference. The                Wall Street Reform and Consumer
                                              investors and other market participants
                                                                                                      comment period for the 2010 ABS                       Protection Act (the ‘‘Act’’).24 Among
                                              to consider how static pool information
                                                                                                      Proposals expired on August 2, 2010.                  other things, the Act mandates a number
                                              could be filed with the Commission in
                                                                                                         On August 30, 2010, we proposed to                 of significant changes to the regulation
                                              a cost-effective manner without undue                                                                         of ABS offerings. In order to provide
                                                                                                      extend the temporary filing
                                              burden or expense that still allows
                                                                                                      accommodation set forth in Rule 312 of
                                              issuers to provide the information in a                                                                         16 Extension of Filing Accommodation for Static
                                              desirable format. We also noted,                          13 Extension  of Filing Accommodation for Static    Pool Information in Filings With Respect to Asset-
                                              however, that it might be necessary,                    Pool Information in Filings With Respect to Asset-    Backed Securities, Release No. 33–9137 (Aug. 30,
                                                                                                                                                            2010) [75 CFR 54059] (hereinafter, the ‘‘Proposing
                                              among other things, to extend the                       Backed Securities, Release No. 33–9087 (Dec. 15,
                                              accommodation.12                                        2009) [74 FR 67812] (the ‘‘2009 Static Pool
                                                                                                                                                              17 The public comment letters we received are
                                                                                                      Extension Adopting Release’’).
                                                 On December 15, 2009, we adopted a                     14 Asset-Backed Securities, Release No. 33–9117     available online at
                                              one-year extension of the filing                        (Apr. 7, 2010) [75 FR 23328] (the ‘‘2010 ABS            18 See letters from the American Securitization
                                                                                                      Proposing Release’’).
                                                                                                        15 Portable Document Format (PDF) is a file
                                                                                                                                                            Forum (‘‘ASF’’), CNH Capital America LLC (‘‘CNH
                                                                                                                                                            Capital’’), and the Securities Industry and Financial
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                                                9 See  2004 Adopting Release, Section III.B.4.b.      format created by Adobe Systems in 1993 for           Markets Association (‘‘SIFMA’’).
                                                10 17  CFR 232.312(a). Instead of relying on Rule     document exchange. PDF captures formatting              19 See letter from ASF.
                                              312, an issuer can include information required by      information from a variety of desktop publishing        20 See letters from SIFMA and CNH Capital.
                                              Item 1105 of Regulation AB physically in the            applications, making it possible to send formatted
                                              prospectus or, if permitted, through incorporation                                                              21 See letter from ASF.
                                                                                                      documents and have them appear on the recipient’s
                                              by reference from an Exchange Act report.               monitor or printer for free as they were intended.      22 See letter from CNH Capital.
                                                 11 17 CFR 232.312(a); see also 2004 Adopting                                                                 23 See letter from SIFMA.
                                                                                                      To view a file in PDF format, you need Adobe
                                              Release, Section III.B.4.b.                             Reader, an application distributed by Adobe             24 Public Law 111–203, 124 Stat. 1376 (July 21,
                                                 12 2004 Adopting Release, Section III.B.4.b.         Systems.                                              2010).

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                                              80298         Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              ample time for the Commission and its                    Register 30 days before it becomes                    312 remain otherwise unchanged. The
                                              staff to give proper consideration to                    effective. This requirement, however,                 disclosure requirements themselves,
                                              comments received on the 2010 ABS                        does not apply if the agency finds good               which are contained in Forms S–1 and
                                              Proposals and in light of the changes to                 cause for making the rule effective                   S–3 under the Securities Act and
                                              the regulations of ABS offerings that are                sooner.28 Because the temporary filing                require the provision of the information
                                              mandated by the Act, we are adopting                     accommodation expires on December                     set forth in Item 1105 of Regulation AB,
                                              the extension to the temporary filing                    31, 2010, we believe it is necessary to               also remain unchanged. Therefore, the
                                              accommodation set forth in Rule 312 of                   make the amendment effective                          amendment will not result in an
                                              Regulation S–T for an additional                         December 31st so that there is no gap                 increase or decrease in the costs and
                                              eighteen months so that it would apply                   between which an issuer would be                      burdens imposed by the ‘‘collection of
                                              to filings with respect to ABS filed on                  required to convert its static pool data              information’’ requirements previously
                                              or before June 30, 2012. Although we                     into an EDGAR filing. In addition, this               approved by the OMB. No commentator
                                              are adopting an eighteen-month                           extension creates no new requirements                 suggested the extension would impose
                                              extension of Rule 312, we may take                       but maintains a voluntary                             any new paperwork burden.
                                              action on the 2010 ABS Proposals,                        accommodation that relieves a registrant
                                              including the static pool proposal, at                   from the obligation to file static pool               III. Benefit-Cost Analysis
                                              any time before the expiration of the                    data on EDGAR, provided it makes the                     In this section, we examine the
                                              extension.                                               information available on a Web site. The              benefits and costs of the amendment. In
                                                 Under the extension, the temporary                    Commission therefore believes the                     the Proposing Release, we requested
                                              filing accommodation set forth in Rule                   extension grants or recognizes an                     that commentators provide views,
                                              312 of Regulation S–T will apply to                      exemption or relieves a restriction. On               supporting information and estimates
                                              filings with respect to ABS filed on or                  the basis of the foregoing, the                       on the benefits and costs that may result
                                              before June 30, 2012. During the                         Commission finds good cause to make                   from the adoption of the proposed
                                              extension, the existing requirements of                  the amendment effective December 31,                  amendment. No commentator addressed
                                              Rule 312 will continue to apply.                         2010.                                                 the cost-benefit analysis of the
                                              Pursuant to these requirements, the                                                                            Proposing Release.
                                              registrant must disclose its intention to                II. Paperwork Reduction Act
                                                                                                          Rule 312 of Regulation S–T was                     A. Benefits
                                              provide static pool information through
                                              a Web site in the prospectus included in                 adopted in 2004 along with other new                    We initially adopted the filing
                                              the registration statement at the time of                and amended rules and forms to address                accommodation provided by Rule 312 of
                                              effectiveness and provide the specific                   the registration, disclosure and                      Regulation S–T because commentators
                                              Internet address where the static pool                   reporting requirements for ABS under                  requested flexibility in the presentation
                                              information is posted in the prospectus                  the Securities Act and the Exchange                   of required static pool information.
                                              filed pursuant to Rule 424.25 The                        Act. In connection with this prior                    Given the large amount of statistical
                                              registrant must maintain such                            rulemaking, we submitted a request for                information involved, those
                                              information on the Web site unrestricted                 approval of the ‘‘collection of                       commentators argued for a Web-based
                                              and free of charge for a period of not                   information’’ requirements contained in               approach that would allow issuers to
                                              less than five years, indicate the date of               the amendments and rules to the Office                present the information in an efficient
                                              any updates or changes to the                            of Management and Budget (‘‘OMB’’) in                 manner and with greater functionality
                                              information, undertake to provide any                    accordance with the Paperwork                         and utility than might have been
                                              person without charge, upon request, a                   Reduction Act of 1995 (‘‘PRA’’).29 OMB                available if an EDGAR filing was
                                              copy of the information as of the date of                approved these requirements.30                        required. We believe this greater
                                              the prospectus if a subsequent update or                    Item 1105 of Regulation AB 31                      functionality and utility has enhanced
                                              change is made to the information and                    requires certain static pool information,             an investor’s ability to access and
                                              retain all versions of the information                   to the extent material, to be provided in             analyze the static pool information
                                              provided on the Web site for a period                    prospectuses included in registration                 because investors have been able to
                                              of not less than five years in a form that               statements for ABS offerings.32 Rule 312              access static pool information in more
                                              permits delivery to an investor or the                   is a temporary filing accommodation                   user-friendly formats than was initially
                                              Commission. In addition, the                             that permits the posting of the static                capable with filings on EDGAR and also
                                              registration statement for the ABS must                  pool information required by Item 1105                removed the burden on issuers of
                                              contain an undertaking pursuant to Item                  on an Internet Web site under the                     duplicating the information in each
                                              512(l) of Regulation S–K 26 that the                     conditions set forth in the rule.33 The               prospectus as well as easing the burdens
                                              information provided on the Web site                     amendment to Rule 312 further extends                 of updating such information.34 As we
                                              pursuant to Rule 312 is deemed to be                     the existing temporary filing                         discussed in the 2004 Adopting Release,
                                              part of the prospectus included in the                   accommodation provided by the rule for                since the information is deemed to be
                                              registration statement.27                                an additional eighteen months. As is the              part of the prospectus included in the
                                                 The Administrative Procedure Act                      case today, issuers may choose whether                registration statement, the rule is
                                              generally requires that an agency                        or not to take advantage of the                       designed to give investors access to
                                              publish an adopted rule in the Federal                   accommodation. The conditions of Rule                 accurate and reliable information.
                                                                                                                                                               By further extending the
                                                25 17  CFR 230.424.
                                                26 17
                                                                                                         28 See 5 U.S.C. 553(d).                             accommodation provided by Rule 312,
                                                       CFR 229.512(l).
                                                                                                                                                             these benefits to both issuers and
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                                                                                                         29 44 U.S.C. 3501 et seq.
                                                 27 17 CFR 232.312. As we indicated in the 2004
                                                                                                         30 The collections of information to which Rule
                                              Adopting Release, if the conditions of Rule 312 are                                                            investors will continue to apply. As
                                                                                                       312 of Regulation S–T relates are ‘‘Form S–1’’ (OMB
                                              satisfied, then the information will be deemed to be
                                                                                                       Control No. 3235–0065) and ‘‘Form S–3’’ (OMB
                                                                                                                                                             noted in the 2009 Static Pool Extension
                                              part of the prospectus included in the registration                                                            Adopting Release, based on the staff’s
                                                                                                       Control No. 3235–0073).
                                              statement and thus subject to all liability provisions
                                              applicable to prospectuses and registration
                                                                                                         31 17 CFR 229.1105.                                 experience since Rule 312 became
                                                                                                         32 See Form S–1 and Form S–3 under the
                                              statements, including Section 11 of the Securities
                                              Act [15 U.S.C. 77k]. 2004 Adopting Release, Section      Securities Act.                                         34 See Section I above and 2004 Adopting Release,

                                              III.B.4.b.                                                 33 17 CFR 232.312(a).                               Section V.D.

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                                                            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                        80299

                                              effective in 2006, the vast majority of                 filing and disclosure obligations. As a               consider or determine whether an action
                                              residential mortgage-backed security                    result of the extension of the                        is necessary or appropriate in the public
                                              issuers and a significant portion of ABS                accommodation, ABS issuers will be                    interest, to also consider whether the
                                              issuers in other asset classes have relied              able to continue their current practices              action will promote efficiency,
                                              on the accommodation provided by the                    for an additional eighteen months.                    competition, and capital formation.
                                              rule to disclose static pool information                   For investors, there may be costs                     As discussed in greater detail above,
                                              on an Internet Web site.35 If we did not                associated with the static pool                       Rule 312 of Regulation S–T was adopted
                                              further extend the accommodation                        information not being electronically                  as a temporary filing accommodation so
                                              provided by Rule 312 as we are doing                    filed with the Commission. For                        that issuers of ABS could present static
                                              today, static pool information would                    example, when information is                          pool information on an Internet Web
                                              have been required in EDGAR filings                     electronically filed with the                         site. The amendment to Rule 312 of
                                              beginning on January 1, 2011. We                        Commission, investors and staff can                   Regulation S–T that we are adopting
                                              believe this would have resulted in                     access the information from a single,                 today further extends its application for
                                              costs for issuers as they attempt to                    permanent, and centralized location, the              eighteen months. We are not changing
                                              adjust their procedures in a short period               EDGAR Web site.38 We think these costs                the conditions of Rule 312 or to the
                                              of time in order to present the                         are mitigated by the fact that ABS                    disclosure obligations to which it
                                              information in a format acceptable to                   issuers relying on the Rule 312                       applies. We do not believe that the
                                              the EDGAR system and could have                         accommodation must ensure that the                    eighteen-month extension will impose a
                                              resulted in costs to investors if the                   prospectus for the offering contains the              burden on competition. We also believe
                                              information filed on EDGAR was                          Internet Web site address where the                   the extension of the filing
                                              presented in a less useful format.                      static pool information is posted, the                accommodation will continue to
                                                 As indicated above, on April 7, 2010,                Web site must be unrestricted and free                promote efficiency and capital
                                              we issued a release proposing to require                of charge, such information must remain               formation by permitting ABS issuers to
                                              the filing of static pool information on                on the Internet Web site for five years               disclose static pool information in a
                                              EDGAR at the same time we proposed                      with any changes clearly indicated and                format that is more useful to investors
                                              other amendments addressing the                         the issuer must undertake to provide the              and cost-effective and not unduly
                                              disclosure, offering process and                        information to any person free of charge,             burdensome for ABS issuers.
                                              reporting of ABS issuers.36 We believe                  upon request, if a subsequent update or                  We requested comment on whether
                                              that the eighteen-month extension to the                change is made. Furthermore, because                  the proposed amendment, if adopted,
                                              temporary filing accommodation                          the information is deemed included in                 would promote efficiency, competition,
                                              contained in Rule 312 will benefit both                 the prospectus under Rule 312, it is                  and capital formation. We did not
                                              investors and issuers by maintaining a                  subject to all liability provisions                   receive any comments directly
                                              consistent approach to the filing of                    applicable to prospectuses and                        responding to this request.
                                              static pool information while we and                    registration statements.
                                              our staff consider comments received on                    Investors and issuers may have                     V. Regulatory Flexibility Act
                                              the proposed amendment to static pool                   incurred costs to adjust their processes              Certification
                                              filing together with our other proposals                in anticipation of the lapse of the Rule                In Part VII of the Proposing Release,
                                              regarding the offering and sale of asset-               312 accommodation and potential                       the Commission certified pursuant to
                                              backed securities and in light of the                   reversion to a requirement to file static             5 U.S.C. 605(b) that the proposed
                                              changes to the regulations of ABS                       pool information on EDGAR. In this                    amendment to Rule 312 of Regulation
                                              offerings that are mandated by the                      case, benefits to investors or issuers of             S–T would not have a significant
                                              Dodd-Frank Act.                                         not having to change their procedures                 economic impact on a substantial
                                              B. Costs                                                regarding static pool reporting in a short            number of small entities. While the
                                                                                                      time frame would be diminished by any                 Commission encouraged written
                                                 We do not believe the eighteen-month                 costs already incurred in anticipation of             comments regarding this certification,
                                              extension of the Rule 312                               the change. We believe such                           no commentators responded to this
                                              accommodation will impose any new or                    anticipatory action and any associated                request or indicated that the amendment
                                              increased costs on issuers. In the Cost-                costs are minimal.                                    as adopted would have a significant
                                              Benefit Analysis section of the 2004
                                                                                                      IV. Consideration of Impact on the                    economic impact on a substantial
                                              Adopting Release, we noted that ABS
                                                                                                      Economy, Burden on Competition and                    number of small entities.
                                              issuers electing the Web-based
                                              accommodation provided by Rule 312                      Promotion of Efficiency, Competition                  VI. Statutory Authority and Text of the
                                              would incur costs related to the                        and Capital Formation                                 Amendment
                                              maintenance and retention of static pool                  Section 2(b) of the Securities Act                    The amendment described is being
                                              information posted on a Web site and                    requires us, when engaging in                         adopted under the authority set forth in
                                              might also incur start-up costs.37 While                rulemaking where we are required to                   Sections 6, 7, 10, 19 and 28 of the
                                              it is likely that certain of those costs will                                                                 Securities Act of 1933 (15 U.S.C. 77f,
                                              continue to impact ABS issuers that                        38 See, e.g., comment letter from EDGAROnline
                                                                                                                                                            77g, 77j, 77s and 77z–3).
                                              elect the Web-based approach during                     dated December 9, 2009, on the Extension of Filing
                                              the extension period, we do not believe                 Accommodation for Static Pool Information in          List of Subjects in 17 CFR Part 232
                                                                                                      Filings With Respect to Asset-Backed Securities,
                                              the amendment will impose any new or                    Release No. 33–9074 (Oct. 19, 2009) [74 FR 54767]       Reporting and recordkeeping
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                                              increased costs for ABS issuers because                 (the ‘‘2009 Static Pool Extension Proposing           requirements, Securities.
                                              it does not change any other conditions                 Release’’). EDGAROnline commented that extending
                                              to the accommodation or the underlying                  the filing accommodation will hinder the quality      Text of the Amendment
                                                                                                      and comparability of information because investors
                                                                                                      will not be able to depend on a common repository     ■ For the reasons set out in the
                                               35 See Section I of the 2009 Static Pool Extension
                                                                                                      for cross issuer comparisons. The public comments
                                              Adopting Release.                                       on the 2009 Static Pool Extension Proposing
                                                                                                                                                            preamble, the Commission hereby
                                               36 See 2010 ABS Proposing Release.
                                                                                                      Release are available at          amends title 17, chapter II, of the Code
                                               37 See 2004 Adopting Release, Section V.D.             comments/s7-23-09/s72309.shtml.                       of Federal Regulations as follows:

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                                              80300        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              PART 232—REGULATION S–T—                                  First Street, NE., Washington, DC                   pipelines under the ICA and fulfilling
                                              GENERAL RULES AND REGULATIONS                             20426, (202) 502–6527;                              the requirements of the EPAct 1992. In
                                              FOR ELECTRONIC FILINGS                                  Michael Lacy (Technical Information),                 Order No. 561, the Commission
                                                                                                        Office of Energy Market Regulation,                 developed an indexing methodology for
                                              ■ 1. The authority citation for part 232                  888 First Street, NE., Washington, DC               the purpose of allowing oil pipelines to
                                              continues to read, in part, as follows:                   20426, (202) 502–8843.                              change rates without making cost-of-
                                                Authority: 15 U.S.C. 77f, 77g, 77h, 77j,              SUPPLEMENTARY INFORMATION:                            service filings. The Commission found
                                              77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n,                                                               that the indexing methodology adopted
                                              78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29,          Before Commissioners: Jon Wellinghoff,
                                                                                                        Chairman; Marc Spitzer, Philip D. Moeller,
                                                                                                                                                            in the final rule simplified and
                                              80a–30, 80a–37, and 7201 et seq.; and 18                                                                      expedited the process of changing rates.
                                              U.S.C. 1350.                                              John R. Norris, and Cheryl A. LaFleur.
                                                                                                                                                            The Commission further determined
                                              *      *   *     *     *                                Order Establishing Index for Oil Price                that the indexing methodology would
                                              ■  2. Amend § 232.312 paragraph (a)                     Change Ceiling Levels                                 ensure compliance with the just and
                                              introductory text by removing                              1. On June 15, 2010, the Commission                reasonable standard of the ICA by
                                              ‘‘December 31, 2010’’ and in its place                  issued a Notice of Inquiry (NOI),1 in                 subjecting the chosen index to periodic
                                              adding ‘‘June 30, 2012’’ in the first                   which it proposed to continue using the               monitoring and, if necessary,
                                              sentence.                                               Producer Price Index for Finished                     adjustment. After extensive analysis of
                                                                                                      Goods plus 1.3 percent (PPI–FG+1.3) for               proposals from interested parties, the
                                                By the Commission.
                                                                                                      the next five-year period beginning July              Commission adopted an index of PPI–
                                                Dated: December 16, 2010.
                                                                                                      1, 2011. The Commission applies the                   FG minus 1 percent (PPI–FG–1), which
                                              Elizabeth M. Murphy,                                                                                          was supported by a methodology
                                                                                                      index to existing oil pipeline
                                              Secretary.                                              transportation rates to establish new                 developed by Dr. Alfred E. Kahn (Kahn
                                              [FR Doc. 2010–32098 Filed 12–21–10; 8:45 am]            annual rate ceiling levels for pipeline               Methodology) on behalf of a group of
                                              BILLING CODE 8011–01–P                                  rate changes. The NOI invited interested              shippers. The Commission also
                                                                                                      persons to submit comments on the                     committed to review every five years the
                                                                                                      continued use of PPI–FG+1.3 and to                    continued appropriateness of the index
                                              DEPARTMENT OF ENERGY                                    propose, justify, and fully support, any              in relation to industry costs.
                                                                                                      alternative indexing proposals.                          3. In the first five-year review, which
                                              Federal Energy Regulatory                               Comments and reply comments were                      established the index level for 2001–
                                              Commission                                              due August 20, 2010, and September 20,                2006, the Commission deviated from the
                                                                                                      2010, respectively. Based upon full                   Kahn Methodology, and, based upon a
                                              18 CFR Part 342                                         consideration of the comments and                     different analysis, concluded that the
                                                                                                      reply comments received, and for the                  index should be retained as PPI–FG–1.5
                                              [Docket No. RM10–25–000]
                                                                                                      reasons discussed below, the                          The U.S. Court of Appeals for the
                                              Five-Year Review of Oil Pipeline                        Commission finds that an index of PPI–                District of Columbia (D.C. Circuit)
                                              Pricing Index                                           FG plus 2.65 percent (PPI–FG+2.65)                    reviewed and remanded the
                                                                                                      should be established for the five-year               Commission’s order because the
                                              Issued December 16, 2010.                               period commencing July 1, 2011.                       Commission failed to justify a departure
                                              AGENCY:  Federal Energy Regulatory                                                                            from the Kahn Methodology used in
                                              Commission, DOE.                                        I. Background                                         Order No. 561.6 On remand, the
                                              ACTION: Order establishing index for oil                A. Establishment of the Indexing                      Commission used the Kahn
                                              price change ceiling levels.                            Methodology                                           Methodology to set an index level of an
                                                                                                                                                            unadjusted PPI–FG for the five-year
                                                                                                         2. Congress in the Energy Policy Act               period beginning July 2001. This order
                                              SUMMARY:   The Federal Energy
                                                                                                      of 1992 (EPAct 1992) required the                     on remand was upheld by the D.C.
                                              Regulatory Commission (Commission) is
                                                                                                      Commission to establish a ‘‘simplified                Circuit.7
                                              issuing this Final Order concluding its
                                                                                                      and generally applicable’’ ratemaking                    4. In the second five-year review, the
                                              third five-year review of the oil pricing
                                                                                                      methodology for oil pipelines 2 that was              Commission proposed to retain the rate
                                              index, established in Order No. 561.
                                              After consideration of the initial, reply               consistent with the just and reasonable               of an unadjusted PPI–FG. However,
                                              and supplemental comments, the                          standard of the Interstate Commerce Act               based upon the data presented during
                                              Commission has concluded that an                        (ICA).3 On October 22, 1993, the                      that proceeding, the Commission
                                              index level of Producer Price Index for                 Commission issued Order No. 561,4                     adopted an index of PPI–FG+1.3, which
                                              Finished Goods plus 2.65 percent (PPI–                  promulgating regulations pertaining to                was again calculated using the Kahn
                                              FG+2.65) should be established for the                  the Commission’s jurisdiction over oil                Methodology.8
                                              five-year period commencing July 1,                       1 Five-Year Review of Oil Pipeline Pricing Index,   B. The Kahn Methodology
                                              2011. At the end of this five-year period,              75 FR 34959 (June 21, 2010), FERC Stats. & Regs.
                                              the Commission will once again initiate                                                                         5. The Kahn Methodology measures
                                                                                                      ¶ 35,566 (2010) (NOI).
                                              review of the index to determine                          2 Public Law 102–486, 106 Stat. 3010, § 1801(a)
                                                                                                                                                            changes in operating and capital costs
                                              whether it continues to measure                         (Oct. 24, 1992). The EPAct 1992’s mandate of
                                                                                                                                                               5 Five-Year Review of Oil Pipeline Pricing Index,
                                                                                                      establishing a simplified and generally applicable
                                              adequately the cost changes in the oil                  method of regulating oil transportation rates         93 FERC ¶ 61,266 (2000) (First Five-Year Review),
                                              pipeline industry.                                      specifically excluded the Trans-Alaska Pipeline       aff’d in part and remanded in part sub nom. AOPL
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                                              ADDRESSES: Secretary of the                             System (TAPS), or any pipeline delivering oil,        v. FERC, 281 F.3d 239 (DC Cir. 2002) (AOPL II).
                                                                                                      directly or indirectly, into it. Id. § 1804(2)(B).       6 AOPL II, 281 F.3d 239.
                                              Commission, Federal Energy Regulatory                     3 49 U.S.C. app. 1 (1988).                             7 Five-Year Review of Oil Pipeline Pricing Index,
                                              Commission, 888 First Street, NE.,                        4 Revisions to Oil Pipeline Regulations Pursuant    102 FERC ¶ 61,195 (2003) (First Five-Year Review
                                              Washington, DC 20426.                                   to the Energy Policy Act, Order 561, FERC Stats. &    Remand Order), aff’d sub nom. Flying J Inc. v.
                                              FOR FURTHER INFORMATION CONTACT:                        Regs. ¶ 30,985 (1993), order on reh’g, Order No.      FERC, 363 F.3d 495 (DC Cir. 2004).
                                                                                                      561–A, FERC Stats. & Regs. ¶ 31,000 (1994), aff’d,       8 Five-Year Review of Oil Pipeline Pricing Index,
                                              Andrew Knudsen (Legal Information),                     Association of Oil Pipe Lines v. FERC, 83 F.3d 1424   114 FERC ¶ 61,293 (2006) (Second Five-Year
                                                 Office of the General Counsel, 888                   (D.C. Cir. 1996) (AOPL I).                            Review).

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                                                                  Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                                              80301

                                              on a per barrel-mile basis using Form                                       establish the cumulative cost change for                             percent), the Kahn Methodology
                                              No. 6 data from the prior five-year                                         each pipeline.11                                                     considers three different measures of
                                              period (for example, between 2004 and                                          7. Once these cumulative cost changes                             central tendency. One measure is the
                                              2009 in this proceeding).9 The Kahn                                         have been calculated for each pipeline                               median of each data set. Another
                                              Methodology does not include direct                                         with sufficient Form No. 6 data, the                                 measure, the weighted mean, calculates
                                              measures of the capital costs related to                                    Kahn Methodology culls a data set                                    an average barrel-mile cost change in
                                              rate of return on investment or income                                      consisting of pipelines with cumulative                              which each pipeline’s cost change is
                                              taxes; as a proxy for this data, the Kahn                                   per-barrel-mile cost changes in the                                  weighted by its barrel-miles. A third
                                                                                                                          middle 50 percent of all pipelines. Later
                                              Methodology relies upon changes over                                                                                                             measure, the un-weighted average,
                                                                                                                          applications of the index also culled a
                                              the five year period in net carrier                                                                                                              calculates the simple average of the
                                                                                                                          data set consisting of pipelines with
                                              property per barrel-mile.                                                   cumulative cost changes in the middle                                percentage cost change per barrel-mile
                                                6. The Kahn Methodology assigns a                                         80 percent of all pipelines. This                                    for each pipeline. For each data set, a
                                              weight to the Form No. 6 operating                                          trimming is done to remove statistical                               composite, is calculated by taking the
                                              expenses relative to the net plant using                                    outliers, or spurious data points that                               simple average of the median, the
                                              an ‘‘operating ratio.’’ 10 The weighted                                     could bias the sample in either                                      weighted mean, and the un-weighted
                                              operating expense and the weighted net                                      direction.                                                           mean. Table 1 provides a description of
                                              plant are then added together to                                               8. For each of the two data sets (the                             the statistical values of central tendency
                                                                                                                          middle 50 percent and the middle 80                                  used by parties to develop the index.

                                                                                                                                                      TABLE 1
                                                                  Line                                                      Middle 80 percent                                                              Middle 50 percent

                                              A   ...........................................   Median .............................................................................   Median.
                                              B   ...........................................   Weighted Mean ...............................................................          Weighted Mean.
                                              C   ...........................................   Un-weighted Mean ..........................................................            Un-weighted Mean.
                                              D   ...........................................   Composite of 80 percent = (A+B+C)/3 ...........................                        Composite of 50 percent = (A+B+C)/3.

                                                 In the most recent index review, the                                     relative to PPI–FG over the prior five-                                13. On October 8, 2010, Valero filed
                                              industry-wide cost index differential                                       year period.                                                         Supplemental Reply Comments and on
                                              was calculated by averaging the middle                                                                                                           October 20, 2010, AOPL filed a
                                                                                                                          II. Comments From Industry
                                              50 composite and the middle 80                                                                                                                   Response (October 20 Response).
                                              composite on Line D and then                                                  10. Comments were filed by the                                     A. Proposals for New Index Rates
                                              comparing that value to the PPI–FG                                          American Trucking Associations,
                                              index data over the same period. The                                        National Propane Gas Association                                        14. In comments and reply comments,
                                              index level was then set at PPI–FG plus                                     (NPGA), Tesoro Refining and Market                                   several parties proposed departures
                                              (or minus) this differential.                                               Company and Sinclair Oil Corporation                                 from existing index levels. AOPL
                                                 9. The Kahn Methodology has evolved                                      (Sinclair/Tesoro, collectively), Air                                 proposes an index of PPI–FG plus 3.64
                                              during the course of prior index                                            Transport Association of America                                     percent (PPI–FG+3.64) as the oil
                                              reviews. In Order Nos. 561 and 561–A,                                       (ATA), Society for the Preservation of                               pipeline pricing index for the five-year
                                              the Commission only considered the                                          Oil Pipeline Shippers (SPOPS), the                                   period beginning July 1, 2011. AOPL
                                              middle 50 percent and did not consider                                      Association of Oil Pipe Lines (AOPL),                                states that its witness, Dr. Ramsey
                                              the middle 80 percent. In the first and                                     Valero Marketing and Supply (Valero),                                Shehadeh, applied the Kahn
                                              second five-year index reviews, the                                         and Navajo Refining Company, L.L.C.                                  Methodology to a data set including an
                                              Commission considered both the middle                                       (Navajo).                                                            initial sample of 110 pipelines,12
                                              50 percent and the middle 80 percent.                                                                                                            calculating the following data regarding
                                              Also, in Order Nos. 561 and 561–A, as                                         11. Reply Comments were filed by the
                                                                                                                          Canadian Association of Petroleum                                    pipeline cost changes for the 2004–2009
                                              well as the first review, the Commission                                                                                                         period:
                                              merely cited Kahn’s Methodology to                                          Producers (CAPP), the Pipeline Safety
                                              demonstrate that it produced index                                          Trust, Sinclair/Tesoro, Platte Pipe Line
                                                                                                                          Company (Platte), ATA, Navajo, AOPL,                                                     TABLE 2 13
                                              levels that were close, although not
                                              exactly the same as, the proposed index                                     and SPOPS.
                                                                                                                                                                                                                       Middle 80       Middle 50
                                              levels of PPI–FG–1 (in Order Nos. 561                                         12. On September 24, 2010, the U.S.                                       Line              percent         percent
                                              and 561–A) and an unadjusted PPI–FG                                         Department of Transportation, Pipeline
                                              (in the first review). In the second five-                                  and Hazardous Materials Safety                                       Median ..............          4.26             4.26
                                              year review, the Commission used the                                        Administration (PHMSA) filed a Motion                                Weighted Mean                  9.91             7.07
                                              Kahn Methodology itself to set the                                          for Leave to File Out-of-Time and                                    Un-weighted
                                                                                                                                                                                                 Mean .............           8.81             5.74
                                              precise index levels by averaging the                                       Comments and NPGA filed late Reply                                   Composite .........            7.66             5.69
                                              middle 50 and middle 80 composites                                          Comments.
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                                                9 Specifically, this data is drawn from the Form                          Expense at Year 5/Operating Revenue at Year 5))/                     pipelines in the Form No. 6 for the years 2004
                                              No. 6: Carrier Property, page 110; Accrued                                  2. If the operating ratio is greater than one, then it               through 2009. According to AOPL, Dr. Shehadeh
                                              Depreciation, page 111; Operating Revenues and                              is assigned the value of 1 under the Kahn                            then removed from this data set any pipelines that
                                              Operating Expenses, page 114; Crude and Products                            Methodology.                                                         did not report data for any year in that period, as
                                              Barrel-Miles, page 600. To the extent this                                     11 Cumulative Cost Change = (1-operating ratio) *                 well as the Trans Alaska Pipeline System carriers
                                              information is incomplete, alternate data reported
                                              in the Form No. 6 has been substituted.                                     net plant + operating ratio * operating expenses.                    and any pipelines that had FERC Form No. 6
                                                10 The ‘‘operating ratio’’ = ((Operating Expense at                          12 AOPL states that Dr. Shehadeh began his                        reporting errors or incomplete FERC Form No. 6
                                              Year 1/Operating Revenue at Year 1) + (Operating                            analysis using cost data reported by the oil                         data.

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                                              80302          Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                 15. AOPL calculated an average                         Platte states that it is a member of AOPL            emphasizes that an agency must reveal
                                              annual pipeline cost growth rate of 6.68                  and filed to provide further support for             an adequate explanation of the basis for
                                              percent based upon the middle 50                          AOPL’s request of an index of PPI–                   its proposal and that the rulemaking is
                                              composite growth rate and the middle                      FG+3.64. On the other hand, NPGA                     procedurally defective and should be
                                              80 composite growth rate. AOPL notes                      states that it supports the arguments and            withdrawn. Sinclair/Tesoro avers that
                                              that the PPI–FG geometric mean rate of                    recommendations espoused by Mr.                      the Commission provided no data
                                              growth for the years 2004 through 2009                    O’Loughlin on behalf of Valero,                      analysis or support showing that it has
                                              is 3.04 percent. AOPL concludes actual                    including the use of a PPI–FG without                evaluated the reasonableness of PPI–
                                              oil pipeline cost increases during the                    any adjustment. Navajo states that it                FG+1.3 as the appropriate index for
                                              years 2004 through 2009 exceeded PPI–                     prefers Valero’s proposal to establish an            determining rate ceilings.
                                              FG at a rate of 3.64 percent (6.68 minus                  index level of PPI–FG.                                  23. AOPL asserts that these criticisms
                                              3.04). Thus, Dr. Shehadeh proposes an                        19. Other parties also proposed                   of the NOI are baseless. AOPL posits
                                              index rate for the five-year period                       differing index levels. In reply                     that the Commission’s methodology for
                                              beginning July 1, 2011, of PPI–FG+3.64.                   comments, CAPP and its expert Mark                   calculating its index is well-known to
                                                 16. In contrast, Valero and its expert,                Pinney state that if AOPL’s analysis is              industry participants and that there
                                              Mr. Matthew O’Loughlin, contend that                      reproduced using constant 2004 barrel-               exists an ‘‘opportunity for interested
                                              an index equal to an unadjusted PPI–FG                    miles instead of the recession-                      parties to participate in a meaningful
                                              more accurately reflects pipelines’                       influenced 2009 data, the annual cost                way in the discussion and final
                                              actual cost changes. Valero states that                   increase between 2004 and 2009 is PPI–               formulation of rules.’’ 15 AOPL further
                                              Mr. O’Loughlin applies a modified                         FG plus 1.62 percent (PPI–FG+1.62),                  emphasizes that Dr. Shehadeh has
                                              version of the Kahn Methodology. First,                   which CAPP observes is much closer to                provided data supporting his result
                                              Mr. O’Loughlin proposes to exclude                        the current PPI–FG+1.3 than the index                pursuant to the established
                                              pipelines that experienced large rate                     level proposed by AOPL. SPOPS asserts                methodology and states the Commission
                                              base changes from the data set used to                    that the index should be set at zero until           can rely upon these calculations and
                                              calculate index levels. Second, to                        all pipeline over-recoveries are at just             data.
                                              determine cost changes between 2004                       and reasonable levels and Navajo                     b. Commission Determination
                                              and 2009, Mr. O’Loughlin measures the                     proposes to deny index increases to
                                              cost change per barrel-mile between                       pipelines that are currently over-                      24. The Commission rejects the
                                              2004 and 2009 using the ‘‘Total Cost of                   recovering. Navajo also proposes to base             assertion that the NOI is procedurally
                                              Service’’ and barrel-miles reported on                    the index upon changes in operating                  defective. The Commission inaugurated
                                              page 700. Unlike the other Form No. 6                     and maintenance costs and to allow                   its five-year review of the indexation
                                              data used in the Kahn Methodology, the                    indexed increases only to the proportion             methodology proposing to continue the
                                              page 700 data includes an interstate                      of the pipeline’s rate that can be                   existing indexing level of PPI–FG+1.3
                                              total cost of service calculated under the                attributed to such operating and                     while inviting interested parties ‘‘to
                                              Opinion No. 154–B Methodology used                        maintenance costs.                                   propose, justify, and fully support, any
                                              to determine oil pipeline rates.                             20. Other parties, as discussed below,            alternative indexing proposals.’’ 16 By
                                              Following these procedures, Mr.                           without proposing particular index                   soliciting comments on the current
                                              O’Loughlin derives the following data:                    levels, urge the Commission to reassess              index level, the Commission follows the
                                                                                                        the index methodology to avoid over-                 same procedure that it used in the
                                                                  TABLE 3 14                            recoveries. Some parties also raised                 previous five-year review proceeding for
                                                                                                        procedural concerns and argued for                   allowing parties to present evidence that
                                                                      Middle 80        Middle 50        various changes to the Commission’s                  the index level should be modified.17
                                                     Line                                                                                                       25. Moreover, the Commission
                                                                       percent          percent         Form No. 6 reporting requirements.
                                                                                                                                                             subsequently received extensive on-the-
                                              Median ..............            2.6       III. Discussion
                                                                                                  2.6                                                        record comments and workpapers from
                                              Weighted Mean                    4.9                3.3                                                        AOPL, Valero, and other parties. The
                                              Unweighted                                    21. The Commission adopts an index
                                                                                                                                                             analysis contained within these findings
                                                Mean .............       3.9         2.9 level of PPI–FG+2.65. The Commission
                                                                                                                                                             is based upon Form No. 6 data, which
                                              Composite .........        3.8         2.9 rejects the procedural challenges to the
                                                                                         validity of the NOI and to consideration                            is publically available on the
                                                17. Mr. O’Loughlin notes that the        of any modifications to the Kahn                                    Commission Web site and was utilized
                                              middle 50 composite of 2.9 percent is      Methodology. The Commission’s                                       extensively by both AOPL and Valero.
                                              very close to the PPI–FG of 3.0 percent    proposed index level of PPI–FG+2.65 is                              Furthermore, although the
                                              over the last five years and supports an   supported by the Kahn Methodology as                                Commission’s mechanisms for assessing
                                              index of an unadjusted PPI–FG. In Mr.      applied by AOPL, except that the                                    revisions to the index may evolve over
                                              O’Loughlin’s view, the middle 50 is the    Commission adopts Valero’s proposal to                              time, the parties are familiar with the
                                              most appropriate for determining index     calculate the index using only the                                  types of data that have been considered
                                              levels, and should be used instead of the middle 50 percent and not the middle                                 by the Commission in the past,
                                              composite of the middle 50 and the         80 percent of the data set.                                         including the variants of the Kahn
                                              middle 80.                                 A. Procedural Arguments                                               15 AOPL Reply Comment at 38 (quoting
                                                18. Other parties endorsed either the
                                                                                                                                                             Connecticut Light and Power Co. v. Nuclear
                                              views expressed by AOPL or Valero.         1. The Validity of the Notice of Inquiry                            Regulatory Commission, 673 F.2d 525, 528 (DC
emcdonald on DSK2BSOYB1PROD with RULES

                                                                                                        a. Comments                                          Cir.)).
                                                13 Shehadeh  August 20 Decl. at Exhibit A5.                                                                    16 NOI, FERC Stats. & Regs. ¶ 35,566 at P 4.
                                                14 O’Loughlin August 20 Aff. ¶ 6. Mr. O’Loughlin           22. The American Trucking                           17 The current indexing level of PPI–FG+1.3 was

                                              explains that he only reports data to the nearest         Association and Sinclair/Tesoro                      developed in the Commission’s prior five-year
                                              tenth because, in his view, more precision is not         challenge the validity of the NOI. These             review proceeding. Second Five-Year Review, 114
                                              useful given the wide ranging distribution of annual                                                           FERC ¶ 61,293. This proceeding involved extensive
                                              percentage cost changes experienced by the
                                                                                                        parties state that the NOI contains no               record evidence and comments from shippers, and
                                              pipelines in the measurement group. O’Loughlin            justification for the index of PPI–FG+1.3            the record from that proceeding remains available
                                              September 20 Aff. ¶ 5 n.3.                                specified in the NOI. Sinclair/Tesoro                on the Commission Web site.

