19494 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

1 5 U.S.C. 571–83 (1988), as amended by Pub. L.

102–354, 106 Stat. 944 (Aug. 26, 1992).

2 18 CFR Part 385.

futures contract settlement price

comes within 0.12 of the fourth

highest or lowest existing exercise

price.

Option Price

The contract price is payable by the

buyer to the seller on exercise or

expiry of the option, not at the time

of the purchase. Positions are

marked to market daily, as with

futures positions.

List of Subjects in 17 CFR Part 30

Commodity futures, Commodity

options, Foreign transactions.

Accordingly, 17 CFR Part 30 is

amended as set forth below:

PART 30—FOREIGN FUTURES AND

FOREIGN OPTION TRANSACTIONS

1. The authority citation for Part 30

continues to read as follows:

Authority: Secs. 2(a)(1)(A), 4, 4c, and 8a of

the Commodity Exchange Act, 7 U.S.C. 2, 6,

6c and 12a.

2. Appendix B to Part 30 is amended

by adding the following entry after the

existing entries for the ‘‘London

International Financial Futures and

Options Exchange’’ to read as follows:

Appendix B—Option Contracts

Permitted To Be Offered or Sold in the

U.S. Pursuant to § 30.3(a)

Exchange Type of contract

FR date

and citation

* * * * *

London International Financial Futures and Options Exchange.Option Contract on

ThreeMonth

Eurolira

(‘‘Eurolira’’)

Interest

Rate Futures Contract.

199ll;

ll FR

ll

* * * * *

Issued in Washington, D.C. on April 14,

1995.

Jean A. Webb,

Secretary to the Commission.

[FR Doc. 95–9636 Filed 4–18–95; 8:45 am]

BILLING CODE 6351–01–P

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

18 CFR Parts 343 and 385

[Docket No. RM91–12–000]

[Order No. 578]

Alternative Dispute Resolution

Issued April 12, 1995.

AGENCY: Federal Energy Regulatory

Commission.

ACTION: Final rule.

SUMMARY: The Federal Energy

Regulatory Commission (Commission) is

issuing a Final Rule to implement the

Alternative Dispute Resolution Act of

1990 (ADRA). To implement its policy

in support of alternative dispute

resolution, the Commission is amending

its Rules of Practice and Procedure to

add regulations adopting provisions

authorized in the ADRA and to establish

procedures for approving ADR in

particular proceedings.

In particular, the new rules: Adopt

guidelines for applying ADR techniques

and definitions from the ADRA;

establish procedures for submitting,

reviewing, and monitoring proposals to

use ADR in specific proceedings;

incorporate the provisions of the ADRA

regarding binding arbitration

proceedings, arbitral awards, and review

of arbitration results; and adopt the

provisions of the ADRA regarding

confidentiality in ADR proceedings

established under the new rules. The

Commission is also amending its Rules

of Practice and Procedure to modify

existing regulations and to add new

regulations with respect to the

submission and review of offers of

settlement. Finally, the Commission is

consolidating almost all of its

regulations dealing with the use of ADR

in oil pipeline rate proceedings into its

Rules of Practice and Procedure.

EFFECTIVE DATE: May 19, 1995.

FOR FURTHER INFORMATION CONTACT:

Barry Smoler, Office of the General

Counsel, Federal Energy Regulatory

Commission, 825 N. Capitol Street, NE.,

Washington, DC 20426, (202) 208–1269.

SUPPLEMENTARY INFORMATION: In

addition to publishing the full text of

this document in the Federal Register,

the Commission also provides all

interested persons an opportunity to

inspect or copy the contents of this

document during normal business hours

in Room 3104, 941 North Capitol Street,

NE., Washington, DC 20426.

The Commission Issuance Posting

System (CIPS), an electronic bulletin

board service, provides access to the

texts of formal documents issued by the

Commission. CIPS is available at no

charge to the user and may be accessed

using a personal computer with a

modem by dialing (202) 208–1397. To

access CIPS, set your communications

software to 19200, 14400, 12000, 9600,

7200, 4800, 2400, 1200 or 300bps, full

duplex, no parity, 8 data bits, and 1 stop

bit. The full text of this document will

be available on CIPS for 60 days from

the date of issuance in ASCII and

WordPerfect 5.1 format. After 60 days

the document will be archived, but still

accessible. The complete text on

diskette in Wordperfect format may also

be purchased from the Commission’s

copy contractor, La Dorn Systems

Corporation, located in Room 3104, 941

North Capitol Street, NE., Washington,

DC 20426.

Table Of Contents

I. Introduction

II. Background

III. ADR Rules

A. Initiating the Use of ADR

B. Mechanism for Using ADR

C. Arbitration

D. Confidentiality

IV. Settlement Rules

A. Omnibus Settlements

B. Uncontested Settlements

C. Contested Settlements

V. Miscellaneous

A. ADR in Oil Pipeline Rate Proceedings

B. ADR and Other Agencies

VI. Administrative Findings

A. Regulatory Flexibility Act

B. Environmental Review

C. Information Collection Requirements

VII. Effective Date

Before Commissioners: Elizabeth

Anne Moler, Chair; Vicky A. Bailey,

James J. Hoecker, William L. Massey,

and Donald F. Santa, Jr.

I. Introduction

The Federal Energy Regulatory

Commission (Commission) is issuing a

Final Rule to implement the Alternative

Dispute Resolution Act of 1990

(ADRA).1 To implement its policy in

support of alternative dispute

resolution, the Commission is amending

Subparts E and F of Part 385 of its Rules

of Practice and Procedure 2 to add

regulations adopting provisions

authorized in the ADRA and to establish

procedures for approving ADR in

particular proceedings.

In particular, new Rule 604 adopts

guidelines for applying ADR techniques

and definitions from the ADRA and

establishes procedures for submitting,

reviewing, and monitoring proposals to
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19495

3The provision implementing the statutory

requirement for negotiation in oil pipeline rate

proceedings remains in § 343.5.

4See Administrative Conference of the U.S.,

Sourcebook: Federal Agency Use of Alternative

Means of Dispute Resolution (Office of the

Chairman, 1987) (Sourcebook) at 44–45.

5Under the Department of Energy Organization

Act, Pub. L. No. 95–91, 91 Stat. 565 (Aug. 4, 1988)

and E.O. No. 12009, 42 FR 46267 (Sept. 15, 1977),

the Chair is responsible for the administrative

functions of the agency. With respect to those

matters, the Commission’s ADR policy has

developed separately.

6Administrative Conference of the U.S., The

Administrative Dispute Resolution Act: Guidance

for Agency Dispute Resolution Specialists (Office of

the Chairman, 1992).

7 58 FR 58753 (Nov. 4, 1993), III FERC Stats. &

Regs. Preambles ¶ 30,985; order on reh’g, Order No.

561–A, 59 FR 40243 (Aug. 8, 1994), III FERC Stats.

& Regs. Preambles ¶ 31,000 (July 28, 1994).

8 56 FR 18789 (Apr. 24, 1991), IV FERC Stats. &

Regs. Notices ¶ 35,523 (1991).

9 59 FR 59,715 (November 18, 1994), IV FERC

Stats. & Regs. Preambles ¶ 32,510.

10EEI at 3.

11See PG&E at 3–5.

use ADR in specific proceedings. New

Rule 605 incorporates the provisions of

the ADRA regarding binding arbitration

proceedings, arbitral awards, and review

of arbitration results. New Rule 606

adopts the provisions of the ADRA

regarding confidentiality in ADR

proceedings established under proposed

new Rules 604 and 605. The

Commission is amending Subparts E, F,

and G of Part 385 of its Rules of Practice

and Procedure to modify existing

regulations and to add new regulations

with respect to the submission and

review of offers of settlement. Finally,

the Commission is consolidating almost

all of § 343.5 of its regulations, dealing

with the use of ADR in oil pipeline rate

proceedings, into Part 385.3

The Commission’s purpose in

adopting these new rules and

amendments is to provide optional

opportunities for regulated entities and

other parties who come before the

Commission to simplify and expedite

their proceedings. We stress that all of

these newly authorized procedures are

purely voluntary on the part of the

parties affected by them, and are in

addition to all previously authorized

procedures and informal practices that

parties have used or had available for

use. We encourage regulated entities

and other parties to try these new

procedures and experiment with them.

They are intended to alleviate the costs

and other burdens of regulatory

litigation.

The Commission will continue to seek

means of further streamlining and

expediting its litigatory processes,

including any revisions or supplements

to today’s new rules that may in the

future appear appropriate. We welcome

suggestions on how to refine these rules

after they have gone into practice.

II. Background

The ADRA amended Chapter 5 of

Title 5, United States Code, by adding

a new subchapter to provide explicit

statutory authorization allowing federal

agencies to use ADR techniques in lieu

of litigation to resolve a dispute in the

agency’s administrative programs when

all the participants to the dispute

voluntarily agree to its use. ADR

methods include the use of a neutral, an

individual who functions to aid the

participants in resolving the

controversy. The ADRA provides that

ADR methods may include, but are not

limited to, settlement negotiations,

conciliation, facilitation, mediation,

factfinding, minitrials, and arbitration,

or any combination of these.4

The ADRA requires each agency to

adopt a policy that addresses the use of

alternative means of dispute resolution

and case management in connection

with the agency’s administrative

actions. The Commission will fulfill this

requirement with this rulemaking

proceeding and through revisions to its

regulations with respect to the matters

under the Commission’s substantive

jurisdiction.5 As required by the ADRA,

the Commission has consulted with the

Administrative Conference of the

United States (ACUS) and reviewed the

ACUS guidance to agencies in

developing their ADR policies and in

implementing those policies.6

The Congress further encouraged the

use of ADR procedures in the Energy

Policy Act of 1992. Section 1802(e) of

that Act directed the Commission to

establish appropriate ADR procedures,

including required negotiations and

voluntary arbitration, early in oil

pipeline proceedings as a method

preferable to adjudication in resolving

disputes related to rates. The

Commission did so by issuing Order No.

561, Revisions to Oil Pipeline

Regulations Pursuant to the Energy

Policy Act of 1992 on October 22, 1993.7

Additionally, Vice President Gore’s

National Performance Review

recommended that federal agencies

expand their use of ADR techniques.

On April 17, 1991, the Commission

issued a Notice of Inquiry (NOI) seeking

comments on: (1) How best to

implement the ADRA, (2) whether

changes in the Commission’s

regulations are necessary or appropriate

to facilitate the use of alternative means

of dispute resolution, and (3) whether

changes in the Commission’s

regulations governing settlements are

necessary or appropriate.8

On November 10, 1994, in response to

the comments on the NOI, the

Commission issued a Notice of

Proposed Rulemaking (NOPR).9 The

NOPR discussed at length the

application of ADR to Commission

proceedings. The specific proposals in

the NOPR are discussed below, in the

context of the comments received

thereon.

In response to the NOPR, the

Commission received 27 comments. The

commenters are identified in an

Appendix to this Final Rule, and their

comments are summarized and

discussed below.

III. ADR Rules

Because the use of ADR complements

current settlement practices, the NOPR

proposed to include the new rules in

Subpart F of Part 385 of the

Commission’s Rules of Practice and

Procedure concerning settlements.

Specifically, the NOPR proposed to

amend Rule 601(a) to provide for the

convening of conferences to evaluate

whether ADR is practicable in a

particular proceeding. New Rule 604

was proposed to establish a mechanism

for filing proposals to use ADR; new

Rule 605 was proposed to adopt the

provisions in the ADRA for binding

arbitration procedures; and new Rule

606 was proposed to adopt the

provisions in the ADRA for

confidentiality in ADR proceedings. As

the NOPR explained, the settlement

rules were retained separately so that as

many options as possible would be

available for expediting resolution of

disputes before the Commission.

EEI asks us to confirm that the new

rules do not in any way preclude parties

from engaging in informal settlement

discussions with each other outside the

scope of organized ADR activities.10 We

so confirm. We reject all suggestions by

PG&E 11 that the Final Rule in any way

limits or precludes settlement

discussions. The Final Rule does not

preclude any other form of informal

discourse, negotiation or agreement

among any combination of participants

on any combination of issues. ADR is an

additional alternative.

The NOPR explained that, apart from

the provisions in proposed Rule 605 for

binding arbitration proceedings, the

proposed rules did not include separate

provisions for the Commission’s review

of the ultimate outcome of an ADR

proceeding. The Commission’s intent is

that the ultimate outcome of an ADR

proceeding, like any other settlement, be

subject to Commission review in a
19496 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

12See, e.g., American Public Power Association;

Consumers Power Company; New England Power

Service; and Wisconsin Municipal Group.

13 Industrials at 8.

14Missouri PSC at 6–7.

