[Federal Register Volume 83, Number 126 (Friday, June 29, 2018)]
[Notices]
[Pages 30795-30801]
[FR Doc No: 2018-13977]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83504; File No. SR-CBOE-2018-045]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to Exchange Rule 6.2., Hybrid Opening (and Sometimes Closing) System
(``HOSS'')

June 25, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 15, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal pursuant to Section 19(b)(3)(A)(iii) of the Act \3\
and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.2., Hybrid Opening (and
Sometimes Closing) System (``HOSS'').
(additions are italicized; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc. Rules

* * * * *
Rule 6.2. Hybrid Opening (and Sometimes Closing) System (``HOSS'')
    (a)-(h) (No change).
    . . . Interpretations and Policies:
    .01 Modified Opening Procedure for Series Used to Calculate the
Exercise/Final Settlement Values of Volatility Indexes. All provisions
set forth in Rule 6.2 remain in effect unless superseded or modified by
this Interpretation and Policy .01. On the dates on which the exercise
and final settlement values are calculated for options (as determined
under Rule 24.9(a)(5) or (6)) or (security) futures contracts on a
volatility index (i.e., expiration and final settlement dates), the
Exchange utilizes the modified opening procedure described below for
all series used to calculate the exercise/final settlement value of the
volatility index for expiring options and (security) futures contracts
(these option series referred to as ``constituent options'').
    (a) Strategy Orders. All orders for participation in the modified
opening procedure that are related to positions in, or a trading
strategy involving, expiring volatility index options or (security)
futures (``strategy orders''), and any change to or cancellation of any
such order:
    (i)-(ii) (No change).
    Whether orders are strategy orders for purposes of this Rule 6.2.01
depends

upon specific facts and circumstances. The Exchange may also deem order
types other than those provided above as strategy orders if the
Exchange determines that to be the case based upon the applicable facts
and circumstances.
    (b) Non-Strategy Orders. All other orders for participation in the
modified opening procedure[s] (``non-strategy orders''), and any change
to or cancellation of any such order, must be received prior to the
applicable cut-off time (as determined by the Exchange on a class-by-
class basis) in order to participate at the opening price for the
applicable series, which may be no earlier than 8:25 a.m. and no later
than the opening of trading in the option series. The Exchange will
announce all determinations regarding changes to the applicable non-
strategy order cut-off time at least one day prior to implementation.
    (c) Market-Makers. A Market-Maker with an appointment in a class
with constituent option series may submit bids and offers in those
series for bona fide market-making purposes in accordance with Rule 8.7
and the Exchange Act for its market-maker account prior to the open of
trading for participation in the modified opening procedure. The
Exchange will deem these bids and offers to be non-strategy orders, and
will not deem them to be changes to or cancellations of previously
submitted strategy orders, if:
    (i) The Trading Permit Holder with which the Market-Maker is
affiliated has established, maintains, and enforces reasonably designed
written policies and procedures (including information barriers, as
applicable), taking into consideration the nature of the Trading Permit
Holder's business and other facts and circumstances, to prevent the
misuse of material nonpublic information (including the submission of
strategy orders); and
    (ii) when submitting these bids and offers, the Market-Maker has no
actual knowledge of any previously submitted strategy orders.
* * * * *
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Cboe Options and Cboe Futures Exchange, LLC (``CFE'') list options
and futures, respectively, on different volatility indexes that are
calculated using prices of options traded on Cboe Options.\5\ The final
settlement value for these derivatives is determined on the morning of
their expiration date through a special opening quotation (``SOQ'') of
the volatility index using the opening prices of a portfolio of options
(for example, the settlement value of VIX options and futures uses the
opening prices of a portfolio of S&P 500 Index options (``SPX
options'') that expire approximately 30 days later). On the days when
the settlement values for these contracts are determined, Cboe Options
opens the constituent options \6\ for these volatility indexes using
the modified Hybrid Opening System (``HOSS'') procedure.\7\ The main
feature of the modified HOSS procedure used to calculate the exercise/
final settlement value of volatility indexes for expiring options and
(security) futures that distinguishes it from the normal opening
procedure used on all other days is a cutoff time for the entry of
strategy orders.\8\ By providing market participants with a mechanism
to buy and sell constituent options at prices used to calculate the
final settlement value of the volatility index derivatives, the
volatility index settlement process is ``tradable.''
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    \5\ These volatility indexes include the Cboe Volatility Index
(``VIX'') and the Russell 2000 Volatility Index (``RVX''). Options
expire on an expiration date and settle to an exercise settlement
value, and futures settle on a final settlement date to a final
settlement value. For ease of reference, the Exchange will use the
options terminology throughout this filing when referring to the
``expiration/final settlement date'' and ``expiration/final
settlement value'' for volatility index derivatives.
    \6\ ``Constituent options'' are the series used to calculate the
exercise/final settlement value of the volatility index for expiring
options and (security) futures contracts.
    \7\ See Rule 6.2, Interpretation and Policy .01.
    \8\ Strategy orders are all orders (defined in Rule 1.1(ooo) as
a firm commitment to buy or sell option contracts) for participation
in the modified opening procedure that are related to positions in,
or a trading strategy involving, volatility index options or
(security) futures (as discussed below, the proposed rule change is
adding ``expiring'' to this definition). In general, the Exchange
considers orders to be strategy orders if they are for (a) option
series with the expiration that will be used to calculate the
exercise or final settlement value of the applicable volatility
index option or futures contract; (b) option series spanning the
full range of strike prices for the appropriate expiration for
option series that will be used to calculate the exercise or final
settlement value of the applicable volatility index option or
futures contract (not necessarily every available strike price); and
(c) put options with strike prices at or less than the ``at-the-
money'' strike price and for call options with strike prices greater
than or at the ``at-the-money'' strike price. Whether orders are
strategy orders depends upon specific facts and circumstances. The
Exchange may also deem order types other than those provided above
as strategy orders if the Exchange determines that to be the case
based upon the applicable facts and circumstances. The strategy
order cut-off time may be no earlier than 8:00 a.m. and no later
than the opening of trading in the series, and is currently 8:20
a.m. Chicago time. See Rule 6.2, Interpretation and Policy .01.
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    The volatility index settlement process is patterned after the
process used to settle SPX options. On the days SPX options expire, S&P
calculates an SOQ of the S&P 500 Index using the opening prices of the
component stocks in their primary markets. Market participants can
replicate the exposure of their expiring SPX options by entering orders
to buy and sell the component stocks of the S&P 500 Index at their
opening prices. If they are successful, market participants can
effectively construct a portfolio that matches the value of the SOQ. At
this point, the derivatives and cash markets converge.
    In a very similar way, the exercise settlement value for volatility
index derivatives is an SOQ of the volatility index using opening
prices of the constituent options used to determine the value of the
index. With respect to VIX, the VIX exercise settlement value is
calculated using the opening prices of SPX options that expire
approximately 30 days later. Analogous to the settlement process for
SPX options, market participants can replicate the exposure of their
expiring VIX derivatives by entering buy and sell orders in constituent
SPX options. If they are successful, market participants can
effectively construct a portfolio of SPX options whose value matches
the value of the VIX SOQ. By doing so, market participants may make or
take delivery of the SPX options that will be used to settle VIX
derivatives.
    A tradable settlement creates the opportunity to convert the
exposure of an expiring VIX derivative into the portfolio of SPX
options that will be used to settle the expiring contract.
Specifically, some market participants

