This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

3449

Vol. 63, No. 15

Friday, January 23, 1998

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1730

RIN 0572–AA74

Electric System Operations and

Maintenance

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

SUMMARY: The Rural Utilities Service

(RUS) is amending its regulations by

adding a new part on electric system

operations and maintenance. This

action codifies and clarifies RUS policy

relating to the operations and

maintenance of electric systems by RUS

electric borrowers. This rule also

contains provisions relating to the

review and evaluation of borrowers’

electric systems and facilities operations

and maintenance practices. These

policies are presently contained in RUS

Bulletin 161–5, which will be rescinded

when the final rule becomes effective.

This action clarifies the policies,

procedures, and requirements,

facilitates understanding and

compliance, and improves program

effectiveness with respect to electric

system operations and maintenance.

EFFECTIVE DATE: This rule is effective

February 23, 1998.

FOR FURTHER INFORMATION CONTACT: Mr.

Fred J. Gatchell, Deputy Director,

Electric Staff Division, Rural Utilities

Service, U.S. Department of Agriculture,

Stop 1569, 1400 Independence Ave.,

SW., Washington, DC 20250–1569,

telephone (202) 720–1398, e-mail

fgatchel@rus.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be

not significant for the purposes of

Executive Order 12866 and therefore

has not been reviewed by the Office of

Management and Budget (OMB).

Regulatory Flexibility Act Certification

The Administrator of RUS has

determined that a rule relating to the

RUS electric loan program is not a rule

as defined in the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.), and, therefore,

the Regulatory Flexibility Act does not

apply to this rule.

National Environmental Policy Act

Certification

The Administrator has determined

that this rule will not significantly affect

the quality of the human environment

as defined by the National

Environmental Policy Act of 1969 (42

U.S.C. 4321 et seq.). Therefore, this

action does not require an

environmental impact statement or

assessment.

Catalog of Federal Domestic Assistance

The program described by this rule is

listed in the Catalog of Federal Domestic

Assistance programs under No. 10.850,

Rural Electrification Loans and Loan

Guarantees. This catalog is available on

a subscription basis from the

Superintendent of Documents, the

United States Government Printing

Office, Washington, DC 20402–9325.

Executive Order 12372

This rule is excluded from the scope

of Executive Order 12372,

Intergovernmental Consultation, which

may require consultation with State and

local officials. A Final Rule-Related

Notice entitled, ‘‘Department Programs

and Activities Excluded from Executive

Order 12372,’’ (50 Fed. Reg. 47034)

exempted RUS loans and loan

guarantees from coverage under this

order.

Executive Order 12988

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. RUS has determined that this

rule meets the applicable standards in

section 3 of the Executive Order.

National Performance Review

This regulatory action is being taken

as part of the National Performance

Review program to eliminate

unnecessary regulations and improve

those that remain in force.

Information Collection and

Recordkeeping Requirements

The recordkeeping and reporting

burdens contained in this rule were

approved by OMB pursuant to the

Paperwork Reduction Act of 1995 (44

U.S.C. chapter 35) under control

number 0572–0025.

Unfunded Mandates

This rule contains no Federal

mandates (under the regulatory

provision of Title II of the Unfunded

Mandates Reform Act) for State, local,

and tribal governments or the private

sector. Thus, this rule is not subject to

the requirements of section 202 and 205

of the Unfunded Mandates Reform Act.

Background

RUS has promulgated policies and

procedures regarding the review and

evaluation of the operations and

maintenance practices of RUS financed

electric systems. These policies and

procedures are presently contained in

RUS Bulletin 161–5, Electric System

Review and Evaluation. The security

instrument and loan contract between

RUS and electric borrowers set certain

standards for the operation and

maintenance of each borrower’s electric

system. The purpose of this rule is to

implement the operations and

maintenance provisions of the security

instrument and loan contract between

RUS and electric borrowers and to

consolidate and clarify RUS policies

and procedures with respect to electric

system operations and maintenance.

