[Federal Register Volume 77, Number 17 (Thursday, January 26, 2012)]
[Notices]
[Pages 4065-4068]
[FR Doc No: 2012-1581]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66203; File No. SR-FINRA-2011-057]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Partial Amendment No. 1 and Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Partial Amendment No. 1, To Adopt
FINRA Rule 5123 (Private Placements of Securities) in the Consolidated
FINRA Rulebook

January 20, 2012.

I. Introduction

    On October 5, 2011, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt FINRA Rule 5123. The
proposed rule change was published for comment in the Federal Register
on October 24, 2011.\3\ The Commission received 16 comment letters in
response to the proposed rule change.\4\ On November 17, 2011, FINRA
extended the time period in which the Commission must approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to approve or disapprove the proposed
rule change, to January 20, 2012. On January 19, 2012, FINRA filed
Partial Amendment No. 1 to the proposed rule change and a letter
responding to comments.\5\ The Commission is publishing this notice and
order to solicit comments on Partial Amendment No. 1 to the proposed
rule change from interested persons and to institute proceedings
pursuant to Section 19(b)(2)(B) of the Exchange Act to determine
whether to approve or disapprove the proposed rule change, as modified
by Partial Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 65585 (Oct. 18, 2011), 76 FR
65758 (Oct. 24, 2011) (Notice of Filing of Proposed Rule Change to
Adopt New FINRA Rule 5123 (Private Placements of Securities), SR-
FINRA-2011-057) (``Notice of Filing''). The comment period closed on
November 18, 2011.
    \4\ See Letters from Ryan Adams, Christine Lazaro, Esq., and
Lisa Catalano, Esq., St. John's School of Law Securities Arbitration
Clinic, dated November 10, 2011 (``St. John's''); Ryan K. Bakhtiari,
President, Public Investors Arbitration Bar Association, dated
November 14, 2011 (``PIABA''); David T. Bellaire, Esq., Financial
Services Institute, Inc., dated November 14, 2011 (``FSI''); Robert
E. Buckholz, Chair, Committee on Securities Regulation, New York
City Bar Association, dated November 9, 2011 (``NYC Bar''); Richard
B. Chess, President, Real Estate Investment Securities Association,
dated November 14, 2011 (``REISA''); Alicia M. Cooney, Managing
Director, Monument Group (``Monument Group''), dated January 12,
2012 (Monument Group); Martel Day, Chairman, Investment Program
Association, dated November 14, 2011 (``IPA''); Jack E. Herstein,
President, North American Securities Administrators Association,
Inc., dated November 17, 2011 (``NASAA''); Joan Hinchman, Executive
Director, National Society of Compliance Professionals, dated
November 14, 2011 (``NSCP''); William A. Jacobson, Associate
Clinical Professor, and Carolyn L. Nguyen, Cornell Law School, dated
November 14, 2011 (``Cornell''); Stuart J. Kaswell, Executive Vice
President, Managed Funds Association, dated November 14, 2011
(``MFA''); William H. Navin, Senior Vice President, The Options
Clearing Corporation, dated November 9, 2011 (``OCC''); Jeffrey W.
Rubin, Chair, Federal Regulation of Securities Committee, American
Bar Association, dated November 14, 2011 (``ABA''); Sullivan &
Cromwell LLP, dated November 10, 2011 (``S&C''); Osamu Watanabe,
Deputy General Counsel, Moelis & Co., dated November 28, 2011
(``Moelis''); and Donald S. Weiss, K&L Gates LLP, dated November 14,
2011 (``K&L Gates'') . Comment letters are available at www.sec.gov.
    \5\ See Letter from Stan Macel, FINRA, to Elizabeth Murphy,
Secretary, SEC, dated January 19, 2012 (``Response Letter''). The
text of proposed Partial Amendment No. 1 and FINRA's Response Letter
are available on FINRA's Web site at http://www.finra.org, at the
principal office of FINRA and at the Commission's Public Reference
Room. FINRA's Response Letter is also available on the Commission's
Web site at www.sec.gov.
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    Institution of these proceedings does not indicate that the
Commission has reached any conclusions with respect to the proposed
rule change, nor does it mean that the Commission will ultimately
approve or disapprove the proposed rule change. Rather, as discussed
below, the Commission seeks additional input from interested parties on
the issues presented by the proposed rule change, as modified by
Partial Amendment No. 1, and on FINRA's Response Letter.