may desire to maintain the vega, or volatility, risk exposure of
expiring VIX derivatives. Since VIX derivatives expire 30 days prior to
the SPX options used to calculate their settlement value, a market
participant may have a vega risk from its portfolio of index positions
that the participant wants to continue to hedge after the participant's
VIX derivatives expire. To continue that vega coverage following
expiration of a VIX derivative, a market participant may determine to
trade the portfolio of SPX options used to settle an expiring VIX
derivative, since those SPX options still have 30 more days to
expiration. This trade essentially replaces the uncovered vega exposure
``hole'' created by an expiring VIX derivative.
    Since the VIX settlement value converges with the value of the
portfolio of SPX options used to calculate the settlement value of VIX
derivatives, trading this SPX option portfolio mitigates settlement
risk. This is because, if done properly, the vega exposure obtained in
the SPX option portfolio will replicate the vega exposure of the
expiring VIX derivative (i.e., elimination of slippage). Because a
market participant is converting vega exposure from one instrument
(expiring VIX derivative) to another (portfolio of SPX options expiring
in 30 days), the market participant is likely to be indifferent to the
settlement price received for the expiring VIX derivative. Importantly,
trading the next VIX derivative expiration (i.e., rolling) will not
accomplish the conversion of vega exposure since that VIX derivative
contract would necessarily cover a different period of expected
volatility and would be based on an entirely different portfolio of SPX
options.
    To replicate expiring volatility index derivatives on their
expiration dates with portfolios of constituent options, market
participants generally submit strategy orders to participate in the
modified HOSS procedure on volatility index settlement dates. The
Exchange understands that the entry of strategy orders may lead to
order imbalances in the option series being used to determine the final
settlement value. To the extent (1) market participants seeking to
replicate an expiring VIX derivative position are on one side of the
market (e.g., strategy order to buy SPX options) and (2) those market
participants' orders predominate over other orders during the modified
HOSS procedure, those trades may contribute to an order imbalance prior
to the open.
    To provide market participants with time to enter additional orders
and quotes to offset any such imbalances prior to the opening of these
series, the Exchange established a strategy order cut-off time.\9\ The
time period after this cut-off time also permits market participants
to, among other things, update prices of orders and quotes in response
to changing market conditions until the open of trading.\10\ Generally,
if a series (1) has a market order imbalance, or (2) is at a price that
is outside the Exchange prescribed opening width (as described in Rule
6.2(d)), the series will not open for trading. Prior to the open, the
Exchange disseminates messages to market participants indicating the
expected opening price for a series or imbalance information for that
series (as applicable) to further encourage market participants to
enter orders and quotes to offset any imbalances, to submit
competitively priced bids and offers, and to promote a fair and orderly
opening.
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    \9\ See Securities Exchange Act Release Nos. 52367 (August 31,
2005), 70 FR 53401 (September 8, 2005) (SR-CBOE-2004-86)
(established initially for rapid opening system procedure, which is
no longer used).
    \10\ Pursuant to Rule 6.2, Interpretation and Policy .01(b), the
Exchange may determine a non-strategy order cut-off time, which may
be no earlier than 8:25 a.m. and no later than the opening of
trading. The current non-strategy order cut-off time is the opening
of trading.
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    In the options market, it is important for Market-Makers to provide
liquidity to execute against orders submitted by other market
participants. Pursuant to Rule 8.7, a Market-Maker has general
obligations to, among other things, engage (to a reasonable degree
under existing circumstances) in dealings for the Market-Maker's own
account when there exists, or it is reasonably anticipated that there
will exist, a lack of price continuity, a temporary disparity between
the supply of and demand for an option (i.e., an imbalance), to compete
with other Market-Makers to improve markets in its appointed classes,
and to update market quotations in response to changed market
conditions in its appointed classes. Certain types of Market-Makers
have obligations to facilitate resolution of imbalances and make
competitive markets, and the proposed rule change is consistent with
those obligations.\11\ As described above, the entry of strategy orders
may lead to order imbalances in the option series used to determine the
final settlement value for expiring volatility index derivatives. In
order for the Exchange's system to open these series for trading (i.e.,
to resolve order imbalances) and achieve the most competitive pricing
in these series, Market-Maker participation in the modified HOSS
procedure is important for adding liquidity and promoting a fair and
orderly opening and settlement process.
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    \11\ See, e.g., Rules 8.15 and 8.85 (describing obligations of
Lead-Market-Makers and Designated Primary Market-Makers,
respectively).
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    The Exchange understands that some Market-Makers may hesitate to
provide liquidity that could resolve order imbalances, out of a concern
that adding such liquidity after the strategy order cut-off time could
be deemed either a new strategy order or a modification to or
cancellation of an existing strategy order. As a result, this perceived
risk may lead to reduced liquidity and may exacerbate the time it takes
to open a series at a competitive price.\12\ The proposed rule change
encourages Market-Makers to provide liquidity on volatility index
derivative settlement days by explicitly stating in Rule 6.2,
Interpretation and Policy .01 that bona fide Market-Maker activity does
not constitute either a strategy order or a modification to or
cancellation of a previously submitted strategy order during the
modified HOSS procedure. The Exchange believes Market-Maker liquidity
is important to the resolution of order imbalances on volatility index
settlement days and to the orderly opening of series on such days, due
to the fact that a series cannot open if there is a market order
imbalance. Also, Market-Maker liquidity is desirable to advance the
opening of series at competitive prices on volatility index settlement
days. The Exchange's system also relies on Market-Maker liquidity to
open series for trading. Pursuant to Rule 6.2(d), the Exchange's system
will not open a series for trading if there are no Market-Maker quotes
present. Additionally, the width of the best Market-Maker quotes on the
Exchange must be within a certain price range for the System to open a
series for trading. The Exchange believes the proposed rule change will
incentivize Market-Maker liquidity on volatility settlement days by
explicitly stating in the Rules that providing such liquidity will not
be deemed to constitute either submission of a strategy order or
modification to or cancellation of a previously submitted strategy
order.
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    \12\ See Rule 6.2(d).
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    Specifically, proposed Rule 6.2, Interpretation and Policy .01(c)
states a Market-Maker with an appointment in a class with constituent
option series may submit bids and offers in those series for bona fide
market-making purposes in accordance with Rule 8.7 and the Securities
Exchange Act of 1934 (the ``Act''), for its market-maker account prior
to the open of trading for participation in the modified opening