15As discussed below, the NOPR emphasized that

under Rule 601(b)(3), any party who fails to attend

a conference convened for the purpose of

determining whether to use ADR waives any

objection to decisions made about an ADR proposal

at that conference. Thus, the unanimous consent is

by those participants who choose to attend a

conference convened for the purpose of

determining whether to use ADR. As the NOPR

indicated, there is an exception for binding

arbitration proposals under new Rule 605(a)(5),

which requires express consent of all parties in

such a proposal.

16AGD at 3–4; EEI at 3–4; Electric Generation at

4–5; Northern Distributors at 1–6; ANR and CIG at

3–4; PG&E at 5–6; Transco; and Williams and

Northwest at 6.

17Natural Gas Supply at 2; Natural Gas

Clearinghouse at 8–9. 18PEC Pipeline Group at 7–8.

manner that conforms with the

Commission’s statutory duties using

existing procedures for evaluating

settlements. As with the outcome of any

settlement, the Commission’s approval

of the outcome of the ADR method used

in a particular proceeding will not

constitute approval of, or precedent

regarding, any principle or issue in that

proceeding. To the extent ADR

techniques are used to resolve issues in

licensing or certificate cases, that

resolution will become part of the

Commission’s evaluation of any license

or certificate that might be issued.

The commenters generally support

the use of ADR.12 The Industrials,

noting that section 11 of the ADRA

provides for an October 1, 1995 sunset

provision, ask us to clarify whether the

Commission intends for new Rules 604,

605 and 606 to expire on that date.13

The Missouri PSC suggests a ‘‘sunset

review’’ within ‘‘the next two to four

years.’’ 14

If and when the ADRA expires, the

Commission will review the continued

legal viability of the binding arbitration

provisions. The other provisions are all

independently sustainable, absent

ADRA, under the Commission’s own

organic statutes. All of the

Commission’s regulations are in any

event reviewable at any time to

determine whether they can be

improved, just as the Final Rule herein

adds improvements to previously

adopted regulations, and all such

regulations can and will be deleted if

and when they are determined to be no

longer useful or appropriate.

A. Initiating the Use of ADR

New Rule 604(a)(1) provides that

participants may, subject to the

limitations of subparagraph (a)(2) of that

section, use ADR to resolve any issue in

a pending matter as long as all of the

participants agree to using ADR. The

NOPR explained that, under the ADRA,

any use of ADR proceedings must be

voluntary on the part of the participants,

and that the Commission is not willing

to create different levels of participants

for purposes of determining whether the

participants support using an ADR

proceeding. Thus, the NOPR proposed

to require the unanimous consent

contemplated by the ADRA.15

A number of commenters want to be

able to use ADR procedures even if the

participants are less than unanimous in

requesting such use.16 Two commenters

support the requirement for unanimous

request before ADR procedures can be

implemented.17

Commenters who oppose the

requirement for unanimous consent

contend that one reluctant participant

ought not to be able to frustrate the

ability of everyone else in the case to

use ADR procedures to resolve their

disagreements. They suggest that there

is a public interest in using ADR

procedures under those circumstances.

Some contend that only participants

who have a ‘‘substantial interest’’ in the

outcome of the case should be able to,

in effect, ‘‘veto’’ use of ADR;

participants with an ‘‘indirect or

attenuated interest’’ should not be able

to preclude ADR, but should be free to

‘‘opt out’’ and pursue their own

remedies. They characterize this

approach as ‘‘non-binding ADR.’’

Another variation would be to sever one

or more issues so as to use ADR

procedures, unanimously requested, to

resolve the rest of the issues.

Commenters who support the unanimity

requirement as proposed in the NOPR

stress the importance of protecting the

procedural rights of all of the parties to

a proceeding, not just the big parties or

the majority of the parties.

There is considerable merit to the

positions expressed on both sides of this

issue. ADR cannot work unless the users

of it want it to work and want to use it.

A single peripheral party ought not to be

able to prevent everyone else from using

ADR, but significant interests cannot be

excluded. It is very difficult to codify a

bright line test in the regulations. We

will adopt the rule as proposed. We

strongly urge all participants and

decisional authorities to be flexible and

creative in adapting ADR to their needs

and to the facts and circumstances of

particular cases, and in devising

alternative procedures that facilitate

informal resolution of most issues by all

participants, or of all issues by most

participants, while preserving the rights

of non-participants to disagree.

The NOPR explained that the

Commission seeks to encourage parties

to consider the use of ADR as a routine

part of the Commission’s decisionmaking processes. Accordingly, the

NOPR proposed to amend Rule 601(a)

by adding the words ‘‘or the use of

alternative dispute resolution

procedures’’ to specifically provide for a

conference to address the possibility of

using ADR techniques. The NOPR also

proposed to amend Rule 504(b)(7) to

conform to the amendment proposed in

Rule 601(a). As under the existing rule,

a conference could be convened at any

time during any proceeding.

The NOPR noted that Rule 601(b)(3)

provides that the failure of any party to

attend a conference convened under

Rule 601(a) constitutes waiver of all

objections that party may have to any

order or ruling arising out of, or

agreement reached at, the conference.

That condition would apply as well in

the context of a conference at which an

agreement to use ADR was reached.

Thus, Rule 601(b)(3) would operate to

waive an absent party’s objections to an

ADR proposal reached in the conference

if the conference was noticed in

advance as a conference addressing the

possibility of using ADR.

The Commission proposed an

exception for proposals to use binding

arbitration under proposed new Rule

605. In those cases, Rule 605(a)(5)

would require the express consent of all

interested parties to such an agreement.

Thus, a party’s absence from a

conference under Rule 601 would not

waive the party’s rights to object to the

use of binding arbitration under Rule

605.

The PEC Pipeline Group raises the

possibility that a participant in a

proceeding might seek to disrupt

potentially promising settlement

discussions by moving to convene a

conference to discuss the use of ADR

procedures or moving to consolidate

proceedings for disposition of a

settlement.18 The regulatory devices in

the Final Rule are intended to facilitate

resolution of conflicts, not to postpone

them. The Commission expects that the

appropriate decisional authorities will

be able to distinguish between the two

and rule accordingly.

Several commenters object to the

provisions that failure to attend the

conference will in effect constitute

waiver of any objection to the use of

ADR. Interior asks us to clarify the

procedures for objecting to the use of

ADR. Commerce and Natural Gas

Supply state that some participants may

be unable to attend due to financial or
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19497

19EEI at 4; Natural Gas Supply at 2–3. 20 18 CFR 385.102 (b) and (c).

logistical constraints, or schedule

conflicts. Commerce requests that

telephone conferences be permitted, and

that written objection be accepted upon

a showing of good cause for inability to

object in person. Supply and EEI would

make written objection as effective as

personal objection without a showing of

good cause for failure to attend in

person.19 All of these commenters stress

the importance of receiving timely and

accurate notice of the conference.

Rule 601(b)(1) already requires that

the participants be given notice of the

time and place ‘‘of the conference’’ and

‘‘of the matters to be addressed at the

conference.’’ We encourage the

decisional authorities to make every

effort to accommodate the financial,

logistical and schedule conflict needs

and constraints of the participants, and

to be flexible and creative in setting the

time, place and format of the

conference, including use of telephone

or video communication (as that

technology becomes more widely

available). We do, however, want the

participants to make a meaningful effort

to communicate with each other, even if

only for the purpose of engaging in a

dialogue over why they are or are not

willing to consider use of ADR

procedures to resolve their differences.

Therefore, we will not allow

participants to block the use of ADR

procedures by mailing in a written

objection without any discussion with

other participants about whether ADR

might or might not be useful.

B. Mechanism for Using ADR

Existing Rule 603 provides

procedures for the parties or the

Commission to incorporate the use of

settlement negotiations in Commission

proceedings, while existing Rule 602

provides procedures for the submission

and review of written offers of

settlement at any time during a

proceeding. New Rule 604 provides

similar procedures by which

participants can use any other ADR

method. The mechanism consists of the

filing and review of a proposal to use a

particular ADR method.

The ADRA lists six factors for an

agency to consider when identifying

cases in which the use of ADR would

not be appropriate. The NOPR proposed

to adopt these factors in subparagraph

(a)(2) of Rule 604 and to require that

they be considered whenever a proposal

to use ADR is made. Thus, the new rule

provides that the appropriate decisional

authority will consider not using ADR

if: (1) A definitive resolution is required

for precedential value; (2) the matter

involves significant questions of policy

requiring additional procedures before

final resolution; (3) maintaining

established policy is of special

importance; (4) the matter significantly

affects persons or organizations who are

not parties to the proceeding; (5) a full

public record of the proceeding is

important and the record cannot be

provided by dispute resolution; or (6)

the Commission must maintain

continuing jurisdiction over the matter

and dispute resolution would interfere

with the Commission’s authority to alter

the disposition of the matter if

circumstances change.

The use of ADR when any of these

factors is present is not absolutely

prohibited under the rule. New Rule

604(a)(3) provides that ADR may be

used if the dispute resolution

proceeding can be structured to avoid

the identified problem or if other

concerns significantly outweigh one or

more of the factors.

New Rule 604(a)(4) incorporates the

ADRA’s provision that the agency’s

decision to use or not to use an ADR

proceeding is not subject to judicial

review. New Rule 604(a)(5) provides

that settlement agreements reached

through the use of ADR will be subject

to Rule 602, notice and comment

procedures, unless the decisional

authority, upon motion or otherwise,

orders a different procedure.

Rule 604(b) incorporates various

ADRA definitions. ‘‘Party’’ and

‘‘participant’’ are defined in Rule 102.20

While staff is not included in the

definition of ‘‘party,’’ it is a

‘‘participant.’’ The proposed rules

provide for the full participation of

parties and staff in the ADR process to

the same extent as in the settlement

process.

The NOPR explained that the

definition of participant in Rule 102

does not expressly identify the

additional entities that are permitted to

participate in the application

procedures in the Commission’s rules

for a license or exemption to construct,

operate, and maintain a hydroelectric

project. To ensure that all participants

in such hydroelectric proceedings also

may participate in any matters

concerning ADR under Subpart F of the

Commission’s regulations, the

Commission proposed to adopt a

definition of ‘‘participant’’ in Rule

604(b)(8) that includes these entities,

which may be state and federal agencies

and Indian tribes having statutory roles

or a direct interest in the hydroelectric

proceedings, as participants in ADR

proceedings.

New Rule 604(e)(1) permits the

participants to submit a written

proposal at any time during a

proceeding to use ADR to resolve all or

part of any matter in controversy or

anticipated to be in controversy in the

proceeding. The proposal should be

written to avoid procedural

disagreements during the ADR

proceeding. A written proposal also is

needed by the decisional authority to

determine the appropriateness of using

ADR in the proceeding and whether to

suspend action on a matter to give

participants the opportunity to resolve

their disputes by means of an ADR

process. The NOPR explained that,

except for the binding arbitration

process identified in the ADRA and

incorporated in new Rule 605, the

Commission does not intend to identify

the specific ADR methods available to

the parties nor to mandate specific

procedures for each type of ADR, but

leaves the selection and procedures to

the discretion of the participants.

New Rule 604(e)(2) provides that, if a

proceeding is pending before an

administrative law judge (ALJ), the

proposal must be filed with the ALJ.

New Rule 604(e)(3) provides that, if a

proposal involves binding arbitration, it

must be filed with the Secretary for

consideration by the Commission. For

all other matters, new Rule 604(e)(4)

provides that a proposal to use ADR

may be filed with the Secretary, who

will transmit the proposal to the

appropriate decisional authority. New

Rule 604(e)(6) allows the participants to

modify the ADR proposal once it has

been approved and provides that

requests to modify must follow the same

procedure as proposals for ADR.

Cinergy urges us to convene the ADR

conference as quickly as possible,

preferably within 20 days of the filing

of the motion. We will encourage

decisional authorities to expedite this

process, but all potentially affected

participants must be afforded ample

time to consider their positions and

make appropriate arrangements.

Cinergy also proposes that the

proposal be deemed approved unless an

order denying approval is issued within

10 days, rather than the proposed 30

days. While we encourage decisional

authorities to act as quickly as possible

under the circumstances presented (e.g.,

if there is clear unanimity among

participants), because of the sometimes

large number of parties and need for

notice, it is not practical to shorten the
19498 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

21The Industrials (at 4) question what happens if

the 30th day falls on a weekend or holiday.

Consistent with long-established Commission

practice, the time period is extended until the day

after the weekend or holiday. See Rule 2007(a)(2).

22A non-governmental neutral may, however,

have a personal conflict of interest provided that

the conflict is disclosed to all of the participants

and given that disclosure they nonetheless consent

to that neutral’s service.