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                                                              Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                 80303

                                              Methodology. The Commission has                           is required to adopt Mr. O’Loughlin’s                 alternative indexing proposals.’’ 19 Thus,
                                              considered comments, reply comments,                      proposals. Valero reiterates that it is not           by inviting parties to submit ‘‘to
                                              supplemental reply comments, and an                       proposing a change to this legislative                propose, justify, and fully support any
                                              even later response, giving each party                    rule embodied in the regulations, but                 alternative indexing proposals,’’ the
                                              more than adequate opportunity to                         only a change in data inputs to that                  Commission provided notice to AOPL
                                              respond. Both the data used in this                       methodology. Valero also contends that                and others that the Commission would
                                              proceeding and any potential changes                      all parties, including AOPL, are on                   consider different methodologies for
                                              from the methodology used in the past                     notice of the alternative proposals                   calculating the Index, such as the
                                              index review have been subject to ample                   before the Commission.                                proposals advanced by Valero, among
                                              opportunity for examination and                              30. Additionally, Valero disagrees                 others.20 Although the DC Circuit
                                              comment. It is clear that the technical                   with AOPL’s contention that the NOI                   rejected in 2003 proposed changes to
                                              support for the index level adopted in                    does not contemplate an analysis such                 the Kahn Methodology for assessing
                                              this proceeding has been provided to                      as the O’Loughlin approach. Valero                    changing pipeline costs, the Court
                                              the parties with adequate opportunity                     states that the Commission invited                    rejected this proposal because the
                                              for analysis and comment.                                 parties to submit comments proposing,                 Commission had neither addressed
                                                                                                        among other things, alternative indexing              concerns regarding the new
                                              2. Scope of This Proceeding                               proposals. Valero argues that AOPL                    methodology nor justified its
                                              a. Comments                                               mistakes Mr. O’Loughlin’s                             methodological shift.21 The Court did
                                                                                                        improvements to data sources as a                     not hold that the Commission cannot
                                                 26. In reply comments, AOPL argues                     change in the methodology itself.                     make justified modifications to the
                                              that the Commission must adhere to the                    Rather, Valero contends Mr.                           Kahn Methodology. As the Commission
                                              methodology applied in prior                              O’Loughlin’s approach constitutes a                   did in prior five-year reviews of the
                                              proceedings, and AOPL contends that                       better approach to utilizing the same                 indexing level, the Commission will
                                              the changes proposed by Valero and its                    methodology.                                          give consideration to alternative
                                              expert Mr. O’Loughlin (using page 700                        31. Similarly, on reply, Navajo avers              methodologies for calculating the
                                              data, excluding pipelines with large rate                 that FERC adopted the Kahn                            index.22
                                              base changes, and using only the middle                   Methodology only upon the express
                                              50 percent) are beyond the scope of the                   caveat that its initial conclusions were              B. Proposed Changes to the Kahn
                                              five-year review initiated by the NOI.                    not necessarily ‘‘a choice for all time’’             Methodology
                                                 27. AOPL contends that in the prior                    and that the ICA required monitoring of               1. Rate Base Screening Methodology
                                              five year review, the Commission                          the index. Navajo adds that an agency
                                              limited the purpose of the review to                                                                            a. Valero Initial and Reply Comments
                                                                                                        may depart from past policy or
                                              adjustments to the index, not whether                     precedent so long as the Commission                      34. To develop the data set for the
                                              the index should be changed. AOPL                         acknowledges the change and supports                  Index, Valero urges the Commission to
                                              adds that because the existing                            its new decision with reasoned                        apply a ‘‘rate base screening’’
                                              methodology was promulgated as part of                    decision-making and substantial                       methodology that excludes pipelines
                                              a Commission rulemaking, replacing                        evidence. SPOPS also emphasizes that                  experiencing both: (a) A rate base
                                              that methodology requires a new                           the Commission has the flexibility to                 increase (through expansion) or
                                              rulemaking. AOPL asserts that in the                      modify its indexing methodology.                      decrease (through divestiture) greater
                                              NOI, the Commission requested                                32. In its response, AOPL reiterates
                                              comments on the appropriate index                         that Mr. O’Loughlin’s methodology is a                  19 NOI,  FERC Stats. & Regs. ¶ 35,566 at P 4.
                                              level, but gave no indication it was                      fundamental departure from the                          20 AOPL   has been given an opportunity to
                                                                                                                                                              respond to these proposals, and AOPL has filed
                                              changing its methodology. Moreover,                       established methodology and would                     reply comments and an October 20 Response that
                                              AOPL adds that to the extent the                          require a new rulemaking initiated by a               vigorously critique the proposed alterations to the
                                              Commission departs from its prior                         Notice of Proposed Rulemaking. AOPL                   Kahn Methodology.
                                              methodology, the Commission must                          states that Fox Television also made                    21 AOPL II, 281 F.3d at 248.
                                                                                                                                                                22 AOPL argues that in the last indexing review,
                                              establish that the methodology is                         clear that an agency must still provide
                                                                                                                                                              the Commission stated that the purpose of the five-
                                              justified. In contrast to Mr. O’Loughlin’s                a reasoned explanation for its decisions              year review was to determine ‘‘what extent the PPI–
                                              proposal, AOPL states that Dr.                            and that a more detailed justification is             FG should be adjusted to better reflect those cost
                                              Shehadeh derived the index of PPI–FG                      required when the prior policy                        changes, not whether the method for determining
                                              +3.64 with the same methodology used                                                                            pipeline costs should be changed.’’ Second Five-
                                                                                                        engendered serious reliance interest.                 Year Review, 114 FERC ¶ 61,293 at P 46 (emphasis
                                              by Dr. Kahn and adopted by the                            Valero, according to AOPL, downplays                  added). However, in that passage, the Commission
                                              Commission in prior proceedings and                       this reliance inappropriately. AOPL                   was referring to a proposal by the shipper parties
                                              accepted by the D.C. Circuit.                             states that the reliance interest was not             for an entirely new rulemaking to re-assess the
                                                 28. In supplemental reply, citing FCC                                                                        means for tracking pipeline costs justified, in part,
                                                                                                        a reliance on any precise pricing index,              by criticism of the data in Form No. 6. Id. See also
                                              v. Fox Television Stations, Inc.,18 Valero                but rather that the pipelines have a                  ATA, Lion Oil Company, National Cooperative
                                              states that the Commission only needs                     continued expectation that the                        Refinery Association, Sinclair/Tesoro, Response,
                                              to establish that the new policy is                       Commission will apply the established                 Docket No. RM05–22, at 13–14 (filed January 23,
                                                                                                                                                              2006). However, elsewhere in Second Five-Year
                                              permissible under the statute, that there                 methodology in calculating the index.                 Review, when parties did not propose a new
                                              are good reasons for the new policy, and                                                                        rulemaking and instead proposed changes using the
                                              that the agency believes it to be a better                b. Commission Determination                           existing information reported to the Commission, as
                                              policy. Valero emphasizes that the most                      33. The Commission rejects AOPL’s                  Mr. O’Loughlin has done here, the Commission
emcdonald on DSK2BSOYB1PROD with RULES

                                                                                                        assertion that modifications to the                   evaluated those changes and did not find them to
                                              reasonable course of action available to                                                                        be beyond the scope of the five-year review process.
                                              an agency is not always to maintain its                   methodology for evaluating changing                   Second Five-Year Review, 114 FERC ¶ 61,293 at P
                                              current policy unchanged.                                 pipeline costs are beyond the scope of                30–36 (rejecting proposal to use ‘‘the arithmetic
                                                 29. Valero also dismisses AOPL’s                       this proceeding. The NOI invited                      average of the geometric mean of each pipeline’s
                                                                                                                                                              cumulative unit cost change, as opposed to Dr.
                                              argument that a new rulemaking process                    ‘‘interested persons to submit comments               Kahn’s method of calculating the geometric mean
                                                                                                        on the continued use of PPI+1.3 and to                of the arithmetic average of cumulative unit cost
                                                18 129   S.Ct. 1800 (2009).                             propose, justify, and fully support, any              change.’’).

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                                              80304        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              than 50 percent during the 2004–2009                    mitigate the effect of the inclusion of the           irrelevant to the value of the
                                              period and (b) recovery of cost changes                 pipelines with major rate base changes.               information that these pipelines can
                                              during the 2004–2009 period through                       38. Valero states that otherwise                    provide as evidence for indexing
                                              some means other than incremental rate                  applying Dr. Shehadeh’s methodology,                  pipeline costs.’’ 24
                                              increases via the index, such as a cost-                while using Valero’s rate base screening
                                                                                                                                                               42. AOPL further claims that in Order
                                              of-service filing or a settlement                       methodology reduces his recommended
                                                                                                                                                            No. 561, the Commission established
                                              agreement.23 For pipelines with rate                    index from PPI–FG+3.64 to PPI–FG+2.6.
                                                                                                                                                            the Index level at PPI–FG–1 to account
                                              base changes greater than 50 percent,                   Valero also states that excluding the
                                                                                                                                                            for a wave of asset retirements that
                                              Valero also excluded (a) any pipeline                   pipelines with large rate base
                                                                                                      expansions would not frustrate                        resulted in significant rate base changes.
                                              with a major divestiture or (b) any
                                                                                                      expectations because these pipelines do               AOPL states that it would now be
                                              pipeline that acquired another pipeline
                                                                                                      not typically use indexing to recover                 inconsistent to exclude rate base
                                              where the pipeline divesting the assets
                                                                                                      increased costs, and the index has never              changes when those changes relate to
                                              continued to exist after the divestiture.
                                              In conducting the assessment of                         previously been set at PPI–FG+3.64 and                pipeline expansions. AOPL states that
                                              pipelines with major rate base changes,                 there could have been no expectation                  the disqualification from the data set
                                              Mr. O’Loughlin also excluded pipelines                  that this index level would be approved.              pipelines that undertake significant
                                              with what he concluded were unreliable                                                                        expansion will discourage pipeline
                                                                                                      b. AOPL Reply Comments                                expansions and improvements.
                                                 35. Valero justifies the rate base                      39. AOPL states that if a pipeline
                                                                                                                                                            c. Other Shipper Reply Comments
                                              screening methodology because, citing                   experiencing a rate base change is truly
                                              Order Nos. 561 and 561–A, Valero avers                  a statistical outlier, it will be excluded              43. In reply comments, NPGA, ATA
                                              that the index is intended for normal,                  by using the middle 50 and middle 80                  and Navajo expressed support for
                                              not extraordinary, changes. Valero                      data sets as applied in the Kahn                      Valero’s rate base screening
                                              contends that large rate base changes are               Methodology. AOPL states that Mr.                     methodology.
                                              ‘‘extraordinary’’ and that cost changes of              O’Loughlin’s ‘‘rate screening
                                              this nature are typically recovered by a                methodology’’ is a highly subjective,                 d. Valero Supplemental Reply Brief
                                              cost-of-service filing or settlement, not               results-driven attempt to eliminate
                                                                                                      pipelines with higher cost changes.                     44. Responding to AOPL, Valero
                                              incremental rate changes pursuant to                                                                          disputes the assertion that the rate base
                                              the index.                                              This, AOPL argues, biases the data set
                                                                                                      downward before any application of                    screening methodology understates cost
                                                 36. Thus, if the index level reflects
                                              cost data from the pipelines                            statistical measures. AOPL emphasizes                 changes experienced by a typical
                                              experiencing rate base changes, Valero                  that an appropriate statistical method                pipeline operator. Valero states that Mr.
                                              argues that pipelines receiving annual                  for excluding outliers must be                        O’Loughlin’s analysis applied an
                                              index increases that did not construct                  systematic and objective.                             objective filter which removed pipelines
                                              major expansions would obtain a                            40. AOPL contends Mr. O’Loughlin’s                 experiencing cost increases and cost
                                              windfall due to an index inflated for                   ‘‘double-recovery’’ argument lacks                    decreases of more than 50 percent.
                                              cost changes not experienced by normal                  consistency with the structure of the                 Valero notes that pipelines that
                                              pipelines. Furthermore, Valero argues                   index methodology. According to                       underwent expansions and major
                                              that pipelines that constructed major                   AOPL, under the Commission’s                          capital investments often sought to
                                              expansions would receive double                         regulations, if a pipeline files a cost-of-           recover those costs by means other than
                                              compensation, first, through a cost-of-                 service rate increase, those rates form               the price index; to Valero, this suggests
                                              service or other rate changing                          the ceiling for that year, but in the next            that the cost increases were
                                              methodology related to the expansion                    index year, the pipeline must apply the               extraordinary.
                                              and, second, through an inflated index.                 applicable index, whether it is higher or               45. In response to AOPL’s and Dr.
                                              Furthermore, regarding divestitures and                 lower. AOPL asserts that, rather than                 Shehadeh’s argument that volume
                                              acquisitions, Valero and its witness                    reflecting ‘‘double recovery,’’ this merely           increases offset the cost increases,
                                              O’Loughlin also aver that comparisons                   follows the appropriate operation of the              Valero states that it would not have
                                              between the period before the                           index under the Commission’s                          been necessary or cost-justified to adopt
                                              divestitures or acquisitions and after                  regulations, which permit annual                      increased cost-based rates if increased
                                              those transactions are meaningless                      changes in rate ceilings due to actual                volumes fully offset any new costs.
                                              because the systems being compared are                  industry-wide cost changes as compared                Valero adds that if volumes had
                                              different.                                              to PPI–FG. AOPL further argues that Mr.               increased commensurately with costs on
                                                 37. Valero argues that measures taken                O’Loughlin’s double-recovery argument                 these pipelines, then the pipelines with
                                              by the Commission in prior proceedings                  would also discourage pipeline                        large rate base changes would not be at
                                              do not fully correct the biases caused by               expansions and improvements by                        the high end of the measurement group
                                              the inclusion of these pipelines. For                   excluding pipelines that would                        in terms of cost-of-service per barrel-
                                              example, Valero asserts the usage of the                undertake significant expansion projects              mile changes.
                                              middle 80 percent or middle 50 percent                  or that incur significant expenses in
                                              of the sample data set in the prior rate                compliance with safety regulations.                     46. Valero also avers that Dr.
                                              proceedings does not adequately                            41. AOPL also contends that the                    Shehadeh’s claim that the rate base
                                                                                                      inclusion of pipelines with large rate                screening methodology would have
                                                23 Using the rate base screening methodology, Mr.
                                                                                                      base changes in the data set does not                 increased the index adjustment factor
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                                              O’Loughlin excluded 25 pipelines that he states         create a windfall because, under the                  established in Order No. 561 contradicts
                                              experienced major rate base changes during the
                                              2004–2009 period. O’Loughlin August 20 Aff. ¶ 10.       indexing methodology, pipeline costs                  his claim that Mr. O’Loughlin’s
                                              Twelve pipelines with rate base changes of more         are merely increasing to reflect                      methodology biases results downward
                                              than 50 percent remained in the data set because,       increased costs across the industry.                  and leads to an inappropriately low
                                              according to Mr. O’Loughlin, they did not appear                                                              index.
                                              to have requested alternative ratemaking treatment
                                                                                                      AOPL’s witness Dr. Shehadeh states that
                                              and no major acquisition or divestiture was             whether a pipeline ‘‘used a rate
                                              identified. O’Loughlin October 8 Aff. ¶ 15.             mechanism other than indexation is                      24 Shehadeh   September 20 Decl. at 11.

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                                                            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                80305

                                              e. AOPL October 20, 2010 Response                       competition, economic changes, or                        O’Loughlin, several of the pipelines that
                                                 47. AOPL states that once an initial                 changing product supplies. As Valero’s                   Mr. O’Loughlin identified as
                                              rate is set for a pipeline expansion,                   expert Mr. O’Loughlin notes, there is a                  experiencing significant rate base
                                              indexing becomes the primary method                     wide range in the changes in pipeline                    changes relied upon indexed rates (or at
                                              for changing oil pipeline rates.                        per barrel-mile costs,26 and much of this                least did not seek some other form of
                                              According to AOPL, there is no reason                   variability 27 is unrelated to the                       recovery, such as a cost-of-service
                                              to exclude pipelines filing a cost-of-                  significant rate base changes cited for                  filing).30 The fact that a non-trivial
                                              service or settlement rate when                         exclusion by Mr. O’Loughlin. By                          number of pipelines experiencing rate
                                              examining industry-wide cost changes                    selectively modifying the data set based                 base changes continued to use the
                                              and that the presence of ratemaking                     upon one potential cause for cost                        indexing methodology reinforces the
                                              alternatives do not justify setting the                 changes, Mr. O’Loughlin risks distorting                 inclusion of pipelines with rate base
                                              index below overall industry levels.                    the index calculation.                                   changes in the data set.
                                              AOPL avers that if pipelines                               50. Moreover, the index is pursuant to                   53. Additionally, merely because a
                                              undertaking significant infrastructure                  a Congressional mandate to develop a                     pipeline seeks recovery of rates outside
                                              investment are excluded from the                        ‘‘simplified and generally applicable                    the indexing methodology, for example
                                              measurement of cost changes, the index                  ratemaking methodology* * *.’’ 28                        through a cost-of-service, does not
                                              will be inappropriately low, causing                    Consistent with this mandate of general                  establish that the pipeline should be
                                              more pipelines to use other ratemaking                  applicability, the Commission is                         excluded from the data set used to
                                              methods and undermining the purpose                     reluctant to inquire into the particular                 develop the index. The changing costs
                                              of the index.                                           circumstances of every pipeline and                      that compelled the pipeline to seek
                                                                                                      selectively remove pipelines that                        recovery outside the indexing
                                              f. Commission Determination                             experienced cost changes due to one                      methodology nonetheless reflect
                                                 48. The Commission will not adopt                    particular factor from the data set used                 industry cost experience. Moreover, for
                                              Valero’s proposal to exclude pipelines                  to calculate the index.29                                those pipelines with significant rate
                                              experiencing major rate base changes                       51. Furthermore, large rate base                      base increases, Mr. O’Loughlin’s
                                              from the data set. To determine which                   changes can reflect changing pipeline                    decision to include only those pipelines
                                              pipelines should be trimmed from the                    costs. The cost of new investment                        where the pipeline opted to continue to
                                              data sample, the Commission has relied                  associated with rate base increases                      use the index could skew the index
                                              upon the level of the cost changes, not                 reflects industry cost experience related                downward; this is because the pipelines
                                              the reasons why a particular pipeline’s                 to pipeline infrastructure on a barrel-                  continuing to use the index are more
                                              changing costs might be anomalous.                      mile basis. These rate base changes also                 likely to be the pipelines where the rate
                                              Thus, in assessing Form No. 6 data in                   provide important information                            base change decreased per-barrel mile
                                              prior index proceedings, the                            regarding industry capital requirements.                 costs.
                                              Commission has trimmed the data sets                    A rate base change, like any other                          54. Valero repeatedly cites language
                                              to remove outliers, such as the 25                      change in the business circumstances of                  in Order Nos. 561 and 561–A that the
                                              percent of pipelines with the greatest                  a pipeline, is only an outlier if a                      index accounts only for ‘‘normal,’’ not
                                              cost increases per barrel-mile and the 25               pipeline’s per barrel costs change in a                  ‘‘extraordinary’’ changes.31 However,
                                              percent with the greatest decreases. As                 manner disproportionate to those                         this language does not support Valero’s
                                              discussed below, the Commission in                      changes experienced by other pipelines.                  proposal to exclude pipelines
                                              this proceeding will trim the data set to                  52. Moreover, the index serves as a                   experiencing major rate changes from
                                              pipelines in the middle 50 percent of                   means of recovery for some pipelines                     the data set used to determine the index
                                              cost changes. To the extent that a                      with significant rate base changes.                      level. In these passages, ‘‘extraordinary’’
                                              particular pipeline’s cost change is an                 According to data provided by Mr.                        referred to pipelines experiencing
                                              anomalous outlier compared to the                                                                                changed per barrel-mile costs that were
                                              changes on other pipelines, using the                     26 O’Loughlin    August 20 Aff. ¶¶ 44–45, Figure 14.   greater than the changing costs
                                              middle 50 percent of cost changes,                        27 For  example, Mr. O’Loughlin explains that,         experienced by other pipelines
                                              should remove any distorting impact                     using his own methodology, of the 97 pipelines in        regardless of the causes underlying any
                                                                                                      his data set, which has been culled pursuant to the      particular pipeline’s cost changes. Thus,
                                              resulting from the pipeline’s presence in               rate base screening methodology, there ‘‘are 20
                                              the index.25                                            pipelines that experienced average cost increases
                                                                                                                                                               even though a rate base change of 50
                                                 49. In contrast to this simplified                   greater than 10% per year and 10 pipelines that          percent is a significant occurrence, it is
                                              methodology, the rate base screening                    experienced average cost decreases of more than          only ‘‘extraordinary’’ as Order Nos. 561
                                                                                                      10% per year over the five-year period.’’ O’Loughlin     and 561–A used that term to the extent
                                              methodology proposed by Valero                          August 20 Aff. ¶ 45.
                                              selectively emphasizes one factor that                    28 Energy Policy Act of 1992 Public Law 102–486
                                                                                                                                                               that it causes an anomalous change in
                                              may cause a substantial change in                       Sec. 1801(a), 106 Stat. 3010 (Oct. 24, 1992).
                                                                                                                                                               costs per barrel-mile.
                                              pipeline costs per barrel-mile while                      29 The D.C. Circuit has previously recognized the         55. Valero’s contention that including
                                              ignoring other factors. There is no doubt               importance of an index that is relatively simple to      pipelines with rate base changes in the
                                              that substantial changes in rate base can
                                                                                                      derive. AOPL II, 281 F.3d at 247 (quoting EPAct          data set used to determine index will
                                                                                                      1992, at § 1801(a)). The complexity of Mr.               lead to double-recovery is without
                                              alter the per barrel-mile costs of a                    O’Loughlin’s rate base screening methodology is
                                              particular pipeline. However, costs per                 demonstrated by Appendix F of his September 20
                                                                                                                                                               merit. After making a cost-of-service
                                              barrel-mile can also be altered by                      Affidavit, in which Mr. O’Loughlin examines the          filing, the cost-of-service rate becomes
                                                                                                      circumstances of 37 pipelines that experienced rate      the ceiling rate for that year 32 and
                                              shifting customer demand, increased                     base changes greater than 50 percent. To apply the       pipelines are authorized to increase
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                                                                                                      rate base screening methodology, for each pipeline
                                                25 To the extent that large rate base changes are     with a change in rate base exceeding 50 percent,
                                                                                                                                                               their rates pursuant to the index in
                                              associated with disproportionately large cost shifts,   Mr. O’Loughlin examined tariff filings, assessed
                                                                                                                                                                  30 O’Loughlin September 20 Aff. ¶ 54 n.75,
                                              AOPL’s expert Dr. Shehadeh explains that 18 of the      acquisition and divestiture activity, probed into the
                                              25 pipelines removed by Mr. O’Loughlin due to rate      reliability of the pipeline’s reported data,             Appendix F at 8–10.
                                              base changes were excluded when the data set was        researched whether the pipeline had sought rate             31 Valero Supplemental Reply Comment at 14–15

                                              reduced to the middle 50 percent using Dr.              increases pursuant to the index, and generally           (citing Order No. 561–A, FERC Stats. & Regs.
                                              Shehadeh’s methodology. Shehadeh September 20           sought to determine why the rate base changes            ¶ 31,000 at 31,097).
                                              Decl. at 12.                                            occurred.                                                   32 18 CFR 342.3(d)(5).

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                                              subsequent years.33 Valero’s argument                    Valero asserts that the Commission’s                   80 reoccurred, but again the relative
                                              ultimately rests upon the contention                     methodology has varied over the years,                 merits of the middle 50 and middle 80,
                                              that the index is inflated by the                        and in Order Nos. 561 and 561–A, the                   and the departure from the prior Order
                                              inclusion of pipelines experiencing rate                 Commission used an analysis of only                    No. 561 methodology were not weighed
                                              base changes. However, as noted                          the middle 50 percent of the data set,                 or discussed.
                                              previously, such inflation of the index                  not a composite of the middle 50                          61. Given the more fully developed
                                              only occurs if the rate base changes lead                percent and middle 80 percent of the                   record presented here, the Commission
                                              to changes in per barrel-mile costs that                 data set. Valero’s Mr. O’Loughlin                      returns to its approach in Order Nos.
                                              are anomalous. To the extent that the                    emphasizes that the middle 50 percent                  561 and 561–A to use the middle 50
                                              rate base change leads to an anomalous                   better serves the goal of excluding                    percent as the most appropriate method
                                              cost increase or decrease, it will be                    extraordinary data points. Mr.                         for trimming the data sample. The
                                              excluded by the data set trimming as                     O’Loughlin also identifies an additional               purpose of the index is to permit a
                                              discussed below.                                         three pipelines in the middle 80 percent               simplified recovery for normal cost
                                                                                                       that he states have unusual                            changes, not to enable recovery for
                                              2. Data Trimming and the Middle 50                       characteristics, such as a cost of capital             extraordinary cost increases or
                                              a. Valero Initial and Reply Comments                     under two percent or, in another case,                 decreases.36 The middle 50 percent
                                                 56. Valero urges the Commission to                    no rate base yet a positive depreciation               more appropriately adjusts the index
                                              calculate the index using a data sample                  expense.                                               levels for ‘‘normal’’ cost changes as
                                              trimmed to the middle 50 percent, i.e.                   d. AOPL’s October 20, 2010 Response                    opposed to the middle 80 percent,
                                              removing the 25 percent of pipelines                                                                            which, by definition, includes pipelines
                                                                                                         59. In its response, AOPL reiterates its             relatively far removed from the median.
                                              with the greatest cost increases and the                 position that both the middle 50 percent
                                              25 percent of pipelines with the greatest                                                                       Furthermore, some of these more
                                                                                                       and middle 80 percent should be used.                  dramatic cost changes may be due to
                                              cost decreases. Although Valero                          AOPL reiterates its contention that the
                                              acknowledges that recent index                                                                                  circumstances on a particular pipeline
                                                                                                       wide distribution of pipeline cost                     that are not broadly shared across the
                                              proceedings have considered both the                     changes does not support assigning no
                                              middle 50 and middle 80 percent,                                                                                industry. Even when accurate data is
                                                                                                       weight to the middle 80 percent. AOPL                  reported, pipelines in the middle 80, as
                                              Valero contends that trimming the data                   also challenges the three pipelines Mr.
                                              set to the middle 80 percent                                                                                    opposed to the middle 50, are more
                                                                                                       O’Loughlin identified as anomalous,
                                              inadequately accounts for outliers due                                                                          likely to have cost changes resulting
                                                                                                       noting that one was excluded from Dr.
                                              to the widely varying average annual                                                                            from factors particular to that pipeline,
                                                                                                       Shehadeh’s data set and that the others
                                              cost changes. Valero adds that the                                                                              such as a rate base expansion, plant
                                                                                                       showed overall cost changes that were
                                              middle 80 includes pipelines with                                                                               retirement, or localized changes in
                                                                                                       not all that different from other
                                              anomalous characteristics, such as very                                                                         supply and demand. Using the middle
                                                                                                       pipelines. AOPL states that as the Form
                                              high costs per barrel-mile or the absence                                                                       50 ensures that pipelines with relatively
                                                                                                       No. 6 data has improved, there is no
                                              of rate base.                                                                                                   large cost increases or decreases do not
                                                                                                       merit to limiting the data set.
                                                                                                                                                              distort the index.
                                              b. AOPL Reply Comments                                   e. Commission Determination                               62. The Commission further observes
                                                 57. AOPL opposes trimming the                            60. The Commission will use the                     that our adoption of the middle 50
                                              sample data set to the middle 50 percent                 middle 50 percent of the data set to                   provides a better remedy for some of the
                                              of pipelines. Dr. Shehadeh responds to                   determine the appropriate index level.                 concerns Mr. O’Loughlin used to justify
                                              Mr. O’Loughlin’s proposal by stating                     This use of the middle 50 percent is                   his rate base screening methodology. Of
                                              that the wide distribution of pipeline                   consistent with the Commission’s                       the 25 pipelines Mr. O’Loughlin seeks to
                                              cost changes (as opposed to a                            approach when it adopted the indexing                  exclude via the rate base screening
                                              normalized bell curve) does not support                  methodology. In Order Nos. 561 and                     methodology, 18 are excluded by using
                                              ignoring the middle 80 percent in favor                  561–A, the initial rulemaking                          the middle 50 percent in the Kahn
                                              of the middle 50 percent. Rather, Dr.                    establishing the indexing methodology,                 Methodology as applied by Dr.
                                              Shehadeh claims that the wide                            the Commission used only the middle                    Shehadeh.37 More generally, the
                                              distribution supports the use of the                     50 percent of the data set to determine                adoption of the middle 50 is a less
                                              middle 80 percent, rather than the                       the appropriate indexation level. In that              subjective and more simplified method
                                              middle 50 percent because it would be                    proceeding, neither the Commission nor                 (consistent with the EPAct 1992) of
                                              more inclusive and represent a larger                    Dr. Kahn considered the middle 80                      removing potentially anomalous data
                                              number of pipelines.                                     percent. In the second review, Dr. Kahn                than selective removal of certain
                                                                                                       introduced the middle 80 percent to his                pipelines with particular characteristics
                                              c. Valero Supplemental Reply
                                                                                                       analysis.34 Given that the two data sets               from the data sample. The middle 50
                                                                                                       supported the same resulting index-                    also is preferable to such selective
                                                 58. Valero contends, contrary to                      level of an unadjusted PPI–FG, using                   screening methods because it avoids the
                                              AOPL’s assertions, that Mr.                              both (as opposed to just the middle 50)                risk that the index is skewed because
                                              O’Loughlin’s use of the middle 50                        was not discussed or contested, as there               certain cost changes (such as rate base
                                              percent data set is justified and                        was little substantive impact from this                changes) are selectively excluded while
                                              consistent with Commission policy.                       departure from the Order No. 561
                                                                                                                                                                 36 Order No. 561–A, FERC Stats. & Regs. ¶ 31,000
                                                                                                       methodology.35 In the second and most
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                                                33 However,   further undermining Valero’s double-     recent 5-year review, the composite                    at 31,097 (noting that the purpose of the Index is
                                              recovery argument, the Commission has denied an                                                                 to ensure recovery of ‘‘normal’’ cost changes, not
                                              increase pursuant to the index when the cost-of-
                                                                                                       usage of the middle 50 and the middle                  ‘‘extraordinary’’ cost changes).
                                              service filing supporting the existing rate already                                                                37 Shehadeh September 20 Decl. at 12. Only 13 of

                                              incorporated the cost changes covered by the index.        34 Kahn Decl. at 13 (August 31, 2000) (Docket No.    the 25 are excluded in the middle 80 percent. Id.
                                              See SFPP, L.P., 117 FERC ¶ 61,271 (2006) (denying        RM00–11–000).                                          The number of excluded pipelines include four
                                              an index increase because the cost-of-service rate,        35 The composite of the middle 50 and middle 80      companies that Dr. Shehadeh removed due to
                                              which used a 2005 base period, already reflected         were very similar in that proceeding at 1.32 percent   missing data. Shehadeh September 20 Decl. at 12
                                              the 2005 cost changes covered by the index).             and 1.2 percent, respectively. Id.                     n.15.

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                                              other significant changes (changes in                   fifteen pipelines in Dr. Shehadeh’s data              while assuming that the competitive
                                              local supply and demand) are                            set, the weight for the index of changes              cost of capital remains constant.
                                              incorporated.                                           in net plant is zero percent, making the                 72. AOPL also argues that if rate of
                                                 63. The Commission accordingly                       index of changes in net plant irrelevant.             return from page 700 is used to measure
                                              concludes that the middle 50 provides                   Valero contends that its proposed                     cost increases, increases in pipeline
                                              a robust data sample for determining                    methodology using data from page 700                  efficiency will not result in lower
                                              changing barrel-mile costs. The middle                  obviates the need for the operating ratio             indexation levels. AOPL explains that
                                              50 percent of pipelines represents 76                   because the total cost of service on page             pipeline returns are based on a proxy
                                              percent of total barrel-miles in 2004                   700 incorporates both operating and                   group and as the profitability increases
                                              subject to the index,38 and thus for this               capital costs.                                        for companies in the proxy group,
                                              index calculation, the Commission finds                    67. Valero explains that operating                 returns will likely increase. As a result,
                                              it unnecessary to include the middle 80                 expense, net carrier property, and                    using return from page 700 will tend to
                                              percent to obtain a representative                      barrel-mile data, which are reported on               increase, as oppose to decrease, future
                                              sample of the data. Finally, the use of                 pages 110–111, 300–303, and 600–601                   index levels.
                                              the middle 50 minimizes the risk of                     of the Form No. 6, include intrastate, as                73. AOPL also disagrees with Mr.
                                              including pipelines that experienced                    well as interstate, pipeline information.             O’Loughlin’s claim that page 700 data is
                                              either large increases or decreases in                  The solution, Valero contends, is to use              superior to Form No. 6 data because
                                              cost (or errant data) that may be                       the data on page 700 of the Form No. 6,               page 700 data does not include
                                              included in an 80 percent sample, while                 which includes only interstate                        intrastate costs. AOPL counters that oil
                                              still capturing changes from a broad                    information.                                          pipelines often make intrastate and
                                              spectrum of the pipeline industry.                                                                            interstate movements through the same
                                                                                                      b. Other Shipper Comments                             pipeline segments. Thus, AOPL believes
                                              3. Page 700 Data                                                                                              that it is reasonable to assume that both
                                                                                                        68. In their comments, other parties
                                              a. Valero’s Initial and Reply Comments                                                                        interstate and intrastate cost changes are
                                                                                                      addressed Valero’s proposal to use page
                                                 64. Valero and Mr. O’Loughlin aver                   700. ATA emphasized that any analysis                 likely to be representative of interstate
                                              that the Commission should adopt page                                                                         cost changes.
                                                                                                      of costs should be based on the
                                              700, which uses the Opinion No. 154–                                                                             74. AOPL argues that Mr. O’Loughlin
                                                                                                      interstate costs reported on page 700.
                                              B methodology to derive a total cost-of-                                                                      mistakenly describes the page 700 data
                                                                                                      ATA emphasizes that page 700 contains                 as new and instead suggests that the
                                              service for interstate pipeline                         the information available to shippers to
                                              companies. Valero states there are                                                                            information Mr. O’Loughlin proposes to
                                                                                                      provide a screening tool to determine                 use has been available to the
                                              several advantages to using the page 700                whether a ‘‘pipeline’s cost of service or
                                              data as opposed to the other Form No.                                                                         Commission for many years.
                                                                                                      per-barrel/mile costs’’ are so divergent
                                              6 data relied upon by the Commission                    from revenues as to warrant a challenge               d. Valero Supplemental Reply
                                              in the past.                                            to the rates. ATA stresses that it is                    75. Responding to AOPL, Valero
                                                 65. Valero asserts that by relying upon              appropriate to use the same data to                   asserts that pipeline efficiency gains
                                              page 700 data, the Commission can                       develop the index as is used to
                                              avoid using net carrier property as a                                                                         will not distort the return information
                                                                                                      determine whether a pipeline is                       from page 700 because basic finance
                                              proxy for actual changes in allowed                     recovering its costs.
                                              return and income tax. Valero notes that                                                                      theory provides that an increase in a
                                                                                                        69. NPGA likewise submits that any                  company’s current and future cash flow
                                              the Commission has previously                           proper analysis of operating costs
                                              questioned the effectives of net carrier                                                                      increases the equity value of the
                                                                                                      should be based on interstate operations              company. Regarding AOPL’s contention
                                              property as a proxy for changes in
                                                                                                      and costs and not on costs that reflect               that volatility in the page 700 return
                                              capital costs. Valero further states that
                                                                                                      intrastate operations. Thus, NPGA urges               data will skew results, Valero argues
                                              Mr. O’Loughlin’s analysis shows that
                                                                                                      the use of page 700 data.                             that Dr. Shehadeh, by analyzing the rate
                                              the change in net plant is typically
                                              greater than the change in allowed                        70. In reply comments, SPOPS urges                  of return in isolation from the allowed
                                              return and income tax. Additionally,                    that to the extent the Commission                     return and income tax allowance,
                                              Valero argues that net plant data                       continues to apply its methodology, the               obtained a result that is not fully
                                              reported on Form No. 6 can also include                 Commission should use the primary                     indicative of a pipeline’s capital costs.
                                              purchase accounting adjustments                         source for the jurisdictional costs of                Valero further argues that recessionary
                                              (PAAs), which the Commission does not                   service for the pipelines, the page 700               declines in petroleum demand
                                              allow for ratemaking purposes absent a                  and the underlying workpapers, not the                increased the average cost of service per
                                              showing of substantial benefits to                      secondary source methodology                          barrel mile for 2009. Valero concludes
                                              ratepayers.                                             demanded by AOPL.                                     that if the recessionary volatility in
                                                 66. Valero also contends that the                    c. AOPL’s Reply Comments                              barrel-miles is reflected in developing
                                              ‘‘operating ratio’’ weighting methodology                                                                     unit costs, the prevailing rates of return
                                              as applied by Dr. Shehadeh leads to a                     71. AOPL opposes the use of page 700                as reported in the cost-of-service
                                              distorted analysis. The operating ratio is              data. AOPL argues that the page 700                   calculations on page 700 of the Form
                                              set between zero and one based upon                     data is more volatile due to the return               No. 6, must also be used.
                                              the ratio of operating expenses to                      element underlying the page 700 total                    76. Valero disputes AOPL’s
                                              revenues. If operating expenses exceed                  cost-of-service data. Specifically, AOPL              contention that an interstate cost-of-
                                              revenues, then the operating ratio is set               contends that stock market fluctuations               service value was reflected on page 700
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                                              to one, meaning that no weight is                       make the rate of return highly sensitive              as early as 1994. Valero states that a
                                              assigned to capital costs (net plant                    to the end-year selected by the                       reliable total interstate-only cost-of-
                                              under the prior methodology) in the                     Commission (i.e., 2008 versus 2009) for               service data and the specific line items
                                              formula. Thus, Valero contends that for                 calculating the index. According to                   composing the interstate cost of service,
                                                                                                      AOPL, the Form No. 6 net carrier                      including jurisdictional rate base, were
                                               38 AOPL Comments at 14–15; Dr. Shehadeh                property data is preferable because it                not available until 2000. Valero states
                                              August 20 Decl. at 10 n.23.                             reflects actual changes in capital costs              that the Commission has not previously