Most of the provisions of this rule

represent policies and requirements that

have been in effect for some time. One

new provision expands the requirement

for electric system review and

evaluation of borrower’s electric

systems to include power supply

borrowers in addition to the distribution

borrowers presently covered by Bulletin

161–5. Proper operation and

maintenance practices are equally

significant for power supply borrowers,

so RUS believes that power supply

borrowers’ operation and maintenance

practices should be covered under the

review and evaluation requirements of

this rule. RUS Form 300, Review Rating

Summary, has also been updated and

revised based on RUS’ experience using

this form.
3450 Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Rules and Regulations

Comments

On April 16, 1997, RUS published a

proposed rule at 62 Fed. Reg. 18544.

Comments were received from ten

parties, including two cooperative

associations, a borrower engineering

committee, two distribution borrowers,

and five power supply borrowers. RUS

considered all comments received. The

significant and most commonly made

comments are addressed herein.

Several commenters requested that

RUS provide more guidance and

supplemental information regarding

these requirements, especially the

ratings of the items on RUS Form 300,

Review Rating Summary. RUS is

currently preparing Bulletin 1730–1,

‘‘Electric System Operation and

Maintenance (O&M),’’ which will

provide guidelines related to O&M,

including a rating guide for RUS Form

300.

Some commenters requested that RUS

provide for an ‘‘alternative dispute

resolution’’ procedure if a borrower

disagrees with a rating or determination

made by RUS. This type of disagreement

has rarely occurred, and RUS believes

that an adequate appeal avenue already

exists. Any disagreements with the RUS

staff’s rating can always be appealed

with the Regional Director or the

Administrator.

One commenter requested that this

rule address more operational concerns,

such as momentary interruptions,

voltage stability, job training and safety,

and lightning protection. It was also

suggested that RUS require that an O&M

survey be completed prior to beginning

a new construction work plan (CWP) or

long-range engineering plan (LRP). RUS

encourages borrowers to expand and

elaborate on the O&M requirements

prescribed by this rule to meet their

specific needs; however, RUS has

decided not to expand the requirements

of this rule in these areas.

Some commenters recommended that

the O&M reviews be limited to specific

areas where a borrower has experienced

problems, to borrowers with specific

financial problems, or to certain specific

types of facilities. RUS believes that all

aspects of all borrowers’ O&M should be

reviewed periodically and these reviews

should cover all facilities. These

reviews can reveal potential problem

areas that can be corrected before they

manifest themselves as operational or

financial difficulties. Therefore, RUS

has not changed the scope of this rule.

Several commenters pointed out that

the proposed rule does not adequately

address borrowers who own but do not

operate certain facilities. The rule has

been changed to address this situation.

Several commenters requested that

the frequency of inspection and test be

determined giving due consideration to

the manufacturer’s recommendations,

but that borrowers should not be

specifically required to blindly follow

such recommendations. RUS agrees and

has revised the rule accordingly.

Some commenters requested that RUS

clarify the requirement to evaluate

compliance with the prior editions of

the National Electrical Safety Code

(NESC) and the National Electrical Code

(NEC), when applicable. The rule has

been clarified with respect to the NEC.

Since the NESC itself specifically

addresses facilities that comply with

prior editions of the NESC, no change is

needed in the rule with respect to the

NESC.

Several commenters requested that

RUS eliminate duplication of reviews

made by other Federal agencies and

State commissions, etc. The rule has

been changed to indicate that RUS will

not duplicate these reviews, but may

review the reports of these other

reviewers. Since some of these other

reviews may target a specific area (e.g.,

safety), and the RUS’ review covers a

wider range of areas (e.g., safety,

reliability, economy, etc.), the RUS

review may partially overlap the

reviews of others.

Several commenters requested that

RUS eliminate the requirement for an

explanation of the borrower’s rating of

acceptable items. It is not RUS’ intent to

require an extensive discussion of these

items, but simply an explanation of how

the borrower arrived at its rating. RUS

believes that this should involve little

extra effort and should improve the

overall value of the review, so no

change has been made to this

requirement.

One commenter suggested that RUS

require that the borrower’s Board of

Directors be appraised of the findings of

the O&M review. Item 15 of RUS Form

300 calls for the date that the O&M

review was reviewed by the Board of

Directors. For purposes of clarifying the

rule, a specific provision has been

added to the rule requiring discussion of

the O&M review with the Board of

Directors.