23The NOPR explained that this is consistent

with the Commission’s current settlement

procedures. Under Rule 603, the settlement judge

serves a single function as a mediator or facilitator

and cannot be a decisionmaker or advisor in that

proceeding.

24 Industrials at 3.

25 Industrials at 6–8.

26Columbia Gas at 4 suggests adding several more

words to subsection 604(c)(1), believing that they

may have been inadvertently omitted. There was no

omission, and the extra words are unnecessary.

Columbia Gas also alleges that there is an

inconsistency between subsections (c) and (e) of

section 604. Although phrased differently, we

believe that both subsections are clear and we do

not perceive any substantive inconsistency.

27Northwest Users at 4–5; Electric Generation at

7. Electric Generation also urges us to aggressively

monitor the status of ADR proceedings. We will

monitor them as appropriate. 28EEI at 3.

29PG&E at 6–9.

period after which ADR will be deemed

approved.21

Rule 604(c) provides that a neutral

may be a permanent or temporary

officer or employee of the Federal

Government, (including an ALJ), or any

other individual who is acceptable to

the participants in an ADR proceeding.

A neutral may not have any official,

financial, or personal conflict of interest

with respect to the issues in

controversy.22 The NOPR explained

that, if a staff member serves as a

neutral, in no event could that person

thereafter serve in any other capacity in

the proceeding.23

Rule 604(c)(3) provides that neutrals

may be selected from rosters kept by the

Federal Mediation and Conciliation

Service, ACUS, and the American

Arbitration Association, as well as any

other source. Pursuant to proposed Rule

604(c)(2), neutrals will be selected by

the participants and will serve at the

will of the participants unless the ADR

agreement provides otherwise.

Missouri PSC suggests that an ALJ

who participates as a neutral should not

participate thereafter in a decisional

capacity without the written consent of

all parties. The short answer is that once

an ALJ or any other Commission

employee has participated as a neutral

in an ADR procedure, they are

permanently barred from any role in the

decisional process involving that case,

with or without consent.

Missouri PSC also suggests that the

Commission compile a roster of neutrals

familiar with utility regulation.

Knowledge of utility law and

commercial practice would have

obvious relevance to a neutral’s ability

to function effectively in that role, but

the Commission does not wish to put

itself in the position of screening and

endorsing the qualifications of persons

who wish to serve in that capacity. The

participants should be free to choose

whomever they wish, unencumbered by

semi-official rosters.

The Industrials request clarification of

the responsibility of the participants for

compensating a Commission employee,

including an ALJ, who serves as a

neutral.24 Any Commission employee,

including an ALJ, who serves as a

neutral does so in his or her official

capacity as a federal employee and

cannot properly accept any additional

compensation of any kind from any

participant in the proceeding. With

respect to other neutrals, we agree with

the Industrials that it would be useful

for the participants to clarify matters of

compensation in the ADR agreement.

The Industrials ask us to clarify in

Rule 604 what authority the neutral has,

particularly with respect to such matters

as issuing subpoenas, compelling

production of documents and issuing

protective orders.25 The Industrials

misunderstand the role and posture of

the neutral. The neutral’s authority to

issue orders is derived from the

participants, not from the Commission.

The participants, in their ADR

agreement, are free to authorize or not

authorize the neutral to direct

production of their documents, issue

protective orders, or issue any other

order to which they may or may not

wish to be bound. The one exception, as

the Industrials themselves recognize, is

that ALJ’s retain all of their delegated

authority as presiding officers of the

Commission; selection as a neutral does

not serve to in any way suspend or

diminish their authority. Thus, if the

participants want their neutral to

exercise judicial-type authority, they

can either select an ALJ to serve as their

neutral or select an outsider and

authorize that person to exercise

whatever powers they wish to confer

and by which they wish to be bound.26

New Rule 604(e)(5) provides for the

issuance of an order by the decisional

authority approving or denying a

proposal filed under Rule 604 or Rule

605. The decisional authority will

determine whether ADR would be

appropriate for a particular proceeding

on a case by case basis, using the

guidelines set forth in new Rules 604(a)

(2)and (3). A proposal to use ADR will

be deemed approved unless the

decisional authority issues an order

denying approval within 30 days after

the proposal is filed.

New Rule 604(f) allows the decisional

authority to require status reports on the

proceeding at any time. The NOPR

explained that this provision is

designed to prevent parties from using

ADR as a stalling tactic. New Rule 604(g) gives the decisional

authority, upon motion or otherwise,

the authority to terminate an ADR

proceeding under Rule 604 or 605 if it

appears that ADR is no longer

appropriate. New Rule 604(g)(2)

provides that a decision to terminate an

ADR proceeding is not subject to

judicial review because the decision is

interlocutory in nature. This is

consistent with the existing settlement

negotiation procedures in Rules 603 (h)

and (i). The NOPR explained that

parties may seek Commission review of

such a decision under Rule 715 in cases

pending before an ALJ or, in all other

cases, under Rule 212 as a motion for

reconsideration.

Several commenters 27 ask us to

define standards for terminating ADR

proceedings. We prefer not to provide

standards because it is not practical to

attempt to anticipate in a generic rule all

of the circumstances that might justify

termination of such a proceeding. It is

best left to case by case determination,

based on the peculiar facts and

circumstances presented.

EEI urges us to encourage greater use

of ADR by announcing a policy of

adopting whatever result the parties

reach without modification unless it

would contravene a statutory

obligation.28 Natural Gas Pipeline urges

us to overturn the results of an ADR

procedure ‘‘only under exceptional

circumstances.’’ PG&E urges us to

accord ‘‘substantial deference’’ to the

results of ADR procedures.29

The Commission obviously must

reserve authority to ensure that

decisions reached through ADR

procedures are not contrary to the

public interest or inconsistent with

statutory requirements. Within those

broad parameters, the Commission can

and will give substantial deference to

whatever consensus participants reach

through the ADR process.

C. Arbitration

New Rule 605 incorporates the

arbitration provisions as they appear in

the ADRA, with a few modifications as

discussed below. The NOPR explained

that, to the extent participants wish to

use a different arbitration procedure,

they are free to propose one rather than

using the procedure set forth in Rule

605.

New Rule 605(a) provides that the

participants may at any time submit a
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19499

30Cinergy at 3; PGC Pipeline Group at 11.

31CIG and ANR at 2–3.

32Columbia Gas at 4–6.

33PEC Pipeline Group at 12–13.

34Northwest Users at 5–7.

35Electric Generation at 8.

36Natural Gas Pipeline at 7.

37AGD at 4.

proposal to use the binding arbitration

provisions of Rule 605 to resolve all or

part of any matter in controversy before

the Commission. New Rule 605(a)(2)

requires that a proposal to use binding

arbitration follow the procedures

outlined in Rule 604(d). New Rule

605(a)(3) requires that the proposal be

submitted in writing and contain the

information listed in Rule 604(e). Under

new Rule 605(a)(4), the arbitration

process can be monitored and

terminated just as other ADR methods

under Rules 604 (f) and (g). To ensure

that arbitration is truly voluntary on all

sides, new Rule 605(a)(5) provides that

the Commission will not require any

person to consent to an arbitration

proposal as a condition of receiving a

contract or benefit. Similarly, no

company regulated by the Commission

may impose such a condition. New Rule

605(a)(5) further requires that an

arbitration proposal under Rule 605

have the express written consent of all

parties to the dispute.

Under new Rule 605(b), the

participants in an arbitration proceeding

are entitled to select the arbitrator. The

particular procedure to be used in

selecting an arbitrator is not provided;

however, the arbitrator is required to

meet the requirements of the neutral as

described in new Rule 604(d). Rule

605(c) sets forth the arbitrator’s duties,

including conducting hearings,

administering oaths, and issuing

subpoenas to compel attendance of

witnesses and production of evidence at

hearing. As explained in the NOPR, the

arbitrator has the power to issue awards

but not the authority to issue licenses

and certificates.

New Rule 605(d) incorporates the

provisions in section 579 of the ADRA

that establish basic rules for the conduct

of binding arbitration proceedings,

including hearings. Rule 605(d)(1)

provides that the arbitrator will set the

time and place for the hearing and

notify the participants. New Rules

605(d) (2) and (3) provide for

preparation of a record, if desired, and

for presenting evidence. Under new

Rule 605(d)(3)(iv), the arbitrator may

exclude evidence that is irrelevant,

immaterial, unduly repetitious or

privileged. New Rule 605(d)(4) prohibits

ex parte communications with the

arbitrator, allowing the arbitrator to

impose sanctions for a violation of this

prohibition. New Rule 605(d)(5)

requires the arbitrator to issue an award

within 30 days of the close of the

hearing unless the participants and

arbitrator agree to a different schedule.

New Rule 605(e) incorporates the

ADRA standards for issuing and

appealing arbitral awards. The award

will be in writing and include a brief,

informal discussion of the factual and

legal basis for the award. The prevailing

participants will file the award with the

Commission and any other relevant

agencies and serve all participants. The

award becomes final 30 days after it is

served on all participants. However, the

Commission, upon motion or otherwise,

can extend this period for one

additional 30-day period upon notice of

the extension to all participants. New

Rule 605(e)(3) provides that a final

award is binding on the participants.

Several commenters 30 ask us to

clarify that the terms ‘‘arbitrator’’ and

‘‘arbitration’’ are broad enough to

authorize use of a panel of arbitrators

and not just a single person. We so

confirm; the singular includes the

plural.

CIG and ANR ask us to indicate in

advance the outer range of potentially

acceptable results of the arbitration.31 It

is simply impractical for the

Commission to do this, because it would

in effect require the Commission to

partially prejudge the case before there

is an adequate record on which to make

such decisions. It would also defeat the

purpose of inviting the parties to work

out their own solution before the

Commission becomes heavily involved

in the decisional process.

Columbia Gas asks us to incorporate

various interpretations of ADRA in the

regulations.32 ADRA speaks for itself on

these matters, and we perceive no need

to construe these particular statutory

provisions in the regulations, or to

address them in this preamble to the

regulations. Contrary to Columbia Gas’

suggestion, nothing in Rule 605

precludes the filing of an arbitration

award with any other agency, regardless

of whether such an award is also filed

with the Commission. In other words,

the award should be filed with

whichever agency or agencies it is

relevant. Also contrary to Columbia Gas’

suggestion, while section 580(a)(1) of

ADRA allows the Commission to omit

formal findings and conclusions, it does

not preclude the Commission from

requiring findings and conclusions on

its own authority.

In response to PEC Pipeline Group,33

we clarify that Rule 605(a)(5) does not

prevent parties to a settlement from

agreeing to the use of future binding

arbitration to resolve disputes under a

settlement, and does not prevent parties

from entering into transportation and

storage arrangements that include an

arbitration clause.

New Rule 605(f) provides procedures

for the Commission to vacate an award.

New Rule 605(f)(1) permits any person

to request, within ten days of the filing

of an award under Rule 605(e), that the

Commission vacate the award and

requires that person to provide notice of

the request to all participants.

Responses to such a request must be

filed within ten days after the request is

filed. Under new Rule 605(f)(2), the

Commission, upon request or otherwise,

may vacate an arbitration award before

the award becomes final. New Rule

605(e) adopts the ADRA’s provision that

the award need only discuss informally

the factual and legal bases for the award.

The NOPR explained that if the

participants wish to require that an

award include formal findings of fact

and conclusions of law, they may do so

by adopting a different standard.

New Rule 605(f)(4) adopts the ADRA’s

provision for monetary relief. Thus, if

the Commission vacates an arbitration

award, a party to the arbitration

proceeding may petition the

Commission for an award of the

attorney fees and expenses incurred in

connection with the arbitration

proceeding. The Commission must

award the petitioning party those fees

and expenses that would not have been

incurred in the absence of the

arbitration proceeding, unless the

Commission finds that special

circumstances make the award unjust.

As provided by the ADRA, new Rule

605(f)(6) establishes that a decision by

the Commission to vacate an arbitration

award is not subject to judicial review.

Northwest Users question how

extensively arbitration awards will be

vacated. They contend that persons who

are not parties to the proceeding should

not be able to move to vacate an

arbitration award, nor should such

nonparties be allowed to intervene out

of time for that purpose.34 Electric

Generation urges us to articulate a

stringent standard for review of

arbitration awards, suggesting ‘‘manifest

injustice.’’ 35 Natural Gas Pipeline

suggests that we confine vacature to

‘‘exceptional circumstances.’’ 36

As AGD notes,37 the Commission has

a statutory responsibility to vacate an

arbitration award if it contravenes the

public interest or is in any other way

inconsistent with statutory

requirements. The Commission does,

however, want to encourage parties to
19500 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

38PEC Pipeline Group at 12.

