This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

58486

Vol. 65, No. 190

Friday, September 29, 2000

1Pub. L. 102–552, 106 Stat. 4102 (Oct. 28, 1992)

(codified as section 5.17(a)(2)(B), (a)(2)(C), (a)(13),

and (1)(14) of the Act.)

FARM CREDIT ADMINISTRATION

12 CFR Part 611

RIN 3052–AC00

Organization; Stockholder Vote on

Like Lending Authority

AGENCY: Farm Credit Administration.

ACTION: Reproposed rule; request for

comment.

SUMMARY: The Farm Credit

Administration (FCA or Agency) is

reproposing regulations to carry out

territorial consent requirements of the

Farm Credit Act of 1971, as amended

(Act). The reproposed rule requires

Farm Credit System (FCS or System)

institutions and stockholders in certain

areas of the country to vote on certain

charter amendments. The charter

amendments would provide eligible

customers the opportunity to obtain

lending services from more than one

association.

EFFECTIVE DATE: Please send your

comments to us by October 30, 2000.

ADDRESSES: You may send comments by

electronic mail to ‘‘reg-comm@fca.gov’’

or through the Pending Regulations

section of our Web site at

‘‘www.fca.gov.’’ You may also send

comments to Patricia W. DiMuzio,

Director, Regulation and Policy

Division, Office of Policy and Analysis,

Farm Credit Administration, 1501 Farm

Credit Drive, McLean, Virginia 22102–

5090 or fax them to (703) 734–5784. You

may review copies of all comments we

receive in the Office of Policy and

Analysis, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Eric Howard, Senior Policy Analyst,

Office of Policy and Analysis, Farm

Credit Administration, McLean, VA

22102–5090, (703) 883–4498, TDD

(703) 883–4444,

or

Joy Strickland, Senior Counsel, Office of

General Counsel, Farm Credit

Administration, McLean, VA 22102–

5090, (703) 883–4020, TDD (703) 883–

4444.

SUPPLEMENTARY INFORMATION:

I. Objectives

On March 8, 2000, we announced our

plan to remove geographic barriers by

considering applications for national

(also referred to as nationwide) charters

from direct lender associations. We

believe removing the geographic

constraints on System entities will

promote greater efficiency, improve

customer service, and ensure the System

continues to meet the current and future

needs of rural America. We also believe

national charters can improve the safety

and soundness of FCS associations’ loan

portfolios because they offer

opportunities to diversify commodity

and geographic concentration risks. We

issued guidance to System institutions

on May 3, 2000, explaining the process

of applying for a national charter. Before

we can grant national charters in all 50

states, however, the Act requires certain

associations to conduct stockholder

votes. Our objectives for this rule are to:

• Implement the stockholder

approvals required by statute; and

• Ensure stockholders have adequate

information before voting on

competitive charters.

II. Background

On May 9, 2000, we published a

proposed rule in the Federal Register to

amend part 611 of our regulations. See

65 FR 26776. Provisions in the Farm

Credit Banks and Associations Safety

and Soundness Act of 1992 (1992

amendments) require stockholder votes

on competitive charters involving

certain associations in Alabama,

Louisiana, Mississippi, and New

Mexico.1 Stockholder approval in these

states is necessary before we can act on

applications for competitive charters

that would include the territory served

by the covered associations. The

proposed rule required stockholders in

these four states to vote on competitive

charters that would allow eligible

customers to borrow from more than

one association.

We received 18 comment letters in

response to the proposed rule. Of this

total, we received comments from three

Farm Credit banks, three production

credit associations (PCAs), four Federal

land credit associations (FLCAs), two

agricultural credit associations, and one

jointly managed PCA/FLCA. We also

received a comment letter from a Farm

Credit Bank (FCB) and seven of its

affiliated associations. Several

commenters sent in more than one

comment.

The comment letters revealed several

views about the proposed requirements

for conducting stockholder votes on

competitive charters. One commenter

wrote to convey full support for the

proposed rule. Several commenters

expressed support for removing the

territorial restrictions that prevent

borrowers from choosing their System

lender, but objected to specific

requirements of the proposed rule.

Many of the commenters objected to the

short timeframes required to fulfill the

proposed voting procedures. Other

commenters raised concerns over the

impact added competition would have

on their institution and urged us to

withdraw or substantially revise the rule

to address these concerns. Finally, the

FCB of Texas and seven of its affiliated

associations (hereinafter referred to as

the FCB of Texas) questioned our

authority to issue a rule requiring

stockholder votes on competitive

charters.

We have decided to repropose this

regulation. On July 20, 2000, we

published a notice in the Federal

Register seeking comment on our May

3, 2000 publication entitled National

Charters (Booklet). See 65 FR 45066.

This Booklet is located on our Web site

at ‘‘www.fca.gov’’ and provides

guidance on the national charter

application process. Because we believe

that comments on the Booklet may be

relevant to this regulation, we have

decided to ask for further comment on

the regulation. In addition, we have

modified the proposed rule to address

many of the comments we received. The

modifications provide greater flexibility

for implementing the statutory voting

requirements. We believe that an

additional opportunity for comment

may be beneficial to the covered

associations and their stockholders.

III. The Reproposed Regulations—

General Comments

A. FCA Authority

The FCB of Texas commented the

FCA lacks the authority to force a vote

on competitive charters in the covered

areas. The commenters assert that

Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules 58487

nothing in the Act or its amendments

requires affected institutions to conduct

votes of their stockholders or boards of

directors. And, if a covered association

does not conduct a vote, the FCA would

not be able to approve a new or

amended competitive charter.

According to the commenters, the FCA’s

authority is merely to inform the

covered institutions of an overcharter

request. It would then be up to the

institutions’ boards of directors to

conduct the votes if they chose to do so.

Finally, the commenters assert that

conducting a vote on competitive

charters is a business decision that is

best left to the institution.

In response to these comments, we

observe that the FCA has broad

authority in section 5.17(a)(9) of the Act

to prescribe regulations necessary or

appropriate for carrying out the Act.

Section 5.17(a)(11) of the Act gives us

the authority to exercise such incidental

powers as may be necessary or

appropriate to fulfill our duties and

carry out the purposes of the Act. We

also have the authority in sections

2.0(b)(8)(D), 2.10(c)(4) and 5.17(a)(2)(A)

of the Act to issue and approve

amendments to Federal charters of

System institutions. This reproposed

rule is based on these authorities

implementing the requirements of the

1992 amendments.

The 1992 amendments state that FCA

cannot issue a charter amendment that

will result in competition for

institutions in covered areas unless

specified approvals take place. The Act

does not, however, contain any details

on how to fulfill the approvals. We

agree with the commenters that, as a

general principle, business decisions

should be left to System institutions.