II. Description of the Proposed Rule Change and Summary of Comments

    FINRA is proposing to adopt FINRA Rule 5123, which, prior to
Partial Amendment No. 1, would have required that members and
associated persons that offer or sell any applicable private placement
(as described in the proposed rule change), or participate in the
preparation of a private placement memorandum (``PPM''), term sheet or
other disclosure documents in connection with any such private
placement, provide relevant disclosures to each investor prior to sale
describing the anticipated use of offering proceeds, and the amount and
type of offering expenses and offering compensation. If any issuer's
disclosure documents did not contain the requisite information about
the offering expenses and use of proceeds, the proposed rule change
would have required the member to create and provide to any potential
investor a separate disclosure document containing this information.
FINRA Rule 5123 also would have required that each participating member
file the PPM, term sheet or other disclosure document, and any exhibits
thereto, with FINRA no later than 15 calendar days after the date of
the first sale, and any material amendments to such document, or any
amendments to any disclosures mandated by the proposed rule change,
also were required to be filed no later than 15 calendar days after the
date such document was provided to any investor or prospective
investor, as discussed further below.
    While some commenters expressed support for the goals of the
proposed rule change,\6\ the remaining commenters expressed a broad
range of concerns, such as: its scope, as derived from the definition
of private placement; the broker-dealer disclosure requirements; the
filing requirements; the exemptions; and whether the proposed rule
change is consistent with FINRA's regulatory oversight and authority.
In particular:

    \6\ Cornell; FSI; NASAA; PIABA; St. John's. Two of these
commenters suggested FINRA members provide additional disclosure:
NASAA recommended that the rule require members to provide
additional risk disclosures to investors; Cornell urged FINRA to
adopt a provision in the Proposed Rule to require a member to
disclose any affiliation between the issuer and the member.
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     Several commenters argued that definition of private
placement \7\ in the proposed rule change is overbroad and could be
interpreted to apply to any offer or sale of securities for which an
exemption from registration is claimed under the Securities Act of
1933 (``Securities Act''), including public offerings and secondary
market trading.\8\ For example, commenters stated that, due to the
fact that it is not expressly limited to ``non-public'' offerings,
the proposed definition is broader than the definition of ``private
placement'' in FINRA Rule 5122 (Private Placements of Securities
Issued by Members), which applies to member private offerings.\9\
The ABA, NYC Bar, and S&C suggested narrowing the scope of FINRA
Rule 5123 to specific types of ``non-public'' offerings, or
referring back to the definition of ``private placement'' in FINRA
Rule 5122.
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    \7\ See proposed FINRA Rule 5123(a).
    \8\ ABA; NYC Bar; S&C. See also NASAA (seeking clarification as
to the application of the Proposed Rule to secondary transactions of
private placements). The ABA stated that the concept of a ``non-
public offering'' is well understood to mean a primary offering of
securities that is exempt from registration under the Securities Act
by reason of Section 4(2) thereof and the rules of the Commission
thereunder (including Rule 506 of Regulation D). The NYC Bar stated
that exemptions pursuant to Sections 3(b), 4(2) and 4(5) of the
Securities Act are traditionally viewed as being ``private placement
exemptions.''
    \9\ FINRA Rule 5122(a)(4) defines ``private placement'' as a
``non-public offering of securities conducted in reliance on an
available exemption from registration under the Securities Act''
(emphasis added).
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     Several commenters suggested that the requirement that
each member provide applicable disclosure documentation to each
investor in a private placement prior to a sale could be interpreted
to require a FINRA member to have primary responsibility for
preparing disclosure documents in the event that an issuer does not
prepare them.\10\ Two commenters suggested that in some cases
members may not have access to all necessary information from
issuers \11\ and one of these two also stated that it may be
impractical and inefficient for members to be charged with gathering
and providing the required information.\12\ One commenter suggested
that the production of a disclosure document by a FINRA member would
increase the liability of the FINRA member in the offering.\13\
Another commenter suggested, as an alternative, that the proposed
rule change prohibit a member from participating in a private
placement if the issuer does not provide the mandated
disclosures.\14\
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    \10\ ABA; NSCP; NYC Bar; REISA.
    \11\ ABA; NYC Bar.
    \12\ ABA.
    \13\ REISA.
    \14\ NYC Bar.
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     Two commenters argued that by requiring members to
provide disclosures regarding private placements, the proposed rule
change would be contrary to the intent of Congress and/or the
federal securities laws, which do not otherwise prescribe these
disclosures for many types of private placements.\15\
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    \15\ ABA; MFA.
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     Three commenters stated that the proposed rule change
could significantly affect the ability of many issuers to raise
capital.\16\ The ABA and MFA also stated that they believe that the
proposed rule change is inconsistent with the Exchange Act.
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    \16\ ABA; MFA; REISA.
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     Commenters expressed concerns regarding exemptions, in
most cases advocating to broaden proposed exemptions or to add new
exemptions. Two commenters urged FINRA to adopt an explicit
exemption for merger and acquisition transactions.\17\ The ABA
suggested that FINRA exempt employees ``of the issuer or its
affiliates'' and define affiliates to have the same meaning as in
FINRA Rule 5121(f)(1). Cornell urged more clarity regarding the term
``affiliate,'' noting that different definitions of the term exist
in the federal securities laws.\18\ A few commenters urged FINRA to
adopt additional exemptions for ``knowledgeable employees'' of a
private fund, as defined in Rule 3c-5 of the Investment Company Act
of 1940.\19\ MFA asked that other ``sophisticated investors'' that
are purchasers of private funds be exempt from the requirements of
the proposed rule change. In addition, Moelis suggested an exemption
for ``employees of the broker dealer or its affiliates, who are
accredited investors.'' Monument Group asked for an exemption either
for ``all offers of private funds by registered independent
placement agents,'' or alternatively for all ``offers to accredited
investors.'' \20\ Monument Group also stated that, as proposed, the
inclusion of a single purchaser who proved to be a ``mere accredited
investor'' of an offering would cause the loss of the exemption for
private placement offerings offered solely to ``institutional
accounts, as defined in NASD Rule 3110(c)(4),'' as well as to
``qualified purchasers, as defined in Section 2(a)(51)(A)'' of the
Investment Company Act of 1940.
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    \17\ ABA; NYC Bar.
    \18\ See Cornell (noting the differing definitions of
``affiliate'' in Securities Act Rule 144 and Exchange Act Rule 12b-
2).
    \19\ ABA; K&L Gates; see also MFA.
    \20\ Monument Group.
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     Several commenters stated that a single filing for each
offering, rather than by each member, would be sufficient for the
regulatory purposes of the proposed rule change and that the firm
making the filing could be tasked with disclosing the other members
of the selling group in offerings in which more than one firm
participated.\21\