One commenter suggested that RUS

not require a corrective action plan

(CAP) in all cases where there is an

unsatisfactory (i.e., 0 or 1) rating. RUS

considers any unsatisfactory rating to be

a potentially serious problem, so a CAP

should be prepared. However, if the

correction of the deficiency is already

underway or can be accomplished in a

short time or simply, the CAP may be

very short and simple, such as referring

to an item in an approved CWP. The

rule does not specify the format or

amount of detail required for a CAP, so

that borrowers have sufficient flexibility

to tailor it to the seriousness and

complexity of the problem. No change

has been made to this requirement.

A number of commenters requested

that RUS clarify or eliminate various

items on the RUS Form 300. RUS has

reviewed these items and has

determined that requiring ‘‘Staff Hours’’

under part IV, Operations and

Maintenance Budgets, is confusing,

burdensome, and of limited benefit.

This item has been deleted. RUS

believes that Bulletin 1730–1, ‘‘Electric

System Operation and Maintenance

(O&M),’’ should provide additional

guidance.

Some commenters are concerned that

RUS requirements with respect to O&M

may require excessive and unavailable

funding. RUS recognizes that correcting

operating and maintenance deficiencies

may indeed be expensive, especially if

the system has been allowed to

deteriorate. Nevertheless, proper O&M

of borrowers’ systems is essential to the

success of the rural electric program and

to protecting the property that is the

security for the Government’s loans and

guarantees. It is essential that each

borrower budget sufficient resources to

operate and maintain its system

efficiently and properly.

One commenter stated that ‘‘this

wasteful activity [the proposed rule] is

unneeded, unnecessary and without

common sense.’’ RUS disagrees. As

stated above, proper O&M of borrowers’

systems is essential to the success of the

rural electric program and to protecting

the property that is the security for the

Government’s loans and guarantees.

This rule is intended to clearly outline

RUS policies and procedures and the

borrowers’ responsibilities with respect

to O&M.

List of Subjects in 7 CFR Part 1730

Electric power, Loan programs—

energy, Reporting and recordkeeping

requirements, Rural areas.

In view of the above, RUS hereby

amends 7 CFR chapter XVII by adding

part 1730 to read as follows:

PART 1730—ELECTRIC SYSTEM

OPERATIONS AND MAINTENANCE

Subpart A—General

Sec.

1730.1 Introduction.

1730.2 RUS policy.

1730.3 RUS addresses.

1730.4 Definitions.

1730.5–1730.19 [Reserved]
Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Rules and Regulations 3451

Subpart B—Operations and Maintenance

Requirements

1730.20 General.

1730.21 Inspections and tests.

1730.22 Borrower analysis.

1730.23 Review rating summary, RUS Form

300.

1730.24 RUS review and evaluation.

1730.25 Corrective action.

1730.26 Engineer’s certification.

1730.27–1730.99 [Reserved]

Appendix A to Subpart B of Part 1730—

Review Rating Summary, RUS Form 300

Authority: 7 U.S.C. 901 et seq., 1921 et

seq., 6941 et seq.

Subpart A—General

§ 1730.1 Introduction.

(a) This part contains the policies and

procedures of the Rural Utilities Service

(RUS) related to electric borrowers’

operation and maintenance practices

and RUS’ review and evaluation of such

practices.

(b) The policies and procedures

included in this part apply to all electric

borrowers (both distribution borrowers

and power supply borrowers) and are

intended to clarify and implement

certain provisions of the security

instrument and loan contract between

RUS and electric borrowers regarding

operations and maintenance. This part

is not intended to waive or supersede

any provisions of the security

instrument and loan contract between

RUS and electric borrowers.

(c) The Administrator may waive, for

good cause, on a case by case basis,

certain requirements and procedures of

this part.

§ 1730.2 RUS policy.

It is RUS policy to require that all

property of a borrower be operated and

maintained properly in accordance with

the requirements of each borrower’s

loan documents. It is also RUS policy to

provide financial assistance only to

borrowers whose operations and

maintenance practices and records are

satisfactory or to those who are taking

corrective actions expected to make

their operations and maintenance

practices and records satisfactory to

RUS.

§ 1730.3 RUS addresses.

(a) Persons wishing to obtain forms

referred to in this part should contact:

Program Support and Regulatory

Analysis, Rural Utilities Service, U.S.

Department of Agriculture, Stop 1522,

1400 Independence Ave., SW.,

Washington, DC 20250–1522, telephone

(202) 720–8674. Borrowers or others

may reproduce any of these forms in

any number required.