However, the FCA wishes to implement

the Act in a way that ensures a fair

process for all institutions and

stockholders affected by this statutory

requirement.

Many institutions have submitted

charter amendment requests to us for

national territories. The Act requires

certain approvals before we can grant

national charter amendments. We

believe that it is critical that the

approval process be fair to both the

covered institutions that must approve

the charter amendments and the

institutions seeking the charter

amendments. To ensure an appropriate

approval process, we are implementing

a voting process through notice and

comment rulemaking. By taking this

action, all affected parties will have an

opportunity to provide input on the

process.

The commenters have suggested a

situation that provides strong

justification for FCA to adopt

regulations requiring a voting process to

implement the 1992 amendments. The

commenters suggest that covered

institutions could refuse to conduct a

stockholder vote. Under this scenario,

no competitive charter amendments in

the covered geographic areas would ever

be possible. This result would be unfair

to the System institutions seeking

national charters. It would also be unfair

to stockholders in the covered areas

who would be deprived of the

opportunity to express their views on

the merits of having other FCS lenders

serving their areas. This is clearly not

what Congress intended when it

adopted the 1992 amendments.

There is no evidence in the plain

language of the Act or the legislative

history that Congress intended to

prevent competitive charter

amendments from being granted. If

Congress intended to prevent

competitive charters, it could have done

so. There is also no evidence that

Congress intended to grant the covered

institutions the ability to prevent charter

amendments through inaction. Instead,

the remedy Congress granted the

covered institutions is to prevent

competition by disapproving charter

amendments through votes of the

stockholders and bank boards of

directors in all the covered areas and

association boards of directors in New

Mexico.

If the covered associations never act

on competitive charters, no other

associations could get charter

amendments for those areas. This would

unfairly restrict all the other

associations in the System from seeking

competitive charters in the covered

areas. In contrast, our approach in the

reproposed regulation is fair. Those

stockholders, associations, and banks

that do not want competitive charters in

the covered territories have a full and

fair remedy to prevent competitive

charters. They can vote to disapprove

the issuance of competitive charters.

This rule would ensure that a fair

approval process occurs.

B. Group Voting on National Charters

Some commenters stated that voting

on national charters as a group violates

the 1992 amendments. They contend

the 1992 amendments require a vote to

approve or disapprove each competitive

charter amendment. They believe that

the covered institutions should have an

opportunity to evaluate the identity of

the specific association requesting the

charter amendment and the impact of

granting it a competitive charter. The

commenters note our concern over the

cost and disruptive effect voting on each

charter request would entail.

In response, we note that the 1992

amendments do not specify the details

for stockholders, associations, and bank

boards of directors to approve or

disapprove competitive charter

amendments. Therefore, it is our

responsibility to specify how to carry

out the consent requirement in a

reasonable manner. We acknowledge

that there are other, less desirable

procedures, such as a separate vote on

each competitive charter amendment

that might comply with the Act. We

believe, however, the Act also permits

the covered institutions to conduct a

vote on whether any association charter

amendment can be granted. We further

believe that the intent of Congress,

which was to give covered institutions

the right to prevent their territories from

being overchartered without their

consent, is preserved by voting on

whether any association could be

chartered in the covered territories.

The commenters suggest that FCA

bundle many requests together to lessen

the burden of separate stockholder and

board votes. This suggestion presents

many practical problems considering

there are over 100 direct lender

associations in the System. Providing

specific association-by-association

information on each association seeking

a national charter would be

cumbersome and burdensome to both

the covered institutions and the voting

stockholders. We believe we are

proposing the most reasonable approach

by requiring covered institutions to

conduct votes on whether any

competitive charter may be granted in

their territories. If a covered institution

wishes to allow competitive charters for

certain associations but not others, it

can vote to disapprove the question in

the rule and conduct individual votes

on particular associations at a later time.

In the latter event, the institution can

make the business decision to conduct

votes on more than one association at a

time as it sees fit. However, we do not

believe it is appropriate for us to place

this added burden on covered

institutions and their stockholders.

C. Fairness of Process

Finally, one bank and three

associations commented that it is unfair

that a covered association could vote to

disapprove overchartering but remain

eligible to receive a nationwide charter.

The commenters encouraged us to

prevent covered associations from being

able to protect their current lending area

from competition by disapproving the

question, while at the same time

applying for a nationwide charter.

58488 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules

2Pub. L. 100–233, 101 Stat. 1568 (Jan. 6, 1988).

3The FCA Board stated on March 8, 2000, that

the second phase for implementing its philosophy

on intra-System competition would involve crosstitle authority for direct lender associations. The

FCA will provide guidance on cross-title authority

issues at a later date.

4H.R. Rep. No. 783, 102nd Cong., 2nd Sess. (Aug.

4, 1992).

5 Id.

6Until recently, the New Mexico FLCA was a

Federal land bank association that had no direct

lending authority of its own. It made loans only as

an agent of the FCB of Wichita.

7Section 5.17(a)(2)(B) and (a)(2)(C) of the Act.

8 Id.

We note that the commenters make

compelling points on this issue. We did

not, however, make this change in the

reproposed regulations for several

reasons. First, the 1992 amendments

grant certain rights to the covered

associations that the Act does not

provide to the rest of the FCS

associations. We believe implementing

the commenters’ suggestions could be

viewed as penalizing the covered

associations for exercising their

statutory protections. Further, limiting

those eligible for national charters

would be inconsistent with the Board’s

philosophy to ensure greater

opportunities for agricultural and rural

borrowers.

IV. The Reproposed Regulations—

Section-by-Section Discussion

A. Section 611.1150—Definitions

We received three comments

concerning which institutions should be

covered by the voting requirements. The

FCB of Wichita commented that Farm

Credit of New Mexico, FLCA, (New

Mexico FLCA), should be a covered

association. The New Mexico FLCA

commented that we should include it as

a covered association and that it

supports the comments of the FCB of

Wichita. The bank stated that the New

Mexico FLCA exercises lending

authority in territory that was served by

associations that were reassigned

pursuant to section 433 of the

Agricultural Credit Act of 1987 (1987

Act).2 Thus, the bank concluded that the

New Mexico FLCA comes within the

protections of the 1992 amendments.

The bank believes that excluding the

New Mexico FLCA could result in

unfair competition from other New

Mexico associations should cross-title

lending authority be implemented.3

We did not include the New Mexico

FLCA as a covered association because

we believe the 1992 amendments apply

only to associations that were

reassigned. The language of the 1992

amendments must be interpreted

consistent with its legislative history.