procedure. The Exchange will deem these bids and offers to be non-
strategy orders, and will not deem them to be changes to or
cancellations of previously submitted strategy orders, if:
    (i) The Trading Permit Holder with which the Market-Maker is
affiliated has established, maintains, and enforces reasonably designed
written policies and procedures (including information barriers, if
applicable), taking into consideration the nature of the business of
the Trading Permit Holder and other facts and circumstances, to prevent
the misuse of material nonpublic information (including the submission
of strategy orders); and
    (ii) when submitting these bids and offers, the Market-Maker has no
actual knowledge of any previously submitted strategy orders.
    In other words, if a Market-Maker submits bids or offers in
constituent options on a volatility index derivative settlement day,
and if such bids and offers are for its market-maker account and
submitted for purposes of its market-making activities on the Exchange
(including in accordance with Market-Maker obligations, such as to
offset imbalances or provide competitive pricing), the Market-Maker may
submit those bids and offers any time prior to the open of trading,
including both before and after the strategy order cut-off time. As
long as the Trading Permit Holder has appropriate procedures in place
both to prevent the Market-Maker from knowing about the submission of
strategy orders by other persons within the Trading Permit Holder
organization with which it is affiliated, and to prevent other persons
from knowing about the Market-Maker's submission of bids and offers,
the Exchange will not review such bids and offers for either potential
impermissible entry of strategy orders, or cancellations of or
modifications to previously submitted strategy orders.
    Bona fide Market-Maker activity is generally activity consistent
with Market-Maker requirements under the Act and Cboe Options Rules:
     Pursuant to the Act, a market-maker is a specialist
permitted to act as a dealer, any dealer acting in the capacity of
block positioner, and any dealer who, with respect to a security, holds
himself out (by entering quotations in an inter-dealer communications
system or otherwise) as being willing to buy and sell such security for
his own account on a regular or continuous basis.\13\
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    \13\ 15 U.S.C. 78c(a)(38); see also 12 U.S.C. 1851(d)(1)(B)
(market-making is intended to service ``the reasonably expected
near-term demand'' of other parties).
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     Pursuant to Rule 8.7, a Market-Maker appointed to a class
must, among other things, engage to a reasonable degree under existing
circumstances in dealings for the Market-Maker's own account when there
exists, or it is reasonably anticipated that there will exist, a lack
of price continuity, a temporary disparity between the supply of and
demand for an option (i.e., an imbalance), to compete with other
Market-Makers to improve markets in its appointed classes, and to
update market quotations in response to changed market conditions in
its appointed classes. Additionally, pursuant to Rule 8.7, all quotes a
Market-Maker submits, including prior to the opening, must comply with
all requirements, including applicable bid-ask differential and minimum
size requirements.\14\ Rule 8.7, Interpretation and Policy .01 imposes
an ongoing price continuity requirement on Market-Makers that applies
through the opening of trading, as well as during regular trading
hours.
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    \14\ Rule 6.2, Interpretation and Policy .02 permits the
Exchange to set different minimum quote size and bid-ask
differential requirements for opening quotes as those for intraday
quotes.
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     In addition to these obligations, Market-Makers also
effect transactions for the purpose of hedging, reducing risk of,
rebalancing, or liquidating their open positions.\15\
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    \15\ See, e.g., Rule 8.7, Interpretation and Policy .03.
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    As noted above, the Exchange implemented the strategy order cut-off
time for the operational purpose of providing market participants with
time to enter additional orders and quotes to offset any such
imbalances prior to the opening of these series.\16\ The Exchange's
surveillance procedures to determine market participants' compliance
with the strategy order cut-off time are separate and distinct from the
Exchange's surveillance procedures to identify potentially manipulative
behavior. Therefore, from the Exchange's perspective, whether a Market-
Maker's bids and offers constitute strategy orders is distinct from
whether the submitting Market-Maker is attempting to engage in
manipulative behavior. The classification of bona fide Market-Maker
activity as non-strategy orders will have no impact on the Exchange's
surveillance procedures to detect activity intended to manipulate the
settlement value or violate other Rules. Additionally, all Market-Maker
bids and offers, even though not considered strategy orders pursuant to
the proposed rule change, will continue to be subject to Exchange
surveillance procedures that monitor trading in the option series used
to calculate volatility index settlement values on expiration dates, as
well as surveillance procedures that monitor Market-Maker activity for
compliance with Market-Maker obligations in the Rules. This activity
will merely be excepted from Exchange surveillance procedures
determining compliance with the operational strategy order cut-off
time.
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    \16\ See supra note 9.
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    The Exchange believes Market-Makers are more likely to interact
with and resolve order imbalances on volatility index settlement days
if they can be confident that their bids and offers submitted for that
purpose will not be deemed strategy orders or cancellations of or
modifications to previously submitted strategy orders. As discussed
above, the purpose of the strategy order cut-off time is to provide
market participants, including Market-Makers, with sufficient time to
address imbalances created by strategy orders. Additionally, as
discussed above, pursuant to Rule 6.2(d), whether a series opens
depends on the presence of Market-Maker quotes at prices no wider than
an acceptable price range. Market-Makers are an important source of
liquidity on the Exchange, and also have various obligations with which
they must comply. The proposed rule change will provide a Market-Maker
with an opportunity to provide liquidity on volatility settlement dates
and to satisfy their Market-Maker obligations, without concern that the
Exchange may consider such activity to constitute the placing of, or
cancellations to or modifications of, strategy orders, even if the
Trading Permit Holder organization with which the Market-Maker is
affiliated submitted a strategy order.
    The purpose of this proposed change is to accommodate the fact that
the Trading Permit Holder with which the Market-Maker is affiliated may
submit a strategy order while the Market-Maker may also be submitting
bids and offers to accommodate a fair and orderly opening process, by
among other things, resolving market order imbalances and submitting
competitively priced bids and offers.
    For example, a Trading Permit Holder organization may have an SPX
Market-Maker and a separate volatility trading desk. During the
modified opening procedure on a volatility settlement day, the trading
strategy of the SPX Market-Maker is to provide markets in SPX options
(both before and after the strategy order cut-off time), and the
trading strategy of the volatility trading desk may be to replicate
Vega exposure by replacing its expiring VIX options positions with
positions in the SPX

constituent series. To replicate its Vega exposure, the volatility
trading desk may enter strategy orders prior to the strategy order cut-
off time. These are separate and distinct trading strategies. If the
Trading Permit Holder organization has reasonable policies and
procedures in place such that the SPX Market-Maker has no knowledge of
the volatility trading desk's submission of strategy orders, and that
the volatility trader has no knowledge of the SPX Market-Maker's
submission of bids and offers, the Exchange believes it is appropriate
for the SPX Market-Maker's bids and offers to not be deemed strategy
orders, or the modification to or cancellation of the strategy order
submitted by its affiliated volatility trading desk.
    The Exchange does not believe it is necessary to restrict the bona
fide market-making activities of a Market-Maker within its appointed
classes due to other unrelated trading activities that may involve
submissions of orders deemed to be strategy orders of which the Market-
Maker has no actual knowledge. The proposed rule change expressly
provides that activity related to a Market-Maker's market-making
activity in an appointed class will not constitute the submission of a
strategy order or the cancellation of or modification to a previously
submitted strategy order.
    The proposed rule change makes clear that a Market-Maker's
submission of bids and offers for bona fide market-making purposes in
constituent series is permitted on volatility settlement days through
the open of trading in the same manner as it is permitted in all in
series in its appointed classes at all other times. This will encourage
Market-Makers to continue to submit bids and offers through the open,
despite other trading activity within the Trading Permit Holder
organization. This will also ensure Market-Makers can respond to
imbalances and update their quotes \17\ in accordance with their
market-making dealings and obligations. The Exchange believes this will
contribute to price transparency and liquidity in the option series at
the open, and thus will promote a fair and orderly opening on
volatility index settlement days. The Exchange continuously evaluates
the modified HOSS procedure to identify potential enhancements, and
intends to modify the procedure as it deems appropriate to contribute
to a fair and orderly opening process. A fair and orderly opening in
these series benefits all market participants who trade in the
volatility index derivatives and the constituent options.
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    \17\ As noted above, the Exchange's system will not open a
series if there is no quote or if the opening quote or price is
outside an acceptable price range.
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    The proposed rule change would not eliminate a Market-Maker's
requirements to abide by Exchange Rules 4.1 (Just and Equitable
Principles of Trade), 4.7 (Manipulation), and 4.18 (Prevention of the
Misuse of Material, Nonpublic Information). The requirement in the
proposed rule change that the Trading Permit Holder with which a
Market-Maker is affiliated must establish, maintain, and enforce
policies and procedures reasonably designed to ensure the Market-Maker
will not have knowledge of the submission of strategy orders is
consistent with requirements of Rule 4.18. The Exchange will continue
to conduct surveillance to monitor trading in the option series used to
calculate volatility index settlement values on expiration dates,
including but not limited to, monitoring entry of strategy orders, or
modifications to strategy orders, following the cut-off time, as well
as compliance with other Rules.
    The proposed rule change also makes nonsubstantive changes to add
paragraph headings and numbering.
    Additionally, the proposed rule change modifies Interpretation and
Policy .01(a) to state that ``strategy orders'' means all orders for
participation in the modified opening procedure that are related to
positions in, or a trading strategy involving, expiring volatility
index options or (security) futures. The addition of the word
``expiring'' is a codification of the Exchange's longstanding
interpretation of the term strategy order. As discussed above, to
replicate expiring volatility index derivatives on their expiration
dates with options portfolios, market participants generally submit
strategy orders to participate in the modified HOSS opening process on
volatility index settlement dates. The addition of the word
``expiring'' is consistent with the introductory paragraph in
Interpretation and Policy .01, which states the modified HOSS procedure
applies to series used to calculate the exercise/final settlement value
of the volatility index for expiring options and (security) futures,
and demonstrates the rule is meant to refer to orders that relate to
strategies involving expiring volatility index derivatives. Therefore,
the proposed codification is consistent with this general practice, as
well as the current rule.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\18\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \19\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \20\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ Id.
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    In particular, the Exchange believes the proposed change will
increase liquidity on volatility index settlement dates, as it will
remove an impediment that may discourage Market-Makers from submitting
bids and offers to offset imbalances and update the prices of their
quotes in response to changing market conditions prior to the open. The
Exchange believes this additional liquidity may contribute to a fair
and orderly opening by increasing execution opportunities, reducing
imbalances in constituent options, and increasing the presence of
quotes within the acceptable price range, which would benefit all
market participants who trade in the volatility index derivatives and
the constituent options. The Exchange does not believe it is necessary
to restrict the bona fide market-maker activities of a Market-Maker due
to other unrelated trading activities by the Trading Permit Holder
organization with which it is affiliated. The Exchange notes that the
proposed rule change would not impact a Market-Maker's requirements to
abide by Exchange Rules 4.1 (Just and Equitable Principles of Trade),
4.7 (Manipulation), and 4.18 (Prevention of the Misuse of Material,
Nonpublic Information). The requirement in the proposed rule change
that the Trading Permit Holder with which a Market-Maker is affiliated
must establish, maintain, and enforce policies and procedures
reasonably designed to ensure the Market-Maker will not have knowledge
of the submission of strategy orders is consistent with requirements