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                                              addressed the possibility of using this                    81. AOPL defends the data in Form                  throughput used in the methodology to
                                              interstate, page 700 data in the index.                 No. 6. AOPL states that while PAAs                    the costs incurred to transport the
                                                 77. Valero also challenges Dr.                       reflected in Form No. 6 are generally not             throughput used in the methodology.
                                              Shehadeh’s claim that the interstate-                   allowed to be reflected in regulated                  Given that page 700 does not match
                                              only operating and maintenance                          rates, these adjustments are appropriate              interstate costs with interstate volumes,
                                              expense and depreciation expense data                   when calculating cost changes because                 the Commission rejects its usage in the
                                              reported on page 700 are unsuitable for                 the PAAs reflect the opportunity cost of              methodology.
                                              the rate index methodology because the                  capital. Moreover, AOPL states that
                                                                                                      PAAs do not create the perverse                       4. Adjustments for Declining
                                              data contain various accounting,                                                                              Throughput
                                              allocation, and normalizing                             incentives in the calculation of an
                                              assumptions. Rather, Valero contends                    industry-wide index that they do when                 a. Comments
                                              that because the calculations of                        calculating an individual pipeline’s                     86. In reply comments, CAPP asserts
                                              operating and maintenance expense                       rates. Also, AOPL also contends that                  that the index should not be inflated by
                                              must be consistent with the                             although the accounting reserves in                   the decline in throughput between 2004
                                              Commission’s Opinion No. 154–B                          Form No. 6 present timing issues for the              and 2009. CAPP contends that the
                                              methodology and because changes in                      purposes of a ratemaking proceeding,                  widespread recession caused the
                                              those components impact the costs a                     they also represent real costs of doing               reduction in 2009 barrel miles and that
                                              pipeline can recover in rates, those                    business that are properly reflected in               such throughput declines cannot be
                                              considerations are appropriate for                      the calculation of the rate index.                    expected to continue for another five
                                              determining the price index.                               82. AOPL also defends the usage of
                                                                                                                                                            years. CAPP states that its expert Mark
                                                 78. Valero states that Dr. Shehadeh’s                the operating ratio. AOPL states that
                                                                                                                                                            Pinney replicated AOPL’s analysis using
                                              preferred data source, the operating and                applying a weight of one to operating
                                                                                                                                                            constant 2004 barrel miles and the
                                                                                                      expenses and zero to net plant is
                                              maintenance expense data on page 114                                                                          resulting increase equated to PPI–FG
                                                                                                      appropriate for a company where
                                              of the Form No. 6, can contain                                                                                plus 1.62 percent. CAPP argues that it
                                                                                                      operating costs are greater than revenue.
                                              accounting reserves that are not                                                                              is inconsistent with the purpose of an
                                              permitted for ratemaking. Valero states                 f. Commission Determination                           inflation adjusted index to allow
                                              that carriers should not be permitted to                   83. The Commission does not adopt                  changes in volumes to affect index
                                              use these discretionary changes in                      Mr. O’Loughlin’s proposal to use page                 levels and that increasing the index due
                                              accounting reserves to influence the                    700 data because there is a mismatch                  to declining volumes will be self-
                                              change in unit costs used to determine                  between the page 700 total cost-of-                   perpetuating. CAPP also argues that
                                              the level of index to be used for annual                service, which includes only interstate               allowing a generic index increase based
                                              adjustments.                                            data, and the page 700 throughput data,               on 2009 barrel-mile data contradicts
                                              e. AOPL October 20, 2010 Response                       which includes interstate and intrastate              Commission ratemaking policy for new
                                                                                                      data.                                                 pipeline facilities by using barrel-mile
                                                 79. AOPL renews its arguments that                      84. As the shipper parties emphasize,              data instead of capacity as billing
                                              (a) intrastate costs are representative of              the total cost of service data on page 700            determinants.
                                              interstate costs; (b) inclusion of the rate             relates solely to interstate costs.                      87. Also in reply, ATA states that U.S.
                                              of return from page 700 would make the                  However, the throughput data used by                  Energy Information Administration
                                              index more volatile; (c) net plant is a                 Mr. O’Loughlin from page 700 reports a                (EIA) estimates project an increase in
                                              preferable measure of return for the                    combination of interstate and intrastate              total crude oil and petroleum
                                              purposes of establishing the index than                 volumes. As AOPL explains in its                      consumption from 2010 to 2011. ATA
                                              the page 700 data; and (d) the page 700                 October 20 Response, the barrel-mile                  thus advocates establishing an index
                                              data has been available during prior                    information listed on page 700 provides               using constant 2009 volumes for 2011
                                              indexing proceedings.                                   that the barrel-mile figure should be the             through 2016 as a ‘‘conservative’’
                                                 80. AOPL also argues that Valero’s                   same as that reported on line 33a of                  approach more favorable to pipelines.
                                              proposed usage of page 700 ignores                      page 600 of the Form No. 6. The                          88. In its October 20 Response, AOPL
                                              serious accounting issues. AOPL states                  instructions for page 600 refer to the                contends that adjusting actual historical
                                              that, in order to derive a unit cost for                inclusion of ‘‘all oils received’’ by the             throughput to assume constant volume
                                              each carrier, Mr. O’Loughlin divides the                pipeline and makes no distinction                     levels is speculative and directly
                                              total cost-of-service reported on page                  between interstate and intrastate                     contrary to the Commission’s
                                              700 by the total throughput reported on                 volumes. Consequently, pipelines may                  established methodology. AOPL also
                                              page 700. AOPL states that the page 700                 be reporting both interstate and                      challenges CAPP’s suggestion that the
                                              cost-of-service figure provides each                    intrastate volumes on page 700.                       Commission uses capacity to measure
                                              carrier’s interstate cost-of-service using                 85. Thus, Mr. O’Loughlin’s                         costs instead of actual throughput,
                                              an Opinion No. 154–B methodology.                       calculations compare one set of costs                 stating that because the oil pipeline
                                              However, AOPL states that the barrel-                   (interstate costs) with a different set of            industry is a highly capital intensive
                                              mile data on page 700 includes                          throughput (combined interstate and                   industry, when throughput declines,
                                              interstate and intrastate volumes. AOPL                 intrastate). Changes in transported                   costs do not decline proportionally.
                                              explains that the instructions on page                  throughput on a particular movement                   AOPL adds that CAPP treats volumes as
                                              700 indicate that the barrel-mile figure                cause changes in the costs related to the             remaining constant but makes no
                                              should be the same as that reported on                  very same movement. Thus, it is an                    attempt to adjust for fuel and power
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                                              page 600, and the barrel-mile figure on                 axiomatic rule of ratemaking that the                 costs that are dependent upon volume
                                              page 600 includes ‘‘all oils’’ received by              same set of costs and volumes must be                 levels. Moreover, AOPL adds that
                                              the pipeline, not just interstate oils.                 used to determine rates. To obtain an                 contrary to CAPP’s assertion that the
                                              AOPL contends that there could be a                     accurate measurement of changing per                  decline resulted from the 2009
                                              mismatch between the interstate only                    barrel-mile costs for purposes of                     recession, more than 60 percent of the
                                              costs and the interstate and intrastate                 establishing an index level, the                      throughput decline occurred between
                                              volumes.                                                methodology must match the                            2004 and 2005. Thus, AOPL states that

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                                              capacity should not be used to measure                   period. As Dr. Shehadeh demonstrates,                to the part of the rate attributable to
                                              costs.                                                   more than 60 percent of the decline in               operating and maintenance expense.
                                                                                                       barrel-miles during the 2004–2009                    Navajo elaborates that if the operating
                                              b. Commission Determination
                                                                                                       period recorded on Form 6 occurred                   and maintenance expense costs were 40
                                                 89. The Commission rejects CAPP’s                     between 2004 and 2005,41 and was                     percent of a pipeline’s cost of service on
                                              and ATA’s proposal to use constant                       unrelated to the recession in 2008 and               page 700 of its Form No. 6, the index-
                                              barrel-miles in the Kahn Methodology                     2009. Thus, it is not the case that the              based rate increase should equal the
                                              rather than the actual barrel-mile levels.               index level has been distorted by the                pre-existing ceiling rate times the index
                                                 90. The Commission finds it                           recession in 2008 and 2009.                          multiplied by ‘‘0.4.’’
                                              appropriate to continue to rely upon                                                                             96. In reply comments, ATA states
                                              historical data in applying the Kahn                     5. Applying the Index Only to
                                                                                                       Operations and Maintenance Costs                     that it agrees that applying an index
                                              Methodology. The DC Circuit has                                                                               adjustment to items not subject to
                                              upheld the Commission’s reliance upon                    a. Comments                                          inflation misaligns cost recovery with
                                              historical data finding that the usage of                                                                     cost increases. ATA also alleges this
                                                                                                          94. In its comments and reply
                                              historical data is consistent with the                                                                        provides a disincentive to invest in
                                                                                                       comments, Navajo urges the
                                              mandate to apply ‘‘a simplified and                                                                           infrastructure.
                                                                                                       Commission to apply the index only to
                                              generally applicable ratemaking                                                                                  97. In reply comments and its October
                                                                                                       operating and maintenance costs and
                                              methodology.’’ 39                                                                                             20 Response, AOPL asserts that the
                                                                                                       not to costs attributable to depreciation,
                                                 91. Moreover, CAPP’s and ATA’s                                                                             Commission has twice rejected the
                                                                                                       return, and income tax allowances.
                                              analysis of cost changes assuming                                                                             selective indexing proposal advocated
                                                                                                       Navajo asserts that depreciation is not
                                              constant volumes are problematic                                                                              by Navajo. AOPL states that Navajo’s
                                                                                                       affected by inflation because
                                              because they utilize asynchronous data.                                                                       proposal is beyond the scope of this
                                                                                                       depreciation is based upon equity
                                              Regarding CAPP’s proposal to use                                                                              proceeding. Moreover, AOPL asserts
                                                                                                       investment, a historical cost. Navajo
                                              constant 2004 barrel-miles, the 2009                                                                          that because the Commission measures
                                                                                                       further contends that the two
                                              costs reflect the expenses associated                                                                         capital cost changes by comparing
                                                                                                       components of return—return on equity
                                              with the lower 2009 volume levels.
                                                                                                       (in the form of increased deferred                   changes in net carrier property, the
                                              Since certain costs (such as fuel and
                                                                                                       return) and cost of debt—already                     Kahn Methodology does not incorporate
                                              power) increase and decrease with
                                                                                                       incorporate an inflation component.                  inflation for either return or income tax
                                              volume levels, using 2004 data volume
                                                                                                       Thus, Navajo asserts that automatically              allowance as alleged by Navajo. Rather,
                                              data with 2009 operating costs will not
                                                                                                       granting pipelines an additional                     AOPL asserts, the methodology is based
                                              present an accurate depiction of the
                                                                                                       inflation-based index increase would                 upon the assumption that the
                                              change in per barrel-mile costs. By
                                                                                                       enable pipelines to ‘‘double-dip’’ the               competitive rate of return on capital
                                              applying an upward adjustment to 2009
                                                                                                       inflation element. Third, Navajo asserts             does not change.
                                              volumes without adjusting for the costs
                                                                                                       that the income tax allowance should                    98. AOPL adds that the Commission
                                              that would have been incurred as a
                                                                                                       not be increased automatically by an                 has twice previously rejected Navajo’s
                                              result of those higher volumes, CAPP
                                                                                                       index, because one of its two                        proposal, first in Order No. 561 and in
                                              imposes a downward distortion on the
                                                                                                       components (the tax rate) generally is               the first five year review on the basis
                                              change in pipeline costs calculated
                                                                                                       fixed by law and does not vary based on              that it would be difficult to administer
                                              under the Kahn Methodology. Similarly,
                                                                                                       inflation, and the second component                  and create perverse incentives. AOPL
                                              ATA’s proposal to assume constant
                                                                                                       (rate of return on equity) already                   states that Navajo has provided the
                                              2009 volumes is defective because it
                                                                                                       accounts for inflation.                              Commission with no valid reason to
                                              does not adjust 2004 costs so that the                      95. Instead, Navajo avers that the                reverse its prior rulings. Furthermore,
                                              2004 costs reflect the lower 2009                        index should only be applied to                      AOPL asserts that under Navajo’s
                                              volumes.                                                 operating and maintenance (operating
                                                 92. The Commission further rejects                                                                         proposal, each pipeline would be
                                                                                                       and maintenance expense) costs. Navajo               required to perform calculations to
                                              CAPP’s argument that it is inappropriate
                                                                                                       acknowledges that the Commission                     determine its own pipeline specific
                                              to allow the indexing methodology to be
                                                                                                       previously rejected this approach as too             index, a fundamental change from the
                                              calculated based upon declining
                                                                                                       complicated in Order Nos. 561 and 561–               ‘‘generally applicable’’ ratemaking
                                              volumes. Declining volumes require                       A, but Navajo notes that the
                                              pipelines to increase rates in order to                                                                       methodology required by the EPAct
                                                                                                       Commission now collects categorical                  1992.
                                              meet revenue needs and, for existing oil                 cost data from pipelines on page 700 of
                                              pipelines, the Commission uses existing                  Form No. 6 and the Commission could                  b. Commission Determination
                                              volumes, not capacity, to determine                      apply the index only to operating and                   99. The Commission rejects Navajo’s
                                              rates.40 Thus, much as in a cost-of-                     maintenance costs as recorded on page                proposal. The Commission has twice
                                              service, such declining volumes should                   700. Thus, Navajo states that the                    rejected proposals similar to the one
                                              lead to increased pipeline recovery                      Commission could use the change in                   advocated by Navajo. In Order No. 561
                                              levels in the indexing methodology.                      operating and maintenance expense                    as affirmed by the D.C. Circuit, the
                                                 93. Finally, CAPP fails to demonstrate                costs identified by O’Loughlin to                    Commission concluded that limiting
                                              that the declining throughput for the                    develop the indexed rate.42 Navajo                   index increases to operating and
                                              2004–2009 period resulted primarily                      explains that under its proposal, for                maintenance costs would create
                                              from the unusual economic conditions                     each pipeline seeking an annual index                perverse incentives for pipelines to
                                              in 2008 and 2009 as opposed to changes
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                                                                                                       increase, the index rate could be applied            direct a disproportionate amount of
                                              reflected throughout the prior five-year
                                                                                                                                                            their spending to operating and
                                                                                                         41 Shehadeh   October 20 Decl. at 29.
                                                39 AOPL   II, 281 F.3d at 247 (2003) (quoting EPAct      42 To
                                                                                                                                                            maintenance costs and to neglect capital
                                                                                                               derive this rate, Navajo relies upon Mr.
                                              1992, at § 1801(a)).                                     O’Loughlin’s showing a change in the O&M costs
                                                                                                                                                            expenditures.43 Moreover, because new
                                                40 See 18 CFR 346.2(b)(2). Moreover, it is not clear
                                                                                                       for the middle 50 percent of oil pipelines of 5.0
                                              how this capacity information could be obtained in       percent and a change for the composite of the 50       43 Order No. 561, FERC Stats. & Regs. ¶ 30,985 at

                                              the application of the index, since pipelines report     and 80 percent of 5.4 percent. O’Loughlin August     30,951–52, aff’d AOPL I, 83 F.3d at 1437. The
                                              throughput in Form No. 6, not capacity.                  20 Aff. ¶ 49, Figure 15.                                                                        Continued

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                                              80310        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              investment may be substantial and                       in cost changes experienced between                   Navajo—reject the notion that the index
                                              would not be covered by the index,                      crude and product pipelines could                     reflects actual pipeline cost changes.
                                              many companies would be required to                     argue in favor of separate indices for                Sinclair/Tesoro argues that it is unlikely
                                              file cost-of-service cases to recover                   these two groups. Valero states that                  the pipeline industry is experiencing
                                              significant increases in cost.44                        using his methodology, Mr. O’Loughlin                 cost increases equal to the broader
                                                 100. In addition to creating perverse                determined that the median annual                     economy since the last review. In
                                              incentives, the Commission’s prior                      change in unit costs is 2.1 percent for               support, Sinclair/Tesoro cites depressed
                                              orders noted that Navajo’s proposal                     products pipelines and 3.3 percent for                cost levels in areas specific to pipeline
                                              would also undermine the statutory                      crude pipelines. The composite index                  operation, such as labor, energy, and
                                              mandate to establish a generally                        for the middle 50 percent of the datasets             materials used in pipeline construction.
                                              applicable and simplified                               is 2.3 percent for products pipelines and             In contrast, Sinclair/Tesoro represents
                                              methodology.45 The availability of page                 4.3 percent for crude pipelines.                      that PPI–FG has recovered more rapidly,
                                              700 data does not change this                              103. In reply comments, ATA                        almost completely rebounding to its
                                              conclusion. Under Navajo’s proposal,                    advocates the adoption of separate                    mid-2008 peak. Thus, Sinclair/Tesoro
                                              the index would not be generally                        indices for crude and product pipelines,              states that it is not appropriate to
                                              applicable. Each pipeline would receive                 asserting that separate indices would                 maintain the prior period rate ceiling of
                                              its own annual index adjustment to the                  allocate costs more equitably among                   PPI–FG+1.3.
                                              ceiling rate dependent upon the                         shippers. ATA emphasizes that doing                      107. In its comments, ATA states that,
                                              pipeline’s specific level of operating                  otherwise would force product shippers                based upon a sample of 73 Commission-
                                              costs as reported on page 700. Navajo’s                 to subsidize crude shippers. The ATA                  regulated pipelines, over 30 pipelines
                                              proposal is also contrary to the purpose                urges that the data to produce separate               have reported over-recoveries for some
                                              of a simplified methodology. Requiring                  indices is readily available, noting that             or all of the years from 2002–2009, and
                                              pipelines to multiply the index level by                of the 97 pipelines included within Mr.               that these pipelines reported over-
                                              the ratio of ‘‘operating and maintenance’’              O’Loughlin’s analysis, 31 were                        recoveries of approximately $1.9 billion.
                                              expenses to ‘‘total cost-of-service’’ on                classified as crude pipelines and 45                  ATA asserts that this could cause
                                              page 700 before applying the index to a                 were classified as product pipelines.                 parties to defer capital expenditures
                                              pipeline’s existing ceiling rate will                   NPGA also states that, as established by              because returns on depreciated assets
                                              increase the likelihood of disputes in                  Mr. O’Loughlin, the disparity in cost                 exceed those provided by new
                                              each annual application of the index as                 changes between crude pipelines and                   investments. Moreover, ATA suggests it
                                              parties challenge those particular                      product pipelines supports the                        is suspicious that pipelines that are
                                              components of page 700 data.                            development of separate indices.                      under-recovering by substantial
                                                 101. Furthermore, Navajo’s arguments                    104. In its reply comments and                     amounts have not filed a cost-of-service
                                              are theoretically unsound. Capital costs                October 20 Response, AOPL represents                  rate increase. In Reply Comments, ATA
                                              are a component of a pipeline’s total                   that the Commission has previously                    further emphasizes that pipelines
                                              costs, and any index that tracks actual                 rejected separate indices and                         experience non-uniform cost changes.
                                              cost changes must account for changing                  emphasizes that Valero witness                        ATA states that the Commission should
                                              capital costs. The Commission also                      O’Loughlin ultimately concluded that                  be ‘‘careful’’ in designing any index to be
                                              rejects Navajo’s argument that for                      the Commission should apply one index                 applied to pipelines generally.
                                              income tax and rate of return, the index                                                                         108. In addition to reiterating ATA’s
                                                                                                      to all oil pipelines.
                                              double-counts inflation. The Kahn                                                                             concerns regarding over-recovery,
                                              Methodology uses net carrier property                   b. Commission Determination                           NPGA states that the major propane
                                              as a proxy for income tax and rate of                      105. Mr. O’Loughlin has provided                   pipelines are now controlled by one
                                                                                                                                                            company and that as a result shippers
                                              return, and net carrier property does not               some evidence to indicate that product
                                                                                                                                                            have experienced a pattern of increased
                                              contain any internal inflation-related                  and crude pipelines have experienced
                                                                                                                                                            costs through new fees, reduced service,
                                              adjustments.46                                          different levels of cost change. However,
                                                                                                                                                            sale of necessary assets to a pipeline
                                                                                                      neither Mr. O’Loughlin, ATA, nor
                                              6. Separate Indices for Crude and                                                                             affiliate, and operating penalties.
                                                                                                      NPGA offered an explanation for why
                                              Product Pipelines                                                                                             Although NPGA acknowledges that
                                                                                                      this cost disparity between crude and
                                              a. Comments                                                                                                   pipelines as a whole are reporting an
                                                                                                      product pipelines exists. ATA and
                                                                                                                                                            under-recovery, NPGA states that this
                                                 102. In its comments, Valero and its                 NPGA rely upon Mr. O’Loughlin’s
                                                                                                                                                            does not relieve the Commission of its
                                              witness O’Loughlin recommend one                        testimony, but Mr. O’Loughlin
                                                                                                                                                            duty to ensure that each individual
                                              index for crude and product pipelines.                  recommends using one index for all                    carrier’s rates are just and reasonable
                                              However, Valero avers that differences                  pipelines,47 and ATA and NPGA                         and the existence of such a disparity
                                                                                                      otherwise have failed to demonstrate                  merely indicates that the index does not
                                              Commission returned to the issue in the first five      that the Commission should depart from                reflect actual changes in pipeline cost.
                                              year review, again rejecting the proposal on the        its prior policy applying one uniform                 NPGA and ATA urge the Commission to
                                              basis that it could cause perverse consequences.        index to all pipelines. Thus, on the
                                              First Five-Year Review, 93 FERC at 61,854–55.                                                                 require pipelines showing over-
                                                44 Order No. 561, FERC Stats. & Regs. ¶ 30,985 at
                                                                                                      record presented here, the Commission                 recoveries to show cause why their rates
                                              30,952.                                                 will continue to apply one index to both              should not be considered unjust and
                                                45 Order No. 561, FERC Stats. & Regs. ¶ 30,985 at     crude and product pipelines.                          unreasonable.
                                              30,951–52; First Five-Year Review, 93 FERC at                                                                    109. Similarly, SPOPS avers that oil
                                                                                                      C. Allegations of Pipeline Over-Recovery
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                                                46 Because it is not presented by the facts here,                                                           pipelines are consistently over-
                                                                                                      1. Comments                                           recovering their costs. Accordingly,
                                              the Commission does not address whether using
                                              rate of return data that incorporated an inflation        106. In their comments, several                     SPOPS proposes an index rate of zero
                                              component would, in fact, be inappropriate for          shippers—Sinclair/Tesoro, the Trucking                until pipeline profits return to a just and
                                              deriving the index. Similarly, the Commission does
                                              not address issues related to using actual page 700     Association, ATA, NGPA, SPOPS, and                    reasonable level. SPOPS states that
                                              tax allowance data because the index currently uses                                                           since the inception of the index the
                                              a proxy for income tax costs.                             47 O’Loughlin   August 20 Aff. ¶ 61.                Commission has allowed pipelines to

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                  80311

                                              increase their rates by 39 percent, even                to actual changes in costs as Dr.                      1. Pipeline Integrity and Regulatory
                                              though by 2009, 41 oil pipelines                        Shehadeh shows in his calculations                     Safety Costs
                                              reported excess profits totaling over                   using the Kahn Methodology.                            AOPL Initial Comments
                                              $200 million per year. In its comments,
                                                                                                      2. Commission Determination                               115. AOPL states that costs have
                                              SPOPS includes in these profits the
                                              income tax allowance for Master                            112. The fact that some pipelines may               increased due to assessment and re-
                                              Limited Partnerships (MLP), which do                    be over-recovering is not contrary to the              assessment of pipeline structural
                                              not incur income taxes. SPOPS states                    establishment of a general index level                 integrity and remediation required by
                                              that it is difficult to challenge rate                  for all pipelines. The purpose of the                  the Pipelines and Hazardous Materials
                                              increases pursuant to the index. SPOPS                  index is to track cost changes using a                 Safety Administration (PHMSA), an
                                              states, as a result, the Commission has                 generally applicable and simple                        agency of the United States Department
                                              abdicated its responsibility under the                  method, and does not involve an                        of Transportation. AOPL, supported by
                                              ICA, emphasizing that not even ‘‘a little               assessment of whether each of the                      the Declaration of William R. Byrd,
                                              unlawfulness’’ is permitted, and that the               various pipelines are over- or under-                  stresses that assessment requires
                                              Commission index as applied by the                      recovering their costs. This can be seen               expensive technology (including rental
                                              Commission tolerates unlawfulness.                      in the application of the index. When a                of inline inspection tools), labor
                                                 110. In reply, Navajo states that it has             pipeline proposes an indexed rate                      intensive processes (involving
                                              reservations about basing the index on                  change, the Commission is not subject                  excavation and manual inspection), and
                                              PPI–FG. Navajo states that nothing in                   to a statutory duty to examine the whole               remediation. Mr. Byrd represents that
                                              the record demonstrates that pipeline                   rate.48 Rather, the Commission’s inquiry               ‘‘compliance with the integrity
                                              costs inherently correlate with general                 is limited to a comparison of the                      management regulations is likely to be
                                              rates of producer price inflation. In                   changes in the rates and costs from year               the largest single variable cost item for
                                              addition to claiming that pipelines have                to year.                                               most pipelines and these costs show no
                                              been over-recovering, on reply, Navajo                     113. As the Commission explained                    signs of decreasing.’’ 52
                                              also state that pipelines should not                    previously, inherent to the application                   116. Mr. Byrd projects pipeline
                                              receive the benefit of automatically-                   of any industry-wide pipeline index,                   integrity costs to continue increasing
                                              approved rate increases when the                        some pipelines will over-earn while                    because inline inspection tools are
                                              pipeline reports that it is over-                       others will under-earn.49 However, the                 becoming more expensive and more
                                              recovering. Navajo states that                          Kahn Methodology ensures that that                     likely to detect pipeline anomalies
                                              withholding the index from pipelines                    indexed changes are consistent with                    requiring correction. AOPL states that
                                              that are over-recovering can be                         recent industry-wide historical norms.50               PHMSA has imposed increasingly
                                              accomplished through page 700, and                      To the extent that the customers of a                  stringent obligations and that new or
                                              thus is not any less administratively                   particular pipeline determine that the                 expanded regulatory requirements may
                                              efficient than the Commission’s current                 underlying rates on a particular pipeline              be imposed by Congress during the
                                              approach nor, in Navajo’s view, does it                 are unjust and unreasonable, those                     reauthorization of the Pipeline Safety
                                              increase litigation.                                    parties may file a complaint against that              Act, which AOPL expects to occur later
                                                 111. AOPL in its Reply Comments                      particular pipeline’s rates pursuant to                in 2010 or 2011.
                                              and October 20 Response states that the                 the ICA and the Commission                                117. AOPL and Mr. Byrd identify
                                              Commission properly rejected similar                    regulations. Moreover, even when                       other regulatory obligations over the
                                              arguments during the prior 5-year                       considering pipeline over-recoveries                   past five years that have increased costs,
                                              review. AOPL notes that the                             and under-recoveries (as opposed to                    including public awareness program
                                              Commission’s rationale in past                          cost changes), Dr. Shehadeh presented                  regulations and operator qualification
                                              proceedings accepts that some pipelines                                                                        regulations. AOPL and Mr. Byrd explain
                                                                                                      evidence that in 2009, the oil pipeline
                                              may over-earn while others under-earn                                                                          that costs in the next five years are
                                                                                                      industry as a whole was under-earning
                                              as an inherent attribute of the index.                                                                         likely to increase due to new PHMSA
                                                                                                      by approximately 17 percent.51
                                              AOPL asserts that the pertinent issue is                                                                       control room management regulations,
                                              not the overall level of pipeline cost, but             D. Other Factors Affecting Pipeline                    new PHSMA guidelines regarding land-
                                              rather how the index compensates for                    Costs Raised by the Parties                            use on or near pipeline rights-of-way,
                                              changes in pipeline costs. AOPL also                      114. Although not linked to any                      new chemical facility anti-terrorism
                                              states although page 700 data may show                  particular modification of the index                   standards promulgated by the
                                              excess revenues, it does not mean a                     methodology, the comments urged the                    Department of Homeland Security, and
                                              pipeline rates are not just and                                                                                issues regarding greenhouse gas
                                                                                                      Commission to consider general issues
                                              reasonable. According to AOPL, there                                                                           emissions issued by the Environmental
                                                                                                      related to pipeline integrity and the
                                              are several other mechanisms other than                                                                        Protection Agency.
                                                                                                      MLP business structure.
                                              an Opinion No. 154–B methodology to                                                                               118. In separate comments, PHMSA
                                              establish a pipeline’s rates, including                    48 Second Five-Year Review, 114 FERC ¶ 61,293
                                                                                                                                                             also represents that pipeline safety and
                                              market-based rates and negotiated rates.                at P 57. This is consistent with the grandfathering    integrity regulations have imposed
                                              In addition, AOPL contends the                          of the then-existing rates under the EPAct 1992.       significant compliance costs over the
                                              shippers’ allegations do not reflect                    EPAct 1992, at § 1803.                                 past eight years. Further, PHMSA notes
                                              actual pipeline cost recovery. Based on                    49 Order No. 561, FERC Stats. & Regs. ¶ 30,985 at
                                                                                                                                                             the possibility of future regulatory
                                              Dr. Shehadeh’s calculations, AOPL                       30,948–49; Second Five-Year Review, 114 FERC ¶
                                                                                                      61,293 at P 57.                                        changes and that it anticipates the cost
                                              claims approximately two-thirds of                                                                             of these activities will continue to
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                                                                                                         50 Contrary to Sinclair/Tesoro’s claims and
                                              pipelines’ page 700 calculations report                 Navajo’s allegations, as discussed above, the          impose significant financial burdens.
                                              under-earning on an Opinion No. 154–                    empirical evidence presented using the Kahn
                                              B basis. AOPL responds to Sinclair’s                    Methodology demonstrates that pipeline costs per       b. Reply Comments
                                              claim that the pipeline industry                        barrel-mile have increased at a rate exceeding
                                                                                                      changes in PPI–FG over the past five-years. There
                                                                                                                                                                119. Several reply comments noted
                                              experienced cost changes in alignment                   is no indication that an adjusted PPI–FG is            increased costs related to pipeline
                                              with the global economic recession by                   inadequate for tracking cost changes.
                                              stating it is speculative and is contrary                  51 Shehadeh September 20 Decl. at 32–33.             52 AOPL   Comment at 19 (quoting Byrd Decl. at 7).

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                                              80312        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              integrity. Platte, an interstate liquids                pipelines as environmental regulations                 organization and operation may create a
                                              pipeline, expects to incur more than $2                 have also imposed costs on shippers,                   tension between how a pipeline makes
                                              million above historic levels of integrity              and that it is unfair to impose these                  prudent safety and integrity-related
                                              related costs for the foreseeable future.               costs alone on shippers.                               decisions without contravening cash
                                              Platte notes that significant additional                                                                       distribution constraints. CAPP argues
                                                                                                      c. AOPL October 20, 2010 Response
                                              costs may appear in damage prevention                                                                          that the Commission should not view
                                              initiatives, valve spacing, leak detection,                123. AOPL states that it relies on Mr.              the cash requirements of MLPs as a
                                              and increased focus on preventing small                 Byrd’s declaration to explain that Dr.                 legitimate basis for increasing the
                                              releases. The Pipeline Safety Trust notes               Shehadeh’s calculations are consistent                 revenue flow generated by regulated
                                              that it is currently recommending that                  with real-world industry experience,                   rates. SPOPS also claims that the MLP
                                              Congress increase PHMSA’s jurisdiction                  and to show that establishing an index                 structure attracts capital to the pipeline
                                              over hazardous liquid pipelines and that                below PPI–FG+3.64 would frustrate                      industry but, rather than making
                                              Congress direct PHMSA to expand                         expectations on which past pipeline                    investments in infrastructure, diverts
                                              integrity management and other safety-                  investments have been made, among                      the equity capital away in payouts to the
                                              related requirements.                                   other things.                                          general and limited partner investors.
                                                 120. Other parties challenged AOPL’s                    124. AOPL also states that Mr. Byrd’s                  127. AOPL responds in its
                                              contention that the pipeline integrity                  testimony is consistent with the                       Supplemental Reply Comments that
                                              costs supported an elevated index level.                comments of PHMSA, which state,                        shippers made substantially similar
                                              Valero notes that accounting treatment                  among other things, that regulations                   arguments during the prior five-year
                                              of pipeline costs was not consistent                    have imposed significant compliance                    review period, and the Commission
                                              prior to 2006, when the Commission                      costs and events, including the                        rejected them. Furthermore, AOPL
                                              clarified the accounting practices for                  Deepwater Horizon oil spill, have also                 states it is not seeking ‘‘an increased
                                              integrity programs.53 Thus, Valero states               caused PHMSA to expand its integrity                   allowance’’ to enhance MLP cash flow
                                              that AOPL, by comparing changes in                      management regulations. AOPL                           requirements. AOPL asserts neither the
                                              account 320 between 2004 and 2009,                      disagrees with SPOPS’ suggestion that                  cash flow requirements of MLPs nor the
                                              overstates the changes in pipeline                      pipelines should seek to recover these                 dividend policies of corporate-owned
                                              integrity costs. Valero also emphasizes                 safety and integrity management costs                  pipelines are part of the calculation of
                                              that account 320 costs, which include                   through cost-of-service filings, arguing               changes in oil pipelines costs. Nor is
                                              both interstate and intrastate data, are                that such an approach is inconsistent                  there any ‘‘tension’’ between pipeline
                                              only 14.4 percent of the total cost-of-                 with the implementation of a generally                 safety and capital investment and MLP
                                              service. Moreover, Valero notes that the                applicable ratemaking methodology.                     cash distribution requirements, as CAPP
                                              Commission has previously rejected                      AOPL argues that if pipelines were                     contends. AOPL contends the issue is
                                              adjustments to the index based upon                     required to use cost-of-service filings to             not about the pipeline organizational
                                              estimates of anticipated increases in                   recover these kinds of costs, the                      structure, but whether pipelines will be
                                              pipeline integrity costs.54 Lastly, Valero              efficiency gains which were intended by                able to recover sufficient revenue to
                                              asserts that claims of future increases in              EPAct in implementing the generally                    fund their operations. Accordingly,
                                              regulatory expenses are speculative.                    applicable index methodology would be                  AOPL argues shippers provide no valid
                                                 121. ATA, in its reply, states that                  lost.                                                  basis to abandon the established
                                              pipeline integrity cost increases are
                                                                                                      d. Commission Determination                            methodology.
                                              already appropriately accounted for in
                                              the years 2004 through 2009. ATA states                    125. AOPL and other parties have                    a. Commission Determination
                                              that the Pipeline Integrity Management                  submitted this information regarding                      128. All pipelines, regardless of
                                              program was established in 2002, and                    future costs for Commission                            business form, experience changes in
                                              that the program required hazardous                     consideration, but they have not                       cost. The index is designed to enable
                                              liquid pipeline operators to develop a                  proposed to depart from the Kahn                       pipelines be able to recover sufficient
                                              written plan to initially assess the                    Methodology’s reliance upon historic                   revenue to fund their operations,
                                              integrity of their pipelines over a                     data. Moreover, future costs projections               whether or not the pipeline’s business
                                              roughly five year period with baseline                  related to regulatory changes are                      form is as an MLP. The middle 50 Kahn
                                              assessments to be 50 percent completed                  speculative and inappropriate for                      Methodology allows the Commission to
                                              by September 30, 2004, and 100 percent                  inclusion in the index.55 Accordingly,                 appropriately exclude outliers and to
                                              completed by March 31, 2008. After the                  the evidence presented regarding                       track general changes in pipeline costs
                                              baseline assessment, the assessments are                prospective regulatory changes does not                whatever the form of the business.
                                              to be repeated every five year period.                  alter the Commission’s determination
                                                 122. SPOPS also avers that future                                                                           Accordingly, the discussion regarding
                                                                                                      regarding the appropriate index level as               MLPs does not alter the Commission’s
                                              costs are speculative and inconsistent                  calculated based upon historic costs.
                                              with a backward looking methodology.                                                                           determination regarding the appropriate
                                              SPOPS asserts that a large increase                     2. Master Limited Partnerships                         index level.
                                              rewards pipelines with unjust and                          126. CAPP contends that the                         E. Revisions to Form No. 6
                                              unreasonable rates and that the                         Commission should not grant an
                                              pipelines not recovering their costs are                increased allowance merely to enhance                  1. Comments
                                              free to file for rate increase. Sinclair/               cash flow requirements that may be                       129. ATA and NPGA aver that Form
                                              Tesoro also assert that more stringent                  attributable to the MLP form of                        No. 6 should be revised to segregate cost
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                                              safety regulations are not unique to                    business. CAPP states that due to federal              and revenue for each regulated common
                                                                                                      tax laws, MLPS generally distribute all                carrier and or system and to supply
                                                53 Valero Reply Comment at 8 (citing
                                                                                                      available cash flow to unit holders in                 separate page 700 data for each oil
                                              Jurisdictional Public Utilities and Licensees,          the form of quarterly distributions.                   pipeline or system included in the
                                              Natural Gas Companies, and Oil Pipeline
                                              Companies, 111 FERC ¶ 61,501 (2005)).                   CAPP argues that the form of business                  report. To enhance transparency, ATA
                                                54 Valero Reply Comment at 10 (citing AOPL II,                                                               and NPGA also asserts that Form No. 6
                                              281 F.3d at 247).                                         55 AOPL   II, 281 F.3d at 247.                       should be revised to require the pipeline

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                         80313

                                              to file all workpapers that fully support               DEPARTMENT OF JUSTICE                                 determined that the public comment
                                              the data reported on Form No. 6 page                                                                          merited no change in the rule, as the
                                              700, including a total cost-of-service.                 28 CFR Part 16                                        commenter concurred with the
                                              ATA and NPGA also assert that                           [CPCLO Order No. 006–2010]                            exemptions claimed, and because an
                                              pipelines must file Form No. 6 before                                                                         exemption rule does not provide an
                                              initiating an index rate increase. ATA                  Privacy Act of 1974; Implementation                   appropriate venue for the discussion
                                              and NPGA also argue that the                                                                                  requested.
                                                                                                      AGENCY:  Federal Bureau of
                                              Commission should change the interest                   Investigation, Department of Justice.                 Regulatory Flexibility Act
                                              rates applicable to refunds as provided
                                                                                                      ACTION: Final rule.                                      This proposed rule relates to
                                              in 18 CFR § 340.1(c)(2)(i) to reflect the                                                                     individuals as opposed to small
                                              pipeline’s rate of return as reported on                SUMMARY:    The Federal Bureau of                     business entities. Pursuant to the
                                              Form No. 6, page 700.                                   Investigation (FBI), a component of the               requirements of the Regulatory
                                                 130. SPOPS urges, in its reply                       Department of Justice, issued a                       Flexibility Act, 5 U.S.C. 601–612,
                                              comments, that shippers and customers                   proposed rule for a new Privacy Act                   therefore, the proposed rule will not
                                              should be allowed access to the                         system of records entitled, the ‘‘Data                have a significant economic impact on
                                              workpapers underlying page 700.                         Integration and Visualization System                  a substantial number of small entities.
                                              SPOPS also contends that the page 700                   (DIVS),’’ JUSTICE/FBI–021, 75 FR 53262
                                                                                                      (August 31, 2010). DIVS is exempt from                Small Business Regulatory Enforcement
                                              data should reveal both the nominal and                                                                       Fairness Act
                                              the real rate of return on equity,                      the subsections of the Privacy Act listed
                                                                                                      below for the reasons set forth in the                  The Small Business Regulatory
                                              including the amount of dollars of
                                                                                                      following text. Information in this                   Enforcement Fairness Act (SBREFA) of
                                              equity both collected in rates and
                                                                                                      system of records related to matters of               1996, codified as a note to 5 U.S.C. 601,
                                              dollars placed in rate base. SPOPS states
                                                                                                      law enforcement and the exemptions are                requires the FBI to comply with small
                                              that the current rate of return on equity                                                                     entity requests for information and
                                                                                                      necessary to avoid interference with the
                                              must be known to determine the need                     national security and criminal law                    advice about compliance with statutes
                                              for the index increase to attract capital.              enforcement functions and                             and regulations within FBI jurisdiction.
                                                 131. In reply comments, AOPL argues                  responsibilities of the FBI. This                     Any small entity that has a question
                                              that the Commission has addressed and                   document addresses a public comment                   regarding this document may contact
                                              rejected the proposal regarding                         on the proposed rule.                                 the person listed in FOR FURTHER
                                              segmented data and workpapers. AOPL                     DATES: Effective Date: December 22,                   INFORMATION CONTACT. Persons can
                                              states the Commission in its ruling                     2010.                                                 obtain further information regarding
                                              explained that page 700 is designed to                                                                        SBREFA on the Small Business
                                                                                                      FOR FURTHER INFORMATION CONTACT:     Erin             Administration’s Web page at http://
                                              be a preliminary screening tool for                     Page, Assistant General Counsel,
                                              pipeline rate filings and not form the                                                              
                                                                                                      Privacy and Civil Liberties Unit, Office              sum_sbrefa.html.
                                              basis of a decision or demonstrates the                 of the General Counsel, FBI,
                                              just and reasonableness of proposed or                  Washington, DC 20535–0001, telephone                  Paperwork Reduction Act
                                              existing rates. AOPL asserts the                        202–324–3000.                                           The Paperwork Reduction Act of
                                              Commission has revisited this issue as                  SUPPLEMENTARY INFORMATION:                            1995, 44 U.S.C. 3507(d), requires that
                                              recently as December 2008 and upheld                                                                          the FBI consider the impact of
                                              its initial views.                                      Background
                                                                                                                                                            paperwork and other information
                                              2. Commission Determination                               On August 31, 2010, the FBI                         collection burdens imposed on the
                                                                                                      published notice of a new Privacy Act                 public. There is no current or new
                                                132. The Commission finds that the                    system of records entitled, ‘‘Data                    information collection requirements
                                              proposals to modify Form No. 6 are                      Integration and Visualization System                  associated with this proposed rule. The
                                              outside the scope of this proceeding,                   (DIVS),’’ JUSTICE/FBI–021, which                      records that are contributed to DIVS are
                                              which is to set the going-forward index                 became effective on October 1, 2010. In               created by the FBI or other law
                                              level.                                                  conjunction with publication of the                   enforcement and intelligence entities
                                                                                                      DIVS system of records notice, the FBI                and sharing of this information
                                                The Commission orders: Consistent                     initiated a rulemaking to exempt DIVS                 electronically will not increase the
                                              with our review and verification of the                 from a number of provisions of the                    paperwork burden on the public.
                                              sample pipeline Form No. 6 data, and                    Privacy Act, in accordance with
                                              the application of the previously                       subsections 553a(j) and/or (k). On                    Unfunded Mandates
                                              approved Order No. 561 methodology to                   August 31, 2010, the FBI published at                    Title II of the Unfunded Mandates
                                              that data, the Commission determines                    75 FR 53262 a proposed rule exempting                 Reform Act of 1995 (UMRA), Public
                                              that the appropriate oil pricing index for              records in the DIVS from Privacy Act                  Law 104–4, 109 Stat. 48, requires
                                              the next five years, July 1, 2011 through               subsections (c)(3), and (4); (d)(1), (2), (3)         Federal agencies to assess the effects of
                                              June 30, 2016, should be PPI–FG+2.65.                   and (4); (e)(1), (2) and (3); (e)(4)(G), (H)          certain regulatory actions on State,
                                                By the Commission.                                    and (I); (e)(5) and (8); (f) and (g).                 local, and tribal governments, and the
                                                                                                                                                            private sector. UMRA requires a written
                                              Nathaniel J. Davis, Sr.,                                Public Comment                                        statement of economic and regulatory
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                                              Deputy Secretary.                                          The FBI received one comment on the                alternatives for proposed and final rules
                                              [FR Doc. 2010–32062 Filed 12–21–10; 8:45 am]            proposed rule. The commenter                          that contain Federal mandates. A
                                              BILLING CODE 6717–01–P                                  concurred with the exemptions cited                   ‘‘Federal mandate’’ is a new or
                                                                                                      but requested that the FBI provide more               additional enforceable duty, imposed on
                                                                                                      information explaining the FBI’s                      any State, local, or tribal government, or
                                                                                                      ‘‘internal controls’’ in protecting the data          the private sector. If any Federal
                                                                                                      itself from improper violations. The FBI              mandate causes those entities to spend,