The legislative history clarifies that

Congress intended the amendments to

only apply to those ‘‘associations

availing themselves of the opportunity

to be reassigned.’’ 4 Congress stated that:

‘‘The amendment is intended only to

assure the farmer-borrowers who own

the reassigned associations that their

associations would not be overchartered

without their consent.’’ 5 Thus, the

legislative history demonstrates that

section 5.17(a)(13) and (14) does not

apply to the New Mexico FLCA.

After the PCAs changed their

affiliation from the FCB of Wichita to

the FCB of Texas, the FCB of Texas’

charter was amended to include shortand intermediate-term lending in New

Mexico, but that authority was not

deleted from the FCB of Wichita’s

charter. The overlapping bank charters

created the potential for PCA

overchartering that the 1992

amendments were designed to address.

At the time the 1992 amendments were

enacted, there was no potential for

overchartering the New Mexico FLCA

because it was not reassigned and the

FCB of Wichita continued to have the

only long-term lending charter for that

territory. 6 Therefore, we believe

Congress clearly intended to protect

only the reassigned New Mexico PCAs

from overchartering without consent.

We also received comments from the

Northwest Louisiana PCA and the FCB

of Texas that the rule should include the

Northwest Louisiana PCA as a covered

association. The commenters maintain

that the 1992 amendments were

intended to protect those areas that

suffered because of the failure and

subsequent receivership of the former

Federal Intermediate Credit Bank of

Jackson (FICBJ). Because the Northwest

Louisiana PCA is included in that

geographic area, it should not be

overchartered without its consent. They

further maintain that excluding the PCA

merely because it reassigned to the FCB

of Texas would unfairly deny it this

statutory protection.

This position is contrary to the

language of the 1992 amendments.

Congress carefully crafted a description

of the area where the protections would

apply. Section 5.17(a)(2)(B) applies only

to the geographic area where due to the

failure of the FICBJ to merge, the FICBJ

or its successor (AgFirst FCB) is

chartered to provide short-and

intermediate-term credit, and a

neighboring FCB that is not the FICBJ’s

successor (FCB of Texas) is chartered to

provide long-term credit. Northwest

Louisiana PCA was reassigned from the

FICBJ to the FCB of Texas in 1993.

However, because the reassignment was

not under section 433 of the 1987 Act,

the PCA’s territory was deleted from the

FICBJ’s charter. The FCB of Texas is

currently chartered to provide long-term

credit in the geographic area served by

Northwest Louisiana PCA. Neither the

FICBJ nor its successor (AgFirst FCB) is

chartered to provide short-and

intermediate-term credit in this area. As

a result, Northwest Louisiana PCA is not

entitled to the protections of the 1992

amendments.

Finally, one association commented

the 1992 amendments should not apply

in areas where the FCB of Texas no

longer provides direct long-term credit

because it has transferred its long-term

lending authority to the FLCAs. Thus,

the commenter believes that the

protections should not apply to the

FLCAs and should only apply to the

remaining Federal land bank association

(FLBA), the Federal Land Bank

Association of South Mississippi. In

response, we note that under section

5.17(a)(2)(C) the protections apply in the

area where the FCB of Texas ‘‘is

chartered to provide long-term credit.’’ 7

As the commenters correctly note, the

FCB of Texas has transferred direct

lending authority to the FLCAs in the

former Jackson district and no longer

provides credit directly.8 Although the

direct lending authority remains in the

bank’s charter, our regulations make

clear that this authority cannot be

exercised once a bank transfers direct

lending authority to its FLCAs.

However, the FCB of Texas’ charter also

authorizes it to lend to its associations

for the purpose of providing long-term

credit. We conclude that the charter

thus allows the bank to ‘‘provide longterm credit’’ within the meaning of

section 5.17(a)(2)(C) and that the

consent provisions apply to the FLCAs.

We have carefully considered the

comments on the definition of covered

associations. For the reasons stated

above, we are making no changes to the

associations covered by the reproposed

rule.

B. Section 611.1151—What

Stockholders Must Decide

Most of the commenters expressed

concern with the wording of the

proposed stockholder question. Some of

the commenters believe the question

could be confusing or misleading to

stockholders on the consequences of

their vote. Commenters also inquired

why we proposed one question for

stockholders and another for boards of

directors. Others felt that the question

was too vague and should more closely

follow the language of the statute.

Finally, other commenters contended

Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules 58489

9The FCB of Texas is scheduled to transfer its

direct lending authority to the FLBA by October 1,

2000.

10We believe the commenters’ concern about a

possible conflict between association stockholders

and a bank’s board of directors is misplaced. These

two groups are members of different organizations

that may have different interests.

that the question was designed to

encourage approval.

These commenters have persuaded us

to repropose a single question for both

stockholders and boards of directors.

The question in the reproposed rule

more closely follows the statute, but is

written in plain language to promote

greater understanding by the voters. By

more closely following the statute, the

consequences of approving or

disapproving the question should be

clearer to stockholders. We note that

neither the proposed nor reproposed

question is intended to encourage a

particular outcome. In addition, to help

reduce the potential for confusion, we

are adding a statement for the New

Mexico PCAs to explain that the

territories that currently overlap will not

be affected by the outcome of the

question.

Two banks and two associations

encouraged us to change the voting

process to allow reciprocal approval of

the question. The commenters

expressed concern that under the

proposal, a covered association voting

‘‘yes’’ would open its territory to

another covered association that voted

‘‘no.’’ The commenters suggested that

covered associations should be able to

condition their approval of the question

on the approval of other covered

associations.

We agree with the commenters’

suggestion, and the reproposed question

provides for reciprocal voting. The

reproposed question is as follows:

Should the Farm Credit Administration

issue a charter or charter amendment

that would allow any Farm Credit

System association to exercise lending

authority in the territory now served by

X Association?

Approval. Voting to approve means

that any other association will be able

to make loans in the territory now

served by X Association, but only if X

Association has the opportunity to make

loans in the territory served by the other

association.

Disapproval. Voting to disapprove

means that no other association will be

able to [make long-term mortgage loans

or make short-and intermediate-term

loans as appropriate] in the territory

now served by X Association.

[For New Mexico PCAs—Currently,

more than one PCA serves your

territory. This competition will not be

eliminated regardless of your vote.]