of Rule 4.18. As a result, the Exchange does not believe that proposed
rule change will be burdensome on Market-Makers.
    The Exchange believes the proposed rule change will contribute to
price transparency and liquidity in the option series at the open, and
thus a fair and orderly opening on volatility index settlement days. A
fair and orderly opening in these series benefits all market
participants who trade in the volatility index derivatives and the
constituent options.
    The proposed rule change to add the term ``expiring'' to the
definition of strategy orders is merely a codification of a current
Exchange interpretation and is consistent with the definition of
constituent options in the current rule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Because of the importance of
Market-Maker liquidity in the options market and the Exchange's need
for competitive quotes to open a series, the Exchange believes it is
appropriate for Market-Makers' bids and offers prior to the opening of
trading, including after the strategy order cut-off time, not be
considered strategy orders, or cancellations to or modifications of
previously submitted strategy orders. As discussed above, Market-Makers
are subject to various obligations under the Rules, and the proposed
rule change provides them with the ability to satisfy these obligations
without the risk of their market-making activity being deemed to
constitute strategy orders or modifications to or cancellations of
strategy orders. The requirement in the proposed rule change that the
Trading Permit Holder with which a Market-Maker is affiliated must
establish, maintain, and enforce policies and procedures reasonably
designed to ensure the Market-Maker will not have knowledge of the
submission of strategy orders is consistent with requirements of Rule
4.18. As a result, the Exchange does not believe the proposed rule
change will be burdensome on Market-Makers. The Exchange does not
believe it is necessary to restrict the bona fide market-maker
activities of a Trading Permit Holder organization due to its other
unrelated trading activities. The proposed rule change has no impact on
intermarket competition, as it applies to orders and quotes submitted
to an SOQ process the Exchange conducts prior to the open of trading in
certain classes.
    Cboe Options believes that the proposed rule change will relieve
any burden on, or otherwise promote, competition. The Exchange believes
the proposed rule change will contribute to price transparency and
liquidity in constituent options at the open on volatility index
settlement days, and thus to a fair and orderly opening on those days.
A fair and orderly opening, and increased liquidity, in these series
benefits all market participants who trade in the volatility index
derivatives and the constituent options.
    The proposed rule change to add the term ``expiring'' to the
definition of strategy orders has no impact on competition, as it is
merely a codification of a current Exchange interpretation and is
consistent with the definition of constituent options in the current
rule.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \21\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\22\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 protected]. Please include
File Number SR-CBOE-2018-045 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2018-045. 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 website (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 website 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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2018-045 and should be submitted on
or before July 20, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13977 Filed 6-28-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 14 (Monday, January 22, 2018)]
[Notices]
[Page 3048]
[FR Doc No: 2018-01057]

-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket Number FRA-2017-0129]

Notice of Application for Approval To Discontinue or Modify a
Railroad Signal System

    Under part 235 of Title 49 of the Code of Federal Regulations (CFR)
and 49 U.S.C. 20502(a), this provides the public notice that on
December 19, 2017, National Railroad Passenger Corporation (Amtrak)
petitioned the Federal Railroad Administration (FRA) seeking approval
to discontinue or modify a signal system. FRA assigned the petition
Docket Number FRA-2017-0129.
    Applicant: National Railroad Passenger Corporation, Mr. Nicholas J.
Croce III, PE, Deputy Chief Engineer C&S, Acting, 2995 Market Street,
Philadelphia, PA 19104.
    Amtrak is installing new clear block signals at Oak and Bush
interlockings to establish NORAC Rule 562 territory, cab signals
without fixed automatic block signals. As a result, Amtrak seeks to
retire the fixed wayside signals numbers 651, 652, 672, 673, 695, and
696 on Tracks 2, 3, and 4 on Amtrak's Northeast Corridor, Mid-Atlantic
Division, Main Line, Philadelphia to Washington.
    All NORAC Rules will remain in effect. The existing advanced civil
speed enforcement system (ACSES) will be modified to enforce a positive
stop at Oak and Bush interlockings for a train with failed cab signal
equipment unless the ``C'' signal is displayed allowing the failed
train to enter the block.
    The reason for removal of the signals is to eliminate maintenance
and operation of unnecessary hardware no longer needed, and to reduce
delays to trains caused by failures of the signals. The signals are not
required in NORAC Rule 562 territory.
    A copy of the petition, as well as any written communications
concerning the petition, is available for review online at
www.regulations.gov and in person at the U.S. Department of
Transportation's (DOT) Docket Operations Facility, 1200 New Jersey
Avenue SE, W12-140, Washington, DC 20590. The Docket Operations
Facility is open from 9 a.m. to 5 p.m., Monday through Friday, except
Federal Holidays.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested parties
desire an opportunity for oral comment and a public hearing, they
should notify FRA, in writing, before the end of the comment period and
specify the basis for their request.
    All communications concerning these proceedings should identify the
appropriate docket number and may be submitted by any of the following
methods:
     Website: http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Operations Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, W12-140, Washington, DC
20590.
     Hand Delivery: 1200 New Jersey Avenue SE, Room W12-140,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal Holidays.
    Communications received by March 8, 2018 will be considered by FRA
before final action is taken. Comments received after that date will be
considered if practicable.
    Anyone can search the electronic form of any written communications
and comments received into any of our dockets by the name of the
individual submitting the comment (or signing the document, if
submitted on behalf of an association, business, labor union, etc.).
Under 5 U.S.C. 553(c), DOT solicits comments from the public to better
inform its processes. DOT posts these comments, without edit, including
any personal information the commenter provides, to
www.regulations.gov, as described in the system of records notice (DOT/
ALL-14 FDMS), which can be reviewed at https://www.transportation.gov/privacy. See also https://www.regulations.gov/privacyNotice for the
privacy notice of regulations.gov.