39Cinergy at 3; Cig and ANR at 4; see also Natural

Gas Pipeline at 7.

40Electric Generation at 8–9.

41PEC Pipeline Group at 10–11.

42The NOPR explained that existing Rule 2101

permits a participant to appear in a proceeding in

person or by an attorney or other qualified

representative, and that existing Rule 2102 provides

for suspension or disqualification (temporary or

permanent) of representatives when necessary.

43AGD at 4–5.

44PEC Pipeline Group at 14–16.

45New Rule 606(k) should also help alleviate the

problem raised by Natural Gas Supply (at 5) with

respect to protection of proprietary information

related to research and development projects. We

have also added to Rule 606(f) the cross-references

that Natural Gas Supply requested to sections

385.410 and 388.112.

46Electric Generation at 9–10.

explore and use ADR procedures, and

recognizes that extensive vacature of

arbitration awards would discourage

parties from using them. The

Commission would be very loath to

allow last minute interventions to

disrupt a settlement or arbitration award

after the parties have laboriously

reached such a resolution. On balance,

given the Commission’s statutory

responsibilities, decisions on vacature

will necessarily have to be made on a

case by case basis. We confirm for PEC

Pipeline Group 38 that if an arbitration

award is vacated the parties return to

the status quo ante as if the arbitration

proceeding had never occurred.

Several commenters asked us to

clarify who has to reimburse whom for

fees and expenses in the event that an

arbitration award is vacated, and who

can petition for it.39 Electric Generation

urges us to make the losers reimburse

the winners.40 The PEC Pipeline Group

expresses strong opposition to the

proposed rule and urges us not to adopt

it.41 The rule is required by the last

sentence of section 580(g) of the ADRA,

which is unmistakably clear on its face

and should assuage the commenters’

concerns: ‘‘Such fees and expenses shall

be paid from the funds of the agency

that vacated the award.’’ We have added

a sentence to subsection 605(f)(4) to

clarify it. All participants to the

arbitration proceeding can petition the

Commission for reimbursement by the

Commission of the fees and expenses

they incurred in the arbitration process

if the Commission vacates the

arbitration award at the end of that

process. We confirm to the PEC Pipeline

Group that parties may agree to forego

the right to petition for fees and

expenses, and may also agree in

advance on conditions pursuant to

which an arbitration award can be

reviewed by the Commission.

D. Confidentiality

New Rule 606 governs confidentiality

in ADR proceedings established under

new Rules 604 and 605, and

incorporates most of the confidentiality

provisions for neutrals and participants

that are found in the ADRA. Under new

Rule 606(a), confidentiality must be

maintained by a neutral unless: (1) All

participants in the ADR proceeding and

the neutral consent in writing to the

disclosure; (2) the communication has

already been made public; (3) the

communication is required by statute to

be made public; or (4) a court

determines, after a balancing of

considerations, that disclosure is

necessary to prevent a manifest

injustice, to help establish a violation of

law, or to prevent harm to the public

health or safety.

Under new Rule 606(b), a participant

in the ADR proceeding must not

disclose information concerning any

dispute resolution communication

unless, pursuant to five of the seven

exceptions set out in the ADRA: (1) All

participants consent in writing; (2) the

communication has already been made

public; (3) the communication is

required by statute to be made public;

(4) a court determines, after balancing

considerations, that disclosure is

necessary to prevent manifest injustice,

establish a violation of law, or prevent

harm to the public health or safety; or

(5) the communication is relevant to

determining the existence or meaning or

the enforcement of an agreement or

award resulting from the proceeding.

Under new Rule 606(c), any

communication disclosed in violation of

this section will not be admissible in

any proceeding relating to the issues in

controversy. New Rule 606(d) provides

that the participants may agree to

alternative confidentiality procedures

for disclosure by a neutral, but should

inform the neutral of any modifications

prior to the commencement of the ADR

procedure. If the neutral is not so

informed, the provisions of new Rule

606(a) would apply. Under new Rule

606(e), the participants must be notified

of a demand for disclosure, whether by

discovery or other legal process.

Proposed Rules 606(f) through (i) adopt

the remaining provisions of the ADRA,

including the provision that nothing in

the section would prevent discovery or

admissibility of evidence that is

otherwise discoverable, merely because

the evidence was presented in the

course of a dispute resolution

proceeding.42

AGD supports the rule as proposed.43

Cinergy suggests revisions to

subsections 606(a)(4) and (b)(4); we will

not make those revisions because, as

proposed and adopted, those

subsections directly track the language

of section 574 of the ADRA.

We have made several revisions in

response to the comments of the PEC

Pipeline Group.44 First, we have revised

Rules 606(a)(2) and (b)(2) by inserting

the word ‘‘otherwise,’’ so that they now

read ‘‘The dispute resolution

communication has otherwise already

been made public.’’ Next, we have

tightened Rule 606(c) by deleting the

latter part of it, so that it now reads

‘‘Any dispute resolution communication

that is disclosed in violation of

paragraphs (a) or (b) of this section shall

not be admissable in any proceeding.’’

Third, we have substituted the word

‘‘participant’’ for the word ‘‘neutral’’ in

Rule 606(e), so that it now reads ‘‘If a

demand for disclosure, by way of

discovery request or other legal process,

is made upon a participant before the

commencement of the dispute

resolution communication, the

participant will make reasonable efforts

to notify the neutral and the other

participants of the demand.’’ (Emphasis

added) Finally, we have added a new

Rule 606(k), which reads as follows:

‘‘Where disclosure is authorized by this

section, nothing in this section

precludes use of a protective agreement

or protective orders.’’ 45

We have not adopted the other

changes suggested by PEC Pipeline

Group or by Electric Generation 46

because we do not believe they are

warranted. The matters raised by

Electric Generation with respect to the

Freedom of Information Act are not

addressed here because they are beyond

the scope of this rulemaking.

IV. Settlement Rules

A. Omnibus Settlements

The NOPR explained that the

authority of the ALJ and the

Commission to consolidate multiple

proceedings exclusively under their

respective jurisdictions for review in an

omnibus settlement is established,

respectively, in Rules 503(a), 101(e), and

212. The NOPR proposed to codify

current practice and amend Rule 503(a)

by adding that the Chief ALJ may order

multiple proceedings that are pending

before ALJs to be consolidated for

settlement, as well as hearing, on any or

all matters in issue. The Commission is

amending the procedures in Rule 602(b)

for the submission of offers of

settlement to provide specifically for

requests to be filed with the

Commission for consolidation or other

appropriate procedural relief to enable

proceedings pending before ALJs to be
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19501

47 Industrials at 10.

48Tejas Power Co. v. FERC, 908 F.2d 998 (D.C.

Cir. 1990). Specifically, the court found that the

issues in that rate proceeding required the

Commission to examine the impact of the

settlement and collect evidence that the consumers’

interest would be served by the agreement, that the

parties had adequate bargaining power to produce

an equitable agreement, and that the agreement’s

terms are acceptable under the Commission’s

requirements.

49AGD at 7–8.

50Natural Gas Pipeline at 4.

51 Industrials at 18–21.

52Rule 602(h)(1)(iii) and Rule 602(h)(2)(iv). See,

e.g., Tennessee Gas Pipeline Co., 31 FERC ¶ 61,308

(1985), in which the Commission approved a

settlement in the public interest on issues where the

record was sufficient, but severed an issue for later

decision where the record was insufficient.

53FERC Stats. & Regs. Preambles, 1977–1981

¶ 30,061, at 30,433.

transmitted to the Commission for

consideration in an omnibus settlement

together with proceedings pending

before the Commission. The amendment

adds new paragraph (b)(3) to permit any

participant in a proceeding covered by

an offer of settlement submitted under

(b)(1) to file a consolidation request

when the settlement covers multiple

proceedings pending in part before the

Commission and in part before one or

more ALJs.

The Industrials request that the

Commission codify standards for

determining when party severance

would be appropriate in an omnibus

settlement. In particular, they state that

‘‘[i]n effect, we believe, the Commission

should clarify its new rules providing

for the severance of parties to state that

severance should be by party, by

contested issue of material fact.’’ In the

alternative, they ‘‘recommend that the

final rule be clarified to provide that

severance of parties should proceed by

docket, rather than by omnibus

settlement.’’ 47

The issue of severance, generally, is

discussed below. We see no reason to

treat severance differently in the context

of omnibus settlements than in any

other context.

B. Uncontested Settlements

Rule 602(g) provides for the

certification to the Commission of

uncontested settlements filed with an

ALJ. If an offer is uncontested, the ALJ

is required under Rule 602(g)(1) to

certify to the Commission the offer of

settlement with the hearing record and

any related pleadings. Under the

standard set out in Rule 602(g)(3), the

Commission may approve an

uncontested offer ‘‘upon a finding that

the settlement appears to be fair and

reasonable and in the public interest.’’

The NOPR explained that the court in

Tejas Power Co. v. FERC held that the

Commission is required to make an

independent determination that the

settlement is in the public interest.48 On

some issues, an exercise of the

Commission’s independent review may

be required even though the parties may

not want to develop a record. In these

circumstances, the Commission is

entitled to require the development of

an adequate record before it can

determine whether an uncontested

settlement is in the public interest.

AGD maintains that the Commission

should amend its rules to provide that

it will act on an uncontested settlement

within 45 days after it is certified to the

Commission. In the alternative, it asks

that an uncontested settlement be

treated the same way as an uncontested

initial decision under Rules 708 and 712

by its becoming effective within 45 days

after transmission to the Commission

unless it is stayed by the Commission

pending further review.49

Natural Gas Pipeline maintains that

uncontested settlements should be

deemed approved and become effective

without a Commission order, absent

contrary Commission action, within 30

days after the close of the comment

period.50

While the Commission attempts as a

matter of course to act on uncontested

settlements as expeditiously as possible,

a time constraint would not be in the

public interest because some

settlements, even though not contested,

are complicated nevertheless. It cannot

be assumed that every aspect of every

uncontested settlement is consistent

with the public interest and in

conformity with key Commission

policies. We note in this regard,

however, that the Commission’s goal is

to act on uncontested electric and gas

rate settlements within 45 days of the

close of the comment period or date of

certification to the Commission, and to

act on contested electric and gas rate

settlements within 90 days of those

trigger dates. In most cases the

Commission has been able to adhere to

these goals, particularly with respect to

the uncontested cases.

The Industrials maintain that the

Commission should review, and not

refashion, uncontested settlements. In

addition, they claim the Commission

cannot order the parties to provide more

support for the settlement; they contend

the Commission can only reject it or

return it to the parties to decide how to

fix deficiencies.51

The Commission is not limited to

rejecting an uncontested settlement or

returning it to the parties to decide how

to fix it. Of course, the Commission may

take both approaches. In addition, the

Commission may refashion an

uncontested settlement to comport with

the public interest and the Commission

may conclude that it is in the public

interest that there be more support for

all or part of an uncontested settlement.

C. Contested Settlements

Rule 602(h) provides for processing

settlements that are contested in whole

or in part by any participant. Rule

602(h)(1) governs the Commission’s

evaluation and decision of contested

settlements. Rule 602(h)(2) sets out the

standards that govern the ALJ’s

evaluation of contested settlements in

proceedings before the ALJ and provides

for the certification of the settlement to

the Commission for a decision on the

merits of the contested issues.

As discussed in the NOPR, under

Rule 602(h)(1) the Commission may

decide the merits of the issues in a

contested settlement if the record

contains substantial evidence upon

which to base a reasoned decision or the

Commission determines there is no

genuine issue of material fact. Under

Rule 602(h)(2), a settlement that is

contested by a party and that is before

an ALJ may be certified to the

Commission for a merits decision if,

under Rule 602(h)(2)(ii), no genuine

issue of material fact exists. If genuine

issues of material fact exist, the ALJ may

still certify the contested settlement but

only if the following three conditions

specified in Rule 602(h)(2)(iii) are met:

(1) The parties concur on a motion for

omission of the initial decision, (2) the

presiding officer determines that the

record contains substantial evidence

from which the Commission may reach

a reasoned decision on the merits of the

contested issues, and (3) the parties

have an opportunity to avail themselves

of their rights with respect to the

presentation of evidence and crossexamination of opposing witnesses.

As we explained in the NOPR, the

rules permit either the Commission or

the ALJ, as appropriate, to sever

contested issues from a settlement and

resolve them separately.52 The

uncontested issues may be considered

under the expedited procedures for

Commission review of uncontested

settlements, while the contested issues

proceed with further review on the

merits. In establishing the settlement

rules in 1979, the Commission

encouraged the parties to a settlement to

indicate whether parts of the settlement

are severable and to advise the ALJ or

the Commission to permit a prompt

decision on the uncontested parts of the

settlement.53 This Final Rule amends
19502 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

54Natural Gas Clearinghouse at 3–7.