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                                              80314        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              in aggregate, $100 million or more in                   authorized law enforcement and                        investigation on notice of that fact and
                                              any one year, the UMRA analysis is                      intelligence efforts, particularly efforts            allow the subject an opportunity to
                                              required. This proposed rule would not                  to identify and defuse any potential acts             engage in conduct intended to impede
                                              impose Federal mandates on any State,                   of terrorism or other potential violations            that activity or avoid apprehension.
                                              local, or tribal government or the private              of criminal law. Revealing this
                                                                                                                                                               (6) From subsection (e)(4)(I), to the
                                              sector.                                                 information could also permit the
                                                                                                                                                            extent that this subsection is interpreted
                                                                                                      record subject to obtain valuable insight
                                              List of Subjects in 28 CFR Part 16                      concerning the information obtained                   to require more detail regarding the
                                                Administrative practices and                          during an investigation and to take                   record sources in this system than has
                                              procedures, Courts, Freedom of                          measures to impede the investigation,                 been published in the Federal Register.
                                              Information Act, Government in the                      e.g., destroy evidence or flee the area to            Should the subsection be so interpreted,
                                              Sunshine Act, and the Privacy Act.                      avoid the investigation.                              exemption from this provision is
                                              ■ Pursuant to the authority vested in the                  (2) From subsection (c)(4) notification            necessary to protect the sources of law
                                              Attorney General by 5 U.S.C. 552a and                   requirements because this system is                   enforcement and intelligence
                                              delegated to me by Attorney General                     exempt from the access and amendment                  information and to protect the privacy
                                              Order 2940–2008, 28 CFR Part 16 is                      provisions of subsection (d) as well as               and safety of witnesses and informants
                                              amended as follows:                                     the access to accounting of disclosures               and others who provide information to
                                                                                                      provision of subsection (c)(3). The FBI               the FBI. Further, greater specificity of
                                              PART 16—[AMENDED]                                       takes seriously its obligation to maintain            properly classified records could
                                                                                                      accurate records despite its assertion of             compromise national security.
                                              ■ 1. The authority citation for part 16                 this exemption, and to the extent it, in
                                              continues to read as follows:                           its sole discretion, agrees to permit                    (7) From subsection (e)(5) because in
                                                 Authority: 5 U.S.C. 301, 552, 552a, 552(b)           amendment or correction of records, it                the collection of information for
                                              (g), 553; 18 U.S.C. 4203(a)(1); 28 U.S.C. 509,          will share that information in                        authorized law enforcement and
                                              510, 534; 31 U.S.C. 3717, 9701.                         appropriate cases.                                    intelligence purposes, it is impossible to
                                                                                                         (3) From subsection (d)(1), (2), (3),              determine in advance what information
                                              Subpart E—Exemption of Records                          and (4), (e)(4)(G) and (H) because these              is accurate, relevant, timely and
                                              Systems Under the Privacy Act                           provisions concern individual access to               complete. With time, seemingly
                                              ■ 2. Section 16.96 is amended to add                    and amendment of law enforcement,                     irrelevant or untimely information may
                                              new paragraphs (v) and (w) to read as                   intelligence and counterintelligence,                 acquire new significance when new
                                              follows:                                                and counterterrorism records, and                     details are brought to light.
                                                                                                      compliance could alert the subject of an              Additionally, the information may aid
                                              § 16.96 Exemption of Federal Bureau of                  authorized law enforcement or                         in establishing patterns of activity and
                                              Investigation Systems—limited access.                   intelligence activity about that                      providing criminal or intelligence leads.
                                              *      *      *    *      *                             particular activity and the investigative             It could impede investigative progress if
                                                 (v) The following system of records is               interest of the FBI and/or other law                  it were necessary to assure relevance,
                                              exempt from 5 U.S.C. 552a(c)(3) and (4);                enforcement or intelligence agencies.                 accuracy, timeliness and completeness
                                              (d)(1), (2), (3) and (4); (e)(1), (2) and (3);          Providing access could compromise
                                                                                                                                                            of all information obtained during the
                                              (e)(4)(G), (H) and (I); (e)(5) and (8); (f)             sensitive information classified to
                                                                                                                                                            scope of an investigation. Further, some
                                              and (g) of the Privacy Act:                             protect national security; disclose
                                                 (1) Data Integration and Visualization               information which would constitute an                 of the records searched by and/or
                                              System (DIVS), (JUSTICE/FBI–021).                       unwarranted invasion of another’s                     contained in DIVS may come from other
                                                 (2) These exemptions apply only to                   personal privacy; reveal a sensitive                  agencies and it would be
                                              the extent that information in this                     investigative or intelligence technique;              administratively impossible for the FBI
                                              system is subject to exemption pursuant                 could provide information that would                  to vouch for the compliance of these
                                              to 5 U.S.C. 552a(j) and/or (k). Where                   allow a subject to avoid detection or                 agencies with this provision.
                                              compliance would not appear to                          apprehension; or constitute a potential                  (8) From subsection (e)(8) because to
                                              interfere with or adversely affect the                  danger to the health or safety of law                 require individual notice of disclosure
                                              intelligence and law enforcement                        enforcement personnel, confidential                   of information due to compulsory legal
                                              purpose of this system, and the overall                 sources, and witnesses.                               process would pose an impossible
                                              law enforcement process, the applicable                    (4) From subsection (e)(1) because it              administrative burden on the FBI and
                                              exemption may be waived by the FBI in                   is not always possible to know in
                                                                                                                                                            may alert the subjects of law
                                              its sole discretion.                                    advance what information is relevant
                                                                                                                                                            enforcement investigations, who might
                                                 (w) Exemptions from the particular                   and necessary for law enforcement and
                                              subsections are justified for the                       intelligence purposes, and a major tenet              be otherwise unaware, to the fact of
                                              following reasons:                                      of DIVS is that the relevance and utility             those investigations.
                                                 (1) From subsection (c)(3), the                      of certain information that may have a                   (9) From subsections (f) and (g) to the
                                              requirement that an accounting be made                  nexus to terrorism or other crimes may                extent that the system is exempt from
                                              available to the named subject of a                     not always be evident until and unless                other specific subsections of the Privacy
                                              record, because this system is exempt                   it is vetted and matched with other                   Act.
                                              from the access provisions of subsection                sources of information that are                         Dated: November 2, 2010.
                                              (d). Also, because making available to a                necessarily and lawfully maintained by
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                                              record subject the accounting of                        the FBI.                                              Nancy C. Libin,
                                              disclosures from records concerning                        (5) From subsection (e)(2) and (3)                 Chief Privacy and Civil Liberties Officer.
                                              him/her would specifically reveal any                   because application of this provision                 [FR Doc. 2010–32108 Filed 12–21–10; 8:45 am]
                                              investigative interest in the individual                could present a serious impediment to                 BILLING CODE 4410–02–P
                                              by the FBI or agencies that are recipients              efforts to solve crimes and improve
                                              of the disclosures. Revealing this                      national security. Application of these
                                              information could compromise ongoing,                   provisions would put the subject of an

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                              80315

                                              DEPARTMENT OF LABOR                                     protection plan meeting the                           existing compliance guidance
                                                                                                      requirements of § 1926.502(k).                        referencing STD 03–00–001 will be
                                              Occupational Safety and Health                             After OSHA promulgated                             withdrawn or revised as appropriate.
                                              Administration                                          § 1926.501(b)(13) in 1994,
                                                                                                      representatives of the residential                    Authority and Signature
                                              29 CFR Part 1926                                        construction industry argued that they                  This document was prepared under
                                                                                                      needed more compliance flexibility than               the authority of David Michaels, PhD,
                                              Compliance Directive for Fall                           the standard allowed. As a result, OSHA               MPH, Assistant Secretary of Labor for
                                              Protection in Residential Construction                  issued Instruction STD 3.1 on December                Occupational Safety and Health, U.S.
                                              AGENCY:  Occupational Safety and Health                 8, 1995. STD 3.1 set out an interim                   Department of Labor, 200 Constitution
                                              Administration (OSHA), Labor.                           compliance policy that permitted                      Avenue, NW., Washington, DC 20210,
                                                                                                      employers engaged in certain residential              pursuant to Sections 4, 6, and 8 of the
                                              ACTION: Notice of Significant
                                                                                                      construction activities to use specified              Occupational Safety and Health Act of
                                              Enforcement Policy Change; Rescission
                                                                                                      alternative procedures instead of                     1970 (29 U.S.C. 653, 655, and 657), and
                                              of Interim Fall Protection Compliance                   conventional fall protection. These                   Secretary of Labor’s Order 4–2010 (75
                                              Directive for Residential Construction.                 alternative procedures could be used                  FR 55355).
                                              SUMMARY:   The Occupational Safety and                  without a prior showing of infeasibility
                                                                                                      or greater hazard and without a written,              David Michaels,
                                              Health Administration (OSHA) is
                                                                                                      site-specific fall protection plan.                   Assistant Secretary of Labor for Occupational
                                              issuing compliance directive STD 03–                                                                          Safety and Health.
                                              11–002 Fall Protection in Residential                      On June 18, 1999, the Agency issued
                                                                                                      STD 3–0.1A (subsequently re-designated                [FR Doc. 2010–32154 Filed 12–21–10; 8:45 am]
                                              Construction. This directive rescinds
                                              compliance directive STD 03–00–001,                     STD 03–00–001), which was a plain                     BILLING CODE 4510–26–P

                                              Plain Language Revision of OSHA                         language replacement for STD 3.1. And
                                              Instruction STD 3.1, Interim Fall                       shortly after issuing STD 03–00–001,
                                              Protection Compliance Guidelines for                    OSHA published an Advanced Notice of                  DEPARTMENT OF THE TREASURY
                                              Residential Construction, effective on                  Proposed Rulemaking (ANPR). (64 FR
                                                                                                      38077, July 14, 1999). The Agency noted               Fiscal Service
                                              June 18, 1999. There continue to be high
                                              numbers of fall-related fatalities in                   that publication of that notice marked
                                                                                                      the ‘‘begin[ning] [of its] * * *                      31 CFR Part 208
                                              residential construction. The Advisory
                                              Committee on Construction Safety and                    evaluation * * * of’’ STD 03–00–001. In               RIN 1510–AB26
                                              Health, the National Association of                     the ANPR, the Agency noted that there
                                              Home Builders, and the Occupational                     had been ‘‘advances in the types and                  Management of Federal Agency
                                                                                                      capability of commercially available fall             Disbursements
                                              Safety and Health State Plan
                                                                                                      protection equipment’’ since the
                                              Association have recommended the                                                                              AGENCY:  Financial Management Service,
                                                                                                      promulgation of § 1926.501(b)(13) (64
                                              withdrawal of directive STD 03–00–001.                                                                        Fiscal Service, Treasury.
                                                                                                      FR at 38080), and stated that it
                                              DATES: Effective date: June 16, 2011.                                                                         ACTION: Final rule.
                                                                                                      ‘‘intend[ed] to rescind * * * [STD 03–
                                              FOR FURTHER INFORMATION CONTACT:                        00–001] unless persuasive evidence
                                              General information and press inquiries:                * * * [was] submitted * * *                           SUMMARY:    The Department of the
                                              Ms. Mary Ann Garrahan, Acting                           demonstrating that for most residential               Treasury (Treasury), Financial
                                              Director of the Office of                               construction employers complying with                 Management Service (FMS), is
                                              Communications, Room N–3647, OSHA,                      * * * [§ 1926.501(b)(13)] is infeasible or            amending its regulation to require
                                              U.S. Department of Labor, 200                           presents significant safety hazards.’’ (64            recipients of Federal nontax payments
                                              Constitution Avenue, NW., Washington,                   FR at 38078).                                         to receive payment by electronic funds
                                              DC 20210; telephone (202) 693–1999.                        Summary of Action. In Directive STD                transfer (EFT), effective May 1, 2011.
                                                 Technical inquiries: Contact Mr.                     03–11–002 OSHA rescinds STD 03–00–                    The effective date is delayed until
                                              Garvin Branch, Directorate of                           001. In the new directive, OSHA                       March 1, 2013, for individuals receiving
                                              Construction, Room N–3468, OSHA,                        describes the comments it received in                 Federal payments by check on May 1,
                                              U.S. Department of Labor, 200                           response to the ANPR and concludes                    2011; and for individuals who file
                                              Constitution Avenue, NW., Washington,                   that it did not receive ‘‘persuasive                  claims for Federal benefits before May 1,
                                              DC 20210; telephone (202) 693–2020 or                   evidence’’ showing a continued need for               2011, and request check payments when
                                              fax (202) 693–1689.                                     STD 03–00–001. OSHA notes that there                  they file. Individuals who do not choose
                                                 Electronic copies of this Federal                    continue to be high numbers of fall-                  direct deposit of their payments to an
                                              Register notice: Go to OSHA’s Web site                  related fatalities in residential                     account at a financial institution would
                                              (, and select                       construction. Directive STD 03–11–002,                be enrolled in the Direct Express® Debit
                                              ‘‘Federal Register,’’ ‘‘Date of Publication,’’          also describes more recent                            MasterCard® card program, a prepaid
                                              and then ‘‘2010.’’                                      developments, including                               card program established pursuant to
                                              SUPPLEMENTARY INFORMATION:                              recommendations from the Advisory                     terms and conditions approved by FMS.
                                              Background. Under 29 CFR                                Committee on Construction Safety and                  Treasury waives the EFT requirement
                                              1926.501(b)(13), workers engaged in                     Health, the National Association of                   for recipients born prior to May 1, 1921,
                                              residential construction six (6) feet or                Home Builders, and the Occupational                   who are receiving payments by paper
                                              more above lower levels generally must                  Safety and Health State Plan                          check on March 1, 2013; for payments
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                                              be protected by conventional fall                       Association, that provide independent                 not eligible for deposit to a Direct
                                              protection (i.e., guardrail systems, safety             support for the Agency’s decision to                  Express® prepaid card account; and for
                                              net systems, or personal fall arrest                    rescind STD 03–00–001.                                recipients whose Direct Express® card
                                              systems). However, if an employer can                      Directive STD 03–11–002 sets forth                 has been suspended or cancelled. In
                                              demonstrate that such fall protection is                OSHA’s interpretation of ‘‘residential                addition, this rule establishes the
                                              infeasible or presents a greater hazard,                construction’’ for purposes of 29 CFR                 criteria under which a payment
                                              it may implement a written fall                         1926.501(b)(13) and explains that                     recipient may request a waiver if the

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                                              80316        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              EFT requirement creates a hardship due                  would continue to do so under the                     impairment or remote geographic
                                              to his or her mental impairment or                      proposed rule.                                        location.
                                              remote geographic location.                                Treasury’s proposed rule stated that a
                                                                                                      Federal payment recipient could choose                I. Background
                                              DATES: This rule is effective February
                                                                                                      to have payments directly deposited to                   Part 208 sets forth the general rule
                                              22, 2011.
                                                                                                      his or her own account at the recipient’s             requiring Federal payments to be made
                                              ADDRESSES: You can download this rule                   financial institution. The NPRM stated                by EFT and the requirements for
                                              at the following Web site: http://                      that individuals who did not choose                   accounts to which Federal payments
                                     You may also                     direct deposit of their payments to an                may be sent by EFT. ‘‘Federal payment’’
                                              inspect and copy this rule at: Treasury                 account at a financial institution would              means any nontax payment made by an
                                              Department Library, Room 1428, Main                     be enrolled in the Direct Express® 1                  agency, including, but not limited to,
                                              Treasury Building, 1500 Pennsylvania                    Debit MasterCard® card program, a                     Federal wage, salary, and retirement
                                              Avenue, NW., Washington, DC 20220.                      prepaid card program established                      payments; vendor and expense
                                              Before visiting, you must call (202) 622–               pursuant to terms and conditions                      reimbursement payments; benefit
                                              0990 for an appointment. In accordance                  approved by FMS. The proposed rule                    payments; and miscellaneous payments.
                                              with the U.S. government’s                              contemplated that, beginning on March                 See 31 CFR 208.2(g). Federal payments
                                              eRulemaking Initiative, FMS publishes                   1, 2013, all recipients of Federal benefit            include payments made to
                                              rulemaking information on http://                       and other non-tax payments would                      representative payees and other
                                                        receive their payments by direct                      authorized payment agents. See 31 CFR
                                              offers the public the ability to comment                deposit, either to a bank account or to               210.5(b)(1). For Part 208 purposes,
                                              on, search, and view publicly available                 a Direct Express® card account.                       ‘‘agency’’ means any department,
                                              rulemaking materials, including                            Treasury sought comment on all                     agency, or instrumentality of the United
                                              comments received on rules.                             aspects of the proposed rule, and                     States Government, or a corporation
                                              FOR FURTHER INFORMATION CONTACT: Walt                   specifically requested comments                       owned or controlled by the Government
                                              Henderson, Director, EFT Strategy                       regarding (1) exceptional circumstances               of the United States. See 31 CFR
                                              Division; Natalie H. Diana, Senior                      where specific types of individual EFT                208.2(a).
                                              Counsel; or Ronda Kent, Senior                          waivers could be needed, (2) the costs                   As explained in the NPRM, Part 208
                                              Counsel, at                  to recipients for accessing their benefit             provides that any individual who
                                              or (202) 874–6619.                                      payments received by paper check                      receives a Federal benefit, wage, salary,
                                                                                                      compared to those received by EFT, and                or retirement payment is eligible to
                                              SUPPLEMENTARY INFORMATION: On June                                                                            open an Electronic Transfer Account
                                              17, 2010, the Department of the                         (3) alternative phase-in approaches.
                                                                                                         Treasury is finalizing the proposal in             (ETA) at a financial institution that
                                              Treasury (Treasury), Financial                                                                                offers such accounts, and establishes the
                                                                                                      the NPRM to require, in general, that all
                                              Management Service (FMS), published a                                                                         responsibilities of Federal agencies and
                                                                                                      Federal nontax payment recipients
                                              notice of proposed rulemaking (NPRM)                                                                          recipients under the regulation. Part 208
                                                                                                      receive payments by EFT. The March 1,
                                              at 75 FR 34394, requesting comment on                                                                         also sets forth a number of waivers to
                                                                                                      2011 effective date has been changed to
                                              a proposed amendment to 31 CFR part                                                                           the general requirement that Federal
                                                                                                      May 1, 2011. There remains a delayed
                                              208 (Part 208), which implements the                                                                          payments be delivered by EFT. See 31
                                                                                                      effective date of March 1, 2013, for: (1)
                                              requirements of 31 U.S.C. 3332. Section                                                                       CFR 208.4. Among the waivers
                                                                                                      individuals receiving Federal payments
                                              3332, title 31, United States Code, as                                                                        previously included in the regulation
                                                                                                      by check on May 1, 2011; and (2)
                                              amended by subsection 31001(x)(1) of                                                                          were waivers for situations in which an
                                                                                                      individuals who file claims for Federal
                                              the Debt Collection Improvement Act of                                                                        individual determined that payment by
                                                                                                      benefits before May 1, 2011 and request
                                              1996 (Pub. L. 104–134) (Section 3332),                                                                        EFT would impose a hardship due to a
                                                                                                      check payments when they file. In
                                              generally requires that all Federal                                                                           physical or mental disability or a
                                                                                                      addition, after consideration of the
                                              nontax payments be made by electronic                                                                         geographic, language or literacy barrier,
                                                                                                      comments received, Treasury is
                                              funds transfer (EFT), unless waived by                                                                        or would impose a financial hardship.
                                                                                                      modifying its proposed elimination of
                                              the Secretary. The Secretary must                                                                             See 31 CFR 208.4(a).
                                                                                                      all individual waivers from the EFT
                                              ensure that individuals required to                                                                              Treasury has reviewed the comments
                                                                                                      requirement. Instead, Treasury will
                                              receive Federal payments by EFT have                                                                          received in response to the NPRM, and,
                                                                                                      automatically waive the EFT
                                              access to an account at a financial                                                                           as described in more detail below,
                                                                                                      requirement for: (1) A recipient born
                                              institution ‘‘at a reasonable cost’’ and                                                                      modified its proposal to eliminate all
                                                                                                      prior to May 1, 1921, who is receiving
                                              with ‘‘the same consumer protections                                                                          individual waivers from the EFT
                                                                                                      Federal payments by check on March 1,
                                              with respect to the account as other                                                                          requirements. The Secretary’s waiver
                                                                                                      2013; (2) a payment that is not eligible
                                              account holders at the same financial                                                                         authority remains unchanged, and
                                                                                                      for deposit to a Direct Express® prepaid
                                              institution.’’ See 31 U.S.C. 3332(f), (i)(2).                                                                 Federal agencies continue to have the
                                                                                                      card account; and (3) a recipient whose
                                              Direct deposit is the primary method                                                                          ability to waive payment by direct
                                                                                                      Direct Express® card has been
                                              used to make EFT Federal payments.                                                                            deposit or other EFT method in the
                                                                                                      suspended or cancelled. Also, the final
                                                 The NPRM proposed to amend Part                                                                            circumstances described in paragraphs
                                                                                                      rule establishes the criteria under which
                                              208 to require all recipients of Federal                                                                      (b) through (g) of § 208.4, namely, for
                                                                                                      a payment recipient may request a
                                              nontax payments to receive payments                                                                           situations where the infrastructure in a
                                                                                                      waiver if the EFT requirement creates a
                                              by EFT, effective March 1, 2011, with a                                                                       foreign country does not support EFT,
                                                                                                      hardship due to his or her mental
                                              delayed effective date of March 1, 2013                                                                       for certain disaster or military
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                                              for individuals receiving Federal                         1 Direct Express® is a registered service mark of   situations, for situations in which there
                                              payments by check on March 1, 2011,                     the Financial Management Service, U.S.                may be a security threat or for valid law
                                              and for individuals who file claims for                 Department of the Treasury. The Direct Express®       enforcement reasons, for non-recurring
                                              Federal benefits before March 1, 2011                   Debit MasterCard® card is issued by Comerica          payments, and for unusual and/or
                                                                                                      Bank, pursuant to a license by MasterCard
                                              and request check payments when they                    International Incorporated. MasterCard® and the
                                                                                                                                                            urgent situations where the Government
                                              file. Recipients receiving payments by                  MasterCard® Brand Mark are registered trademarks      would be seriously injured unless
                                              direct deposit prior to March 1, 2011,                  of MasterCard International Incorporated.             payment is made by a method other

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                        80317

                                              than EFT. The final rule revises the                    claimants’ representatives                            that direct deposit of Social Security
                                              criteria for the agency waiver related to               recommended that Treasury waive the                   disability or SSI benefits could
                                              non-recurring payments, as described                    EFT requirements for attorneys and                    inadvertently lead to disqualification
                                              below.                                                  other representatives who receive fee                 from Medicaid whereas an individual
                                                                                                      payments for representing Social                      receiving a paper check payment can
                                              II. Summary of NPRM Comments
                                                                                                      Security claimants. The association and               control when the payment is deposited
                                                 Treasury received 33 comment letters                 the attorneys stated that, when fee                   into his or her account. An unidentified
                                              and 1,087 comments solicited by and                     monies are electronically deposited into              individual opposed the proposed rule
                                              sent to a consumer advocate                             an attorney’s account, the attorney does              primarily because the commenter
                                              organization via its Web site. Of the 33                not receive adequate information to                   believed that benefit recipients are
                                              comment letters, three were from                        determine which client the fee payment                entitled to choose to receive their
                                              consumer advocate groups. One of the                    is for. In addition, the association and              payments by paper check, and did not
                                              groups submitted its comments on                        the attorneys stated that many attorneys              agree with Treasury’s underlying
                                              behalf of its low-income clients, another               and other representatives, as associates              rationale for the proposed rule.
                                              consumer advocate organization, and 23                  or employees of a firm, are precluded                    In addition to its own comment, one
                                              national, state, and local advocates for                from accepting direct deposit of                      consumer advocate organization sent
                                              low and moderate income recipients of                   representative fees into their own                    Treasury 1,087 comments it solicited
                                              Federal benefits. While the consumer                    personal bank account. These fee                      and received through its Web site. Sixty-
                                              advocate groups generally                               payments must be deposited directly to                three of the Web site commenters
                                              acknowledged the benefits of EFT, all                   accounts owned by their firms. This is                expressed support for Treasury’s
                                              three groups opposed the complete                       problematic because the Social Security               proposed rule, but most of the
                                              elimination of waivers for individuals                  Administration will only make                         commenters opposed the proposal for
                                              for whom EFT might impose a hardship                    representative fee payments to                        one or more of the following reasons:
                                              and suggested improvements to the                       individual attorneys or representatives,              (1) 845 of the commenters cited a
                                              Direct Express® card and changes to the                 most of whom are not the owners of                    preference for allowing those who wish
                                              Direct Express® card terms and                          their firm’s bank account, and therefore              to continue to receive a paper check to
                                              conditions. In addition, the three groups               cannot accept or direct payments to                   do so (more than 140 of the commenters
                                              recommended that Treasury issue                         them.                                                 already receive their payments
                                              consumer protection rules for                              A national trade association                       electronically, but were concerned for
                                              individuals whose benefit payments are                  representing neighborhood financial                   others who may choose not to do so);
                                              delivered electronically to prohibit                    service providers, such as check                      (2) 615 of the commenters cited an
                                              predatory loans, the unlawful freezing                  cashers, remittance servicers, short-term             objection to bank fees, including Direct
                                              or garnishing of benefit payments                       lenders and bill payment providers, did               Express® card fees, with approximately
                                              legally exempt from garnishment, and                    not support Treasury’s proposal. It                   482 commenters objecting to requiring a
                                              the offsetting of overdraft and other                   viewed the proposal as depriving                      benefit recipient to pay fees to receive
                                              bank fees against benefit payments.                     Americans of the right of choice with                 a monthly paper statement; (3) 558
                                                 Three comment letters were from                      respect to the delivery of Federal nontax             commenters cited concerns about
                                              associations that represent financial                   payments, disproportionately affecting                requiring benefit recipients to bank
                                              institutions. One commenter supported                   low- and moderate-income individuals.                 online and/or discomfort with adapting
                                              Treasury’s proposal, provided that                         Treasury received six comment letters              to new payment technologies, especially
                                              payments would be delivered, by                         from individual or unidentified                       for older benefit recipients; (4) 475
                                              default, to a recipient’s existing bank                 commenters with various concerns. One                 commenters cited concerns about
                                              account and that recipients would be                    of these commenters, a coordinator of a               whether electronic banking would lead
                                              allowed to elect direct deposit to                      local Volunteer Income Tax Assistance                 to increased identity theft; (5) 410
                                              reloadable prepaid cards issued by                      program, supported the proposed rule,                 commenters cited concerns about
                                              insured depositary institutions. Another                encouraged Treasury to discontinue the                providing bank account information to
                                              commenter supported Treasury’s                          ETA program, and suggested modifying                  the Social Security Administration or
                                              proposal, including the alternative debit               the Direct Express® card program to                   other Federal agencies; and (6) 134
                                              card option, because of the potential                   provide at least one surcharge-free                   commenters were concerned about the
                                              cost savings to credit unions. The third                automated teller machine (ATM)                        ability of elderly benefit recipients to
                                              association commenter also supported                    withdrawal at any ATM. Another                        change the way they receive their
                                              Treasury’s proposal and urged Treasury                  commenter, a certified public                         benefit payments. Approximately 125 of
                                              not to include individual waivers in the                accountant, raised concerns about                     the commenters simply expressed
                                              final rule.                                             whether the proposed rule would create                general opposition to Treasury’s
                                                 A national electronic payments                       problems if nursing homes are unable to               proposal. Other miscellaneous reasons
                                              association and one financial institution               clearly identify the resident for whom a              for opposing Treasury’s proposal
                                              submitted comment letters supporting                    benefit payment has been directly                     included preference for checks (65
                                              Treasury’s proposal. The electronic                     deposited to the nursing home’s trust                 commenters), concerns about EFT
                                              payments association supported the                      account. Another individual suggested                 processing (13 commenters) and
                                              Direct Express® card as a safe,                         that Treasury clarify that it continues to            improper garnishment (6 commenters),
                                              convenient, and reasonably priced                       support the ETA as an option for                      opposition to prepaid cards (21
                                              alternative for unbanked Federal benefit                receiving Federal benefit payments by                 commenters), concerns about access to
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                                              recipients. The financial institution                   direct deposit. Another individual                    the banking system (35 commenters),
                                              urged Treasury to consider expanding                    suggested that Treasury require                       need for access to a free account (18
                                              its regulations to allow direct deposit of              financial institutions to allow recipients            commenters), and hardship (10
                                              Federal payments to general purpose                     of Federal funds to obtain the full                   commenters).
                                              reloadable prepaid debit cards.                         amount of their payment in one                          Finally, three Federal government
                                                 Fourteen attorneys and an association                transaction with minimal charge. An                   agencies submitted comments for
                                              that represents Social Security                         individual attorney raised a concern                  Treasury’s consideration. One agency

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                                              80318        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              expressed uncertainty about whether                        The Direct Express® card, which is                 ATM network consists of ATMs owned
                                              recipients of payments from that agency                 now a nationwide option for most                      by a variety of entities who have agreed
                                              would qualify for the Direct Express®                   Federal benefit recipients, meets these               to offer surcharge-free ATM access to
                                              card. Two agencies raised concerns                      statutory account requirements. There                 Direct Express® cardholders.
                                              about making payments to recipients                     are no monthly fees and most services                 Cardholders are provided with
                                              who reside in geographically remote                     are free, so it is possible for an                    information on how to recognize the
                                              areas with no access to electronic                      individual to use the Direct Express®                 various logos that identify a surcharge-
                                              financial services.                                     card for free. There are no fees for                  free ATM, the Direct Express® card Web
                                                                                                      cardholders to sign up for or activate the            site has an ATM locator feature to assist
                                              III. Treasury’s Responses to NPRM
                                                                                                      card; receive deposits; make purchases                cardholders in finding a surcharge-free
                                                                                                      at retail locations, online or by                     ATM, and cardholders may call the
                                                 In developing the final rule, Treasury               telephone; get cash at retail locations               customer service department with any
                                              has attempted to implement the                          and financial institutions; or check the              questions on how to locate a surcharge-
                                              requirements of Section 3332 on balance                 card’s balance at an ATM, by telephone                free ATM. The Direct Express® card
                                              with concerns expressed by different                    or online. Transaction history and other              provider does not impose a daily limit
                                              commenters. The final rule essentially                  account information are available at no               for ATM withdrawals, although many
                                              adopts the core provisions of the                       cost online or by telephone, but if                   ATM owners do set limits on the
                                              proposed rule, and also makes available                 desired, a cardholder may receive a                   maximum amount of cash that may be
                                              several important waivers for                           monthly paper statement for $ .75 per                 withdrawn by any debit cardholder.
                                              individuals in circumstances in which                   month. There are no fees for declined                 ATM owners’ daily ATM withdrawal
                                              Treasury finds that requiring EFT could                 transactions and, in rare instances when              limits typically range from $200 to
                                              create a significant hardship for those                 overdrafts occur, there are no overdraft              $1,000.
                                              individuals. The final rule reflects the                fees.                                                    Direct Express® cardholders are
                                              view of the commenters who generally                       Cardholders can choose to receive free             protected by the Federal Reserve
                                              agree that receiving payments by EFT is                 automated text, email or telephone ‘‘low              Board’s Regulation E (12 CFR part 205,
                                              beneficial to recipients and taxpayers                  balance’’ alerts or ‘‘deposit notifications’’         which implements the Electronic Funds
                                              for the reasons described in the NPRM                   when money is deposited to their card                 Transfer Act (Regulation E)), which
                                              and this final rule. Treasury has                       account. Cardholders may close their                  generally provides certain protections to
                                              addressed the concerns raised by those                  Direct Express® card account at any                   a cardholder whose card is lost or
                                              opposed to the EFT requirement, and                     time without a fee. There are no                      stolen, subject to reporting
                                              will continue to monitor carefully                      inactivity fees and there is no charge for            requirements. In fact, Direct Express®
                                              whether recipients are subject to                       bank teller cash withdrawals at                       cardholders have 90 days to report
                                              additional hardships in the future                      MasterCard® member banks. The free                    unauthorized transactions rather than
                                              because of the requirements of this final               services and minimal fees are fully                   the typical 60 days offered by most
                                              rule. Treasury’s responses to the NPRM                  disclosed on the Direct Express® Web                  financial institutions. Card balances are
                                              comments are as follows.                                site (, in                    covered by deposit insurance by the
                                              1. Retain Paper Check as a Payment                      materials available to interested                     Federal Deposit Insurance Corporation
                                              Option                                                  applicants, and in materials that are sent            (FDIC) to the extent allowed by law and
                                                                                                      to new cardholders along with the card.               Direct Express® cardholders are not at
                                                 Many commenters voiced a                             Fee and features information are also
                                              preference for Treasury to allow                                                                              risk for an improper garnishment or the
                                                                                                      available by calling the Direct Express®              related freezing of funds in the card
                                              recipients the choice of a paper check as               toll-free call center.
                                              a way to receive their Federal payments.                                                                      account. More information about the
                                                                                                         Cardholders may make purchases
                                              Treasury recognizes that the paper                                                                            Direct Express® card, including a list of
                                                                                                      anywhere Debit MasterCard® is
                                              check has been an important Federal                                                                           all fees and the terms and conditions of
                                                                                                      accepted, including millions of retail
                                              payment instrument for at least 150                                                                           card use, can be found at
                                                                                                      locations worldwide, online, or by
                                              years. Treasury also recognizes that                                                                
                                                                                                      telephone. The Direct Express® card
                                              choice, as expressed by many of the                                                                              In light of the choices available to
                                                                                                      provider does not impose any limits on
                                              commenters, is an important American                                                                          payment recipients, as well as the
                                                                                                      the number of transactions a cardholder
                                              value. While Congress mandated that all                                                                       benefits of electronic payments to
                                                                                                      may conduct with a card. Similarly,
                                              non-tax payments be made                                                                                      recipients and the Government,
                                                                                                      cardholders may make cash
                                              electronically, Part 208 continues to                                                                         Treasury believes it is appropriate to
                                                                                                      withdrawals and check their account
                                              offer payment recipients the choice of                                                                        make all Federal nontax payments
                                                                                                      balances at ATMs. A cardholder is
                                              how to receive their payments in an                                                                           electronically.
                                                                                                      allowed one free ATM cash withdrawal
                                              electronic format. Payment recipients                   for every Federal payment the                         2. Provide Limited Waivers From EFT
                                              have many financial account options                     cardholder receives, valid until the end              Requirement
                                              available to them, and in fiscal year                   of the month following the month of
                                              2010, more than 80% of all non-tax                      receipt. For subsequent ATM cash                      a. Limited Waivers for Hardship Based
                                              payment recipients selected their own                   withdrawals, a cardholder pays a fee to               on Mental Impairment and Geographic
                                              accounts for the purpose of receiving                   the card issuer of $.90 per ATM                       Barriers
                                              payments by EFT. Further, Congress                      withdrawal in the United States. ATM                     In its NPRM, Treasury requested
                                              conditioned its mandate on Treasury                     owners often charge ATM users                         comments about ‘‘examples of
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                                              making available to payment recipients                  additional fees, known as ‘‘surcharge                 exceptional circumstances where
                                              an account at a financial institution ‘‘at              fees;’’ however, a Direct Express®                    specific types of individual EFT waivers
                                              a reasonable cost’’ and with ‘‘the same                 cardholder may make cash withdrawals                  could be needed, even with the
                                              consumer protections with respect to                    at more than 53,000 Direct Express®                   availability of the Direct Express® card
                                              the account as other account holders at                 card surcharge-free network ATMs                      for Federal benefit recipients.’’ See 75
                                              the same financial institution.’’ See 31                without paying any surcharge fees. The                FR 34394, at 34395. After review and
                                              U.S.C. 3332(f), (i)(2).                                 Direct Express® card surcharge-free                   consideration of all of the comments,

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                          80319