(b) Documents required to be

submitted to RUS under this part are to

be sent to the office of the borrower’s

assigned RUS General Field

Representative (GFR) or such other

office as designated by RUS.

§ 1730.4 Definitions.

Terms used in this part have the

meanings set forth in 7 CFR Part 1710.2.

References to specific RUS forms and

other RUS documents, and to specific

sections or lines of such forms and

documents, shall include the

corresponding forms, documents,

sections and lines in any subsequent

revisions of these forms and documents.

In addition to the terms defined in 7

CFR Part 1710.2, the term Prudent

Utility Practice has the meaning set

forth in Article 1, Section 1.01 of

Appendix A to Subpart B of 7 CFR Part

1718—Model Form of Mortgage for

Electric Distribution Borrowers, for the

purposes of this Part.

§§ 1730.5–1730.19 [Reserved]

Subpart B—Operations and

Maintenance Requirements

§ 1730.20 General.

Each distribution borrower and power

supply borrower shall operate and

maintain its system in compliance with

Prudent Utility Practice, in compliance

with its loan documents, and in

compliance with all applicable laws,

regulations and orders, shall maintain

its systems in good repair, working

order and condition, and shall make all

needed repairs, renewals, replacements,

alterations, additions, betterments and

improvements, in accordance with

applicable provisions of the borrower’s

security instrument. Each borrower is

responsible for on-going operations and

maintenance programs, for maintaining

records of the physical and electrical

condition of its electric system and for

the quality of services provided to its

customers. The borrower is also

responsible for all necessary inspections

and tests of the component parts of its

system, and for maintaining records of

such inspections and tests. Each

borrower shall budget sufficient

resources to operate and maintain its

system in accordance with the

requirements of this part. For portions

of the borrower’s system that are not

operated by the borrower, if any, the

borrower is responsible for ensuring that

the operator is operating and

maintaining the system properly in

accordance with the operating

agreement.

§ 1730.21 Inspections and tests.

(a) Each borrower shall conduct all

necessary inspections and tests of the

component parts of its electric system,

and maintain adequate records of such

inspections and tests.

(b) The frequency of inspection and

testing will be determined by the

borrower in conformance with

applicable laws, regulations, national

standards, and Prudent Utility Practice.

The frequency of inspection and testing

will be determined giving due

consideration to the type of facilities or

equipment, manufacturer’s

recommendations, age, operating

environment and hazards to which the

facilities are exposed, consequences of

failure, and results of previous

inspections and tests. The records of

such inspections and tests will be

retained in accordance with applicable

regulatory requirements and Prudent

Utility Practice. The retention period

should be of a sufficient time period to

identify long-term trends. Records must

be retained at least until the applicable

inspections or tests are repeated.

(c) Inspections of facilities must

include a determination of whether the

facility complies with the National

Electrical Safety Code, National

Electrical Code (as applicable), and

applicable State or local regulations.

Any serious or life-threatening

deficiencies shall be promptly repaired,

disconnected, or isolated in accordance

with applicable codes or regulations.

Any other deficiencies found as a result

of such inspections and tests are to be

recorded and those records are to be

maintained until such deficiencies are

corrected or for the retention period

required by paragraph (b) of this section,

whichever is longer.

§ 1730.22 Borrower analysis.

(a) Each borrower shall periodically

analyze in writing its operations and

maintenance policies, practices, and

procedures to determine if they are

appropriate and if they are being

followed. The records of inspections

and tests are also to be reviewed and

analyzed to identify any trends which

could indicate deterioration in the

physical condition or the operational

effectiveness of the system or suggest a

need for changes in operations or

maintenance practices. For portions of

the borrower’s system that are not

operated by the borrower, if any, the

borrower’s written analysis would also

include a review of the operator’s

performance under the operating

agreement.

(b) When a borrower’s operations and

maintenance policies, practices, and

procedures are to be reviewed and

evaluated by RUS, the borrower shall:

(1) Conduct the analysis required by

paragraph (a) of this section not more
3452 Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Rules and Regulations

than 90 days prior to the scheduled RUS

review;

(2) Complete RUS Form 300, Review

Rating Summary, and other related

forms, prior to RUS’ review and

evaluation; and

(3) Make available to RUS the

borrower’s completed RUS Form 300

(including a written explanation of the

basis for each rating) and records related

to the operations and maintenance of

the borrower’s system.