55Arkla Energy Resources, 48 FERC ¶ 61,602,

reh’g denied, 49 FERC ¶ 61,051 (1989).

56Tejas Power Co. v. FERC, 908 F.2d 998 (D.C.

Cir. 1990).

57Columbia Gas Transmission Corp., 64 FERC

¶ 61,366, reh’g denied and order clarified, 66 FERC

¶ 61,214 (1994); Southern Natural Gas Co., 67 FERC

¶ 61,156 (1994), appeal docketed, Mississippi

Valley Gas Co. v. FERC, No. 94–1486 (D.C. Cir. filed

July 1, 1994).

58United Municipal Distribution Group v. FERC,

732 F.2d 102 (D.C. Cir. 1984).

59Arkla Energy Resources, 48 FERC ¶ 61,602 at p.

61,303, reh’g denied, 49 FERC ¶ 61,051 (1989).

60PEC Pipeline Group at 7.

61Columbia Gas Transmission Corp., 64 FERC

¶ 61,366, reh’g denied and order clarified, 66 FERC

¶ 61,214 (1994); Southern Natural Gas Co., 67 FERC

¿ 61,156 (1994).

62 Industrials at 12.

63Natural Gas Clearinghouse at 7–8.

64AGD at 6; Electric Generation at 12; Natural Gas

Supply at 4.

Rule 602(h)(1) (ii) and (iii) and Rule

602(h)(2)(iv) to permit the ALJ or the

Commission to sever contesting parties

as well, by adding the phrase

‘‘contesting parties or’’ before the

discussion beginning with ‘‘contested

issues’’.

Natural Gas Clearinghouse 54

maintains that contesting parties should

not be involuntarily severed from

contested settlements. It contends there

are many reasons to reaffirm the nosevering policy of Arkla.55 It argues that

an exercise of raw power due to unequal

bargaining power is against public

policy and violates the Tejas decision’s

emphasis on adequate bargaining

power.56

The rule merely recognizes that the

Commission permits the severing of

parties in certain circumstances.57 Such

a policy has been approved by the

United States Court of Appeals for the

District of Columbia Circuit.58 Nothing

in Tejas is to the contrary. Tejas merely

dealt with the weight to be given to the

settling parties’ position in a contested

settlement where the Commission

approved the settlement for all parties.

Severing a party, of course, no longer

makes that party bound by the

settlement.

Of course, there are no hard and fast

criteria for determining whether party

severing is appropriate. That decision

depends on the circumstances of the

particular settlement. The Commission

must consider the nature of the issue or

issues contested, the state of the record,

and the impact of the Commission’s

decision on the settlement. Those

factors are illustrated by the

Commission’s decisions in Arkla and

Columbia. In Arkla, the Commission

refused to sever contesting parties

because, as there described, that would

create a ‘‘no lose’’ situation for those

parties, who were interruptible

customers.59 Instead, the Commission

stated that it would resolve the

contested issues on the merits.

However, in Columbia, the Commission

concluded that it was appropriate to

sever the contesting party with respect

to its firm rates, where the contesting

party would not be in a ‘‘no lose’’

situation and the record was inadequate

for reaching a decision on the merits.

This refinement of Arkla enabled

Columbia and the settling parties to reap

the benefits of their bargain while

enabling the contesting party to litigate

its case.

The PEC Pipeline Group maintains

that ‘‘the Commission should abandon

its sweeping prohibition against

severing parties from Part 284

transportation and storage rate

settlements * * * (and) clarify that

severance of contesting parties is

allowed in Part 284 transportation and

storage rate settlements when the

contesting parties have no direct

economic interest in the settlement.’’ 60

The Commission does permit parties to

be severed in Part 284 settlements as

indicated by the recent Columbia and

Southern proceedings.61 A party’s lack

of direct economic interest in the

settlement should be considered when

such a circumstance arises.

The Industrials ask the Commission to

clarify ‘‘what are the effects, if a party

is severed, tries an issue such as rate

design, and the outcome dictates that

party is entitled to rates lower than the

rates applicable to the consenting

parties.’’ 62 For example, they assert that

the refund floor in the next rate case

should be the lower of the settled or

litigated result. In addition, they ask for

clarification about terms and conditions,

such as it is unduly discriminatory to

have differing quality or pressure

standards owing to a settlement and a

merits decision. The Commission

concludes that the Industrials’

clarification requests should be

considered in case-specific situations.

Under paragraph (ii) of Rule 602(h)(2),

the ALJ determines whether a

settlement that is contested by any

participant contains a genuine issue of

material fact. If the settlement does not,

the ALJ may certify the settlement

directly to the Commission. If the

settlement contains a genuine issue of

material fact, the ALJ may certify the

settlement only if the three conditions

under paragraph (iii) are met. The NOPR

proposed to amend Rule 602(f) to

require a strong showing by contesting

parties detailing any genuine issues of

material fact that they contend exist.

Natural Gas Clearinghouse maintains

that the Commission should not require

contesting parties to submit affidavits

detailing genuine issues of material fact

because this will encourage extensive

discovery rather than produce more

certifiable settlements. It submits that

disciplining parties for superficial

claims is a more ‘‘surgical’’ solution.63

Other commenters support the

requirement for affidavits.64

The Commission continues to believe

that the affidavit approach is the

appropriate way to ensure that genuine

issues of material fact exist. This is a

more efficient approach than

disciplining parties at some later date.

As with a motion for summary

disposition, the ALJ can determine if

discovery is needed for a party to

determine whether genuine issues of

material fact exist.

Under the previous Rule 602(h)(2)(iii),

the ALJ could certify an offer of

settlement or part of any offer of

settlement even if the settlement

contained genuine issues of material

fact. In these circumstances, the ALJ

was entitled to certify an offer that is

contested by a party if all of the

following conditions, contained in

subparts (A), (B), and (C), were met:

(A) The parties concur on a motion for

omission of the initial decision as

provided in Rule 710;

(B) The presiding officer determines

that the record contains substantial

evidence from which the Commission

may reach a reasoned decision on the

merits of the contested issues; and

(C) The parties have an opportunity to

avail themselves of their rights with

respect to the presentation of evidence

and cross-examination of opposing

witnesses.

If any one of these conditions was not

present, the judge could direct further

procedures as deemed appropriate,

including certification of the settlement

at a later time if the conditions were

then met.

The NOPR proposed to modify the

regulations to permit the ALJ to certify

a settlement if there is less than

unanimous concurrence of the parties

under condition (A) to a motion filed

under Rule 710 for omission of the

initial decision. To accomplish this, the

NOPR proposed to amend both

condition (A) and Rule 710 to delegate

to the ALJ the authority to determine

that, if a motion filed under Rule 710

has less than unanimous concurrence,

omission of the initial decision is

appropriate to the same extent the

Commission is able to make that

determination under Rule 710. The

NOPR concluded that condition (C) is

subsumed by condition (B) and
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19503

65Natural Gas Pipeline at 4–7.

66 Industrials at 21–23.

67Natural Gas Supply at 4.

68Northern Distributors at 6–8.

69Northeast and New Jersey at 3–4.

70Rule 602(h)(2)(iii)(B).

71 Industrials at 14.

72See United Gas Pipe Line Company, 47 FERC

¶ 61,035 (1989); cf. Southern Natural Gas Company,

10 FERC ¶ 61,287 at p. 61,577 (1988).

73PEC Pipeline Group at 4–6. The PEC Pipeline

Group also maintains that the Commission should

not permit an ALJ to certify a settlement ‘‘unless,

at a minimum, the contested settlement is

sponsored and supported by the primary party.’’ We

prefer to leave this to the discretion of the ALJs.

74 Industrials at 15.

75See Rule 601(a).

76 In rate cases, for instance, the trial staff initiates

settlement discussions by the filing of top sheets

which are followed by settlement conferences

where all parties are invited to attend. If the

discussions held at these conferences suggest that

a settlement is obtainable, further settlement

conferences are held. In all other cases, the trial

staff explores with the parties whether settlement

discussions should be pursued. If settlement

discussions are held, no party is kept out of the

process. There may be occasions, however, when

smaller meetings with selected parties are held to

advance settlement.

77 Industrials at 23–24.

proposed to eliminate condition (C)

entirely.

Natural Gas Pipeline submits that the

ALJ should certify to the Commission a

settlement that is sponsored or

supported by the applicant and also has

substantial support among other

participants. It maintains that the

Commission, not the ALJ, is better able

to decide policy issues, decide whether

the record is adequate, establish special

procedures, and effect severance

procedures.65

The ALJ is best suited to rule in the

first instance about whether a settlement

should be certified and, if not, what

procedures should be pursued. Natural’s

approach in essence would limit the

ALJs to record fashioners only.

The Industrials maintain that the ALJs

are better equipped than the

Commission to sift through a record to

find facts and that the initial decision

process is not a roadblock. At a

minimum, they assert the Commission

should clarify that omission of the

initial decision is discretionary.66

Omission of an initial decision is only

mandatory if all parties join or concur

in the motion.

Natural Gas Supply is concerned

about the lack of standards on omission

of an initial decision in Rules

602(h)(2)(iii)(A) and 710.67 The

Commission concludes that those

sections should be applied on a casespecific basis.

Natural Gas Supply maintains that the

existence of record evidence is

unrelated to the credibility of the

evidence and that a mini-hearing should

not be a material imposition on the

parties or the fact finder. Northern

Distributors also opposes the deletion of

the right to cross-examination, which it

says will not be inconsistent with the

use of affidavits because it will allow

the testing of and developing of

assertions in the affidavits.68 Northeast

and New Jersey also oppose the limits

on cross-examination because, they

contend, that is the only true test of

contested facts. They also oppose the

proposed limit on an opportunity to

present evidence.69

The commenters are incorrect in their

view that the Commission has limited

the opportunity to present evidence and

to cross-examine witnesses. The

Commission has merely eliminated

previous Rule 602(h)(2)(iii)(C) because it

is subsumed within subsection (B)’s

requirement of substantial evidence.

The ALJ will have to determine whether

a party is entitled to present evidence

and to cross-examine witnesses when

the determination is made concerning

whether the ‘‘record contains

substantial evidence from which the

Commission may reach a reasoned

decision on the merits of the contested

issues.’’ 70 In this vein, the Commission

emphasizes that substantial evidence

pertains to the quality and not the

quantity of the evidence; evidence

elicited through cross-examination of

witnesses may be necessary and

appropriate in some instances but not in

others.

The Industrials ask the Commission to

clarify the role of the trial staff in

prehearing and settlement discussions

and during and after any hearings are

held for severed parties or on severed

issues. They state that the trial staff is

an advocate of the public interest with

an independent position of its own and

should continue to participate in

hearings on the merits even if it

supports a settlement. They argue that

the staff should not be permitted to

withhold its witnesses or withdraw its

testimony during contested party

litigation.71

The rule adopts nothing that affects

the trial staff’s role in proceedings. It is

well settled that trial staff members can

not be required to testify on behalf of a

private litigant.72 The trial staff often

acts as an informal mediator, although

it is not a pure neutral in that it can also

advance a position on the merits.

Continued litigation of unsettled issues

may or may not be in the public interest,

depending on the circumstances

presented. There is often a public

interest benefit in avoiding the societal

cost of continued litigation. In those

circumstances, the trial staff may decide

that it can best serve the public interest

by supporting a settlement rather than

proceeding with litigation of unresolved

issues.

The PEC Pipeline Group maintains

that the Commission should modify the

settlement regulations so that only

parties with a direct economic interest

in the outcome of a proceeding have

standing to contest a settlement.73 We

will not curtail the rights of parties to

oppose a settlement based on their

degree of economic interest in the

outcome. Such parties have a right to

their day in court regardless of their

economic stake in the outcome.

