25164 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules

Minerals Leases’’ established

procedures for obtaining refunds and

credits of excess payments and clarified

what payments are not subject to

Section 10’s requirements. Unit

agreement revisions are covered in this

rule under ‘‘Transactions not subject to

section 10’’.

This rule also provides for a de

minimis exception to the MMS approval

process. On February 23, 1996 (61 FR

7016), MMS published a document

raising the de minimis reporting

requirements from $250 to $2,500. By

raising the de minimis level, companies

may now recover overpayments below

the de minimis amount from future

royalty payments. This change will

reduce administrative costs for MMS

and companies.

6. The Appeals Process

Comments Received—‘‘Current

appeals process is too long.’’

Action Taken or Planned—MMS has

made several administrative processing

changes to streamline the appeal

process. One change was transferring

decisionmaking on routine appeals from

the Appeals Division to the Royalty

Management Program. This has reduced

the Appeals Division’s workload by 20

percent and freed up staff to work on

more complex cases.

Other efforts included the initiation of

several pilot programs to look at

additional streamlining possibilities.

One pilot program was aimed at

decreasing the time and expense

incurred by MMS in its preparation of

an appellant’s administrative record. A

second pilot program involved

reformatting the decisionmaking process

to speed the issuance of shorter, more

timely decisions. The third pilot

program will test the use of alternative

dispute resolution mechanisms to

resolve many of the administrative

appeals.

Spinoff projects from these pilot

efforts are still ongoing and will result

in further changes to the appeals

process in the future. We are engaged in

a concentrated effort, during the spring

and summer of 1996, to resolve all of

the older, active appeals on the docket.

Also, the Royalty Policy Committee has

established an Appeals/Settlement/ADR

subcommittee which should provide

MMS with additional advice on ways to

improve the process of resolving

disputes involving royalty collections.

Timetable—The first two pilots were

put in place the latter half of 1994, and

the third pilot began the end of February

1995.

Further administrative streamlining

changes and possibly regulatory changes

by MMS are anticipated for calendar

year 1996.

7. Other MMS Regulatory Actions

—MMS is evaluating comments

received on the proposed rule to

establish liability for royalty due on

Federal and Indian leases, and to

establish responsibility to pay and

report royalty and other payments.

—MMS published an advance notice of

proposed rulemaking on valuation of

oil from Federal and Indian leases and

is evaluating the comments received

from industry, States, and Indian

tribes on this notice.

Dated: May 13, 1996.

Cynthia Quarterman,

Director, Minerals Management Service.

[FR Doc. 96–12545 Filed 5–17–96; 8:45 am]

BILLING CODE 4310–MR–M

DEPARTMENT OF THE TREASURY

Office of the Assistant Secretary for

Financial Markets

Fiscal Service

31 CFR Part 356

Amendments to the Uniform Offering

Circular for the Sale and Issue of

Marketable Book-Entry Treasury Bills,

Notes and Bonds

AGENCY: Office of the Assistant

Secretary for Financial Markets,

Treasury.

ACTION: Advance Notice of Proposed

Rulemaking.

SUMMARY: The Secretary of the Treasury

(Secretary) is authorized under Chapter

31 of Title 31, United States Code, to

issue United States obligations and to

offer them for sale under such terms and

conditions as the Secretary may

prescribe. The Department of the

Treasury (Department or Treasury) is

issuing this Advance Notice of Proposed

Rulemaking to solicit comments on the

design details, terms and conditions,

and other features of a new type of

marketable book-entry security the

Treasury intends to issue, inflationprotection notes or bonds, with a return

linked to the inflation rate in prices or

wages. The Treasury is specifically

interested in comments concerning

choice of index, structure of the

security, auction technique, offering

sizes, and maturities. The Treasury also

invites comments on other specific

issues raised, as well as on any other

issues relevant to the new type of

security.

DATES: Comments must be received on

or before June 19, 1996.