C. Section 611.1152—Bank and

Association Boards of Directors’ Votes

The FCB of Texas commented that its

stockholders should be permitted to

vote on the question as it affects lending

in the former Jackson district. The bank

believes that its charter will be affected

by the national charter amendments and

therefore, the Act requires a vote of its

stockholders. Section 5.17(a)(2)(B) of the

Act requires approval by various parties

depending on which charters are

‘‘affected.’’ Because this rulemaking

only addresses amendments to

association charters, only the provisions

of section 5.17(a)(2)(B)(i) apply. Under

that section, bank stockholders do not

participate in the voting. Further, this

rule applies to charter amendment

requests for direct lender associations

only. By the time voting occurs under

this rule, the FCB of Texas will have no

direct lending authority in the former

Jackson district.9 Therefore, the FCB of

Texas’ charter will not be affected by

direct lender association charter

amendment requests. Thus, we are not

including bank stockholder voting in

the reproposed rule.

A bank and two associations asked for

clarification on bank and association

board voting. They asked which bank

boards would vote in connection with

the PCAs that were reassigned in New

Mexico. We clarify that the board of

directors of the FCB of Wichita will vote

on the question as it affects the PCA of

Southern New Mexico, which is

affiliated with it. The FCB of Texas will

vote on the question as it affects the two

associations it funds, the PCA of New

Mexico and the PCA of Eastern New

Mexico.

The commenters also asked whether

each of the boards of directors of the

PCAs that were reassigned in New

Mexico would vote on competitive

charters with respect to the other New

Mexico PCAs. We clarify that the boards

of directors of the PCAs in New Mexico

will vote on the question only with

respect to their own institution.

Finally, the FCB of Texas asserted that

conducting stockholder votes before the

boards of directors’ votes could waste

resources and promote unnecessary

conflict between stockholders and the

boards of directors. The commenters

also noted that typically a matter is

presented to stockholders only after the

board of directors has considered the

issue and recommends approval. The

commenters maintain that if the boards

of directors vote first and disapprove the

question, there would be no need for a

stockholder vote.

We believe there are compelling

reasons for the association stockholders

to vote first. It is the stockholders/

borrowers who will be most affected by

the outcome of the national charter

votes. We believe that the bank boards

(and, in New Mexico, the PCA boards)

should have the benefit of knowing the

views of the association stockholders

before making their own decision.

We also disagree that this order of

voting promotes confusion and

unnecessary conflict between

stockholders and their boards of

directors. In the former Jackson district,

the Act does not provide for the

approval of the association boards of

directors. 10 Nonetheless, the voting

procedure allows the associations’ board

and management to make a

recommendation to the stockholders

and provide reasons for their

recommendations. Thus, we do not

believe this process will confuse the

stockholders about their boards’

position on the issue.

D. Section 611.1153—Information

Statement

The FCB of Texas commented the

FCA lacks the authority to dictate the

form and substance of the Information

Statement. The commenters assert that

nothing in the Act grants the FCA the

power to prescribe or even influence the

material in an information statement

transmitted to stockholders. The

commenters also assert that the FCA has

no authority to make any changes in the

content of the Information Statement.

The commenters agree that all

information contained in the

Information Statement should be

accurate and complete, but they are

concerned that we are attempting to

control the contents of their

communications with stockholders.

The FCA has authority in the Act to

regulate and review information

provided by institutions to stockholders

in several areas. For example, section

5.17(a)(8) authorizes us to regulate

information on the financial condition

and operations of the institutions, and

section 7.11 authorizes us to approve

the disclosures to stockholders for

certain corporate actions including

mergers, transfers of lending authority

and terminations. We have

implemented these statutory provisions

by rule. These areas highlight the need

for FCA review of and involvement in

the disclosure provided to stockholders

to ensure stockholders receive complete

and accurate information. We also have

broad authority to prescribe regulations

necessary and appropriate to implement

the Act. Using that authority, we have

58490 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules

previously adopted rules to implement

other corporate actions, such as

transfers of lending authority and

mergers, consolidations, and charter

amendments of associations. These

rules include detailed requirements for

our review and approval of the

information provided to stockholders.

We used these regulations as a guideline

for developing the model Information

Statement. We believe that regulating

the disclosure given to stockholders for

significant chartering actions is critical

to carrying out our statutory authority.

Our authority to change the content of

the Information Statement is consistent

with our authority to review and

approve it and to adopt regulations

prescribing its content. Notwithstanding

our authority to do so, we recognize that

making changes to the Information

Statement would be a step beyond the

past procedures we have adopted. Based

on the points raised by the commenters,

we do not believe it is necessary to

include this provision in the reproposed

rule.

As a general matter, we want to assure

the commenters that our intent is not to

influence a vote of the stockholders of

the associations. We want only to

ensure that the stockholders receive

accurate and complete information on

the consequences of competitive

charters in the covered areas. We also

believe that our involvement in the

disclosure process is necessary to

ensure that the stockholders receive

balanced information. We point out that

the association boards of directors are

free to recommend approval or

disapproval to their stockholders and

provide detailed reasons for their

recommendations. Finally, we are not

requiring the institutions to adopt the

model Information Statement word-forword. Although we believe the model

Information Statement is balanced and

provides complete information to

stockholders, institutions may modify

the wording, as long as the information

presented is complete, balanced, and

not misleading.

The FCB of Texas commented that the

FCA has no authority to include a

statement of the FCA Board in the

Information Statement. The commenters

believe that this is inconsistent with the

FCA’s role as an arms-length regulator.

The commenters further state that

inclusion of a FCA Board statement

would be an attempt to manipulate the

business decisions of the institutions.

We believe that we have authority to

require a statement of our views on the

charter amendments to be included in

the Information Statement. We do,

however, understand the commenters’

concerns. Our goal in proposing to

include our views in the Information

Statement was to ensure fair and

balanced disclosure. Based on the

commenters’ concerns, however, we

have reconsidered whether including

the FCA Board’s views is necessary.

Because we will review and approve the

Information Statement, and because we

are providing a model Information

Statement, we do not believe that

including our views is necessary.

Finally, we clarify for the commenters

that all equity holders will receive the

Information Statement to keep them

informed of the issues affecting their

institution. Only voting stockholders,

according to the institution’s bylaws,

would vote on the question.

E. Section 611.1154—Timeframe for the

Vote

The FCB of Texas commented that the

proposed regulations provided

extremely short time limits for

conducting the vote. For example, they

believe that 10 days for stockholders to

review the Information Statement is

inadequate. They noted the proposed

timeframe does not provide an

opportunity for information meetings

with stockholders to discuss the

potential benefits and drawbacks of this

initiative. Finally, the commenters

suggest they will need a minimum of 6

months for the entire process, including

preparation of the Information

Statement.