    \21\ ABA; FSI; IPA; NYC Bar; REISA; S&C.

    FINRA responded to the comments in its Response Letter and filed
Partial Amendment 1.\22\
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    \22\ See supra, note 5.
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III. Description of Partial Amendment No. 1

    FINRA's proposed changes in response to comments, as set forth in
Partial Amendment No. 1, are summarized below.
    First, FINRA is proposing to amend proposed FINRA Rule 5123 to
clarify that the term ``private placement'' in the proposed rule change
would mean a non-public offering of securities conducted in reliance on
an available exemption from registration under the Securities Act.
Accordingly, the proposed rule's private placement definition would be
consistent with

FINRA Rule 5122 and would not apply to securities offered pursuant to
the following provisions:
     Securities Act Sections 4(1), 4(3) and 4(4) (which
generally exempt secondary transactions);
     Securities Act Sections 3(a)(2) (offerings by banks),
3(a)(9) (exchange transactions with an existing holder, where no one is
paid to solicit the exchange), 3(a)(10) (securities subject to a
fairness hearing), or 3(a)(12) (securities issued by a bank or bank
holding company pursuant to reorganization or similar transactions); or
     Section 1145 of the Bankruptcy Code (securities issued in
a court-approved reorganization plan that are not otherwise entitled to
the exemption from registration afforded by Securities Act Section
3(a)(10)).\23\
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    \23\ See NYC Bar; S&C (advocating that the proposed rule not
apply to these categories of securities).
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    Second, FINRA is proposing to amend the filing and disclosure
requirements of the proposed rule change for those private placements
for which a disclosure document includes a description of the
anticipated use of offering proceeds, the amount and type of offering
expenses, and the amount and type of compensation provided or to be
provided to sponsors, finders, consultants, and members and their
associated persons in connection with the offering. Members would be
required to provide, prior to any sale, the disclosure document to each
investor other than those investors in a private placement that would
be subject to an exemption, as provided by the proposed rule change, as
amended. Each member participating in the offering or a member
designated to make the filing on behalf of all members identified in
the filing would also be required to file such document with FINRA no
later than 15 calendar days after the date of first sale.
    Third, FINRA is proposing to amend the filing and disclosure
requirements of the proposed rule change for those private placements
for which there is no disclosure document. If no disclosure document is
used, the participating member (or a designated member acting on behalf
of the member) would, however, be required to make a notice filing,
identifying the private placement and the participating members and
stating that no disclosure document was used, with FINRA no later than
15 calendar days after the date of first sale. The proposed rule change
as amended would not prohibit a member from participating in such
private placements. The proposed rule change would not require the
member to make any additional disclosure to investors in such
offerings.
    Fourth, FINRA is proposing to add supplementary material to the
proposed rule change that would clarify that the rule would not require
delivery of multiple copies of a disclosure document to a single
customer. Specifically, the proposed rule change would require an
affected member to deliver disclosure documents only to persons to whom
it sells shares in the private placement.