    Issued in Washington, DC.
Robert C. Lauby,
Associate Administrator for Railroad Safety, Chief Safety Officer.
[FR Doc. 2018-01057 Filed 1-19-18; 8:45 am]
 BILLING CODE 4910-06-P


Response to Public Comments on Greenhouse Gas Reporting Program:

Information Collection Request for the Greenhouse Gas Reporting Program

May 2016

Response to Public Comments on the Greenhouse Gas Reporting Program: Information Collection Request for the Greenhouse Gas Reporting Program

U. S. Environmental Protection Agency
Office of Atmospheric Programs
Climate Change Division
Washington, D.C.

FOREWORD

This document provides the EPA's responses to public comments on the Information Collection Request for the Greenhouse Gas Reporting Program. The EPA published a Notice of Information Collection Request Renewal in the Federal Register on November 5, 2015 (80 FR 68534).
During the 60-day public comment period, the EPA received comment letters in response to the November 5, 2015 proposal. This document provides the EPA's responses to the significant public comments regarding these proposals. The verbatim text of each comment extracted from the original comment letters is included in this document, arranged by subject. For each comment, the name and affiliation of the commenter and the document control number (DCN) assigned to the comment letter are provided. Where possible, the EPA separated comments on specific topics into their respective data categories. Within the data categories, similar comment excerpts from multiple commenters were combined into a group of comments with a single response.
The EPA's responses to comments are generally provided immediately following each comment. In some cases, the EPA provided responses to specific comments or groups of similar comments. Copies of all comment letters submitted are available at the EPA Docket Center Public Reading Room or electronically through http://www.regulations.gov by searching Docket ID. No. EPA-HQ-OAR-2012-0333.

The primary contact regarding questions or comments on this document is:4
Carole Cook<PHONE_NUMBER>
U.S. Environmental Protection Agency
Office of Atmospheric Programs
Climate Change Division
Mail Code 6207-A
1200 Pennsylvania Avenue, NW
Washington, D.C.  20460
For technical information, contact the Greenhouse Gas Reporting Rule Hotline at: http://www.epa.gov/ghgreporting/contactus.html.

Table of Contents

Page

FOREWORD	iii
Table of Contents	v
List of Commenters	vi
Acronyms and Abbreviations	vii
1.0 General Overarching Comment	1
2.0 Support for GHGRP ICR	2
3.0 Subpart RR Costs	4
4.0 Subpart W Comments	6
4.1 Reference to Previously Submitted Comments	6
4.2 Support for Subpart W Analyses	7
4.3 Burden Estimates Related to Subpart W Are Not Complete	12

List of Commenters
Document Control Number
Commenter Name
Commenter Affiliation
EPA-HQ-OAR-2012-0333-0031
Anonymous
None
EPA-HQ-OAR-2012-0333-0032
David McCabe, Lesley Fleischman, Ann Weeks, and Darin Schroeder
Clean Air Task Force
EPA-HQ-OAR-2012-0333-0033
Karin Ritter
American Petroleum Institute (API)

Acronyms and Abbreviations

API	American Petroleum Institute
ARB	Air Resource Board
BLM	Bureau of Land Management
BLS	Bureau of Labor and Statistics
BOEM	Bureau of Ocean Energy Management
CATF	Clean Air Task Force
CBI	confidential business information
CFR	Code of Federal Regulations
CO2	carbon dioxide
DOE 	Department of Energy
EIA	Energy Information Administration
EOR	enhanced oil recovery
EPA	U.S. Environmental Protection Agency
FLIGHT	Facility Level Information on Greenhouse Gases Tool
FR	Federal Register
GHG	greenhouse gas
GHGRP	Greenhouse Gas Reporting Program
ICR	Information Collection Request
LOE	level of effort
NASA	National Aeronautics and Space Administration
NOAA	National Oceanic and Atmospheric Administration
OMB	Office of Management and Budget
SECARB	Southeast Regional Carbon Sequestration Partnership
UIC	Underground Injection Control
UNFCCC	United Nations Framework Convention on Climate Change
U.S.	United States

1.0 General Overarching Comment
Commenter Name: Anonymous
Commenter Affiliation: None
Comment Number: EPA-HQ-OAR-2012-0333-0031
Page(s): 1
Comment 1: The budget estimate noted here seems extraordinarily high for this program, especially since that it appears to rely on the requirement that certain companies/organizations/facilities monitor and report levels of CO2 emission. The number is perhaps inflated by the inclusion of the `necessity' to `develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information.'
	Given that the Greenhouse Gas Reporting Program has been authorized/emplaced since 2009, and given that CO2 emissions have been a point of major public and commercial concern both in the U.S. and in Europe since at least 2009 (and memorably before that year), `development' of collection and validation technologies and systems for processing and maintaining information should no longer be a `necessity.' The nature of CO2 has not changed. Perhaps output levels and sampling intervals have changed, but Commercial-Off-The-Shelf (COTS) products and systems are keeping up with these standards since corporations want to independently verify what government monitoring informs them they are putting into the air.
	Requesting/recommending modification of this proposal/submission for renewal to no longer support `development' and instead focus on acquisition, installation, and utilization of currently available COTS systems. If modification of the renewal is not possible, requesting/recommending re-evaluation of the program regulations in the future. Reinventing technology and systems using federal funding is unnecessary and potentially wasteful, and increases the burden on the agency that develops and installs the items in question.

Response 1: In estimating the cost for respondents to comply with the GHGRP in this ICR Renewal, EPA did not include any costs for developing new technologies that are not already commercially available.  Respondents can comply with the GHGRP using existing COTS technologies. The commenter may have been confused by the description of "burden" in Section 6(g) of the Supporting Statement. The description originates from the definition of "burden" by OMB at 5 CFR 1320.3.

2.0 Support for GHGRP ICR
Commenter Name:  David McCabe, Lesley Fleischman, Ann Weeks, and Darin Schroeder
Commenter Affiliation:  Clean Air Task Force
Comment Number: EPA-HQ-OAR-2012-0333-0032
Page(s): 1-2
Comment 1: We appreciate the opportunity to provide these comments on the Proposed Information Collection Request Renewal for the Greenhouse Gas Reporting Program (GHGRP) on behalf of the Clean Air Task Force. We strongly support renewal of the information collection request (ICR) which underpins the Agency's Greenhouse Gas Reporting Program, is amply justified by the Agency and for all the reasons we describe below.
Sections 114 and 208 of the Clean Air Act provide the authority for the ICR, and EPA's use of the collected data to support the development of Greenhouse Gas regulations and policies is squarely within the purposes of those sections. See 42 U.S.C. §§ 7414(a), 7542(a). This ICR and the GHGRP which it enables, provides a standard, comparable data source that provides essential information about the sources of harmful emissions of the greenhouse gases (GHGs) that drive climate change. As EPA describes in the Supporting Statement Part A for the Information Request, in 2007, Congress directed EPA to enact regulations "to require mandatory reporting of greenhouse gas emissions above appropriate thresholds in all sectors of the economy of the United States," using the Agency's existing Clean Air Act authority.
The resulting data set offers policymakers, the public and businesses invaluable and necessary information for use in improving understanding, developing internal controls and regulations to limit these emissions, and offers accountability to the public. In particular, the GHGRP has been important in supporting the President's Climate Action Plan. The final Carbon Pollution standards and the final Clean Power Plan both rely on information under subpart D that EPA has collected from the power industry, and to the extent that geologic sequestration of carbon dioxide is used by sources to satisfy either of those rules, section RR provides information on the fate of the carbon dioxide transferred to enhanced oil recovery or sequestration facilities. In the oil and gas industry, information about methane releases similarly has enabled the creation of proposed methane regulations. Together these two industries are the largest US greenhouse gas emitters.
The ICR supplements and complements other efforts to quantify GHG emissions  -  which by themselves are not sufficient to support federal policymaking or enable companies to benchmark their efforts using a standardized data set. The ICR does not duplicate efforts  -  indeed as the examples EPA provides in the Supplemental Statement Part A note, often existing efforts are aimed at other goals and do not provide sufficient information to be helpful to nationwide efforts to understand the generation and fate of greenhouse gas emissions. Additionally, various agencies of the Federal government have committed significant resources to further improve understanding of these emissions.
EPA's standardized data collection under this ICR also enables the transition to the international reporting requirements under the United Nations Framework Convention on Climate Change (UNFCCC).
The need for this standardized Greenhouse Gas ICR was further clarified in December when the Parties to the UNFCCC, including the United States, unanimously agreed to the Paris Agreement committing the Parties to work to establish a transparent framework to "to provide a clear understanding of climate change action in the light of the objective of the [UNFCCC], including clarity and tracking of progress towards achieving Parties' individual nationally determined contributions [i.e., the emissions targets for each nation] under [the Paris Agreement]." This framework is intended to enhance previous activity under the UNFCCC to quantify emissions.
EPA requires the retention of records associated with the information collected under this ICR, for 5 years, for facilities using the Agency's e-GGRT software called IVT. We continue to support this, because as the Agency continues to work with this program it will need to be able to adequately audit and verify the data collection, and that process requires a sufficient amount of past data for meaningful comparisons to be made.
In summary, the ICR is justified and its extension is necessary not only to improve understanding about US anthropogenic greenhouse gas emissions sources and fates, but also to support informed policymaking, and allow businesses to benchmark their own progress at GHG control within their industries.
Response 1: The EPA thanks the commenter for their support.