The Industrials maintain that to avoid

‘‘settlement by ambush,’’ the

Commission should require settlement

sponsors to hold at least one formal

settlement conference for outlining or

summarizing the settlement and to

answer questions before a settlement is

filed. They add that a failure to do so

should be deemed ‘‘bad faith.’’ 74

The Commission sees no reason to

require a formal settlement conference

in each case. Whether a conference

should be convened is a case-specific

matter to be determined by the

decisional authority on a case by case

basis.75 It might be appropriate only in

those instances when not all of the

parties have been involved in the

settlement negotiation process. In those

circumstances, there may be a reason to

believe, based on the record developed

to that point, that the settlement might

be opposed. If, however, all of the

parties have been invited to participate

in the settlement process then there

would be no purpose to requiring yet

another meeting.76

The Industrials maintain that, in light

of the affidavit process, the Commission

should either (1) modify the time

periods for initial comments and reply

comments to 45 and 30 days,

respectively, or (2) give the ALJs the

authority to modify the time

requirements. They contend in the

alternative that ‘‘if one or more parties

claims to have been unfairly excluded

from the settlement process, those

parties should be entitled to move at

any time for a settlement judge to

preside over further proceedings. In

such a situation, the dates for comments

on the settlement, as provided under

Rule 602(f), should automatically be

suspended.’’ 77 The Commission

believes that the current rules about

settlements provide the ALJs with

adequate authority to act on any

requests for extensions of time (Rule
19504 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

78Natural Gas Supply at 5–7.

79Filings and Reporting Requirements for

Interstate Natural Company Rate Schedules and

Tariff, 60 FR 311 (Jan. 13, 1995), IV FERC Stats. &

Regs. Proposed Regulations ¶ 32,511 (Dec. 16,

1994).

80 Industrials at 23–24.

81See 42 U.S.C.A. 7172 note (West Supp. 1993).

82Revisions to Oil Pipeline Regulations pursuant

to the Energy Policy Act of 1992, Order No. 561,

58 FR 58785 (November 4, 1993), III FERC Stats. &

Regs. ¶ 30, 985 (1993), order on reh’g and

clarification, Order No. 561–A, 59 FR 40243

(August 8, 1994), III FERC Stats. & Regs. ¶ 31,000

(1994).

83PEC Pipeline Group at 16–17.

84See, for example, Order No. 561 at 30,974,

where the Commission specifically provided: ‘‘A

decision by the Commission to vacate an arbitration

award would not be subject to judicial review.’’

85The comments of the Department of Commerce

were submitted by its National Marine Fisheries

Service.

86 16 U.S.C. 797(e).

87 16 U.S.C. 811.

88 16 U.S.C. 823a(c).

89 16 U.S.C. 1536(a)(2).

90 16 U.S.C. 803(j).

91 16 U.S.C. 661 et seq.

92We are not willing to adopt Interior’s

suggestion that State and Federal resource agencies

be accorded the power to, in effect, veto the use of

ADR procedures in hydropower license cases. The

statutory rights of the resource agencies can be

adequately protected without precluding all of the

other interested participants in the process from

meeting and trying to resolve their differences

through use of ADR procedures.

602(f)(2)) or for a settlement judge (Rule

603).

Natural Gas Supply suggests other

steps to more efficiently resolve rate

matters. It recommends (1) requiring the

filing of Statement P with the case itself,

(2) requiring staff to timely prepare and

submit top sheets, and (3) appointing a

settlement judge for each new rate

filing.78 These matters fall beyond the

scope of this proceeding. For example,

the Commission is proposing in another

rulemaking to require the submission of

Statement P with a rate filing.79

Finally, the Industrials ask us to

codify the procedures for technical

conferences. That is also a matter that is

beyond the scope of this rulemaking.80

V. Miscellaneous

A. ADR in Oil Pipeline Rate Proceedings

Section 1802(e) of the Energy Policy

Act of 1992 81 required the Commission,

to the maximum extent practicable, to

establish ADR procedures in oil

pipeline rate proceedings including

required negotiations and voluntary

arbitration for use early in contested rate

proceedings. In Order No. 561,82 the

Commission established ADR and

arbitration procedures for oil pipelines

at § 343.5 of its regulations. Those

provisions are much the same as the

ADR rules proposed in the ADR NOPR

in the instant proceeding except for a

provision that requires the Commission

to refer all protested oil pipeline rate

filings to a settlement judge for

recommended resolution.

The NOPR asked for comments on

whether to integrate the oil pipeline

provisions into the proposed ADR rules

so that the Commission would then

have a single set of ADR rules. The

Association of Oil Pipelines (AOPL)

supports integration but claims that the

prohibitions against judicial review in

the proposed rules are not included in

the oil pipeline ADR rules and thus

should not be made applicable to oil

pipelines in the final rules here. The

PEC Pipeline Group observes that the

Congressional mandate for required

negotiation does not apply to gas

pipelines and therefore that the required

negotiation approach is inappropriate in

the gas pipeline context.83

The Commission concludes that it

would be more efficient and less

confusing for all participants in

Commission proceedings to have a

single set of ADR rules. The

Commission thus will make the ADR

rules adopted here applicable to oil

pipelines. The Commission disagrees

with AOPL’s position on judicial review

because we did not intend special

judicial review provisions for oil

pipelines,84 and thus will not exclude

oil pipelines from the provisions

adopted here regarding judicial review.

The Commission agrees, however, that

negotiation should not be required other

than for oil pipelines and thus will

make the required negotiation provision

currently in the oil pipeline ADR rules

applicable only to oil pipelines.

Therefore, we are deleting most of

§ 343.5 of the Commission’s regulations,

except for the required negotiation

provision previously at § 343.5(b),

which is now renumbered simply as

§ 343.5. We are also deleting some of the

related definitions in § 343.1.

B. ADR and Other Agencies

The U.S. Departments of Commerce 85

and the Interior generally support the

use of ADR, but Interior expresses

concern over how those Departments’

statutory functions in the hydropower

licensing process will be protected and

integrated in the ADR process.

Section 4(e) of the Federal Power Act

(FPA) requires that Commission licenses

for projects located within United States

reservations must include all conditions

that the Secretary of the department

under whose supervision the

reservation falls shall deem necessary

for the adequate protection and

utilization of such reservation.86 Section

18 of the FPA requires the Commission

to require the licensee to provide ‘‘such

fishways as may be prescribed by the

Secretary of the Interior or the Secretary

of Commerce.’’ 87 Interior also refers to

section 30(c) of the FPA,88 which

requires the Commission to include fish

and wildlife protective conditions in

exemptions from licenses when those

Departments so mandate, and to section

7(a)(2) of the Endangered Species Act,89

which requires certain consultation

with Interior’s U.S. Fish and Wildlife

Service. We also note that section 10(j)

of the FPA,90 in conjunction with the

Fish and Wildlife Coordination Act,91

mandates consultation with both

Commerce and Interior on fish and

wildlife mitigation conditions in

Licenses.

We assure both Departments that their

statutory authority and responsibilities

will not be impaired. The ADR rules are

not intended, nor could they be lawfully

construed, to in any way waive, evade,

or undermine any agency’s statutory

rights or responsibilities. Having

rendered that categorical assurance, we

urge both Commerce and Interior to join

us in devising ways to integrate the

conduct of their statutory functions

under the FPA with the Commission’s.

In particular, we encourage Commerce

and Interior to participate early and

actively in consultative, ADR, or any

other informal fora for discussing

environmental problems and potential

mitigatory and enhancement measures

with license applicants, other interested

persons, and (where appropriate) our

staff, in an effort to resolve these matters

as early, cooperatively and efficiently as

possible.92

The Colorado River Energy

Distributors Association (CREDA)

comment on the use of ADR techniques

in the context of requests by Federal

Power Marketing Agencies (PMA’s) for

confirmation and approval of rates

proposed for the sale of power from

federally-owned projects.

CREDA asserts that PMA rate

proceedings at the Commission lend

themselves especially well to ADR

proceedings. CREDA cites the

Commission’s traditional advisory role

in deciding whether to confirm and

approve PMA rates, and maintains that

this role would be greatly enhanced by

the availability of ADR. CREDA further

cites the sometimes conflicting goals of

the PMA’s, the customers of PMA’s, and

the federal power generating agencies

that are charged with recovery of the

costs of operating the projects. CREDA

concludes that in light of these

conflicting interests and the numerous

complex issues involved in PMA rate

proceedings, informal resolution of

these issues through ADR proceedings
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19505

93 5 U.S.C. 601–612.

94 5 U.S.C. 605(b).

95Section 380.4(a)(2)(ii) of the Commission’s

regulations categorically exempts from

environmental review Commission proposals for

promulgation of rules that are clarifying, corrective,

or procedural, or that do not substantially change

the effect of the regulations being amended. See 18

CFR 380.4(a)(2)(ii). 96 5 CFR 1320.13.

could greatly reduce the Commission’s

workload in PMA rate proceedings.

CREDA generally supports the

Commission’s proposals to incorporate

use of ADR. CREDA recognizes that

§ 300.1(a) of Part 300 of the

Commission’s regulations already

specifically states that, except as

otherwise provided by rule or order, the

Commission’s Rules of Practice and

Procedure apply to filings by PMA’s in

which confirmation and approval is

sought for proposed rates. CREDA

nevertheless recommends, out of an

abundance of caution, that the

Commission specifically state in its

regulations concerning Commission

consideration of PMA rate filings that

ADR is available upon Commission

order. It is not necessary, however, to

make specific provision for ADR in the

regulations concerning PMA rate filings

because § 300.1(a) makes the Rules of

Practice and Procedure generally

applicable to all PMA rate proceedings

under Part 300.

VI. Administrative Findings

A. Regulatory Flexibility Act

The Regulatory Flexibility Act

(RFA) 93 generally requires the

Commission to describe the impact that

a rule will have on small entities or to

certify that the rule will not have a

significant economic impact on a

substantial number of small entities.

The Commission is not required to make

an analysis if a rule will not have such

an impact.94

Pursuant to section 605(b) of the RFA,

the Commission certifies that the Final

Rule adopted herein will not have a

significant economic impact on a

substantial number of small entities.

B. Environmental Review

The Commission is not preparing an

environmental assessment or

environmental impact statement in this

proceeding because the new rules and

amendments are procedural only,

changing only the Commission’s Rules

of Practice and Procedure, and therefore

have no significant effect on the human

environment.95

C. Information Collection Requirements

Office of Management and Budget

(OMB) regulations require OMB to

approve certain information collection

requirements imposed by agency

rules.96 However, this Final Rule

contains no new information collection

requirements in part 385 and therefore

is not subject to OMB approval.

VII. Effective Date

This rule is effective May 19, 1995.

List of Subjects

18 CFR Part 343

Pipelines, Reporting and

recordkeeping requirements.

18 CFR Part 385

Administrative practice and

procedure, Electric power, Penalties,

Pipelines, Reporting and recordkeeping

requirements.

By the Commission.

Lois D. Cashell,

Secretary.

In consideration of the foregoing, the

Commission amends parts 343 and 385,

Chapter I, Title 18, Code of Federal

Regulations, as set forth below.

PART 343—PROCEDURAL RULES

APPLICABLE TO OIL PIPELINE

PROCEEDINGS

1. The authority citation for part 343

is revised to read as follows:

Authority: 5 U.S.C. 571–583; 42 U.S.C.

7101–7352; 49 U.S.C. 60502; 49 App. U.S.C.

1-85.

§ 343.1 [Amended]

2. In § 343.1, paragraphs (a), (b), (d),

(e), (f), (g) and (h) are removed, and

paragraphs (c) and (i) are redesignated

as paragraphs (a) and (b), respectively.

3. § 343.5 is revised to read as follows:

§ 343.5 Required negotiations.

The Commission or other decisional

authority may require parties to enter

into good faith negotiations to settle oil

pipeline rate matters. The Commission

will refer all protested rate filings to a

settlement judge pursuant to § 385.603

of this chapter for recommended

resolution. Failure to participate in such

negotiations in good faith is a ground for

decision against the party so failing to

participate on any issue that is the

subject of negotiation by other parties.

PART 385—RULES OF PRACTICE AND

PROCEDURE

1. The authority citation for part 385

continues to read as follows:

Authority: 5 U.S.C. 551–557; 15 U.S.C.

717–717z, 3301–3432; 16 U.S.C. 791a–825r,

2601–2645; 31 U.S.C. 9701; 42 U.S.C. 7101–

7352; 49 U.S.C. 60502; 49 App. U.S.C. 1–85.

2. In § 385.503, paragraph (a) is

revised to read as follows:

§ 385.503 Consolidation, severance and

extension of close-of-record date by Chief

Administrative Law Judge (Rule 503).

(a) The Chief Administrative Law

Judge may, on motion or otherwise,

order proceedings pending under this

subpart consolidated for hearing on, or

settlement of, any or all matters in issue

in the proceedings, or order the

severance of proceedings or issues in a

proceeding. The order may be appealed

to the Commission pursuant to Rule

715.

* * * * *

3. In § 385.504, paragraph (b)(7) is

revised to read as follows:

§ 385.504 Duties and powers of presiding

officers (Rule 504).

* * * * *

(b) Powers. * * *

(7) Hold conferences of the

participants, as provided in Subpart F of

this part, including for the purpose of

considering the use of alternative

dispute resolution procedures;

* * * * *

4. In § 385.601, paragraph (a) is

revised to read as follows:

§ 385.601 Conferences (Rule 601).