IV. Proceedings To Determine Whether To Approve or Disapprove SR-FINRA-
2011-057 and Grounds for Disapproval Under Consideration

    In view of the issues raised by the proposed rule change, the
Commission has determined to institute proceedings pursuant to Section
19(b)(2) of the Exchange Act to determine whether to approve or
disapprove FINRA's proposed rule change.\24\ Institution of such
proceedings appears appropriate at this time in view of the legal and
policy issues raised by the proposed rule change. As noted above,
institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
comment on the proposed rule change and provide the Commission with
arguments to support the Commission's analysis as to whether to approve
or disapprove the proposed rule change.
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    \24\ 15 U.S.C. 78s(b)(2). Section 19(b)(2)(B) of the Exchange
Act provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
The time for conclusion of the proceedings may be extended for up to
an additional 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding or if the self-
regulatory organization consents to the extension.
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    The Commission is asking that commenters address the changes that
FINRA proposes in Partial Amendment No. 1, the comments received on the
Notice of Filing, and FINRA's Response Letter, in addition to any other
comments they may wish to submit about the proposed rule change. The
Commission requests comment, in particular, on the following aspects of
the proposed rule change, as modified by Partial Amendment No. 1:

    (1) the categories of offerings that would be subject to the
proposed rule change under the proposed definition of ``private
placement;''
    (2) the potential impact on investors purchasing private
placement securities through a broker-dealer subject to the proposed
rule change;
    (3) the potential impact on members of having to comply with the
proposed rule change, including any burdens associated with
implementing the obligations of the proposed rule change; and
    (4) the potential impact on competition and capital formation,
including: (a) Whether members would continue to participate in
private placements subject to the proposed rule change; (b) whether
the proposed rule change would encourage issuers to utilize
unregistered firms to effect their covered offerings; and (c)
whether the proposed rule change would affect access to capital, the
costs of capital raising or the cost of capital for issuers.

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\25\ the
Commission is providing notice of the grounds for disapproval under
consideration. In particular, Section 15A(b)(6) of the Exchange Act
\26\ requires, among other things, that FINRA rules must be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and, in general, to protect
investors and the public interest.
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    \25\ 15 U.S.C. 78s(b)(2)(B).
    \26\ 15 U.S.C. 78o-3(b)(6).
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    The Commission believes FINRA's proposed rule change, as amended,
raises questions as to whether it is consistent with the requirements
of Section 15A(b)(6) of the Exchange Act, including whether FINRA's
proposed rule change, as amended, would prevent fraudulent and
manipulative acts, promote just and equitable principles of trade, and
protect investors and the public interest and also whether the proposed
rule change is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, to fix minimum profits, to
impose any schedule or fix rates of commissions, allowances, discounts,
or other fees to be charged by its members, or to regulate any matters
not related to the purposes of the Exchange Act or the administration
of FINRA.
    The Commission also believes FINRA's proposed rule change, as
amended, raises questions as to whether it is consistent with the
findings that the Commission must make as set forth in Section 3(f) of
the Exchange Act, including whether FINRA's proposed rule change, as
amended, would promote efficiency, competition, and capital formation.

V. Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues

identified above, as well as any others they may have identified with
the proposed rule change, as amended. In particular, the Commission
invites the written views of interested persons concerning whether the
proposed rule change, as modified by Partial Amendment No. 1, is
inconsistent with Section 15A(b)(6) or any other provision of the
Exchange Act, or the rules and regulations thereunder.
    Although there do not appear to be any issues relevant to approval
or disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\27\
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    \27\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97
(1975), grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Report of the Senate Committee on Banking, Housing and Urban
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess.
30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments by [insert date 30 days from publication in the Federal
Register] concerning Partial Amendment No. 1 and regarding whether the
proposed rule change, as modified by Partial Amendment No. 1, should be
approved or disapproved. Any person who wishes to file a rebuttal to
any other person's submission must file that rebuttal by March 12,
2012. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2011-057 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2011-057. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make publicly available.
    All submissions should refer to File Number SR-FINRA-2011-057 and
should be submitted on or before February 27, 2012. Rebuttal comments
should be submitted by March 12, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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Kevin M. O'Neil,
Deputy Secretary.
[FR Doc. 2012-1581 Filed 1-25-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: June 13, 2008 (Volume 73, Number 115)]
[Proposed Rules]
[Page 33754-33758]
[DOCID:fr13jn08-31]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2008-0257; FRL-8579-8]

Approval and Promulgation of Air Quality Implementation Plans;
Pennsylvania; Determination of Attainment of the Fine Particle Standard

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to determine that the Harrisburg-Lebanon-
Carlisle, Pennsylvania nonattainment area for the 1997 fine particle
(PM2.5) National Ambient Air Quality Standard (NAAQS) has
attained the 1997 PM2.5 NAAQS. This proposed determination
is based upon quality assured, quality controlled, and certified
ambient air monitoring data that show that the area has monitored
attainment of the 1997 PM2.5 NAAQS since the 2004-2006
monitoring period, and continues to monitor attainment of the standard
based on 2005-2007 data. In addition, quality controlled and quality
assured monitoring data for 2008 that are available in the EPA Air
Quality System (AQS) database, but not yet certified, show this area
continues to attain the 1997 PM2.5 NAAQS. If this proposed
determination is made final, the requirements for this area to submit
an attainment demonstration and associated reasonably available
measures, a reasonable further progress plan, contingency measures, and
other planning State Implementation Plans (SIPs) related to attainment
of the standard shall be suspended for so long as the area continues to
attain the 1997 PM2.5 NAAQS.