                                              Treasury agrees with those commenters                   automated teller machines (ATMs); and                 example, according to one agency, many
                                              who urged Treasury to reconsider its                    other hardships that make both a bank                 recipients of Individual Indian Money
                                              proposed elimination of individual                      account and the Direct Express® card                  payments live in remote and less
                                              waivers from the EFT requirement for                    unusable for the payment recipient.                   developed areas such as Alaska and on
                                              claims of hardships due to mental                       This organization also suggested that                 reservations throughout Indian Country
                                              disability or geographic barriers.                      Treasury not review waiver requests                   in an environment lacking many
                                              Treasury does not agree, however, that                  because the costs of policing a waiver                amenities including public
                                              such reconsideration should be                          process would far outweigh the costs                  infrastructure such as roads and
                                              extended to the elimination of waivers                  associated with letting recipients who                convenient access to providers of goods
                                              related to physical disability, language                would not qualify for a waiver receive                and services. The other agency noted
                                              or literacy barriers, or where payment                  a paper check. Another consumer                       that Regional Advisory Council
                                              by EFT would impose a financial                         advocate organization also objected to                members appointed under the Alaska
                                              hardship. None of the commenters                        the elimination of the provision                      National Interest Lands Conservation
                                              provided specific examples of how                       allowing recipients to determine on                   Act (ANILCA) travel to council meetings
                                              physical disability or language or                      their own whether they qualify for a                  held in off-roadway bush villages where
                                              literacy barriers would make receiving                  waiver to obtain their Federal payments               it is highly unusual for most village
                                              payments by EFT more difficult than                     by paper check. Unlike the other two                  merchants to have the infrastructure to
                                              receiving payments by paper check and                   consumer advocate organizations, this                 accept charge cards. These villages are
                                              Treasury does not find any basis for                    organization urged Treasury to offer the              cash economies with check cashing
                                              maintaining a waiver for such                           broadest waiver possible to allow any                 capabilities, but no ability to process
                                              conditions. In addition, although several               individual who wants his or her                       electronic financial transactions. In its
                                              commenters urged Treasury to consider                   payments by paper check to receive                    comment, one consumer advocate
                                              that any fees charged for use of the                    them that way.                                        organization cited the lack of access to
                                              Direct Express® card could create a                        After reviewing the comments,                      banks and ATMs in the majority of
                                              financial hardship, the Direct Express®                 Treasury has reconsidered its proposed                Montana, rural parts of Alaska, and
                                              card is structured in such a way that it                elimination of the waivers related to                 some rural parts of Missouri. The fact
                                              may be used at no cost to the payment                   mental disability and geographic                      that an area is rural or remote does not
                                              recipient, thus minimizing a                            barriers. A consumer advocate                         necessarily preclude the use of
                                              beneficiary’s risk of incurring a financial             organization commented on the need to                 electronic financial services. As these
                                              hardship to receive and use his or her                  provide a waiver for individuals who                  examples demonstrate, it is the
                                              benefits. Treasury recognizes that more                 have mental or emotional disabilities,                combination of being in an area that is
                                              education regarding how to use the card                 for example, someone with an anxiety                  rural or remote plus being in an area
                                              for free is needed and is expanding its                 disorder that makes it difficult to                   lacking the transportation or other
                                              program to provide such information to                  receive benefits electronically, but not              infrastructure (for example, access to the
                                              Direct Express® cardholders in various                  by paper check. Another commenter                     Internet and online banking) necessary
                                              ways, including direct mail,                            cited his parents with poor memories                  to access electronic financial services.
                                              informational pictorial brochures,                      stating that having their payments                    Therefore, Treasury is including in the
                                              online videos, and more.                                deposited electronically would simply                 final rule a waiver from the EFT
                                                                                                      add to their confusion and problems in                requirement for an individual recipient
                                                  One consumer advocate organization                  taking care of their own finances. In                 who lives in a remote area lacking the
                                              urged Treasury to retain a paper check                  recognition of individuals within the                 infrastructure to support electronic
                                              option for those who articulate a                       payment recipient population who may                  financial transactions.
                                              ‘‘legitimate’’ reason for receiving                     have mental impairments that do not                      Under this final rule, to assert one of
                                              payments by paper check, including                      hinder their ability to manage their                  these two waivers based on mental
                                              physical or mental disability that makes                financial transactions using checks or                impairment or geographic barrier, a
                                              it difficult to use a debit card; difficulty            cash, but for whom EFT would present                  Federal payment recipient is required to
                                              accessing funds without incurring fees,                 a significant hardship, Treasury is                   provide to Treasury a written
                                              costs, or inconvenience; availability of a              retaining a waiver from the EFT                       certification supporting his or her
                                              less expensive and more beneficial                      requirement for an individual payment                 request, in such form as Treasury may
                                              alternative using a paper check; dispute                recipient for whom EFT would impose                   prescribe. The individual is required to
                                              with the participating financial provider               a hardship because of his or her                      sign the certification before a notary
                                              of the debit card; concerns over privacy                inability to manage a bank account or                 public, or otherwise file the certification
                                              or financial security; literacy and                     prepaid debit card due to a mental                    in such form that Treasury may
                                              technology barriers; and need to                        impairment. Treasury notes that, in                   prescribe. Treasury will publish
                                              accommodate assistance provided by a                    those cases where a beneficiary suffers               guidance describing the waiver process.
                                              representative payee or family member.                  from a mental disability necessitating
                                              This commenter proposed that Treasury                                                                         b. Automatic Waivers for Recipients
                                                                                                      the appointment of a representative
                                              accept individuals’ statements about the                                                                      Born Prior to May 1, 1921 Who Are
                                                                                                      payee, the representative payee is the
                                              need for a paper check without inquiry                                                                        Receiving Federal Payments by Check
                                                                                                      ‘‘recipient’’ of a Federal payment under
                                              or review. Another consumer advocate                                                                          on March 1, 2013; for Payments Not
                                                                                                      this rule. In those cases, it is the
                                              organization similarly urged Treasury to                                                                      Eligible for the Direct Express® Card;
                                                                                                      condition of the representative payee
                                              reconsider its proposal to eliminate                    and not the beneficiary that is the                   and for Recipients Whose Direct
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                                              individual waivers with respect to                      determining factor as to whether a                    Express® Card Has Been Suspended or
                                              people with mental disabilities,                        waiver is appropriate.                                Cancelled
                                              emotional disorders, or other disabilities                 Two Federal agencies cited the need                   In addition to the limited waivers
                                              making the use of the Direct Express®                   to consider the inability of payment                  from the EFT requirement for hardship
                                              card difficult; people who live in rural                recipients who live in remote and less                claims due to mental impairment and
                                              areas, or even inner city areas, where                  developed areas of the country to access              geographic barriers, Treasury has added
                                              there is not ready access to banks and                  their payments electronically. For                    automatic waivers for: (1) A recipient

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                                              80320        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              born prior to May 1, 1921, who is                       recipients whose Direct Express® card                 that benefit the physically disabled,
                                              receiving Federal payments by check on                  has been suspended or cancelled by the                such as accessible transportation, public
                                              March 1, 2013; (2) a payment that is not                card issuer due to improper, fraudulent,              accommodations, and online banking,
                                              eligible for deposit to a Direct Express®               or unauthorized use. The Direct                       have generally rendered receiving
                                              prepaid card account; and (3) a recipient               Express® card program currently                       benefit payments by EFT no more
                                              whose Direct Express® card has been                     accepts Social Security, SSI, and                     difficult than receiving payments by
                                              suspended or cancelled.                                 Veterans compensation and pension                     paper check. In some cases, EFT
                                                 Many commenters were concerned                       benefit payments, as well as Railroad                 payments may even be easier for the
                                              about the ability of elderly check                      Retirement benefit, Black Lung benefit,               recipient. With the elimination of this
                                              payment recipients to adapt to                          and civil service retirement benefit                  waiver, Treasury recognizes that for
                                              electronic money technologies. For                      payments. If a recipient receives a                   those who are physically disabled, the
                                              example, one consumer advocate                          payment for which the Direct Express®                 ability to travel in remote and rural
                                              organization explained that ‘‘[p]eople                  card is unavailable (for example, an                  areas may be limited, but considers this
                                              who are older are more likely to be                     Individual Indian Money payment or a                  to be more a hardship due to a
                                              unaccustomed to or uncomfortable                        pension benefit payment), then the                    geographic barrier, described above,
                                              using the technology involved in                        individual is automatically exempt from               than solely because of a physical
                                              electronic disbursements.’’ An                          the EFT requirement for that payment                  disability. In addition, as suggested by
                                              individual commenter noted: ‘‘Many of                   type. Once the card becomes available                 two commenters, Treasury is working
                                              us older people do not understand and                   for the payment type, then the recipient              with the Direct Express® card provider
                                              get confused by this paperless society                  will be required to switch to an EFT                  to determine the feasibility of providing
                                              * * * ’’ On the other hand, another                     payment option. If the individual also                cardholders with an additional
                                              commenter believed that paper checks                    receives other types of Federal                       convenience card that could be loaded
                                              cause problems for older people noting                  payments that are accepted by the Direct              via the Internet or by telephone with a
                                              that through her work as a coordinator                  Express® card, those payments remain                  cardholder-determined amount of funds
                                              of a Volunteer Income Tax Assistance                    subject to the EFT requirement.                       for use by a caregiver or relative to make
                                              program in Missouri, she has ‘‘witnessed                   Further, under the terms and                       purchases on behalf of the cardholder.
                                              firsthand the hardships that * * *                      conditions of the Direct Express® card                   ii. Language Barriers. None of the
                                              elderly * * * individuals face when a                   program, the card issuer reserves the                 commenters urged Treasury to continue
                                              Treasury Check is lost or misdirected                   right to suspend or cancel the Direct                 the waiver from the EFT requirements
                                              through the mail.’’ Many senior citizens                Express® card for reasons such as                     based on hardship due to language
                                              receive their benefit payments                          cardholder breach of the account terms                barriers. All of the Direct Express®
                                              electronically, and are very capable of                 and conditions, multiple cardholder                   cardholder materials are in English and
                                              managing their finances electronically.                 claims of unauthorized transactions, a                Spanish, and the Direct Express® card
                                                 In recognition of the concerns raised                card being used for an unlawful                       provider offers both English and
                                              by the commenters about the elderly,                    purpose, or other similar reasons.                    Spanish support through its automated
                                              Treasury has established an automatic                   Treasury agrees that the card provider                telephone service and its customer
                                              waiver from the EFT requirement for                     needs to retain the right to suspend or               service representatives. Callers may
                                              recipients born prior to May 1, 1921,                   cancel an individual’s card account in                choose to speak with a customer service
                                              who are receiving Federal payments by                   these types of cases, and recognizes that             representative in either language. In
                                              check on March 1, 2013. According to                    in the few instances where suspension                 addition, the Direct Express® card
                                              the Social Security Administration,                     or cancellation occurs, the payment                   provider offers real-time free interpreter
                                              almost 80% of Social Security recipients                recipient may have no other way to                    services in virtually any language a
                                              who will turn 80 years old in 2011                      receive his or her payment except by a                caller requires. For example, in
                                              receive their payments electronically.                  paper check.                                          September 2010, the Direct Express®
                                              By comparison, fewer than 72% of                                                                              card provider handled customer service
                                              Social Security recipients who will turn                c. Elimination of Waivers Based on
                                                                                                                                                            calls in 19 different languages in
                                              90 years old in 2011 receive their                      Hardship Due to Physical Disability,
                                                                                                                                                            addition to English, including languages
                                              payments electronically. Further, for                   Language or Literacy Barriers, or Where
                                                                                                                                                            such as Mandarin, Urdu, Tagalog, and
                                              most of the population of elderly benefit               Payment by EFT Would Impose a
                                              recipients, the EFT requirement is not                  Financial Hardship                                       iii. Literacy Barriers. None of the
                                              effective until March 2013, giving                         Given the availability of the Direct               commenters specifically urged Treasury
                                              Treasury, Federal agencies, community                   Express® card and Treasury’s expansion                to continue its waiver based on
                                              organizations, and others more than two                 of its public education campaign                      hardship due to literacy barriers,
                                              years to educate individuals so they                    describing how to use the Direct                      although several commenters alluded to
                                              may become comfortable with and adapt                   Express® card, physical disability,                   the difficulties people have due to a lack
                                              to the requirement. Between the                         language or literacy barriers, and fees no            of basic literacy skills. For example, one
                                              publication of the final rule and the                   longer present hardships requiring                    commenter noted that the constituents
                                              effective date for current check                        waivers from the EFT requirement.                     she works with in a poor, rural area of
                                              recipients, Treasury will work with                        i. Physical Disability. As noted above,            Georgia are often barely literate and deal
                                              Federal agencies and various                            Treasury requested specific examples of               with cash because they understand it.
                                              organizations to educate all affected                   the types of hardships that could make                Treasury recognizes that lack of basic
                                              individuals, including the elderly and                  it difficult to use EFT as compared to a              literacy skills hinders many in
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                                              long-time check recipients, about how                   paper check, but none were cited by the               managing their financial affairs, and
                                              to use direct deposit or the Direct                     many commenters. While Treasury                       understands the challenges associated
                                              Express® debit card.                                    recognizes that not all physical                      with moving some individuals to
                                                 Treasury has also waived the EFT                     disability barriers have been eliminated,             payment by EFT from payment by paper
                                              requirement for any payment that is not                 the Americans With Disabilities Act of                check. The delayed effective date of the
                                              eligible for a Direct Express® card                     1990, Public Law101–336 (Jul. 26,                     rule for those currently receiving paper
                                              account and for those payment                           1990), and the advent of many services                checks to March 2013, gives Treasury

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                                                                Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                                         80321

                                              additional time to expand its public                                     research conducted with respect to                                        ‘‘reasonable cost.’’ See 31 U.S.C.
                                              education efforts related to EFT options.                                cardholder education materials sent to                                    3332(i)(2)(a). In addition to low-cost
                                              Among other things, through its Go                                       approximately 7,000 newly enrolled                                        accounts available from financial
                                              Direct ® campaign, Treasury will work                                    Direct Express® cardholders who                                           institutions and other financial service
                                              with more than 1,800 partners who                                        receive Veterans compensation and                                         providers around the country, Federal
                                              know their communities best to help                                      pension benefit payments, Treasury will                                   payment recipients have at least one
                                              educate check recipients about the                                       develop materials, such as informational                                  low-cost option—the Direct Express®
                                              benefits of direct deposit, the options for                              pictorial brochures, and methods for                                      card—and many recipients potentially
                                              receiving payments electronically, and                                   further educating benefit recipients as                                   have a second option—the Electronic
                                              how to safely and cost-effectively use                                   necessary, and as suggested by several                                    Transfer Account (ETA), an account
                                              the Direct Express® card. With the                                       commenters.                                                               developed by Treasury in 1999.
                                              assistance of its partners, Treasury is                                     In addition, Treasury continues to                                     Although the ETA is not available on a
                                              able to tailor its education efforts to                                  work with its Go Direct® partners to                                      nationwide basis and does not include
                                              meet the differing needs of local                                        promote financial education. For                                          some of the more useful features that
                                              communities.                                                             example, through its partnership with                                     have become available with prepaid
                                                 Treasury especially recognizes the                                    the Federal Deposit Insurance                                             debit cards in recent years (thus making
                                              need for and importance of expanded                                      Corporation (FDIC), the Go Direct®                                        the Direct Express® card a more cost-
                                              cardholder education for existing and                                    campaign is working to raise awareness                                    effective and useful option in most
                                              new Direct Express® cardholders. While                                   of the value of financial education                                       cases), the ETA continues to meet the
                                              Treasury recognizes that the current                                     through the FDIC’s award-winning                                          needs of some benefit recipients and
                                              pool of Direct Express® cardholders may                                  Money Smart financial education                                           will continue to be available.
                                              not resemble future Direct Express®                                      program. The Money Smart program is                                          The Direct Express® card offers a
                                              cardholders in either demographic                                        a comprehensive financial education                                       user-friendly low-cost option for Federal
                                              characteristics or attitudinal variables,                                curriculum designed to help individuals                                   benefit payment recipients (see Direct
                                              according to research conducted in                                       outside the financial mainstream                                          Express® card fee tables below). The
                                              March 2009 (Direct Express—                                              enhance their financial skills and create                                 account fees are structured so that even
                                              Cardholder Satisfaction and Usage                                        positive banking relationships. Many Go                                   those cardholders without access to
                                              Survey, OMB Control No. 1510–0074),                                      Direct® campaign partners have used                                       surcharge-free ATMs can use their cards
                                              95 percent of Direct Express®                                            the Money Smart curriculum in their                                       for free because they can access their
                                              cardholders are satisfied with the card.2                                financial education efforts, including                                    funds through free POS purchases either
                                              Eight in ten satisfied cardholders cite                                  banks, credit unions, law enforcement                                     in-store or online, can get cash back for
                                              convenience, safety or immediate access                                  and crime prevention organizations,                                       free at retail locations, and can get cash
                                              to money as reasons for their                                            aging and senior organizations, library                                   for free at any MasterCard® member
                                              satisfaction. Eighty-six percent of those                                systems, and community and disability                                     financial institution. The Direct
                                              surveyed said they would recommend                                       organizations.                                                            Express® surcharge-free ATM network
                                              the card to a friend or family member                                       iv. Financial Hardship. Many                                           has more than 53,000 surcharge-free
                                              who receives Federal benefits. Despite                                   commenters suggested that the cost of                                     ATMs, and the Direct Express® card
                                              this high satisfaction rate, Treasury                                    receiving payments electronically is                                      program provider continues to identify
                                              believes that many Direct Express®                                       higher than receiving payments by                                         opportunities to expand the network
                                              cardholders may be unaware of                                            paper check for many benefit recipients,                                  further.
                                              important features that promote proper                                   and expressed concern that Treasury’s                                        While many commenters expressed
                                              card usage and reduce fees, such as the                                  EFT requirement will create a financial                                   concern about having to pay fees to the
                                              availability of free text message alerts on                              hardship for many of America’s most                                       Direct Express® card provider, or pay
                                              their cell phones when a deposit is                                      vulnerable population. Treasury’s goal                                    fees to receive a paper statement,
                                              made or when their balance is low, the                                   is to provide Federal beneficiaries and                                   Treasury believes that these fees are
                                              surcharge free ATM network, the ability                                  other payment recipients with a low-                                      generally lower than costs that could be
                                              to get cash back at point-of-sale (POS)                                  cost option for receipt of Federal                                        imposed for cashing a Treasury check
                                              locations for free, or even the ability to                               payments, which goes beyond the                                           and managing financial transactions on
                                              make purchases at retail locations for                                   requirement in Section 3332 that                                          a cash basis. The Direct Express® fee
                                              free. Using its research, including recent                               Treasury make available an account at a                                   tables are as follows:

                                                                                                                                  STANDARD FREE SERVICES
                                                                                                                      Service                                                                                          Fee

                                              Purchases at U.S. merchant locations .........................................................................................................                 FREE
                                              Cashback with purchase ..............................................................................................................................          FREE
                                              Cash from bank tellers .................................................................................................................................       FREE
                                              Customer service calls .................................................................................................................................       FREE
                                              Web account access ....................................................................................................................................        FREE
                                              Deposit notification .......................................................................................................................................   FREE
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                                              Low balance notification ...............................................................................................................................       FREE
                                              Card replacement-One free per year ...........................................................................................................                 FREE
                                              ATM balance inquiry .....................................................................................................................................      FREE
                                              ATM denial of service ...................................................................................................................................      FREE

                                                2 Summaries of all of the surveys conducted by                         rulemaking may be found at http://
                                              or on behalf of Treasury that are cited in this                

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                                              80322            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                                                                                STANDARD FREE SERVICES—Continued
                                                                                                               Service                                                                                         Fee

                                              ATM cash withdrawal in the U.S. including the District of Columbia, Guam, Puerto Rico, and U.S. Virgin                                           One free withdrawal with each deposit
                                                Islands. Surcharge by ATM owner may apply.                                                                                                      to your Direct Express® Card Ac-
                                                * For each Federal government deposit to your Card Account, Comerica Bank will waive the fee for one ATM cash withdrawal in the U.S. The
                                              fee waiver earned for that deposit expires on the last day of the following month in which the deposit was credited to the Card Account.

                                                                                                               THE ONLY FEES YOU CAN BE CHARGED
                                                                                                         Optional service                                                                                      Fee

                                              ATM cash withdrawals after free transactions are used in U.S. including the District of Columbia, Guam,                                          $0.90 each withdrawal (after free
                                                Puerto Rico, and U.S. Virgin Islands. Surcharge by ATM owner may apply.                                                                          transactions are used).
                                              Monthly paper statement mailed to you .......................................................................................................    $0.75 each month.
                                              Funds transfer to a personal U.S. bank account .........................................................................................         $1.50 each time.
                                              Card replacement after one free each year .................................................................................................      $4.00 after one (1) free each year.
                                              Overnight delivery of replacement card .......................................................................................................   $13.50 each time.
                                              ATM cash withdrawal outside of U.S. Surcharge by ATM owner may apply ..............................................                              $3.00 plus 3% of amount withdrawn.
                                              Purchase at Merchant Locations outside of U.S. .........................................................................................         3% of purchase amount.

                                                 The low fees and nationwide                                     fee per withdrawal cited in the 2010                               activating the card, or fees for customer
                                              availability of the Direct Express® card                           checking study by (http://                            service calls, which can drive up costs
                                              more than satisfy the statutory                                                           of other prepaid card products. By
                                              requirement of 31 U.S.C. 3332 for                                  banks-taking-a-bigger-bite-with-atm-                               educating Direct Express® cardholders
                                              Treasury to make available an account                              fees.aspx).4 There is no online bill                               to learn how to avoid multiple ATM
                                              at a financial institution ‘‘at a reasonable                       paying service currently offered in the                            withdrawals, cardholders can quickly
                                              cost’’ and with ‘‘the same consumer                                Direct Express® card program, so a                                 learn how to incur no monthly fees
                                              protections with respect to the account                            cardholder would pay his or her own                                whatsoever.
                                              as other account holders at the same                               bills directly to the vendor or retailer,                            The regulatory impact assessment,
                                              financial institution.’’ See 31 U.S.C.                             with no fee being charged by the                                   below, contains additional scenarios
                                              3332(f), (i)(2).                                                   provider. The Direct Express® card                                 describing the Direct Express® card fees
                                                 A recent report comparing fees for                              provider does not impose charges for                               based on card usage.
                                              general purpose reloadable prepaid                                 POS purchases, balance inquiries, or for                             Costs incurred to use the Direct
                                              cards helps illustrate the low cost of                             receiving a deposit.                                               Express® card can compare favorably to
                                              using a Direct Express® card. A                                                                                                       the cost of cashing a check and
                                              consumer advocate organization                                         FIG. 1—DIRECT EXPRESS® CARD                                    conducting necessary cash transactions.
                                              conducted a case study showing the                                         FEES: SAMPLE SCENARIO                                      While some individuals may be able to
                                              wide variations in fee structures for four                                                                                            cash government checks at no cost,
                                              prepaid card products. See, ‘‘Prepaid                                                             Fees                Fees            there are often fees of up to $20 or more
                                              Cards: Second-Tier Bank Account                                     Direct Express®             (with no           (with ATM          for cashing a check, according to
                                                                                                                    Card trans-
                                              Substitutes,’’ Consumers Union                                                                    ATM             surcharge of
                                                                                                                      actions                                                       Treasury’s research in 2007 (SSA & SSI
                                              (September 2010) (http://                                                                      surcharge)            $2.33)
                                                                                                                                                                                    Check Recipient Survey, OMB Control
                                                                         1st ATM with-                                                      No. 1510–0074). Check recipients may
                                              2010PrepaidWP.pdf). Using a sample                                   drawal (free                                                     also incur money order and postage
                                              consumer scenario,3 the report stated                                with 1st de-                                                     costs to pay bills that are not incurred
                                              that, for the four prepaid card products                             posit) .............             FREE                 $2.33      with the Direct Express® card.
                                              studied, monthly fees ranged from                                  2nd ATM with-
                                              $15.45 to $43.75 for the first and second                            drawal (free                                                 3. Suggested Changes to Direct Express®
                                              months of card use. In contrast, as                                  with 2nd de-                                                 Card Program. Various Commenters
                                              shown in Figure 1, below, a Direct                                   posit) .............             FREE                   2.33 Suggested a Number of Ways That the
                                              Express® cardholder under the same                                 3rd ATM with-                                                  Direct Express® Card Should Be
                                                                                                                   drawal ............                $ .90                3.23
                                              scenario would spend no more than $                                                                                               Changed
                                                                                                                 Three bill pay-
                                              .90 per month if using surcharge-free                                ments ............               FREE                 FREE
                                                                                                                                                                        a. ATM Cash Withdrawal Fees. A few
                                              ATMs (one free ATM withdrawal per                                  Eight POS .........                FREE                 FREE
                                                                                                                                                                     commenters suggested a range of ways
                                              deposit, with a $ .90 per ATM                                      Weekly Balance
                                              withdrawal charge after that), and no                                                                                  to maximize a cardholder’s ability to
                                                                                                                   Inquiry ...........       FREE             FREE
                                              more than $7.89 per month if no                                                                                        access his or her cash from an ATM for
                                                                                                                 Two Deposits ....           FREE             FREE
                                              surcharge-free ATMs were used,                                                                                         free. Suggestions ranged from providing
                                                                                                                                                                7.89 cardholders with at least one surcharge-
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                                              assuming the average $2.33 surcharge                                    Total ...........         .90
                                                                                                                                                                     free ATM withdrawal to providing free
                                                3 The sample consumer scenario in the cited                         In addition, the Direct Express® card            unlimited ATM withdrawals and
                                              report consisted of a cardholder making the                        does not have any monthly fees, fees for expanding the current surcharge-free
                                              following transactions in a month: Three ATM                                                                           network. Treasury’s current Direct
                                              withdrawals, three bill payments (rent, utilities,                                                                     Express® card offers sufficient
                                              phone), eight point-of-sale purchases (groceries and                 4 The consumer scenarios used in the cited report

                                              meals once a week), weekly balance inquiry, and                    assumed that the cardholder did not incur any ATM opportunities for a cardholder to access
                                              two deposits.                                                      surcharge fees.                                     his or her cash without incurring a fee.

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                         80323

                                              The Direct Express® card program offers                 accounts may offer free monthly paper                 increase costs to the cardholder. Instead,
                                              one free ATM withdrawal for each                        statements, as one commenter noted,                   Treasury will educate cardholders on
                                              deposit received. The free withdrawal is                these bank accounts generally also                    how to avoid the need to use checks by
                                              valid until the last day of the month                   require credit checks and minimum                     making purchases with the debit card,
                                              following the month of receipt of the                   balances, and have other requirements                 and if checks are necessary, where to
                                              deposit. Thus, if a cardholder receives                 that hinder the ability of recipients to              find low-cost money orders. In addition,
                                              two deposits in January 2011, the                       obtain accounts, none of which are                    MasterCard has an initiative aimed at
                                              cardholder is entitled to two free ATM                  required to open a Direct Express® card               increasing acceptance of its card
                                              cash withdrawals that are good until                    account. Two commenters suggested                     products by property managers. As part
                                              February 28, 2011. In addition,                         that the Direct Express® card program at              of this initiative, Treasury and
                                              cardholders may obtain cash at retail                   a minimum offer a free annual paper                   MasterCard are working together to
                                              locations and bank tellers without                      statement for those who do not elect to               emphasize to property managers the
                                              incurring a fee. The Direct Express®                    receive electronic or monthly paper                   importance of accepting the Direct
                                              card provider does not impose limits on                 statements. The Direct Express® card                  Express® card for rent payments.
                                              the number of cash back or teller                       provider currently makes available a                     f. Ability to Reload Cards With Non-
                                              transactions a cardholder may conduct,                  cardholder’s complete transaction                     Federal Funds. Two commenters
                                              although merchants may impose a limit                   history, upon request and at no cost.                 suggested that the Direct Express® card
                                              on the amount of cash back a cardholder                 Therefore, Treasury believes that it has              program be expanded to allow
                                              may receive.                                            adequately addressed concerns related                 cardholders to deposit funds other than
                                                 After using available free                           to free monthly statements.                           Federal payments to their card account.
                                              withdrawals, Direct Express®                               c. Encourage Opt In Election at                    Treasury does not plan to implement
                                              cardholders who choose to withdraw                      Enrollment Time of Method for                         this suggestion at this time because of
                                              additional cash from an ATM are                         Receiving Transaction Information. One                the increased cost to the Direct Express®
                                              charged a fee by the Direct Express®                    commenter suggested that cardholders                  card program, increased opportunity for
                                              card provider of $ .90 per withdrawal.                  who sign up for a Direct Express® card                fraud, and added complexity for
                                              The card provider does not impose any                   be given the opportunity at enrollment                cardholders. Treasury has plans to
                                              limits on ATM withdrawals. If the                       to elect to receive paper statements, text            expand the card program to include as
                                              cardholder withdraws cash from an                       messages, or electronic mail messages                 many Federal payments as possible.
                                              ATM that is not in the Direct Express®                  with transactions and balance                            With respect to the broader need for
                                              network, the ATM owner may charge                       information. Treasury explored this                   more safe, low-cost financial account
                                              the cardholder an additional fee, known                 suggestion, but determined that it is not             options, Treasury is exploring the
                                              as a ‘‘surcharge,’’ which can range from                feasible at this time given that many of              feasibility of offering general purpose
                                              $1.00 to $3.50 or more. If the cardholder               the Direct Express® card enrollments are              accounts to low- and moderate-income
                                              uses one of the more than 53,000 Direct                 handled by the respective Federal                     tax refund recipients and encouraging
                                              Express® surcharge-free ATMs, the                       benefit agency when the beneficiary is                initiatives for financial products and
                                              cardholder can avoid a surcharge fee.                   applying for his or her benefit. Treasury             services that are appropriate and
                                              The Direct Express® card provider                       is exploring the use of additional                    accessible for millions of Americans
                                              continues to look for ways to expand the                mailings to cardholders to ensure that                who are not fully incorporated into the
                                              network, and Treasury will continue to                  cardholders are aware of their options                financial mainstream, as authorized by
                                              educate current and new cardholders                     for receiving transaction and balance                 the ‘‘Improving Access to Mainstream
                                              about alternative ways to get cash                      information.                                          Financial Institutions Act of 2010,’’
                                              without paying a fee and how to use                        d. Provide Additional Convenience                  enacted as Title XII of the Dodd-Frank
                                              their card to pay for goods and services.               Card. Two commenters suggested that                   Wall Street Reform and Consumer
                                                 b. Free Monthly Paper Statements.                    the Direct Express® card program                      Protection Act (Pub. L. 111–203, Jul. 21,
                                              Several commenters stated a preference                  provide cardholders with the option of                2010). The FDIC also is encouraging the
                                              for paper statements at no cost to the                  allocating a discrete amount of their                 banking industry to offer safe, low-cost
                                              cardholder. Currently, Direct Express®                  funds to a second convenience card.                   transaction and basic savings account
                                              cardholders may obtain transaction and                  The cardholder could then give this                   products for low- and moderate-income
                                              balance information for free by calling a               card to a caregiver or relative who could             customers with its Model Safe Accounts
                                              customer service number or visiting the                 use it to make purchases for the                      Pilot (
                                              Direct Express® secure Web site. Upon                   cardholder. In this way, the cardholder               template/).
                                              request, the Direct Express® card                       would not have to turn over his or her                   g. Changes to Terms and Conditions
                                              provider will send a cardholder a paper                 primary card to the caregiver or relative             of the Direct Express® Card Program.
                                              transaction history at no cost. In                      and trust the caregiver or relative not to            Three commenters suggested changing
                                              addition, cardholders may sign up for                   use all of the funds. Treasury supports               some of the terms and conditions of the
                                              free text message, phone call, or email                 this suggestion as a way to mitigate a                Direct Express® card program. One
                                              alerts when they receive a deposit or                   cardholder’s risks and is working with                suggestion was to change the title of the
                                              reach a low balance amount pre-                         the Direct Express® card provider to                  Direct Express® card program provider’s
                                              determined by the cardholder. If a                      determine the feasibility and cost of                 terms and conditions document to
                                              cardholder prefers a monthly paper                      providing this option.                                ‘‘Notice of Rights and Obligations.’’
                                              statement, the provider charges a fee of                   e. Provide Access to Checks. Two                   Other suggestions were to prohibit terms
                                              $ .75 per month. Because not every                      commenters suggested that the Direct                  that waive a cardholder’s right to a jury
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                                              cardholder desires or would use a paper                 Express® card program provide                         trial or to bring a class action lawsuit;
                                              statement, and because transaction and                  cardholders with the ability to write                 to allow disputes to be governed by the
                                              balance information is available via                    checks. Treasury has explored this                    laws of the state in which the
                                              different mechanisms, Treasury has                      suggestion, but is concerned that adding              cardholder resides, rather than the State
                                              determined that the cost of paper                       such an option could potentially                      of Michigan, which is where the Direct
                                              statements should be borne by those                     increase fraud opportunities, add                     Express® card provider is located; not to
                                              who want them. While other bank                         complexity to the card program, and                   require that the recipient contact the

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                                              80324        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              merchant prior to cancelling a                          attitudes towards the use of prepaid                  statutory mandate by providing access
                                              preauthorized transfer; to make clearer                 debit cards. In addition, it should be                to one account at a reasonable cost.
                                              when the time to dispute a charge                       noted that, at any time, benefit                      Treasury disagrees. The statute does not
                                              begins; make clearer that garnishments                  recipients may choose direct deposit to               require Treasury to ensure than any
                                              are not permitted, except as authorized                 their bank account rather than the Direct             account chosen by a Federal payment
                                              by law (for example, to collect                         Express® card.                                        recipient’s must comply with the
                                              delinquent taxes or child support); and                    h. Cardholder Education. Several                   Section 3332(i) requirements. The
                                              to improve the protections under                        commenters suggested that Treasury                    provision requires that Treasury
                                              Regulation E. Treasury will review the                  should do more to educate beneficiaries               regulations ensure that individuals
                                              terms and conditions and, at a                          about their payment options, and                      ‘‘required * * * to have an account’’
                                              minimum, will ask the Direct Express®                   specifically about the Direct Express®                have ‘‘access to such an account at a
                                              card provider to clarify the language                   card features, fees, and terms. One                   reasonable cost’’ and with ‘‘the same
                                              regarding dispute time frames and                       commenter suggested that the Direct                   consumer protections with respect to
                                              garnishments. At this time, Treasury                    Express® card program customer service                the account as other account holders at
                                              does not plan to implement the                          be improved to make it easier to reach                the same financial institution’’
                                              remaining suggestions, which would                      an operator. Another commenter                        (emphasis added). The Direct Express®
                                              result in additional costs to the Direct                suggested that cardholders should be                  card account is an account that meets
                                              Express® card program, and perhaps                      provided with a wallet size information               the statutory requirements.
                                              even preclude Treasury from offering a                  card, noting that ‘‘[t]hough the                         Nonetheless, Treasury is committed to
                                              valuable low-cost account option for                    information on the Direct Express® card               taking steps to resolve several concerns
                                                                                                      is generally quite good, it could be                  raised by commenters. With respect to
                                              those beneficiaries who prefer a prepaid
                                                                                                      improved.’’ As mentioned previously,                  protecting Federal beneficiaries from
                                              debit card over a bank account. For
                                                                                                      Treasury will be launching its expanded               unlawful freezing and garnishment of
                                              example, allowing lawsuits involving
                                                                                                      cardholder education campaign                         protected benefits, Treasury and the
                                              the Direct Express® card program to be
                                                                                                      immediately to ensure that information                four major benefit paying agencies—
                                              based on various choice-of-law
                                                                                                      about the Direct Express® card and how                Office of Personnel Management,
                                              provisions would increase costs for the
                                                                                                      to use it are easily accessible to the                Railroad Retirement Board, Social
                                              program to an unacceptable level,
                                                                                                      beneficiary population for whom the                   Security Administration, and
                                              leaving a large number of Federal
                                                                                                      card is intended. As part of its                      Department of Veterans Affairs—will
                                              benefit recipients without any cost-                    education effort, Treasury is in the                  soon publish a joint rule. See, Notice of
                                              effective option for enjoying the safety                process of working with the Direct                    Proposed Rulemaking, Garnishment of
                                              and convenience of direct deposit.                      Express® card provider to develop a                   Accounts Containing Federal Benefit
                                              Requiring the Direct Express® provider                  wallet size information card for                      Payments, 75 FR 20299, Apr. 19, 2010.
                                              to cancel a preauthorized debit before                  cardholders and pictorial brochure with               The rule will help ensure that
                                              the cardholder has contacted the                        information on how to use the card. In                garnishment-exempt benefit payments
                                              merchant could leave cardholders                        addition, Treasury works continuously                 in an account are not improperly seized,
                                              vulnerable to cancellation of needed                    with the Direct Express® card provider                by requiring financial institutions to
                                              goods or services because of a lack of                  to maximize and improve customer                      exempt from freezing or seizure a
                                              understanding about the need to make                    service. For example, when Treasury                   defined amount equivalent to benefit
                                              alternative payment arrangements for                    and the provider learned of the                       payments deposited to an account prior
                                              necessary services, such as utilities. The              difficulties cardholders were having in               to a financial institution’s receipt of a
                                              Direct Express® card provider follows                   reaching a live customer service                      garnishment order. This new rule will
                                              standard industry practices, except that                representative, the provider modified its             protect benefit recipients where benefit
                                              with respect to the protections afforded                telephone system and automated                        payments are directly deposited to an
                                              under Regulation E, the Direct Express®                 messages to make contact with a live                  account at a financial institution.
                                              card provider offers an extended time                   representative easier from a cardholder’s                In response to comments related to
                                              period within which to dispute a                        perspective. Among other things,                      allowing Federal payments to be
                                              transaction from the industry standard                  Treasury’s plans for cardholder                       delivered to ‘‘safe’’ prepaid card
                                              of 60 days to 90 days. Treasury believes                education include direct mail and other               accounts, Treasury is publishing, on this
                                              it has obtained the best possible terms                 communications explaining how to use                  date, an interim rule amending 31 CFR
                                              and conditions for an account that                      the card to make purchases, pay bills,                part 210 (Part 210 Interim Rule), which
                                              provides the most cost-effective,                       get cash back, as well as information                 generally requires that a Federal direct
                                              consumer-friendly terms available.                      about how to check balances and                       deposit payment be delivered to a
                                              Treasury will, however, continue to                     transaction history. As appropriate,                  deposit account at a financial institution
                                              work closely with the Direct Express®                   Treasury will work with its 1,800 Go                  in the name of the recipient, subject to
                                              card provider to identify and suggest                   Direct® partners to further enhance its               certain exceptions. The Part 210 Interim
                                              improvements to the program. Even                       cardholder education efforts.                         Rule allows Federal payments to be
                                              though satisfaction with the Direct                        4. Regulation of the Banking Industry              deposited to an account accessed
                                              Express® card program among current                     and Prepaid Cards. Several commenters                 through a prepaid card or similar card
                                              cardholders remains very high at 95%                    suggested that Treasury take steps to                 that meets the following requirements,
                                              (Direct Express®—Cardholder                             improve consumer protections                          as more fully described in the interim
                                              Satisfaction and Usage Survey, March                    associated with financial services                    rule: The account funds are insured by
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                                              2009, OMB Control No. 1510–0074),                       products. One commenter suggested                     the Federal Deposit Insurance
                                              Treasury is committed to taking all                     that Section 3332 requires Treasury to                Corporation or National Credit Union
                                              feasible and cost-effective steps to                    take steps to ensure that any account                 Share Insurance Fund to the extent
                                              improve the program because the                         established by an individual to comply                permitted by law, the account does not
                                              agency recognizes that current users                    with the EFT requirement is available at              have an attached line of credit or loan
                                              may be different than future users in                   a ‘‘reasonable cost’’ and stated that                 feature that triggers automatic
                                              their demographic characteristics or                    Treasury is not complying with the                    repayment from the card account, and

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                                              the issuer of the card account provides                 nor does it currently recognize firms as              agencies, and expects the waiver to be
                                              the cardholder with the same                            representatives. Secondly, many                       employed on an exception basis and
                                              protections under Regulation E required                 attorneys state that their banks are                  only until expanded remittance data is
                                              to be provided for payroll card accounts                unwilling or unable to provide all of the             more widely available to attorneys and
                                              (12 CFR 205.18).                                        information needed to identify the                    other representatives. In addition,
                                                 Several other concerns raised by                     client on whose account the deposit was               Treasury notes that there are many
                                              commenters relating to the regulation of                made. This second point is also raised                options for receipt of remittance data for
                                              bank overdraft fees, account advances                   by an individual concerned that nursing               vendors, and therefore does not expect
                                              offered by financial institutions, and                  homes would similarly be unable to                    agencies to use this waiver to exempt
                                              setoff of fees owed by account holders                  identify the resident to whom a direct                vendor payments from the EFT
                                              are outside the scope of this rule.                     deposit payment belongs.                              requirements.
                                                 5. Delay Effective Dates. Two                           The Social Security Administration                    Treasury is removing the requirement
                                              commenters urged Treasury to delay the                  recently announced that it will include               that agencies determine that the cost of
                                              proposed effective dates for EFT                        an ‘‘addenda record’’ to display                      making an EFT payment exceeds the
                                              payments under the NPRM. One                            identifying information with all direct               cost of making a payment by check, as
                                              consumer advocate organization                          deposit fee payments sent to                          it may not be possible for an agency to
                                              suggested a delay ‘‘until there is a                    representatives. See, Social Security                 make this determination.
                                              greater confidence that people are                      Administration letter at http://                         7. Privacy and Identity Theft
                                              prepared to switch to electronic               The               Concerns. Many commenters raised
                                              disbursements,’’ but did not specify a                  Social Security Administration                        concerns about electronic banking
                                              date for implementation. This                           encourages receiving financial                        leading to an increased risk of identity
                                              commenter urged more time for                           institutions to pass through to their                 theft. Typically, the comments
                                              education noting that some people                       account holders, as quickly as possible,              expressed concern about identity theft
                                              shifting to electronic payments will                    pertinent information. In this way,                   through online banking. This rule does
                                              need far more education or counseling                   attorneys and other representatives of                not mandate any requirement to bank
                                              than others. Another commenter                          Social Security claimants will be able to             online. Many financial institutions,
                                              suggested a delay to 2020. As explained                 identify the purpose of the payments. In              including the Direct Express® card
                                              in the NPRM, Treasury has accounted                     addition, the Social Security                         provider, offer online banking services
                                              for the unique issues raised for                        Administration may, in the future,                    as a convenience, but account holders
                                              converting current check recipients to                  recognize firms which might help                      are not required to use these services.
                                              electronic payments by delaying the                     address the difficulties in using EFT for                None of the comments specifically
                                              implementation date for those                           representative fee payments.                          articulated exactly how this rule would
                                              individuals to March 1, 2013. Between                      In order to mitigate these difficulties,           increase a payment recipient’s risk of
                                              now and 2013, Treasury plans a robust                   and until these issues are more fully                 identity theft. Based on Treasury’s
                                              campaign to educate people about the                    addressed, Treasury recognizes the need               experience with paper checks and
                                              EFT requirement, EFT options and                        to modify one of the waivers that may                 electronic payments, receiving
                                              costs, how to use EFT, and more.                        be exercised by a paying agency, rather               payments by direct deposit decreases
                                              Treasury agrees with commenters who                     than Treasury, in § 208.4(f) regarding                rather than increases the risk of identity
                                              recommend a strong education                            non-recurring payments. As the                        theft. As noted in the NPRM, in fiscal
                                              campaign, and as noted above, plans to                  commenters pointed out, some attorneys                year 2009, more than 670,000 Social
                                              utilize and expand its existing network                 and representatives may receive                       Security and SSI checks were reported
                                              of Go Direct® partners in order to                      multiple payments in a given year for                 lost or stolen. In fiscal year 2010, more
                                              provide outreach and sufficient                         the multiple clients they represent                   than 540,000 checks were reported as
                                              information to all affected beneficiaries.              before the Social Security                            lost or stolen. In fiscal year 2009,
                                              Therefore, Treasury does not believe                    Administration, and thus do not meet                  Treasury investigated more than 70,000
                                              that there is a need to further extend the              the technical definition of a recipient of            cases of altered or fraudulently
                                              effective dates proposed in the NPRM,                   a non-recurring payment in § 208.4(f)                 endorsed checks, totaling $64 million in
                                              except that Treasury is delaying the                    (‘‘Where the agency does not expect to                estimated value, and in fiscal year 2010,
                                              initial effective date from March 1 to                  make more than one payment to the                     Treasury investigated almost 50,000
                                              May 1, 2011.                                            same recipient within a one-year period,              cases totaling $93 million in estimated
                                                 6. Provide Waiver for Attorney Fees                  i.e., the payment is non-recurring’’). To             value. People intent on committing
                                              for Social Security Cases. An                           address this, Treasury is modifying                   fraud can use a stolen Treasury check,
                                              organization that represents Social                     § 208.4(f) to allow Federal paying                    along with other stolen or fake
                                              Security claimants’ representatives and                 agencies to waive the EFT requirement                 identification documents, to open an
                                              a number of attorneys who represent                     for payments made to the same recipient               account in the recipient’s name or
                                              Social Security claimants recommended                   in a single year when these payments                  otherwise impersonate a check payee. A
                                              that Treasury exempt attorneys’ fee                     are not made on a regular, recurring                  Treasury check that has been endorsed,
                                              payments from the EFT requirements for                  basis and remittance data explaining the              but not cashed, offers further
                                              two main reasons. First, the individual                 purpose of the payments is not readily                opportunities for identity theft.
                                              attorneys or representatives receiving                  available from the recipient’s financial                 In addition to identity theft concerns,
                                              the fee payment are not the ‘‘owners’’ of               institution receiving the payment by                  many commenters expressed concern
                                              their firm’s bank account, and in some                  EFT.                                                  about their privacy and were opposed to
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                                              cases, are therefore precluded from                        Treasury encourages paying agencies                having to disclose their banking
                                              electronically depositing their fee                     to contact Treasury, before invoking this             information to the Federal Government.
                                              payment to the firm’s account. This is                  waiver, to discuss various ways that                  Federal agencies are subject to the
                                              problematic in these cases because the                  remittance data can be made available to              Privacy Act of 1972, 5 U.S.C. 552a,
                                              Social Security Administration does not                 payment recipients, which may negate                  which strictly governs the collection of
                                              currently make representative fee                       the need for a waiver. Treasury                       personal information from individuals,
                                              payments directly to the firm’s account,                discourages the use of this waiver by                 as well as the maintenance and