ADDRESSES: Comments should be sent

to: the Government Securities

Regulations Staff, Bureau of the Public

Debt, 999 E Street NW., Room 515,

Washington, DC 20239. Comments

received will be available for public

inspection and copying at the Treasury

Department Library, Room 5030, Main

Treasury Building, 1500 Pennsylvania

Avenue NW., Washington, DC 20220.

FOR FURTHER INFORMATION CONTACT:

Norman Carleton, Director, Office of

Federal Finance Policy Analysis, Office

of the Assistant Secretary for Financial

Markets, at 202–622–2680. In addition,

the Treasury plans to hold a series of

investor meetings in New York,

Washington, DC, Chicago, Boston, San

Francisco, and possibly other cities in

late May and in June 1996 to discuss the

new securities, answer questions, and

solicit comments. To request

information about attending any of these

meetings, contact the Office of

Financing, Bureau of the Public Debt, at

202–219–3350.

SUPPLEMENTARY INFORMATION: The

Treasury Department intends to issue a

new type of marketable book-entry

security with a nominal return linked to

the inflation rate in prices or wages, as

officially published by the United States

Government. The Treasury is

considering various indices for this

purpose, including the Consumer Price

Index for All Urban Consumers (CPI-U)

published by the Bureau of Labor

Statistics (BLS) of the Department of

Labor, the core CPI (CPI-U, excluding

food and energy, as published by the

BLS), the Gross Domestic Product (GDP)

deflator published by the Bureau of

Economic Analysis (BEA) of the

Department of Commerce, and the

Employment Cost Index—Private

Industry (ECI) also published by BLS.

Through this notice, the Treasury is

soliciting comments on the design

details of the planned inflationprotection securities and on which

index (those mentioned above or

another index) would be most likely to

result in the broadest market for the new

securities. At the end of this notice is a

hypothetical term sheet with proposed

formulas applicable to one of the

structures being considered for the new

security.

This advance notice of proposed

rulemaking is not an offering of

securities, and any of the currently

contemplated features of inflationprotection securities that are described

in this notice may change. The terms

and conditions of particular securities

that may be offered will be set forth in
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules 25165

the Uniform Offering Circular (31 CFR

Part 356) and the applicable offering

announcement.

The Department intends to issue

inflation-protection notes or bonds in

order to save on interest costs and to

broaden the types of debt instruments

available to investors in U.S. financial

markets. Because the Treasury, rather

than the investor, would bear the

inflation risk on an inflation-protection

security, the Department expects that

the prices at which it would sell this

new type of security would capture

some or all of the inflation risk premium

charged by investors on conventional

Treasury securities. In other words,

investors should be willing to pay extra

for a security on which the issuer, rather

than the investor, bears the risk of

higher than expected inflation.

Consequently, the expected interest

costs to the Treasury of inflationprotection securities should be lower

than those on conventional Treasury

securities.

In addition, inflation-protection

securities may prove to be attractive

investments to investors who do not

now invest in Treasury securities to any

significant extent. For example, certain

pension funds that currently invest in

bonds other than Treasury securities

because of the higher yields on private

fixed-income securities may find

Treasury inflation-protection notes or

bonds useful to include in their

portfolios. The new securities would

offer explicit inflation protection to

investors, which has heretofore been

unavailable in a Treasury debt

instrument. This inflation protection

could prove attractive for investments

for retirement. Also, because the path of

changes in market prices of inflationprotection securities would be markedly

different from that of the market price

of conventional fixed-income

instruments or equity investments,

inflation-protection securities could be

useful for achieving some portfolio

diversification. This broadening of the

market for Treasury securities should

also result in lower overall interest costs

for the Treasury over time.

Indexation Methodology. A design of

the inflation-protection securities that is

currently being considered is modeled,

with some modifications, on the Real

Return Bonds currently issued by the

Government of Canada. The Department

is soliciting comments about this choice

of model and the specific details

described below and in the hypothetical

term sheet, as well as the formulas in

the appendix.