DATES: Written comments must be received on or before July 14, 2008.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2008-0257 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. E-mail<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2008-0257, Cristina Fernandez, Chief, Air
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and

special arrangements should be made for deliveries of boxed
information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2008-0257. EPA's policy is that all comments received will be included
in the public docket without change, and may be made available online
at http://www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://
www.regulations.gov or e-mail. The http://www.regulations.gov Web site
is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov, your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in http://
www.regulations.gov or in hard copy during normal business hours at the
Air Protection Division, U.S. Environmental Protection Agency, Region
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.

FOR FURTHER INFORMATION CONTACT: Rose Quinto,<PHONE_NUMBER>, or by e-
mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we'',
``us'', or ``our'' is used, we mean EPA.
    Organization of this document. The following outline is provided to
aid in locating information in this preamble.

I. What Action Is EPA Taking?
II. What Is the Effect of This Action?
III. What Is the Background for This Action?
IV. What Is EPA's Analysis of the Relevant Air Quality Data?
V. Proposed Action
VI. Statutory and Executive Order Reviews

I. What Action Is EPA Taking?

    EPA is proposing to determine that the Harrisburg-Lebanon-Carlisle,
Pennsylvania PM2.5 nonattainment area has attained the 1997
PM2.5 NAAQS. This determination is based upon quality
assured, quality controlled, and certified ambient air monitoring data
that show the area has monitored attainment of the 1997
PM2.5 NAAQS since the 2004-2006 monitoring period, and
monitoring data that continue to show attainment of the 1997
PM2.5 NAAQS based on the 2005-2007 data. In addition,
quality controlled and quality assured monitoring data for 2008 that
are available in the EPA AQS database, but not yet certified, show this
area continues to attain the 1997 PM2.5 NAAQS.

II. What Is the Effect of This Action?

    If this determination is made final, under the provisions of EPA's
PM2.5 implementation rule (see 40 CFR 51.1004(c)), the
requirements for the Harrisburg-Lebanon-Carlisle, Pennsylvania
PM2.5 nonattainment area to submit an attainment
demonstration and associated reasonably available control measures, a
reasonable further progress plan, contingency measures, and any other
planning SIPs related to attainment of the 1997 PM2.5 NAAQS
would be suspended for so long as the area continues to attain the 1997
PM2.5 NAAQS.
    As further discussed below, the proposed determination would: (1)
For the Harrisburg-Lebanon-Carlisle, Pennsylvania nonattainment area,
suspend the requirements to submit an attainment demonstration and
associated reasonably available control measures (RACM) (including
reasonably available control technologies (RACT)), a reasonable further
progress plan (RFP), contingency measures, and any other planning SIPs
related to attainment of the 1997 PM2.5 NAAQS; (2) continue
until such time, if any, that EPA subsequently determines that the area
has violated the 1997 PM2.5 NAAQS; (3) be separate from, and
not influence or otherwise affect, any future designation determination
or requirements for the Harrisburg-Lebanon-Carlisle, Pennsylvania area
based on the 2006 PM2.5 NAAQS; and (4) remain in effect
regardless of whether EPA designates this area as a nonattainment area
for purposes of the 2006 PM2.5 NAAQS. Furthermore, as
described below, any such final determination would not be equivalent
to the redesignation of the area to attainment based on the 1997
PM2.5 NAAQS.
    In accordance with 40 CFR section 51.1004(c) (72 FR 20586, 20665),
this proposed determination would suspend the requirement for the
Harrisburg-Lebanon-Carlisle, Pennsylvania nonattainment area to submit
an attainment demonstration and associated RACM, including RACT,
related to the 1997 PM2.5 NAAQS. Recently EPA noted that
certain language in the preamble of its PM2.5 implementation
rule, 72 FR 20586, 20603 (April 25, 2007), contradicts the regulatory
text in 40 CFR 51.1004(c). On May 22, 2008, EPA issued a memorandum
``to eliminate any confusion that could result from this erroneous
statement.'' Memorandum from William T. Harnett, Director, Air Quality
Policy Division to Regional Air Division Directors, ``PM2.5
Clean Data Policy Clarification.'' This memorandum stated:
    ``Section 51.1004(c) provides that: `Upon a determination by EPA
that an area designated nonattainment for the PM2.5 NAAQS
has attained the standard, the requirements for such area to submit
attainment demonstrations and associated reasonably available control
measures, reasonable further progress plans, contingency measures, and
other planning SIPs related to attainment of the PM2.5 NAAQS
shall be suspended. * * *'
    Section 51.1010 provides in part: `For each PM2.5
nonattainment area, the State shall submit with the attainment
demonstration a SIP revision demonstrating that it has adopted all
reasonably available control measures (including RACT for stationary
sources) necessary to demonstrate attainment as expeditiously as
practicable and to meet any RFP requirements.'
    Thus the regulatory text defines RACT as included in RACM, and
provides that it is only required insofar as it is necessary to advance
attainment. See also section 51.1010(b). As a result, when an area is
attaining the standard, the suspension of the RACM requirement pursuant
to 51.1004(c) necessarily includes the suspension of the RACT
requirement.
    However, the preamble to the PM2.5 implementation rule,
including a response to comments, contains