(c) For those facilities not included on

the RUS Form 300 (e.g., generating

plants), the borrower shall prepare and

complete an appropriate supplemental

form for such facilities.

§ 1730.23 Review rating summary, RUS

Form 300.

RUS Form 300 in Appendix A shall

be used when required by this part.

§ 1730.24 RUS review and evaluation.

RUS will initiate and conduct a

periodic review and evaluation of the

operations and maintenance practices of

each borrower for the purpose of

assessing loan security and determining

borrower compliance with RUS policy

as outlined in this part. This review will

normally be done at least once every

three years. The borrower will make

available to RUS the borrower’s policies,

procedures, and records related to the

operations and maintenance of its

complete system. Reports made by other

inspectors (e.g., other Federal agencies,

State inspectors, etc.) will also be made

available, as applicable. RUS will not

duplicate these other reviews but will

use their reports to supplement its own

review. RUS may inspect facilities, as

well as records, and may also observe

construction and maintenance work in

the field. Key borrower personnel

responsible for the facilities being

inspected are to accompany RUS during

such inspections, unless otherwise

determined by RUS. RUS personnel may

prepare an independent summary of the

operations and maintenance practices of

the borrower. The borrower’s

management will discuss this review

and evaluation with its Board of

Directors.

§ 1730.25 Corrective action.

(a) For any items on the RUS Form

300 rated unsatisfactory (i.e., 0 or 1) by

the borrower or by RUS, the borrower

shall prepare a corrective action plan

(CAP) outlining the steps (both short

term and long term) the borrower will

take to improve existing conditions and

to maintain an acceptable rating. The

CAP must include a time schedule and

cost estimate for corrective actions, and

must be approved by the borrower’s

Board of Directors. The CAP must be

submitted to RUS for approval within

90 days after the completion of RUS’

evaluation noted in § 1730.24.

(b) The borrower must periodically

report to RUS in writing progress under

the CAP. This report must be submitted

to RUS every six months until all

unsatisfactory items are corrected unless

RUS prescribes a different reporting

schedule.

§ 1730.26 Engineer’s certification.

Where provided for in the borrower’s

loan documents, RUS may require the

borrower to provide an ‘‘Engineer’s

Certification’’ as to the condition of the

borrower’s system (including, but not

limited to, all mortgaged property.)

Such certification shall be in form and

substance satisfactory to RUS and shall

be prepared by a professional engineer

satisfactory to RUS. If RUS determines

that the Engineer’s Certification

discloses a need for improvements to

the condition of its system or any other

operations of the borrower, the borrower

shall, upon notification by RUS,

promptly undertake to accomplish such

improvements.

§§ 1730.27–1730.99 [Reserved]

Appendix—A to Subpart B of Part

1730—Review Rating Summary, RUS

Form 300

Borrower Designation llll

Date Prepared llll

Ratings on form are:

0: Unsatisfactory—no records

1: Unsatisfactory—corrective action needed

2: Acceptable, but should be improved—

see attached recommendations

3: Satisfactory—no additional action

required at this time

N/A: Not applicable

PART I—TRANSMISSION and

DISTRIBUTION FACILITIES

1. Substations (Transmission and

Distribution)

a. Safety, Clearance, Code Compliance—

Rating: llll

b. Physical Condition: Structure, Major

Equipment, Appearance—

Rating: llll

c. Inspection Records Each Substation—

Rating: llll

d. Oil Spill Prevention—Rating: llll

2. Transmission Lines

a. Right-of-Way: Clearing, Erosion,

Appearance, Intrusions—

Rating: llll

b. Physical Condition: Structure,

Conductor, Guying—Rating: llll

c. Inspection Program and Records—

Rating: llll

3. Distribution Lines—Overhead

a. Inspection Program and Records—

Rating: llll

b. Compliance with Safety Codes:

Clearances—Rating: llll

Compliance with Safety Codes: Foreign

Structures—Rating: llll

Compliance with Safety Codes:

Attachments—Rating: llll

c. Observed Physical Condition from Field

Checking: Right-of-Way—Rating:

llll

Observed Physical Condition from Field

Checking: Other—Rating: llll

4. Distribution—Underground Cable

a. Grounding and Corrosion Control—

Rating: llll

b. Surface Grading, Appearance—

Rating: llll

c. Riser Poles: Hazards, Guying,

Condition—Rating: llll

5. Distribution Line Equipment: Conditions

and Records

a. Voltage Regulators—Rating: llll

b. Sectionalizing Equipment—

Rating: llll

c. Distribution Transformers—

Rating: llll

d. Pad Mounted Equipment—Safety:

Locking, Dead Front, Barriers—Rating:

llll

Pad Mounted Equipment—Appearance:

Settlement, Condition—Rating: llll

e. Kilowatt-hour and Demand Meter

Reading and Testing—Rating: llll

PART II—OPERATION AND

MAINTENANCE

6. Line Maintenance and Work Order

Procedures

a. Work Planning and Scheduling—

Rating: llll

b. Work Backlogs: Right-of-Way

Maintenance—Rating: llll

Work Backlogs: Poles—Rating: llll

Work Backlogs: Retirement of Idle

Services—Rating: llll

Work Backlogs: Other—Rating: llll

7. Service Interruptions

a. Average Annual Hours/Consumer by

Cause (Complete for each of the previous

5 years)

1. Power Supplier llll

2. Major Storm llll

3. Scheduled llll

4. All Other llll

5. Total llll

Rating: llll

b. Emergency Restoration Plan—

Rating:llll

8. Power Quality

General Freedom from Complaints—

Rating:llll

9. Loading and Load Balance

a. Distribution Transformer Loading—

Rating:llll

b. Load Control Apparatus—

Rating:llll

c. Substation and Feeder Loading—

Rating:llll

10. Maps and Plant Records

a. Operating Maps: Accurate and Up-toDate—Rating:llll

b. Circuit Diagrams—Rating:llll

c. Staking Sheets—Rating:llll

PART III—ENGINEERING

11. System Load Conditions and Losses

a. Annual System Loses, llll%—

Rating:llll

b. Annual Load Factor, llll%—

Rating:llll
Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Rules and Regulations 3453

c. Power Factor at Monthly Peak,

llll%—Rating:llll

d. Ratio of Individual Substation Peak kW

to kVA, llll—Rating:llll

12. Voltage Conditions

a. Voltage Surveys—Rating:llll

b. Substation Transformer Output Voltage

Spread—Rating:llll

13. Load Studies and Planning

a. Long Range Engineering Plan—

Rating:llll

b. Construction Work Plan—

Rating:llll

c. Sectionalizing Study—Rating:llll

d. Load Data for Engineering Studies—

Rating:llll

e. Load Forecasting Data—Rating:llll

PART IV—OPERATION AND

MAINTENANCE BUDGETS

For Previous 2 Years:

Normal Operation—Actual $llll

Normal Maintenance—Actual $llll

Total—Actual $llll

For Present Year:

Normal Operation—Budget $llll

Normal Maintenance—Budget $llll

Total—Budget $llll

For Future 3 Years:

Normal Operation—Budget $llll

Normal Maintenance—Budget $llll

Additional (Deferred) Maintenance—Budget

$llll

Total—Budget $llll

14. Budgeting:

Adequacy of Budgets For Needed Work—

Rating:llll

15. Date Discussed with Board of Directors

llll

Remarks: llll

EXPLANATORY NOTES

Item No. llll Comments llll

Rated by llll llll Title llll

Date llll

Reviewed by llll Manager llll Date

llll

Reviewed by llll RUS GFR llll

Date llll

Dated: January 14, 1998.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 98–1661 Filed 1–22–98; 8:45 am]

BILLING CODE 3510–15–P

FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 900, 932 and 933

[No. 97–83]

RIN 3069–AA66

Membership Eligibility

AGENCY: Federal Housing Finance

Board.

ACTION: Final rule.

SUMMARY: The Federal Housing Finance

Board (Finance Board) is amending the

definition of the term ‘‘State’’ in its

Membership Regulation to include the

U.S. Territory of American Samoa

(American Samoa) and the U.S.

Commonwealth of the Northern Mariana

Islands (the Northern Mariana Islands).