3.0 Subpart RR Costs
Commenter Name:  David McCabe, Lesley Fleischman, Ann Weeks, and Darin Schroeder
Commenter Affiliation:  Clean Air Task Force
Comment Number: EPA-HQ-OAR-2012-0333-0032
Page(s): 8
Comment 1: CATF strongly supports the proposed renewal request for portions of the ICR supporting EPA's Carbon Pollution Rule and Clean Power Plan governing carbon dioxide emissions from new and existing fossil-fueled power plants and combustion turbines. EPA collects greenhouse gas (carbon dioxide emissions) data from power plants under subpart D, from suppliers of carbon dioxide for industrial use under subpart PP, and under RR from those intending to sequester carbon underground (either in saline sequestration sites, or via enhanced oil recovery activities), and UU for those who sequester carbon dioxide as an incidental matter when they use carbon dioxide in enhanced oil and gas recovery activities.

The final Carbon Pollution Rule, 80 Fed. Reg. 64,510 (Oct. 23, 2015), promulgated under Clean Air Act section 111(b), 42 U.S.C. §7411(b), expressly anticipates that new fossil fueled power plants can and will rely on capturing carbon dioxide and sending it to geologic sequestration from atmospheric release, in saline or EOR activity. Reporting the fate of that carbon dioxide, which occurs under the GHGRP supported by this ICR request, is an essential element in tracking the success of the Carbon Pollution Rule. Similarly, carbon capture and sequestration activities can form the basis by which states and affected sources meet the standards included in the EPA's final Clean Power Plan, 80 Fed. Reg. 64,662 (Oct. 23, 2015), promulgated under Clean Air Act section 111(d), 42 U.S.C. §7411(d). As such, this ICR renewal request directly advances the purposes of section 114 of the Clean Air Act under which it is authorized, namely "[f]or the purpose of ... assisting in the development of ...any implementation plan under ...section 7411(d), ... any standard of performance under section 7411...[and/or] of determining whether any person is in violation of any such standard or any requirement of such plan...." 42 U.S.C. § 7414(a). This data collection activity does not duplicate any other effort to track the airside fate of injected carbon dioxide, and supplements and complements the information collected under the Underground Injection Program's monitoring and reporting requirements.

EPA has revised its earlier estimates of the costs associated with the RR reporting requirements for sequestration activities (either in saline or EOR activities), which the Agency now reports are higher than the initial estimates. It must be noted, however, that EPA relies on cost data from "first-of-a-kind" monitoring activities, in the report entitled "Analysis of the Costs Associated with Subpart RR (Geologic Sequestration of Carbon Dioxide) Reporting Under the EPA Greenhouse Gas Reporting Program," accompanying the proposed ICR renewal request. These costs are associated with the monitoring of two SECARB research projects, and otherwise are based on modeling assessments accompanying EPA's UIC Class VI rule, and some DOE modeling. Because they are based on "first-of-a-kind" projects, or modeling, these costs are likely very conservative. Costs will come down as those who develop projects become familiar with the technologies and processes needed to collect the data necessary to track the air-side fate of injected carbon dioxide.

Response 2: The EPA thanks the commenter for their support. The commenter mentions that the Subpart RR cost estimates are based on "first-of-a-kind" projects and are therefore likely to be conservative. The EPA acknowledges that the cost estimates are based on, among other sources, the costs incurred as part of Department of Energy Regional Carbon Sequestration Partnership projects, and that costs may decline in the future as more geologic sequestration projects are implemented. However, the commenter did not provide additional data that could be used to estimate the extent of these potential cost reductions. Therefore, EPA is maintaining the basis of its cost estimates.

4.0 Subpart W Comments
4.1 Reference to Previously Submitted Comments
Commenter Name: Karen Ritter
Commenter Affiliation: American Petroleum Institute
Comment Number: EPA-HQ-OAR-2012-0333-0031
Page(s): 1

Comment 1: The American Petroleum Institute (API) appreciates the opportunity to offer comments to the U.S. Environmental Protection Agency (EPA) on this information collection request (ICR) that would enable the agency to continue to collect data for the mandatory Greenhouse Gas Reporting Program (GHGRP) after May 31, 2016.

API represents over 625 oil and natural gas companies, leaders of a technology-driven industry that supplies most of America's energy, supports more than 9.8 million jobs and 8 percent of the U.S. economy, and, since 2000, has invested nearly $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives. API has an extensive record related to GHG emissions estimation and reporting, and has participated extensively throughout the process of developing the reporting rules applicable to its members' pertinent industry sectors, all the while attempting to balance the quality of the data collected while reducing unnecessary burdens on the reporting entities.

At this time API has elected not to collect updated additional information from its members, based on their facilities' experience with reporting under the GHGRP, as a means for comparison to EPA's burden estimates for GHG reporting. Rather our comments reiterate our previous comments of August 10, 2012 (attached hereto on page 3) and are summarized as follows:

First, API requested that EPA implement a GHGRP that would provide for less frequent reporting following the five year anniversary of annual reporting under the GHGRP based upon the burden of ongoing annual reporting and upon the lack of material change in annual emissions in the oil and gas industry.

Second, API requested that EPA focus on the most significant emission sources instead of focusing on overly-frequent reporting of minor sources whose emissions are unlikely to change and perhaps should be excluded.
Third, API continues to emphasize the importance of continuing to implement a flexible policy for the ongoing use of Best Available Monitoring Methods (BAMM) in order to facilitate the reporting of high quality data while accommodating real-world operation, practices and burdens on industry.
Response 1: The attachment is a copy of the comments submitted by API on August 10, 2012, in reference to EPA's previous GHGRP ICR Renewal Request (EPA ICR No. 2300.10). EPA is incorporating its response to those comments (see document number EPA-HQ-OAR-2012-0333-0015 in Docket EPA-HQ-OAR-2012-0333).  In addition, EPA provides an updated rationale for annual reporting in section 3(d) of the Supporting Statement to this ICR Renewal.