language that is at odds with the explicit provisions of the regulatory
text. The preamble states that `The EPA wishes to clarify that the
Clean Data Policy does not provide for suspension of the requirements
for NSR nor for RACT.' 72 FR 20603 (April 25, 2007.) \1\ Thus, the
preamble erroneously states that SIP submissions to meet RACT
obligations are not suspended, while the regulatory text provides that
RACT, as a subset of RACM, is suspended when an area is attaining the
standard.\2\ The purpose of this section of the preamble was to correct
a misstatement in the preamble to the proposed rule concerning the
status of NSR requirements in areas subject to the Agency's Clean Data
Policy and to respond to comments on that policy. When this preamble
text was drafted, EPA was considering several formulations of RACT,
some of which would have resulted in a freestanding RACT requirement
beyond RACM for certain areas. 72 FR 20610-20612. Those options were
not selected in the final rulemaking, which adopted the formulation
found in section 51.1010. EPA thus adopted a combined approach to RACT
and RACM. Accordingly, pursuant to section 51.1004(c), areas with clean
data are not required to make a RACT submission. However, the contrary
draft preamble language inadvertently was not revised to conform to the
regulatory option that had been selected. Thus, the preamble language
is irreconcilable with and was never intended to interpret the
regulatory text that was chosen for the final rule.''
---------------------------------------------------------------------------

    \1\ On the same page, in a response to a comment, EPA states:
``The Clean Data Policy does not waive requirements for NSR nor for
RACT.''
    \2\ The statement is accurate as to NSR requirements.
---------------------------------------------------------------------------

    EPA further stated that its ``memorandum does not change the
regulation published in the Federal Register on April 25, 2007. Because
the promulgated regulation is clear, we believe it is clear that the
preamble statement is an error. National Wildlife Federation v. EPA,
286 F.3d 554 (D.C. Cir. 2002) (a regulation is controlling over the
language of a preamble.). Cf. Association of American R.Rs. v. Costle,
562 F.2d 1310, 1316 (D.C. Cir. 1977) (citing Yazoo Railroad Co. v.
Thomas, 132 U.S. 174, 188 (1889)) (`Where the enacting or operative
parts of a statute are unambiguous, the meaning of the statute cannot
be controlled by language in the preamble.') However, because the
preamble statement could cause confusion, we are issuing this
memorandum to explain the misstatement in the preamble and that the
regulatory text is controlling.''
    Consequently, if this proposed determination is made final, the
requirement for the Harrisburg-Lebanon-Carlisle, Pennsylvania
PM2.5 nonattainment area to make RACT submissions related to
attainment of the 1997 PM2.5 nonattainment NAAQS would be
suspended for so long as the area continues to attain the 1997
PM2.5 NAAQS.
    If this rulemaking is finalized and EPA subsequently determines,
after notice-and-comment rulemaking in the Federal Register, that the
area has violated the 1997 PM2.5 NAAQS, the basis for the
suspension of the specific requirements, set forth at 40 CFR section
51.1004(c), would no longer exist, and the area would thereafter have
to address the pertinent requirements.
    The determination that EPA proposes with this Federal Register
notice, that the air quality data show attainment of the 1997
PM2.5 NAAQS, is not equivalent to the redesignation of the
area to attainment. This proposed action, if finalized, would not
constitute a redesignation to attainment under section 107(d)(3) of the
Clean Air Act (CAA), because we would not yet have an approved
maintenance plan for the area as required under section 175A of the
CAA, nor a determination that the area has met the other requirements
for redesignation. The designation status of the area would remain
nonattainment for the 1997 PM2.5 NAAQS until such time as
EPA determines that it meets the CAA requirements for redesignation to
attainment.
    This proposed action, if finalized, is limited to a determination
that the Harrisburg-Lebanon-Carlisle, Pennsylvania PM2.5
area has attained the 1997 PM2.5 NAAQS. The 1997
PM2.5 NAAQS became effective on July 18, 1997 (62 FR 36852)
and are set forth at 40 CFR section 50.7. The 2006 PM2.5
NAAQS, which became effective on December 18, 2006 (71 FR 61144) are
set forth at 40 CFR section 50.13. EPA is currently in the process of
making designation determinations, as required by CAA section
107(d)(1), for the 2006 PM2.5 NAAQS. EPA has not made any
designation determination for the Harrisburg-Lebanon-Carlisle,
Pennsylvania area based on the 2006 PM2.5 NAAQS. This
proposed determination, and any final determination, will have no
effect on, and is not related to, any future designation determination
that EPA may make based on the 2006 PM2.5 NAAQS for the
Harrisburg-Lebanon-Carlisle, Pennsylvania area. Conversely, any future
designation determination of the Harrisburg-Lebanon-Carlisle,
Pennsylvania area, based on the 2006 PM2.5 NAAQS, will not
have any effect on the determination proposed by this notice.
    If this proposed determination is made final and the Harrisburg-
Lebanon-Carlisle, Pennsylvania area continues to demonstrate attainment
with the 1997 PM2.5 NAAQS, the requirements for the
Harrisburg-Lebanon-Carlisle, Pennsylvania area to submit an attainment
demonstration and associated reasonably available control measures, a
reasonable further progress plan, contingency measures, and any other
planning SIPs related to attainment of the 1997 PM2.5 NAAQS
would remain suspended, regardless of whether EPA designates this area
as a nonattainment area for purposes of the 2006 PM2.5
NAAQS. Once the area is designated for the 2006 NAAQS, it will have to
meet all applicable requirements for that designation.