For this particular structure, the

principal amount of the inflationprotection security is adjusted for

inflation, so that the adjusted value

remains the same in constant dollars.

This is achieved by multiplying the

principal value of the security at

issuance by an index ratio. The index

ratio is the reference index number

applicable for the valuation day divided

by the reference index number

applicable for the issue date.

Because the reporting of a monthly

price or wage series index number for a

particular month by necessity takes

place after the month has ended and

because the market needs to determine

accrued interest on a daily basis, there

has to be a lag in the indexation of the

security. For this structure, if it is based

on a monthly index that is reported in

the following month, the indexation of

the principal on the first day of any

month is based on the index number for

the third preceding month. For example,

the index number applicable to the first

day of December is the one reported for

September. For other days of the month,

a linear interpolation is made between

the index number for the third

preceding month and the one for the

second preceding month (in this

example, October). Using the third

preceding month as the reference month

is the minimum lag that enables

interpolation between the index number

for that month and the following month.

Under this structure, interest is

payable semiannually. Interest

payments are a fixed percentage of the

value of the inflation-adjusted principal,

in current dollars, for the date on which

it is paid.

Alternative Structures. The Treasury

has given the most study to the

Canadian model for inflation-protection

securities, which in turn is a

modification of the United Kingdom’s

index-linked gilts. However, alternative

structures are possible, and the Treasury

is asking for comment on whether

alternative structures might be more

desirable for U.S. financial markets.

One alternative structure is a zerocoupon inflation-indexed security. This

type of security could prove to be quite

volatile in price, but, if held to maturity,

this structure would provide the greatest

certainty about its return, since there

would be no reinvestment risk

associated with coupon payments.

In addition to general comments

concerning the market for a zero-coupon

inflation-protection security, the

Treasury is soliciting comments about

the use for this structure of an index,

such as the GDP deflator, that is subject

to retroactive revisions. Since the

Treasury would only make one payment

on a zero-coupon inflation-protection

security, revisions would be less of a

problem from the cash flow perspective

than with a security that pays interest

every six months. However, the use of

an index that is revised retroactively

may cause some impediments to trading

the security and would complicate the

applicable tax rules.

Another quite different structure is an

inflation-protection security that pays

out principal and interest at periodic

intervals. Ignoring the lags, under this

structure, each payment is equal in real

terms, but the proportion of each

payment representing principal and

interest changes. In other words, this

structure is similar to the cash flows of

a home mortgage, and, more

specifically, a price level adjusted

mortgage. This structure may be

appealing to investors desiring a flow of

periodic payments that stay constant in

real terms. It is also possible that this

structure may be more appealing than a

Canadian-type security to taxable

investors concerned about receiving

sufficient cash payments from the

security to satisfy the tax on the income

from the security.

Price or Wage Indices. The Treasury is

requesting comments on which price or

wage index is likely to result in the

broadest market for inflation-protection

securities. Specifically, the Department

is considering (1) the CPI–U, (2) the core

CPI, (3) the GDP deflator, and (4) the

ECI. The Treasury also requests

comments on whether another index

would serve the desired purpose better.

The CPI–U is the best known measure

of inflation, and, as such, is a logical

candidate for indexing the securities.

However, the CPI–U may not be the best

index for certain investors. For example,

pension funds’ liabilities are more

sensitive to change in wages than to

changes in consumer prices.

The core CPI is a less volatile index

than the CPI–U, and this may be

appealing to investors. However, while

energy and food prices eventually

influence other prices, the core CPI

could be criticized for not completely

reflecting any trend that may develop in

prices in the energy and food sectors.

The GDP deflator is a broad measure

of price trends in the economy. As

noted above, its use may be better suited

to a zero-coupon inflation-protection

security than to a note or bond paying

semiannual coupons, because the GDP

deflator, unlike the other indices under

consideration, is subject to periodic

revision.