4.2 Support for Subpart W Analyses
Commenter Name:  David McCabe, Lesley Fleischman, Ann Weeks, and Darin Schroeder
Commenter Affiliation:  Clean Air Task Force
Comment Number: EPA-HQ-OAR-2012-0333-0032
Page(s): 2-7
Comment 2: The data collected about greenhouse gas emissions from petroleum and natural gas systems under Subpart W have proved essential. These data have helped guide policy decisions at the EPA, at other federal agencies, and at the state level. The data also provides a direct measurement of the impact of these policies. The importance of Subpart W data will only grow in the future as the Administration seeks to show that it is on track to meeting its goal of reducing methane emissions by 40-45% by 2025. Subpart W data has been cited in academic papers and communities seeking to understand the large greenhouse gas sources in their neighborhoods have used it. For all of these reasons the ICR should be renewed.

Time series data is critical. EPA has collected four or five years of data (depending on the industry). From this data, we are just now beginning to see illuminating and actionable patterns. Time series data is much more informative than a single year snapshot, because it allows us to see whether emissions are trending up or down for a given emissions source. Emissions for some sources have proven to vary considerably year-to-year, as shown in Figure 1. It is therefore important that EPA continue to collect data annually in order to extend this dataset so that trends and insights from the dataset can continue to be discerned.

Given the variability in some sources, it would be inappropriate to reduce the frequency of data collection from prior ICRs (such as from annual to every second or every third year)  -  trends would take more time to emerge. It is also possible that the year-to-year variability in some sources does not solely reflect real changes in emissions, but rather reflects a lack of reliable knowledge by some reporters of important parameters used to calculate emissions from those sources. If the reporting frequency were reduced from annual to less than annual, these reporters would most likely take a correspondingly longer time to arrive at accurate values for these important parameters.

The GHGRP has become more informative over time. In the most recent release of GHGRP data in October 2015, some activity data, which had previously been deferred from reporting, was finally made available to the public. This activity data is an important complement to the emissions data that had previously been released, allowing the public to gain a better understanding of emissions sources in the oil and gas industry. These data will address weaknesses in activity data for certain sources in the US GHG Inventory; several recent peer-reviewed studies have reported that uncertainly in activity data is a significant contributor to overall uncertainty in emissions from the oil and gas industries.

In addition, some critically important data has not yet been collected, but will be soon. Companies are now required to collect API numbers associated with onshore oil and gas production facilities as part of the GHGRP, and they will need to report these data (for year 2016) in 2017. This will allow us to correlate Subpart W emissions data with production data. On the same timeline, companies will have to report to Subpart W emissions from gathering and boosting systems, transmission pipeline blowdowns, and hydraulically fractured oil well completions. Recent studies have suggested that emissions from these segments may be significant. Data on these sources will provide a more complete picture of oil and gas industry emissions and will help guide future policy.

These planned improvements make the ICR renewal even more important for EPA and other policymakers, and to improve the public's understanding of emissions, particularly from the natural gas gathering industry.

Data from the GHGRP has improved the accuracy of the U.S. Greenhouse Gas Inventory Report. As EPA notes in the supporting statement, the GHGRP and the GHG Inventory complement each other, though they have different methodologies and serve different purposes. Nevertheless, EPA has used data collected as part of the GHGRP to improve the emissions estimated by the U.S. GHG Inventory. For example, the GHG Inventory now uses GHGRP data on emissions from refineries and hydraulic fracturing completions and workovers at natural gas wells. And, there are opportunities for the GHGRP data to be used even more extensively to complement the GHG Inventory, such as improving the estimate of emissions from completions and workovers at oil wells and splitting up pneumatic controller vent emissions among high bleed, intermittent bleed, and low bleed controllers.

Notably, activity data such as the number of emitting sources (such as counts of particular equipment) are often a source of significant uncertainty in estimates of emissions from the oil and gas industry. Estimates of nationwide activity counts based on the quantity of equipment at the relatively small number of sites sampled by bottom-up sampling studies have significant uncertainty. In contrast, real equipment counts from all facilities above the emissions threshold, nationwide, are collected through the GHGRP, leading to significantly more accurate activity data than available from bottom-up studies that sample a few dozen sites, at most. Renewing the ICR will therefore significantly improve the activity data in the US GHG Inventory while helping policymakers to assess the seriousness of nationwide methane pollution from individual classes of equipment.

GHGRP data has already been an important information resource for policy-makers. The EPA recently proposed methane emissions standards for new and modified sources in the oil and natural gas sector, and Subpart W data helped inform its policy decisions. In the lead up to its proposal, the EPA released five White Papers on potentially significant emissions sources in the industry. In each of these white papers, published in April 2014, the EPA cited Subpart W data as a primary source of information about emissions: compressors, oil well completions, pneumatic devices, fugitive emissions, and liquids unloading. And, in its August 2015 proposal and supporting technical documents, the EPA again relied extensively on data from the GHGRP to justify and support its proposed policy:

      :: Emissions reduction potential from hydraulically fractured oil wells,
      :: fugitive emissions from well sites,
      :: emissions from high- and low-bleed pneumatic controllers,
      :: emissions from chemical injection pumps, and
      :: emissions from compressors in the transmission and storage segments.

GHGRP data has been particularly valuable in assessing methane emissions due to the waste of natural gas resources on lands administered by the Bureau of Land Management (BLM). An analysis of Subpart W data suggests that methane emissions on federal lands are disproportionately high compared to methane emissions on private land. CATF examined these disproportionate emissions in our May 2014 comments to BLM and in the supplemental comments that we submitted in May 2015. Methane emissions associated with the waste of natural gas are disproportionately large from four high-producing Western U.S. oil and gas basins -- Green River, Piceance, San Juan, and Uintah. The majority of oil and gas production in these basins is from Federal lands, mineral estate, or Indian Trust Land overseen by BLM -- at least 63 percent of oil and 79 percent of gas. These four basins accounted for 30 percent of all the methane emissions reported to the GHGRP from nationwide onshore oil and gas production, while only producing 13 percent of U.S. onshore natural gas and 2 percent of U.S. onshore oil. Such analysis of disproportionate emissions on federal land would not have been possible without the data reported to the GHGRP.

The California Air Resources Board (ARB) is working on Greenhouse Gas Emission Standards for Crude Oil and Natural Gas Facilities. It released a draft policy proposal in April 2015. As part of our comments on this draft proposal, we cited California specific data from the GHGRP on emissions of methane from leaks, intermittent-bleed pneumatic controllers, and liquids unloading.

The GHGRP allows us to track emissions reduction progress. The Administration has set an ambitious goal of reducing methane emissions 40-45% from 2012 levels by 2025. This methane target, in turn, is one part of the Administration's broader target of reducing GHG emissions by 26-28% below 2005 levels by 2025. Together with the GHG Inventory, the GHGRP will allow us to track progress toward meeting these goals. The GHG Inventory gives a macro-level picture of overall nationwide emissions, while the GHGRP data provides a granular picture of the emissions reductions made by specific sources.

The GHGRP allows us to track impacts of regulations. For example, the EPA's 2012 New Source Performance Standards for VOCs from the Oil and Gas Industry required that emissions by controlled from hydraulically fractured gas wells. According to Subpart W data, gas well completion emissions have declined from 265,261 metric tons methane in 2011 to 45,431 metric tons methane in 2014. This data shows that emissions from this source are dropped quite a bit  -  but significant emissions remain, despite the 2012 rules. Since the bulk of these emissions are from venting of natural gas from these wells during completion, the GHGRP data suggests that EPA should further investigate this source to ensure that operators are complying with the 2012 rules.