We understand that the stockholders

will be voting on a significant issue. As

a result, we have revised the timeframes

for preparing the Information Statement

and conducting the stockholders’ and

boards of directors’ votes. The

reproposed regulation requires the

stockholders’ votes be completed by

July 16, 2001, and the boards of

directors’ votes be completed by July 31,

2001. The extended timeframes should

also allow more time for the institutions

to prepare the Information Statement as

well as greater time for stockholders to

review and discuss the question. In

order to ensure that the votes are

conducted by July 31, 2001, however,

the reproposed regulations require that

the covered associations submit the

Information Statement to us for review

by May 1, 2001. It is also important to

note that while we granted covered

associations the flexibility to determine

the time available for stockholder

review, the reproposed regulations

continue to require that stockholders be

given at least 10 days. Finally, the

reproposal extends the time for our

review of the Information Statement

from 10 to 15 business days.

F. Miscellaneous Sections

We received no comments on

§§ 611.1155 through 611.1158; thus we

are making no changes to this section in

the reproposed rule.

Proposed § 611.1159 would prohibit

an officer, director, employee, or agent

of an institution from making any

representation that would appear to be

a statement of the FCA on the merits of

the question. The FCB of Texas

commented that this section would

violate the First Amendment of the

Constitution because it ‘‘chills free

speech.’’ Further, they believe that as

written, the prohibition is too vague. We

respond by revising § 611.1159 to more

clearly communicate our intention. The

reproposed rule prohibits any officer,

director, employee, or agent of an

institution from making any untrue or

misleading statement to stockholders in

connection with a vote on the question.

This prohibition is standard in

disclosures to stockholders for most

corporate activities involving

stockholder votes, and it is not intended

to restrict free speech. Instead, it is

intended to ensure that stockholders are

not misled.

We received numerous comments on

proposed § 611.1160, which provided

for us to conduct a stockholder vote on

the question if an institution failed to do

so. The commenters questioned whether

FCA has the authority to conduct a vote

of stockholders. We continue to believe

that we have the authority to implement

the 1992 amendments by conducting a

vote of stockholders if necessary. After

carefully considering the comments,

however, we do not believe that this

provision is necessary. Instead, we will

rely on our enforcement authorities to

ensure the votes are conducted. Thus,

we are not including § 611.1160 in the

reproposed rule.

G. Other Comments

A bank and two associations

commented that they could not evaluate

the issues that this proposal raised with

regard to cross-title lending authority.

The commenters noted that they would

reserve further comments on this issue

until they received more information on

this process. As previously noted, we

plan to provide guidance on cross-title

authority issues at a later date.

One association commented that

imposing voting requirements on

associations in some states without

imposing the same requirements on

associations in all states may violate the

due process clause of the Fifth

Amendment. We note that we are

merely implementing the statutory

Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules 58491

voting requirements that Congress

enacted in the 1992 amendments.

List of Subjects in 12 CFR Part 611

Accounting, Agriculture, Banks and

banking, Rural areas.

For the reasons stated in the

preamble, we are reproposing

amendments to part 611 of chapter VI,

title 12 of the Code of Federal

Regulations as follows:

PART 611—ORGANIZATION

1. The authority citation for part 611

continues to read as follows:

Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0,

3.21, 4.12, 4.15, 4.20, 4.21, 5.9, 5.10, 5.17,

7.0–7.13, 8.5(e) of the Farm Credit Act (12

U.S.C. 2011, 2021, 2071, 2091, 2121, 2142,

2183, 2203, 2208, 2209, 2243, 2244, 2252,

2279a–2279f–1, 2279aa–5(e)); secs. 411 and

412 of Pub. L. 100–233, 101 Stat. 1568, 1638;

secs. 409 and 414 of Pub. L. 100–399, 102

Stat. 989, 1003, and 1004.

2. Add subpart J to read as follows:

Subpart J—Stockholder Vote on Like

Lending Authority

Sec.

611.1150 What definitions are used in this

subpart?

611.1151 What must your stockholders

decide?

611.1152 What votes must be conducted by

bank and certain association boards of

directors?

611.1153 What must the Information

Statement contain?

611.1154 What is the timeframe for this

vote?

611.1155 How are the votes tabulated?

611.1156 Who is notified of the results of

the stockholder vote?

611.1157 How many votes are needed for

passage of the questions?

611.1158 What notifications must be made?

611.1159 Are there additional

requirements?

Appendix A to Subpart J—Model Information

Statement

Subpart J—Stockholder Vote on Like

Lending Authority

§ 611.1150 What definitions are used in

this subpart?

(a) Days means calendar days unless

otherwise noted.

(b) You or covered associations means

the associations subject to section

5.17(a)(2)(B), (a)(2)(C), (a)(13) and (a)(14)

of the Farm Credit Act of 1971, as

amended, specifically First South

Production Credit Association;

Louisiana Federal Land Bank

Association, FLCA; Federal Land Bank

Association of North Alabama, FLCA;

Federal Land Bank Association of South

Alabama, FLCA; Federal Land Bank

Association of North Mississippi, FLCA;

Production Credit Association of

Southern New Mexico; Production

Credit Association of Eastern New

Mexico; Production Credit Association

of New Mexico; and the FLBA of South

Mississippi provided that it is chartered

as a Federal land credit association.

(c) We or us means the Farm Credit

Administration.

§ 611.1151 What must your stockholders

decide?

(a) You must conduct a vote of your

voting stockholders, voting in person or

by proxy, at a duly authorized meeting,

on this question:

Question: Should the Farm Credit Administration issue a charter or charter amendment that would allow any Farm Credit System

association to exercise lending authority in the territory now served by X Association?

Approval: Voting to approve means that any other association will

be able to make loans in the territory now served by X Association, but only if X Association has the opportunity to make loans

in the territory served by the other association.

Disapproval: Voting to disapprove means that no other association

will be able to [make long-term mortgage loans or make short- and

intermediate-term loans as appropriate] in the territory now

served by X Association.

New Mexico PCAs must include the following: Currently, more than one PCA serves your territory. This competition will not be eliminated

regardless of your vote.

(b) Before the vote on the question,

you must prepare an Information

Statement, obtain Farm Credit

Administration approval of it, and

distribute it to your stockholders.

§ 611.1152 What votes must be conducted

by bank and certain association boards of

directors?

(a) Not later than 12 days following

the notice from the independent third

party required by § 611.1156(a), the

board of directors of the Farm Credit

Bank of Texas, AgFirst Farm Credit

Bank, and the Farm Credit Bank of

Wichita must vote on the question in

paragraph (a) of § 611.1151 with regard

to their affiliated associations and report

the results to us.

(b) Not later than 12 days following

the notice from the independent third

party required by § 611.1156(a), the

boards of directors of the Production

Credit Association of Southern New

Mexico, the Production Credit

Association of Eastern New Mexico, and

the Production Credit Association of

New Mexico must vote on the question

in paragraph (a) of § 611.1151 and report

the results to us.