(a) Convening. The Commission or

other decisional authority, upon motion

or otherwise, may convene a conference

of the participants in a proceeding at

any time for any purpose related to the

conduct or disposition of the

proceeding, including submission and

consideration of offers of settlement or

the use of alternative dispute resolution

procedures.

* * * * *

5. In § 385.602, paragraphs (b)(3) and

(f)(4) are added and paragraphs (h)(1)(ii)

introductory text, (h)(1)(iii), (h)(2)(iii),

and (h)(2)(iv) are revised to read as

follows:

§ 385.602 Submission of settlement offers

(Rule 602).

* * * * *

(b) Submission of offer. * * *

(3) If an offer of settlement pertains to

multiple proceedings that are in part

pending before the Commission and in

part set for hearing, any participant may

by motion request the Commission to

consolidate the multiple proceedings

and to provide any other appropriate

procedural relief for purposes of

disposition of the settlement.

* * * * *

(f) Comments. * * *

(4) Any comment that contests an

offer of settlement by alleging a dispute

as to a genuine issue of material fact
19506 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

must include an affidavit detailing any

genuine issue of material fact by specific

reference to documents, testimony, or

other items included in the offer of

settlement, or items not included in the

settlement, that are relevant to support

the claim. Reply comments may include

responding affidavits.

* * * * *

(h) Contested offers of settlement.

(1) * * *

(ii) If the Commission finds that the

record lacks substantial evidence or that

the contesting parties or contested

issues can not be severed from the offer

of settlement, the Commission will:

* * * * *

(iii) If contesting parties or contested

issues are severable, the contesting

parties or uncontested portions may be

severed. The uncontested portions will

be decided in accordance with

paragraph (g) of this section.

(2) * * *

(iii) Any offer of settlement or part of

any offer may be certified to the

Commission, if:

(A) The parties concur on a motion for

omission of the initial decision as

provided in Rule 710, or, if all parties

do not concur in the motion, the

presiding officer determines that

omission of the initial decision is

appropriate under Rule 710(d), and

(B) The presiding officer determines

that the record contains substantial

evidence from which the Commission

may reach a reasoned decision on the

merits of the contested issues.

(iv) If any contesting parties or

contested issues are severable, the

uncontested portions of the settlement

may be certified immediately by the

presiding officer to the Commission for

decision, as provided in paragraph (g) of

this section.

* * * * *

6. In Subpart F, §§ 385.604 through

385.606 are added to read as follows:

§ 385.604 Alternative means of dispute

resolution (Rule 604).

(a) Applicability. (1) Participants may,

subject to the limitations of paragraph

(a)(2) of this section, use alternative

means of dispute resolution to resolve

all or part of any pending matter if the

participants agree. The alternative

means of dispute resolution authorized

under Subpart F of this part will be

voluntary procedures that supplement

rather than limit other available dispute

resolution techniques.

(2) Except as provided in paragraph

(a)(3) of this section, the decisional

authority will not consent to use of an

alternative dispute resolution

proceeding if:

(i) A definitive or authoritative

resolution of the matter is required for

precedential value;

(ii) The matter involves or may bear

upon significant questions of policy that

require additional procedures before a

final resolution may be made, and the

proceeding would not likely serve to

develop a recommended policy;

(iii) Maintaining established policies

is of special importance;

(iv) The matter significantly affects

persons or organizations who are not

parties to the proceeding;

(v) A full public record of the

proceeding is important, and a dispute

resolution proceeding cannot provide a

record; or

(vi) The Commission must maintain

continuing jurisdiction over the matter

with authority to alter the disposition of

the matter in the light of changed

circumstances, and a dispute resolution

proceeding would interfere with the

Commission’s fulfilling that

requirement.

(3) If one or more of the factors

outlined in paragraph (a)(2) of this

section is present, alternative dispute

resolution may nevertheless be used if

the alternative dispute resolution

proceeding can be structured to avoid

the identified factor or if other concerns

significantly outweigh the identified

factor.

(4) A determination to use or not to

use a dispute resolution proceeding

under Subpart F of this part is not

subject to judicial review.

(5) Settlement agreements reached

through the use of alternative dispute

resolution pursuant to Subpart F of this

part will be subject to the provisions of

Rule 602, unless the decisional

authority, upon motion or otherwise,

orders a different procedure.

(b) Definitions. For the purposes of

Subpart F of this part:

(1) Alternative means of dispute

resolution means any procedure that is

used, in lieu of an adjudication, to

resolve issues in controversy, including

but not limited to, settlement

negotiations, conciliation, facilitation,

mediation, factfinding, minitrials, and

arbitration, or any combination thereof;

(2) Award means any decision by an

arbitrator resolving the issues in

controversy;

(3) Dispute resolution communication

means any oral or written

communication prepared for the

purposes of a dispute resolution

proceeding, including any memoranda,

notes or work product of the neutral,

parties or non-party participant. A

written agreement to enter into a

dispute resolution proceeding, or a final

written agreement or arbitral award

reached as a result of a dispute

resolution proceeding, is not a dispute

resolution communication;

(4) Dispute resolution proceeding

means any alternative means of dispute

resolution that is used to resolve an

issue in controversy in which a neutral

may be appointed and specified parties

participate;

(5) In confidence means information

is provided:

(i) With the expressed intent of the

source that it not be disclosed, or

(ii) Under circumstances that create a

reasonable expectation on behalf of the

source that the information will not be

disclosed;

(6) Issue in controversy means an

issue which is or is anticipated to be

material to a decision in a proceeding

before the Commission and which is the

subject of disagreement between

participants who would be substantially

affected by the decision or between the

Commission and any such participants;

(7) Neutral means an individual who,

with respect to an issue in controversy,

functions specifically to aid the parties

in resolving the controversy;

(8) Participants in a dispute

resolution proceeding that is used to

resolve an issue in controversy in a

proceeding involving an application for

a license or exemption to construct,

operate, and maintain a hydroelectric

project pursuant to the Federal Power

Act or the Public Utility Regulatory

Policies Act shall include such state and

federal agencies and Indian tribes as

have statutory roles or a direct interest

in such hydroelectric proceedings.

(c) Neutrals. (1) A neutral may be a

permanent or temporary officer or

employee of the Federal Government

(including an administrative law judge),

or any other individual who is

acceptable to the participants to a

dispute resolution proceeding. A neutral

must have no official, financial, or

personal conflict of interest with respect

to the issues in controversy, except that

a neutral who is not a government

employee may serve if the interest is

fully disclosed in writing to all

participants and all participants agree.

(2) A neutral serves at the will of the

participants, unless otherwise provided.

(3) Neutrals may be selected from

among the Commission’s administrative

law judges or other employees, from

rosters kept by the Federal Mediation

and Conciliation Service, the

Administrative Conference of the

United States, the American Arbitration

Association, or from any other source.

(d) Submission of proposal to use

alternative means of dispute resolution.

(1) The participants may at any time

submit a written proposal to use
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19507

alternative means of dispute resolution

to resolve all or part of any matter in

controversy or anticipated to be in

controversy before the Commission.

(2) For matters set for hearing under

Subpart E of this part, a proposal to use

alternative means of dispute resolution

other than binding arbitration must be

filed with the presiding administrative

law judge.

(3) A proposal to use binding

arbitration must be filed with the

Secretary for consideration by the

Commission.

(4) For all other matters, a proposal to

use alternative means of dispute

resolution may be filed with the

Secretary for consideration by the

appropriate decisional authority.

(5) The appropriate decisional

authority will issue an order, approving

or denying, under the guidelines in Rule

604(a) (2) and (3), a proposal to use

alternative means of dispute resolution.

Denial of a proposal to use alternative

dispute resolution will be in the form of

an order and will identify the specific

reasons for the denial. A proposal to use

alternative dispute resolution is deemed

approved unless an order denying

approval is issued within 30 days after

the proposal is filed.

(6) Any request to modify a

previously-approved ADR proposal

must follow the same procedure used

for the initial approval.

(e) Contents of proposal. A proposal

to use alternative means of dispute

resolution must be in writing and

include:

(1) A general identification of the

issues in controversy intended to be

resolved by the proposed alternative

dispute resolution method,

(2) A description of the alternative

dispute resolution method(s) to be used,

(3) The signatures of all participants

or evidence otherwise indicating the

consent of all participants; and

(4) A certificate of service pursuant to

Rule 2010(h).

(f) Monitoring the alternative dispute

resolution proceeding. The decisional

authority may order reports on the

status of the alternative dispute

resolution proceeding at any time.

(g) Termination of alternative dispute

resolution proceeding. (1) The

decisional authority, upon motion or

otherwise, may terminate any

alternative dispute resolution

proceeding under Rule 604 or 605 by

issuing an order to that effect.

(2) A decision to terminate an

alternative dispute resolution

proceeding is not subject to judicial

review.

§ 385.605 Arbitration (Rule 605).

(a) Authorization of arbitration. (1)

The participants may at any time submit

a written proposal to use binding

arbitration under the provisions of Rule

605 to resolve all or part of any matter

in controversy, or anticipated to be in

controversy, before the Commission.

(2) The proposal must be submitted as

provided in Rule 604(d).

(3) The proposal must be in writing

and contain the information required in

Rule 604(e).

(4) An arbitration proceeding under

this rule may be monitored and

terminated as provided in Rule 604 (d)

and (g).

(5) No person may be required to

consent to arbitration as a condition of

entering into a contract or obtaining a

benefit. All interested parties must

expressly consent before arbitration may

be used.

(b) Arbitrators. (1) The participants to

an arbitration proceeding are entitled to

select the arbitrator.

(2) The arbitrator must be a neutral

who meets the criteria of a neutral

under Rule 604(c).

(c) Authority of arbitrator. An

arbitrator to whom a dispute is referred

under this section may:

(1) Regulate the course of and conduct

arbitral hearings;

(2) Administer oaths and affirmations;

(3) Compel the attendance of

witnesses and the production of

evidence to the extent the Commission

is authorized by law to do so; and

(4) Make awards.

(d) Arbitration proceedings. (1) The

arbitrator will set a time and place for

the hearing on the dispute and must

notify the participants not less than 5

days before the hearing.

(2) Any participant wishing that there

be a record of the hearing must:

(i) Prepare the record;

(ii) Notify the other participants and

the arbitrator of the preparation of the

record;

(iii) Furnish copies to all identified

participants and the arbitrator; and

(iv) Pay all costs for the record, unless

the participants agree otherwise or the

arbitrator determines that the costs

should be apportioned.

(3) (i) Participants to the arbitration

are entitled to be heard, to present

evidence material to the controversy,

and to cross-examine witnesses

appearing at the hearing to the same

extent as in a proceeding under Subpart

E of this part;

(ii) The arbitrator may, with the

consent of the participants, conduct all

or part of the hearing by telephone,

television, computer, or other electronic

means, if each participant has an

opportunity to participate.

(iii) The hearing must be conducted

expeditiously and in an informal

manner.

(iv) The arbitrator may receive any

oral or documentary evidence, except

that irrelevant, immaterial, unduly

repetitious, or privileged evidence may

be excluded by the arbitrator.

(v) The arbitrator will interpret and

apply relevant statutory and regulatory

requirements, legal precedents, and

policy directives.

(4) No interested person will make or

knowingly cause to be made to the

arbitrator an unauthorized ex parte

communication relevant to the merits of

the proceeding, unless the participants

agree otherwise. If a communication is

made in violation of this prohibition,

the arbitrator will ensure that a

memorandum of the communication is

prepared and made a part of the record,

and that an opportunity for rebuttal is

allowed. Upon receipt of such

communication, the arbitrator may

require the offending participant to

show cause why the claim of the

participant should not be resolved

against the participant as a result of the

improper conduct.

(5) The arbitrator will make the award

within 30 days after the close of the

hearing or the date of the filing of any

briefs authorized by the arbitrator,

whichever date is later, unless the

participants and the arbitrator agree to

some other time limit.

(e) Arbitration awards. (1)(i) The

award in an arbitration proceeding

under Subpart F of this chapter will

include a brief, informal discussion of

the factual and legal basis for the award.

(ii) The prevailing participants must

file the award with the Commission,

along with proof of service on all

participants.

(2) The award in an arbitration

proceeding will become final 30 days

after it is filed, unless the award is

vacated. The Commission, upon motion

or otherwise, may extend the 30-day

period for one additional 30-day period

by issuing a notice of the extension

before the end of the first 30-day period.

(3) A final award is binding on the

participants to the arbitration

proceeding.