III. What Is the Background for This Action?

    On July 18, 1997 (62 FR 36852), EPA established a health-based
PM2.5 NAAQS at 15.0 micrograms per cubic meter ([mu]g/m3)
based on a 3-year average of annual mean PM2.5
concentrations, and a twenty-four hour standard of 65 [mu]g/m3 based on
a 3-year average of the 98th percentile of 24-hour concentrations. EPA
established the standards based on significant evidence and numerous
health studies demonstrating that serious health effects are associated
with exposures to particulate matter. The process for designating areas
following promulgation of a new or revised NAAQS is contained in
section 107(d)(1) of the CAA. EPA and State air quality agencies
initiated the monitoring process for the 1997 PM2.5 NAAQS in
1999, and developed all air quality monitors by January 2001. On
January 5, 2005 (70 FR 944), EPA published its air quality designations
and classifications for the 1997 PM2.5 NAAQS based upon air
quality monitoring data from those monitors for calendar years 2001-
2003. These designations became effective on April 5, 2005. The
Harrisburg-Lebanon-Carlisle, Pennsylvania (Cumberland, Dauphin, and
Lebanon Counties) area was designated nonattainment for the 1997
PM2.5 NAAQS (see 40 CFR part 81).

IV. What Is EPA's Analysis of the Relevant Air Quality Data?

    EPA has reviewed the ambient air monitoring data for
PM2.5, consistent with the requirements contained in 40 CFR
part 50 and recorded in the EPA

AQS database for the Harrisburg-Lebanon-Carlisle, Pennsylvania
PM2.5 nonattainment area from 2004 through the present time.
    On the basis of that review, EPA has concluded that this area
attained the 1997 PM2.5 NAAQS since the 2004-2006 monitoring
period, and continues to monitor attainment of the NAAQS based on 2005-
2007 data. In addition, quality controlled and quality assured
monitoring data for 2008 that are available in the EPA AQS database,
but not yet certified, show this area continues to attain the 1997
PM2.5 NAAQS.
    Under EPA regulations at 40 CFR Part 50, section 50.7:
    (1) The annual primary and secondary PM2.5 standards are
met when the annual arithmetic mean concentration, as determined in
accordance with 40 CFR Part 50, Appendix N, is less than or equal to
15.0 [mu]g/m3.
    (2) The 24-hour primary and secondary PM2.5 standards
are met when the 98th percentile 24-hour concentration, as determined
in accordance with 40 CFR Part 50, Appendix N, is less than or equal to
65 [mu]g/m3.
    Table 1 shows the design values for the 1997 24-hour
PM2.5 NAAQS for Harrisburg-Lebanon-Carlisle, Pennsylvania
nonattainment area monitors for the years 2004-2006 and 2005-2007.
Table 2 shows the design values for the 1997 annual PM2.5
NAAQS for these same monitors and the same 3-year periods.