Periodic revisions of an index pose

three potential problems. The first is the

need for finality in determining

payment amounts. Second, the change

in an index for a given period could be

based on an index number for a

previous period that has since been
25166 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules

revised. An indexation methodology

designed to correct for revisions in

previous values of the index would

create additional complexity. Finally,

even for a zero-coupon security,

revisions may cause complications in

the applicable tax rules throughout the

life of the security. Revisions may be

less of a problem for a security that

makes only one payment at maturity

than for one that pays interest every six

months.

The ECI may appeal to pension funds,

whose liabilities are more linked to

wage, rather than price, inflation. In this

regard, commenters are also asked to

address whether the total compensation

or the wages and salaries series of the

ECI would be the most useful. Since the

ECI is a quarterly index, the precise

indexation methodology and the

formulas in the appendix, which

assume a monthly index, would need to

be modified.

The Treasury is also requesting

comments on whether a seasonally

adjusted or non-seasonally adjusted

series would be preferable. Seasonal

adjustment smoothes out fluctuations,

but seasonal factors are subject to

revisions for a considerable period of

time.

Calculation of the Price or Wage

Series. From time to time, government

statistical agencies, such as the BLS and

the BEA, revise their methodology for

calculating indices in order to improve

their accuracy. Such revisions on a

forward-going basis may affect the

inflation rate as measured by the index

and, therefore, the return to investors.

For a Canadian-type or level real

payment inflation-protection security,

revisions of a price or wage index

number that has previously been

reported, however, would not be used

for calculations of principal value or

interest payments. This is in order for

there to be finality in determining

payment amounts.

When a price or wage index is rebased

to a different year, the Treasury would

use the price or wage index series with

the same base year(s) as when the

security was first issued, as long as that

series continues to be published. The

reason for this is to maintain precision

in the indexation of the security that

may otherwise be lost due to rounding,

a problem that becomes more acute if

the price or wage index has increased

significantly from the original base

year(s) to the new one. The Department

is specifically soliciting comments on

this point.

In the case of an index series reported

on a monthly basis in the following

month, the Department is considering

the following procedure for the

Canadian-type security if the index is

reported late. If the index number for a

particular month is not reported by the

last day of the following month, the

Department would announce by the end

of the next business day an index

number based on the last twelve-month

change in the index available. This

number would be used for all

subsequent calculations and would not

be replaced by the actual price or wage

index number when it is reported. Since

the Treasury may use a price or wage

series that is not seasonally adjusted,

the Treasury welcomes comments on

this procedure. The Department believes

that this calculation would rarely, if

ever, be necessary.

If the price or wage index for an

inflation-protection security is

discontinued while that security is

outstanding, the Treasury would consult

with the agency responsible for the

index, and, based on such discussions,

the Treasury would select an

appropriate substitute index and

methodology for linking the two series.

Determinations of the Secretary in this

regard would be final.

Finally, if the Federal Government

commences publication of a new

version of the index that is more

appropriate for indexation than the one

originally chosen, the Treasury expects

it would then use the new version for

indexing new inflation-protection

securities. Concerning the introduction

of a new version, the Treasury is

requesting commenters to address

whether the Treasury should also index

outstanding inflation-protection

securities to the new version starting

from its introduction or whether

outstanding securities should remain

indexed to the original series as long as

that series continues to be published.

Auction Technique. The Department

is considering offering inflationprotection securities through a singleprice auction. The exact type of auction

has yet to be determined, and the

Department is particularly interested in

input from potential auction

participants, as well as others, on this

subject.

For a Canadian-type inflationprotection security, options include two

types of single-price auctions where the

Treasury asks for bids in terms of real

yield to three decimal places. In the first

case, the highest accepted yield would

become the coupon, and the inflationprotection note or bond would be issued

at par. In the second case, the Treasury

would set a coupon after the auction in

an increment of 0.125%, and the price

of the security would be determined by

the formulas in the appendix.

Also, the Treasury could announce a

coupon on the security and accept bids

in terms of price. However, this option

runs counter to the Department’s

auction practice for its conventional

Treasury securities, and, at least

initially, it may be difficult to judge

what would be the appropriate coupon.