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                                              80326        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              disclosure of the information. Among                    Information about ETAs may be found                   recipients requesting a waiver are
                                              other things, Federal agencies are                      at                           required to provide to Treasury a
                                              restricted in how they may use personal                    9. Require EFT to Existing Bank                    written certification supporting their
                                              information, such as bank account                       Accounts. An association that                         request, in such form as Treasury may
                                              information, and must ensure that the                   represents financial institutions                     prescribe. The certification requires a
                                              information is not disclosed in an                      suggested that when a recipient has an                recipient to identify the basis for his or
                                              unauthorized way. Except in limited                     established banking relationship, the                 her request and provide a brief
                                              circumstances or with proper consent,                   default election should be to convert the             explanation of how the exception
                                              bank account information provided by                    benefit payment to a direct deposit to                applies to his or her situation. The
                                              individuals to agencies for the purpose                 that established bank account. Through                recipient shall sign the certification
                                              of receiving payment by direct deposit                  its Go Direct® campaign, Treasury                     before a notary public.
                                              may be used and disclosed only for that                 encourages financial institutions to
                                                                                                      work with their own customers who                     V. Section-by-Section Analysis
                                              purpose. For an example of agency
                                              regulations implementing the Privacy                    receive Federal benefit and other                        New § 208.2(c) adds a definition for
                                              Act of 1972, see Treasury’s regulations                 payments by paper check on converting                 ‘‘Direct Express® card’’ as meaning the
                                              at 31 CFR part 1, subpart C.                            to payment by direct deposit. The Go                  debit prepaid card issued to recipients
                                                 With respect to customer account                     Direct® campaign communicates the                     of Federal benefits by Treasury’s
                                              information held by a financial                         many benefits to financial institutions               financial agent pursuant to requirements
                                              institution, including Direct Express®                  that encourage their customers to                     established by Treasury. The Direct
                                              card account information, the                           convert to direct deposit, which include              Express® card features are explained in
                                              Government is precluded from receiving                  increasing a financial institution’s                  the NPRM, in this rulemaking, and on
                                              any customer-specific account                           customer base and customer loyalty,                   the Direct Express® card Web site at
                                              information from a financial institution,               operational and transaction-based cost      
                                              and the financial institution is                        savings, and reduction of check fraud.                   Redesignated § 208.2(e) (formerly
                                              precluded from providing any customer-                  See Absent clear                    § 208.2(d)) clarifies that the definition of
                                              specific account information to the                     instructions from a payment recipient,                ‘‘electronic benefits transfer’’ includes
                                              Government, without the account                         Treasury is unable to ascertain with                  disbursement through a Direct Express®
                                              holder’s consent or without first                       certainty whether a payment recipient                 card account. As has been the case,
                                              following a process that provides the                   has a current bank account to which                   ‘‘electronic benefits transfer’’ (EBT)
                                                                                                      payments should be directed. Therefore,               continues to include, but is not limited
                                              account holder with an opportunity to
                                                                                                      Treasury allows each recipient to have                to, disbursement through an ETASM and
                                              object to any disclosure, generally for
                                                                                                      payments electronically delivered to an               a Federal/State EBT program.
                                              law enforcement purposes. See, Right to
                                                                                                      account at a financial institution of his                Section 208.4(a) is divided into two
                                              Financial Privacy Act, 12 U.S.C. 3401, et
                                                                                                      or her choice since the recipient is in               paragraphs (a)(1) and (a)(2). It is noted
                                                                                                      the best position to determine the most               that, in cases where a representative
                                                 8. Continue to Offer the ETA. A                      cost-effective and desirable account                  payee has been designated by the
                                              couple of commenters urged Treasury to                  option for receipt of his or her Federal              benefit paying agency and is receiving
                                              continue to offer the ETA option for                    payments.                                             payments on behalf of a beneficiary, the
                                              those beneficiaries who opt for this                                                                          representative payee is the ‘‘individual’’
                                              account to receive their benefit                        IV. Final Rule
                                                                                                                                                            for purposes of § 208.4(a). Redesignated
                                              payments by direct deposit. Treasury                       As explained above and in the                      § 208.4(a)(1) is revised to allow waivers
                                              continues to offer the ETA as an                        regulatory impact assessment below,                   where an individual:
                                              alternative to the Direct Express® card.                Treasury is revising its NPRM proposal                   (i) Is receiving a Federal payment by
                                              It is also an option for unbanked Federal               to address the comments we received                   check prior to May 1, 2011. In such
                                              benefit recipient seeking a safe,                       regarding elimination of all individual               cases, the individual may continue to
                                              affordable banking relationship.                        waivers from the EFT requirement.                     receive those payments by check
                                              Currently, the ETA is offered by 392                    Under the final rule, the EFT                         through February 28, 2013;
                                              financial institutions with over 53,000                 requirement will not apply to (1)                        (ii) Files a claim for a Federal
                                              branch locations. The ETA program has                   payment recipients born prior to May 1,               payment prior to May 1, 2011, and
                                              over 121,000 account holders who                        1921, who are receiving Federal                       requests payment by check at the time
                                              receive Federal benefit payments.                       payments by check on March 1, 2013;                   he or she files the claim. In such cases,
                                              Although the ETA is not available on a                  (2) payments that are not eligible for                the individual may receive those
                                              nationwide basis and does not include                   deposit to a Direct Express® prepaid                  payments by check through February
                                              some of the more useful features that                   card account established pursuant to                  28, 2013;
                                              have become available with prepaid                      terms and conditions approved by FMS;                    (iii) Was born prior to May 1, 1921,
                                              debit cards in recent years, it continues               and (3) payment recipients whose Direct               and is receiving Federal payments by
                                              to meet the needs of some benefit                       Express® card has been suspended or                   check on March 1, 2013;
                                              recipients in certain regions of the                    cancelled. In addition, an individual                    (iv) Receives payments that are not
                                              country. Treasury has no plans to                       payment recipient may request a waiver                eligible for deposit to a Direct Express®
                                              eliminate the ETA option and continues                  from the EFT requirement if the EFT                   card account. In such cases, those
                                              to support the ETA through its call                     requirement would impose a hardship                   payments are not required to be made
                                              center and Web site. It should be noted,                because of the inability of a recipient to            by electronic funds transfer, unless and
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                                              however, that Treasury is directing more                manage an account at a financial                      until such payments become eligible for
                                              of its resources to educating                           institution or a Direct Express® card                 deposit to a Direct Express® card
                                              beneficiaries about the Direct Express®                 account due to a mental impairment or                 account;
                                              card since the card is available                        because a recipient lives in a remote                    (v) Is ineligible for a Direct Express®
                                              nationwide, provides more useful                        geographic location lacking the                       card because of suspension or
                                              features than the ETA, and may be used                  infrastructure to support electronic                  cancellation of the individual’s card by
                                              more cost-effectively than an ETA.                      financial transactions. Payment                       the Financial Agent;

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                          80327

                                                 (vi) Has filed a waiver request with                 paragraph (f)) which previously allowed               removed because they no longer apply.
                                              Treasury certifying that payment by                     Federal paying agencies, rather than                  ETASM accounts remain available from
                                              electronic funds transfer would impose                  Treasury, to waive the EFT requirement                financial institutions that continue to
                                              a hardship because of the individual’s                  for payments that are non-recurring, i.e.,            offer them. For more information about
                                              inability to manage an account at a                     no more than one payment to the same                  ETASM accounts, visit http://www.eta-
                                              financial institution or a Direct Express®              recipient within a one-year period.         
                                              card account due to a mental                            Under the revised rule, the waiver exists
                                                                                                                                                            VI. Procedural Analysis
                                              impairment, and Treasury has not                        for payments made to the same recipient
                                              rejected the request;                                   in a single year when these payments                  Regulatory Planning and Review
                                                 (vii) Has filed a waiver request with                are not made on a regular, recurring                    It has been determined that this
                                              Treasury certifying that payment by                     basis and remittance data explaining the              regulation is a significant regulatory
                                              electronic funds transfer would impose                  purpose of the payments is not readily                action as defined in Executive Order
                                              a hardship because of the individual’s                  available from the recipient’s financial              12866 in that this rule would have an
                                              inability to manage an account at a                     institution receiving the payment by                  annual effect on the economy of $100
                                              financial institution or a Direct Express®              electronic funds transfer. As mentioned               million or more, and this rule raises
                                              card account due to the individual                      above, agencies should make limited                   novel policy issues arising out of the
                                              living in a remote geographic location                  use of this waiver and should use this                legal mandate in 31 U.S.C. 3332.
                                              lacking the infrastructure to support                   waiver only after discussions with                    Accordingly, this final rule has been
                                              electronic financial transactions, and                  Treasury to rule out other ways in                    reviewed by the Office of Management
                                              Treasury has not rejected the request.                  which remittance data can be made                     and Budget. The Regulatory Impact
                                                 New § 208.4(b) requires payment                      available.                                            Assessment prepared by Treasury for
                                              recipients requesting a waiver from the                    Section 208.6 is revised to remove the             this regulation is provided below.
                                              EFT requirement because of a mental                     provisions for the general account
                                              impairment or remote geographic                         requirements for Federal payments                        SUMMARY OF ESTIMATED BENEFITS
                                              location to provide Treasury with a                     made electronically to an account at a
                                                                                                                                                                        AND COSTS
                                              certification, in writing, supporting their             financial institution. These
                                              request in such form that Treasury may                  requirements are contained in 31 CFR
                                                                                                                                                            Benefit .................................    $117 million.
                                              prescribe. The individual shall attest to               210.5 and do not need to be duplicated                Cost .....................................   Not estimated.
                                              the certification before a notary public                in Part 208. Revised § 208.6 states that              Net Benefits .........................       Not estimated.
                                              or otherwise file the certification in                  any individual who receives a Federal
                                              such form that Treasury may prescribe.                  benefit, wage, salary, or retirement                     The analysis used nominal dollars in 2010.
                                              A payment recipient requesting these                    payment will be eligible for a Direct                 1. Description of Need for the
                                              types of waivers will be required to                    Express® card account.                                Regulatory Action
                                              provide identifying information, such as                   Section 208.7 is revised to state that
                                              name, address, and Social Security                      agencies shall put into place procedures              a. Statutory and Regulatory History
                                              number, as well as a short statement                    that allow recipients to provide the                     As discussed in the Regulatory Impact
                                              supporting the reason for the waiver                    information necessary: (i) For the                    Assessment in the NPRM, this
                                              request. Unless Treasury rejects the                    delivery of their payments by EFT to an               rulemaking is necessary to expand
                                              request, the recipient will not be                      account at a financial institution, or (ii)           compliance with the electronic funds
                                              required to comply with the EFT                         to enroll for a Direct Express® card                  transfer (EFT) provisions of section
                                              requirement. As noted above, in cases                   account. Agencies no longer need to                   3332, title 31 United States Code
                                              where a representative payee receives                   notify individuals about their right to               (Section 3332). In 1996, Congress
                                              payments on behalf of a beneficiary, the                invoke a hardship waiver. FMS will                    enacted subsection 31001(x)(1) of the
                                              representative payee is the individual                  provide guidance and work with                        Debt Collection Improvement Act of
                                              requesting the claim based on the                       agencies to ensure that they have the                 1996 (Pub. L. 104–134) (DCIA), which
                                              representative payee’s circumstances.                   information they need to effectively                  amended Section 3332 to generally
                                              Treasury will be publishing additional                  explain the rule, available waivers,                  require that all nontax Federal payments
                                              guidance regarding the waiver process.                  direct deposit, and features and fees of              be made by EFT, unless waived by the
                                                 The Secretary’s waiver authority                     the Direct Express® card.                             Secretary of the Treasury (Secretary).
                                              remains unchanged, and Federal                             Section 208.8 is revised to state that             The Secretary must ensure that
                                              agencies continue to have the flexibility               payment recipients are required to                    individuals required to receive Federal
                                              to waive payment by direct deposit or                   provide a Federal agency with the                     payments by EFT have access to an
                                              other EFT method in the circumstances                   necessary information to receive                      account at a financial institution ‘‘at a
                                              described in redesignated paragraphs                    payments electronically. To receive a                 reasonable cost’’ and with ‘‘the same
                                              (a)(2) through (a)(7) of § 208.4 (formerly              payment by direct deposit to an account               consumer protections with respect to
                                              paragraphs (b) through (g)), namely, for                at a financial institution, a recipient will          the account as other account holders at
                                              certain payments to payees in a foreign                 need to provide his or her account                    the same financial institution.’’ See 31
                                              country where the infrastructure does                   information. To enroll for a Direct                   U.S.C. 3332(f), (i)(2).
                                              not support EFT, for certain disaster or                Express® card account, a recipient will                  To implement Section 3332 as
                                              military situations, for situations in                  need to provide sufficient demographic                Congress intended, Treasury
                                              which there may be a security threat or                 information to allow for an account to                promulgated 31 CFR part 208 (Part 208).
                                              for valid law enforcement reasons, for                  be established, including information                 Part 208 sets forth requirements for
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                                              non-recurring payments, and for                         needed for identity verification                      accounts to which Federal payments
                                              unusual and/or urgent situations where                  purposes.                                             may be sent by EFT; provides that any
                                              the Government would be seriously                          Section 208.11 is revised to conform               individual who receives a Federal
                                              injured unless payment is made by a                     to the technical revision and delete the              benefit, wage, salary, or retirement
                                              method other than EFT.                                  reference to § 208.6.                                 payment is eligible to open an
                                                 Treasury is revising redesignated                       Appendices A and B containing                      Electronic Transfer Account (ETA) at a
                                              paragraph (a)(6) of § 208.4 (formerly                   Model ETASM Disclosure Notices are                    financial institution that offers such

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                                              80328        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              accounts; and establishes the                           purchases. The limited payment                        remove the Part 208 individual waivers
                                              responsibilities of Federal agencies and                capability of the ETA resulted in a need              to EFT requirements. GAO–08–645,
                                              recipients under the regulation. Part 208               for hardship exceptions for geographic,               pages 20–22.
                                              also sets forth a number of waivers to                  financial, and physical disability
                                                                                                                                                            b. Technology Changes in the Banking
                                              the general requirement that Federal                    reasons, since individuals might not
                                              payments be delivered by EFT. See 31                    have convenient or feasible access to
                                              CFR 208.4.                                              physical POS or ATM locations.                           As discussed in the Regulatory Impact
                                                 In conjunction with the initial                      Moreover, the ETA allows monthly and                  Assessment in the NPRM, the
                                              publication of Part 208, Treasury                       other fees which, although limited,                   technological developments and
                                              developed the ETA, a low-cost account                   could still pose a financial hardship for             widespread acceptance of debit and
                                              offered by participating financial                      some benefit recipients. This meant that              prepaid card products during the last
                                              institutions for those individuals who                  a waiver for financial hardship was also              decade have made it feasible and
                                              wish to receive their Federal payments                  necessary.                                            advantageous for Treasury to revise its
                                              by direct deposit. The ETA was                             Since its inception in 1999 through                existing implementing regulation to
                                              established with the intention that it                  September 2010, only 251,941 ETA                      expand the scope of individuals subject
                                              would eventually become available                       accounts have been opened, and, as of                 to the EFT requirements. Specifically,
                                              nationwide, and thereby comply with                     September 2010, there are only 121,191                the development and implementation of
                                              the statutory mandate that any person                   active ETA accounts. Anecdotal                        the Direct Express® card, a MasterCard ®
                                              required to receive payment by EFT                      evidence suggests that, with some                     prepaid debit card developed by
                                              have access to an account at a financial                exceptions, the ETA is not a cost-                    Treasury exclusively for Federal benefit
                                              institution at a reasonable cost and with               effective product for financial                       recipients, means that Treasury can now
                                              standard consumer protections.                          institutions. According to a 2002 report              comply with the requirement of Section
                                              However, the ETA is not available                       by the Government Accountability                      3332 to ensure that individuals required
                                              nationwide, and, as a result, does not                  Office (GAO), although many financial                 to receive Federal payments by EFT
                                              meet the statutory requirement related                  institutions believed that the ETA was                have access to an account at a financial
                                              to account access.                                      a good product for the target market, the             institution that is reasonably priced and
                                                 Any financial institution that wishes                financial institutions were reluctant to              subject to standard consumer
                                              to offer the ETA may do so by entering                  offer the account because they did not                protections.
                                              into a financial agency agreement                       see the product as profitable. See,                      Reloadable prepaid debit cards, which
                                              agreeing to offer the ETA in accordance                 ‘‘Electronic Transfers: Use by Federal                were a small specialty product in the
                                              with the terms and conditions                           Payment Recipients Has Increased but                  1990s, are now widely available and can
                                              established by Treasury. See Notice of                  Obstacles to Greater Participation                    be used at a vast number of merchant
                                              Electronic Transfer Account Features,                   Remain,’’ GAO–02–913, page 31 (Sept.                  locations across the country, not only to
                                              64 FR 38510 (July 16, 1999). A                          12, 2002) (                     purchase goods and services, but also to
                                              participating financial institution must                d02913.pdf). From the consumer                        obtain cash through cashback
                                              open an ETA for any individual who                      perspective, reasons for lack of interest             transactions at POS locations. With the
                                              requests one, with some limited                         include the inability to write checks,                expansion of the Internet and other
                                              exceptions, provided that the individual                limited availability of ETAs, lack of                 technological advances, consumers have
                                              authorizes the direct deposit of his or                 awareness of ETAs, a difficult                        the ability to make online purchases
                                              her Federal benefit, wage, salary or                    enrollment process, and a personal                    with a debit card, as well as the ability
                                              retirement payments. A financial                        preference for doing business without a               to pay for goods and services over the
                                              institution may charge an account fee of                bank account. Id., at 35–36.                          telephone, resulting in the mitigation of
                                              up to $3.00 per month, and may charge                      GAO has issued at least two reports                some past obstacles to electronic
                                              other account-related fees as usually                   on the Federal Government’s efforts to                payment acceptance. Even for those
                                              and customarily charged to other retail                 increase the use of electronic payments               without access to the Internet, or who
                                              customers. ETA cardholders must be                      rather than checks. See, for example,                 buy goods and use services from
                                              allowed to withdraw funds at least four                 2002 GAO report cited above, and                      vendors who do not accept debit card
                                              times per month without incurring fees.                 ‘‘Electronic Payments: Many Programs                  payments, debit cards can be used to
                                              Checks are not offered with ETAs.                       Electronically Disburse Federal Benefits,             purchase money orders, thereby
                                              Account holders access their funds                      and More Outreach Could Increase Use,’’               eliminating the step of having to cash a
                                              through online debit at ATMs,                           GAO–08–645 (June 23, 2008) (http://                   check or carry large amounts of cash to
                                              commonly referred to as ‘‘PIN debit,’’         In                 complete necessary financial
                                              and through POS networks. Offline                       these referenced reports, GAO                         transactions.
                                              (signature) debit is not permitted.                     recognizes the advantages of electronic                  The ‘‘2007 Federal Reserve Payments
                                              Treasury pays a participating financial                 payments, but also recognizes the two                 Study, Noncash Payment Trends in the
                                              institution a fee of $12.60 for each ETA                major historical obstacles to removing                United States: 2003–2006,’’ sponsored
                                              account established.                                    the Part 208 individual waivers. First,               by the Federal Reserve System (released
                                                 The hardship waivers in Part 208                     there are a high number of check                      December 10, 2007) (http://
                                              prior to this rulemaking were necessary                 recipients who do not have a bank           
                                              because the ETA was not (and is not)                    account or who lack convenient access                 communications/pdf/research/
                                              available to all benefit recipients across              to an account at a reasonable cost with               2007_payments_study.pdf), highlights
                                              the country. In addition, because the                   appropriate consumer protections.                     the growing acceptance of debit cards in
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                                              ETA does not permit signature debit and                 GAO–02–913, pages 16–24 (Sept. 12,                    the United States. According to the
                                              does not include bill payment capability                2002); GAO–08–645, pages 19–20, 33                    study, debit cards now surpass credit
                                              as a required feature, the ETA                          (June 23, 2008). Second, consumer                     cards as the most frequently used
                                              cardholders have limited options in                     concerns about the improper freezing                  payment type. The Federal Reserve
                                              paying for goods and services with an                   and seizure of Federal benefit funds                  noted that the highest rate of growth
                                              ETA. They cannot use the ETA, for                       typically exempt from garnishment has                 was in automated clearing house (ACH)
                                              example, to make online and telephone                   led to resistance to Treasury’s efforts to            payments, which grew about 19 percent

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                          80329

                                              per year, followed closely by debit card                market for a branded debit card,                      considered effective unless Treasury
                                              payments. The annual use of debit cards                 reloadable only with Federal benefit                  rejects the request.
                                              increased by about 10 billion payments                  payments. As part of the pilot, Treasury
                                                                                                                                                            3. Baseline
                                              over the survey period to 25.3 billion                  sent letters to 35,000 Social Security
                                              payments in 2006, an annual growth                      and SSI check recipients in Chicago and               a. Amount of Federal Disbursement
                                              rate of transactions of 17.5% from 2003                 southern Illinois, offering them the                     The baseline amount of Federal
                                              to 2006. Many financial service                         opportunity to sign up for a Direct                   disbursement described in the NPRM is
                                              providers offer general prepaid branded                 Express® card to receive their Federal                updated as follows. In fiscal year 2010,
                                              reloadable cards intended for recipients                benefit payments electronically. In                   Treasury disbursed almost 85% of its
                                              of wages, incentive or bonus payments,                  addition, Treasury included information               nontax payments electronically, or more
                                              state benefits and child support                        about the program in check envelopes                  than 793 million payments. Despite the
                                              payments, and other types of high                       mailed to all Illinois Social Security and            general requirement that Federal
                                              volume or regularly recurring payments.                 SSI check recipients. The card features               payments be made electronically, and
                                              Many states offer or require the use of                 offered for the pilot program were                    Treasury’s efforts to persuade check
                                              electronic payment cards for those who                  similar to the current Direct Express®                recipients to convert to direct deposit,
                                              receive state benefits, such as temporary               card product, although the fees were                  Treasury nevertheless continues to print
                                              assistance to needy families.                           slightly higher.
                                                                                                                                                            and mail many millions of checks each
                                                 Treasury’s experience with offering                  2. Provision                                          year, at a substantially higher cost to the
                                              electronic payment card products dates                     Treasury is implementing this rule in              Government than if those payments
                                              back to 1989, and illustrates how                       two phases. The first phase would                     were delivered by EFT. For example, of
                                              Treasury’s products have evolved and                    require all new benefit recipients to sign            the approximately 143 million checks
                                              how acceptance of these products has                    up for direct deposit to a bank account               disbursed for nontax payments, in fiscal
                                              grown. In 1989, Treasury offered a debit                of the recipients’ choice or to a Direct              year 2010, more than 130 million of
                                              card product, known as the SecureCard,                  Express® card account, beginning May                  them were Federal benefit checks
                                              on a pilot basis in Baltimore, Maryland,                1, 2011. The second phase would begin                 mailed to almost 11 million benefit
                                              at no cost to SSI recipients. The                       on March 1, 2013, at which time all                   recipients, causing avoidable payment-
                                              undeveloped nature of the POS system                    recipients of Federal benefit and other               related problems for many check
                                              at that time presented the primary                      nontax payments would receive their                   recipients, and resulting in extra costs to
                                              challenge in that pilot. To make the card               payments by direct deposit, either to a               taxpayers of more than $117 million
                                              useful, Treasury installed POS                          bank account or to a Direct Express®                  that would not have been incurred had
                                              equipment at various local merchants, at                card account.                                         those payments been made by EFT.
                                              a substantial cost to the Government. In                   Those receiving their benefit                      Social Security (retirement, disability,
                                              1992, Treasury initiated the Direct                     payments by check before May 1, 2011,                 and survivors benefits) and SSI
                                              Payment Card pilot for Social Security                  could continue to do so through                       payments represent more than 92
                                              and SSI recipients in Texas, which had                  February 28, 2013, after which those                  percent, or approximately 120 million,
                                              a better developed POS infrastructure,                  recipients would convert to direct                    of those benefit check payments. The
                                              and subsequently extended the pilot to                  deposit. For Federal benefit recipients,              remaining 10 million benefit check
                                              Social Security recipients in Argentina.                this means that individuals who file                  payments are made to recipients of civil
                                              From 1992 through 1997, approximately                   claims for Federal benefits before May 1,             service retirement, railroad retirement,
                                              46,000 recipients enrolled, and the                     2011, and who request check payments                  Black Lung, and Veterans benefits.
                                              program was well-received by                            when they file, would be permitted to                 Although the direct deposit payments
                                              recipients. Building on the success of                  receive payments by check through                     rate has increased since 1996, when it
                                              the Direct Payment Card pilot, in 1996,                 February 28, 2013. Individuals who file               was 58%, the rate has climbed only
                                              Treasury joined a Federal-State                         claims for benefits on or after May 1,                slowly since fiscal year 2005 when it
                                              electronic benefits transfer (EBT)                      2011, would receive their payments by                 first reached 80%.
                                              program known as the Benefit Security                   direct deposit. Individuals receiving
                                              Card program. The Benefit Security                                                                            b. Affected Population
                                                                                                      their payments by direct deposit prior to
                                              Card was offered to Federal and/or state                May 1, 2011, would continue to do so.                    As noted above, in fiscal year 2010,
                                              benefit recipients in eight southeastern                   In this final rule, Treasury waives the            Treasury disbursed 130 million checks
                                              states, known as the Southern Alliance                  EFT requirement for recipients born                   to almost 11 million benefit recipients.
                                              of States, which included Alabama,                      prior to May 1, 1921 who are receiving                Treasury estimates that approximately 4
                                              Arkansas, Florida, Georgia, Kentucky,                   Federal payments by check on March 1,                 million of those recipients do not have
                                              Missouri, North Carolina, and                           2013, for payments that are not eligible              bank accounts.
                                              Tennessee. Treasury’s Benefit Security                  for deposit to a Direct Express® card                    Treasury recognizes the demographic
                                              Card program allowed benefit recipients                 account, and for recipients whose Direct              differences between payment recipients
                                              to access their Federal and/or state                    Express® card has been suspended or                   who are more willing to accept direct
                                              benefits via a single debit card. When                  cancelled. In addition, this rule allows              deposit and those who are not. Treasury
                                              Treasury terminated the card program in                 a recipient to request a waiver from the              also recognizes that there are a variety
                                              January 2003, approximately 51,000                      EFT requirement on the basis that EFT                 of reasons why check recipients do not
                                              Federal benefit recipients were enrolled                would impose a hardship because of the                switch to direct deposit. Because the
                                              in the program. Although customers                      recipient’s inability to manage an                    majority of its check payments are made
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                                              were pleased with the product, Treasury                 account at a financial institution or a               to Social Security and SSI recipients,
                                              and most states were concerned about                    Direct Express® card account due to a                 Treasury’s research focuses on this
                                              cardholder costs, which were scheduled                  mental impairment, or because the                     population. During implementation of
                                              to increase at the time Treasury                        recipient lives in a remote geographic                its rule, Treasury will continue its
                                              terminated the program. At the end of                   location lacking the infrastructure to                research efforts to ensure that the needs
                                              2006, Treasury initiated a small Direct                 support electronic financial                          of all check recipients are adequately
                                              Express® card program to gauge the                      transactions. The waiver request is                   addressed and take appropriate action.

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                                              80330        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                 While recognizing that the results of                a Direct Express® card account. Since                 male and retired, less likely to have a
                                              the study is not generalizable to the U.S.              September 2008, the Social Security                   disability, less likely to receive some
                                              population, Treasury’s study,                           Administration has been offering new                  other form of government assistance,
                                              ‘‘Understanding the Dependence on                       Social Security and SSI recipients the                less likely to depend on their benefit as
                                              Paper Checks—A Study of Federal                         option of signing up for a Direct                     their sole source of income, and more
                                              Benefit Check Recipients and the                        Express® card, in addition to direct                  likely to be Caucasian. SSI recipients are
                                              Barriers to Boosting Direct Deposit’’                   deposit at a financial institution, at the            likely to be younger (average age 50),
                                              (2004), sheds some insight on                           time they enroll for benefits. Social                 less likely to have a bank account, more
                                              individuals who choose to receive                       Security is also allowing individuals to              likely to have a representative payee
                                              Federal benefits through paper checks                   sign up at local offices and by                       acting on their behalf, more likely to be
                                              (OMB Control No. 1510–0074). The                        telephone. The Direct Express® card has               African-American, more likely to be
                                              average age of a Social Security check                  been a major contributor in the decline               female, more likely to live in a city,
                                              recipient was 66 years old. Sixty-one                   of Social Security and SSI check                      more likely to receive some other form
                                              percent of the Social Security check                    payments over the last two years, but                 of benefit payment, and more likely to
                                              recipients were female; 39% were male.                  has had an especially significant impact              depend on others for assistance with
                                              Thirty-five percent of the Social                       on the SSI check payment volume. The                  daily chores and errands. Direct deposit
                                              Security check recipients had not                       average monthly payment amount for an                 recipients are more technologically
                                              completed high school, while 26% had                    SSI check recipient is $545, whereas the              savvy than either Social Security or SSI
                                              some college education or beyond. Sixty                 average monthly payment amount for a                  check recipients. They are more likely
                                              percent of Social Security recipients                   Social Security check recipient is $808               to own a cell phone or to use a personal
                                              were retired; 27% did not have bank                     for beneficiaries who receive their                   computer and the Internet. Compared
                                              accounts; 12% received some other form                  payment on the third of the month, and                with check recipients, direct deposit
                                              of government assistance; and, 27% had                  $915 for all other Social Security check              beneficiaries responding to the survey
                                              a disability.                                           recipients. There has been a year-over-               were more likely to have confidence in
                                                 Comparatively, the average age of a                  year decrease in SSI checks of 6.91% in               banks, to believe that computers are
                                              SSI check recipient was 50. Seventy                     March 2010, compared to March 2009,                   secure, and to feel that ATMs are safe.
                                              percent of the SSI check recipients were                which is significantly greater than the                  Despite these demographic
                                              female; 30% were male. Fifty-one                        3.81% decline in March 2009, compared                 differences, Treasury has found that the
                                              percent of the SSI recipients had not                   to March 2008. The number of all                      reasons for resistance to direct deposit
                                              completed high school, while 15% had                    nontax checks decreased from 148                      among check recipients have remained
                                              some college education or beyond. Only                  million in fiscal year 2009 to 143                    fairly constant over the years. Many
                                              21% of SSI recipients were retired; 68%                 million in fiscal year 2010.                          people express a desire to see the
                                              did not have a bank account; 42%                                                                              physical payment in check form. Others
                                              received some other form of government                  4. Assessment of Potential Costs and                  feel a greater sense of control when
                                              assistance, and 42% had a disability.                   Benefits                                              handling checks, and many, especially
                                                 According to Treasury research in                    a. Potential Costs                                    those receiving SSI, believe that
                                              2007 (SSA & SSI Check Recipient                                                                               receiving checks helps them to better
                                              Survey, OMB Control No. 1510–0074),                        There are potential short-term costs               manage their money and maintain their
                                              the check recipient population                          associated with the rulemaking. First,                standard of living. Barriers that need to
                                              demographics had not changed                            there are intangible emotional costs for              be overcome can be grouped into four
                                              significantly. The 2007 survey found                    individuals who are fearful or resistant              general categories: informational (those
                                              that 28% of Social Security check                       to direct deposit. In its 2004 research,              who do not understand how direct
                                              recipients did not have a bank account,                 Treasury learned that there are some key              deposit works); emotional (those who
                                              but that 9% more SSI recipients had                     differences among Social Security check               just prefer to receive checks); inertia
                                              bank accounts than in 2004 (in 2007,                    recipients, SSI check recipients, and                 (those who are receptive to electronic
                                              59% of SSI recipients did not have a                    those that receive their benefit payments             payments, but need to be motivated to
                                              bank account).                                          by direct deposit. Although these                     sign up); and mechanical (those who do
                                                 The above-referenced Treasury                        differences do not necessarily explain                not have bank accounts, and in some
                                              research shows that younger benefit                     why certain individuals are more                      cases, do not want bank accounts).
                                              recipients convert to direct deposit at a               resistant than others to receiving                       Treasury expects most recipients to
                                              faster rate than older benefit recipients.              payments by direct deposit, the data                  pay less for EFT payments than for
                                              Younger benefit recipients who have                     helps Treasury properly target its public             check payments. While some
                                              had their payments for less than a year                 education campaign. For example,                      individuals may be able to cash
                                              are signing up for direct deposit at rates              because the data described below shows                government checks at no cost, there are
                                              that far exceed their proportions in the                that Social Security check recipients are             often fees of up to $20 or more for
                                              population. Close to 50% of those Social                more likely than SSI check recipients to              cashing a check, according to Treasury’s
                                              Security and SSI check recipients who                   have a bank account, Treasury can                     research in 2007 (SSA & SSI Check
                                              converted to direct deposit had been                    direct its resources to informing Social              Recipient Survey, OMB Control No.
                                              receiving their benefits for less than one              Security check recipients about the                   1510–0074). The Direct Express® card
                                              year. Conversely, only 16% of Social                    benefits of directly depositing payments              program is structured so that there are
                                              Security check recipients and 15% of                    to an existing bank account. For SSI                  several ways for cardholders to access
                                              SSI recipients who had been receiving                   recipients who are less likely to have a              their funds and use their card without
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                                              their payments nine (9) years or longer                 bank account, Treasury can focus its                  paying any fees. The Direct Express®
                                              signed up for direct deposit.                           Direct Express® card information to that              card account fees compare favorably to
                                                 Treasury and the Social Security                     population.                                           those charged by financial service
                                              Administration found that, in fiscal year                  Compared to SSI check recipients,                  providers offering general purpose
                                              2010, 79.1% of new Social Security                      Social Security check recipients are                  reloadable cards, which often charge
                                              enrollees signed up for direct deposit                  older (average age 66), more likely to                fees for sign-up, monthly maintenance,
                                              either to an existing bank account or to                have a bank account, more likely to be                ATM withdrawals, balance inquiries,

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                                                                 Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                                                                    80331

                                              and customer service calls. Cardholders                                    surcharge-free ATM network, the                                            year. Importantly, there are no
                                              may use their card to make purchases                                       cardholder will not pay a surcharge fee                                    overdrafts, minimum balance
                                              and get cash back at a POS location                                        to an ATM owner. In addition, there are                                    requirements, or credit requirements to
                                              without paying a fee; obtain cash from                                     many other features that cardholders                                       sign up for the card. The few fees that
                                              any MasterCard® member bank teller                                         can access without paying a fee,                                           are charged for the card include $.90 for
                                              window without paying a fee; and make                                      including unlimited customer service                                       ATM transactions after free ATM
                                              one free ATM cash withdrawal for each                                      calls (with or without live operators);                                    transactions are used, $.75 per month
                                              benefit payment deposited to the card                                      optional automated low balance alerts                                      for optional paper statements, fees for
                                              account (the free ATM cash withdrawal                                      or deposit notifications; and online or                                    using the card outside the United States,
                                              is available until the end of the month                                    telephone transaction history and other                                    and replacement cards beyond the free
                                              following the month of deposit). If the                                    account information. There is no fee to                                    replacement card. By way of
                                              cardholder makes a withdrawal using an                                     sign up for the card, close the account,                                   illustration, sample Direct Express®
                                              ATM within the Direct Express®                                             or to obtain one replacement card per                                      cardholder scenarios follow:

                                                                                                    FIG. 2—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 1
                                                                                                  Direct Express® Card                                                                                                                                     (with ATM
                                                                                                                                                                                                            (with no ATM
                                                                                                       transactions                                                                                                                                        surcharge
                                                                                                                                                                                                             surcharge)                                    of $2.33) 5

                                              1st ATM withdrawal (free with 1st deposit) ...........................................................................                      FREE       ..............................................               $2.33
                                              Three bill payments ................................................................................................................        FREE       ..............................................               FREE
                                              Eight POS transactions ..........................................................................................................           FREE       ..............................................               FREE
                                              Weekly Balance Inquiry .........................................................................................................            FREE       ..............................................               FREE
                                              One Deposit ...........................................................................................................................     FREE       ..............................................               FREE

                                                    Total Monthly Fee ...........................................................................................................         FREE ..............................................                      2.33

                                                                                                    FIG. 3—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 2
                                                                                                                 Direct Express® Card                                                                                                                      (with ATM
                                                                                                                                                                                                                             (with no ATM
                                                                                                                      transactions                                                                                                                         surcharge
                                                                                                                                                                                                                              surcharge)                    of $2.33)

                                              1st ATM withdrawal (free with 1st deposit) .............................................................................................................                                    FREE                    $2.33
                                              2nd ATM withdrawal ................................................................................................................................................                          $.90                    3.23
                                              Eight POS transactions ...........................................................................................................................................                          FREE                    FREE
                                              Weekly Balance Inquiry ...........................................................................................................................................                          FREE                    FREE
                                              One Deposit .............................................................................................................................................................                   FREE                    FREE

                                                    Total Monthly Fee .............................................................................................................................................                            .90                 5.56

                                                                                                    FIG. 4—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 3
                                                                                                 Direct Express® Card                                                                                      (with no ATM                                    (with ATM
                                                                                                      transactions                                                                                                                                         surcharge
                                                                                                                                                                                                            surcharge)                                      of $2.33)

                                              1st ATM withdrawal (free with 1st deposit) ..........................................................................                      FREE       ................................................              $2.33
                                              Bank Teller Cash Withdrawal ...............................................................................................                FREE       ................................................              FREE
                                              Eight POS transactions ........................................................................................................            FREE       ................................................              FREE
                                              Weekly Balance Inquiry ........................................................................................................            FREE       ................................................              FREE
                                              One Deposit .........................................................................................................................      FREE       ................................................              FREE

                                                    Total Monthly Fee .........................................................................................................          FREE ................................................                     2.33

                                                                                                    FIG. 5—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 4
                                                                                             Direct Express® Card                                                                                                                                         (with ATM
                                                                                                                                                                                                      (with no ATM
                                                                                                  transactions                                                                                                                                            surcharge
                                                                                                                                                                                                       surcharge)                                           $2.33)
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                                              1st ATM withdrawal (free with 1st deposit) ..................................................................                      FREE .....................................................            $2.33.
                                              Purchase Money Order for $700 at US Post Office (USPS) to pay rent ....................                                            $1.50 (to USPS) ....................................                  1.50 (to USPS).
                                              Eight POS transactions ................................................................................................            FREE .....................................................            FREE.
                                              Weekly Balance Inquiry ................................................................................................            FREE .....................................................            FREE.