The GHGRP will allow us to track voluntary corporate activities. The Natural Gas STAR Methane Challenge Program, which was proposed by EPA in July 2015, seeks to encourage companies to take voluntary steps to reduce methane emissions from their operations. In both the Best Management Practice and One Future Commitment Options, the Methane Challenge Program relies on Subpart W reporting and additional supplemental reporting to track a company's progress toward meeting its voluntary commitment. If the Administration is to use this voluntary program as a means of meeting its 40-45% reduction target, it needs a robust platform for companies and the EPA to report and track emissions. Data from the GHGRP platform, with some small additions, allows for such tracking.
The FLIGHT tool is a useful resource for communities. This tool presents GHGRP data in a user-friendly manner, and it allows interested parties to examine large sources of GHG emissions by type and location. One example of this occurred after scientists at NASA and NOAA detected a methane "hot spot" in New Mexico. In an attempt to pinpoint the source of these methane emissions, the Western Environmental Law Center noted: "According to EPA's Greenhouse Gas Reporting Program, in which oil and gas companies self-report their emissions, the [oil and gas] industry accounts for almost 90 percent of methane emissions in the Four Corners."
The GHGRP has been cited widely in the academic literature. Numerous studies that seek to measure and quantify methane emissions from the oil and gas industry have been released in the past few years. In many cases, researchers have extensively used emissions and activity data from the GHGRP. Appendix 1 contains a sample list of peer-reviewed papers that cite the GHGRP.
GHGRP can help investors understand the growing risks related to climate change. There is growing concern amongst investors about the rising risk to their investments from climate change. A survey conducted by CERES found that almost 70% of asset management view climate change as a material risk. Such risks include potential regulatory changes to reduce emissions, impacts of assets from a changing climate, and reputational harm to companies/industries from perceived bad actors. Methane is a potent and growing form of carbon risk, and investors will increasingly need robust and relevant information to help them assess company performance and manage risk. The GHGRP, with its abundant data, can help them do this. By making this data readily available to investors (and the public), the GHGRP influence firms and motivate them to take action to reduce emissions.
Response 2: The EPA thanks the commenter for their support.

4.3 Burden Estimates Related to Subpart W Are Not Complete
Commenter Name: Karen Ritter
Commenter Affiliation: American Petroleum Institute
Comment Number: EPA-HQ-OAR-2012-0333-0031
Page(s): 2
Comment 1: Additionally, the final 2014 GHGRP amendments for onshore production (November 2014 Final Rule: EPA-HQ-OAR-2011-0512) would lead to an increased reporting burden that is not fully accounted for in EPA's burden estimates. The increased reporting burden is due to requiring expanded reporting of new data elements that include: the quantity of gas produced at wells (which is already reported to the Energy Information Administration, EIA), the number of producing wells acquired, the number of producing wells divested, the number of wells completed, and the number of wells permanently taken out of service. Moreover, for offshore platforms, EPA added reporting requirements for both the total annual quantity of gas handled, as well as the total annual quantity of oil and condensate handled in the calendar year, including production volumes and volumes transferred via pipeline from another location. Requiring reporting of these additional items for both onshore and offshore production will impose a significant burden on reporters with no improvement or change in the quality of emissions data reported.

In past comments, API noted that EPA has other avenues to acquire the needed information - such as commercial data systems DI-Desktop or the EIA's information for onshore production, or the monthly reports to Bureau of Ocean Energy Management (BOEM) at the well level, for offshore production.

In summary, API members have expended substantial resources complying with EPA's GHG reporting program and believe that now might be an opportune time for EPA to consider how to reduce this substantial burden on reporters. API is ready to continue discussions of these recommendations with the EPA.

Response 1: These comments have already been addressed in a previous Response to Public Comment document (see document number EPA-HQ-OAR-2011-0512-0102 in Docket EPA-HQ-OAR-2011-0512). The EPA incorporates those responses in their entirety and repeats certain responses below.

For comments related to "expanded reporting of new reporting elements" for the onshore production segment, please see the comment and response related to excerpt 88 from comment letter EPA-HQ-OAR-2011-0512-0084-A2.
      The commenter stated that "requiring reporting of the information [stated above] will impose a significant burden on reporters with no improvement or change in the quality of emissions data reported." The commenter also noted that "EPA has other avenues at its disposal to acquire the information - such as the commercial data systems such as DI-Desktop or the EIA's information."
      In the response, the EPA "maintains the information listed by the commenters is needed to characterize and inform the EPA's verification of the data. We disagree with the commenters that the information would be overly burdensome to collect."

In particular, EPA assumes that respondents to the onshore production segment already track these data as part of normal business practices.

For comments related to "expanded reporting of new reporting elements" for the offshore production segment, please see the comments and responses related to excerpts 90, 135, 136, and 138 from comment letter EPA-HQ-OAR-2011-0512-0084-A2.

      The commenter stated that the gathering of the data elements in §98.236(aa)(2) "overreaches EPA's authority" and that the data elements raise CBI concerns.

      In the response, the EPA disagreed that the information referenced by the commenter "overreaches our authority to gather information. The EPA has determined that these data elements [in] §98.236(aa)(2) are useful and necessary for the verification of existing data and for characterizing the emissions from the industry segment."

      As a result of the commenter's concern over potential release of CBI data, EPA changed the proposed data elements for offshore production so that the finalized data elements are "consistent with BOEM [Bureau of Ocean Energy Management] reporting requirements" which are publicly available and therefore cannot be deemed as CBI.
As such, as noted in footnote 5 of Appendix E to the Supporting Statement for ICR number 2300-17 in docket EPA-HQ-OAR-2011-0512-0333, the burden that is estimated in this ICR Renewal request for the Offshore Production industry segment is lower than for other subpart W segments because the activities to collect the data are already accounted for in the burden estimates for the BOEM requirements.


[Federal Register Volume 81, Number 246 (Thursday, December 22, 2016)]
[Notices]
[Pages 94015-94016]
[FR Doc No: 2016-30813]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket No. FRA-2000-7257, Notice No. 84]

Railroad Safety Advisory Committee; Notice of Meeting
Postponement

AGENCY: Federal Railroad Administration (FRA), Department of
Transportation (DOT).

ACTION: Notice.

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SUMMARY: FRA announces the postponement of the fifty-seventh meeting of
the RSAC, a Federal Advisory Committee that develops railroad safety
regulations through a consensus process.

DATES: The RSAC meeting scheduled to be held on Thursday, January 26,
2017 is postponed.

FOR FURTHER INFORMATION CONTACT: Kenton Kilgore, RSAC Administrative
Officer/Coordinator, FRA, 1200 New Jersey Avenue SE., Mailstop 25,
Washington, DC 20590,<PHONE_NUMBER>; or Robert Lauby, Associate
Administrator for Railroad Safety and Chief Safety Officer, FRA, 1200
New Jersey Avenue SE., Mailstop 25, Washington, DC 20590, (202) 493-
6474.

SUPPLEMENTARY INFORMATION: Under Section 10(a)(2) of the Federal
Advisory Committee Act (Public Law 92-463), FRA is giving notice of a
postponed meeting of the RSAC. The RSAC meeting scheduled to be held on
Thursday, January 26, 2017, at the National Association of Home
Builders, National Housing Center, located at 1201 15th Street NW.,
Washington, DC, is postponed and will be rescheduled via another
Federal Register Notice.
    The RSAC was established to provide advice and recommendations to
FRA on railroad safety matters. The RSAC is composed of 59 voting
representatives from 38 member organizations, representing various rail
industry perspectives. In addition, there are non-voting advisory
representatives from the agencies with railroad safety regulatory
responsibility in Canada and Mexico, the National Transportation Safety
Board, and the Federal Transit Administration. The diversity of the
RSAC ensures the requisite range of views and expertise necessary to
discharge its responsibilities. See the RSAC Web site for details on
prior RSAC activities and pending tasks at http://rsac.fra.dot.gov/.
Please refer to the notice published in the Federal Register on March
11, 1996 (61 FR 9740), for additional information about the RSAC.

Robert C. Lauby,
Associate Administrator for Railroad Safety, Chief Safety Officer.
[FR Doc. 2016-30813 Filed 12-21-16; 8:45 am]
 BILLING CODE 4910-06-P