Noncompetitive bids up to $5 million

per bidder would be permitted for

inflation-protection securities. In order

to ensure that enough competitive bids

are accepted to price the security fairly,

the Treasury is considering whether all

or part of the noncompetitive bids

should be filled by issuing more

securities than the originally announced

public offering amount. The Department

is requesting comments on this issue.

Given the pricing uncertainty

inherent in any new type of security, the

Treasury is requesting comments on

whether the Treasury should announce

prior to a single-price auction of an

inflation-protection security that it

retains, and may exercise, the option to

award an amount greater or less than the

announced public offering amount. The

reason for awarding less stems from the

use of the single-price auction technique

and the unique nature of this new

instrument. If there were an extremely

long tail between the yield necessary to

sell, for example, 95 percent of the

announced size and the remaining 5

percent, awarding less would avoid

issuing the security with an

unreasonably high real yield. (In any

case, the Secretary reserves the right, in

any auction, to award an amount of

securities greater or less than the

offering amount. See 31 CFR 356.33)

The Department also welcomes

comments on whether a single-price or

a multiple-price auction would be more

appropriate for inflation-protection

securities.

The Treasury is also requesting

commenters to address whether any of

the auction rules for conventional

Treasury securities are inappropriate for

an offering of inflation-protection

securities and specifically whether there

should be a limit to the amount

recognized at a single yield from a

bidder or the amount awarded to a

single bidder in an auction of inflationprotection securities.

Frequency. The Treasury

contemplates issuance of inflationprotection securities on a regular

quarterly cycle.

Reopenings. The Treasury could

reopen an issue of an inflationprotection note or bond, though the

flexibility to do this under changing

market conditions is conditioned by tax

issues involving the original issue

discount rules that have yet to be
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules 25167

decided. A reopening would also be

accomplished by an auction. The

Department welcomes comments on

whether bids on an issue that is being

reopened should be in terms of real

yield or price.

For a Canadian-type security,

amounts bid at an auction for a

reopened inflation-protection security

would be in terms of original par

amount, not the inflation-adjusted par

amount. The Treasury would announce

prior to the auction the index ratio

necessary to convert the original par

amount to the inflation-adjusted par

value for the settlement date. This

means that if the index ratio for the

settlement date is 1.03, a $1,000 bid

amount would translate into $1,030

inflation-adjusted par value. The

Treasury is requesting comments on this

procedure.

Also, the Treasury is requesting

comments on whether reopenings of an

issue would be important for market

liquidity, or whether they would act as

a constraint on prices, given the

possibility of additional supply of the

security in the next quarter.

Maturities. The Department’s current

thinking is that 10-year inflationprotection notes or 30-year inflationprotection bonds would be the most

appropriate maturity sectors for this

instrument. The Treasury is soliciting

comments on which maturity sectors

would be most in demand for inflationprotection notes or bonds.

Amounts. The Department is

requesting comments on the appropriate

size of the initial auctions of inflationprotection notes or bonds. The Treasury

intends to increase the size of the

auctions from the initial levels over

time.

Book-Entry Form and Systems. The

inflation-protection securities would be

offered only in book-entry form. They

would be issued and maintained in the

commercial book-entry system which is

operated by the Federal Reserve Banks,

acting as fiscal agents for the Treasury

Department. The Treasury also would

make inflation-protection securities

available through TREASURY DIRECT,

a system designed primarily to enable

investors who do not intend to trade

Treasury securities to hold their bookentry securities directly on the records

of the Treasury.

Eligible amounts for holding and

transferring would be in multiples of

$1000 of original par value for a

Canadian-type inflation-protection

security. The Treasury is soliciting

comments on any operational issues

arising from the fact that the amount of

an inflation-protection security held and

transferred on the book-entry systems

would be referred to in terms of the

original par value, not the inflationadjusted value.