(4) An award may not serve as an

estoppel in any other proceeding for any

issue that was resolved in the

proceeding. The award also may not be

used as precedent or otherwise be

considered in any factually unrelated

proceeding or in any other arbitration

proceeding.

(f) Vacating an award. (1) Within 10

days after the award is filed, any person

may file a request with the Commission

to vacate an arbitration award and must
19508 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations

serve the request to vacate on all

participants. Responses to such a

request are due 10 days after the request

is filed.

(2) Upon request or otherwise, the

Commission may vacate any award

issued under this rule before the award

becomes final by issuing an order to that

effect, in which case the award will be

null and void.

(3) Rule 2202 regarding separation of

functions applies with respect to a

decision to vacate an arbitration award.

(4) If the Commission vacates an

award under paragraph (f)(3) of this

section, a party to the arbitration may,

within 30 days of the action, petition

the Commission for an award of

attorney fees and expenses incurred in

connection with the arbitration

proceeding. The Commission will award

the petitioning party those fees and

expenses that would not have been

incurred in the absence of the

arbitration proceeding, unless the

Commission finds that special

circumstances make the award unjust.

The fees and expenses awarded will be

paid by the Commission.

(5) An arbitration award vacated

under this paragraph will not be

admissible in any proceeding relating to

the issues in controversy with respect to

which the award was made.

(6) A decision by the Commission to

vacate an arbitration award is not

subject to rehearing or judicial review.

§ 385.606 Confidentiality in dispute

resolution proceedings (Rule 606).

(a) Except as provided in paragraphs

(d) and (e) of this section, a neutral in

a dispute resolution proceeding shall

not voluntarily disclose, or through

discovery or compulsory process be

required to disclose, any information

concerning any dispute resolution

communication or any communication

provided in confidence to the neutral,

unless:

(1) All participants in the dispute

resolution proceeding and the neutral

consent in writing;

(2) The dispute resolution

communication has otherwise already

been made public;

(3) The dispute resolution

communication is required by statute to

be made public, but a neutral should

make the communication public only if

no other person is reasonably available

to disclose the communication; or

(4) A court determines that the

testimony or disclosure is necessary to:

(i) Prevent a manifest injustice;

(ii) Help establish a violation of law;

or

(iii) Prevent harm to the public health

or safety of sufficient magnitude in the

particular case to outweigh the integrity

of dispute resolution proceedings in

general by reducing the confidence of

participants in future cases that their

communications will remain

confidential.

(b) A participant in a dispute

resolution proceeding shall not

voluntarily disclose, or through

discovery or compulsory process be

required to disclose, any information

concerning any dispute resolution

communication, unless:

(1) All participants to the dispute

resolution proceeding consent in

writing;

(2) The dispute resolution

communication has otherwise already

been made public;

(3) The dispute resolution

communication is required by statute to

be made public;

(4) A court determines that the

testimony or disclosure is necessary to:

(i) Prevent a manifest injustice;

(ii) Help establish a violation of law;

or

(iii) Prevent harm to the public health

and safety of sufficient magnitude in the

particular case to outweigh the integrity

of dispute resolution proceedings in

general by reducing the confidence of

participants in future cases that their

communications will remain

confidential; or

(5) The dispute resolution

communication is relevant to

determining the existence or meaning of

an agreement or award that resulted

from the dispute resolution proceeding

or to the enforcement of the agreement

or award.

(c) Any dispute resolution

communication that is disclosed in

violation of paragraphs (a) or (b) of this

section shall not be admissible in any

proceeding.

(d) The participants may agree to

alternative confidential procedures for

disclosures by a neutral. The

participants must inform the neutral

before the commencement of the

dispute resolution proceeding of any

modifications to the provisions of

paragraph (a) of this section that will

govern the confidentiality of the dispute

resolution proceeding. If the

participants do not so inform the

neutral, paragraph (a) of this section

shall apply.

(e) If a demand for disclosure, by way

of discovery request or other legal

process, is made upon a participant

regarding a dispute resolution

communication, the participant will

make reasonable efforts to notify the

neutral and the other participants of the

demand. Any participant who receives

the notice and within 15 calendar days

does not offer to defend a refusal of the

neutral to disclose the requested

information waives any objection to the

disclosure.

(f) Nothing in Rule 606 prevents the

discovery or admissibility of any

evidence that is otherwise discoverable,

merely because the evidence was

presented in the course of a dispute

resolution proceeding. See sections

385.410 and 388.112 of this chapter.

(g) Paragraphs (a) and (b) of this

section do not preclude disclosure of

information and data that are necessary

to document an agreement reached or

order issued pursuant to a dispute

resolution proceeding.

(h) Paragraphs (a) and (b) of this

section do not prevent the gathering of

information for research and

educational purposes, in cooperation

with other agencies, governmental

entities, or dispute resolution programs,

so long as the participants and the

specific issues in controversy are not

identifiable.

(i) Paragraphs (a) and (b) of this

section do not prevent use of a dispute

resolution communication to resolve a

dispute between the neutral in a dispute

resolution proceeding and a participant

in the proceeding, so long as the

communication is disclosed only to the

extent necessary to resolve the dispute.

(j) Nothing in this section precludes

parties from seeking privileged

treatment for documents under section

388.112 of this chapter.

(k) Where disclosure is authorized by

this section, nothing in this section

precludes use of a protective agreement

or protective orders.

7. In § 385.710, paragraph (d) is added

to read as follows:

§ 385.710 Waiver of the initial decision

(Rule 710).

* * * * *

(d) Waiver by presiding officer. A

motion for waiver of the initial decision,

requested for the purpose of

certification of a contested settlement

pursuant to Rule 602(h)(2)(iii)(A), may

be filed with, and decided by, the

presiding officer. If all parties join in the

motion, the presiding officer will grant

the motion. If not all parties join in the

motion, the motion is denied unless the

presiding officer grants the motion

within 30 days of filing the written

motion or presenting an oral motion.

The contents of any motion filed under

paragraph (d) of this section must

comply with the requirements in

paragraph (b) of this section. A motion

may be oral or written, and may be

made whenever appropriate for the

consideration of the presiding officer.
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Rules and Regulations 19509

Note.—This appendix will not be

published in the Code of Federal Regulations.

Appendix

Alternative Dispute Resolution

Docket No. RM91–12–000

Commenters

American Gas Distributors (AGD)

American Public Power Association

Association of Oil Pipelines (AOPL)

Colorado Interstate Gas Company and ANR

Pipeline Company (CIG and ANR)

Colorado River Energy Distributors

Association (CREDA)

Columbia Gas Transmission Corporation

and Columbia Gulf Transmission Company

(Columbia Gas)

Consumers Power Company (Consumers)

Edison Electric Institute (EEI)

Electric Generation Association (Electric

Generation)

McCormack Institute of Public Affairs

Missouri Public Service Commission

(Missouri PSC)

Natural Gas Clearinghouse

Natural Gas Pipeline Company of America

(Natural Gas Pipeline)

Natural Gas Supply Association (Natural

Gas Supply)

New England Power Service

Northeast Energy Associates and North

Jersey Energy Associates (Northeast and

North Jersey)

Northern Distributors Group (Northern

Distributors)

Northwest Industrial Gas Users (Northwest

Users)

Pacific Gas and Electric Company (PG&E)

Process Gas Consumers Group, American

Iron and Steel Institute, and Georgia

Industrial Group (Industrials)

Texas Eastern Transmission Corporation,

Panhandle Eastern Pipe Line Company,

Trunkline Gas Company and Algonquin Gas

Transmission Company (PEC Pipeline Group)

Transcontinental Gas Pipe Line

Corporation (Transco)

U.S. Department of Commerce (Commerce)

U.S. Department of the Interior (Interior)

Williams Natural Gas Company and

Northwest Pipeline Company (Williams)

Wisconsin Municipal Group

[FR Doc. 95–9594 Filed 4–18–95; 8:45 am]

BILLING CODE 6717–01–P

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1310

[DEA No. 128F]

RIN 1117–AA26

Records, Reports, and Exports of

Listed Chemicals

AGENCY: Drug Enforcement

Administration (DES), Justice.

ACTION: Final rule.

SUMMARY: This final rule adds methyl

isobutyl ketone (MIBK) as a List II

Chemical under the Controlled

Substances Act (CSA). This action is

based on substantial evidence that

MIBK is increasingly being used as a

solvent in the production of cocaine

hydrochloride during the conversion of

cocaine base to cocaine hydrochloride.

The recent steps by the Government of

Columbia (GOC) to control MIBK further

support this action.

This action will only affect specific

types of transactions which are greater

than 500 gallons or 1523 kilograms of

MIBK destined for countries in the

Western Hemisphere (with the

exception of transactions destined for

Canada). These transactions include (1)

export transactions; (2) international

transactions in which a U.S. broker or

trader participates; and (3)

transshipments through the U.S.

EFFECTIVE DATE: May 19, 1995.

FOR FURTHER INFORMATION CONTACT:

Howard McClain Jr., Chief, Drug and

Chemical Evaluation Section, Office of

Diversion Control, Drug Enforcement

Administration, Washington, DC 20537

at (202) 307–7183.

SUPPLEMENTARY INFORMATION: The

Controlled Substances Act (CSA).

specifically 21 U.S.C. section 802,

provides the Attorney General with the

authority to specify by regulation,

additional precursor and essential

chemicals as ‘‘listed chemicals’’ if they

are used in the illicit manufacture of

controlled substances. Section 802(39)

also provides the Attorney General with

authority to establish a threshold

amount for ‘‘listed chemicals’’ if the

Attorney General so elects. This

authority has been delegated to the

Administrator of DEA by 28 CFR 0.100

and redelegated to the Deputy

Administrator under 28 CFR 0.104

(Subpart R) Appendix Sec. 12.

On February 28, 1995 the Deputy

Administrator of the Drug Enforcement

Administration (DEA) published a

Notice of Proposed Rulemaking (60 FR

10814). This notice proposed the

addition of methyl isobutyl ketone

(MIBK) as a List II Chemical under the

Controlled Substances Act (CSA).

Interested parties were given 30 days in

which to submit comments and

objections.

Only one comment was received in

response to the Notice of Proposed

Rulemaking. This comment requested

further clarification of the meaning of

the term ‘‘Western Hemisphere’’.

Webster’s II New Riverside University

Dictionary defines the term ‘‘Western

Hemisphere’’ to mean, ‘‘The half of the

earth that includes North and South

America, the surrounding waters, and

all neighboring islands’’. For purposes

of this rulemaking, this is the definition

that the DEA is adopting.

While methyl ethyl ketone (MEK) has

become the solvent of choice in the

processing of cocaine base to cocaine

hydrochloride, recent regulatory and

enforcement efforts in Latin America

have resulted in a reduced availability

of MEK. Information available to DEA

indicates that in response to this

shortfall of MEK, cocaine laboratory

operators have moved to the utilization

of MIBK for the processing of cocaine

base to cocaine hydrochloride. Due to

information regarding the use of MIBK

for cocaine processing, the dramatic

increase in MIBK importation, and the

importation of MIBK by some firms that

the Government of Colombia (GOC)

considers suspect, the GOC has recently

taken steps to control the sale and

distribution of MIBK.

The United States is a major producer

of MIBK and exports MIBK to Colombia

and other countries within Latin

America. In light of the above, the DEA

has determined that the control of MIBK

as a List II Chemical under the CSA is

warranted. Since the illicit use of MIBK

for cocaine processing occurs in Latin

America, MIBK shipments exported

from the U.S., shipments transshipped

or transferred through the U.S., and

international transactions in which a

U.S. broker or trader participates, shall

be considered regulated transactions if

destined for any country in the Western

Hemisphere (with the exception of

transactions destined for Canada) 21

U.S.C. section 802(39)(A)(iii). In

addition, a threshold similar to that of

MEK shall be established for MIBK. A

threshold of 500 gallons (by volume) or

1523 kilograms (by weight) shall be

established for MIBK. Therefore, this

action will only effect specific types of

transactions which are greater than 500

gallons or 1523 kilograms of MIBK

destined for designated countries. These

transactions include (1) export

transactions; (2) international

transactions in which a U.S. broker or

trader participates; and (3)

transshipments through the U.S. Import

transactions of MIBK into the U.S. (not

destined for transshipment or transfer to

designated countries), and domestic

transactions of MIBK are excluded from

the definitions of regulated transactions

contained in 21 CFR 1310.01(f) and

1313.02(d).

The Deputy Administrator hereby

certifies that this rulemaking will have

no significant impact upon entities

whose interests must be considered

under the Regulatory Flexibility Act, 5

U.S.C. 601 et seq. A review of maritime

shipments of MIBK reveals that during

a two year period, there were less than