                                                5 The 2010 checking study cited an                
                                              average $2.33 surcharge fee per withdrawal (http://                        a-bigger-bite-with-atm-fees.aspx).

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                                              80332              Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                                                                        FIG. 5—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 4—Continued
                                                                                             Direct Express® Card                                                                                                                                  (with ATM
                                                                                                                                                                                                     (with no ATM
                                                                                                  transactions                                                                                                                                     surcharge
                                                                                                                                                                                                      surcharge)                                     $2.33)

                                              One Deposit ..................................................................................................................     FREE .....................................................     FREE.

                                                    Total Monthly Fee .................................................................................................          $1.50 ......................................................   $3.83.

                                                                                                    FIG. 6—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 5
                                                                                                                 Direct Express® Card                                                                                                               (with ATM
                                                                                                                                                                                                                          (with no ATM
                                                                                                                      transactions                                                                                                                  surcharge
                                                                                                                                                                                                                           surcharge)                of $2.33)

                                              1st ATM withdrawal (free with 1st deposit) .............................................................................................................                                FREE                $2.33
                                              5 additional ATM withdrawals ..................................................................................................................................                         $4.50               16.15
                                              One POS transaction ...............................................................................................................................................                     FREE                FREE
                                              Weekly Balance Inquiry ...........................................................................................................................................                      FREE                FREE
                                              One Deposit .............................................................................................................................................................               FREE                FREE

                                                    Total Monthly Fee .............................................................................................................................................                      4.50             18.48

                                                 Even in Scenario 5, which is not the                                    initial costs for customer service                                         only one percentage point since 2004.
                                              recommended way to use the Direct                                          training for customer service                                              While Treasury research shows that
                                              Express® card, a cardholder incurs less                                    representatives responsible for                                            direct deposit education has a positive
                                              expense than what some beneficiaries                                       educating new enrollees and current                                        impact on the likelihood of a check
                                              pay to cash their Treasury checks.                                         check recipients about the new rules,                                      recipient to switch to direct deposit, the
                                              Treasury expects that, with its expanded                                   but these costs are expected to be more                                    effort is time consuming,
                                              cardholder education, fees incurred                                        than offset by the cost savings expected                                   administratively burdensome, costly,
                                              under Scenarios 1 through 4 would be                                       once customer service centers no longer                                    and resource-intensive. During the
                                              more typical.                                                              have to respond to individual inquiries                                    period July 2009 through June 2010,
                                                 Treasury expects to continue to incur                                   related to check problems. The one-time                                    Treasury spent $4.5 million on its Go
                                              expenditures for the public education                                      costs to increase customer service                                         Direct® campaign, and expects to spend
                                              related to the implementation of the                                       capacity at the Treasury enrollment                                        another $4 million during the period
                                              new rule and to temporarily expand its                                     center (both telephone and online)                                         July 2010 through June 2011. Prior
                                              telephone and online direct deposit                                        could total as high as $20 million from                                    years’ costs have ranged from $5 million
                                              enrollment center to accommodate those                                     the effective date of the final rule                                       to $10 million for Treasury to establish
                                              converting from check payments to                                          through 2013. These costs include                                          and sustain its presence in target
                                              direct deposit to comply with the new                                      Treasury’s costs for processing waiver                                     markets to promote and encourage
                                              rule, whether the conversion is to an                                      requests. After 2013, Treasury expects                                     check recipients to convert to direct
                                              account at a financial institution or to a                                 these costs to drop off significantly.                                     deposit.
                                              Direct Express® card account. However,                                        The Go Direct® campaign, sponsored                                         Finally, and less directly, financial
                                              such expenditures will taper off after                                     by Treasury and the Federal Reserve                                        institutions may experience some costs
                                              the new rule is fully implemented, since                                   Banks, highlights the need for this                                        associated with converting their check
                                              direct deposit enrollment in the future                                    educational program. Despite the                                           recipient customers to direct deposit,
                                              will occur at the time of benefit                                          success of the campaign with more than                                     but Treasury does not expect this to be
                                              enrollment. Federal benefit agencies                                       five million direct deposit enrollments                                    a significant burden since financial
                                              may incur costs to temporarily expand                                      achieved since 2005 as a result of the                                     institutions already enroll a significant
                                              customer service centers to                                                campaign’s activities, an estimated 11                                     number of direct deposit recipients
                                              accommodate recipients’ questions and                                      million Federal benefit recipients still                                   through Treasury’s Go Direct®
                                              enrollments until the new rules are fully                                  receive checks each month. Treasury                                        campaign.
                                              implemented.                                                               research shows that the likelihood of
                                                                                                                                                                                                    b. Potential Benefits
                                                 Treasury expects increased costs for                                    current check recipients switching to
                                              its call center and Web site used to                                       direct deposit remained generally                                            The potential benefits of the rule to
                                              enroll check recipients into direct                                        unchanged from 2004 to 2007, with                                          the Government and taxpayers are
                                              deposit, although these costs are                                          55% of banked Social Security check                                        significant. As noted above, in fiscal
                                              expected to drop off after 2013, when                                      recipients surveyed in 2007 being very                                     year 2010, Treasury mailed more than
                                              the rule would be fully implemented.                                       unlikely to change to direct deposit,                                      130 million Federal benefit checks to
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                                              The education costs, estimated at $10                                      down from 59% in 2004. The                                                 approximately 11 million benefit
                                              million over the next three years, are                                     percentage of banked Social Security                                       recipients, resulting in extra costs to
                                              costs that Treasury would have incurred                                    check recipients likely to switch to                                       taxpayers of more than $117 million
                                              even without the rule, and for                                             direct deposit went from 27% in 2004                                       that would not have been incurred had
                                              potentially longer than the next three to                                  to 28% in 2007. Comparatively, 40% of                                      those payments been made by EFT.
                                              five years. Similarly, Treasury expects                                    banked SSI check recipients were likely                                    Without the rule change and given the
                                              benefit paying agencies to incur some                                      to switch to direct deposit in 2007, up                                    current trends, the number of checks

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                         80333

                                              that Treasury prints and mails each year                reported lost or stolen. In fiscal year                  Second, Treasury also considered
                                              is expected to increase significantly over              2009, Treasury investigated more than                 phasing in the elimination of the
                                              the coming years, primarily as a result                 70,000 cases of altered or fraudulently               individual EFT waivers over a longer
                                              of the aging of the baby boomer                         endorsed checks, totaling $64 million,                period of time. Treasury is concerned
                                              generation. Beginning in 2008, the first                and in fiscal year 2010, Treasury                     that such a delay results in additional
                                              wave of 78 million baby boomers                         investigated almost 50,000 cases,                     costs to individuals who will be delayed
                                              became eligible for Social Security                     totaling $93 million. When checks are                 in realizing the benefits of direct
                                              benefits. Even as the more                              misrouted, lost in the mail, stolen, or               deposit. Treasury intends to begin its
                                              technologically-savvy baby boomers                      fraudulently signed, Treasury must send               public education campaign immediately
                                              enter the rolls, while improving, the                   replacement checks to the recipient.                  upon the promulgation of this final rule.
                                              direct deposit rate for fiscal year 2010                This can result in a delay in payment,                Treasury will monitor the progress of its
                                              climbed no higher than 79.1% for new                    especially if fraud or counterfeiting is              campaign, and adjust the campaign as
                                              Social Security enrollees. With the                     involved, thereby creating a hardship                 necessary to ensure maximum
                                              increase in retiring baby boomers,                      for benefit recipients who rely on these              effectiveness. In addition, a delayed
                                              Treasury expects to issue approximately                 payments for basic necessities such as                implementation results in additional
                                              60 million new payments each year to                    food, rent, or medication. In contrast,               costs to the Government and taxpayers.
                                              approximately 5 million newly enrolled                  individuals receiving Federal payments                For every year that Treasury delays full
                                              recipients (based on Social Security                    electronically rarely have any delays or              implementation of the EFT rule, the
                                              Administration actuarial data). Of those                problems with their payments. Nine out                Government spends at least $117
                                              60 million payments, an estimated 9                     of ten problems with Treasury-                        million more for check payments than it
                                              million would be made by check based                    disbursed payments are related to paper               would otherwise spend if recipients
                                              on the current overall direct deposit/                  checks even though checks constitute                  were receiving EFT payments.
                                              check ratio (85 percent/15 percent) for                 only 19 percent of all Treasury-                         Finally, Treasury considered
                                              Social Security payments. By 2020, the                  disbursed payments made by the                        eliminating all EFT waivers, and
                                              Social Security Administration projects                 Government.                                           whether to institute a formal application
                                              there will be 18.6 million more Social                     These projected savings also do not                process for individuals seeking to
                                              Security beneficiaries than in fiscal year              account for the costs that would no                   invoke a waiver to the EFT requirement.
                                              2009, which would result in more than                   longer be incurred by banks and credit                Treasury is concerned that such an
                                              223 million additional payments each                                                                          approach would require the
                                                                                                      unions for cashing checks and
                                              year. At the current direct deposit/check                                                                     unnecessary development of a new
                                                                                                      reimbursing the Government when there
                                              ratio, this would mean 33.5 million                                                                           bureaucratic infrastructure to process
                                                                                                      are alterations, forgeries, or
                                              additional checks each year beginning                                                                         the applications, and would impose
                                                                                                      unauthorized indorsements of Federal
                                              in 2020, at a cost of $31 million each                                                                        administrative burdens on both
                                                                                                      benefit checks. In fiscal year 2009, it
                                              year, leading to a total annual cost of                                                                       Government agencies and benefit
                                                                                                      cost the banking industry $69.3 million
                                              more than $156 million more than if                                                                           recipients. After reviewing comments
                                                                                                      to reimburse the Treasury for checks
                                              those payments were made by direct                                                                            received in response to the NPRM,
                                                                                                      that had been fraudulently altered or
                                              deposit.                                                                                                      Treasury retained waivers for recipients
                                                                                                      counterfeited, or contained a forged or
                                                 These projected cost savings do not                                                                        born prior to May 1, 1921 who are
                                                                                                      unauthorized indorsement. In fiscal year              receiving Federal payments by check on
                                              take into account future increased costs
                                              in postage, paper, and salaries; the cost               2010, these costs increased to $88                    March 1, 2013, for payments that are not
                                              of issuing benefit checks other than                    million.                                              eligible for deposit to a Direct Express®
                                              Social Security and SSI; or the costs                   5. Alternative Approaches Considered                  card account, and for recipients whose
                                              agencies incur in handling inquiries and                                                                      Direct Express® card has been
                                              authorizing replacement checks. For                        Treasury considered three alternative              suspended or cancelled. In addition,
                                              example, the Social Security                            approaches to achieving the benefits of               this rule allows a payment recipient to
                                              Administration expects administrative                   direct deposit other than the approach                request a waiver from the EFT
                                              savings resulting from a drop in non-                   described in this rulemaking notice.                  requirement on the basis that EFT
                                              receipt and lost check actions. The                        First, Treasury could have eliminated              would impose a hardship because of the
                                              Social Security Administration also                     the individual EFT waivers sooner for                 recipient’s inability to manage an
                                              expects to save money by eliminating                    everyone, i.e., eliminate the waivers for             account at a financial institution or a
                                              the ‘‘Payment Delivery Alert System,’’                  all benefit recipients on the same                    Direct Express® card account due to a
                                              which is a joint effort among the Social                effective date, but Treasury was                      mental impairment, or because the
                                              Security Administration, Treasury, and                  concerned about the impact of such a                  recipient lives in a remote geographic
                                              the U.S. Postal Service to locate and                   rule on payment recipients if the                     area lacking the infrastructure to
                                              deliver delayed Social Security and SSI                 amount of time to educate the public                  support electronic financial
                                              checks.                                                 about the rule’s requirements and                     transactions. Recipients requesting
                                                 Those who receive their payments by                  benefits was inadequate. It is important              waivers are required to submit a
                                              direct deposit do not have to worry                     for Treasury and benefit agencies to be               certification with a short statement
                                              about a lost or stolen check, or carrying               prepared to respond to recipients’                    explaining why they need a waiver. The
                                              around large amounts of cash that can                   inquiries about the new rules, which                  certification will be signed by the
                                              be easily lost or stolen. Each year,                    requires sufficient time to train agency              individual requesting the waiver before
                                              approximately half a million                            customer service representatives,                     a notary public, or in such form that
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                                              individuals call Treasury to request                    educate those affected by the new rules,              Treasury may prescribe. The waiver
                                              claims packages related to problems                     and to implement any process changes                  request is considered effective unless
                                              with check payments. For example, in                    that may be required. Treasury will                   Treasury rejects the request.
                                              fiscal year 2009, more than 670,000                     work closely with the agencies to ensure                 The availability of the Direct Express®
                                              Social Security and SSI checks were                     that implementation requirements are                  card negates the need for other
                                              reported lost or stolen, and in fiscal year             understood and can be addressed in the                individual waivers. Agencies retain the
                                              2010, more than 540,000 checks were                     time frame in the rule.                               ability to waive EFT requirements for

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                                              80334        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              classes of payments for various reasons.                payments. This allows Federal payment                 ■ For the reasons set out in the
                                              Finally, in an unusual or exceptional                   recipients to receive multiple types of               preamble, 31 CFR part 208 is amended
                                              circumstance, the Secretary has the                     Federal payments to a single Direct                   to read as follows:
                                              authority to waive the EFT requirement,                 Express® card account.
                                              but Treasury does not anticipate                                                                              PART 208—MANAGEMENT OF
                                                                                                      b. Garnishment                                        FEDERAL AGENCY DISBURSEMENTS
                                              invoking this authority except in rare
                                              situations.                                               Treasury has also addressed the                     ■ 1. The authority citation for part 208
                                              6. Other Issues                                         concerns about the improper freezing                  continues to read as follows:
                                                                                                      and seizure of benefit funds exempt
                                              a. Financial Agent                                                                                              Authority: 5 U.S.C. 301; 12 U.S.C. 90, 265,
                                                                                                      from garnishment. Treasury and the four
                                                                                                                                                            266, 1767, 1789a; 31 U.S.C. 321, 3122, 3301,
                                                 Building on the ‘‘lessons learned’’ in               major benefit paying agencies—Office of               3302, 3303, 3321, 3325, 3327, 3328, 3332,
                                              previous programs and the Direct                        Personnel Management, Railroad                        3335, 3336, 6503; Pub. L. 104–208, 110 Stat.
                                              Express® card program pilot, Treasury                   Retirement Board, Social Security                     3009.
                                              issued an announcement in 2007                          Administration, and Department of
                                              seeking a financial institution qualified               Veterans Affairs—published a notice of                ■ 2. In § 208.2, redesignate paragraphs
                                              to act as a Treasury-designated financial               proposed rulemaking and will soon                     (c) through (o) as paragraphs (d) through
                                              agent to provide debit card services for                publish a joint rule. The rule will help              (p), respectively, add new paragraph (c),
                                              Federal benefit recipients nationwide,                  ensure that garnishment-exempt benefit                and revise redesignated paragraph (e) to
                                              through the Direct Express® card                        payments in an account are not                        read as follows:
                                              program. Treasury has unique legal                      improperly seized, and will protect                   § 208.2    Definitions.
                                              authority to designate a financial                      benefit recipients where benefit
                                                                                                                                                            *      *     *    *     *
                                              institution as its financial agent to                   payments are directly deposited to an
                                                                                                                                                               (c) Direct Express® card means the
                                              disburse Federal benefit payments                       account at a financial institution.
                                                                                                                                                            prepaid debit card issued to recipients
                                              electronically, which includes the                      Regulatory Flexibility Act Analysis                   of Federal benefits by a Financial Agent
                                              establishment of an account meeting                                                                           pursuant to requirements established by
                                              certain requirements, maintenance of an                   It is hereby certified that the rule will           Treasury.
                                              account, the receipt of Federal payments                not have a significant economic impact
                                                                                                      on a substantial number of small                      *      *     *    *     *
                                              electronically, and the provision of
                                                                                                      entities. The rule applies to individuals                (e) Electronic benefits transfer (EBT)
                                              access to funds in the account on the
                                                                                                      who receive Federal payments, and does                means the provision of Federal benefit,
                                              terms specified by Treasury. See 12
                                                                                                      not directly impact small entities.                   wage, salary, and retirement payments
                                              U.S.C. 90; 31 CFR 208.2. Fifteen
                                                                                                      Accordingly, a regulatory flexibility                 electronically, through disbursement by
                                              financial institutions responded, and
                                                                                                      analysis under the Regulatory                         a financial institution acting as a
                                              after careful review of the applications,
                                                                                                      Flexibility Act (5 U.S.C. 601 et seq.) is             Financial Agent. For purposes of this
                                              Treasury selected Comerica Bank as its
                                                                                                      not required.                                         part, EBT includes, but is not limited to,
                                              agent based on various criteria,
                                                                                                                                                            disbursement through an ETAsm, a
                                              including the proposed cardholder fees.                 Unfunded Mandates Act of 1995                         Federal/State EBT program, or a Direct
                                              Treasury considered, but rejected,
                                                                                                                                                            Express® card account.
                                              selecting multiple financial agents                        Section 202 of the Unfunded
                                              (although it has the option to do so in                 Mandates Reform Act of 1995, 2 U.S.C.                 *      *     *    *     *
                                              the future) primarily to ensure that the                1532 (Unfunded Mandates Act),                         ■ 3. Amend § 208.4 as follows:
                                              selected financial agent would be able to               requires that the agency prepare a                    ■ a. Remove the introductory text;
                                              maintain a sufficient volume of active                  budgetary impact statement before                     ■ b. Revise paragraph (a);
                                              accounts in order to cost-effectively                   promulgating any rule likely to result in             ■ c. Add paragraph (a)(1);
                                                                                                      a Federal mandate that may result in the              ■ d. Redesignate paragraphs (b) through
                                              sustain a program with the lowest
                                              possible cardholder fees. The financial                 expenditure by State, local, and tribal               (g) as paragraphs (a)(2) through (a)(7).
                                                                                                                                                            ■ e. In redesignated paragraph (a)(4),
                                              agent selection process used by                         governments, in the aggregate, or by the
                                              Treasury enabled Treasury to obtain                     private sector, of $100 million or more               further redesignate paragraphs (1) and
                                              debit card services with the most value                 in any one year. If a budgetary impact                (2) as paragraphs (a)(4)(i) and (ii);
                                                                                                                                                            ■ f. Revise redesignated paragraph
                                              for benefit recipients, including, among                statement is required, section 205 of the
                                                                                                      Unfunded Mandates Act also requires                   (a)(6); and
                                              other things, better consumer
                                                                                                                                                            ■ g. Add new paragraph (b).
                                              protections than those offered by most                  the agency to identify and consider a
                                                                                                                                                               The revisions and additions read as
                                              prepaid card products, a surcharge-free                 reasonable number of regulatory
                                              ATM network of more than 53,000                         alternatives before promulgating the
                                              surcharge-free ATMs, free low balance                   rule. We have determined that the rule                § 208.4    Waivers.
                                              alerts and deposit notification,                        will not result in expenditures by State,                (a) Payment by electronic funds
                                              unlimited free customer service calls,                  local, and tribal governments, in the                 transfer is not required in the following
                                              and the ability to use the debit card                   aggregate, or by the private sector, of               cases:
                                              product to access Federal benefit                       $100 million or more in any one year.                    (1) Where an individual:
                                              payments without incurring a fee.                       Accordingly, we have not prepared a                      (i) Is receiving a Federal payment by
                                              Treasury provides oversight to confirm                  budgetary impact statement or                         check prior to May 1, 2011. In such
                                              that its financial agent operates the                   specifically addressed any regulatory                 cases, the individual may continue to
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                                              Direct Express® card program to provide                 alternatives.                                         receive those payments by check
                                              maximum value at a reasonable cost to                   List of Subjects in 31 CFR Part 208                   through February 28, 2013;
                                              cardholders. The card program is now                                                                             (ii) Files a claim for a Federal
                                              available to recipients of Social                          Accounting, Automated Clearing                     payment prior to May 1, 2011, and
                                              Security, SSI, Veterans compensation                    House, Banks, Banking, Electronic funds               requests payment by check at the time
                                              and pension, civil service retirement,                  transfer, Financial institutions,                     he or she files the claim. In such cases,
                                              and railroad retirement benefit                         Government payments.                                  the individual may receive those

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                        80335

                                              payments by check through February                      EBT services within the meaning of                    that triggers automatic repayment from
                                              28, 2013;                                               Public Law 104–208.                                   the card account. In addition, the issuer
                                                 (iii) Was born prior to May 1, 1921,                 ■ 5. Revise § 208.7 to read as follows:               of the card account must provide the
                                              and is receiving payment by check on                                                                          cardholder with all of the consumer
                                              March 1, 2013;                                          § 208.7    Agency responsibilities.                   protections that apply to a payroll card
                                                 (iv) Receives a type of payment that                   An agency shall put into place                      under the Federal Reserve Board’s
                                              is not eligible for deposit to a Direct                 procedures that allow recipients to                   Regulation E.
                                              Express® card account. In such cases,                   provide the information necessary for                 DATES: This interim final rule is
                                              those payments are not required to be                   the delivery of payments to the recipient             effective January 21, 2011. Comments
                                              made by electronic funds transfer,                      by electronic funds transfer to an                    must be received on or before February
                                              unless and until such payments become                   account at the recipient’s financial                  22, 2011.
                                              eligible for deposit to a Direct Express®               institution or a Direct Express® card                 ADDRESSES: You can download this
                                              card account;                                           account.                                              interim final rule at the following Web
                                                 (v) Is ineligible for a Direct Express®              ■ 6. Revise § 208.8 to read as follows:               site: You
                                              card because of suspension or                                                                                 may also inspect and copy this interim
                                              cancellation of the individual’s card by                § 208.8    Recipient responsibilities.
                                                                                                                                                            final rule at: Treasury Department
                                              the Financial Agent;                                       Each recipient who is required to                  Library, Freedom of Information Act
                                                 (vi) Has filed a waiver request with                 receive payment by electronic funds                   (FOIA) Collection, Room 1428, Main
                                              Treasury certifying that payment by                     transfer shall provide the information                Treasury Building, 1500 Pennsylvania
                                              electronic funds transfer would impose                  necessary to effect payment by                        Avenue, NW., Washington, DC 20220.
                                              a hardship because of the individual’s                  electronic funds transfer.                            Before visiting, you must call (202) 622–
                                              inability to manage an account at a                     ■ 7. Revise the third sentence in                     0990 for an appointment.
                                              financial institution or a Direct Express®              § 208.11 to read as follows:                             In accordance with the U.S.
                                              card account due to a mental                                                                                  government’s eRulemaking Initiative,
                                              impairment, and Treasury has not                        § 208.11    Accounts for disaster victims.
                                                                                                                                                            FMS publishes rulemaking information
                                              rejected the request; or                                  * * * Treasury may deliver payments                 on
                                                 (vii) Has filed a waiver request with                to these accounts notwithstanding any        offers the public the
                                              Treasury certifying that payment by                     other payment instructions from the                   ability to comment on, search, and view
                                              electronic funds transfer would impose                  recipient and without regard to the                   publicly available rulemaking materials,
                                              a hardship because of the individual’s                  requirements of §§ 208.4 and 208.7 of                 including comments received on rules.
                                              inability to manage an account at a                     this part and § 210.5 of this chapter.                   Comments on this rule, identified by
                                              financial institution or a Direct Express®              * * *                                                 docket FISCAL–FMS–2010–0003,
                                              card account due to the individual                      ■ 8. Remove Appendix A and Appendix                   should only be submitted using the
                                              living in a remote geographic location                  B to Part 208.                                        following methods:
                                              lacking the infrastructure to support                                                                            • Federal eRulemaking Portal: http://
                                                                                                        Dated: December 16, 2010.
                                              electronic financial transactions, and                                                               Follow the
                                                                                                      Richard L. Gregg,
                                              Treasury has not rejected the request.                                                                        instructions on the Web site for
                                                                                                      Fiscal Assistant Secretary.
                                              *       *    *     *      *                                                                                   submitting comments.
                                                                                                      [FR Doc. 2010–32117 Filed 12–21–10; 8:45 am]
                                                 (6) Where the agency does not expect                                                                          • Mail: Walt Henderson, Financial
                                              to make payments to the same recipient                  BILLING CODE 4810–35–P                                Management Service, 401 14th Street,
                                              within a one-year period on a regular,                                                                        SW., Room 337, Washington, DC 20227.
                                              recurring basis and remittance data                                                                              The fax and e-mail methods of
                                                                                                      DEPARTMENT OF THE TREASURY                            submitting comments on rules to FMS
                                              explaining the purpose of the payment
                                              is not readily available from the                       Fiscal Service                                        have been decommissioned.
                                              recipient’s financial institution                                                                                Instructions: All submissions received
                                              receiving the payment by electronic                     31 CFR Part 210                                       must include the agency name
                                              funds transfer; and                                                                                           (‘‘Financial Management Service’’) and
                                                                                                      RIN 1510–AB24                                         docket number FISCAL–FMS–2010–
                                              *       *    *     *      *
                                                 (b) An individual who requests a                                                                           0003 for this rulemaking. In general,
                                                                                                      Federal Government Participation in                   comments received will be published on
                                              waiver under paragraphs (a)(1)(vi) and                  the Automated Clearing House
                                              (vii) of this section shall provide, in                                                              without change,
                                              writing, to Treasury a certification                    AGENCY:  Financial Management Service,                including any business or personal
                                              supporting that request, in such form                   Fiscal Service, Treasury.                             information provided. Comments
                                              that Treasury may prescribe. The                        ACTION: Interim final rule.
                                                                                                                                                            received, including attachments and
                                              individual shall attest to the                                                                                other supporting materials, are part of
                                              certification before a notary public, or                SUMMARY:   The Department of the                      the public record and subject to public
                                              otherwise file the certification in such                Treasury, Financial Management                        disclosure. Do not disclose any
                                              form that Treasury may prescribe.                       Service (FMS) is amending its                         information in your comment or
                                                                                                      regulation governing the use of the                   supporting materials that you consider
                                              ■ 4. Revise § 208.6 to read as follows:
                                                                                                      Automated Clearing House (ACH)                        confidential or inappropriate for public
                                              § 208.6   Availability of the Direct Express®           system by Federal agencies to permit the              disclosure.
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                                              Card.                                                   delivery of Federal payments to prepaid               FOR FURTHER INFORMATION CONTACT: Walt
                                                An individual who receives a Federal                  debit cards that meet certain criteria. To            Henderson, Director of the EFT Strategy
                                              benefit, wage, salary, or retirement                    be eligible to receive Federal payments,              Division, at (202) 874–6619 or
                                              payment shall be eligible to open a                     a card must provide the cardholder with     ; or
                                              Direct Express® card account. The                       pass-through deposit or share insurance               Natalie H. Diana, Senior Counsel, at
                                              offering of a Direct Express® card                      and the card account must not have an                 (202) 874–6680 or
                                              account shall constitute the provision of               attached line of credit or loan feature     

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                                              80336        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              SUPPLEMENTARY INFORMATION:      On May                  recipient and comes under the                         proposal to allow Federal payments to
                                              14, 2010, we published in the Federal                   recipient’s control.                                  be deposited to prepaid card accounts.
                                              Register, at 75 FR 27239, a Notice of                      The ‘‘in the name of the recipient’’                  Several commenters, including
                                              Proposed Rulemaking (NPRM)                              requirement has the effect of prohibiting             financial institutions and a nonprofit
                                              requesting comment on a number of                       payments to pooled accounts in which                  organization focusing on financial
                                              proposed amendments to 31 CFR part                      the recipient’s ownership interest is                 services for underserved consumers,
                                              210 (part 210). One of the proposed                     reflected in subacccount records.                     supported the proposed prepaid card
                                              amendments was to allow Federal                         Because prepaid card programs are                     exception to the ‘‘in the name of the
                                              payments to be delivered to prepaid                     generally set up using this kind of                   recipient’’ requirement. Those
                                              debit card or similar card accounts                     structure, the delivery of non-vendor                 supporting the exception noted that
                                              meeting certain consumer protection                     Federal payments to these types of cards              prepaid products can benefit Federal
                                              requirements. The NPRM also proposed                    currently is prohibited. We indicated in              payment recipients by expanding their
                                              to allow Federal payments to be                         the NPRM that we believed that the ‘‘in               options to receive Federal payments.
                                              delivered to certain kinds of accounts                  the name of the recipient’’ requirement               They pointed out that underbanked
                                              established by nursing facilities or                    may be impeding the use of prepaid                    Federal benefit recipients currently may
                                              religious orders. In addition, the NPRM                 card programs that may be beneficial to               use a variety of high cost financial
                                              addressed a number of other issues,                     the unbanked and underbanked                          service providers to cash their benefit
                                              including requirements adopted by                       populations. We therefore requested                   checks and pay their bills. These
                                              NACHA—The Electronic Payments                           comment on a proposal to create an                    commenters also noted that
                                              Association in 2009 to identify                         exception to the ‘‘in the name of the                 underbanked individuals may tend to
                                              international payment transactions                      recipient’’ requirement in order to allow             hold significant amounts of cash, which
                                              using a new Standard Entry Class and                    the delivery of Federal payments to                   may pose a security risk. According to
                                              proposed changes to the process for                     accounts accessed by prepaid and stored               these commenters, expanding Federal
                                              reclaiming post-death benefit payments                  value cards, provided that the card bears             benefit recipients’ ability to use prepaid
                                              from financial institutions.                            the cardholder’s name and meets the                   cards could alleviate many of these
                                                 In this Interim Final Rule, we are                   following requirements:                               concerns.
                                              finalizing the proposal in the NPRM to                     • The account accessed by the card is                 Most commenters supported our
                                              allow Federal payments to be delivered                  held at an insured depository institution             proposed requirement that the prepaid
                                              to prepaid card accounts meeting                        and meets the requirements for pass-                  cardholder’s balance be FDIC-insured
                                              certain consumer protection                             through insurance under 12 CFR part                   via the FDIC’s requirements for pass-
                                              requirements, with a number of changes                  330 such that the cardholder’s balance                through insurance. Comments regarding
                                              reflecting the comments that we                         is FDIC insured to the extent permitted               the proposed requirement that card
                                              received. Although we previously                        by law; and                                           accounts constitute ‘‘accounts’’ subject
                                              requested and received comment on the                      • The card account constitutes an                  to Regulation E were mixed. Several
                                              prepaid card proposal, we are issuing                   ‘‘account’’ as defined in 12 CFR 205.2(b)             commenters urged us to clarify the
                                              this rule as an interim final rule in order             such that the consumer protections of
                                                                                                                                                            proposed requirement that the
                                              to provide the public with an additional                Regulation E (12 CFR part 205), the rule
                                                                                                                                                            consumer protections of Regulation E
                                              opportunity to comment. This interim                    prescribed by the Board of Governors of
                                                                                                                                                            apply to the cardholder. Some
                                              final rule does not address any of the                  the Federal Reserve System (Board) to
                                                                                                                                                            commenters noted that currently the
                                              other proposed amendments to part 210                   implement the Electronic Fund Transfer
                                                                                                                                                            only type of prepaid cards to which
                                              that were published in the NPRM. The                    Act, apply to the cardholder.
                                                                                                                                                            Regulation E applies are payroll cards.
                                              final rule relating to those proposed                   We requested comment on the                           Since Regulation E does not currently
                                              amendments will be issued separately.                   implications of allowing delivery of                  apply to general use prepaid cards,
                                                                                                      Federal benefit and other non-vendor                  some commenters were uncertain as to
                                              I. Background and Summary of Prepaid
                                                                                                      payments to accounts that meet the                    whether only payroll cards would be
                                              Card Proposal
                                                                                                      requirements listed above. We further                 eligible for the proposed exception.
                                                 Title 31 CFR 210.5(a) generally                      noted that we are mindful of concerns
                                              requires that a Federal direct deposit                                                                        Therefore, commenters requested that
                                                                                                      that account arrangements may be                      the final rule clarify whether a prepaid
                                              payment be delivered to a deposit                       structured to facilitate automatic third
                                              account at a financial institution. For all                                                                   card that would fit within the exception
                                                                                                      party debits to a direct deposit account
                                              payments other than vendor payments,                                                                          proposed by Treasury must: (a) Actually
                                                                                                      (known in some States as payday
                                              the account at the financial institution                                                                      be subject to Regulation E (which, under
                                                                                                      lending) and similar arrangements that
                                              must be in the name of the recipient,                                                                         current law, would eliminate many or
                                                                                                      are inappropriate for Federal benefit
                                              unless one of the exceptions listed in                                                                        all general use prepaid products from
                                                                                                      recipients, and we particularly solicited
                                              the regulation applies. As explained in                                                                       eligibility under the proposed
                                                                                                      comment on whether the consumer
                                              the NPRM, our long-standing                                                                                   exception); or (b) provide protections
                                                                                                      protections required in the proposed
                                              interpretation of the words ‘‘in the name                                                                     similar or identical to those contained
                                                                                                      exception are adequate to prevent
                                              of the recipient’’ has been that the                                                                          in Regulation E.
                                                                                                      potential abuses.                                        Other commenters suggested that
                                              payment recipient’s name must appear
                                              in the account title. See, e.g., 64 FR                  II. Summary of Comments                               Regulation E should be extended to
                                              17480, referring to discussion at 63 FR                    We received 12 comments in response                cover all prepaid cards. We note that
                                              51490, 51499. The purpose of this                       to the NPRM. The commenters                           FMS does not have the authority to
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                                              requirement is to ensure that the                       represented a variety of perspectives.                amend Regulation E to cover prepaid
                                              payment reaches the intended recipient                  Comments were submitted by financial                  cards. That authority is assigned to the
                                              through delivery to a deposit account                   institutions, consumer advocacy groups,               Board.1 One commenter, referring to
                                              that the recipient owns and to which he                 industry associations, the Senate                        1 See 15 U.S.C. 1693b(a). This authority will be
                                              or she has unfettered access, so that the               Committee on Finance and the House                    transferred to the Bureau of Consumer Financial
                                              payment is not diverted to a creditor or                Committee on Ways and Means. Most                     Protection (CFPB) pursuant to Public Law 111–203,
                                              another third party before it reaches the               commenters commented on our                           § 1084.