Treasury Tax and Loan Accounts. The

Treasury intends to make inflationprotection securities eligible as

collateral for Treasury Tax and Loan

Accounts. Valuation for collateral

purposes would depend on the precise

structure of the security.

Stripping. For a Canadian-type

security, the Treasury would make

inflation-protection securities eligible

for stripping on the commercial bookentry system at some point after

issuance of the new security had begun.

This would not be operationally

possible initially. Eligibility for

stripping might extend only to inflationprotection securities issued after a

future effective date.

Taxation. In general, a payment on an

inflation-protection security or an

increase in the principal amount of the

security attributable to the inflation

adjustment would be includible in

taxable income for the year in which it

occurs and would be treated as interest

income. Interest payments on inflationprotection securities generally would

have to be included in the owner’s

taxable income when received or as

accrued, depending on the owner’s

method of accounting for tax purposes.

For a zero-coupon inflation-protection

security, the difference between the

issue price and the original par amount

would be interest that the holder would

include as taxable income on a constant

yield basis. The precise tax treatment in

the event the principal decreases

because of a decline in the price or wage

index has yet to be determined. Other

tax issues, including the reporting of

income on the securities by brokers and

other intermediaries (i.e., custodians),

also remain to be determined. Relevant

tax issues would be announced before

the first issue.

Minimum Guarantee. If the sum of all

the interest payments and the inflationadjusted principal value at maturity of

the inflation-protection note or bond is

less than the par value of the note or

bond at issuance, the Treasury would

make an additional payment at maturity

for the difference.

After receipt and consideration of

responses to this advance notice of

proposed rulemaking, the Department

intends to issue a final rule amending

31 CFR Part 356, ‘‘Sale and Issue of

Marketable Book-Entry Treasury Bills,

Notes, and Bonds’’ (Uniform Offering

Circular). Because the rule would relate

to public contracts and procedures for

United States securities, the notice,

public comment, and delayed effective

date provisions of the Administrative

Procedure Act are inapplicable,

pursuant to 5 U.S.C. 553(a)(2).

Hypothetical Term Sheet

Note: This hypothetical term sheet assumes

that an inflation-protection note or bond

would be linked to a price or wage index

reported monthly and that the index number

for each month is reported the following

month.

Issuer: United States Treasury.

Issue: Inflation-protection note or

bond.

Payment Dates: Inflation-adjusted

principal on the security will be paid on

the maturity date as specified in the

offering announcement. Interest on the

security is payable on a semiannual

basis on the interest payment dates

specified in the offering announcement

through the date the principal becomes

payable. In the event any principal or

interest payment date is a Saturday,

Sunday or other day on which the

Federal Reserve Banks are not open for

business, the amount is payable

(without additional interest) on the next

business day.

Maturities: Ten or thirty years.

Indexing Methodology: To calculate

the value of the principal for a

particular valuation date, the value of

the principal at issuance is multiplied

by the index ratio applicable to that

valuation date. Semiannual coupon

interest is determined by multiplying

the value of the principal at issuance by

the index ratio for the coupon payment

date by one-half the stated rate of

interest.

Index Ratio: The index ratio for any

date is the ratio of the reference index

number (reference INUM) applicable to

such date to the reference INUM

applicable to the original issue date.

Reference Inum: The reference INUM

for the first day of any calendar month

is the INUM for the third preceding

calendar month. (For example, the

reference INUM for December 1 is the

INUM reported for September of the

same year, which is released in

October.) The reference INUM for any

other day of the month is calculated by

a linear interpolation between the

reference INUM applicable to the first

day of the month and the reference

INUM applicable to the first day of the

following month.

Any revisions that the agency

responsible for the index makes to any

INUM that has been previously released

shall not be used in calculations of the

value of Treasury inflation-protection

securities.

In the case that the INUM for a

particular month is not reported by the

last day of the following month, the

Treasury will announce an index
25168 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules

number based on the last year-over-year

inflation rate as measured by the chosen

index. Any calculations of the

Treasury’s payment obligations on the

inflation-protection security that need

that month’s INUM number will be

based on the index number that the

Treasury has announced.