    Table 1.--Design Values for the 1997 24-Hour PM2.5 NAAQS for Harrisburg-Lebanon-Carlisle, Pennsylvania in
                                      Micrograms per Cubic Meter ([mu]g/m3)
----------------------------------------------------------------------------------------------------------------
                                                                   1997 24-Hour
                    Location                        AQS site ID     attainment       2004-2006       2005-2007
                                                                     standard      design values   design values
----------------------------------------------------------------------------------------------------------------
Carlisle/Cumberland County......................     42-041-0101              65              38              36
Harrisburg/Dauphin County.......................     42-043-0401              65              38              38
----------------------------------------------------------------------------------------------------------------

    Table 2.--Design Values for the 1997 Annual PM2.5 NAAQS for Harrisburg-Lebanon-Carlisle, Pennsylvania in
                                      Micrograms per Cubic Meter ([mu]g/m3)
----------------------------------------------------------------------------------------------------------------
                                                                    1997 Annual
                    Location                        AQS site ID     attainment       2004-2006       2005-2007
                                                                     standard      design values   design values
----------------------------------------------------------------------------------------------------------------
Carlisle/Cumberland County......................     42-041-0101            15.0            14.4            13.9
Harrisburg/Dauphin County.......................     42-043-0401            15.0            15.0            14.6
----------------------------------------------------------------------------------------------------------------

    EPA's reviews of these data indicate that the Harrisburg-Lebanon-
Carlisle, Pennsylvania nonattainment area has met and continues to meet
the 1997 PM2.5 NAAQS. EPA is soliciting public comments on
the issues discussed in this document. These comments will be
considered before taking final action.

V. Proposed Action

    EPA is proposing to determine that the Harrisburg-Lebanon-Carlisle,
Pennsylvania nonattainment area for the 1997 PM2.5 NAAQS has
attained the 1997 PM2.5 NAAQS and continues to attain the
standard based on data through 2008. As provided in 40 CFR 51.1004(c),
if EPA finalizes this determination, it would suspend the requirements
for this area to submit an attainment demonstration and associated
reasonably available control measures, a reasonable further progress
plan, contingency measures, and any other planning SIPs related to
attainment of the 1997 PM2.5 NAAQS so long as the area
continues to attain the 1997 PM2.5 NAAQS.

VI. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
proposed action is not a ``significant regulatory action'' and
therefore is not subject to review by the Office of Management and
Budget. For this reason, this action is not subject to Executive Order
13211, ``Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This
action proposes to make a determination based on air quality data, and
would, if finalized, result in the suspension of certain Federal
requirements. Accordingly, the Administrator certifies that this rule
will not have a significant economic impact on a substantial number of
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et.
seq.). Because this rule proposes to make a determination based on air
quality data, and would, if finalized, result in the suspension of
certain Federal requirements, it does not contain any unfunded mandate
or significantly or uniquely affect small governments, as described in
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
    This proposed rule also does not have tribal applications because
it will not have a substantial direct effect on one or more Indian
tribes, on the relationship between the Federal Government and Indian
tribes, or on the distribution of power and responsibilities between
the Federal Government and Indian tribes, as specified by Executive
Order 13175 (65 FR 67249, November 9, 2000). This proposed action also
does not have Federalism implications because it does not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132 (64 FR 43255, August 10, 1999),
because it merely proposes to make a determination based on air quality
data and would, if finalized result in the suspension of certain
Federal requirements, and does not alter the relationship or the
distribution of power and responsibilities established in the CAA. This
proposed rule also is not subject to Executive Order 13045 ``Protection
of Children from Environmental Health Risks'' (62 FR 19885, April 23,
1997) because it proposes to determine that air quality in the affected
area is meeting Federal standards.
    The requirements of section 12(d) of the National Technology
Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply
because it would be inconsistent with applicable law for EPA, when
determining the attainment

status of an area, to use voluntary consensus standards in place of
promulgated air quality standards and monitoring procedures otherwise
satisfy the provisions of the CAA.
    This proposed rule does not impose an information collection burden
under the provisions of the Paper Reduction Act of 1995 (44 U.S.C. 3501
et seq.)
    Under Executive Order 12898, EPA finds that this rule, pertaining
to Pennsylvania's determination of attainment of the fine particle
standard for Harrisburg-Lebanon-Carlisle area, involves a proposed
determination of attainment based on air quality data and will not have
disproportionately high and adverse human health or environmental
effects on any communities in the area, including minority and low-
income communities.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Particulate
matter, Reporting and recordkeeping requirements.

    Authority: 42 U.S.C. 7401 et. seq.

    Dated: June 4, 2008.
William T. Wisniewski,
Acting Regional Administrator, Region III.
[FR Doc. E8-13340 Filed 6-12-08; 8:45 am]

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