(c) The votes referenced in paragraphs

(a) and (b) of this section must take

place no later than July 31, 2001.

§ 611.1153 What must the Information

Statement contain?

(a) The Information Statement must

include the question in § 611.1151(a)

and must substantially conform to the

model Information Statement provided

as an appendix to this subpart. The

Information Statement must also

include a:

(1) Notice of meeting;

(2) Proxy ballot and instructions;

(3) Brief summary of the question;

(4) Discussion of the advantages and

disadvantages of approving the

question; and

(5) Association board statement or

recommendation (optional).

(b) We may also require additional

information in the Information

Statement to ensure stockholders have

accurate and adequate information.

§ 611.1154 What is the timeframe for this

vote?

(a) You must submit the Information

Statement to us no later than May 1,

2001, but you may submit it earlier. You

may send the Information Statement to

us by regular mail, facsimile, electronic

transmission, overnight mail, or other

similar delivery method.

(b) Not later than 15 business days

after receipt of the Information

Statement, we will review the

Information Statement and notify you of

our approval or denial. We may require

you to change the Information

Statement to ensure that it provides

accurate and complete information to

stockholders on the question.

(c) You must ensure your

stockholders have a minimum of 10

days to review the Information

Statement before the meeting at which

the stockholders will vote on the

question in § 611.1151.

(d) A meeting of the stockholders to

vote on the question in § 611.1151 must

take place no later than July 16, 2001.

58492 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules

§ 611.1155 How are the votes tabulated?

The votes will be tabulated by an

independent third party within 2

business days of the stockholder

meeting.

§ 611.1156 Who is notified of the results of

the stockholder vote?

(a) On the day the votes are tabulated,

the independent third party must report

the results to you, the appropriate

bank(s), and us.

(b) Within 10 days of the stockholder

meeting, the independent third party

must provide the Farm Credit

Administration with a certified copy of

the stockholders’ vote on the question.

§ 611.1157 How many votes are needed for

passage of the questions?

The votes in §§ 611.1151 and

611.1152 will be determined by the

majority of those voting, in person or by

proxy as appropriate, at a duly

authorized meeting in accordance with

the associations’ or banks’ quorum

requirements.

§ 611.1158 What notifications must be

made?

(a) You must notify the stockholders

of the results of the votes referenced in

§§ 611.1151 and 611.1152 within 10

business days.

(b) The board of directors of the Farm

Credit Bank of Texas, the Farm Credit

Bank of Wichita, and the AgFirst Farm

Credit Bank must notify each of the

covered associations with which they

have a funding relationship of the

results of the vote in § 611.1152(a)

within 2 business days.

§ 611.1159 Are there additional

requirements?

No bank or association director,

officer, employee, or agent may make

any untrue or misleading statement to a

stockholder of the association in

connection with a vote on the question

in § 611.1151.

Appendix A to Subpart J—Model

Information Statement

Table of Contents

A–1 Notice of Stockholders’ Meeting of X

Association

A–2 Proxy Instructions and Ballot

A–3 Proxy Form

A–4 Ballot (For Use as Proxy Ballot or

Voting in Person) X Association

A–5 Brief Summary of the Question

A–6 Advantages and Disadvantages of

Approving the Question

A–7 X Association Board Statement

(Optional)

Note: Appendix A Contains a Model

Information Statement to Aid in Compliance

With Subpart J of Part 611.

A–1—Notice of Stockholders’ Meeting of X

Association

1. A meeting of the stockholders of X

Association will be held at (location) located

at (address), on (date), beginning at (time).

2. At this meeting, you will be asked to

vote on the following question:

Should the Farm Credit Administration

issue a charter or charter amendment that

would allow any Farm Credit System

association to exercise lending authority in

the territory now served by X Association?

Approval. Voting to approve means that

any other association will be able to make

loans in the territory now served by X

Association, but only if X Association has the

opportunity to make loans in the territory

served by the other association.

Disapproval. Voting to disapprove means

that no other association will be able to

[make long-term mortgage loans or make

short- and intermediate-term loans as

appropriate] in the territory now served by X

Association.

(New Mexico PCAs must include the

following: Currently, more than one PCA

serves your territory. This competition will

not be eliminated regardless of your vote.)

3. The Farm Credit Administration (FCA)

Board has received applications from direct

lender associations for national (also referred

to as nationwide) charters. National charters

would enable other Farm Credit System

(System) lenders to make loans in the

territory now served by your Association. As

a result, you could have greater choice of

System lenders in your area.

4. The Farm Credit Act of 1971, as

amended (Act), requires approval by the

voting stockholders of your Association

before the FCA can issue a charter or amend

a charter that would allow any System lender

to make loans, of the same type as those that

your Association can make, in the geographic

territory now served by your Association. For

the question to be approved, a majority of the

voting stockholders of X Association voting,

in person or by proxy, at a duly authorized

meeting of such stockholders, must vote to

approve the question. The Act requires other

approvals before nationwide charters can be

issued in the territory served by X

Association. Also, approval of the question is

conditional upon X Association being able to

lend in the other associations’ territories.

These approvals are explained in the brief

summary of the question (Appendix A–5).

5. Attached is a packet of information

related to the question. The packet includes

a brief summary of the question; advantages/

disadvantages of allowing other System

associations to exercise lending authority for

eligible customers in the geographic territory;

and a Board of Directors’ Statement

(optional).

6. Information on balloting and proxies is

included under Appendix A–2, including the

deadline of (date) for receipt of the proxy

forms by your Association. If you have any

questions about the Information Statement or

the question, you may discuss them at the

stockholders’ meeting on (date). Your board

of directors urges you to vote in person or by

proxy at the stockholders’ meeting.

7. If you are a nonvoting stockholder or

holder of participation certificates, you

cannot vote on the question. However, we

sent you this Information Statement to keep

you informed of the possible changes

affecting your Association.

Enclosures.

lllllllllllllllllllll

Name

(Signature of appropriate association

official(s))

A–2—Proxy Instructions and Ballot

If you are entitled to vote and are unable

to attend the meeting in person, you may

appoint a proxy to vote as you direct. The

following are instructions for completing the

Proxy Ballot and Proxy Form:

1. Complete the Proxy Ballot.

a. Mark either ‘‘APPROVE’’ or

‘‘DISAPPROVE’’ in the appropriate box on

the Ballot. Unmarked Proxy Ballots will be

voted to approve the question.

b. Enclose Proxy Ballot in the Ballot

Envelope provided. Seal the envelope.