If the applicable price or wage series

is discontinued during the period the

inflation-protection security is

outstanding, the Treasury will, in

consultation with the agency

responsible for the series, determine an

appropriate substitute index and

methodology for linking the

discontinued series with the new price

or wage index series. Determinations of

the Secretary in this regard will be final.

Strips: Eligible for the STRIPS

program at a future date.

Taxation: Appreciation of the

principal will be taxed as interest

income in the period the appreciation

occurs. Interest payments will be

includible as interest income when

received or as they accrue, depending

on the taxpayer’s method of accounting.

Other tax details remain to be

determined.

Auction Technique: Single-price

auction. Options:

(1) Bidders bid for coupon, with bids

expressed to three decimal places. The

highest accepted yield becomes the

coupon. Security is issued at par.

(2) Bidders bid real yield, with bids

expressed to three decimal places.

Coupon is set near the highest accepted

real yield in increments of 1⁄8 of 1

percent. Price is determined by formula

in the appendix using the highest

accepted yield.

(3) Before the auction Treasury

announces a coupon, securities are

issued at lowest accepted price.

Minimum Guarantee: If the sum of all

the interest payments and the inflationadjusted principal is less than the par

value of the security at time of issuance,

the Treasury will pay an additional sum

at maturity equal to the difference.

Minimums and Multiples to Bid,

Hold, and Transfer: The minimum to

bid, hold, and transfer is $1000 original

principal value. Larger amounts must be

in multiples of $1000.

BILLING CODE 4810–39–W
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules 25169
25170 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules 25171
25172 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules

BILLING CODE 4810–39–C
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Proposed Rules 25173

PART 356—SALE AND ISSUE OF

MARKETABLE BOOK-ENTRY

TREASURY BILLS, NOTES, AND

BONDS (DEPARTMENT OF THE

TREASURY CIRCULAR, PUBLIC DEBT

SERIES NO. 1–93)

Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et

seq.; 12 U.S.C. 391.

Date: May 15, 1996.

Darcy Bradbury,

Assistant Secretary (Financial Markets).

[FR Doc. 96–12630 Filed 5–16–96; 11:00 am]

BILLING CODE 4810–39–W

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 55

[FRL–5507–7]

RIN 2060–AG40 and AG39

Outer Continental Shelf Air

Regulations Delegation Remand

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The EPA is proposing

revision to the outer continental shelf

(OCS) regulations in response to a

voluntary remand from the U.S. Court of

Appeals for the District of Columbia

Circuit. These regulations establish air

pollution control requirements for

certain sources located on the OCS.

In response to the requirements of

section 328 of the Clean Air Act (Act),

on September 4, 1992, EPA promulgated

the OCS regulations setting up two

regimes for controlling air pollution

from OCS sources for the purposes of

attaining and maintaining Federal air

quality standards and to comply with

certain Act requirements for

preconstruction review of new and

modified major sources. Sources located

within 25 miles of the States’ seaward

boundaries (the 25-mile limit) must

comply with regulations which are, in

most respects, the same as the

regulations for similar sources located

on shore. Sources beyond the 25-mile

limit are required to comply with

Federal new source performance

standards (NSPS), requirements for the

prevention of significant deterioration

(PSD), and national emission standards

for hazardous air pollutants (NESHAP)

related to attainment and maintenance

of ambient air quality standards or the

requirements of part C of title I of the

Act. The Federal operating permits

program and enhanced compliance

monitoring regulatory requirements will

also be incorporated into part 55 when

they are promulgated. In promulgating

the OCS regulations, EPA provided for

delegation to State and local agencies

the authority to implement and enforce

the regulations for sources within the

25-mile limit. However, EPA did not

provide for delegation of the authority

to implement and enforce the

regulations for sources located beyond

the 25-mile limit. The Santa Barbara

County Air Pollution Control District

(APCD) filed a petition for review of the

regulations on several issues, including

the issue of delegation beyond the 25-

mile limit. Upon EPA’s request for a

voluntary remand, the court remanded

the delegation issue to EPA for

reconsideration.