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                         80337

                                              Regulation E, recommended that                          exercising any right of set-off against               we are not determining a fee structure
                                              ‘‘Treasury ensure that these protections                Federal benefit payments.                             or a range of acceptable fees, it is our
                                              are in place prior to allowing benefits to                 On the other hand, another consumer                expectation that the fees for such cards
                                              be deposited onto any cards.’’ It is                    advocacy organization supported the                   be transparent to the recipient,
                                              unclear whether the commenter                           prepaid card proposal without any                     adequately disclosed, and reasonable by
                                              intended to suggest that we delay                       changes, except that they urged us to                 industry standards. We note in this
                                              finalizing the prepaid card proposal                    craft language that ensures that                      regard that Regulation E requires that
                                              until the Board amends Regulation E to                  cardholders’ access to responsibly-                   fees be disclosed in a clear and readily
                                              address general use prepaid cards.                      designed credit is not restricted. This               understandable manner.
                                                                                                      organization recognized the concern                      In developing the interim final rule,
                                                 Some financial institutions                          that the accounts may be structured to
                                              commented that requiring issuers to                                                                           we have attempted to balance the need
                                                                                                      facilitate payday lending or other                    to maintain appropriate consumer
                                              voluntarily provide cardholders with                    similar arrangements that can result in
                                              the protections of Regulation E would                                                                         protections—consistent with the general
                                                                                                      unaffordable debt levels for Federal                  requirement of section 210.5(a)—with
                                              increase costs to cardholders and                       beneficiaries. However, they expressed                concerns expressed by different
                                              adversely impact innovation in the                      concern that a vaguely worded                         commenters. As originally proposed, the
                                              prepaid card industry. Several financial                restriction on credit features associated             exception would not have allowed the
                                              institutions suggested that FMS should                  with card accounts could prevent                      delivery of Federal payments to any
                                              require compliance with only some of                    Federal benefit recipients from                       general use prepaid card accounts,
                                              Regulation E’s protections, such as those               accessing forms of credit that are                    because prepaid card accounts (other
                                              providing protections for unauthorized                  responsibly structured.                               than payroll card accounts) are not
                                              transactions and those governing error                     Finally, some commenters expressed                 subject to Regulation E. Moreover,
                                              resolution processes. These commenters                  concern that we have not pursued
                                                                                                                                                            several commenters indicated that the
                                              recommended that certain Regulation E                   enforcement action against entities that
                                                                                                                                                            industry is unlikely to develop prepaid
                                              requirements, such as the periodic                      may be currently violating the ‘‘in the
                                                                                                                                                            cards that provide cardholders with all
                                              statement requirement, not be imposed.                  name of the recipient’’ requirements by
                                                                                                                                                            of the protections applicable to bank
                                                 In contrast, some other commenters                   allowing payments onto prepaid cards
                                                                                                                                                            deposit accounts. Finalizing the
                                              expressed the view that FDIC insurance                  or other accounts. One commenter
                                                                                                                                                            requirement that eligible cards be
                                              and Regulation E protections are not                    urged that, in order to allow for
                                                                                                                                                            covered by all of the protections that
                                                                                                      enforcement, the rule expressly provide
                                              sufficient to adequately protect                                                                              apply to an account under Regulation E
                                                                                                      that no institution (bank or nonbank)
                                              cardholders. These commenters                                                                                 would therefore have rendered the
                                                                                                      may accept direct deposit of Federal
                                              expressed concern that Federal benefits                                                                       exception pointless. Instead, we are
                                                                                                      payments to accounts that do not meet
                                              might be deposited onto prepaid and                                                                           requiring that the protections that apply
                                                                                                      the rule’s requirements.
                                              stored value products that carry high                                                                         to payroll card accounts under
                                              fees or other features, such as lines of                III. Interim Final Rule                               Regulation E be provided by the card
                                              credit, that may affect the amount of the                  We are revising the proposed prepaid               issuer. For cards that do not constitute
                                              Federal benefit ultimately available to                 card exception to address the comments                payroll cards as defined in Regulation E,
                                              the Federal benefit recipient. One                      we received. We are requiring that the                this means that the issuer must
                                              consumer advocacy organization                          funds accessible through the card be                  voluntarily provide the protections that
                                              requested that FMS impose a number of                   insured for the benefit of the cardholder             apply to payroll cards. This requirement
                                              additional requirements on prepaid                      in light of the fact that commenters                  ensures that cardholders will receive
                                              cards in order for them to be eligible for              uniformly supported such an insurance                 important consumer protections, while
                                              the exception to the ‘‘in the name of the               requirement, but we are broadening that               allowing prepaid card issuers to provide
                                              recipient’’ rule. Additional requirements               provision to allow for eligibility of                 account history and balance information
                                              that commenters proposed include:                       insurance by National Credit Union                    in lieu of sending periodic statements.
                                              Prohibiting the deposit of Federal                      Share Insurance Fund (NCUSIF). We are                    Several commenters pointed
                                              benefits onto prepaid cards or stored                   aware that NCUSIF pass-through                        specifically to Regulation E’s statement
                                              value cards that contain credit features;               insurance is available to beneficial                  requirements as a barrier to the
                                              regulating the fees associated with a                   owners of share accounts in certain                   provision of prepaid cards at a
                                              prepaid card or stored value card;                      circumstances, and we request comment                 reasonable cost. Regulation E provides
                                              imposing fee disclosure requirements;                   on whether credit unions have                         an alternative means of compliance for
                                              requiring prepaid card providers to                     established, or might establish in the                the statement requirements for payroll
                                              inform benefit recipients of the Direct                 future, prepaid card accounts that                    cards. Generally, statements need not be
                                              Express® prepaid card 2 or of any other                 provide pass-through insurance for                    sent if the issuer makes the consumer’s
                                              lower-cost options; and ensuring that                   members or non-members.                               account balance available by phone and
                                              card providers cannot collect fees or                      Because Regulation E currently does                also makes available an electronic
                                              repayment of any advances by                            not cover any prepaid cards other than                history of the consumer’s account
                                                                                                      payroll cards, we are making the                      transaction activity covering 60 days, as
                                                2 The Direct Express® prepaid card is a card          prepaid card exception available for                  well as a written transaction history
                                              established pursuant to terms and conditions            prepaid cards if the issuer voluntarily               covering 60 days upon the consumer’s
                                              approved by FMS. Direct Express® is a registered        provides all of the protections that                  request. See 12 CFR 205.18(b).
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                                              service mark of the Financial Management Service,
                                              U.S. Department of the Treasury. The Direct
                                                                                                      apply to payroll cards under Regulation               Consequently, the unauthorized
                                              Express® Debit MasterCard® card is issued by            E, as may be amended from time to                     transaction and error resolution
                                              Comerica Bank, pursuant to a license by MasterCard      time. In addition, we are adding a                    reporting deadlines for payroll cards are
                                              International Incorporated. MasterCard® and the         requirement that the prepaid card not                 triggered by the earlier of the sending of
                                              MasterCard® Brand Mark are registered trademarks
                                              of MasterCard International Incorporated. See, 75
                                                                                                      have an attached line of credit or loan               a written history reflecting the
                                              FR 34394, 34397–34398 (Jun. 17, 2010) for a             feature that triggers automatic                       transaction to the cardholder or the date
                                              description of the Direct Express® card.                repayment from the card account. While                the cardholder accesses the electronic

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                                              80338        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              account history reflecting the                          consumer on the consumer’s repayment                  those (1) who currently own bank
                                              transaction. See 12 CFR 205.18(c)(3), (4).              by preauthorized electronic fund                      accounts but prefer receiving payments
                                                 We considered developing a separate                  transfers, except for credit extended                 by check due to privacy reasons; and (2)
                                              framework of requirements based on                      under an overdraft credit plan or                     consumers who are unbanked or
                                              Regulation E to apply to prepaid cards                  specified to maintain a specified                     underbanked who receive Federal
                                              to which Federal payments are directly                  minimum balance in the consumer’s                     payments by check.
                                              deposited, but believe it would be                      account.’’ 12 CFR 205.10(e). Because
                                              detrimental to introduce a separate and                                                                       IV. Section-by-Section Analysis
                                                                                                      prepaid cards other than payroll cards
                                              unique framework of consumer                            are not currently covered by this                        Section 210.5(b)(5)(i) permits a
                                              protections for a relatively limited class              provision, we are restricting credit                  Federal payment to be deposited to an
                                              of transactions involving prepaid cards.                features associated with cards as a                   account accessed by a prepaid card that
                                              The payroll card requirements of                        condition for the receipt of Federal                  does not meet the ‘‘in the name of the
                                              Regulation E are well established and                   payments onto a card.                                 recipient’’ requirement if certain
                                              Treasury believes that, in general, the                    This restriction does not, however,                conditions are met. To be eligible to
                                              card industry already is familiar with                  bar the provision of credit to consumers              receive Federal payments, a prepaid
                                              appropriate measures necessary to meet                  who receive Federal payments via an                   card must meet four conditions. The
                                              those requirements. In this regard,                     eligible prepaid card product. Nor does               first condition, at § 210.5(b)(5)(i)(A), is
                                              Treasury believes that a number of                      this restriction absolutely bar a                     that the account be held at an insured
                                              prepaid cards already provide most,                     recipient-cardholder from repaying a                  financial institution. The second
                                              though not necessarily all, of the payroll              loan with an eligible prepaid card                    condition, at § 210.5(b)(5)(i)(B), requires
                                              card protections to cardholders. It is our              product to which Federal payments                     that the account be set up to meet the
                                              expectation that some issuers of existing               have been made. We request comment                    requirements for pass through deposit or
                                              prepaid cards will choose to modify the                 on whether we have struck the                         share insurance under 12 CFR part 330
                                              terms and conditions of the card                        appropriate balance, and on whether the               or 12 CFR part 745 such that the funds
                                              accounts to include all of the payroll                  wording of the prohibition is                         accessible through the card are insured
                                              card protections to cardholders, so that                sufficiently clear.                                   for the benefit of the Federal payment
                                              their cards will be eligible to receive                    To address comments made                           recipient. The third condition, at
                                              Federal payments. We also anticipate                    concerning the need to enforce the ‘‘in               § 210.5(b)(5)(i)(C), is that the account is
                                              that as new prepaid card programs are                   the name of the recipient’’ requirement,              not attached to a line of credit or loan
                                              developed, issuers seeking to make the                  we have added a provision to the                      agreement under which repayment from
                                              cards available to Federal payment                      exception to make it clear that no                    the card account is triggered by delivery
                                              recipients will structure their cards to                person or entity may issue a prepaid                  of the Federal payment. The fourth
                                              incorporate Regulation E’s payroll card                 card that accepts Federal payments in                 condition, at § 210.5(b)(5)(i)(D), requires
                                              protections. We request comment on the                  violation of the rule’s requirements, and             the issuer of the card to comply with all
                                              extent to which prepaid card issuers                    that any financial institution that holds             of the requirements, and to provide the
                                              will choose to do so. We also request                   an account for or on behalf of a prepaid              Federal payment recipient with the
                                              comment on the kinds of changes that                    card issuer to which Federal payments                 same consumer protections, that apply
                                              card issuers will undertake to provide                  are received is responsible for ensuring              to a payroll card under regulations
                                              the consumer protection specified in                    that the requirements of the exception                implementing the Electronic Fund
                                              this interim final rule and the costs                   are met. Treasury believes that, under                Transfer Act (EFTA), 15 U.S.C. 1693a(1).
                                              associated with adopting these changes.                 this provision, a violation of a                      The payroll card provisions of those
                                                 We have also attempted to balance the                requirement of the exception currently                regulations currently are located at 12
                                              competing comments made by                              would be enforceable by the appropriate               CFR 205.18 and are administered by the
                                              consumer organizations relating to                      Federal or State regulator (or both) to               Board of Governors of the Federal
                                              credit features associated with prepaid                 the extent that the regulator has                     Reserve System. This authority is
                                              cards. In order to prevent Federal                      jurisdiction over the person or entity,               scheduled to be transferred to the CFPB
                                              payments from being delivered to                        and in accordance with applicable law.                on the ‘‘designated transfer date,’’ which
                                              prepaid cards that have payday lending                  If we become aware that Federal                       is set as July 21, 2011.3
                                              or ‘‘account advance’’ features, we are                 payments are being deposited to prepaid                  With respect to the fourth condition,
                                              prohibiting prepaid cards from having                   cards that do not meet these                          § 210.5(b)(5)(i)(D) provides that the
                                              an attached line of credit if the credit                requirements, we will review the                      issuer must comply with the rules
                                              agreement allows for automatic                          situation and take appropriate action.                implementing the EFTA ‘‘as amended.’’
                                              repayment of a loan from a card account                 We may, for example, contact both the                 Treasury notes that, as of the designated
                                              triggered by the delivery of the Federal                issuer and the financial institution                  transfer date, the CFPB will be
                                              payment into the account. Our intention                 holding the issuer’s account, review the              authorized to prescribe rules, as well as
                                              is that this restriction will prevent                   terms and conditions of the card                      issue interpretations and guidance,
                                              arrangements in which a bank or                         account, and refer any violations of our              implementing the provisions of the
                                              creditor ‘‘advances’’ funds to a                        requirements to the appropriate                       EFTA (other than section 920 of the
                                              cardholder’s account, and then repays                   regulatory bodies, including the primary              EFTA).4 In addition, the requirements
                                              itself for the advance and any related                  regulator of the financial institution                under the EFTA are enforceable by the
                                              fees by taking some or all of the                       maintaining the card account for an                   Federal banking agencies, the Federal
                                              cardholder’s next deposit. Accounts                     issuer. Treasury requests comment on                  Trade Commission, and other Federal
emcdonald on DSK2BSOYB1PROD with RULES

                                              covered by Regulation E, including                      whether the wording of this provision is              agencies, including the CFPB, subject to
                                              payroll cards, are subject to restrictions              sufficiently clear.                                   several provisions of the Consumer
                                              on these types of arrangements through                     Treasury also seeks comment on
                                                                                                                                                              3 75 FR 57,252 (Sept. 20, 2010).
                                              Regulation E’s ‘‘compulsory use’’                       whether the consumer protections
                                                                                                                                                              4 See Public Law 111–203, § 1075 (amending the
                                              provision, which provides: ‘‘No                         provided by this interim final rule allow             EFTA to allow the Board to prescribe rules relating
                                              financial institution or other person may               for more novel uses of these cards by                 to interchange transaction fees for electronic debit
                                              condition an extension of credit to a                   consumers including, but not limited to,              transactions).

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                                                            Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                          80339

                                              Financial Protection Act of 2010.5                      protection. We seek comment on the                    Unfunded Mandates Act of 1995
                                              Treasury expects that, as the                           degree to which consumer protection is
                                                                                                      already provided by prepaid debit card                   Section 202 of the Unfunded
                                              requirements under the EFTA that apply
                                                                                                      issuers; the changes the issuers would                Mandates Reform Act of 1995, 2 U.S.C.
                                              to a payroll card account may be
                                                                                                      undertake to provide the level of                     1532 (Unfunded Mandates Act),
                                              amended or interpreted from time to
                                                                                                      consumer protection specified in this                 requires that the agency prepare a
                                              time, the CFPB and the agencies charged
                                                                                                      rulemaking; and the costs associated                  budgetary impact statement before
                                              with enforcing the EFTA—not
                                                                                                      with providing these additional                       promulgating any rule likely to result in
                                              Treasury—also will be in the position to
                                                                                                      protections.                                          a Federal mandate that may result in the
                                              administer the requirements under this
                                                                                                         In addition, Treasury believes that                expenditure by State, local, and tribal
                                              § 210.5(b)(5)(i)(D).
                                                 Section 210.5(b)(5)(ii) prohibits a                  once prepaid cards provide the                        governments, in the aggregate, or by the
                                              person or entity from issuing a card that               specified consumer protections, these                 private sector, of $100 million or more
                                              receives Federal payments in violation                  cards will be used in novel ways. An                  in any one year. If a budgetary impact
                                              of these requirements. Moreover, any                    example of this is receiving tax refunds              statement is required, section 205 of the
                                              financial institution violates this                     on these prepaid cards. Given that there              Unfunded Mandates Act also requires
                                              regulation if the institution maintains an              were approximately 45 million tax                     the agency to identify and consider a
                                              account for or on behalf of an issuer of                refund checks issued in FY 2010,                      reasonable number of regulatory
                                              a prepaid card that receives Federal                    assuming $1 per check processing fee on               alternatives before promulgating the
                                              payments if that issuer violates this                   the part of the Federal government, and               rule. We have determined that the
                                              subsection. As discussed above, we will                 assuming that all Federal tax refunds are             interim final rule will not result in
                                              refer violations of the regulation to the               processed through prepaid cards, the                  expenditures by State, local, and tribal
                                              appropriate regulatory bodies.                          reduction in costs to the Federal                     governments, in the aggregate, or by the
                                                 Section 210.5(b)(5)(iii) provides that               government for processing these checks                private sector, of $100 million or more
                                              the term ‘‘payroll card account’’ has the               could be approximately $45 million.                   in any one year. Accordingly, we have
                                              same meaning as that term is defined for                Therefore, Treasury seeks information                 not prepared a budgetary impact
                                              purposes of the rules implementing the                  from the public regarding other ways in               statement or specifically addressed any
                                              EFTA. The term ‘‘prepaid card’’ means a                 which these prepaid cards will be used                regulatory alternatives.
                                              card, code, or other means of access to                 to receive Federal payments across                    Authority To Issue Interim Final Rule
                                              funds of a recipient. The term ‘‘issuer’’               different types of consumers.
                                              means a person or entity that issues a                     Depending upon the comments                          The Administrative Procedure Act (5
                                              prepaid card.                                           received on the interim final rule,                   U.S.C. 551 et seq.) (APA) generally
                                                                                                      Treasury may produce a Regulatory                     requires public notice before
                                              V. Procedural Requirements                              Impact Analysis that comports with the                promulgation of regulations or a
                                              Request for Comment on Plain Language                   requirements of Circular A–4 in its final             showing of good cause that prior notice
                                                                                                      rule.                                                 and opportunity to comment are
                                                Executive Order 12866 requires each                                                                         unnecessary, impracticable, or contrary
                                              agency in the Executive branch to write                 Regulatory Flexibility Act Analysis
                                                                                                                                                            to the public interest. See 5 U.S.C.
                                              regulations that are simple and easy to                    Because no notice of proposed                      553(b). In accordance with section
                                              understand. We invite comment on how                    rulemaking is required, the provisions                553(b), FMS published a notice of
                                              to make the interim final rule clearer.                 of the Regulatory Flexibility Act (RFA)               proposed rulemaking requesting
                                              For example, you may wish to discuss:                   (5 U.S.C. 601 et seq.) do not apply. Even             comment on the prepaid card exception
                                              (1) Whether we have organized the                       if the RFA did apply, we have                         on May 14, 2010 (75 FR 27239) and
                                              material to suit your needs; (2) whether                considered the potential impact of this               FMS has considered the comments
                                              the requirements of the rule are clear; or              rule on small entities and hereby certify             received in developing this interim final
                                              (3) whether there is something else we                  that the interim final rule will not have             rule. FMS is issuing this rule for effect,
                                              could do to make this rule easier to                    a significant economic impact on a                    but also wishes to provide the public
                                              understand.                                             substantial number of small entities. We              another opportunity to comment on it.
                                                                                                      believe the rule will affect only a
                                              Regulatory Planning and Review                                                                                List of Subjects in 31 CFR Part 210
                                                                                                      limited number of small entities and
                                                The Office of Management and Budget                   that any economic impact will be
                                              (OMB)’s Office of Information and                                                                               Automated clearing house, Electronic
                                                                                                      minimal. Currently, Federal non-vendor                funds transfer, Financial institutions,
                                              Regulatory Affairs (OIRA) designates the                payments are not permitted to be
                                              interim final rule as a ‘‘significant                                                                         Fraud.
                                                                                                      delivered to general use prepaid cards.
                                              regulatory action’’ as defined in                       The interim final rule will allow                     ■ For the reasons set forth in the
                                              Executive Order 12866. While Treasury                   prepaid card issuers to develop and                   preamble, 31 CFR part 210 is amended
                                              has not conducted a regulatory impact                   offer to Federal benefit recipients                   as follows:
                                              analysis that comports with the                         prepaid cards that meet the rule’s
                                              requirements of OMB Circular A–4,                       requirements. Some prepaid card                       PART 210—FEDERAL GOVERNMENT
                                              Treasury is providing some preliminary                  issuers, regardless of size, may choose to            PARTICIPATION IN THE AUTOMATED
                                              information about the current industry                  meet the rule’s requirements, in which                CLEARING HOUSE
                                              practices, and potential costs and                      case they may be able to expand their                 ■ 1. The authority citation for part 210
                                              benefits of this rule. Treasury believes                customer base to include Federal benefit
emcdonald on DSK2BSOYB1PROD with RULES

                                                                                                                                                            continues to read as follows:
                                              that many issuers of the prepaid cards                  recipients. Any economic impact for
                                              are already providing some consumer                     these issuers is not expected to be                     Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31
                                                                                                                                                            U.S.C. 321, 3301, 3302, 3321, 3332, 3335, and
                                                                                                      significant. Accordingly, a regulatory
                                                5 See, e.g., Public Law 111–203, §§ 1025–1026                                                               3720.
                                                                                                      flexibility analysis under the RFA is not
                                              (governing the enforcement authorities of the CFPB
                                              and a prudential regulator with respect to a
                                                                                                      required. We invite comments regarding                ■ 2. In § 210.5, redesignate paragraph
                                              depository institution and, depending on the size of    any less burdensome alternatives to this              (b)(5) as (b)(6) and add a new paragraph
                                              that institution, its affiliates).                      rule.                                                 (b)(5) to read as follows:

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                                              80340        Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              § 210.5 Account requirements for Federal                ENVIRONMENTAL PROTECTION                              Environmental Protection Agency, 290
                                              payments.                                               AGENCY                                                Broadway, 25th Floor, New York, New
                                              *       *     *     *    *                                                                                    York 10007–1866, (212) 637–4249.
                                                                                                      40 CFR Part 52                                        SUPPLEMENTARY INFORMATION:
                                                 (b) * * *
                                                                                                      [EPA–R02–OAR–2010–0310, FRL–9214–4]                   Table of Contents
                                                 (5)(i) Where a Federal payment is to
                                              be deposited to an account accessed by                  Approval and Promulgation of                          I. What action is EPA taking?
                                              the recipient through a prepaid card that               Implementation Plans; New Jersey;                     II. What comments did EPA receive in
                                              meets the following requirements:                       8-Hour Ozone Control Measures                              response to its proposal?
                                                 (A) The account is held at an insured                                                                      III. What are EPA’s conclusions?
                                                                                                      AGENCY:  Environmental Protection                     IV. Statutory and Executive Order Reviews
                                              financial institution;
                                                                                                      Agency (EPA).
                                                 (B) The account is set up to meet the                                                                      I. What action is EPA taking?
                                                                                                      ACTION: Final rule.
                                              requirements for pass-through deposit                                                                            On April 9, 2009, New Jersey
                                              or share insurance such that the funds                  SUMMARY:    The Environmental Protection              submitted a proposed revision to the
                                              accessible through the card are insured                 Agency (EPA) is approving a request by                State Implementation Plan (SIP) that
                                              for the benefit of the recipient by the                 New Jersey to revise the State                        includes amendments to New Jersey
                                              Federal Deposit Insurance Corporation                   Implementation Plan (SIP) for ozone                   Administrative Code, Title 7: Chapter 27
                                              or the National Credit Union Share                      involving the control of volatile organic             (NJAC 7:27)
                                              Insurance Fund in accordance with                       compounds (VOCs). The SIP revision                    —Subchapter 24, ‘‘Prevention of Air
                                              applicable law (12 CFR part 330 or 12                   consists of two new rules, Subchapter                    Pollution From Consumer Products,’’
                                              CFR part 745);                                          26, ‘‘Prevention of Air Pollution From                —Subchapter 26, ‘‘Prevention of Air
                                                                                                      Adhesives, Sealants, Adhesive Primers                    Pollution From Adhesives, Sealants,
                                                 (C) The account is not attached to a                 and Sealant Primers,’’ and Subchapter
                                              line of credit or loan agreement under                                                                           Adhesive Primers and Sealant
                                                                                                      34, ‘‘TBAC Emissions Reporting,’’ (TBAC                  Primers,’’
                                              which repayment from the account is                     means tertiary butyl acetate or
                                              triggered upon delivery of the Federal                                                                        —Subchapter 34, ‘‘TBAC Emissions
                                                                                                      t-butyl acetate) and revisions to                        Reporting,’’ and
                                              payments; and                                           Subchapter 23, ‘‘Prevention of Air                    —Amending the definition of volatile
                                                 (D) The issuer of the card complies                  Pollution From Architectural Coatings,’’                 organic compound (VOC) throughout
                                              with all of the requirements, and                       Subchapter 24, ‘‘Prevention of Air                       NJAC 7:27.
                                              provides the holder of the card with all                Pollution From Consumer Products,’’
                                                                                                      and Subchapter 25, ‘‘Control and                      The revisions to Subchapter 24 expand
                                              of the consumer protections, that apply                                                                       the number of consumer product
                                              to a payroll card account under the rules               Prohibition of Air Pollution by
                                                                                                      Vehicular Fuels,’’ of the New Jersey                  categories that are regulated, and
                                              implementing the Electronic Fund                                                                              revised and improved the portable fuel
                                              Transfer Act, as amended.                               Administrative Code. The intended
                                                                                                      effect of this action is to approve control           container requirements. Subchapter 26
                                                 (ii) No person or entity may issue a                 strategies that will result in VOC                    is a new rule that regulates adhesives,
                                              prepaid card that receives Federal                      emission reductions that will help                    sealants, adhesive primers and sealant
                                              payments in violation of this subsection,               achieve attainment of the national                    primers that are sold in larger containers
                                              and no financial institution may                        ambient air quality standard for ozone.               and used primarily in commercial/
                                              maintain an account for or on behalf of                                                                       industrial applications, but includes
                                                                                                      DATES: Effective Date: This rule is                   residential applications of these
                                              an issuer of a prepaid card that receives               effective on January 21, 2011.
                                              Federal payments if the issuer violates                                                                       products, such as carpet and flooring
                                                                                                      ADDRESSES: EPA has established a                      installations and roofing installations.
                                              this paragraph.                                         docket for this action under Docket ID                Subchapter 34 is a new rule that
                                                 (iii) For the purposes of this                       No. EPA–R02–OAR–2010–0310. All                        establishes reporting requirements for
                                              paragraph (b)(5), the term—                             documents in the docket are listed on                 tertiary butyl acetate or t-butyl acetate
                                                 (A) ‘‘Payroll card account’’ shall have              the Web                    (TBAC) emissions. The definition of
                                              the same meaning as that term is                        site. Although listed in the index, some              VOC was revised throughout the New
                                              defined in the rules implementing the                   information is not publicly available,                Jersey rules to exclude TBAC from VOC
                                              Electronic Fund Transfer Act;                           e.g., CBI or other information whose                  emissions limitations or VOC content
                                                                                                      disclosure is restricted by statute.                  requirements, but requires that TBAC be
                                                 (B) ‘‘Prepaid card’’ means a card, code,             Certain other material, such as                       considered a VOC for purposes of
                                              or other means of access to funds of a                  copyrighted material, is not placed on                recordkeeping, emissions reporting,
                                              recipient; and                                          the Internet and will be publicly                     photochemical dispersion modeling and
                                                 (C) ‘‘Issuer’’ means a person or entity              available only in hard copy form.                     inventory requirements. These rules
                                              that issues a prepaid card.                             Publicly available docket materials are               complete the commitment New Jersey
                                              *       *     *     *    *                              available either electronically through               made as part of its RACT analysis and
                                                                                             or in hard                 1997 8-hour national ambient air quality
                                                Dated: December 16, 2010.                             copy at the Environmental Protection                  standard (NAAQS) ozone attainment
                                              Richard L. Gregg,                                       Agency, Region II Office, Air Programs                demonstration that EPA conditionally
                                              Fiscal Assistant Secretary.                             Branch, 290 Broadway, 25th Floor, New                 approved.
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                                              [FR Doc. 2010–32114 Filed 12–21–10; 8:45 am]            York, New York 10007–1866. This                          For additional information, see the
                                              BILLING CODE 4810–35–P
                                                                                                      Docket Facility is open from 8:30 a.m.                proposed rulemaking published on July
                                                                                                      to 4:30 p.m., Monday through Friday,                  22, 2010 (75 FR 42672) or the Technical
                                                                                                      excluding legal holidays. The Docket                  Support Document which is available
                                                                                                      telephone number is 212–637–4249.                     on line at
                                                                                                      FOR FURTHER INFORMATION CONTACT: Paul                 and entering the docket number EPA–
                                                                                                      Truchan, Air Programs Branch,                         R02–OAR–2010–0310.

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                                                           Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                          80341

                                              II. What comments did EPA receive in                    the SIP by providing additional VOC                   the criteria of the Clean Air Act.
                                              response to its proposal?                               emission reductions that the State                    Accordingly, this action merely
                                                 EPA received comments from two                       committed to achieve. Accordingly, EPA                approves State law as meeting Federal
                                              individuals on the July 22, 2010                        is approving the following rules as part              requirements and does not impose
                                              proposal. Comments supported the                        of the SIP: Subchapter 23, ‘‘Prevention               additional requirements beyond those
                                              efforts that New Jersey and the EPA                     of Air Pollution From Architectural                   imposed by State law. For that reason,
                                              were making in improving the air                        Coatings,’’ Subchapter 24, ‘‘Prevention of            this action:
                                                                                                      Air Pollution From Consumer                              • Is not a ‘‘significant regulatory
                                              quality and implementing new control
                                                                                                      Products,’’ Subchapter 25, ‘‘Control and              action’’ subject to review by the Office
                                              strategies. One comment went further,
                                                                                                      Prohibition of Air Pollution by                       of Management and Budget under
                                              recommending the need for measures
                                                                                                      Vehicular Fuels,’’ Subchapter 26,                     Executive Order 12866 (58 FR 51735,
                                              that are necessary for good health and
                                                                                                      ‘‘Prevention of Air Pollution From                    October 4, 1993);
                                              safe living.                                                                                                     • Does not impose an information
                                                                                                      Adhesives, Sealants, Adhesive Primers
                                                 The rules that EPA is approving fulfill
                                                                                                      and Sealant Primers,’’ and Subchapter                 collection burden under the provisions
                                              New Jersey’s commitment, made as part
                                                                                                      34, ‘‘TBAC Emissions Reporting,’’ of                  of the Paperwork Reduction Act
                                              of the reasonably available control
                                                                                                      NJAC 7:27. These rules became                         (44 U.S.C. 3501 et seq.);
                                              technology (RACT) analysis, and were                                                                             • Is certified as not having a
                                                                                                      operative on December 29, 2008. While
                                              used in the 8-hour ozone attainment                                                                           significant economic impact on a
                                                                                                      the changes made to the VOC definition
                                              demonstration to show that the SIP                                                                            substantial number of small entities
                                                                                                      in the other rules included in this SIP
                                              would attain the 8-hour ozone standard.                 revision are also acceptable, EPA will                under the Regulatory Flexibility Act
                                              These rule revisions and new rules                      act on those rules in separate Federal                (5 U.S.C. 601 et seq.);
                                              became operative in the State on                        Register actions at a later date. In                     • Does not contain any unfunded
                                              December 29, 2008 and have already                      addition, EPA finds that Subchapter 26                mandate or significantly or uniquely
                                              started to produce VOC emission                         fully addresses the Control Techniques                affect small governments, as described
                                              reductions.                                             Guideline document for Miscellaneous                  in the Unfunded Mandates Reform Act
                                                 Monitored air quality in New Jersey                  Industrial Adhesives dated September                  of 1995 (Pub. L. 104–4);
                                              supports the progress New Jersey has                    2008.                                                    • Does not have Federalism
                                              made in reducing emissions and                             EPA is also fully approving New                    implications as specified in Executive
                                              preliminary air quality data shows that                 Jersey’s RACT analysis as New Jersey                  Order 13132 (64 FR 43255, August 10,
                                              the New York-Northern New Jersey-                       has fulfilled its commitment to adopt                 1999);
                                              Long Island, NY-NJ-CT nonattainment                     the identified RACT rules, the last of                   • Is not an economically significant
                                              area is in attainment of the 8-hour ozone               which are being approved in this action.              regulatory action based on health or
                                              standard. For the Philadelphia-                         EPA will replace the conditionally                    safety risks subject to Executive Order
                                              Wilmington-Atlantic City, PA-NJ-MD-                     approved RACT analysis in the SIP with                13045 (62 FR 19885, April 23, 1997);
                                              DE nonattainment area, quality assured                  a full approval (40 CFR 52.1582). These                  • Is not a significant regulatory action
                                              air data for 2009 shows attainment,                     revisions meet the requirements of the                subject to Executive Order 13211 (66 FR
                                              making the area eligible for a one year                 Act and EPA’s regulations, and are                    28355, May 22, 2001);
                                              extension of the ozone attainment date.                 consistent with EPA’s guidance and                       • Is not subject to requirements of
                                              When EPA completes the                                  policy. EPA is taking this action                     Section 12(d) of the National
                                              reconsideration of the 2008 8-hour                      pursuant to section 110 and part D of                 Technology Transfer and Advancement
                                              ozone standard, New Jersey like other                   the Act and EPA’s regulations.                        Act of 1995 (15 U.S.C. 272 note) because
                                              States will need to reevaluate their SIP                                                                      application of those requirements would
                                              to determine if additional measures are                 Administrative Correction                             be inconsistent with the Clean Air Act;
                                              necessary to meet the new standard.                       On August 3, 2010, 75 FR 45483, EPA                 and
                                                 EPA thanks the commenters for                        took final action approving a New Jersey                 • Does not provide EPA with the
                                              supporting this rulemaking. In this                     SIP revision, which incorporated                      discretionary authority to address, as
                                              rulemaking EPA is only acting on the                    Subchapter 19, ‘‘Control and Prohibition              appropriate, disproportionate human
                                              April 9, 2009 SIP revision request,                     of Air Pollution from Oxides of                       health or environmental effects, using
                                              which added the above rules to the SIP                  Nitrogen’’ along with two                             practicable and legally permissible
                                              and was submitted to fulfill the                        Administrative Corrections to                         methods, under Executive Order 12898
                                              commitments New Jersey made as part                     Subchapter 19. 40 CFR 52.1570 and                     (59 FR 7629, February 16, 1994).
                                              of the 1997 8-hour ozone attainment                     52.1605 listed only the dates of the two                 In addition, this rule does not have
                                              plan. When EPA completes the                            administrative corrections, June 15,                  Tribal implications as specified by
                                              reconsideration of the 2008 8-hour                      2009 and July 6, 2009, but did not                    Executive Order 13175 (65 FR 67249,
                                              ozone standard and depending on the                     include the initial State effective date,             November 9, 2000), because the SIP is
                                              monitored ozone air quality at that time,               April 20, 2009. This correction will be               not approved to apply in Indian country
                                              New Jersey may need to reevaluate its                   made to 40 CFR 52.1570 and 40 CFR                     located in the State, and EPA notes that
                                              SIP to determine whether additional                     52.1605 by this action.                               it will not impose substantial direct
                                              control measures are necessary to attain                                                                      costs on Tribal governments or preempt
                                              the reconsidered NAAQS for ozone. At                    IV. Statutory and Executive Order                     Tribal law.
                                              this time New Jersey meets the Clean                    Reviews                                                  The Congressional Review Act, 5
                                              Air Act requirements for the ozone                        Under the Clean Air Act, the                        U.S.C. 801 et seq., as added by the Small
emcdonald on DSK2BSOYB1PROD with RULES

                                              RACT SIP.                                               Administrator is required to approve a                Business Regulatory Enforcement
                                                                                                      SIP submission that complies with the                 Fairness Act of 1996, generally provides
                                              III. What are EPA’s conclusions?                        provisions of the Act and applicable                  that before a rule may take effect, the
                                                EPA has evaluated New Jersey’s                        Federal regulations. 42 U.S.C. 7410(k);               agency promulgating the rule must
                                              submittal for consistency with the Act,                 40 CFR 52.02(a). Thus, in reviewing SIP               submit a rule report, which includes a
                                              EPA regulations, and EPA policy. The                    submissions, EPA’s role is to approve                 copy of the rule, to each House of the
                                              new control measures will strengthen                    State choices, provided that they meet                Congress and to the Comptroller General

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                                              80342         Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations

                                              of the United States. EPA will submit a                    (88) * * *                                         products: recordkeeping and reporting,
                                              report containing this action and other                    (i) Incorporation by reference:                    24.7 Chemically formulated consumer
                                              required information to the U.S. Senate,                   (A) New Jersey Administrative Code,                products: testing, 24.8 Portable fuel
                                              the U.S. House of Representatives, and                  Title 7, Chapter 27 (NJAC 7:27):                      containers and spill-proof spouts:
                                              the Comptroller General of the United                   Subchapter 4 ‘‘Control and Prohibition                certification requirements, 24.9 Portable
                                              States prior to publication of the rule in              of Particles from Combustion of Fuel’’                fuel containers and spill proof spouts:
                                              the Federal Register. A major rule                      with an effective date of April 20, 2009;             labeling, 24.10 Portable fuel containers
                                              cannot take effect until 60 days after it               Subchapter 10 ‘‘Sulfur in Solid Fuels’’               and spill proof spouts: recordkeeping
                                              is published in the Federal Register.                   with an effective date of April 20, 2009;             and reporting, 24.12 Penalties and other
                                              This action is not a ‘‘major rule’’ as                  Subchapter 16 ‘‘Control and Prohibition               requirements imposed for failure to
                                              defined by 5 U.S.C. 804(2).                             of Air Pollution by Volatile Organic                  comply; and
                                                 Under section 307(b)(1) of the Clean                 Compounds’’ with an effective date of                   (3) Subchapter 25, ‘‘Control and
                                              Air Act, petitions for judicial review of               April 20, 2009; Subchapter 19 ‘‘Control               Prohibition of Air Pollution by
                                              this action must be filed in the United                 and Prohibition of Air Pollution from                 Vehicular Fuels,’’ 25.1 Definitions.
                                              States Court of Appeals for the                         Oxides of Nitrogen’’ with an effective                  (C) Repeal to NJAC 7:27 with effective
                                              appropriate circuit by February 22,                     date of April 20, 2009 (including two                 date of December 1, 2008 and Operative
                                              2011. Filing a petition for                             Administrative Corrections published in
                                              reconsideration by the Administrator of                                                                       date of December 29, 2008: Subchapter
                                                                                                      the New Jersey Register on June 15,                   24, ‘‘Prevention of Air Pollution From
                                              this final rule does not affect the finality            2009 and July 6, 2009); and Subchapter
                                              of this action for the purposes of judicial                                                                   Consumer Products,’’ section 24.11
                                                                                                      21 ‘‘Emission Statements’’ with an                    Portable fuel containers and spill-proof
                                              review nor does it extend the time                      effective date of April 20, 2009.
                                              within which a petition for judicial                                                                          spouts: testing, repealed without
                                                                                                      *       *    *    *     *                             replacement and reserved.
                                              review may be filed, and shall not                         (89) A revision submitted on April 9,
                                              postpone the effectiveness of such rule                                                                         (ii) Additional information.
                                                                                                      2009, by the New Jersey Department of
                                              or action. This action may not be                       Environmental Protection (NJDEP) that                   (A) Letter dated April 9, 2009 from
                                              challenged later in proceedings to                      establishes new and revised control                   Acting Commissioner Mark N.
                                              enforce its requirements. (See section                  measures for achieving additional                     Mauriello, NJDEP, to George Pavlou
                                              307(b)(2)).                                             reductions of VOC emissions that will                 Acting Regional Administrator, EPA
                                                                                                      help achieve attainment of the national               Region 2, submitting the SIP revision
                                              List of Subjects in 40 CFR Part 52
                                                                                                      ambient air quality standard for ozone.               containing Subchapters 23, 24, 25, 26,
                                                Environmental protection, Air                                                                               and 34.
                                              pollution control, Incorporation by                        (i) Incorporation by reference:
                                              reference, Ozone, Reporting and                            (A) New rules contained in New                     ■ 3. Section 52.1582 is amended by
                                              recordkeeping requirements, Volatile                    Jersey Administrative Code, Title 7,                  revising paragraph (m)(6) to read as
                                              organic compounds.                                      Chapter 27 (NJAC 7:27) with effective                 follows:
                                                                                                      date of December 1, 2008 and Operative
                                               Dated: September 30, 2010.                                                                                   § 52.1582 Control strategy and
                                                                                                      date of December 29, 2008:
                                              George Pavlou,                                                                                                regulations: Ozone.
                                                                                                         (1) Subchapter 26, ‘‘Prevention of Air
                                              Acting Regional Administrator, Region 2.                Pollution From Adhesives, Sealants,                   *     *    *      *    *
                                              ■ Part 52, chapter I, title 40 of the Code              Adhesive Primers and Sealant Primers,’’                 (m) * * *
                                              of Federal Regulations is amended as                    and                                                     (6) The Statewide reasonably
                                              follows:                                                   (2) Subchapter 34, ‘‘TBAC Emissions                available control technology (RACT)
                                                                                                      Reporting.’’                                          analysis for the 8-hour ozone standard
                                              PART 52—[AMENDED]                                          (B) Amendments to NJAC 7:27 with                   included in the August 1, 2007 State
                                                                                                      effective date of December 1, 2008 and                Implementation Plan revision is
                                              ■ 1. The authority citation for part 52
                                                                                                      Operative date of December 29, 2008:                  approved based on EPA’s approval of
                                              continues to read as follows:
                                                                                                         (1) Subchapter 23, ‘‘Prevention of Air             the April 9, 2010 and April 21, 2010 SIP
                                                  Authority: 42 U.S.C. 7401 et seq.                   Pollution From Architectural Coatings,’’              revisions.
                                                                                                      23.2 Definitions;
                                              Subpart FF—New Jersey                                                                                         ■ 4. Section 52.1605 is amended by
                                                                                                         (2) Subchapter 24, ‘‘Prevention of Air
                                                                                                                                                            revising the table entries, under Title 7,
                                              ■ 2. Section 52.1570 is amended by                      Pollution From Consumer Products,’’
                                                                                                                                                            Chapter 27: for Subchapters 19, 23, 24,
                                              revising (c)(88)(i) and adding paragraph                24.1 Definitions, 24.2 Applicability,
                                                                                                                                                            25, and adding new entries for
                                              (c)(89) to read as follows:                             24.4 Chemically formulated consumer
                                                                                                                                                            Subchapters 26 and 34, in numerical
                                                                                                      products: standards, 24.5 Chemically
                                              § 52.1570    Identification of plan.
                                                                                                                                                            order to read as follows:
                                                                                                      formulated consumer products:
                                              *       *    *       *      *                           registration and labeling, 24.6                       § 52.1605 EPA-approved New Jersey
                                                  (c) * * *                                           Chemically formulated consumer                        regulations.

                                                               State regulation                         State effective date         EPA approved date                            Comments

                                                        *                       *                       *                      *                       *                      *              *
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                                              Title 7, Chapter 27.

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                                                                Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations                                                                             80343

                                                                    State regulation                                    State effective date                 EPA approved date                                     Comments

                                                        *                    *                                        *                     *                  *                                               *                   *
                                              Subchapter 19, ‘‘Control and Prohibition of Air                        April 20, 2009, as cor- August 3, 2010, 75 FR                              Subchapter 19 is approved into the SIP ex-
                                                Pollution from Oxides of Nitrogen.’’                                   rected on June 15,      45483.                                             cept for the following provisions: (1)
                                                                                                                       2009 and July 6,                                                           Phased      compliance     plan     through
                                                                                                                       2009.                                                                      repowering in § 19.21 that allows for imple-
                                                                                                                                                                                                  mentation beyond May 1, 1999; and (2)
                                                                                                                                                                                                  phased compliance plan through the use of
                                                                                                                                                                                                  innovative control technology in § 19.23
                                                                                                                                                                                                  that allows for implementation beyond May
                                                                                                                                                                                                  1, 1999.

                                                      *                    *                                          *                   *                    *                                               *                   *
                                              Subchapter 23, ‘‘Prevention of Air Pollution                           December 29, 2008 ... December 22, 2010,
                                                From Architectural Coatings.’’                                                               [insert Federal Reg-
                                                                                                                                             ister page citation].
                                              Subchapter 24, ‘‘Prevention of Air Pollution                           December 29, 2008 ... December 22, 2010,
                                                From Consumer Products.’’                                                                    [insert Federal Reg-
                                                                                                                                             ister page citation].
                                              Subchapter 25, ‘‘Control and Prohibition of Air                        December 29, 2008 ... December 22, 2010,
                                                Pollution by Vehicular Fuels.’’                                                              [insert Federal Reg-
                                                                                                                                             ister page citation].
                                              Subchapter 26, ‘‘Prevention of Air Pollution                           December 29, 2008 ... December 22, 2010,
                                                From Adhesives, Sealants, Adhesive Prim-                                                     [insert Federal Reg-
                                                ers and Sealant Primers.’’                                                                   ister page citation].

                                                      *                   *                                           *                   *                    *                                               *                   *
                                              Subchapter 34, ‘‘TBAC Emissions Reporting.’’                           December 29, 2008 ... December 22, 2010,
                                                                                                                                             [insert Federal Reg-
                                                                                                                                             ister page citation].

                                                           *                              *                             *                              *                                *                      *                   *

                                              [FR Doc. 2010–32034 Filed 12–21–10; 8:45 am]                           of the Federal Food, Drug, and Cosmetic                                   Certain other material, such as
                                              BILLING CODE 6560–50–P                                                 Act (FFDCA) requires EPA to establish                                     copyrighted material, is not placed on
                                                                                                                     a time-limited tolerance or exemption                                     the Internet and will be publicly
                                                                                                                     from the requirement for a tolerance for                                  available only in hard copy form.
                                              ENVIRONMENTAL PROTECTION                                               pesticide chemical residues in food that                                  Publicly available docket materials are
                                              AGENCY                                                                 will result from the use of a pesticide                                   available in the electronic docket at
                                                                                                                     under an emergency exemption granted                            , or, if only
                                              40 CFR Part 180                                                        by EPA.                                                                   available in hard copy, at the OPP
                                                                                                                     DATES: This regulation is effective                                       Regulatory Public Docket in Rm. S–
                                              [EPA–HQ–OPP–2010–0981; FRL–8857–5]                                     D