2. Complete the Proxy Form.

a. If you prefer, you may name as your

proxy someone other than the directors

named on the Proxy Form by writing in the

name of the person in the blank space

provided. Please note that for your vote to

count, the person you name as proxy must

be a voting stockholder of the association and

must be present at the stockholders’ meeting.

b. Date and sign the Proxy Form in the

space indicated.

3. Enclose your signed and dated Proxy

Form and sealed Ballot Envelope in the

business reply envelope provided. Mail to

your Association in the pre-addressed return

envelope provided.

For your vote to count, your Proxy Ballot

and Proxy Form must be received in the

association office no later than (time) on

(date) or delivered to an election official

before balloting at the stockholders’ meeting.

You have the right to cancel your proxy at

any time prior to the beginning of balloting

at the stockholders’ meeting.

A–3—Proxy Form

I, lllll, as holder of stock and

authorized to vote such stock in X

Association, cancel any previous proxies and

appoint (Name), Director, X Association, as

my proxy, or I appoint lllll, as my

proxy to attend the association stockholders’

meeting on (date), and any continuation or

adjournment of the meeting, to vote for me

on the question, and to act for me with the

same effect as if I were personally present.

I understand that I may cancel this proxy

and the authority it represents at any time

prior to balloting at the stockholders’

meeting. Unless cancelled, this proxy will

expire upon the official announcement of the

results of the vote on the question. I also

understand that, if necessary, the person I

name as my proxy can substitute someone

else as my proxy and can later cancel that

substitution.

Date: llllllllllllllllll

lllllllllllllllllllll

Signature*

lllllllllllllllllllll

Representative Title**

*Please sign exactly as your name appears

on the above label.

Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules 58493

**When signing as an executor,

administrator, trustee, or guardian on behalf

of a corporation or partnership, please sign

your name on the first line and indicate your

full representative title on the second line.

A–4—Ballot (For Use as Proxy Ballot or

Voting in Person) X Association

Question: Should the Farm Credit

Administration issue a charter or charter

amendment that would allow any Farm

Credit System association to exercise lending

authority in the territory now served by X

Association?

I direct that my Ballot be voted as follows:

llll Approval. Voting to approve

means that any other association will be able

to make loans in the territory now served by

X Association, but only if X Association has

the opportunity to make loans in the territory

served by the other association.

llll Disapproval. Voting to

disapprove means that no other association

will be able to [make long-term mortgage

loans or make short- and intermediate-term

loans as appropriate] in the territory now

served by X Association.

(New Mexico PCAs must include the

following: Currently, more than one PCA

serves your territory. This competition will

not be eliminated regardless of your vote.)

If I do not direct how this ballot shall be

voted, I intend it to be cast to APPROVE the

question.

Note: For your vote to count, your Proxy

Ballot and Proxy Form must be received in

the association office no later than (time) on

(date) or delivered to an election official prior

to balloting at the stockholders’ meeting. You

have the right to cancel your proxy at any

time prior to the beginning of balloting at the

stockholders’ meeting.

A–5—Brief Summary of the Question

1. In a July 14, 1998, Philosophy

Statement, the FCA Board expressed its view

that competition is beneficial for customers

and will help ensure the Farm Credit System

will continue to meet the current and future

needs of rural America. To facilitate

competition and improve services for all

farmers, ranchers, and other eligible

customers, the FCA Board indicated its

support for several measures including the

removal of geographical restrictions of

System entities.

2. The FCA Board has received

applications for national charters from

System direct lender associations. Before the

FCA can grant applications for full

nationwide charters, however, the Agency

must carry out two requirements of the Act

that call for stockholder voting in certain

areas of the country. Congress required

stockholder voting in the geographic area in

which the Federal Intermediate Credit Bank

(FICB) of Jackson or its successor (AgFirst

Farm Credit Bank) is chartered to provide

short- and intermediate-term credit and the

Farm Credit Bank of Texas is chartered to

provide long-term credit. Congress also

required the consent of stockholders of three

production credit associations in New

Mexico pursuant to section 433 of the

Agricultural Credit Act of 1987.

3. Your Association serves the [counties/

states of xxx], and (insert either (1) has

territory that is within the geographic area of

the successor to the former FICB of Jackson

or (2) reaffiliated under section 433.] As a

result, you are being asked whether you

approve the FCA’s issuance of charters to

associations that would allow them to make

similar loans to you and other eligible

customers in the territory of your

Association.

4. Approval of the question does not,

however, guarantee that other associations

may be chartered to lend in your

Association’s territory. Associations other

than those in the area served by the former

Jackson FICB and the PCAs in New Mexico

may apply for nationwide charters if they

choose to do so. Similarly, your Association

may be able to obtain a charter for all areas

outside of those covered by the Act.

5. In addition, amending the charters of

other associations in the territory served by

the former Jackson FICB and the PCAs in

New Mexico is conditional upon those

associations also voting to approve the

question. If you vote to approve the question,

you are approving the question only for those

associations that will allow your Association

to lend in their territories. Similarly, your

Association’s ability to provide credit in the

territories served by other associations in the

areas covered by the Act will depend upon

whether your Association’s stockholders

approve the same question you have before

you.

6. Following the stockholder vote on the

question, the board of directors of the [insert

appropriate bank] [and insert associations if

this Information Statement refers to section

5.17(a)(13) and (a)(14)] will also vote on the

question. The question must be approved by

a majority of the stockholders voting and a

majority of the board of directors of the banks

[and associations, if appropriate] before

another System lender may be chartered to

make similar loans in the territory of your

Association. If approved by all parties

involved, the FCA may grant requests from

other FCS associations to serve the territory

currently served by your Association.

A–6—Advantages and Disadvantages of

Approving the Question

There are advantages and disadvantages of

your approval of the question. The following

is a brief discussion of the principal

advantages and disadvantages to the

stockholders of your Association. This

discussion does not claim to provide a

complete analysis of all the expected

outcomes of approval of the question. In

addition, there can be no assurance that any

expected advantage or disadvantage below

will take place in whole or part. The

realization of any advantages and

disadvantages depends on how each

association implements its nationwide

charter. You should also consider that the

advantages and disadvantages affect not only

you but also all other eligible System

customers and potential customers.

Advantages

1. Allowing other System associations to

make loans in the territory of your

Association may provide System customers

in the [insert geographic area] with more

choices for credit. You may have a greater

choice of financial services because System

lenders offer different loan products, interest

rates, and repayment options. If the question

is approved, you may have the freedom to

select the System lender of your choice.

2. Competition for loans within a

geographic area may also provide

associations the opportunity and incentive to

become more efficient and more competitive.

This competition is likely to lower the cost

of credit and improve the quality of service

for you and other customers.