Institutions organized under the laws of

American Samoa and the Northern

Mariana Islands, therefore, will be

eligible to apply for Federal Home Loan

Bank (Bank) membership. In accordance

with these changes, the Finance Board

also is clarifying in its regulations that

the Seattle Bank District includes

American Samoa and the Northern

Mariana Islands. In addition, the

Finance Board is designating Hawaii as

the State in which members with a

principal place of business in American

Samoa, the Northern Mariana Islands, or

Guam, shall be deemed to be located for

purposes of election of Bank directors.

DATES: The final rule is effective on

February 23, 1998.

FOR FURTHER INFORMATION CONTACT:

Sharon B. Like, Senior AttorneyAdviser, (202) 408–2930, Office of

General Counsel, Federal Housing

Finance Board, 1777 F Street, N.W.,

Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

A. Membership Eligibility

Requirement—Definition of ‘‘State’’

Under the Federal Home Loan Bank

Act (Act), the Finance Board is

responsible for the supervision and

regulation of the 12 Banks, which

provide advances and other financial

services to their member institutions.

See 12 U.S.C. 1422a(a). Institutions may

become members of a Bank if they meet

certain membership eligibility and

minimum stock purchase criteria set

forth in the Act and the Finance Board’s

implementing Membership Regulation.

See id. sections 1424, 1426, 1430(e)(3);

12 CFR part 933.

Specifically, under the Act and the

Membership Regulation, applicants for

Bank membership must satisfy, among

other requirements, the requirement that

they are ‘‘duly organized under the laws

of any State or of the United States.’’ See

12 U.S.C. 1424(a)(1)(A); 12 CFR

933.6(a)(1), 933.7. Section 2(3) of the

Act defines the term ‘‘State’’ as follows:

The term ‘‘State’’ includes the District

of Columbia, Guam, Puerto Rico, and

the Virgin Islands of the United States.

See 12 U.S.C. 1422(3). Guam and the

U.S. Virgin Islands are U.S. Territories,

while Puerto Rico is a U.S.

Commonwealth.

Section 933.1(cc) of the Finance

Board’s Membership Regulation

implements the statutory definition by

defining the term ‘‘State’’ as follows:

State means a State, the District of

Columbia, Guam, Puerto Rico, and the

Virgin Islands of the United States.

See 12 CFR 933.1(cc). The regulatory

definition does not specifically include

any other U.S. Territories,

Commonwealths or Dependencies

within the meaning of ‘‘State.’’

Therefore, financial institutions

organized under the laws of such other

jurisdictions currently are not eligible

for Bank membership under the

regulation, unless other specific laws or

agreements executed by the United

States and these jurisdictions make the

Act applicable to such jurisdictions.

On September 24, 1997, the Finance

Board published a proposed rule to

amend the definition of the term ‘‘State’’

in § 933.1(c) of the Membership

Regulation to include American Samoa

and the Northern Mariana Islands. See

62 FR 49943 (Sept. 24, 1997). The

Finance Board received six comment

letters on the proposed rule.

Commenters included: one Bank; a

representative of a Guamanian housing

counseling/advocacy organization who

serves on the Bank’s Advisory Council;

the Congressional representative for

American Samoa; the Governor of

American Samoa; an American Samoan

commercial bank that is a member of the

Federal Reserve System with deposits

insured by the Federal Deposit

Insurance Corporation; and a Northern

Mariana Islands public housing

corporation.

In the proposed rule, the Finance

Board stated that it believes that the

term ‘‘State’’ under the Membership

Regulation should be defined

comprehensively to include all other

U.S. Territories, Commonwealths and

Dependencies that share a political

status similar to that of the specified

entities in the statute, i.e., Guam, the

U.S. Virgin Islands, and Puerto Rico. In

addition, if any specific laws or

agreements executed by the United

States and particular jurisdictions make

the Act applicable to such jurisdictions,

then the regulatory definition of the

term ‘‘State’’ should be amended to

include those jurisdictions, consistent

with the laws or agreements.

Accordingly, as described in the

proposed rule, the Finance Board

undertook a broad analysis of existing

and former U.S. Territories,

Commonwealths and Dependencies to

determine whether any of the

jurisdictions satisfy the above

requirements. The research revealed

that only American Samoa and the

Northern Mariana Islands meet the

requirements, as further discussed

below. In order to ensure that all eligible

jurisdictions were included in the