By this action, EPA is revising the

OCS regulations to provide for

delegation to State and local agencies

the authority to implement and enforce

the OCS regulations beyond the 25-mile

limit. Delegation of the program to any

specific State or local agency will be

under separate action.

DATES: Written comments on the

proposed action must be received by

EPA at the address below on or before

June 19, 1996.

ADDRESSES: Comments should be

submitted to the public docket for this

action is available for public inspection

and copying between 8:00 a.m. and 4:00

p.m., Monday through Friday, at the Air

and Radiation Docket and Information

Center (6102), Attention Docket A–95–

07, South Conference Center, Room 4,

401 M Street, SW, Washington, DC

20460. A reasonable fee for copying may

be charged.

FOR FURTHER INFORMATION CONTACT: Mr.

David Stonefield, U.S. EPA, MD–15,

Research Triangle Park, NC 27711,

telephone (919) 541–5350.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

A. Introduction

The Clean Air Act Amendments of

1990 (Pub. L. 101–549, 104 Stat. 2399

(1990)) added section 328 to the Act and

transferred authority to regulate sources

on part of the OCS from the Department

of the Interior (DOI) to EPA. The DOI

retained the authority to regulate OCS

sources in the Gulf of Mexico west of

87.5 degrees longitude. As to the

remaining portions of the OCS—the

Atlantic, Pacific, and Arctic coasts and

the Gulf of Mexico east of 87.5

degrees—section 328 requires EPA to

establish requirements for the control of

air pollution from OCS sources to attain

and maintain Federal and State ambient

air quality standards and to comply

with the provisions of part C (for the

prevention of significant deterioration)

of title I of the Act. For sources within

25 miles of the States’ seaward

boundaries, those requirements must be

the same as would be applicable if the

source were located in the

corresponding onshore area (COA). For

sources beyond the 25-mile limit, the

Administrator had discretion in

determining the requirements. The EPA

proposed (56 FR 63774, December 5,

1991) and promulgated (57 FR 40792,

September 4, 1992) regulations to

implement the requirements of section

328. The regulations require, among

other things, that sources located

beyond 25 miles of States’ seaward

boundaries meet applicable Federal

pollution control requirements which

include PSD, NSPS and NESHAP

regulations to the extent that they are

rationally related to protection of air

quality standards or part C of title I of

the Act (40 CFR 55.13). In addition, EPA

stated in the preamble to the final rule

that it would incorporate into the OCS

rules the requirements of the Federal

operating permits regulations (40 CFR

part 71) and the enhanced monitoring

regulations, when promulgated (57 FR

40803).

B. Delegation Authority

Section 328(a)(3) of the Act permits

States adjacent to an OCS source to

adopt and submit to EPA regulations for

implementing and enforcing the

requirements of that section. It requires

that:

[I]f the Administrator [of EPA] finds that

the State regulations are adequate, the

Administrator shall delegate to that State any

authority the Administrator has under this

Act to implement and enforce such

requirements.

Therefore, in the OCS regulations,

EPA included § 55.11 which authorizes

the delegation of the implementation

and enforcement authority to State and

local agencies for OCS sources that are

located within the 25-mile limit.

However, in the preamble to the

proposed and final rules, EPA stated

that it would retain the authority to

implement and enforce the OCS

regulations for sources located beyond

the 25-mile limit for two reasons. First,

since the sources located beyond the 25-

mile limit are subject only to Federal

requirements, the State would have to

adopt two OCS programs, one for

sources within the 25-mile limit and

one for sources beyond the limit.

Second, it may be difficult to determine

the appropriate agency to receive

delegation for sources located beyond

the 25-mile limit (56 FR 63784 and 57

FR 40801–802). Therefore, in the final