3. System lenders across the country may

be better able to develop niche products and

thus offer specialized lending services to

customers in the territory of your Association

and across the country. You may be able to

obtain your main source of operational

funding from one lender and specialized

services from another. E-commerce services

may be enhanced after territorial restrictions

are removed.

4. National charters may also help System

lenders compete more effectively with nonSystem lenders who are not restricted by

geographical constraints. System lenders will

be able to provide seamless credit to

agricultural producers across the United

States. Removing geographical boundaries

may also allow System lenders to diversify

the geographic and commodity mix in their

loan portfolios, thereby providing

opportunities to improve their long-term

safety and soundness.

5. Finally, approval of this question may

heighten awareness of each System lender’s

public policy mission for service within its

original chartered territory. The FCA will

continue to ensure that each System

association fulfills its responsibility to make

services available to all eligible customers

within its current chartered territory.

Disadvantages

1. As System lenders compete for

customers, some associations may become

less viable if added competitive pressures

reduce profit margins. In addition, if the

challenges associated with greater

competition are not met, the capital

investment of stockholders may be at a

higher risk. There are 155 associations that

may request nationwide charters as of

September 1, 2000. As a result, the

management of your Association may be

under increased pressure to provide efficient

and cost effective services.

2. In the long run, some associations may

be forced to cut back or eliminate certain

services. Also, associations entering new

geographic areas may primarily focus on

larger or more profitable borrowers while less

attention may be given to the more marginal

borrowers in the associations’ new and

existing chartered territories.

3. Some associations may not be

competitive in their present form and may

have to merge or take other corporate

restructuring actions to remain viable.

A–7—X Association Board Statement

(Optional)

The Association board of directors may

state its views and recommendation on the

question and elaborate on the reasons for its

recommendation.

58494 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Proposed Rules

Dated: September 26, 2000.

Kelly Mikel Williams,

Secretary, Farm Credit Administration Board.

[FR Doc. 00–25071 Filed 9–28–00; 8:45 am]

BILLING CODE 6705–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–NM–221–AD]

RIN 2120–AA64

Airworthiness Directives; Saab Model

SAAB 2000 Series Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

adoption of a new airworthiness

directive (AD) that is applicable to

certain Saab Model SAAB 2000 series

airplanes. This proposal would require

an inspection to ensure correct

installation of certain self-seal couplings

in each nacelle, and corrective action, if

necessary. This proposal also would

require installation of a new clamp to

the self-seal couplings. This action is

necessary to prevent separation of the

self-seal couplings, which could result

in loss of engine oil pressure and a

flight-crew-commanded engine

shutdown. This action is intended to

address the identified unsafe condition.

DATES: Comments must be received by

October 30, 2000.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–114,

Attention: Rules Docket No. 2000–NM–

221–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9 a.m. and 3 p.m.,

Monday through Friday, except Federal

holidays. Comments may be submitted

via fax to (425) 227–1232. Comments

may also be sent via the Internet using

the following address: 9-anmnprmcomment@faa.gov. Comments sent

via fax or the Internet must contain

‘‘Docket No. 2000–NM–221–AD’’ in the

subject line and need not be submitted

in triplicate. Comments sent via the

Internet as attached electronic files must

be formatted in Microsoft Word 97 for

Windows or ASCII text.

The service information referenced in

the proposed rule may be obtained from

Saab Aircraft AB, SAAB Aircraft

Product Support, S–581.88, Linko ̈ping,

Sweden. This information may be

examined at the FAA, Transport

Airplane Directorate, 1601 Lind

Avenue, SW., Renton, Washington.

FOR FURTHER INFORMATION CONTACT:

Norman B. Martenson, Manager,

International Branch, ANM–116, FAA,

Transport Airplane Directorate, 1601

Lind Avenue, SW., Renton, Washington

98055–4056; telephone (425) 227–2110;

fax (425) 227–1149.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications shall

identify the Rules Docket number and

be submitted in triplicate to the address

specified above. All communications

received on or before the closing date

for comments, specified above, will be

considered before taking action on the

proposed rule. The proposals contained

in this notice may be changed in light

of the comments received.

Submit comments using the following

format:

• Organize comments issue-by-issue.

For example, discuss a request to

change the compliance time and a

request to change the service bulletin

reference as two separate issues.

• For each issue, state what specific

change to the proposed AD is being

requested.

• Include justification (e.g., reasons or

data) for each request.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report

summarizing each FAA-public contact

concerned with the substance of this

proposal will be filed in the Rules

Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this notice

must submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket Number 2000–NM–221–AD.’’

The postcard will be date stamped and

returned to the commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, Transport Airplane Directorate,

ANM–114, Attention: Rules Docket No.

2000–NM–221–AD, 1601 Lind Avenue,

SW., Renton, Washington 98055–4056.

Discussion

The Luftfartsverket (LFV), which is

the airworthiness authority for Sweden,

notified the FAA that an unsafe

condition may exist on certain Saab

Model SAAB 2000 series airplanes. The

LFV advises that it received reports of

inadvertent separation of certain selfseal couplings of the nacelles.

Subsequent closure of the valves in the

two coupling halves resulted in rupture

of the engine-mounted generator.

Rupture of the generator caused loss of

engine oil pressure and spillage of oil

into the nacelle.

Separation of the self-seal couplings,

if not corrected, could result in loss of

engine oil pressure and a flight-crewcommanded engine shutdown.

Explanation of Relevant Service

Information

Saab has issued Service Bulletin

2000–79–005, dated May 22, 2000,

which describes procedures for a onetime general visual inspection to ensure

correct installation of air-cooled oil

cooler (ACOC) self-seal couplings in

each nacelle, and corrective action, if

necessary. The service bulletin also

describes procedures for installation of

a new clamp to the self-seal couplings

to enhance the lock ring function.

Accomplishment of the actions

specified in the service bulletin is

intended to adequately address the

identified unsafe condition. The LFV

classified this service bulletin as

mandatory and issued Swedish

airworthiness directive 1–158, dated

May 23, 2000, in order to assure the

continued airworthiness of these

airplanes in Sweden.

FAA’s Conclusions

This airplane model is manufactured

in Sweden and is type certificated for

operation in the United States under the

provisions of section 21.29 of the

Federal Aviation Regulations (14 CFR

21.29) and the applicable bilateral

airworthiness agreement. Pursuant to

this bilateral airworthiness agreement,

the LFV has kept the FAA informed of

the situation described above. The FAA

has examined the findings of the LFV,

reviewed all available information, and

determined that AD action is necessary

for products of this type design that are

certificated for operation in the United

States.

Explanation of Requirements of

Proposed Rule

Since an unsafe condition has been

identified that is likely to exist or